PROCEDURAL ISSUES IN INTERNATIONAL RESOURCES LITIGATION: A UNITED STATES PERSPECTIVE
| Jurisdiction | United States |
(Apr 1999)
PROCEDURAL ISSUES IN INTERNATIONAL RESOURCES LITIGATION: A UNITED STATES PERSPECTIVE
Winston & Strawn
New York, New York
I. Introduction1
A. Overview of the United States Judicial System: Parallel State and Federal Courts
In a case involving an alleged cause of action with international implications, i.e., relevant events occurred outside of the United States, or damages were sustained outside of this country, counsel contemplating bringing suit has to decide whether to sue in the United States, if there is a jurisdictional basis for doing so, or in an available foreign jurisdiction. There are usually advantages and disadvantages to litigation in either forum, and it is counsel's task to identify and evaluate them in relation to the contemplated lawsuit. The procedural issues listed in the program are certainly important and appropriate topics in such an inquiry, but it will also probably entail such diverse matters as scope and choice of law issues, available damage remedies and likely recoveries, relative cost and time-constraints, and even such basic considerations as official language. And then there are considerations which are largely empirical. In the U.S., the litigation model is the "adversarial system," and foreign parties must be prepared to manage all that this system entails. Although this country is a common law jurisdiction, with great emphasis placed on judicial precedent, litigants from other common law countries are sometimes surprised at the level to which statutory law plays a role.
A significant issue likely to be presented by most transnational litigation brought in the U.S. is whether the court has jurisdiction — personal jurisdiction over the parties and subject matter jurisdiction over the claim presented. A related issue is whether the court, even if it finds that it has both personal and subject matter jurisdiction, will exercise its discretion to accept such jurisdiction or decline to do so in favor of what it perceives to be a more convenient forum.
In considering whether to initiate a lawsuit in the United States, as opposed to in some other country, it should be kept in mind that there are two separate, relatively parallel, and, to some extent, overlapping court systems — the United States or federal courts and the courts of each of the states.2 Because of the overlapping jurisdiction between the two court systems, in many instances, the same action may be brought either before a state or a federal court. Federal courts are courts of limited jurisdiction as set forth in the United States Constitution; powers not expressly granted to the United States government in the Constitution are reserved to the states.3 The U.S. courts are empowered to hear cases which arise from a "federal question," that is where claims are based on a federal statute or the Constitution, as well as cases where there is "diversity of
[Page 10-A 2]
citizenship," where the plaintiffs and defendants are from different states.4 In cases brought under the court's "diversity" jurisdiction, there is also an "amount in controversy" requirement — a sufficiently large amount of money (currently $75,000) must be at stake for a federal court to hear the case.5 Once an action is properly in federal court, whether based on diversity or federal question jurisdiction, the court may hear claims over which it would not otherwise have jurisdiction, under the concepts of pendent claim or supplemental jurisdiction.6
The consequences of bringing an action in, for example, a New York state court as opposed to the United States District Court for the Southern District of New York, located within yards of each other in downtown Manhattan, will be manifold. The rules governing discovery, the geographical area from which the jury is selected, the judge presiding over important motions, the general tenor of the case, and the atmosphere of the proceedings may vary greatly depending on how this important decision is made. Thus, a party to an action where this option is available will want to weigh carefully the benefits and burdens of litigating in one forum or the other.7
Perhaps even more important than the parallel federal and state court systems is the fact that the federal courts are part of a nationwide judicial system; there is a United States District Court in every state and territory, and some states have as many as four district courts. Depending upon case load, a district court can have from one to over forty judges. In the federal system, the district courts are organized by groups of states and territories into eleven circuits, and each circuit has a court of appeals which takes appeals from the district courts within the circuit.
II. Jurisdiction
A. In personam jurisdiction
When a foreign plaintiff, claiming to have been injured outside of the U.S., sues for redress in a U.S. court, a challenge to the court's jurisdiction and its exercise of jurisdiction is almost inevitable. This has become increasingly likely in recent years as plaintiffs are attracted here by, for example, the prospects of broad discovery, the availability of punitive damages (a concept generally not recognized in civil law), and a largely open and public process which itself can generate substantial pressure on a recalcitrant defendant to seek a way out.
