Most lawsuits involving international trade wind up in federal district court, but before the merits can be heard and to avoid dismissal, the plaintiff must establish that jurisdiction is proper. Here are two recent court cases that demonstrate how this issue can be played out.
What steps must a foreign company take to sue a domestic company in the USA in a contractual dispute over the sale of goods? The court In D&G v. H.A. Import (United States District Court, S.D. New York, Feb 18, 2015) outlined the jurisdictional requirements under diversity for the foreign party to sustain a lawsuit in federal district court. Diversity is the power that a federal district court has to hear a civil matter between parties from different states or between a US person/entity and a foreign person/entity. The defendant, a California resident, ordered food products from the plaintiff, an Italian company. The Italian company delivered the food products but the California defendant only made a single partial payment and still owed over $96,000. The Italian company sued the California defendant in federal district court in New York. The California defendant argued that the lawsuit should be dismissed because the Italian plaintiff inflated its damages to meet the $75,000 threshold required under diversity. The court disagreed. The court reasoned that the Italian plaintiff successfully achieved complete diversity by having one party from Italy and the other from California and by pleading an amount in controversy that exceeded the $75,000 threshold. The court said that even without diversity, the Italian plaintiff could still sue under the court's treaty jurisdiction because the lawsuit involved the United Nations Convention on Contracts for the International Sale of Goods. The court noted that it also had supplemental jurisdiction because the Plaintiff sued under state contract law. What is fascinating, and is not discussed in the court's opinion, is that the Italian plaintiff sued in federal district court in New York. Neither of the parties is from New York and none of underlying activity or contacts seems to have happened in that state. It appears that the Italian plaintiff did some forum shopping that neither the court nor the California defendant seemed to mind.
But not all federal courts are so generous.
In Simmtech v. Citibank Korea (U.S. D New York, Feb 20, 2015), Simmtech, a Korean exporter sued Citibank Korea over investment transactions gone sour. Simmtech brought its lawsuit in federal district court in New York. Simmtech had already tried suing in Korea, but the Korean court dismissed finding the lawsuit to be "unfounded." Citibank Korea moved to dismiss the New York lawsuit, and the court agreed. The court based its reasoning on forum non conveniens, which means what it is sounds like and is based on convenience of the parties and of the court. In this particular lawsuit, the court distinguished between forum shopping and convenience. Under the court's logic, a foreign party should not sue in a federal district court purely to gain a tactical advantage in litigation, for example, because the damages are higher or discovery is easier. The court jurisdiction is proper if there is a practical reason based on convenience to the parties. If not, dismissal is in order if there is a court somewhere else that can more practically entertain the lawsuit. The court dismissed the lawsuit because Simmtech knew any judgment from a New York court would be more generous than a Korean court and because of the expense and effort to transport witnesses from Korea to New York. Forum non conveniens may be the fuzziest weapon that judges use to avoid hearing a case. It requires judges to undertake an "on this hand, but on the other hand" balancing that cannot be quantified or second guessed and that frowns upon lawyers doing what they do best, i.e., take every tactical advantage allowed under the law.
Principal and a founding member of GRVR Attorneys.