1. PIPER AIRCRAFT V. REYNO
Brief Fact Summary. Following an airplane crash in Scotland that killed 6 people, a legal secretary followed a products liability suit in California against the airplane’s manufacturer. The manufacturer moved to dismiss the suit on grounds of forum non conveniens.
Synopsis of Rule of Law. The possibility of change in substantive law should not be given conclusive or even substantial weight in a forum non conveniens inquiry.
In 1976 a small commercial aircraft crashed in the Scottish highlands. The pilot and five passengers, all Scottish subjects and residents, were killed. The heirs and next of kin of all 6 victims were all also Scottish. The aircraft was manufactured in Pennsylvania by petitioner Piper Aircraft Co. The aircraft was owned and operated by a Scottish air taxi service. In July, 1977 a California probate court appointed Defendant Gaynell Reyno administratrix of the estates of the five passengers Defendant was not related to any of the passengers; she was merely the legal secretary to the attorney who filed this lawsuit. Several days after her appointment, Defendant commenced separate wrongful death actions against Plaintiffs Piper and Hartzell in California superior court claiming negligence and strict liability. Defendant admitted that suit was filed in the U.S., as opposed to Scotland, because of its more favorable laws regarding liability and damages. Plaintiffs first removed to federal court in California, and then successfully sought transfer to the Middle District of Pennsylvania, where Plaintiff does business. They then sought to dismiss the case on grounds of forum non conveniens.
Whether a change in substantive law between venues is a sufficient reason for denying a motion to dismiss on grounds of forum non conveniens. What is the standard of review of a trial court’s ruling on a motion to dismiss via forum non conveniens.
The Court of Appeals erred in holding that plaintiffs may defeat a motion to dismiss on the ground of forum non conveniens merely by showing that the substantive law that would be applied in the alternate forum is less favorable to the plaintiffs than that of the present forum. The possibility of change in substantive law should not be given conclusive or even substantial weight in the forum non conveniens inquiry. A plaintiff’s choice of forum is given greater weight when the plaintiff has chosen the home forum. The forum non conveniens determination is committed to the sound discretion of the trial court, and may be overturned only when there has been a clear abuse of discretion.
Although the Supreme Court of the United States rejected the argument that the motion to dismiss should be denied because the law in other forums would be less favorable to the plaintiff, it did however acknowledge that if the alternative forum was so clearly inadequate that it would offer no remedy at all, then the change in substantive law might be grounds for denying the motion. In ruling that the district court did not abuse its discretion in granting the motion, the Supreme Court noted Scotland’s strong interest in the litigation, since all the victims were Scottish residents, coupled with the fact that holding the trial in Pennsylvania would make it impossible for Plaintiff to interplead third party defendants residing in Scotland. Thus the district court correctly held that public policy favored holding the trial in Scotland.
2. GULF OIL V. GILBERT
The case arose when a fire gutted a warehouse owned and operated by the plaintiff. The allegations provide that the defendant carelessly handled a delivery of gasoline to his warehouse tanks and pumps as to cause an explosion and fire which consumed the whole warehouse together with the merchandise of his customers. The plaintiff asks for a judgment amountint to $365,529 in damages. The plaintiff brought the case in the Southern District of New York despite living in Lynchburg, Virginia and where the warehouse is located. On the one hand, the defendant is a corporation organized under the laws of Pennsylavania and is qualified to do business in New York and Virginia. It has officials designated to each state as agents to receive service of process.
When the defendant was sued, it invoked the doctrine of forum non conveniens. It claimed that the Virginia is the appropriate place for trial because it is where the plaintiff lives, where the defendant does his business, where all the events of the litigation took place, where most of the witnesses reside, and where both the state and federal courts are available to the plaintiff and are able to obtain jurisdiction of the defendant.
No federal question is involved and was brought to the U.S. District Court solely on the issue of diversity of citizenship of the parties. The district court dismissed the case citing the Erie Railroad Co. v. Tompkins and considered that the law of New York is forum non conveniens applied and should be left to Virginia courts. However, the Circuit Court of Appeals disagreed as to the applicability of New York law, took a restrictive view of the application of the entire doctrine in federal courts. It reversed the district court. Hence, certiorari was filed.
Whether or not the U.S. District Court has inherent power to dismiss a suit pursuant to the doctrine forum non conveniens.
Yes. The district has the power to dismiss a suit pursuant to the doctrine of forum non conveniens. As shown by several jurisprudence, the U.S. courts are allowed to decline.
3. LUECK v. SUNDSTRAND CORPORATION
Klaus LUECK et al., Plaintiffs-Appellants, v. SUNDSTRAND CORPORATION; Honeywell Corporation; Hydraulic Units, Inc., dba Dowty Aerospace; Messier-Dowty International; Dehavilland, Inc., Defendants-Appellees.