[Page 10-A 3]
First we look at personal jurisdiction. In order for a case to be heard before a U.S. court, that court must have in personam jurisdiction of the defendants in the case. A court may obtain in personam jurisdiction over a defendant by one of several ways. First, if there is a contractual choice of forum clause in a contract between the parties, it will generally be upheld, and the court of the designated forum will normally find that it has in personam jurisdiction over any defendant who has contractually submitted itself to the jurisdiction of such court. However, in a case alleging some form of tortious misconduct, plaintiffs are unlikely to have any contractual basis for personal jurisdiction, and they will have to resort to what amounts to a fairness inquiry based on the facts of the case.
Generally, U.S. courts have in personam jurisdiction over defendants who have such continuous and systematic general business contacts with the proposed U.S. jurisdiction, and have purposefully availed themselves of the benefits of the laws of the forum, that they should reasonably anticipate being hauled into court there. An individual is subject to general jurisdiction in a particular state when he has conducted activities in that state that are "substantial" or "continuous and systematic" so that he may be deemed present in the forum and hence subject to suit in that state with respect to any and all claims asserted against him. See Helicopteros Nacionales de Columbia, S.A. v. Hall, 466 U.S. 408, 415-16 (1984). However, such general jurisdiction will lie only when the level of contact between the defendant and the forum state is high. See Budget Rent-A-Car v. Eighth Judicial District, 108 Nev. 483, 485, 835 P.2d 17, 19 (1992). All U.S. courts do not have general jurisdiction over all U.S. corporations, so the inquiry does not end there. Moreover, it should be borne in mind that many so-called U.S. corporations are actually multinational corporations which operate here and abroad through subsidiaries, considered wholly separate and independent entities for a variety of purposes, including jurisdictional ones. In general, in order to obtain jurisdiction over a parent corporation for the allegedly wrongful activities of its subsidiary, the plaintiff must "pierce the corporate veil" by making a showing that the operations of the parent and subsidiary were so intertwined as to render them indistinguishable from each other. Needless to say, it is not an easy standard to meet.
In the absence of general jurisdiction, a U.S. court may still have specific jurisdiction over a defendant. Specific personal jurisdiction "may be established only where the cause of action arises from the defendant's contacts with the forum." Budget Rent-A-Car, 108 Nev. at 485, 835 P.2d at 19; see also Haisten v. Grass Valley Medical Reimbursement Fund, Ltd., 784 F.2d 1392, 1400
[Page 10-A 4]
(9th Cir. 1986) (cause of action must arise out of forum-related activities for specific jurisdiction to attach).8 The Ninth Circuit has held that the conduct must be "expressly aimed" at the forum state to satisfy the "purposeful availment" prong. See Core-Vent Corp. v. Nobel Industries AB, 11 F.3d 1482, 1486 (9th Cir. 1993); Cordy v. Daily News, L.P., 95 F.3d 892, 833 (9th Cir. 1996) (explaining its decision in Core-Vent, the court stated that "we also expressed doubt that the defamation was truly targeted at California when the purported target was a corporation that did a worldwide business").
Under the second prong of the specific jurisdiction tests — the "arises from" or "arises out of" requirement — specific jurisdiction exists if "but for" the contacts between the defendant and the forum state, the cause of action would not have arisen. See Loral Terracom v. Valley Nat. Bank, 49 F.3d 55, 561 (9th Cir. 1995) (citation omitted). This, of course, is rarely the case in situations such as the hypothetical presented in this program, where the events and damages occur on foreign soil.
The potential lack of in personam jurisdiction is an extremely important defense for a defendant, and should not be overlooked by a plaintiff simply because the defendant is, purportedly, a U.S. corporation. One must consider whether the alleged tortfeasor is, in fact, a U.S. corporation, or whether it is a subsidiary of one organized under foreign laws. Moreover, the location of the alleged tortious event may well determine whether specific jurisdiction in this country will be found over the foreign defendant. Fortunately for...
To continue reading
Request your trial