Argument Preview: Sinochem v. Malaysia Int’l Shipping on 1/9

The following argument preview was written by Melanie Bostwick, a student at Harvard Law School.

Oral arguments tomorrow will begin on Tuesday with Sinochem International v. Malaysia International Shipping, a case in which the Court will consider whether a district court must conclusively establish jurisdiction before dismissing a suit on grounds of forum non conveniens. Gregory A. Castanias of Jones Day will argue on behalf of petitioner Sinochem. He will split his time with Douglas Hallward-Driemeier, Assistant to the Solicitor General, who represents the United States as amicus curiae in support of petitioner. Ann-Michele G. Higgins of Philadelphia’s Rawle & Henderson LLP will argue on behalf of respondent MISC.

The underlying dispute in the case involves an international shipment of steel coils. Sinochem, a Chinese company, contracted with Triorient, an American company which is not a party to the case, for sale of the coils. The contract specified that payment to Triorient was contingent on a valid bill of lading demonstrating that the cargo was loaded on or before April 30, 2003. The coils were loaded onto a vessel owned by Malaysia International Shipping Co. (“MISC”), a Malaysian company; as required, the bill of lading was dated April 30, 2003. While the ship was en route to China, Sinochem became suspicious that MISC had fraudulently backdated the bill of lading, and petitioned a Chinese court for preservation of a maritime claim. The Chinese court ordered MISC’s ship arrested upon arrival, and Sinochem subsequently filed a complaint with that court, where litigation is ongoing.

After Sinochem’s initial petition in China, but before the actual complaint was filed, MISC instituted its own action in the U.S. District Court for the Eastern District of Pennsylvania, alleging that Sinochem had negligently misrepresented the fitness and suitability of MISC’s vessel in its petition for the ship’s arrest. The district court granted Sinochem’s motion to dismiss based on forum non conveniens. In so doing, the court determined that it had subject matter jurisdiction. It did not, however, determine whether personal jurisdiction existed, noting that discovery would be required to resolve that issue conclusively. The court instead determined that China provided an adequate alternative forum for the suit, and that the balance of public and private factors—most notably the location of witnesses, the applicability of Chinese law, the lack of U.S. interests, and the costs involved in litigating simultaneous actions in China and the United States—weighed in favor of dismissal.

A divided panel of the Third Circuit reluctantly reversed. The court held that although dismissal on forum non conveniens grounds does not constitute a dismissal on the merits, “the very nature and definition of forum non conveniens presumes that the court deciding the issue has valid jurisdiction…and venue.” While it acknowledged the judicial inefficiency of such a rule, the majority felt itself bound by Supreme Court precedent. Its holding also compounded an existing circuit split: the Fifth, Seventh, and Ninth Circuits also require jurisdiction to be established before forum non conveniens dismissal, while the Second and D.C. Circuits do not.

This division arises from the Court’s relatively recent decisions in Steel Co. v. Citizens for a Better Environment (1998) and Ruhrgas AG v. Marathon Oil Co. (1999). The Court in Steel Co. held that a federal court may not, on the doctrine of “hypothetical jurisdiction,” decide a cause of action before resolving whether subject matter jurisdiction exists. In Ruhrgas, however, the Court clarified that a court may dismiss on another non-merits ground, such as personal jurisdiction, before determining whether it has subject matter jurisdiction over a case. The central issue in Sinochem, therefore, is whether forum non conveniens is such a non-merits ground, and whether Ruhrgas should be extended to allow forum non conveniens dismissal before the jurisdictional determination.

Sinochem’s principal argument is that the Steel Co. bar on hypothetical jurisdiction applies only to merits decisions, and that forum non conveniens dismissal is a non-merits disposition. It therefore likens forum non conveniens to other contexts in which the Court allows disposition before a jurisdictional determination, including declining pendent jurisdiction of state claims, abstaining under Younger v. Harris before identifying a case or controversy, and ruling on prudential standing before Article III standing. Sinochem advocates a “simple rule”: “Dispositive issues that deny a federal-court audience to the merits of a case, even if not considered to be ‘jurisdictional’ in the narrow sense of that term, may nonetheless be decided at the outset of a case.” It would include discretionary issues, such as forum non conveniens, in this category, and indeed argues that forum non conveniens is particularly appropriate for consideration as early as possible in a case: not only is judicial efficiency served, but the very basis of the forum non conveniens doctrine—sparing foreign defendants from the burden of litigating in an inconvenient forum not intimately connected with the case—favors its early resolution. Finally, Sinochem notes that its desired rule is consistent with the principle of constitutional avoidance, since it allows federal court to avoid unnecessarily deciding difficult questions with significant due process implications.

Sinochem is supported by an amicus brief from the United States, which—because questions of jurisdiction over foreign defendants can turn on issues sensitive to foreign governments—has an interest in having courts refrain from this kind of involvement in management of foreign affairs when it is unnecessary to the resolution of a case. Like Sinochem, the United States urges the Court to recognize forum non conveniens as a threshold, non-merits ground for dismissal. It highlights the similarities between forum non conveniens and venue, and points out that the Supreme Court’s decision in Goldlawr, Inc. v. Heiman permits transfer of venue within the federal system even when the transferor court lacks personal jurisdiction. Finally, as a practical matter, it is irrelevant to plaintiffs whether forum non conveniens or personal jurisdiction is decided first in cases like Sinochem: if personal jurisdiction is lacking, the court will dismiss for that reason, and if personal jurisdiction exists, the court will dismiss based on forum non conveniens.

In response, MISC offers two main arguments affirmance of the Third Circuit’s ruling. First, it rejects the characterization of forum non conveniens analysis as separate from the merits of a case. Balancing the public and private factors relevant to the dismissal decision—such as the location of evidence and witnesses, the connection of the dispute to the United States, and the law to be applied—requires a district court judge to consider the substantive issues that will arise in the case. Regardless whether this consideration renders forum non conveniens a “merits-based decision,” it is an inappropriate inquiry for a court that lacks jurisdiction. MISC argues that the exercise of hypothetical jurisdiction violates separation of powers by allowing the federal courts to exercise jurisdiction not given them by Congress. It distinguishes Ruhrgas by explaining that personal jurisdiction, like subject matter jurisdiction, is mandatory. A court must dismiss if it lacks personal jurisdiction, but forum non conveniens is a discretionary doctrine; thus it is inappropriate to extend Ruhrgas to such dismissals. Furthermore, the very nature of the forum non conveniens doctrine presumes that the court could hear the case, and that the resulting dismissal is completely discretionary. MISC also denies that undue hardship will result from accepting the Third Circuit’s rule. Forum non conveniens is relevant in only a small fraction of the federal docket, and in most of these cases personal jurisdiction is more easily disposed of than is the balancing of factors in the forum non conveniens determination.