2007 International Law Update, Volume 13, Number 12 (December)

2007 International Law Update, Volume 13, Number 12 (December)

Legal Analyses published by Mike Meier, Attorney at Law. Copyright 2017 Mike Meier. www.internationallawinfo.com. 

ANTI‑SUIT INJUNCTION

In case of U.S. enforcement of a Swiss arbitral award, Second Circuit holds that it was proper for district court to issue an anti‑suit injunction that prevents litigation in Indonesia despite anti‑suit injunction issued by Indonesian court

In 1994, Karaha Bodas Company, LLC (KBC), a Cayman Islands company entered into a joint venture with Pertamina, an oil and gas company owned and controlled by the Republic of Indonesia, to explore and develop certain geothermal energy resources in Indonesia (the “Project”). The parties agreed to settle any disputes by binding arbitration in Geneva, Switzerland. In 1998, after the Indonesian government had suspended the Project, KBC initiated arbitration proceedings in Switzerland and was awarded over $261 million.

In 2001, at KBC’s request, the United States District Court for the Southern District of Texas confirmed the Award in the amount of $261 million plus interest. In March 2002, Pertamina filed an action in an Indonesian trial court, while the Texas District Court’s judgment was on appeal in the U.S. Court of Appeals for the Fifth Circuit.

KBC obtained a temporary restraining order from the Texas District Court prohibiting Pertamina from pursuing its case in Indonesia. Pertamina obtained an injunction from the Indonesian court prohibiting KBC from enforcing the Award and annulling the Award, despite the Texas District Court’s temporary restraining order. The Texas District Court issued a preliminary injunction prohibiting the enforcement of the Indonesian injunction.

The United States Court of Appeals for the Fifth Circuit vacated the preliminary anti‑suit injunction issued by the Texas District Court. In March 2004 the Indonesian Supreme Court vacated the Indonesian trial court’s injunction and order nullifying the award, ruling that only the Swiss court had power to annul the Award. The Fifth Circuit affirmed the confirmation of the Award.

KBC sought enforcement of the Texas District Court’s judgment in the Southern District of New York, where Pertamina maintained bank accounts that held hundreds of millions of dollars in assets. The parties engaged in litigation as to whether the money in the accounts belonged to Pertamina or the Indonesian government. The U.S. Court of Appeals for the Second Circuit determined that the money in the account was owned by both Pertamina and the Indonesian government. The District Court then ordered Pertamina to turn over the amount of the award from those funds that they owned.

Pertamina then filed an action in the Cayman Islands claiming fraud and seeking repayment of all funds received by KBC and seeking an injunction prohibiting KBC from disposing of any of the funds. KBC moved in the Southern District of New York for an injunction prohibiting Pertamina from maintaining the action or filing similar actions and allowing KBC to dispose of the funds. The District Court granted the anti‑suit injunction and declared the funds the property of KBC. This appeal ensued.

The U.S. Court of Appeals for the Second Circuit affirms the judgment with minor modifications.

“Under the China Trade test [China Trade & Development Corp. v. M.V. Choong Yong, 837 F.2d 33 (2d Cir. 1987)], an anti‑suit injunction against foreign litigation may be imposed only if two threshold requirements are met: “(A) the parties are the same in both matters, and (B) resolution of the case before the enjoining court is dispositive of the action to be enjoined.” [Cite]. If these two threshold requirements are satisfied, “courts are directed to consider a number of additional factors,” [Cite]. including whether the parallel litigation would: (1) frustrat[e] . . . a policy in the enjoining forum; (2) . . . be vexatious; (3) . . . threat[en] . . . the issuing court’s in rem or quasi in rem jurisdiction; (4) . . . prejudice other equitable considerations; or (5) . . . result in delay, inconvenience, expense, inconsistency, or a race to judgment.” [Slip op. 9]

Here, it is undisputed that the first threshold requirement of China Trade is satisfied. The parties are identical in both the proceedings before the District Court and in the Cayman Islands action. However, the second threshold requirement of China Trade, namely that resolution of the case before the enjoining court is dispositive of the action, requires further analysis.

“¼[T]he federal judgments satisfy the China Trade requirement because the Award, and the federal judgments confirming and enforcing it, actually decided the claims raised in the Cayman Islands action. We also conclude that the [Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”)] permits the federal judgments to be treated as “dispositive” of the Cayman Islands action.” [Slip op. 12]

“¼[F]ederal courts should not attempt to protect a party seeking enforcement of an award under the New York Convention ‘from all the legal hardships’ associated with foreign litigation over the award¼[b]ut federal courts do have inherent power to protect their own judgments from being undermined or vitiated by vexatious litigation in other jurisdictions.” [Slip op. 13‑14]

“Here, an injunction is necessary because the Cayman Islands action threatens to undermine the federal judgments confirming and enforcing the Award against Pertamina, and may also undermine federal jurisdiction to determine whether prior federal judgments should be invalidated on the basis of the fraud alleged by Pertamina. [Cite]. The injunction is also supported by strong public policy considerations. We have noted ‘the strong public policy in favor of international arbitration,’ and the need for proceedings under the New York Convention ‘to avoid undermining the twin goals of arbitration, namely, settling disputes efficiently and avoiding long and expensive litigation.’ [Cite]. These important objectives would be undermined were we to permit Pertamina to proceed with protracted and expensive litigation that is intended to vitiate an international arbitral award that federal courts have confirmed and enforced.” [Slip op. 16]

The Court also finds that the foreign action would be vexatious. Pertamina failed to make a claim of fraud during the six years that litigation in the United States continued. Thus, the Cayman Islands suit was likely for the purpose frustrating the U.S. judgments and creating delay.

