2009 International Law Update, Volume 15, Number 11 (November)

2009 International Law Update, Volume 15, Number 11 (November)

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

FORUM NON CONVENIENS

In action by French company against German companies and Polish individual over control of Polish telecom company, Ninth Circuit affirms forum non conveniens dismissal despite claims that district court failed to give deference to Plaintiff’s choice of forum and improperly balanced private and public factors

In 2006, Vivendi S.A. of France, and its Delaware Holding Company (jointly Vivendi) sued various German telecom companies (collectively T‑Mobile) and a Polish billionaire, Zygmunt Solorz‑Zak (Solorz), in federal district court in Washington State. The complaint alleges a violation under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1962, and common‑law fraud. This is one of at least 20 litigation and arbitration cases that Vivendi initiated to recover its $2.5 billion investment in Polska Telefonia.

This case began in 1999, when both Vivendi and T‑Mobile became interested in the Polish telephone company, Polska Telefonia. At the time, Polish law prohibited foreign investors from owning more than 49% of any telecom company. One of the T‑Mobile defendant companies eventually owned 49%. Vivendi partnered with a Polish company, Elektrim, to jointly own 51%. In 2000, T‑Mobile began arbitration against Vivendi’s Polish partner for its transfer of Polska Telefonia shares, claiming that the transfer breached the Polska Telefonia shareholder agreement. While the arbitration was ongoing, Solorz bought a controlling interest in Elektrim. Vivendi alleged in its federal complaint that Solorz had conspired with T‑Mobile to help T‑Mobile gain control of Polska Telefonia.

In 2004, an arbitration panel found that Elektrim’s transfer of its Polska Telefonia shares to the joint venture was ineffective because it violated the shareholders’ agreement that required the consent of the Polska Telefonia Board of Directors. T‑Mobile and Elektrim then took over the Polska Telefonia management board.

Three years later, the district court dismissed the Complaint based on the forum non conveniens doctrine. It ruled, inter alia, that Poland offered an adequate alternative forum. Vivendi appealed. The U.S. Court of Appeals for the Ninth Circuit affirms the dismissal.

To decide a forum non conveniens question, the district court must consider (1) whether an adequate alternative forum exists, and (2) whether the balance of private and public interest factors favors dismissal. In this case, Vivendi argues that the district court abused its discretion by (a) giving insufficient deference to Vivendi’s choice of forum, and (b) unreasonably balancing the public and private interest factors. The Court of Appeals disagrees.

“Vivendi contends the district court gave insufficient deference to its choice of forum. Under our law, foreign plaintiffs are entitled to less deference than are plaintiffs who file suit in their home forums. ... Vivendi S.A., a French company, filed this action related to European transactions in a forum far from its home. Therefore, the district court did not abuse its discretion when it afforded Vivendi S.A.’s choice of forum ‘little deference.’”

“Moreover, this court’s review of a district court’s forum non conveniens determination is highly deferential. ... In cases concerning foreign plaintiffs, this court rarely has reversed a district court’s grant of a motion to dismiss for forum non conveniens. ...”

“The only allegations Vivendi asserts that connect this action to the United States are the use of ‘U.S. wires’ in various conversations and e‑mail exchanges between the parties and the appointment to Polska Telefonia’s board of Thomas Winkler, the Chief Financial Officer of T‑Mobile International, a German corporation, ‘who upon information and belief conducted business in the United States at T‑Mobile USA’s Seattle, Washington headquarters.’”

“Notably, Vivendi has alleged no facts that show that Winkler took any action from Seattle – or, for that matter, from anyplace else – specifically with respect to T‑Mobile’s allegedly fraudulent acquisition of Polska Telefonia. Instead, these allegations are incidental to the substance of Vivendi’s complaint and involve only tenuous connections to the United States. These allegations do not establish plausibly that a U.S. entity participated in the alleged fraud and thus fail to show that the plaintiffs’ fraud claims are connected to a U.S. business entity. ... Therefore, the district court did not err when it granted Vivendi S.A.’s choice of forum little deference.” [693‑4]

Vivendi’s complaint of improper balancing of factors does not fare any better. “When considering a motion to dismiss for forum non conveniens, the district court must weigh the following private interest factors: ‘the ease of access to sources of proof; [availability of] compulsory process to obtain the attendance of hostile witnesses, and the cost of transporting friendly witnesses; other problems that interfere with an expeditious trial . . .; and the ability to enforce the judgment.’ ...

The district court also must take into account factors affecting the public interest, such as (1) administrative difficulties flowing from court congestion; (2) imposition of jury duty on the people of a community that has no relation to the litigation; (3) local interest in having localized controversies decided at home; [and] (4) . . . the avoidance of unnecessary problems in conflicts of law.’ ... Vivendi contends the district court unreasonably balanced the public and private interest factors in its analysis of the defendants’ motion to dismiss.”

“We hold that the district court did not abuse its discretion when it concluded that the private interest factors favor dismissal. Five of the seven parties reside or have their principal places of business in Europe, and, of the twenty‑two witnesses Vivendi identified, only three reside in the U.S. Notably, none of these U.S.‑based witnesses has information about the substance of the dispute between the parties: one has information about the corporate relationship of T‑Mobile International and T‑Mobile USA, one has information about a letter Vivendi sent to Deutsche Telekom after Vivendi filed its complaint in this case, and one (sic) is a group of unidentified Elektrim bondholders.”