Plaintiffs appeal the district court’s dismissal of their suit on the basis of forum non conveniens.
Plaintiffs, citizens of New Zealand, are victims of an airplane crash in New Zealand, on a New Zealand carrier.
Plaintiffs allege that the radio altimeter of the Ground Proximity Warning System (“GPWS”) malfunctioned during flight and was a causal factor of the accident.
Defendants, the Canadian manufacturer of the aircraft and the American manufacturers of the GPWS and the radio altimeter, argued that New Zealand was an adequate alternative forum and that the public and private factors weighed in favor of dismissal.
The district court agreed with Defendants.
ISSUE: WON The US Courts have jurisdiction over the case
HELD: No, US Courts have no jurisdiction.
* A district court has discretion to decline to exercise jurisdiction in a case where litigation in a foreign forum would be more convenient for the parties.
In dismissing an action on forum non conveniens grounds the court must examine: (1) whether an adequate alternative forum exists, and (2) whether the balance of private and public interest factors favors dismissal. We have also held that a district court must make a choice of law determination in considering whether to dismiss the action.
A forum non conveniens determination is committed to the sound discretion of the district court. The district court’s decision “may be reversed only when there has been a clear abuse of discretion; where the court has considered all relevant public and private interest factors, and where its balancing of these factors is reasonable, its decision deserves substantial deference.”
A. Adequate Alternative Forum
In this case, Plaintiffs’ attorney has candidly admitted that the impetus for the lawsuit is money: United States law offers Plaintiffs a greater potential remedy for their losses than New Zealand law. A jury trial in the United States on these facts could yield significantly higher awards to Plaintiffs than the compensation they will receive from the ACC.
A New Zealand remedy is unquestionably available here. Although New Zealand law does not permit Plaintiffs to maintain this exact suit, New Zealand, through its no-fault accident compensation scheme, has provided and continues to provide a remedy for Plaintiffs’ losses. Plaintiffs have not shown that this type of administrative remedy is so inadequate that it is tantamount to no remedy at all. The forum non conveniens analysis does not look to the precise source of the plaintiff’s remedy, so we will not require the alternative forum to offer a judicial remedy. Several other courts have found New Zealand’s accident compensation system to provide an adequate alternative remedy.
B. The Balance of Public and Private Factors
1. The Private Interest Factors
Courts consider the following private interest factors:
(1) the residence of the parties and the witnesses;
(2) the forum’s convenience to the litigants;
(3) access to physical evidence and other sources of proof;
(4) whether unwilling witnesses can be compelled to testify;
(5) the cost of bringing witnesses to trial;
(6) the enforceability of the judgment; and
(7) “all other practical problems that make trial of a case easy, expeditious and inexpensive.”
Plaintiffs and Defendants each find a different forum to be more convenient because each party focuses on different evidence and witnesses. Plaintiffs focus on the evidence relating to the testing of the radio altimeter and GPWS, which occurred in the United States, so they argue Arizona is a more convenient forum. Defendants, on the other hand, focus on the evidence relating to the crash itself and Plaintiffs’ ongoing medical care, so they contend that New Zealand is a more convenient forum.
We have said previously that a court’s focus should not rest on the number of witnesses or quantity of evidence in each locale. Rather, a court should evaluate “the materiality and importance of the anticipated [evidence and] witnesses’ testimony and then determine[ ] their accessibility and convenience to the forum.”
Although crucial documents and witnesses exist in both fora, the private interest factors are not in equipoise. The documents and witnesses in the United States are all under the control of Plaintiffs and Defendants, so they can be brought to court, no matter the forum. The documents and witnesses in New Zealand, however, are not so easily summoned to the United States. Though some of the New Zealand evidence is under Plaintiffs’ control, including Plaintiffs’ medical and employment records, many of the New Zealand documents and witnesses are under the control of the New Zealand government or Ansett. The district court does not have the power to order the production or appearance of such evidence and witnesses.
It is clear that evidence important to this dispute exists in both the United States and New Zealand. However, because the district court cannot compel production of much of the New Zealand evidence, whereas the parties control, and therefore can bring, all the United States evidence to New Zealand, the private interest factors weigh in favor of dismissal.
Furthermore, as noted above, Plaintiffs are maintaining a suit against Ansett, the carrier, in New Zealand. Ansett, though not a party to this suit, controls documents and witnesses that are relevant to this dispute. Although Plaintiffs characterize the instant suit as focusing on the GPWS rather than the accident, the fact is that both this and the Ansett lawsuits revolve around the causes of the accident. Therefore, a significant number of the same witnesses will be needed in both proceedings and much the same evidence will have to be presented to both courts. Currently, the main difference is that Defendants are not parties to the Ansett suit. If they are brought into that suit, all the evidence under their control would have to be produced in New Zealand. Defendants, who have brought this motion, are willing to cooperate in the production of evidence.