The Court thus affirms the district court with the exception of excluding Switzerland, the country with jurisdiction over the award, from the anti‑suit injunction.

Citation: Karaha Bodas Co., L.L.C. v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, No. 07‑0065‑cv (2d Cir. September 7, 2007).

CHILD ABDUCTION

In dispute over alleged parental abduction of children from Mexico, Sixth Circuit remands for district court to consider what conditions, if any, could ensure the safety of the children upon their return to Mexico during the pendency of custody proceedings

Defendant Claire Simcox appeals from a district court decision ordering her to return to Mexico with two of the four children who currently reside with her in Ohio. The district court found that the return of the minors was required under the Hague Convention on Civil Aspects of International Child Abduction and its implementing legislation, the International Child Abduction Remedies Act (ICARA).

The Defendant and the Plaintiff, both U.S. citizens, had since 2002 resided in Mexico, though in three separate states therein. The family traveled frequently for Mr. Simcox’s work, and spent time in some 45 different countries. In January 2006, Mrs. Simcox left Mexico with four of her children, and escaped to Ohio, where she had family. In assessing the case, the district court was hindered by a lack of credible evidence provided from either party, and Mr. and Mrs. Simcox presented vastly differing views on the home situation the children had been in. However, based on testimony of the three eldest children, the court determined that Mr. Simcox was verbally abusive to his wife and often used physical punishment against the children.

“Mr. Simcox filed this petition seeking return of the children to Mexico on January 12, 2007, nearly one year after the abduction. Preliminarily, the district court concluded that Mr. Simcox had established, by a preponderance of the evidence, that the children were wrongfully removed from Mexico‑the country of ‘habitual residence’ within the meaning of the Hague Convention‑and thus the burden shifted to Mrs. Simcox to prove one of the defenses against return permitted under Article 13. The court noted that the Convention authorizes a court to decline to order the return of a child who objects to such return, if the child is of sufficient age and maturity to consider its views. Id. at 952. The court found that the two older children ‘possessed the requisite level of age and maturity sufficient for this Court to consider their views,’ noted their ‘unequivocal[] . . . objections to return[ing] to Mexico,’ and thus declined to order their return.” [¶ 24]. The court also found the two youngest children, aged 4 and 8, lacked the requisite level of age and maturity, and their views were not taken into account.

Despite much evidence of the ill‑temperament of Mr. Simcox, and his overwhelming need to control combined with a tendency to act out violently, and noting that Mrs. Simcox “ha[d] provided evidence of a serious risk of harm due to abuse and emotional dependence,” the lower court held that it could “only consider that evidence ‘directly establishing the existence of a grave risk that would expose the child to physical or emotional harm or otherwise place the child in an intolerable situation. [¶ 26]. The court then concluded that the threshold of a “grave risk” required to decline to order the return of the younger children was not met.

The district court ultimately decided that Mrs. Simcox had not met her burden of demonstrating a valid defense to the return of the two youngest children, and ordered their return to Mexico for determination of custody by the Mexican courts. Because of evidence of serious abuse at the hands of Mr. Simcox, the district court conditioned return of the children on certain “undertakings” to reduce the risk of harm to the children upon their return to Mexico. For protection, the court further ordered Mrs. Simcox return with them, and retain custody until a decision could be reached by the Mexican courts.

Mrs. Simcox appeals, and raises five arguments: “(1) the district court erred in holding that Mexico was the children’s place of habitual residence prior to their removal; (2) the district court misinterpreted Article 13b of the Convention, which permits a court to decline to order return if such return would present a “grave risk” of harm to the children; (3) the district court erred in adopting undertakings that required Mrs. Simcox herself to return to Mexico and that did not sufficiently ameliorate the risk of harm to the children; (4) the district court erred in holding that Mr. Simcox had not consented to the removal of the children; and (5) the district court erred in determining that D. Simcox was not of sufficient age and maturity to consider his objection to being returned to Mexico.” [¶ 36]

The U.S. Court of Appeals for the Sixth Circuit reverses and remands. In particular, it affirms the district court decision on points 1, 4, and 5, but remands for further consideration on points 2 and 3. Although the Court agrees with much of the district court’s legal analysis of the Hague Convention, its ordered “undertakings” are problematic in this case, in particular the order hat Mrs. Simcox herself return to Mexico. The district court should reconsider what conditions, if any, could ensure the safety of the children in Mexico during the pendency of custody proceedings.

On the matter of the Court’s interpretation of Article 13b and the order that Mrs. Simcox also return to Mexico, the Court takes issue with the lower court’s reasoning. Under Article 13b of the Hague Convention, a court “is not bound to order the return of the child if . . . there is a grave risk that his or her return would expose the child to physical or psychological harm or otherwise place the child in an intolerable situation.” The question before the Court then is at what level will ordering a return expose the child to a “grave risk” of harm or place the child in an “intolerable situation.” This question has no clear answer, but the Court provides an analysis based on both the Hague Convention and its progeny.