“Moreover, the district court concluded, based on its experience, that the ability of the court to compel unwilling witnesses to testify slightly favors dismissal because the procedure under the Hague Convention on the Taking of Evidence Abroad in Civil or Commercial Matters, 23 U.S.T.2555; T.I.A.S. 7444; 847 U.N.T.S. 231; [in force October 7, 1972 ] which would be necessary to produce proof for an American trial, is more cumbersome than European Commission Regulations for taking evidence within Europe, which would be necessary to produce proof for a European trial. This determination, based on the district court’s experience, falls within its ‘sound discretion. ...”

“Vivendi contends [that] the district court erred when it found that the location of most of the relevant documentary evidence in Europe slightly favors a European forum, because this finding ignored technological advances in document production and deposition video‑conferencing, which advances can make litigation in Seattle every bit as efficient and economical as litigation in Warsaw. The district court did not ignore these advances, noting instead that, wherever the litigation ultimately takes place, the parties may choose to conduct discovery electronically. Regardless, given the presence of the vast majority of original, relevant documents in Europe, the district court did not err when it found this factor slightly favors dismissal.” [695‑6]

Citation: Vivendi SA v. T‑Mobile USA Inc., 586 F.3d 689 (9th Cir. 2009).

HUMAN RIGHTS

Canadian Supreme Court rules, in case where Canadian citizen, questioned by Canadian official after citizen’s subjection to sleep deprivation at Guantanamo, sought order that Canada request his repatriation by U.S., that separation of powers and other prudential factors dictate that Court limit itself to issuing declaratory judgment that his treatment violated Section 7 of Canadian Charter of Rights

Omar Ahmed Khadr (Khadr) was a Canadian citizen who was arrested in Afghanistan in 2002 at the age of 15. The authorities detained Khadr and later on charged him with war crimes. The following year, Canadian authorities questioned Khadr and shared the product of these interviews with United States authorities. In 2004, a Canadian official interviewed Khadr, knowing that the U.S. had subjected Khadr to a sleep deprivation technique known as the “frequent flyer program.”

The Canadian government then refused to repatriate Khadr so he applied for judicial review of the government’s decision on grounds that his rights under § 7 of the Canadian Charter of Rights and Freedoms were infringed. It provides that “Everyone has the right to life, liberty and security of the person and the right not to be deprived thereof except in accordance with the principles of fundamental justice.”

The trial judge ruled that the refusal to repatriate him did violate Khadr’s 7 rights and ordered the Canadian government to request the U.S. to return him to Canada.

The government appealed. A majority on the Court of Appeal affirmed the order with respect to Khadr’s return but defined the § 7 breach more narrowly as arising from the coerced 2004 interrogation. The government next appealed to the Supreme Court of Canada. On January 19, 2010, this Court allowed the appeal in part. It held that the trial judge had erred in the exercise of his discretion in mandating that the Canadian government request the U.S. to return Khadr to Canada.

Consistent with the principle of separation of powers and upon the well‑grounded reluctance of courts to intervene in matters of foreign relations, the more appropriate remedy was to grant Khadr a declaratory judgment that the government had infringed his Charter rights. This would leave the executive branch a measure of discretion in deciding how best to respond to Khadr’s situation in light of current information, its responsibility for foreign affairs and in conformity with Charter.

“In this case, the evidentiary uncertainties, the limitations of the Court’s institutional competence, and the need to respect the prerogative powers of the executive, lead us to conclude that the proper remedy is declaratory relief. A declaration of unconstitutionality is a discretionary remedy, Operation Dismantle Inc. v. R., [1985] 1 S.C.R. 441 (S.C.C.) at p. 481, citing Solosky v. Canada (1979), [1980] 1 S.C.R. 821 (S.C.C.). It has been recognized by this Court as ‘an effective and flexible remedy for the settlement of real disputes”: R. v. Gamble, [1988] 2 S.C.R. 595 (S.C.C.), at p. 649. A court can properly issue a declaratory remedy so long as it has the jurisdiction over the issue at bar, the question before the court is real and not theoretical, and the person raising it has a real interest to raise it. Such is the case here.”

“The prudent course at this point, respectful of the responsibilities of the executive and the courts, is for this Court to allow Mr. Khadr’s application for judicial review in part and to grant him a declaration advising the government of its opinion on the records before it which, in turn, will provide the legal framework for the executive to exercise its functions and to consider what actions to take in respect of Mr. Khadr, in conformity with the Charter.”

“The appeal is allowed in part. Mr. Khadr’s application for judicial review is allowed in part. This Court declares that through the conduct of Canadian officials in the course of interrogations in 2003‑2004, as established on the evidence before us, Canada actively participated in a process contrary to Canada’s international human rights obligations and contributed to Mr. Khadr’s ongoing detention so as to deprive him of his right to liberty and security of the person guaranteed by § 7 of the Charter, contrary to the principles of fundamental justice. Costs are awarded to Mr. Khadr.” [¶¶ 46‑48].

Citation: Khadr v. Canada (Prime Minister) (2009), 2009 CarswellNat 1206, 341 F.T.R. 300 (Eng.), 2009 FC 405, 2009 CF 405, 2009 CarswellNat 1472 (F.C.).

