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

Mike Meier, summary of legal developments. Copyright 2017 Mike Meier, Attorney at Law.

1995 International Law Update, Volume 1, Number 10 (October).

ARBITRATION

Seventh Circuit rules on whether federal courts have power to compel arbitration between two foreign citizens where arbitration agreement fails to specify either location for arbitration or method of choosing panel

M. de Mere, a French national who held patents on ballasts for fluorescent and other lamps, contracted with Mr. Jain, an Indian citizen, for the latter to help the former to market his inventions. A clause in the contract provided that the parties could only submit a dispute to an arbitral body "applying French laws." When a dispute arose over Jain's proper share of the royalty moneys Motorola Lighting, Inc. of Illinois was paying de Mere, Jain demanded arbitration in Illinois. De Mere, however, objected that arbitration had to take place in France. When Jain petitioned the local federal district court for enforcement, the court held that it had jurisdiction under the Federal Arbitration Act [FAA] [9 U.S.C. §1ff] relating to international commercial arbitration and the New York Convention [21 U.S.T. 2517] but that the failure of the contract to specify either a place for the hearing or the manner of choosing arbitrators made it impracticable to enforce the agreement.

The U.S. Court of Appeals for the Seventh Circuit, however, reverses and remands the case. The Court first holds that the fact that French law was to apply does not control either the place of arbitration or the manner of choosing the panel. Section 4 of FAA requires a federal court to compel arbitration in its own district in the absence of the parties' choice of place and §5 allows the court to name the arbitrators where the agreement is silent on that point.

Nor do jurisdictional difficulties bar local arbitration. M. de Mere failed to object in timely fashion to lack of personal jurisdiction or to defective service of process. Nor has he moved to dismiss on grounds of forum non conveniens. "To the extent future parties wish to avoid the uncertainty of leaving the forum question open, they can always specify the location of arbitration and the method of selecting an arbitrator in their initial agreement." [692]

Citation: Jain v. De Mere, 51 F.3d 686 (7th Cir. 1995).

CHOICE OF LAW

Third Circuit reads Lauritzen, Romero and Hellenic Lines cases as governing choice of law, not subject matter jurisdiction

The U.S. Court of Appeals for the Third Circuit, in an en banc opinion, holds that the multi-factored analysis established by Lauritzen v. Larsen, 345 U.S. 571 (1953), Romero v. International Terminal Operation Co., 358 U.S. 354 (1959) and Hellenic Lines Ltd. v. Rhoditis, 398 U.S. 306 (1970) governs choice of law, not subject matter jurisdiction, in Jones Act and American general maritime law claims.  The present case involves a claim by a crewmember, a young American woman, who was injured by the propellers of a scuba diving vessel at a resort in St. Lucia.

As for the reasonableness of applying U.S. law, the Court explains: "If the court concludes that the evidence as a whole does not establish the existence of any foreign contacts that would provide a foreign nation with a basis for prescriptive jurisdiction, the plaintiff immedi-ately prevails on the choice of law issue:  a preponderance of -- indeed, all -- the evidence shows that the application of American law in such a case is reasonable.  As long as the plaintiff has shown a basis for prescriptive jurisdiction, ... American interests are implicated, and maritime law may apply unless concerns about conflicts with the law of other interested nations compel the conclusion that this would not be reasonable." [40]

Even though there were foreign contacts here, the defendants failed to present information concerning what potentially applicable St. Lucian law might provide.  Unable to determine the extent of foreign interests at stake, the Court sees application of American law as reasonable, unless virtually all of the Lauritzen factors point away from the U.S.  The Court then proceeds to apply those factors, which are (a) the inaccessibility of a foreign forum, (b) the law of the forum, (c) the place of the wrongful act, (d) the place of contract, (e) the law of the flag, (f) the defendants' allegiance, bases of operation, and other contacts with the U.S., and (g) the domicile or allegiance of the injured seaman. Concluding that the application of American law is reasonable, the Court remands for entry of judgment for the plaintiff on the Jones Act and related claims.