2. The Public Interest Factors
Courts consider the following public interest factors:
(1) local interest of lawsuit;
(2) the court’s familiarity with governing law;
(3) burden on local courts and juries;
(4) congestion in the court; and
(5) the costs of resolving a dispute unrelated to this forum.
The public interest factors weigh against maintenance of this action in Arizona. None of the remaining plaintiffs are citizens or residents of the United States. One of the defendants is a citizen of the chosen forum: Honeywell, which manufactured the radio altimeter in issue. The citizens of Arizona certainly have an interest in the manufacturing of defective products by corporations located in their forum. However, this interest is slight compared to the time and resources the district court in Arizona would expend if it were to retain jurisdiction over this dispute. Furthermore, the interest in New Zealand regarding this suit is extremely high. The crash involved a New Zealand airline carrying New Zealand passengers. The accident and its aftermath, including the accident investigation, the post-investigation activity, and the various legal proceedings including an ongoing criminal probe, have all received significant attention by the local media. Because the local interest in this lawsuit is comparatively low, the citizens of Arizona should not be forced to bear the burden of this dispute.
C. Choice of Law Analysis
This court has held that “[b]efore dismissing a case for forum non conveniens, a district court must first make a choice of law determination.”
However, the choice of law analysis is only determinative when the case involves a United States statute requiring venue in the United States, such as the Jones Act or the Federal Employers’ Liability Act. See Creative Tech., 61 F.3d at 700. The Jones Act, 46 U.S.C.App. § 688(a), and the Federal Employers’ Liability Act, 45 U.S.C. § 56, “contain special provisions mandating venue in the United States district courts.” Creative Tech., 61 F.3d at 700. The purpose of a choice of law inquiry in a forum non conveniens analysis is to determine if one of these statutes would apply.
Where no such law is implicated, the choice of law determination is given much less deference on a forum non conveniens inquiry. Because “there is no arguably applicable law that would end the forum non conveniens inquiry [in this case], ․ no potentially dispositive choice of law determination need have been made.”
4. MONEGRO V. ROSA
Plaintiffs brought suit in the United States District Court for the Northern District of California against the San Francisco Baseball Associates (“the Giants”), the Giants’ Latin America scout, Luis Rosa, and the Giants’ Minor League Coordinator, Jack Hiatt, for violations of federal and state law including sexual harassment, sexual battery, wrongful termination, fraud and conversion. The district court dismissed plaintiffs’ action on the ground of forum non conveniens, concluding that the Dominican Republic was the better forum for the suit.
We have jurisdiction under 28 U.S.C. § 1291, and we reverse.
The thirteen plaintiffs in this care are aspiring professional baseball players who live in the Dominican Republic. When they were between sixteen and twenty years old, they were recruited by Luis Rosa, the Giants’ former Latin America scout. At Rosa’s instigation, each player signed a seven-year minor league contract with the Giants. Although the contracts initially provided that all the plaintiffs would play baseball for the San Pedro Giants in the Dominican Republic, the contracts could be assigned, and the players transferred, to minor or major league teams in the United States. Underscoring this potential for transfer, many of the contracts contained addenda stating salaries in Bellingham, Washington, Scottsdale, Arizona, and Shreveport, Louisiana.
Playing for the San Francisco Giants or some other United States team was the plaintiffs’ common goal. All thirteen plaintiffs claim that Rosa expressly conditioned their continued employment and/or reassignment to United States teams upon their submitting to his sexual advances, and that Rosa appropriated part of their earnings or signing bonuses for his own use. They also allege that the Giants’ management knew or had reason to know of Rosa’s misconduct. In April 1998, plaintiffs initiated this suit against the Giants, Rosa and Hiatt.
In June 1997, plaintiffs had brought substantially similar allegations to the attention of authorities in the Dominican Republic. As a result of their complaints, a combined criminal and civil suit against the Giants and Rosa is now pending in the Dominican Republic. Noting the pendency of this “parallel” proceeding, the defendants moved in June 1998 to dismiss plaintiffs’ complaint on the alternative grounds of forum non conveniens and abstention. The district court granted the defendants’ motion on the ground of forum non conveniens.
Issue: Whether or not the case should be dismissed by virtue of forum non conveniens.
No. U.S. has jurisdiction over the case.
There are two types of cases in which forum non conveniens dismissals have been deemed appropriate in federal court. In the first type, now rarely encountered, a foreign or domestic plaintiff chooses a forum with little or no relation to either the defendant or the action in order to disadvantage the defendant. In the second type, now more commonly encountered, a foreign plaintiff chooses the home forum of an American defendant in an action that has little or no relation to the United States in order to take advantage of more favorable American procedural or substantive rules.