“In considering these authorities, we believe that Hague Convention cases dealing with abusive situations can be placed into three broad categories. First, there are cases in which the abuse is relatively minor. In such cases it is unlikely that the risk of harm caused by return of the child will rise to the level of a “grave risk” or otherwise place the child in an “intolerable situation” under Article 13b... Second, at the other end of the spectrum, there are cases in which the risk of harm is clearly grave, such as where there is credible evidence of sexual abuse, other similarly grave physical or psychological abuse, death threats, or serious neglect. In these cases, undertakings will likely be insufficient to ameliorate the risk of harm, given the difficulty of enforcement and the likelihood that a serially abusive petitioner will not be deterred by a foreign court’s orders. Consequently, unless ‘the rendering court [can] satisfy itself that the children will in fact, and not just in legal theory, be protected if returned to their abuser’s custody,’ the court should refuse to grant the petition. Third, there are those cases that fall somewhere in the middle, where the abuse is substantially more than minor, but is less obviously intolerable. Whether, in these cases, the return of the child would subject it to a ‘grave risk’ of harm or otherwise place it in an ‘intolerable situation’ is a fact‑intensive inquiry that depends on careful consideration of several factors, including the nature and frequency of the abuse, the likelihood of its recurrence, and whether there are any enforceable undertakings that would sufficiently ameliorate the risk of harm to the child caused by its return. Even in this middle category, undertakings should be adopted only where the court satisfies itself that the parties are likely to obey them... Where a grave risk of harm has been established, ordering return with feckless undertakings is worse than not ordering it at all.” [¶ 58]

In examining the facts of the case, the Court concludes that it falls into the second category of situations. While some level of discretion is required, the district court’s order has been inappropriate for two primary reasons:

“The problem with these undertakings is two‑fold. First, the court ordered Mrs. Simcox herself, not just the children, to return to Mexico. Thus, Mrs. Simcox could arguably defeat the order of return by simply refusing to accompany her children to Mexico... Second, there may be doubts as to the enforceability of these undertakings. By the district court’s analysis, Mr. Simcox has exhibited ‘an arrogance, a need to be in control and a tendency to act out violently,’ and such traits raise questions as to Mr. Simcox’s willingness to abide by the court’s undertakings, as do his threats to have his wife arrested upon her return to Mexico.” [Slip op. 16]

The Court remands, and instructs the district court to determine what undertakings, if any, would be sufficient to ensure the safety of the Simcox children upon their return to Mexico pending the outcome of custody proceedings.

Citation: Simcox v. Simcox, No. 07‑3911 (6th Cir. December 28, 2007).

COMPETITION

European Advocate General opines that the reversal of the EU merger approval of the music units of Sony Corporation and Bertelsmann AG should be upheld; ECJ will likely adopt the opinion

The following opinion of the Advocate General of the European Court of Justice (ECJ) analyzes in detail the ECJ’s case law in the area of competition and merger control. In particular, it reviews the extent of the investigation and reasoning that is required of the EU Commission when it authorizes a concentration between companies.

The Advocate General of the ECJ, Juliane Kokott, has issued her opinion in the case of Bertelsmann and Sony Corporation of America v. Impala. In the fall of 2003, Bertelsmann and Sony agreed to integrate their global businesses for recorded music, on‑line music and music publishing, creating the company Sony BMG. The EU Commission approved this proposed concentration through a decision on July 19, 2004 (see 2005 Official Journal (L 62) 30).

The Independent Music Publishers and Labels Association (Impala) of Belgium petitioned the European Court of First Instance to invalidate the Commission decision. See Case T‑464/04, Impala v. Commission [2006] ECR II‑2289. The Court did in fact do so. The Commission thereupon conducted a new merger control procedure, meanwhile Bertelsmann and Sony appealed to the ECJ. The gist of their argument is that the Court of First Instance applied excessive legal requirements. On October 3, 2007, the Commission again declared the concentration compatible with the common market.

The legal basis for this kind of review is the so‑called Merger Regulation, Council Regulation (EEC) No 4064/89 of 21 December 1989 on the control of concentrations between undertakings, as amended. Pursuant to Article 2 of the Merger Regulation, the Commission must approve proposed mergers as to their compatibility with the common market. In general, a concentration that does not create or strengthen a company’s dominant position which would impede effective competition is approvable.

Here, the Advocate General notes that the issue of a dominant position applies not to the two individual companies, but the collective market dominance of both companies combined.

For this determination, the EU applies a two‑part merger control procedure. First, the Commission conducts a preliminary examination of the proposed examination. If this preliminary examination raises serious doubts about the compatibility with the common market, the Commission continues to the second part, which is a formal procedure pursuant to Article 6 of the Regulation. The Commission did in fact conduct a formal review. Eventually, with the above‑mentioned Decision of July 19, 2004, the Commission declared the proposed concentration compatible with the common market. Impala successfully challenged that decision before the Court of First Instance.

The ECJ held a hearing on this matter on November 6, 2007. In her opinion, the Advocate General addresses the appellants’ arguments, among them:

(1) Standard of proof for clearance of concentrations. The appellants claim that the Court of First Instance erroneously applied an excessively high standard of proof for Commission merger clearance decisions. There should be a general presumption that concentrations are compatible with the common market.

The Advocate General disagrees. The Merger Regulation is not based on a general presumption in favor of compatibility of concentrations with the common market. In each case the Commission must make an express finding as to whether the concentration in question is compatible or incompatible with the common market. The participating companies are expressly prohibited from putting their concentration into effect before the decision is made. See Article 7(1) and (5) of the Merger Regulation. (Paragraph 219).

There are only two exceptional situations when a concentration may be presumed to be compatible with the common market: First, when the Commission fails to timely decide the case and, second, when the evidence is so unclear that it is not possible to make a reliable prognosis as to the effect on the common market. (Paragraphs 222 and 223).

(2) The Court’s power to analyze the facts and evidence. The appellants argue that the Court of First Instance exceeded the scope of judicial review by failing to respect the Commission’s discretion in these matters.

