Supreme Court Resolves Circuit Split on Forum Non Conveniens

August 2007

Without much notice or fanfare, in March 2007, the U.S. Supreme Court resolved a split between the Circuit Courts of Appeals in an admiralty case involving the forum non conveniens doctrine in Sinochem Int'l Co., Ltd. v. Malaysia Int'l Shipping Corp., 127 S. Ct. 1184 (2007).

by Michael A. Orlando
Meyer Orlando LLC

The issue before the Court was whether a federal court has discretion to dismiss on forum non conveniens grounds before first determining threshold subject-matter and personal jurisdiction issues. The Third and Fifth Circuits had ruled that a federal court must first resolve jurisdictional issues before it can dismiss on forum non conveniens, whereas the Second, Seventh, and D.C. Circuits had held otherwise.

Sinochem presented a compelling forum non conveniens fact pattern. In 2003 Sinochem International, a Chinese state-owned importer, contracted with a U.S. company, Triorient Trading, Inc., to purchase steel coils. Triorient subchartered a vessel from Malaysia International Shipping, a Malaysian company, to transport the coils from Philadelphia to China. A bill of lading was issued, and payment was made for the coils under a letter of credit.

Shortly thereafter, Sinochem petitioned the Guangzhou Admiralty Court in China for preservation of a maritime claim against Malaysia and arrest of the subject vessel, claiming that Malaysia had falsely backdated the bill of lading. The Chinese court ordered the ship arrested. Malaysia contested the jurisdiction of the Chinese court. That court rejected such objection to jurisdiction, and such was upheld on appeal to the higher court.

Not long after the Chinese court ordered the arrest of the vessel, Malaysia filed the instant suit in U.S. District Court for the Eastern District of Pennsylvania, alleging that Sinochem had made negligent misrepresentations on the filing of the case in China, which caused delays when the ship was arrested. Sinochem moved to dismiss the U.S. case on a number of grounds, including lack of subject-matter and personal jurisdiction, forum non conveniens, and international comity. The district court determined that it had proper admiralty subject-matter jurisdiction. The court also determined that it lacked personal jurisdiction under Pennsylvania's long arm statute, but that limited discovery might reveal a basis for personal jurisdiction under federal rules. However, it did not permit such discovery because it granted the motion to dismiss on the basis of forum non conveniens, ruling that the dispute concerned the arrest of a foreign ship in foreign waters under the order of a foreign court.

On appeal, the Third Circuit agreed that subject-matter jurisdiction existed and that the question of personal jurisdiction could not be resolved without discovery. However, it overturned the dismissal, holding that forum non conveniens could not be used to dismiss the case until both subject-matter and personal jurisdiction were definitively determined.

The U. S. Supreme Court noted that a federal court has discretion to dismiss a case on the ground of forum non conveniens:

when an alternative forum has jurisdiction to hear [the] case, and ... trial in the chosen forum would establish ... oppressiveness and vexation to a defendant ... out of all proportion to plaintiff's convenience, or ... the chosen forum [is] inappropriate because of considerations affecting the court's own administrative and legal problems. Id. at 1190. (Internal citations omitted).

The court goes on to note that such doctrine has been codified as 28 U.S.C. Sect. 1404(a) with regard to a transfer from one federal court to another federal court, but that the doctrine still existed at common law in cases where the alternative forum is foreign or in rare instances where a state court or territorial court is considered as the alternative. Also factoring into the court's consideration was the fact that it had already been decided that the federal venue statute allowed transfer of venue without a threshold determination of personal jurisdiction.

Prior Supreme Court authority had established that jurisdictional issues had to be resolved first, before any merits decisions could be rendered, but that there was no particular order in which subject-matter or personal jurisdiction had to be decided. However, a forum non conveniens dismissal, although it denies a decision on the merits, is not a merits determination:

A district court therefore may dispose of an action by a forum non conveniens dismissal, bypassing questions of subject-matter and personal jurisdiction, when considerations of convenience, fairness, and judicial economy so warrant. Id. at 1192.

Interestingly, this Court had to dance around a 1947 decision in Gulf Oil Corp. v. Gilbert, 67 S. Ct. 839 (1947), which contained the statement, "the doctrine of forum non conveniens can never apply if there is absence of jurisdiction." 67 S. Ct. at 839. Apparently, the Supreme Court does not fellow the maxim ‘never say never' because it can say 'never' and not mean it!

After noting that such statement was "perhaps less than 'felicitously' crafted" (Supreme Court-speak for we do not want to overturn that decision, so what we said then, we are not going to follow now), the Court reasoned that the question presented in Gulf Oil was a different one than what was presented in the instant case and was therefore "no hindrance" to this decision. Gulf Oil was a forum non conveniens case, and perhaps the reason for the circuit split in the first instance. One wonders why not simply admit the mistake and move on?

In the end, the Court holds, "This is a textbook case for immediate forum non conveniens dismissal." Id. at 1194. In keeping with the Court's usual mantra of "the federal courts are overworked as is," it pronounced:

... where subject-matter or personal jurisdiction is difficult to determine, and forum non conveniens considerations weigh heavily in favor of dismissal, the court properly takes the less burdensome course. Id. at 1194.

While the author has no qualms that this is a correctly decided case, it's unfortunate that the Court chose a relatively simple and easy case to resolve a circuit split in an admiralty context. There are many more confounding admiralty circuit splits, especially over marine insurance issues. While resolution of any circuit split is helpful to the practitioner when one of the goals of admiralty law is uniformity, it would be nice to have uniformity on some of the more widespread issues. But that would entail the highest court of this land accepting more admiralty cases for decision, which is not likely to happen.

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