Citation:  Neely v. Club Med Management Services, Inc., No. 93-2069 (3rd Cir. July 26, 1995).

COMPETITION

United States and Europe reach agreement on mutual cooperation in the enforcement of their respective competition laws

Effective retroactively to September 23, 1991, the United States and the European Community concluded an agreement that will govern the interaction between the U.S. and EC competition laws.  Since the European Court of Justice had found that the EC Commission alone lacked competence to approve such an arrangement, the EC Council concluded it on April 10, 1995.

Under this agreement, each party must notify the other whenever its competition authorities become aware that their enforcement activities may affect important interests of the other party (which includes mergers and acquisitions). The EC and U.S. competent authorities may coordinate their enforcement activities.

To avoid conflicts, the agreement outlines factors to determine whether a party's "important interests" are affected by a certain enforcement activity, and provides for consultations.

The competent authority for the EC is the Commission. The Antitrust Division of the U.S. Department of Justice and the Federal Trade Commission are the competent authorities for the U.S.

The agreement broadly defines "anticompetitive activities" as any conduct or transaction that is impermissible under the competition laws of either party.

Citation: Decision of the Council and the Commission of 10 April 1995 concerning the conclusion of the Agreement between the European Communities and the Government of the United States of America regarding the application of their competition laws, 1995 Official Journal (L 95) 45, April 27, 1995.  The interpretative letter should be replaced by the one published in a corrigendum at 1995 Official Journal (L 131) 38, June 15, 1995.

United States enacts statute regulating the disclosure of information by the Department of Justice and the Federal Trade Commission to certain foreign authorities engaged in antitrust enforcement

On November 2, 1994, the "International Antitrust Enforcement Assistance Act of 1994" went into effect as Public Law 103-438. Assuming the existence of an antitrust mutual assistance agreement [AMAA] to share antitrust information between the United States and another country, the statute provides the appropriate domestic machinery for aiding the foreign antitrust authority (FAA). The United States and Canada have a 1984 memorandum of understanding on this subject [see 23 I.L.M. 275] and the EC Council has recently approved such an arrangement [see above].

Among the issues addressed by P.L. 103-438 are the following. In addition to information sharing, §3 authorizes American authorities to initiate a domestic investigation at the request of an FAA. In §4, there is machinery for federal district courts to provide judicial assistance to the FAA such as by taking testimony or obtaining documents. Exceptions to such cooperation are found in §5, e.g., for certain privileged information. Section 7 regulates the publication of proposed AMAA's. There is an extensive definition of statutory terms in §12. Other sections deal with conditions on use of AMAA's, limitations on judicial review, preservation of existing authority, reports to congress and authority to receive reimbursements for assistance given to an FAA.

Citation:  108 Stat. 4597, 34 I.L.M. 494-502 (1995).

CRIMINAL PROCEDURE

DC District Court finds federal extradition statute unconstitutional on Separation of Powers grounds

Two off-duty Chicago police officers allegedly tried to take a woman from her Canadian parents and back to the U.S. Canada sought to extradite them on kidnapping charges.  The U.S. District Court for the District of Columbia holds, however, that the 150-year-old extradition statute [18 U.S.C. §§3181-3195] violates separation of powers.

Judge Lamberth explains this result: "Once a federal extradition judge has certified an individual as extraditable, §3184 commits to the Secretary of State's sole discretion the decision whether to complete the extradition process by signing a warrant of surrender.  ... The question presented by this case is whether a statute may confer upon the Secretary of State the authority to review the legal determinations of federal extradition judges.  Upon consideration of the relevant authorities, the court finds that, while the statute certainly purports to grant the Secretary this power, it is a power which the Constitution forbids him from exercising." [6]

Thereafter, the plaintiffs filed a motion for emergency relief.  On September 15, 1995, Judge Lamberth issued a two-page order certifying as a class all people against whom the U.S. Government has sought or will seek extradition. He then enjoined the U.S. from physically extraditing anyone to any foreign state until the issue has been resolved on appeal.