INSURANCE

After Fifth Circuit’s rehearing en banc on whether McCarran‑Ferguson Act authorizes state law to reverse‑preempt the Convention on the Recognition and Enforcement of Foreign Arbitral Awards or its implementing legislation,  Court concludes that Act does not apply to Convention

In this interlocutory appeal, the Fifth Circuit reviews a motion to compel arbitration of a contractual dispute among three insurers. The McCarran‑Ferguson Act, 15 U.S.C. §§ 1011‑1015 (MFA) exempts the insurance business from most federal regulation. The question here is whether the MFA authorizes state law to reverse‑preempt the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (Convention) (June 10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. 3), and its implementing legislation, 9 U.S.C. §§ 201‑208. The Fifth Circuit concludes that it does not.

The Louisiana Safety Association of Timbermen Self Insurers Fund (LSAT) provides workers’ compensation insurance for its members and had excess insurance through the defendant underwriters at Lloyd’s in London. The re‑insurance agreements contained arbitration clauses. When the LSAT tried to assign its rights under the reinsurance agreements to Safety National Casualty Corporation (SNCC), the defendants refused to recognize that assignment as it was strictly personal and thus non‑assignable. SNCC then sued the defendants in the United States District Court for the Middle District of Louisiana. The defendants responded with an unopposed motion to stay proceedings and to compel arbitration.

The parties tried to launch an arbitration, but could not agree on a panel. The parties filed multiple motions, with the district court eventually granting LSAT’s motion to quash the arbitration. The district court held that, while the Convention does require arbitration, a Louisiana statute, La. Rev. Stat. Ann. § 22:868, prohibits arbitration agreements in insurance contracts. More precisely, the Louisiana statute requires that Louisiana courts retain jurisdiction over actions against insurers. Thus, the MFA does reverse‑preempt the Convention..

This interlocutory appeal ensued. The U.S. Court of Appeals for the Fifth Circuit concluded that the MFA did not cause the Louisiana statute to reverse‑preempt either the Convention or its implementing act. The Fifth Circuit then granted a rehearing en banc and now holds that the MFA does not apply to the Convention.

“We are persuaded that state law does not reverse‑preempt federal law in the present case for two related but distinct reasons: (1) Congress did not intend to include a treaty within the scope of an ‘Act of Congress’ when it used those words in the MFA and (2) in this case, it is when we construe a treaty—specifically, the Convention, rather than the Convention Act—to determine the parties’ respective rights and obligations, that the state law at issue is superseded.” [718].

“Although it is not clear from this provision’s text that arbitration agreements are voided, Louisiana courts have held that such agreements are unenforceable because of this statute ... The Louisiana statute, as so interpreted, conflicts with the U.S.’s commitments under the Convention. The Convention states that each signatory nation ‘shall recognize an agreement in writing under which the parties undertake to submit to arbitration’ their dispute ‘concerning a subject matter capable of settlement by arbitration.’... The Convention contemplates enforcement in a signatory nation’s courts, directing that courts ‘shall’ compel arbitration when requested by a party to an international arbitration agreement, subject to certain exceptions not at issue in the present case ... [...]”

“LSAT contends that the [MFA] resolves this conflict in favor of the application of state law because the Louisiana statute regulates the business of insurance. The [MFA] provides that ‘Congress hereby declares that the continued regulation and taxation by the several States of the business of insurance is in the public interest, and that silence on the part of the Congress shall not be construed to impose any barrier to the regulation or taxation of such business by the several States.’” [719].

“We, ... limit our analysis to whether Louisiana law overrides the Convention’s requirement that the present dispute be submitted to arbitration because we construe an act of Congress to invalidate, impair, or supersede state law. LSAT contends that the Convention was not self‑executing and could only have effect in the courts of this country when Congress passed enabling legislation. Accordingly, LSAT argues that the Convention’s enabling legislation is an ‘Act of Congress’ within the meaning of the [MFA] provision that ‘[n]o Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance ....’” [720‑1].

The Court considers it unreasonable to construe the term “Act of Congress” in the [MFA] as Congress’ intent to permit state law to preempt implemented, non‑self‑executing treaty provisions, but not to preempt self‑executing treaty provisions. The Court also notes that here it is a treaty (the Convention), not an act of Congress (the Convention Act), that the Court construes to supersede Louisiana law.

“ ... [I]t is by reference to the Convention that we have a command ‑ a judicially enforceable remedy ‑ that we ‘supersede’ Louisiana law unless there are defenses set forth in the Convention that counteract that command. Because here the Convention, an implemented treaty, rather than the Convention Act, supersedes state law, the [MFA’s] provision that ‘no Act of Congress’ shall be construed to supersede state law regulating the business of insurance is inapplicable.” [725]

Congressional policy favoring arbitration of international commercial agreements further supports the Court’s finding that referral to arbitration is proper in this case. The Court concludes that the [MFA] does not cause the Louisiana statute Section 22:868 to reverse‑preempt the Convention in this case. Thus, the Court vacates the district court’s order denying the motion to compel arbitration and remands for further proceedings.

Citation: Safety National Casualty Corporation v. Certain Underwriters at Lloyd’s, London, 587 F.3d 714 (5th Cir. 2009).

JUDGMENTS, FOREIGN

In action based upon judgment of Québec court, First Circuit reverses summary judgment for lower court’s failure to resolve genuine issues of fact as to extent of party’s business activities in Québec

According to the complaint, Kitchen International, Inc. (Defendant) and Evans Cabinet Corp. (Plaintiff) entered into a contract in 2004. Plaintiff agreed to supply Defendant with manufactured cabinetry for several residential building sites on the U.S. East Coast. Defendant placed these orders from its Montreal headquarters with the Plaintiff’s Georgia offices.