In deciding whether or not a case should be transferred to a more convenient forum, private and public interests are given consideration.
The private interest factors are:
(1) the residence of the parties and the witnesses; (2) the forum’s convenience to the litigants; (3) access to physical evidence and other sources of proof; (4) whether unwilling witnesses can be compelled to testify; (5) the cost of bringing witnesses to trial; (6) the enforceability of the judgment; and (7) “all other practical problems that make trial of a case easy, expeditious and inexpensive.”
Public interest factors included court congestion, the unfairness of burdening citizens in an unrelated forum with jury duty, the interest in having localized controversies decided at home, the interest in trying the case in a forum familiar with the applicable law, and the interest in avoiding unnecessary conflicts of laws.
[The doctrine of forum non conveniens survives in federal court only when the alternative forum is in a foreign country.]
In this case, the SC that case cannot be dismissed based on forum non conveniens because:
First, plaintiffs’ chosen forum is more than merely the American defendants’ home forum. It is also a forum with a substantial relation to the action. Plaintiffs allege that the Giants, through their agent, Rosa, solicited and entered into contracts with the plaintiffs. Based on these contracts, plaintiffs formed the legitimate expectation that if they demonstrated sufficient skill they would be able to play professional baseball in the United States, possibly in San Francisco for the Giants themselves.
Second, there are no possible co-defendants or third-party defendants who could not be made to appear in the American forum. Indeed, quite the opposite problem exits in this case: If this suit were dismissed in favor of a suit in the Dominican Republic, it is not clear that defendant Rosa would appear, or could be compelled to appear, in that forum. Although “the relative ability of the forums to compel the attendance of significant unwilling witnesses at trial” is an important private interest factor, see 17 James Wm. Moore et al., Moore’s Federal Practice § 111.74[c][iii] (3d ed.1997), the district court did not accord this factor any weight because Rosa “agreed” to participate in legal proceedings in the Dominican Republic. The plaintiffs expressed concern that Rosa’s “agreement” was feigned. Indeed, in their Rule 60(b) motion in the district court for reconsideration of the dismissal, plaintiffs produced affidavits from two people who recount that Rosa told them he did not plan to return to the Dominican Republic where he faces possible imprisonment. Despite this concern, the district court did not make its forum non conveniens dismissal contingent upon Rosa’s participation in the proceeding in the Dominican Republic, either by so ordering in its original dismissal or by amending its dismissal order in response to plaintiffs’ Rule 60(b) motion.
Third, there is no showing that access to proof-even aside from Rosa’s testimony-would be easier in the Dominican Republic. The Giants asserted in their motion to dismiss in the district court that “the costs of bringing witnesses to California would be significantly greater than litigating the matter in the Dominican Republic,” and that “United States citizens have much easier access to the Dominican Republic than Dominican Republic citizens have to enter the United States.” But there is no evidence to support these assertions. Indeed, the only evidence before the district court was a declaration tending to show the opposite, stating that visas would be readily available to plaintiffs.
5. ERIE RAILROAD V. TOMPKINS
Brief Fact Summary.
Defendant Harry Tompkins, was injured by a freight car of Plaintiff Erie Railroad while in Hughestown, Pennsylvania. Defendant brought suit in federal district court in New York, asking the judge to apply “general law” regarding negligence, rather than Pennsylvania law, which required a greater degree of negligence.
Synopsis of Rule of Law.
Except in matters governed by the United States Constitution or Act of Congress, the law that is to be applied in any case is the law of the state.
In July of 1934 Defendant visited his mother-in-law’s house in Pennsylvania. He walked
part of the distance along the railroad tracks of the Plaintiff. A train passed, and an open door on a refrigerator car struck him and knocked him partially under the train. His right arm was severed. Defendant then brought suit against the railroad in the Federal District Court for the Southern District of New York. Under Pennsylvania law the railroad would have been liable only for “wanton” negligence. However, rather than apply Pennsylvania law, the District Judge, at Defendant’s urging, applied the “general law” that the railroad was liable even if it was guilty only of “ordinary negligence. The jury returned a verdict for Defendant. Plaintiff appealed, but the Second Circuit upheld Defendant’s verdict. The railroad then sought certiorari from the Supreme Court of the United States.
Issue. Whether a Federal court sitting in diversity jurisdiction, should apply the substantive law of the state the activities leading to the suit arose in, or the law of the Federal court in the forum state.
Held. The Supreme Court reversed the decision of the court of appeals, holding that except in matters governed by the United States Constitution or Act of Congress, the law that is to be applied in any case is the law of the state. There is no Federal common law.