Citations: Lobue v. Christopher, No. 95-1097 (D.D.C. August 31, 1995).

Switzerland to revise law on international judicial assistance in criminal matters with effects on the Swiss-American MLAT

On May 23, 1995, the Swiss Government issued a Note concerning proposed changes in the Swiss Law on Judicial Assistance, the Treaty with the U.S. on Judicial Assistance in Criminal Matters, and on a Reservation concerning the European Agreement on Judicial Assistance in Criminal Matters.

The proposed revisions will address the delays in judicial assistance that parties have experienced in the past (for example in the Pemex and Marcos cases).  The delays are due to the burdensome procedure required by the Law on Judicial Assistance in Criminal Matters (Bundesgesetz vom 20. März 1981 über internationale Rechtshilfe in Strafsachen, IRSG), because procedures differ among the Swiss Cantons, and because parties have abused procedural remedies to delay the process.

  In particular, the revisions will simplify the IRSG, for example, by limiting the procedural remedies, by dropping the formal objection, and by unifying the procedure for judicial assistance for the whole country. According to the proposal, only individuals who are directly affected by a measure of judicial assistance may lodge an objection.

The proposal would reserve Switzerland's right to refuse judicial assistance if a court has already considered the subject matter in a criminal proceeding. They would also require that the requesting party use the results of the judicial assistance only for the purposes specified in the official request.

The Note contains the drafts of the revised IRSG, the revised Law on the Treaty with the U.S. on Mutual Assistance in Criminal Matters (Bundesgesetz vom 3. Oktober 1975 zum Staatsvertrag mit den Vereinigten Staaten von Amerika ueber gegenseitige Rechtshilfe in Strafsachen, BG-RVUS), and the Swiss reservation to the European Convention.

The competent authority for judicial assistance in criminal matters in Switzerland is the Federal Police Agency (Bundesamt für Polizeiwesen).

Citation:  Botschaft betreffend die Änderung des Rechtshilfegesetzes und des Bundesgesetzes zum Staatsvertrag mit den USA ueber gegenseitige Rechtshilfe in Strafsachen ..., 1995 Bundesblatt, number 20, Band III, May 23, 1995. The Treaty on Mutual Assistance in Criminal Matters, United States‑Switzerland (May 23, 1973) is at 27 U.S.T. 2019, T.I.A.S. No. 8302 (entered into force January 23, 1973).

ENVIRONMENT

EC and Canada to agree on fishing quotas to resolve recent shooting dispute in North Atlantic

The EC Commission published a proposal for an agreement with Canada on fisheries in the North Atlantic.  A dispute between the EC and Canada developed in March of this year when Canada seized the Spanish fishing boat "Estai" in international waters just outside the 200-mile zone near Newfoundland.  The Canadian navy fired warning shots at Spanish vessels, and the Spanish dispatched its navy vessels for the protection of its fishing fleet.

The dispute began on February 1, when the North Atlantic Fisheries Organization (NAFO), which sets voluntary quotas for member states in international waters, granted Canada a 1995 quota for turbot (Greenland halibut) of 16,300 metric tons, while granting the EC only 3,200 tons.  Canada justified its stance as aiming to preserve the turbot in the overfished waters.  The EC nevertheless intended to catch up to 19,000 tons.

The Commission has come up with a proposal for an agreement to resolve the conflict, which may very well become a model for preserving common resources.  The agreement applies provisionally until December 31, 1995, or until adopted by NAFO, if that is earlier.  The agreement provides that the EC and Canada propose to the NAFO Fisheries Commission specific measures to improve fisheries control and enforcement. These include tonnage limits for catches of turbot, satellite tracking of fishing vessels and reports to NAFO of turbot catches at least every 48 hours.