Defendant also claims that the two parties agreed in 2004 that they would set up a products showroom at Defendant’s office in Montreal. According to Defendant, Plaintiff manufactured and shipped cabinetry and related products plus sales and promotional materials to Québec for use in the showroom later that year. Plaintiff denies the existence of such an agreement.  

At some point, various issues came up as to the quality and conformity of the products that Plaintiff had shipped to the East Coast projects. As a result, in May 2006, Defendant hired a Canadian attorney to sue Plaintiff in the Superior Court of Québec for breach of contract Plaintiff was duly served with process. Plaintiff, however, failed to answer or otherwise respond to the suit. On May 31, 2007, the Superior Court of Québec entered a default judgment against Plaintiff in the amount of $149,354.74.

On April 23, 2007, Plaintiff filed this diversity action for breach of contract and quantum meruit in the Massachusetts federal court. Defendant moved to dismiss on the ground that res judicata barred the action. Plaintiff opposed the motion contending that the Superior Court of Québec had lacked jurisdiction over it.

In March 2008, the district court resumed the hearing on the question of summary judgment. The only additional documents supplied by either party were affidavits from their principals. On November 4, 2008, the district court gave summary judgment to Defendant.

The court first determined that, because it was sitting in diversity, it should apply the Massachusetts’s version of the Uniform Foreign Money‑Judgments Recognition Act (UFMJRA or the Act) to determine whether it should enforce the Québec judgment. In order to enforce a judgment under the Act, the court reasoned, the Québec court must have had the power to exercise personal jurisdiction over Plaintiff.

The court first noted that Massachusetts courts had interpreted its long‑arm statute as an assertion of personal jurisdiction to the limits allowed by the U.S. Constitution. The district court then ruled that the Quebec Superior Court’s exercise of personal jurisdiction over Plaintiff did not contravene traditional notions of fair play and substantial justice since the Plaintiff had had several meaningful contacts with Quebec.

As a result, the court employed Québec rules of res judicata to determine whether it should give the default judgment preclusive effect. The court then concluded that Canadian law would bar Plaintiff’s suit. The district court, therefore, held that res judicata precluded the present action and entered summary judgment for Defendant. Plaintiff duly noted an appeal. The U.S. Court of Appeals for the First Circuit reverses.

The Court then sets forth its rationale. “Defendant’s motion to dismiss the Massachusetts action did not attempt simply to bar the prosecution of the current action in Massachusetts on the ground that the district court lacked authority to adjudicate Plaintiff’s present contract claim there. Rather, it was a motion addressed to the merits of the Massachusetts action.”

“It sought a ruling that Plaintiff was precluded from obtaining the substantive relief that it sought in the Massachusetts action because an earlier judgment obtained in another court precluded any further litigation of the matter. As part of that assertion, Defendant submits that the earlier judgment was rendered by a court that had personal jurisdiction over the defendant in that action, i.e. Plaintiff. Plaintiff takes the opposite view. This is a merits dispute properly analyzed at this stage of the proceedings by conventional summary judgment analysis.” [140].

“When sitting in diversity and asked to recognize and enforce a foreign country judgment, federal courts tend to apply the law of recognition and enforcement of the state in which they sit, as required by Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938). However, some courts and commentators have suggested that recognition and enforcement of foreign country judgments deserves application of a uniform federal body of law because suits of this nature necessarily implicate the foreign relations of the United States. This question has not been decided definitively in this circuit.”           

“We shall follow the same course in this case because we need not resolve the matter here. Neither party has suggested that the district court ought to have followed a rule other than that of Massachusetts. In any event, even if the reciprocity rule of Hilton v. Guyot, 159 U.S. 113 (1895) were applicable under the facts of this case, the Massachusetts rule of recognition and enforcement also contains a reciprocity requirement.”

“According to Hilton, a diversity case from the pre‑Erie era, foreign judgments shall be recognized so long as the rendering court afforded an opportunity for full and fair proceedings; the court was of competent jurisdiction over the persons and subject matter; the court conducted regular proceedings, which afforded due notice of appearance to adversary parties; and the court afforded a system of jurisprudence likely to secure an impartial administration of justice between the citizens of its own country and those of other countries. See 159 U.S. supra at 202‑03. The Hilton rule also requires reciprocity in the recognition and enforcement of United States judgments from the jurisdiction of the rendering court. Id. at 210, 226‑27.”.

“With respect to the recognition of foreign country judgments, Massachusetts, like many other states of the Union, has enacted a version of the [UFMJRA]. This section clearly requires that the rendering court have personal jurisdiction over the defendant in order for the resulting judgment to be recognized in Massachusetts. The statute does not state explicitly, however, whether the correctness of that exercise of jurisdiction by the rendering court ought to be determined according to the law of the rendering or [of] the enforcing jurisdiction. The district court suggested that there is currently a division of authority on this question among the states that have enacted a form of the [UFMJRA]. The district court also noted that the Supreme Judicial Court of Massachusetts has not yet spoken squarely on the matter.” [142‑43].

“The district court, faced with the ambiguity about the prevailing rule in Massachusetts with respect to the law governing personal jurisdiction in the rendering court, explicitly declined to resolve the matter and instead applied the governing rule of both jurisdictions.” On appeal, neither party has contended that the district court erred in this regard....”