Also here the Advocate General disagrees. The Commission’s margin of discretion does not preclude Community Courts from analyzing the facts and the evidence. Quite the opposite, courts must conduct their own assessment of the matter, otherwise they cannot ascertain whether the Commission has acted within the limits of its discretion. (Paragraphs 239 and 240).

The Advocate General now proposes that the ECJ decide to

(1) dismiss the appeal; and

(2) Bertelsmann AG and Sony Corporation of America each bear their own costs.

Observers expect the ECJ to follow the Advocate General’s opinion and issue a final decision in early 2008.

Citation: Advocate General’s Opinion ‑ 13 December 2007, Bertelsmann and Sony Corporation of America v. Impala, Case C‑413/06 P, Document 62006C0413, available at the website “eur‑lex.europa.eu.”

HUMAN RIGHTS

In case of apartheid victims’ suit against companies that collaborated with the South African Apartheid Government, Second Circuit finds that claims under Torture Victim Protection Act are properly dismissed where they failed to link defendants to state action; however, claims under the Alien Tort Claims Act are improperly dismissed where the plaintiffs plead a theory of aiding and abetting liability

[Note: The following article discusses the Second Circuit’s opinion issued on October 12, 2007 in the matter of a case against corporate collaborators of the Apartheid Regime in South Africa. The October 12, 2007, opinion vacates the district court’s dismissal of the Plaintiffs’ claims under the Alien Tort Claims Act and remands to the district court. Defendants subsequently moved to stay the issuance of the mandate in this action, pending their petition for certiorari to the Supreme Court. On November 9, 2007, the Second Circuit denied the motion and explained that to grant a stay at this juncture would deprive the district court of the opportunity to address the principal issue upon which the Defendants seek review ‑‑ whether various prudential doctrines require dismissal of these claims. The Second Circuit expressly did not decide this issue and remanded to the district court. A dissenter wrote separately.]

Plaintiffs in this case are victims of apartheid related atrocities in South Africa. Plaintiffs filed suit in New York federal court under the Alien Tort Claims Act, 28 U.S.C. Section 1350 (“ATCA”), against numerous named and unnamed corporate defendants (Defendants). One group of plaintiffs also brought claims under the Torture Victim Protection Act of 1991, 28 U.S.C. Section 1350 (“TVPA”) and the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. Sections 1961 et seq. (“RICO”). The Defendants allegedly collaborated with the Government in maintaining the racially biased apartheid system. Defendants filed a motion.

The South African Minister of Justice and Constitutional Development submitted an ex parte declaration to the district court, asserting that the proceedings interfered “with a foreign sovereign’s efforts to address matters in which it has the predominant interest.” The United States Department of State submitted a “Statement of Interest” claiming that “continued adjudication of the above‑referenced matters risks potentially serious adverse consequences for significant interests of the United States.”

The district court dismissed the claims under the ATCA and the TVPA and denied Plaintiffs motions to amend.

The United States Court of Appeals for the Second Circuit affirms the dismissal of the TVPA claims, but vacates the dismissal of the ATCA claims and the district court denial of Plaintiff’s motions to amend. The Circuit Court remands the case for further proceedings.

Plaintiffs asserted a claim under the TVPA, alleging that the defendants aided and abetted the apartheid Government, subjecting the Plaintiffs to torture and extra‑judicial killing within the meaning of the Torture Victim Protection Act, under actual or apparent authority, or under color of law. For purposes of the TVPA, an individual “acts under color of law” when he acts together with state officials or with significant state aid. The Court finds that the plaintiffs failed to link any Defendants to state aid or the conduct of state officials.

The Court vacates the district court’s dismissal of the Plaintiffs’ ATCA claims because the district court erroneously held that aiding and abetting violations of customary international law cannot provide a basis for ATCA jurisdiction. In this Circuit, a plaintiff may plead a theory of aiding and abetting liability under the ATCA.

Furthermore: “We further vacate the district court’s order denying plaintiffs’ motion for leave to amend. In denying this motion, the district court relied, in part, on the erroneous premise that subject matter jurisdiction did not inhere and reasoned that any additional amendments to the pleadings would be futile. Because the denial of the motion rested, in part, on this erroneous premise, we vacate that order.”

“¼[W]e decline to affirm the dismissal of plaintiffs’ ATCA claims on the basis of the prudential concerns raised by the defendants ¼the Supreme Court identified two different respects in which courts should consider prudential concerns in deciding whether to hear claims brought under the ATCA. First, the Supreme Court held that courts should consider prudential concerns in the context of determining whether to recognize a cause of action under the ATCA¼ Second, the Supreme Court recognized that, in certain cases, other prudential principles might operate to ‘limit[] the availability of relief in the federal courts for violations of customary international law.’”

“Although the district court noted some collateral consequences that might result from the adjudication of these kinds of claims, the consequences it noted were primarily those “that would result from allowing courts in this country to hear civil suits for the aiding and abetting of violations of international norms across the globe.”

“We decline to address these case‑specific prudential doctrines now and instead remand to the district court to allow it to engage in the first instance in the careful “case‑by‑case” analysis that questions of this type require. This approach is particularly appropriate here because the plaintiffs have indicated that, if given the opportunity, they would narrow their claims and clarify the nature of their allegations against the various defendants, changes that may affect how the district court ultimately decides to resolve these issues.” [Slip op. 6‑9]

Citation: Khulumani v. Barclay National Bank Ltd., No. 05‑2141‑cv (2d Cir. October 12, 2007).