Citation:  Proposal for a Council Decision on the conclusion of the Agreement on fisheries in the form of an agreed minute, an exchange of letters, an exchange of notes and the annexes thereto, between the European Community and the Government of Canada, 1995 Official Journal (C 239) 8, September 14, 1995.

GOVERNMENT PROCUREMENT

United States and Europe come to agreement on government procurement to ensure equal treatment of suppliers

The EC Council approved an agreement with the United States on government procurement to ensure equal treatment of suppliers of goods and services.  The agreement takes the form of an exchange of letters.

The letter of U.S. Trade Representative Mickey Kantor confirms, inter alia, that:

The U.S. and the EC have agreed to amend their respective Appendix I of the Government Procurement Agreement signed at Marrakesh on 15 April 1995 as set out in the attachments to the letters.

The U.S. shall grant to EC suppliers of goods and services, including construction services, treatment no less favorable than for out-of-state suppliers for the Massachusetts Port Authority and for the states of West Virginia, North Dakota and as regards Illinois for procurement not covered by the Government Procurement Agreement, and for out-of-city suppliers for the cities of Boston, Chicago, Dallas, Detroit, Indianapolis, Nashville and San Antonio.

The U.S. and the EC shall cooperate and take all necessary steps to improve substantially the transparency of the notices of intended procurement in order to ensure that contracts covered under the Government Procurement Agreement can clearly be identified as such.

The answer of Sir Leon Brittan, on behalf of the EC Commission, agrees that the Kantor letter, his reply and the attachments shall constitute an agreement.

 The Notes to the Annexes explain certain special requirements and exceptions.  For example, the agreement does not apply to procurement of construction-grade steel, motor vehicles and coal for certain state entities.  Nor does it deal with preferences and restrictions in programs for the development of distressed areas and businesses of minorities, veterans and women.

Citation:  Council Decision of 29 May 1995 concerning the conclusion of an Agreement in the form of exchange of letters between the European Community and the United States of America on government procurement, 1995 Official Journal (L 134) 25, June 20, 1995.

United States and Japan agree on opening up Medical Technology Procurement by Japanese government to American firms

In an exchange of letters on November 1, 1994, United States and Japanese officials reached an agreement designed to open up opportunities for American firms to sell their medical technology products and services to the Japanese government. Though Japan is a member of the GATT Government Procurement Code, a number of factors have limited foreign access to this market. For example, foreign firms have encountered great difficulty in taking part in earlier stages of procurement. Moreover, the tailoring of technical specifications to the advantage of Japanese manufacturers, and the awarding of many contracts to domestic suppliers without competitive bidding have put U.S. firms at a disadvantage.

The agreements aim to address these and other problems. Inter alia, the Letters set quantitative and qualitative criteria to assess the degree of progress, provide for nondiscriminatory, open and fair public sector procurement procedures, require a "national treatment" approach, and set up reporting, periodical review and complaint machinery. There is also a detailed list of central government departments and other entities covered by the new measures.

Citation: Japan-United States: Exchange of Letters Containing Medical Technology Procurement Agreement, 34 I.L.M. 78-101 (1995).

IMMIGRATION

Second Circuit holds that China's "one child" policy does not entitle Chinese citizen to asylum or to withholding of deportation

Xin-Chang Zhang arrived in the U.S. on board the smuggling ship "Golden Venture" that grounded on a Rockaway, Queens, beach. Zhang applied for asylum or withholding of deportation based on China's coercive family planning policies. The district court granted Zhang's petition for a writ of habeas corpus.

The U.S. Court of Appeals for the Second Circuit, however, reverses. It finds that Zhang's alleged fear of forced sterilization if returned to China is not enough to grant him asylum or withholding of deportation.