Dissent. The dissenting opinions of Justices Butler and McReynolds are omitted by the casebook. Concurrence. Justice Reed concurred. Justice Reed agreed with the majority to the extent that he thought where Congress has not spoken, then a Federal court should apply the law of the state in which the activities arose. However, he disagreed that there could be no such thing as “federal common law,” finding instead that Congress has the power to declare what rules of substantive law the federal courts shall use.
Discussion. The primary rationale for the Supreme Court’s decision here was the prevention of forum shopping, whereby, under the old policy of allowing a federal court to ignore the state’s substantive law and instead apply “general law” made it so that the substantive law that was applied in each case varied according to enforcement was sought in the state or federal court. Moreover, in asserting that there is no such thing as federal common law, the court is probably referring to judicial common law. Common law, Congress implicitly retained the right to pass rules governing the federal courts, e.g. the Federal Rules of Civil Procedure, etc.
6. MANILA HOTEL CORPORATION VS NATIONAL LABOR RELATIONS COMMISSION
In May 1988, Marcelo Santos was an overseas worker in Oman. In June 1988, he was recruited by Palace Hotel in Beijing, China. Due to higher pay and benefits, Santos agreed to the hotel’s job offer and so he started working there in November 1988. The employment contract between him and Palace Hotel was however without the intervention of the Philippine Overseas Employment Administration (POEA). In August 1989, Palace Hotel notified Santos that he will be laid off due to business reverses. In September 1989, he was officially terminated.
In February 1990, Santos filed a complaint for illegal dismissal against Manila Hotel Corporation (MHC) and Manila Hotel International, Ltd. (MHIL). The Palace Hotel was impleaded but no summons were served upon it. MHC is a government owned and controlled corporation. It owns 50% of MHIL, a foreign corporation (Hong Kong). MHIL manages the affair of the Palace Hotel. The labor arbiter who handled the case ruled in favor of Santos. The National Labor Relations Commission (NLRC) affirmed the labor arbiter.
ISSUE: Whether or not the NLRC has jurisdiction over the case.
No. The NLRC is a very inconvenient forum for the following reasons:
1. The only link that the Philippines has in this case is the fact that Santos is a Filipino;
2. However, the Palace Hotel and MHIL are foreign corporations – MHC cannot be held liable because it merely owns 50% of MHIL, it has no direct business in the affairs of the Palace Hotel. The veil of corporate fiction can’t be pierced because it was not shown that MHC is directly managing the affairs of MHIL. Hence, they are separate entities.
3. Santos’ contract with the Palace Hotel was not entered into in the Philippines;
4. Santos’ contract was entered into without the intervention of the POEA (had POEA intervened, NLRC still does not have jurisdiction because it will be the POEA which will hear the case);
5. MHIL and the Palace Hotel are not doing business in the Philippines; their agents/officers are not residents of the Philippines;
Due to the foregoing, the NLRC cannot possibly determine all the relevant facts pertaining to the case. It is not competent to determine the facts because the acts complained of happened outside our jurisdiction. It cannot determine which law is applicable. And in case a judgment is rendered, it cannot be enforced against the Palace Hotel (in the first place, it was not served any summons).
The Supreme Court emphasized that under the rule of forum non conveniens, a Philippine court or agency may assume jurisdiction over the case if it chooses to do so provided:
(1) that the Philippine court is one to which the parties may conveniently resort to;
(2) that the Philippine court is in a position to make an intelligent decision as to the law and the facts; and
(3) that the Philippine court has or is likely to have power to enforce its decision.
None of the above conditions are apparent in the case at bar.
7. K.K. SHELL v. CA
Kumagai Kaiun Kaisha, Ltd. (hereinafter referred to as Kumagai), a corporation formed and existing under the laws of Japan, filed a complaint for the collection of a sum of money with preliminary attachment against Atlantic Venus Co., S.A. (hereinafter referred to as “Atlantic”), a corporation registered in Panama, the vessel MV Estella and Crestamonte Shipping Corporation (hereinafter referred to as “Crestamonte”), a Philippine corporation. Atlantic is the owner of the MV Estella.
The complaint, docketed as Civil Case No. 8738930 of the Regional Trial Court, Branch XIV, Manila alleged that Crestamonte, as bareboat charterer and operator of the MV Estella, appointed N.S. Shipping Corporation (hereinafter referred to as “NSS”), a Japanese corporation, as its general agent in Japan. The appointment was formalized in an Agency Agreement. NSS in turn appointed Kumagai as its local agent in Osaka, Japan. Kumagai supplied the MV Estella with supplies and services but despite repeated demands Crestamonte failed to pay the amounts due.
NSS and Keihin Narasaki Corporation (hereinafter referred to a Keihin filed complaints-in-intervention.