JURISDICTION

In Colorado action by off‑shore company against its Swiss administration company, Tenth Circuit upholds dismissal for lack of minimum contacts where Colorado‑based corporate attorney allegedly misappropriated funds; the Court rejects agency theory for creating jurisdiction in Colorado; Swiss law may apply by virtue of the choice‑of‑law clause in the agreement and require the Plaintiff to pay Defendant’s attorneys’ fees and costs

Michael Ladney, a Florida business, sought to protect his assets through various foreign corporations. He purchased Melea Ltd. (“Melea”), a Gibraltar corporation, and transferred assets to it. Melea received the assets, including the patents, from the trusts and corporations formed for Plaintiff’s benefit. These trusts and corporations eventually became the owners of all shares and interests in Melea. The purpose of this complex arrangement was apparently to provide the illusion that Melea’s affairs were being conducted from abroad, while they were in fact being run from the United States.

Melea retained Jawer, S.A. (“Jawer”), a Swiss corporation, to administer Melea’s finances. Jawer eventually entered into a Fiduciary Mandate, giving Jawer the power to open bank accounts, appoint Melea’s directors and representatives, and ensure that the representatives acted in Melea’s interest.

In 1996, Melea retained a Colorado attorney, Barry Engel, who served the company until 2002. Melea alleges that Jawer permitted Engel to bill as he pleased, and overcharged for his services.

Melea filed the present action in federal district court in Colorado, alleging that Jawer breached its fiduciary duties by letting a Colorado lawyer overcharge Melea and misappropriate Melea’s funds.

The district court granted Jawer’s motion to dismiss for lack of personal jurisdiction, because Jawer did not have the necessary minimum contacts with Colorado. Melea appeals.

The U.S. Court of Appeals for the Tenth Circuit affirms the dismissal. The Court, however, remands Jawer’s motion for damages and attorneys fees under Swiss law to the district court.

The Court first outlines the general rules for the review. “When evaluating personal jurisdiction under the due process clause, we conduct a two‑step analysis. At the first step, we examine ‘whether the non‑resident defendant has ‘minimum contacts’ with the forum state such that he should reasonably anticipate being haled into court there.’ ... If the defendant has sufficient contacts, we then proceed to the second step. ... At this step, ‘we ask whether the court’s exercise of jurisdiction over the defendant offends ‘traditional notions of fair play and substantial justice,’‘ that is, whether the exercise of jurisdiction is ‘reasonable’ under the circumstances. ... The district court considered both steps of the analysis and concluded that neither supported the exercise of jurisdiction over Jawer. We need only consider the first of these steps, as we conclude that Jawer had insufficient contacts with Colorado to permit the exercise of jurisdiction over it in that state.”

“The ‘minimum contacts’ test may be met in either of two ways. First, if a defendant has ‘continuous and systematic general business contacts’ with the forum state, it may be subjected to the general jurisdiction of the forum state’s courts. Helicopteros Nacionales de Colombia v. Hall, 466 U.S. 408, 414‑16 (1984). It is clear that Jawer’s contacts with Colorado are not ‘continuous and systematic’ enough to give rise to general jurisdiction over Jawer in Colorado. Jawer maintains no office or other place of business in Colorado, is not registered to do business in Colorado, does not solicit customers in Colorado, and has neither bank accounts nor property there. Its contacts with Colorado were almost exclusively limited to Jawer’s communications with Engel on behalf of Melea, which itself did not conduct business in Colorado, short of employing an attorney there. Other than its communications with Engel, which ceased in 2002, Jawer’s only contacts with Colorado came during brief trips on unrelated business.”

“Second, even in the absence of ‘continuous and systematic’ contacts, a state’s courts may exercise specific jurisdiction over a defendant that ‘purposefully directed’ its activities at the state’s residents, if the cause of action arises out of those activities. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472‑73 (1985). Analyzing whether Colorado courts may exercise specific jurisdiction over Jawer requires a lengthier discussion.” [Slip op. 5‑6]

The Court then applies this to the facts at issue. Jawer contracted with Melea for administrative services, and thus had to make payments to Engel in Colorado. It appears that Jawer did not have a choice in this matter, and thus did not purposefully direct such actions towards Colorado. It is unclear though whether Jawer’s communications with Engel were “purposeful,” as there is no evidence in the record that Jawer was contractually obligated to work with Engel. It is possible though, and the facts would have to be developed further.

Even though Jawer may have had purposeful contacts, the Court must also ascertain whether Melea’s cause of action arises out of those contacts. This requirement is not met. Here, Jawer’s alleged breaches of its fiduciary duties to Melea consisted of (1) its failure to review the fees that Engel charged, and (2) disburse funds to Engel. All of these acts occurred in Switzerland.

Melea attempts to circumvent this requirement by arguing that Jawer delegated responsibility to Engel and thus made him his agent in Colorado.

“The argument that Engel was Jawer’s agent is premised on the theory that Jawer transferred ‘the execution in part or total of the Contract of Mandate’ to Engel in accordance with the conditions to the Fiduciary Mandate. ... This theory is untenable. The evidence indicates simply that Engel served as an intermediary through whom all of Melea’s bills were transmitted to Jawer. At times, he also recommended the payment of certain invoices. Other than receiving Melea’s invoices and sending them to Jawer, though, Engel took no actions for Jawer in Colorado. He did not perform any of the acts specified as Jawer’s duties in the Fiduciary Mandate: he did not open or operate Melea’s bank accounts, designate any representatives of Melea, or otherwise perform any administrative acts for Melea.”