The Court points out that the President and Congress could make the necessary legal changes to implement a more favorable immigration policy for refugees under such circumstances.  The Court is not willing to remedy the deficiency by creating such a "political" rule.

Citation: Zhang v. Slattery, 55 F.3d 732 (2nd. Cir., 1995).

JUDGMENTS

Refusal to enforce Korean court order based on confession of judgment for lack of notice of execution of that order upon debtor's property is upheld in Third Circuit

Mr. Choi of Korea agreed to ship cash boxes to Mr. Kim, also a Korean, for sale in the United States.  Their arrangements included a confession-of-judgment provision and a "compulsory execution" clause allowing Choi to levy on Kim's property immediately upon default.  Kim did default and Choi got a Korean court order for execution against Kim's assets.  At this point, Kim fled from Korea and transferred his assets to third parties in New Jersey.  Choi then sued Kim and the transferees in the New Jersey federal court to enforce the Korean court's "judgment." The district court, however, gave summary judgment to Kim.

The U.S. Court of Appeals for the Third Circuit affirms. Assuming (without deciding) that the Korean court order constituted a "judgment," the Court points out that the FCN treaty between the United States and Korea [8 U.S.T. 2217] elevated Korean court judgments to the level of sister state judgments governed by full faith and credit standards. Noting that local state law on enforcement of foreign country judgments should govern in diversity cases, the Court reads New Jersey law as requiring its courts to deny enforcement to out-of-state judgments if the rendering court had failed to provide reasonable notice to the judgment debtor.  The Court holds that the Korean "judgment" fails because of a lack of notice to Kim of the execution order. New Jersey law generally honors clauses wherein debtors knowingly and voluntarily waive notice before issuance of the execution order. This is not the same, however, as pre-seizure notice. Moreover, in dispensing with notice as to debtors who are abroad, Korean procedure itself does not comport with American due process standards.

Citation: Choi v. Kim, 50 F.3d 244 (3rd Cir. 1995).

JUDICIAL ASSISTANCE

Under 28 U.S.C. §1782, Second Circuit reviews denial of discovery in United States requested by parties to French litigation

Two insurance firms engaged in an appeal of a $10,000,000 judgment in a civil action in the French courts won by Ralph Esmerian, Inc., a New York jewelry designer, sought a court order authorizing them to depose witnesses and obtain documents from Esmerian pursuant to 28 U.S.C. §1782.  A key issue in the litigation was whether the insurance firms had breached their duty of giving notice that a jewel courier was untrustworthy.  The courier had later made off with $26,000,000 worth of Esmerian's gems.

The district court declined to issue the order on the grounds that it would amount to an unwarranted intrusion into the powers of the French courts whose rules are relatively restrictive on the scope of discovery and place control of production of documents and witnesses in the court.  Thus, granting the requested order would allow the parties to engage in "American-style" discovery with detriment to the French procedures. 

In reversing for reconsideration, the Second Circuit, in a two-to-one split, holds that trial judges need not seek to delve deeply into foreign procedures or to demand that discovery under §1782 precisely match the degree of disclosures allowed under the law of the forum.  The goal of the statute is (1) to promote efficiency in international litigation and (2) to persuade other nations to do likewise. In the absence of a clear directive in forum law banning a particular type of discovery, American trial judges should not deny all relief merely because of procedural differences. If certain material obtained under §1782 turns out to be inadmissible under French law, the French courts are perfectly able to make that decision.

Citation: Euromepa S.A. v. R. Esmerian, Inc., 51 F.3d 1095 (2nd Cir. 1995).

Fifth Circuit rejects statutory and due process challenges to execution of letter rogatory from Venezuelan civil court pursuant to 28 U.S.C. §1782

A Venezuelan subsidiary of Electronic Data Systems Corporation (EDS) was litigating a labor dispute in a Venezuelan civil court against a Venezuelan national. The civil court issued a letter rogatory requesting that the U.S. District Court for the Northern District of Texas obtain testimony from EDS witnesses and authenticate designated EDS documents located there.