Petitioner Fu Hing Oil Co., Ltd. (hereinafter referred to as Fu Hing”), a corporation organized in Hong Kong and not doing business in the Philippines, filed a motion for leave to intervene with an attached complaint-in-intervention, alleging that Fu Hing supplied marine diesel oil/fuel to the MV Estella and incurred barge expenses for the total sum of One Hundred Fifty-two Thousand Four Hundred Twelve Dollars and Fifty-Six Cents (US$152,412.56) but such has remained unpaid despite demand and that the claim constitutes a maritime lien. The issuance of a writ of attachment was also prayed for.
Petitioner K.K. Shell Sekiyu Osaka Hatsubaisho (hereinafter referred to as K.K. Shell”), a corporation organized in Japan and not doing business in the Philippines, likewise filed a motion to intervene with an attached complaint-in-intervention, alleging that upon request of NSS, Crestamonte’s general agent in Japan, K.K. Shell provided and supplied marine diesel oil/fuel to the W Estella at the ports of Tokyo and Mutsure in Japan and that despite previous demands Crestamonte has failed to pay the amounts of Sixteen Thousand Nine Hundred Ninety-Six Dollars and Ninety- Six Cents (US$16,996.96) and One Million Yen (Y1,000,000.00) and that K.K. Shell’s claim constitutes a maritime lien on the MV Estella. The complaint-in-intervention sought the issuance of a writ of preliminary attachment.
The trial court allowed the intervention of Fu Hing and K.K. Shell on June 19,1987 and August 11, 1987, respectively. Writs of preliminary attachment were issued on August 25, 1987 upon posting of the appropriate bonds. Upon the posting of counterbonds, the writs of attachment were discharged on September 3, 1987.
In the meantime, Atlantic and the AWU Estella filed a petition in the Court of Appeals against the trial court judge, Kumagai, NSS and Keihin, docketed as CA-G.R. SP No. 12999, which sought the annulment of the orders of the trial court dated April 30, 1987 and August 11, 1987.
In a decision dated June 14, 1989, the Court of Appeals annulled the orders of the trial court and directed it to cease and desist from proceeding with the case. According to the Court of Appeals, Fu Hing and K.K. Shell were not suppliers but sub-agents of NSS, hence they were bound by the Agency Agreement between Crestamonte and NSS, particularly, the choice of forum clause, which provides:
12.0-That this Agreement shall be governed by the Laws of Japan. Any matters, disputes, and/or differences arising between the parties hereto concerned regarding this Agreement shall be subject exclusively to the jurisdiction of the District Courts of Japan.
Thus, concluded the Court of Appeals, the trial court should have disallowed their motions to intervene.
ISSUE: Is the finding of CA correct?
HELD: No, the Court finds reversible error on the part of the Court of Appeals in so far; as it disallowed petitioners’ intervention in the case before the trial court and ordered the latter to cease and desist from proceeding with the case.
A reading of the Agency Agreement fails to support the conclusion that K.K. Shell is a sub-agent of NSS and is, therefore, bound by the agreement. No express reference to the contracting of sub-agents or the applicability of the terms of the agreement, particularly the choice-of-forum clause, to sub-agents is made in the text of the agreement.
In view of the inconclusiveness of the Agency Agreement and the pleadings filed in the trial court, additional evidence, if there be any, would still have to be presented to establish the allegation that K.K. Shell is a sub-agent of NSS.
In the same vein, as the choice-of-forum clause in the agreement (paragraph 12.0) has not been conclusively shown to be binding upon K.K. Shell, additional evidence would also still have to be presented to establish this defense, K.K. Shell cannot therefore, as of yet, be barred from instituting an action in the Philippines.
Private respondents have anticipated the possibility that the courts will not find that K.K. Shell is expressly bound by the Agency Agreement, and thus they fall back on the argument that even if this were so, the doctrine of forum non conveniens would be a valid ground to cause the dismissal of K.K. Shell’s complaint-in-intervention.
K.K. Shell counters this argument by invoking its right as maritime lienholder. It cites Presidential Decree No. 1521, the Ship Mortgage Decree of 1978, which provides:
SEC. 21. Maritime Lien for Necessaries; person entitled to such lien-Any person furnishing repairs, supplies, to wage, use of dry dock or marine railway, or other necessaries, to any vessel, whether foreign or domestic, upon the order of the owner of such vessel, or of a person authorized by the owner, shall have a maritime lien on the vessel, which may be enforced by suit in rem, and it shall be necessary to allege or prove that credit was given to the vessel.
Private respondents on the other hand argue that even if P.D. No. 1521 is applicable, K.K. Shell cannot rely on the maritime lien because the fuel was provided not exclusively for the benefit of the MV Estella, but for the benefit of Crestamonte in general. Under the law it must be established that the credit was extended to the vessel itself. Now, this is a defense that calls precisely for a factual determination by the trial court of who benefitted from the delivery of the fuel. Hence, again, the necessity for the reception of evidence before the trial court.