“An agent is one who acts on another’s behalf and is subject to the other’s control. Restatement (Second) of Agency Section 1(1) ... There is no indication that Jawer had control over, or even the right to control, Engel’s actions. Engel was not employed by Jawer; he was employed by Melea.” [Slip op. 10]

In sum, Jawer’s contacts with Colorado (primarily communications with an attorney in Colorado) are insufficient for personal jurisdiction. Jawer’s alleged shortcomings occurred in Switzerland, not Colorado.

Finally, the Court considers Jawer’s claim that Swiss law applies to the dispute, based on the choice‑of‑law of the Fiduciary Mandate, and Jawer should be awarded attorneys fees and costs. Melea argues that Jawer failed to provide prior notice under Fed.R.Civ.P. 44.1. The Court disagrees. Rule 44.1 provides that, in determining foreign law, a court may consider any relevant material regardless of admissibility under the rules of evidence. The Court therefore remands the case for a determination of whether the choice‑of‑law clause is enforceable and whether it mandates the application of Swiss law to the issue of attorneys’ fees and costs.

Citation: Melea, Ltd. v. Jawer SA, No. 07‑1127 (10th Cir. December 26, 2007).

SERVICE OF DOCUMENTS

European Union issues new Regulation on the service of judicial and extrajudicial documents

The European Union (EU) has issued a new regulation on the service of judicial and extrajudicial documents in EU Member States. Regulation 1393/2007 provides the rules for such service of documents, and repeals a prior regulation on the same subject. The Regulation, however, does not apply to Denmark.

The Regulation applies in all civil and commercial matters where judicial or extrajudicial documents need to be transmitted from one Member State to another for service (Article 1).

Each Member State designates its own “receiving agency” or “transmitting agency” for the service of such documents (Article 2). In addition, each will designate a central authority in charge of (a) providing information to the transmitting agencies, (b) resolving problems in transmitting documents, and (c) in exceptional cases, forwarding a request for service to the competent receiving agency (Article 3).

The documents to be transmitted must be accompanied by the standard request form (see Annex I to the Regulation), completed in the official language (or one of the official language or a language acceptable to the receiving Member State) of the place the service is to take place. No legalization or other authenticating formality is required (Article 4).

Once the service of documents has been accomplished, a certificate of completion confirms that service has been accomplished (Article 10).

The Regulation, however, does not preclude services by other means, such as through consular or diplomatic channels (Articles 12 & 13), postal service, or direct service through judicial officers or officers of the Member State to whom the request is addressed (Article 15).

The rules of the Regulation apply for the most part beginning November 13, 2008.

Citation: Regulation (EC) No 1393/2007 of the European Parliament and of the Council of 13 November 2007 on the service in the Member States of judicial and extrajudicial documents in civil or commercial matters (service of documents), 2007 Official Journal of the European Union (L 324) 79) 10 December 2007.

SUBPOENAS

In a case filed under the Lanham Act for trademark infringement, Fourth Circuit holds that a foreign corporation can be compelled to present a designee to testify, even in the absence of any employees, activities, or business locations within the United States, if the corporation has applied for trademark registration with a U.S. government office

Defendant Rosenruist‑Gestao E Servicos LDA (“Rosenruist”) is a Portuguese company that seeks to obtain a United States trademark registration and enjoy the benefits that accompany ownership of a registered mark under the Lanham Act. Virgin Enterprises Ltd. (“VEL”), a British conglomerate that owns numerous United States registrations, opposes the registration of Rosenruist’s mark and commenced an administrative proceeding before the Trademark Trial and Appeal Board (“TTAB”) against Rosenruist to prevent the registration. When Rosenruist refused to appear voluntarily for a Rule 30(b)(6) deposition under the procedural rules promulgated by the Patent and Trademark Office (“PTO”), see 37 C.F.R. Section 2.123 (2006), the district court issued a subpoena under 35 U.S.C.A. Section 24, directing Rosenruist to produce a designee to testify on behalf of the corporation at a deposition in Virginia. The district court refused Rosenruist’s request to quash the subpoena and then subsequently imposed sanctions against Rosenruist when it failed to attend the deposition. Seeking to ensure Rosenruist’s cooperation, VEL filed a motion to compel Rosenruist, on pain of contempt sanctions, to designate its Rule 30(b)(6) representative and appear for the corporate deposition as directed by the subpoena.

Notwithstanding its earlier ruling that Rosenruist had been properly served with a valid subpoena for a Rule 30(b)(6) deposition, the court determined that it could not require Rosenruist to produce a corporate designee for the deposition unless that designee personally resided within the district of the issuing court. Because there are no individuals residing within the Eastern District of Virginia who Rosenruist could designate as its witness under Rule 30(b)(6), the court denied VEL’s request to compel an appearance.” [¶¶ 18‑19]

Pursuant to Rule 30(b)(6) of the Federal Rules of Civil Procedure, Plaintiff sought to conduct a testimonial deposition of Defendant. Defendant refused to appear, and pursuant to the PTO’s rules of procedure Plaintiff compelled Defendant to identify a Rule 30(b)(6) representative and produce that person to testify for the corporation at an oral deposition in Portugal. The TTAB denied Plaintiff’s motion to compel, noting that, according to its manual of procedure, a party residing in a foreign country may be compelled to appear for an oral testimonial deposition only through the procedures provided in The Hague Convention or the issuance of letters rogatory to the appropriate Portuguese legal authority.