“We turn, then, to the question of whether Defendant established that the Superior Court of Québec properly exercised personal jurisdiction over Plaintiff. In the district court, Defendant submitted the affidavit of a Canadian attorney and argued that the Québec court properly exercised jurisdiction under Article 3136 of the Québec Civil Code....” [143‑44].

It provides that “Even though a Québec authority has no jurisdiction to hear a dispute, it may hear it, if the dispute has a sufficient connection with Québec, where proceedings cannot possibly be instituted outside Québec or where the institution of such proceedings outside Québec cannot reasonably be required. Civil Code of Québec, R.S.Q., ch. 64, art. 3136.”               

“... Moreover, the opinion of the district court appears to have interpreted Defendant’s position as relying entirely on this provision....

“There are two problems with this analysis. First, the Québec provision relied upon by Defendant, Article 3136, is clearly a provision that permits Québec courts to assume personal jurisdiction over parties in exceptional cases when there is no other available jurisdiction to which the parties may litigate their dispute. See GreCon Dimter, Inc. v. J.R. Normand, Inc., [2005] 2 S.C.R. 401 para 33. Such a situation is clearly not the case here. The litigants are American corporations which are amenable to suit in the state of their corporate domicile and, with respect to particular transactions, in the states where they have the requisite minimum contacts with the other party and with the transaction at issue in the lawsuit.”

“Because there obviously are other forums quite able to assume jurisdiction over the parties, we must conclude that Defendant has not carried its burden of establishing that this provision can serve as an adequate basis for jurisdiction over Plaintiff in the courts of that province. ...” .

“Under these circumstances, we normally would have little difficulty in concluding that Defendant had not met its burden of establishing that the Québec court had personal jurisdiction over Plaintiff on the basis of Article 3136.” [144].

“First, ... the district court indicated to the parties that it believed Québec’s Code authorized jurisdiction if the contract had been made in Québec or if the cause of action had arisen there. Additionally, Plaintiff, ... explicitly admits in its brief before this court that the Québec court could have had jurisdiction if the contract had been concluded in Québec or if the cause of action arose in Québec”.

“Under these circumstances, we must conclude that Defendant may be able to demonstrate that the Québec court was authorized to exercise jurisdiction if it can demonstrate that a contractual relationship was established with Plaintiff in Québec or that there was a breach of that agreement in Québec or that one of the obligations arising from the contract was to be performed in the Province. A provision of the Civil Code of Québec authorizes the exercise of jurisdiction on these bases. [Cite]. ....

“... [T]he district court took the view that the authority of Québec to exercise jurisdiction over Plaintiff had been established because all of the  orders, communications, payments, correspondence and dealings’ between the parties had taken place through Defendant’s Montreal office. ... The district court also concluded that the parties had [in fact] agreed to create a product showroom to display Plaintiff’s products to potential customers and sales agents from New England and Canada.”

“An examination of the record makes clear, however, that the district court’s factual conclusions were not undisputed. ... “          

“Plaintiff denied, explicitly, any joint venture to establish a showroom in Montreal. Indeed, none of the affidavits make explicit the precise relationship between the alleged showroom and the specific sales of allegedly defective products by Plaintiff. Under these circumstances, it is clear that genuine issues of fact remain to be resolved before the authority of Québec to exercise personal jurisdiction over Plaintiff can be established.” [145]. ...

“The exercise of personal jurisdiction over a defendant such as Plaintiff is governed by the Commonwealth’s long‑arm statute insofar as the exercise of jurisdiction also comports with the requirements of the federal Due Process Clause.[Cite] ... The Massachusetts long‑arm statute permits the exercise of personal jurisdiction when a person has transacted business within the Commonwealth or when the person has contracted to supply services or things within the Commonwealth.”

“This conferral of jurisdiction creates a specifically affiliating jurisdictional nexus; the personal jurisdiction conferred is only with respect to litigation arising out of the transaction within the Commonwealth, .... 

“ ‘First, the claim underlying the litigation must directly arise out of, or relate to, the defendant’s forum‑state activities. Second, the defendant’s in‑state contacts must represent a purposeful availment of the privilege of conducting activities in the forum state, thereby invoking the benefits and protections of that state’s laws and making the defendant’s involuntary presence before the state’s courts foreseeable. Third, the exercise of jurisdiction must, in light of the Gestalt factors, be reasonable.’

“The Gestalt factors that a court will consider include: ‘(1) the defendant’s burden of appearing, (2) the forum state’s interest in adjudicating the dispute, (3) the plaintiff’s interest in obtaining convenient and effective relief, (4) the judicial system’s interest in obtaining the most effective resolution of the controversy, and (5) the common interests of all sovereigns in promoting substantive social policies.”

“The Quebec Superior Court’s exercise of personal jurisdiction over Plaintiff did not contravene traditional notions of fair play and substantial justice. Plaintiff had several contacts with Quebec. All the orders, communications, payments, correspondence and dealings between Parties occurred through Defendant’s Montreal office. Moreover, [the] Parties agreed to create a product showroom at Defendant’s Montreal office, which was ultimately constructed. The purpose of this showroom was to display Plaintiff’s products to potential customers and sales agents from Canada and New England.”

“However, as we have noted in our earlier discussion of the Québec jurisdictional statute, the affidavits supplied by the parties were in conflict. ... [on the key issues].” [147].