In other words, considering the dearth of evidence due to the fact that the private respondents have yet to file their answer in the proceedings below and trial on the merits is still to be conducted, whether or not petitioners are indeed maritime lienholders and as such may enforce the lien against the MV Estella are matters that still have to be established.
Neither are we ready to rule on the private respondents’ invocation of the doctrine of forum non conveniens, as the exact nature of the relationship of the parties is still to be established. We leave this matter to the sound discretion of the trial court judge who is in the best position, after some vital facts are established, to determine whether special circumstances require that his court desist from assuming jurisdiction over the suit.
It was clearly reversible error on the. part of the Court of Appeals to annul the trial court’s orders, insofar as K.K. Shell is concerned, and order the trial court to cease and desist from proceeding with Civil Case No. 87-38930. There are still numerous material facts to be established in order to arrive at a conclusion as to the true nature of the relationship between Crestamonte and K.K. Shell and between NSS and K.K. Shell. The best recourse would have been to allow the trial court to proceed with Civil Case No. 87-38930 and consider whatever defenses may be raised by private respondents after they have filed their answer and evidence to support their conflicting claims has been presented. The Court of Appeals, however, substituted its judgment for that of the trial court and decided the merits of the case, even in the absence of evidence, on the pretext of reviewing an interlocutory order.
8. COMMUNICATION MATERIALS VS. CA
Petitioners COMMUNICATION MATERIALS AND DESIGN, INC., (CMDI) and ASPAC MULTI-TRADE INC., (ASPAC) are both domestic corporations.
Private Respondents ITEC, INC. and/or ITEC, INTERNATIONAL, INC. (ITEC) are corporations duly organized and existing under the laws of the State of Alabama, USA. There is no dispute that ITEC is a foreign corporation not licensed to do business in the Philippines.
ITEC entered into a contract with ASPAC referred to as “Representative Agreement”. Pursuant to the contract, ITEC engaged ASPAC as its “exclusive representative” in the Philippines for the sale of ITEC’s products, in consideration of which, ASPAC was paid a stipulated commission. Through a “License Agreement” entered into by the same parties later on, ASPAC was able to incorporate and use the name “ITEC” in its own name. Thus , ASPAC Multi-Trade, Inc. became legally and publicly known as ASPAC-ITEC (Philippines).
One year into the second term of the parties’ Representative Agreement, ITEC decided to terminate the same, because petitioner ASPAC allegedly violated its contractual commitment as stipulated in their agreements. ITEC charges the petitioners and another Philippine Corporation, DIGITAL BASE COMMUNICATIONS, INC. (DIGITAL), the President of which is likewise petitioner Aguirre, of using knowledge and information of ITEC’s products specifications to develop their own line of equipment and product support, which are similar, if not identical to ITEC’s own, and offering them to ITEC’s former customer.
The complaint was filed with the RTC-Makati by ITEC, INC. Defendants filed a MTD the complaint on the following grounds: (1) That plaintiff has no legal capacity to sue as it is a foreign corporation doing business in the Philippines without the required BOI authority and SEC license, and (2) that plaintiff is simply engaged in forum shopping which justifies the application against it of the principle of “forum non conveniens”. The MTD was denied.
Petitioners elevated the case to the respondent CA on a Petition for Certiorari and Prohibition under Rule 65 of the Revised ROC. It was dismissed as well. MR denied, hence this Petition for Review on Certiorari under Rule 45.
1. Did the Philippine court acquire jurisdiction over the person of the petitioner corp, despite allegations of lack of capacity to sue because of non-registration?
2. Can the Philippine court give due course to the suit or dismiss it, on the principle of forum non convenience?
HELD: petition dismissed.
We are persuaded to conclude that ITEC had been “engaged in” or “doing business” in the Philippines for some time now. This is the inevitable result after a scrutiny of the different contracts and agreements entered into by ITEC with its various business contacts in the country. Its arrangements, with these entities indicate convincingly that ITEC is actively engaging in business in the country.
A foreign corporation doing business in the Philippines may sue in Philippine Courts although not authorized to do business here against a Philippine citizen or entity who had contracted with and benefited by said corporation. To put it in another way, a party is estopped to challenge the personality of a corporation after having acknowledged the same by entering into a contract with it. And the doctrine of estoppel to deny corporate existence applies to a foreign as well as to domestic corporations. One who has dealt with a corporation of foreign origin as a corporate entity is estopped to deny its corporate existence and capacity.
In Antam Consolidated Inc. vs. CA et al. we expressed our chagrin over this commonly used scheme of defaulting local companies which are being sued by unlicensed foreign companies not engaged in business in the Philippines to invoke the lack of capacity to sue of such foreign companies. Obviously, the same ploy is resorted to by ASPAC to prevent the injunctive action filed by ITEC to enjoin petitioner from using knowledge possibly acquired in violation of fiduciary arrangements between the parties.