Subsequently, however, the District Court for the Eastern District of Virginia did issue a subpoena on Plaintiff’s request, and the Plaintiff served it on Defendant’s American counsel. Defendant moved pursuant to Rule 45(c)(3)(A) to quash the subpoena, arguing that the district court lacked the authority to subpoena a foreign resident to appear in the United States for a deposition, and that Plaintiff was attempting to circumvent the proper procedure for compelling Rosenruist’s testimonial deposition as outlined by the TTAB in its order denying the Plaintiff’s initial motion to compel, and that service of the subpoena on counsel for Defendant was ineffective even if the subpoena was valid. [¶ 31]. The district court found in part for Plaintiff and in part for Defendant, holding that while the subpoena had been validly issued, Defendant could not be compelled to appoint a designee under it. The decision of the district court rested on the conclusion that the term “witness” as used in the PTO statute applied only to natural persons, and because Defendants had no employee in the district who could address the questions in the subpoena, Defendant would not be compelled to produce a designee. Plaintiff appealed

The U.S. Court of Appeals for the Fourth Circuit reverses the district court. Agreeing with Plaintiff, the Court holds that (1) for purposes of the TTAP, that the term “witness” is not limited only to natural persons. The PTO regulations expressly contemplate the use of Rule 30(b)(6) depositions in which the corporation is the “person” named in the subpoena as the deponent. (2) there is nothing in the TTAP statute indicating that Congress wished to tie the court’s power to subpoena corporate testimony under Rule 30(b)(6) to the personal residence of the individuals ultimately designated by the corporation to testify on its behalf. Foreign corporations that are subject to the personal jurisdiction of a district court can be and often are required to produce officers, directors, or managing agents, regardless of where such witnesses personally reside, in the United States for a Rule 30(b)(6) deposition.

The implications of the majority’s opinion are significant. Under the rules set forth in the opinion, “a foreign company that has no United States employees, locations, or business activities must produce a designee to testify at a deposition in the Eastern District of Virginia so long as it has applied for trademark registration with a government office located there. As a result, foreign witnesses can be compelled to travel to the United States and give in‑person deposition testimony at the behest of any litigant in a trademark dispute, ‘for use in any contested case in the Patent and Trademark Office’ ‑ though the PTO’s own procedures call for obtaining testimony from foreign companies through other means.” [¶ 76]

Importantly, the Fourth Circuit’s ruling, in effect, creates a national standard. The PTO is located in the Eastern District of Virginia. Applications for trademark registration are filed there, and subpoena enforcement will also frequently be sought there. For any foreign corporation without a pre‑existing United States presence, the majority’s decision will be controlling.

In an extensive dissent, Judge Wilkinson lays out the flaws he sees in the majority’s reasoning. The decision touches on comity concerns, and risks interference with comity by enabling litigants to compel in‑person depositions from foreign companies with the most minimal U.S. contacts, as a condition of those companies obtaining a legal protection that is critical to international commerce. “The majority’s holding that this subpoena is enforceable is problematic for many reasons. It fails to properly apply the statute, 35 U.S.C. Section 24, that is directly relevant to its decision, and it reaches a result that is bound to embroil foreign trademark applicants in lengthy, procedurally complex proceedings. It inverts longstanding canons of construction that seek to protect against international discord, and it disregards the views of the PTO whose proceedings 35 U.S.C. Section 24 is designed to aid. In view of the statutory text, interpretive canons, international relationships, and separation of powers concerns, and the PTO’s own framework, I firmly believe this subpoena must be quashed.” [¶ 77]

Citation: Rosenruist‑Gestao E Servicos LDA v. Virgin Enterprises Ltd., No. 06‑1588 (4th Cir. December 27, 2007).

TERRORISM

Seventh Circuit reverses summary judgment in a civil case against three Defendants accused of donating to foreign terrorist groups that had allegedly been involved in murdering U.S. citizen. While donating money to a foreign terrorist group can give rise to a finding of liability in a civil context, Plaintiffs must produce evidence of a causal connection that shows the conduct of the Defendants helped bring about the terrorist attack that resulted in the underlying tort

In 1996, Palestinian militants shot and killed David Boim, a 17‑year‑old dual citizen of Israel and the U.S., while he was walking to a bus stop in the West Bank. Someone identified his attackers as Amjad Hinawi and Tawfiq Al‑Sharif, both members of the military wing of Hamas. Pursuant to 8 U.S.C. Section 1189, the U.S. government had listed Hamas in 1997 as a “terrorist organization.” The statute defines “terrorist activity” to include assassinating any person by firearm as well as conspiring to do so. The statute also comprises giving “material support” to anyone who intends, or is known, to carry out terrorist attacks, such as by furnishing funds, weapons, or training.

Plaintiffs Joyce and Stanley Boim, the victim’s parents, sued the Quranic Literacy Institute (“QLI”) and the Holy Land Foundation for Relief and Development (“HLF”), alleging that these organizations are the main U.S. fronts for Hamas. In addition, they named Mohammed Abdul Hamid Khalil Salah and the American Muslim Society (“AMS”) as defendants, and sued all four under Section 2333, which grants U.S. nationals injured by acts of international terrorism the right to sue for treble damages in federal court.

The Plaintiff’s theory was that in promoting, raising money for, and otherwise working on behalf of Hamas, the defendants materially supported the terrorists responsible for the murder of their son. The district court found three of the defendants liable on summary judgment and another was found liable at jury trial. Treble damages of $156 million were awarded.