“Furthermore, ... [a]bsent from the district court’s analysis is any discussion of the ‘Gestalt factors,’ which, we have made clear, a court must consider to determine the fairness of subjecting the defendant to a foreign jurisdiction. ...”

“Jurisdiction in these circumstances may not be avoided merely because the defendant did not physically enter the forum State. Although territorial presence frequently will enhance a potential defendant’s affiliation with a State and reinforce the reasonable foreseeability of suit there, it is an inescapable fact of modern commercial life that a substantial amount of business is transacted solely by mail and wire communications across state lines, thus obviating the need for physical presence within a State in which business is conducted. So long as a commercial actor’s efforts are purposefully directed toward residents of another State, we have consistently rejected the notion that an absence of physical contacts can defeat personal jurisdiction there.”

“Because the district court resolved material issues of fact against Plaintiff, the nonmoving party, the judgment must be reversed. The controverted issues of fact that Plaintiff has raised must be resolved. Accordingly, the judgment of the district court is reversed and the case is remanded for proceedings consistent with this opinion.” [148].

Citation: Evans Cabinet Corp. v. Kitchen International Inc., 593 F.3d 135 (1st Cir. 2010).

TORTURE

Second Circuit en banc affirms dismissal of complaint by dual citizen of Syria and Canada under Torture Victims Protection Act whom U.S. detained and then transferred to Syria where he was allegedly tortured; Court considers whether Plaintiff might have Bivens claim for alleged detention and torture suffered in Syria

In September 2002, U.S. authorities detained Maher Arar at John F. Kennedy Airport in New York while he was changing planes. U.S. held him for 12 days, and then transferred him to Syria where he was allegedly interrogated and tortured for 10 months. Arar alleged that he was held in a tiny underground prison cell for 10 months and repeatedly beaten during the interrogations. In October 2003, Syria released him to Canadian embassy officials.

Arar is a dual citizen of Syria and Canada. What led to his arrest was that Canadian authorities allegedly had some indication that Arar was affiliated with Al Qaeda, and so notified U.S. authorities.

In January 2004, Arar filed a Complaint, inter alia based on the Torture Victim Protection Act (TVPA), 28 U.S.C. § 1350 [(appended as a statutory note to the Alien Tort Claims Act, 28 U.S.C. Section 13500) (ATCA)] He named as defendants various U.S. Government officials including the Attorney General, the Secretary of Homeland Security, and the Director of the FBI.

A New York federal court dismissed the complaint pursuant to F.R.Civ.P. 12(b), and Arar appealed. In June 2008, the U.S. Court of Appeals for the Second Circuit held, inter alia, that Arar had failed to state a TVPA claim. See 2008 International Law Update 122. The Second Circuit voted to rehear the case en banc, and now affirms.

On the TVPA claim, the Court agrees with the prior panel that Arar had insufficiently pleaded that the alleged conduct of U.S. officials was done under color of foreign law. The Court therefore focuses on whether Arar might have a claim for improper detention and torture in Syria under Bivens v. Six Unknown Named Agents of Federal Bureau of Narcotics, 403 U.S. 388 (1971) (Bivens).

“To decide the Bivens issue, we must determine whether Arar’s claims invoke Bivens in a new context; and, if so, whether an alternative remedial scheme was available to Arar, or whether (in the absence of affirmative action by Congress) ‘’special factors counsel[] hesitation.’‘ See Wilkie v. Robbins, 551 U.S. 537, 550 ... (2007) ... This opinion holds that ‘extraordinary rendition’ is a context new to Bivens claims, but avoids any categorical ruling on alternative remedies—because the dominant holding of this opinion is that, in the context of extraordinary rendition, hesitation is warranted by special factors. We therefore affirm. ...”

“Our ruling does not preclude judicial review and oversight in this context. But if a civil remedy in damages is to be created for harms suffered in the context of extraordinary rendition, it must be created by Congress, which alone has the institutional competence to set parameters, delineate safe harbors, and specify relief. If Congress chooses to legislate on this subject, then judicial review of such legislation would be available.”

“Applying our understanding of Supreme Court precedent, we decline to create, on our own, a new cause of action against officers and employees of the federal government. Rather, we conclude that, when a case presents the intractable ‘special factors’ apparent here, ... it is for the Executive in the first instance to decide how to implement extraordinary rendition, and for the elected members of Congress – and not for us as judges – to decide whether an individual may seek compensation from government officers and employees directly, or from the government, for a constitutional violation. Administrations past and present have reserved the right to employ rendition, ... and not withstanding prolonged public debate, Congress has not prohibited the practice, imposed limits on its use, or created a cause of action for those who allege they have suffered constitutional injury as a consequence.” [563‑5]

The Court then summarizes the relevant TVPA provisions.“The TVPA creates a cause of action for damages against any ‘individual who, under actual or apparent authority, or color of law, of any foreign nation ... subjects an individual to torture.’ 28 U.S.C. § 1350 note (a)(1). Count One of Arar’s complaint alleges that the defendants conspired with Jordanian and Syrian officials to have Arar tortured in direct violation of the TVPA.”