 The court-appointed commissioner issued subpoenas to three named witnesses and one to EDS's "custodian of records." EDS, however, filed a motion to modify or quash the subpoenas which the district court rejected.  On appeal, EDS first argued that the letter rogatory sought documents that were not "discoverable" under Venezuelan law. The U.S. Court of Appeals for the Fifth Circuit, however, notes the overwhelming federal authority holding that discoverability under the law of the requesting state is not a condition of granting judicial assistance under 28 U.S.C. §1782. Especially where the request comes directly from the foreign court, second-guessing the availability of the evidence under foreign law might jeopardize the spirit of international judicial cooperation and reciprocity that congress intended to advance in this statute.

Secondly, EDS complained that the request failed to satisfy American due process standards. The Court, however, rejects the notion that every foreign letter rogatory has to spell out specific questions to be put to the witness as recommended in 22 C.F.R 92.67(b). Moreover, the failure to designate a specific record custodian is not a problem since F.R.Civ.P. 30(b)(6) allows EDS to do the designating. The Court therefore affirms the judgment granting judicial assistance.

Citation: In re Letter Rogatory from the First Court of First Instance in Civil Matters, Caracas, Venezuela, 42 F.3d 308 (5th Cir. 1995).

JURISDICTION

Second Circuit enforces forum selection clause in cruise ship ticket

Nettie Effron suffered injuries during her South American vacation aboard the cruise ship Stella Solaris.  She had bought the travel package through her travel agent from Sun Line Cruises, a New York company.  The owner of the Stella Solaris is Sun Line Greece, a Greek business.  Effron sued both companies.

The companies moved to dismiss based on the forum selection clause on the back of the "Passenger ticket and contract."  It provided that "any action against the Carrier must be brought only before the courts of Athens[,] Greece to the jurisdiction of which the Passenger submits himself formally excluding the jurisdiction of all and other court or courts of any other country ..."  The district court denied the motion, and the U.S. Court of Appeals for the Second Circuit now reverses.  The Court explains that the legal effect of a forum-selection clause depends in the first instance upon whether its existence was reasonably communicated to the plaintiff.  The issue of reasonable notice is a question of law.  Here, the ticket resembled an airline ticket which has on its face "IMPORTANT NOTICE - READ BACK BEFORE ACCEPTING."  The Second Circuit has upheld provisions in passage contracts that were similar.

  The forum-selection clause does not violate notions of fundamental fairness.  For example, courts in the Southern District of New York have twice enforce contracts designating Greek courts as the exclusive forum.  A forum is not necessarily inconvenient because of its distance if it can be reached in a few hours of air travel.  Moreover, the Second Circuit is concerned more with a forum of contract than with convenience.  The costs and difficulties of suing in Greece do not satisfy The Bremen [inconvenience] standard.  The district court should have enforced this forum-selection clause.

Citation:  Effron v. Sun Line Cruises, Inc., No. 94-9279 (2nd Cir. September 11, 1995).

Ninth Circuit reverses contempt ruling against Luxembourg bank based on bank's violation of TRO and holds that issuing federal court lacked personal jurisdiction over bank

Reebok International Limited (RIL) filed suit in a California federal court against Byron McLaughlin for violating the Lanham Act by counterfeiting RIL's footwear. It also obtained a TRO to freeze various McLaughlin bank accounts including $2,400,000 in Banque Internationale à Luxembourg (BIL). BIL does no business in California or anywhere in the United States. RIL had a copy of the TRO served on BIL in Luxembourg but failed to register it in the Luxembourg courts to make the TRO enforceable under Luxembourg law. McLaughlin had also gotten an order from a Luxembourg court ordering BIL to release the funds to another McLaughlin corporation which it did. At RIL's request, the federal court held BIL in contempt and fixed compensatory sanctions at $2,680,000. BIL appealed, claiming lack of subject matter and personal jurisdiction. The U.S. Court of Appeals for the Ninth Circuit reverses on the grounds that the district court lacked personal jurisdiction over BIL.