Petitioner’s insistence on the dismissal of this action due to the application, or non application, of the private international law rule of forum non conveniens defies well-settled rules of fair play. According to petitioner, the Philippine Court has no venue to apply its discretion whether to give cognizance or not to the present action, because it has not acquired jurisdiction over the person of the plaintiff in the case, the latter allegedly having no personality to sue before Philippine Courts. This argument is misplaced because the court has already acquired jurisdiction over the plaintiff in the suit, by virtue of his filing the original complaint. And as we have already observed, petitioner is not at liberty to question plaintiff’s standing to sue, having already acceded to the same by virtue of its entry into the Representative Agreement referred to earlier.
Thus, having acquired jurisdiction, it is now for the Philippine Court, based on the facts of the case, whether to give due course to the suit or dismiss it, on the principle of forum non convenience. Hence, the Philippine Court may refuse to assume jurisdiction in spite of its having acquired jurisdiction. Conversely, the court may assume jurisdiction over the case if it chooses to do so; provided, that the following requisites are met:
1) That the Philippine Court is one to which the parties may conveniently resort to;
2) That the Philippine Court is in a position to make an intelligent decision as to the law and the facts; and,
3) That the Philippine Court has or is likely to have power to enforce its decision.
The aforesaid requirements having been met, and in view of the court’s disposition to give due course to the questioned action, the matter of the present forum not being the “most convenient” as a ground for the suit’s dismissal, deserves scant consideration.
JURISDICTION OVER RES
3. WORLDWIDE VOLKSWAGEN CORP v WOODSON
Brief Fact Summary. Plaintiffs purchased a car in New York and were subsequently involved in a car accident in Oklahoma. Plaintiffs sued the distributor and retailer of the car (Defendants) in Oklahoma state court for injuries suffered in the car accident. Defendants moved to dismiss arguing Oklahoma did not have personal jurisdiction.
Synopsis of Rule of Law. A non-resident defendant must purposely avail himself of the forum state’s privileges and protections for that state to have personal jurisdiction over him unless the case pertains to a product connected with defendant’s business that was brought into the forum state by the plaintiff. Foreseeability that the product might eventually enter the state is irrelevant if there is no purposeful availment of that state’s privileges and protections.
Facts. The Robinsons, Plaintiffs, bought a car in New York from Seaway, Defendant. Plaintiffs drove the car to Oklahoma where they were in a car accident and injured. Plaintiffs sued Seaway, Audi (the manufacturer), Volkswagen of America (the importer) and World-Wide Volkswagen (Worldwide; the regional distributor) as Defendants in a strict liability action in Oklahoma state court claiming the gas tank and fuel system were defective. There was no evidence that the retailers and distributors had ever made any transactions in Oklahoma. The trial court held that it had jurisdiction over Defendants in Oklahoma and denied World-Wide’s motion for reconsideration. World-Wide sought a writ of prohibition from the Supreme Court of Oklahoma. The writ was denied on the grounds that jurisdiction was authorized by the Oklahoma long arm statute. World-Wide appealed.
Issue. Can a state exercise in personam jurisdiction on the distributor and retailer of a product when the distributor and retailer do not utilize the privileges of conducting activities within that state, and do not distribute their product with the expectation that it will be purchased by consumers within the state?
Held. No. Reversed.
The two goals of International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945), are to avoid unfair inconveniences for the defendant and to maintain the system of co-equal sovereignty among the states.
Although the rule in McGee v. International Life Ins. Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223 (1957), demonstrates that contact with the forum for an out-of-state defendant is not always inconvenient, jurisdictional boundaries are still relevant. Contacts with the forum state are still required. The defendant must purposely avail himself of the laws of the forum state in order for to satisfy the minimum contacts test.
The foreseeability inquiry asks not whether the manufacturer or distributor can foresee his product ending up in a particular state, but whether he can foresee being hailed into court there.
This case is distinguishable from Gray v. American Radiator & Standard Sanitary Co., 22 Ill.2d 432, 176 N.E.2d 761 (Ill. 1961). In Gray, the company delivered its product to another state with the expectation that consumers in that forum state would purchase it. This case involved a unilateral activity completely out of the control of Defendants.
Dissent. Justice Brennan: The analysis should be focused on fairness and reasonableness. The constitutional consideration is not what the best forum is but whether the defendant is linked to that forum and the burden is not unreasonable. The focus is on the relation among the parties, the transaction, and the forum state.
Discussion. The majority opinion shows that a state does not necessarily have personal jurisdiction over a corporate defendant simply because its product was brought into the forum state. There defendant must still have voluntarily connected himself or herself with the forum state via the notion that it purposely availed itself of the forum state’s laws.