In a previous hearing on interlocutory review [“Boim I”], three of the Defendants moved to dismiss the Plaintiff’s complaint for failure to state a claim against them, contending that section 2333 does not support civil causes of action for aiding and abetting acts of international terrorism. On review the Seventh Circuit affirmed the district court’s denial. The court concluded that: (1) section 2333 “reflects an intent by Congress to allow a U.S. national injured by reason of international terrorism to recover from anyone along the causal chain of terrorism and that liability is not limited to those who commit the violent act that causes injury. (2) Knowingly and intentionally providing material support, such as financial support, to terrorist organizations and activities would also constitute an act of international terrorism for purposes of section 2333. (3) “Merely giving money to an organization engaged in terrorism, without more, would constitute an act of international terrorism sufficient to render the donor liable under section 2333.” And (4) Aiding and abetting an act of international terrorism would also support liability under section 2333.

Following the interlocutory review, “the district court went on to conclude that the undisputed facts were sufficient to render [ALS, Salah, and HLF] liable for having aided and abetted Hamas. The court did not render any finding as to whether the Defendants had aided a particular wrongful act or series of acts that had a causal connection to David Boim’s death¼ The district court understood [the Court’s] opinion in Boim I to say that AMS could be liable to the Boim’s so long as it was aware of Hamas’s illegal activities, it wished to help those activities succeed, and it engaged in some act of assistance. Thus, without saying so, the court was relying on [the Court of Appeal’s] articulation of the aiding and abetting theory of liability as the governing standard. The court found that each of these elements had been met.” At trial, the jury found in favor of the Plaintiffs, holding QLI liable. This appeal ensued.

The U.S. Court of Appeals for the Seventh Circuit reverses. In particular, the Court reverses the lower court’s finding of summary judgment against HLF. The district erred in granting collateral estoppel effect to the D.C. Circuit’s ruling that HLF funded Hamas’s terrorist activities. In addition, summary judgment was also improper against all three Defendants for a separate error in the district court’s decision.

In reversing the district court’s summary judgment against the three defendants, the Court Appeals stresses the limit of their previous holding and that there continued to exist a necessity of a finding of causation in fact in order for Plaintiffs to prevail. “Boim I did not relieve Plaintiffs of the burden of showing causation in fact¼ The theory of liability that the Boims advanced in support of their complaint in the prior appeal assumed that they would be able to demonstrate causation in fact.” [Slip op. 32‑33] In the interlocutory appeal, the Court did not consider whether the plaintiffs could obtain relief without establishing that the defendants’ actions were a cause in fact of David Boim’s death. Instead, the question addressed involved the doctrine of proximate cause and specifically its requirement that the injury complained of by the plaintiff have been foreseeable to the defendant. By saying that David Boim’s death must have been a type of harm that was foreseeable to the defendants, and that the Plaintiffs were obligated to prove this, the Court of Appeals was not holding that the plaintiffs were relieved of the obligation to establish that the Defendants’ actions were a factual cause of his death.

“Nothing in Boim I demands that the plaintiffs establish a direct link between the defendants’ donations (or other conduct) and David Boim’s murder‑‑that they funded in particular the terrorists who killed David Boim, for example‑‑in view of the fact that money is fungible and the victims of terrorism are often killed or injured at random, as he was. In that respect, the district court was no doubt correct when it said that the Boims need not link the defendants specifically to the attack on David Boim. A factfinder reasonably could conclude those who provide money and other general support to a terrorist organization are as essential in bringing about the organization’s terrorist acts as those who plan and carry out those acts. For that reason, [the court rejected Defendant’s] suggestion that a $10,000 donation made by a defendant to Hamas or its affiliate with the requisite knowledge and intent that the money will support terrorism could not be deemed a cause of a subsequent terrorist act absent proof that the donor envisioned that particular act. But the plaintiffs still must offer some proof that permits a finding by a preponderance of the evidence that the defendants’ conduct caused terrorist activity that included the shooting of David.” [Slip op. 38]

“[A] defendant’s conduct need not be the sole circumstance responsible for a terrorist act in order to qualify as a cause in fact; it is enough that it be a cause of the act and the resulting harm¼ But without some evidence of a causal link between a defendant’s conduct and Boim’s murder, proof that a defendant supported, aided and abetted, or conspired with Hamas (or an intermediary like HLF) will not suffice to render that defendant liable to the Boims.” [Slip op. 39]

The Court stresses that its decision does not rule out the possibility that relatively modest financial contributions to terrorists or other minor acts of support could be sufficient to render the donor liable for the injuries subsequently inflicted by terrorists. However, some type of causal link between the defendants’ conduct and the death of David Boim must be shown, regardless of what theory of liability the plaintiffs rely upon. By itself, a showing that defendants had knowledge of the terrorist activities of the groups they donated to and desired to help the groups in those acts will not suffice. On remand, if Plaintiffs are unable to identify evidence sufficient to permit a reasonable inference that Defendants’ conduct was a cause in fact of David Boim’s murder, then the Defendants will be entitled to judgment in their favor. If the court concludes that there is a material dispute of fact as to the causal link between Defendants’ conduct and the murder of David Boim, then Defendants will be entitled to a jury trial on that question.

Additionally, because of the reversal of the summary judgment against three of the defendants, the verdict against the fourth defendant, QLI, was also necessarily vacated as the district court had erred in deeming that QLI was bound by the finding of summary judgment against the others. Based on this, the Plaintiffs at trial had made opening and closing statements that stated “the terrorist group Hamas was responsible for the murder.” The Court finds that the error may ultimately prove harmless. If the Boims move for summary judgment on this issue and the district court, on consideration of the evidence, concludes that there is no material dispute of fact as to Hamas’s culpability, then the court properly may enter summary judgment in favor of the Boims on that issue.

Citation: Boim v. Holy Land Foundation for Relief and Development, No. 05‑1815 (7th Cir. December 28, 2007), 2007 U.S. App. LEXIS 29864 (12/28/07).