The Court first rejects BIL's point on subject matter jurisdiction. It notes that it has applied the Lanham Act to activities occurring outside the United States and holds that the district court had subject matter jurisdiction over the enforcement of its own orders.  The Court does, however, find an absence of personal jurisdiction. Only specific jurisdiction applies here and BIL's actions to assist McLaughlin to evade the TRO all took place entirely in Luxembourg. Moreover, RIL had failed to make the TRO enforceable by registering it pursuant to Luxembourg law. In addition, that law imposed a duty upon its banks to surrender deposits upon demand and required BIL to keep its arrangements with McLaughlin secret. Finally, it would be unreasonable to find BIL contumacious for complying with local law and court orders rather than an unenforceable foreign TRO.

Citation: Reebok International Ltd. v. McLaughlin, 49 F.3d 1387 (9th Cir. 1995).

Ninth Circuit rules on federal jurisdiction over suit against Mexican domiciliary and on comity properly given to Mexican law banning foreign ownership of Mexican land

In 1969, Brady and Cardwell, two California investors, wanted to buy several thousand acres of Mexican coastal land on which to build a hotel. They soon found that it lay within a zone where Mexican law barred foreign ownership. Chester Brown, a U.S. citizen domiciled in Mexico, came up with a scheme whereby the investors could use Mexican citizens as straw parties to evade the Mexican Constitution. Through a complex series of manipulative transactions, however, Brown and his Mexican relatives ended up as owners of the land to the disadvantage of Brady and Cardwell. The latter sued Brown and his relatives under RICO with pendent California claims for fraud and constructive trust. After a bench trial, the judge gave judgment to Brady and Cardwell and ordered Brown to convey the title to the land to a bank trust acceptable to the Mexican government. Defendants appealed.

The U.S. Court of Appeals for the Ninth Circuit affirms the judgment based on state law, the RICO counts having been dismissed. The Court first points out that the presence of Chester Brown as defendant destroyed complete diversity, since he was neither a domiciliary nor a citizen of any American state nor was he an alien pursuant to 28 U.S.C. §1332. Nevertheless, the state law claims did arise out of the same nucleus of operative facts as the federal RICO claims. Though dismissed, these can serve as the basis for pendent federal jurisdiction over the state fraud and constructive trust claims. The Court also rejects appellants' arguments that the California courts would under the doctrine of comity apply the Mexican law making direct foreign ownership illegal and void. Unlike prior California precedents, this case involves a clear case of fraud upon a client. Moreover, the trust arrangement the trial judge ordered was not only sensitive to Mexican legal requirements but also calculated to recover the profits lost by plaintiffs as a result of defendants' wrongdoing.

Citation: Brady v. Brown, 51 F.3d 810 (9th Cir. 1995).

LITIGATION ISSUES

Term "habitual resident" under child abduction convention is defined by Third Circuit

In a case of first impression, the Third Circuit rules on a petition under the Hague Convention on the Civil Aspects of International Child Abduction.  The United States has implemented this Convention via the International Child Abduction Remedies Act, 42 U.S.C. §11601 et seq.

The marriage of two U.S. citizens, the Feders, fell apart after they moved to Australia.  Mrs. Feder returned to the U.S. with their son Charles.  Edward Feder alleged that Mrs. Feder "wrongfully retained" their son in the U.S., and requested his return to Australia.  The district court held that the U.S. was Charles' "habitual residence" under Article 3a of the Convention, and denied Feder's petition.  Edward appealed.