“Any allegation arising under the TVPA requires a demonstration that the defendants acted under color of foreign law, or under its authority. Kadic v. Karadzic, 70 F.3d 232, 245 (2d Cir.1995). ‘In construing the term[] ... `color of law,’ courts are instructed to look ... to jurisprudence under 42 U.S.C. § 1983....’ Id. ... Under section 1983, ‘[t]he traditional definition of acting under color of state law requires that the defendant ... have exercised power `possessed by virtue of state law and made possible only because the wrongdoer is clothed with the authority of state law.’ The determination as to whether a non‑state party acts under color of state law requires an intensely fact‑specific judgment unaided by rigid criteria as to whether particular conduct may be fairly attributed to the state. ... A federal officer who conspires with a state officer may act under color of state law, ... but since ‘federal officials typically act under color of federal law,’ they are rarely deemed to have acted under color of state law. ...”

“Accordingly, to state a claim under the TVPA, Arar must adequately allege that the defendants possessed power under Syrian law, and that the offending actions (i.e., Arar’s removal to Syria and subsequent torture) derived from an exercise of that power, or that defendants could not have undertaken their culpable actions absent such power. The complaint contains no such allegation.” [567‑8]

Arar merely alleges that U.S. officials encouraged Syrian officials who then exercised authority under Syrian law. The defendants in this case allegedly acted under the color [of] federal law, not Syrian law. The defendants had no authority under Syrian law. Therefore, the Court agrees with the prior panel and affirms the dismissal of the TVPA claim.

The Court then turns to the Bivens issue. In Bivens, the Supreme Court first recognized an implied private action for damages against federal officers who violated a citizen’s constitutional rights. The Supreme Court, however, warned that the Bivens remedy is extraordinary and should only rarely be applied in “new contexts.” Thus, the Court now considers whether applying Bivens to this case would extend it to a “new context” and whether such an extension is advisable.

“The context of this case is international rendition, specifically, ‘extraordinary rendition.’ Extraordinary rendition is treated as a distinct phenomenon in international law. ... Indeed, law review articles that affirmatively advocate the creation of a remedy in cases like Arar’s recognize ‘extraordinary rendition’ as the context. ... More particularly, the context of extraordinary rendition in Arar’s case is the complicity or cooperation of United States government officials in the delivery of a non‑citizen to a foreign country for torture (or with the expectation that torture will take place). This is a ‘new context’: no court has previously afforded a Bivens remedy for extraordinary rendition.”

“Once we have identified the context as ‘new,’ we must decide whether to recognize a Bivens remedy in that environment of fact and law. The Supreme Court tells us that this is a two‑part inquiry. In order to determine whether to recognize a Bivens remedy in a new context, we must consider: whether there is an alternative remedial scheme available to the plaintiff; and whether ‘`special factors counsel[] hesitation’’ in creating a Bivens remedy. ...” [572].

There are alternative remedial schemes. For example, review of orders of removal from the U.S. is reviewable, and there are rules governing the removal of aliens who pose national security risks. Arar claims that U.S. officials prevented him from seeking these remedies. The Court, however, does not decide whether or not there was a remedial scheme available to Arar. There are special factors present in this case that counsel hesitation. Judicial precedent has found “special factors” that have “counseled hesitation” in cases involving the military, separation of powers, national security, and foreign policy. [573].

“It is a substantial understatement to say that one must hesitate before extending Bivens into such a context. A suit seeking a damages remedy against senior officials who implement an extraordinary rendition policy would enmesh the courts ineluctably in an assessment of the validity and rationale of that policy and its implementation in this particular case, matters that directly affect significant diplomatic and national security concerns.”

“It is clear from the face of the complaint that Arar explicitly targets the ‘policy’ of extraordinary rendition; he cites the policy twice in his complaint, and submits documents and media reports concerning the practice. His claim cannot proceed without inquiry into the perceived need for the policy, the threats to which it responds, the substance and sources of the intelligence used to formulate it, and the propriety of adopting specific responses to particular threats in light of apparent geopolitical circumstances and our relations with foreign countries.” [574‑5].

“To determine the basis for Arar’s alleged designation as an Al Qaeda member and his subsequent removal to Syria, the district court would have to consider what was done by the national security apparatus of at least three foreign countries, as well as that of the United States. Indeed, the Canadian government - which appears to have provided the intelligence that United States officials were acting upon when they detained Arar - paid Arar compensation for its role in the events surrounding this lawsuit, but has also asserted the need for Canada itself to maintain the confidentiality of certain classified materials related to Arar’s claims.” [ 576].

Citation: Arar v. Ashcroft, 585 F.3d 559 (2d Cir. 2009).

EU approves EU‑U.S. Extradition and Mutual Legal Assistance agreements. On October 23, 2009, the European Union Council adopted Decision 2009/820/CFSP. This approves the Agreement on Extradition, as well as the Agreement on Mutual Legal Assistance (AMLA) between the EU and the U.S. Officials signed both Agreements in Washington on June 25, 2003, and they will enter into force for the EU on February 1, 2010. The Agreement on Extradition clarifies the nature of extraditable offenses, and the procedure for exchanging information and transmitting documents between the parties. Extradition to the U.S. will only take place on condition that U.S. courts will not impose or carry out the death penalty. In criminal investigations, the AMLA broadens the exchange of financial information between the two parties. For example, one party may inquire whether a suspect holds a bank account within the jurisdiction of the other party, and obtain details of his financial transactions. Also, the parties may set up joint investigative teams. They agree to make use of video conferencing to obtain testimony from lay or expert witnesses for use in criminal proceedings. Both agreements contain “non‑derogation” clauses that maintain the refusal provision and safeguards already existing in bilateral treaties between the EU Member States and the U.S. Citation: 2009 Official Journal of the European Union (L 291) 40 & (L 323) 11; Council of the European Union press release 14826/09 (Presse 303)(23 October 2009). For full text of agreements see website of EU Treaty Office database, ec.europea.eu.

