Forum Non Conveniens

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Forum Non Conveniens

A doctrine whereby a court that has jurisdiction may decline to exercise it when the parties and the interest of justice would benefitif the action were heard in another court that also has jurisdiction over the matter.

Sinochem International v. Malaysia International Shipping

In Sinochem International Co. v. Malaysia International Shipping, No. 06-102, 549 U.S. ___ (2007), the U.S. Supreme Court addressed the issue of whether a court must first establish its own jurisdiction before dismissing a suit on the grounds of forum non conveniens. The doctrine of forum non conveniens is employed by courts when determining whether a court chosen by plaintiff(s) is convenient for witnesses and defendant(s) as the most suitable arbiter of the merits of the case. In this case, the Supreme Court ruled that a district court has immediate discretion to respond to a defendant's forum non conveniens plea, without first taking up any other threshold objection. Specifically, a court need not first establish its jurisdiction over the matter or parties if it determines, in any event, that a foreign tribunal is the more suitable arbiter of the case. Justice Ruth Bader Ginsberg wrote the opinion for an unanimous Court.

The underlying facts of the case involved two foreign corporations. In 2003, Chinese chemical company Sinochem had contracted with Pennsylvania-based Triorient International (not a party to the dispute) for the purchase and shipment of steel coils. A specific term in the contract gave Sinochem the right to stop payment and/or renegotiate the contract if shipment were not made by April 30, 2003. Triorient then subcontracted/subchartered a shipping vessel from Malaysian International Shipping Company (MISC), a Malaysian shipping company, to transport the coils.

The bill of lading (issued by a transportation carrier to the shipper) indicated that the coils had been loaded by the specified date. However, the vessel did not set sail from the Port of Philadelphia for another two days (May 2, 2003).

On June 8, 2003, Sinochem filed for preservation of a claim against MISC in a Chinese admiralty court, alleging fraudulent backdating of the bill of lading for the shipment, which cost Sinochem its ability to stop payment and/or renegotiate the contract. The Chinese court rejected MISC's jurisdictional objections and ordered the ship to be arrested upon arrival. Its decision was upheld on appeal. Sinochem then filed full suit against MISC in that court.

Shortly after the order for arrest, MISC filed its own suit in a federal district court in Pennsylvania. Sinochem filed a motion in the Pennsylvania court for dismissal of the case for lack of subject matter and personal jurisdiction of the court, and for forum non conveniens.

The district court found that it had subject matter jurisdiction but not personal jurisdiction over Sinochem unless such became evident with further discovery. However, it did not order further discovery or argument because it concluded that dismissal was appropriate, in any event, based on forum non conveniens. This was because sources of proof and key witnesses were based in China. Besides, reasoned the court, witnesses located in the United States would have had to travel to China anyway, because of the ongoing case in the Chinese admiralty court. (The court acknowledged that its decision was inconsistent with the interests of judicial economy because it would likely be appealed and would be a case of first impression before the U.S. Circuit Court of Appeals for the Third Circuit.)

Indeed, MISC filed its appeal with the U.S. Circuit Court of Appeals for the Third Circuit. A divided Third Circuit panel ruled, in February 2006, that the district court should have first determined whether it had personal jurisdiction before ruling on the forum non conveniens motion. Because of disagreement among circuit courts of appeal regarding this issue, the U.S. Supreme Court accepted review.

Justice Ginsberg, writing for the Court, noted, "This is a textbook case for immediate forum non conveniens dismissal." The Court stated that while a federal court generally may not rule on the merits of a case without first determining that it has jurisdiction over the subject matter and parties, there is no mandatory sequencing of non-merit issues. A court has leeway "to choose among threshold grounds for denying audience to a case on the merits," (quoting from one of the Court's previous decisions in Ruhrgas AG v. Marathon Oil Co, 526 U.S. 574.

The Court went on to note that forum non conveniens is a non-merits ground for dismissal. For the district court to have ordered discovery concerning personal jurisdiction over Sinochem would have cost that company expense and delay to no good purpose, since the district court inevitably would dismiss the case without reaching the merits, based on its well-considered forum non conveniens appraisal. Further, even looking at the basis for MISC's complaint—i.e. that Sinochem had misrepresented facts to the Chinese admiralty court in order to secure arrest of the vessel—these issues were best addressed on the merits by the Chinese court. In conclusion, the Supreme Court reversed and remanded, finding that the district court had taken the less burdensome but proper course in dismissing the case based on forum non conveniens.