As to the meaning of "habitual resident," the Third Circuit declares that "a child's habitual residence is the place where he or she has been physically present for an amount of time sufficient for acclimatization and which has a 'degree of settled purpose' from the child's perspective." [14]  The Court finds that Australia is the place of Charles' "habitual residence" and that he was "wrongfully retained" within the meaning of the Convention.  Under the Convention, the conflict of law rules as well as the internal law of the child's habitual residence apply in determining a parent's custody rights (in this case Australia's Family Law Act of 1975). The Court remands to determine whether the exception of Article 13b of the Convention might apply.  It prevents the return of the child if it would expose him to a grave risk of psychological or physical harm or otherwise place him in an intolerable situation.

Citation:  Feder v. Evans-Feder, No. 94-2176, 64 U.S.L.W. 2106 (3rd Cir.  August 8, 1995).

Second Circuit sets measure of damages for injuries arising out of crash of international flight

On September 1, 1983, Soviet aircraft shot down KAL KE007 which had strayed into Soviet air space over the Sea of Japan, killing all 269 passengers. According to experts, the plane had remained airborne for about twelve minutes after being hit by missiles. In a suit in New York federal court pursuant to the Warsaw Convention, two relatives of a deceased passenger won a total jury verdict of $375,000 for loss of society, mental injury and grief, conscious pain and suffering and loss of support and inheritance. KAL appealed claiming that the Death on the High Seas Act (DOHSA) applied and it expressly limits recovery to pecuniary losses.

The Second Circuit affirms in part and reverses in part. It first notes that DOHSA did not apply but that federal judge-made maritime law governed the measure of damages in suits under the Warsaw Convention whether the incident occurred over land or water. Under federal law, the Court concludes (1) that maritime law allows damages for loss of society if claimant shows dependency, (2) that it does not allow additional damages for mental injury or grief; and (3) that it does not provide for loss of support and inheritance unless claimant proves dependency. 

Citation: Zicherman v. Korean Air Lines Co., Ltd., 43 F.3d 18 (2nd Cir. 1994), cert. granted, 63 U.S.L.W. 3745, 3753 (1995).

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

SOVEREIGN IMMUNITY

In District of Columbia Circuit, Court holds that agencies of State of Iran were engaged in commercial activities that had a direct effect in the United States under §1605 of the FSIA

After McKesson Corporation had for several years provided capital and expertise to support a dairy company operating in Iran (Pak Dairy), various agencies in Iran began to interfere with McKesson's investment. McKesson sued the Islamic Republic of Iran for damages under the Foreign Sovereign Immunities Act of 1976 (FSIA) alleging that Iran had effectively severed McKesson's financial links to Pak Dairy. Iran, however, had the matter referred to the Claims Commission set up by the 1981 Algiers Accords. The Commission awarded McKesson substantial contract and other damages.

In 1988, McKesson revived its FSIA suit claiming a subsequent expropriation. In a 1990 interlocutory appeal, the U.S. Court of Appeals for the District of Columbia Circuit held that Iran had acted "in connection with a commercial activity" with "substantial, foreseeable and direct effects" in the United States so as to support federal jurisdiction over Iran under FSIA §1605(a)(2).

On remand, the district court denied Iran's motions to dismiss for lack of jurisdiction and found that the interfering entities were agents of the Iranian government. Iran again appealed, claiming that the intervening Supreme Court opinion in Republic of Argentina v. Weltover, 504 U.S. 607 (1992) had undermined the circuit court's earlier interpretation of §1605(a)(2).

The Court affirms the FSIA rulings. Although Weltover had removed the requirements of showing that the effects were "substantial and foreseeable," it did not impair the Circuit's prior holding on directness, which thus remains the law of the case.

In addition, the Court finds that substantial evidence supported the trial judge's findings on agency. The state entities controlled Pak Dairy's board and, in light of the many anti-American actions of the Iranian government, the board had decided to stop paying dividends to any foreign shareholders including McKesson.

Citation: McKesson v. Islamic Republic of Iran, 311 U.S. App. D.C. 197, 52 F.3d 346 (1995).