Germany and U.S. sign first agreement on coordinating science and technology research. The Governments of the United States and the Federal Republic of Germany have signed a Science and Technology Agreement in a ceremony at the U.S. Department of State. By providing an overall framework for bilateral cooperation, this ground‑breaking Agreement will improve the planning and the carrying out of joint future activities between German and American scientists. The Agreement will also provide for procedures to address any obstacles to cooperation that may arise.. It should also bring various German and American agencies and research institutes together to address intersecting scientific issues and provide mutual scientific, social, and economic benefits to the peoples of both nations. In addition to this Agreement, the U.S. and Germany signed two Memoranda of Understanding in the fields of energy and cancer research. Under the combined arrangements, the U.S. and Germany hope to advance bilateral cooperation on the issues of health, climate change and the ocean and water sciences. These include the fields of stem cell research and rare diseases. Citation: Press Release 2010/189, Office of the Spokesman, U.S. Dept. of State, Thursday, February 18, 2010 at 15:16:25‑0600.

French courts convict twelve for passing off French wine made from merlot and syrah grapes as from pinot noir grape. According to reports from Toulouse, a city of over 350,000 in south central France, and Carcasonne, a smaller town farther east, French courts have convicted a dozen people, from wine growers to a wine merchant, in a joint venture that exported bogus Pinot Noir from this region to the United States. One of the victims was California giant E. & J. Gallo Winery. The southern Languedoc‑Roussillon is not known for producing Pinot Noir, a thin‑skinned grape mainly linked to the Burgundy wine region in east central France. On charges of deception and forgery, the court has handed out sentences to eight vintners and wine cooperatives from this region that ranged from suspended sentences to fines equivalent to $54,000. The Prosecutor explained to the Associated Press over the phone that some defendants were passing off Merlot and Syrah grapes as Pinot Noir in a plot that lasted from January 2006 to March 2008. A spokeswoman for Gallo stated that the company was “deeply disappointed” that the court has convicted Dugasse and Sieur d’Arques, two of its suppliers She stressed that Gallo is no longer selling that wine to its customers. Several defendants maintain their innocence and may appeal their convictions. Citation: Associated Press (online), Toulouse, France, Thursday February 18, 2010 at 14:27:31 GMT (byline of Johanna Decorse, AP writer).

Islamic Man who makes French wife veil her face denied French citizenship. French authorities have declined to award citizenship to an Islamic man who forces his French wife to wear a face‑covering veil. For several years, the government has been denouncing head‑to‑toe veils, and may later ban the wearing of them in public. President Nicolas Sarkozy has regarded the veils as debasing to women, thus making them unwelcome in France. Some look upon Mr. Sarkozy as a law‑and‑order conservative whose relations with the Muslim community have often been uneasy. For example, he has openly favored an all‑out ban on the burqa, niqab and other face‑covering Muslim veils. Immigration Minister Eric Besson said the decision derives from French law which allows the authorities to turn down applicants for citizenship who fail to respect French national values. Prime Minister Francois Fillon, who has the final say, has said he will approve Mr. Besson’s order. Besson’s office said it had spurned the man’s application because the applicant had withheld from his wife the freedom to go about with her face uncovered. The so far unidentified man had declared “I don’t believe in gender equality; women have inferior status; I will not respect the principles of the secular society,” he told reporters. The ruling does not result in the man’s deportation since he can remain in France under his long‑term visa. Muslim leaders reacted circumspectly to Mr. Besson’s announcement, with some condemning the man’s behavior. Citation: Associated Press (online), Paris, Thursday, February 4, 2010 at 12:41:31 GMT (byline of Jenny Barchfield, AP writer with AP writers Nicolas Garriga and Jeffrey Schaeffer contributing).

Swiss high court ruling may hinder investigation of U.S. taxpayers with undeclared assets in secret Swiss bank accounts. In Switzerland, the highest Federal Administrative Tribunal (FAT) has marked out certain limitations on Swiss government cooperation with Washington in a U.S. investigation against banking giant UBS AG. Switzerland cannot hand over files on 26 suspected tax cheats to U.S. authorities because their failure to properly declare assets held abroad doesn’t constitute fraud under Swiss law. It could also adversely affect the way Switzerland can handle the cases of some 4,400 other Americans suspected of trying to evade U.S. taxes by relying on Swiss bank secrecy. In the first appeal by former UBS customers against the handover of their banking details to U.S. authorities, the FAT found that one client’s failure to fill out a supplementary U.S. tax form did not constitute fraudulent behavior. Both Swiss law and the 1996 agreement with the U.S. require evidence of such fraud for Switzerland to lift its strict banking secrecy rules. The FAT points out that Swiss law distinguishes sharply between evasion and fraud: simply failing to act appropriately—such as by omitting to fill out a so‑called W‑9 form to declare assets held abroad—doesn’t as such amount to fraudulent behavior. While the IRS has not yet had a chance to study the ruling, it says it remains optimistic that the Swiss government will continue to honor the 1996 disclosure agreement. Citation: The Associated Press (online), Geneva, Switzerland, Friday, January 22, 2010 at 20:31:49 GMT (byline of Frank Jordans, AP writer).