Cases Conflicts

Conflicts of Law Full Text of Cases Atty.
De Castro PLM College of Law

U.S. Supreme Court (a) The Bremen Court's statement that a freely negotiated forum-selection clause, such as the one there at issue, should be given full effect, 407 U.S. at 407 U. S. 12-13, does not support the Court of Appeals' determination that a nonnegotiated forum clause in a passage contract is never enforceable simply because it Carnival Cruise Lines, Inc. v. Shute is not the subject of bargaining. Whereas it was entirely reasonable for The Bremen Court to have expected the parties to have negotiated with care in selecting a forum for the resolution of disputes arising from their complicated international agreement, it would be entirely unreasonable to assume that a cruise passenger Argued Jan. 15, 1991 would or could negotiate the terms of a forum clause in a routine commercial cruise ticket form. Nevertheless, including a reasonable forum clause in such a form contract well may be permissible for several reasons. Because it is not unlikely that a mishap in a cruise could subject a cruise line to litigation in several different 499 U.S. 585 fora, the line has a special interest in limiting such fora. Moreover, a clause establishing ex ante the dispute CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR resolution forum has the salutary effect of dispelling confusion as to where suits may be brought and defended, thereby sparing litigants time and expense and conserving judicial resources. Furthermore, it is likely that passengers purchasing tickets Syllabus Page 499 U. S. 586 After the respondents Shute, a Washington State couple, purchased passage on a ship owned by petitioner, a Florida-based cruise line, petitioner sent them tickets containing a clause designating courts in Florida as the agreed-upon fora for the resolution of disputes. The Shutes boarded the ship in Los Angeles, and, while in international waters off the Mexican coast, Mrs. Shute suffered injuries when she slipped on a deck mat. The Shutes filed suit in a Washington Federal District Court, which granted summary judgment for petitioner. The Court of Appeals reversed, holding, inter alia, that the forum-selection clause should not be enforced "the serious inconvenience of the contractual forum to one or both of the parties might carry greater weight in under The Bremen v. Zapata Off-Shore Co., 407 U. S. 1, because it was not "freely bargained for," and determining the reasonableness of the forum clause." because its enforcement would operate to deprive the Shutes of their day in court in light of evidence indicating that they were physically and financially incapable of pursuing the litigation in Florida. Id. at 407 U. S. 17. That statement was made in the context of a hypothetical "agreement between two Americans to resolve their essentially local disputes in a remote alien forum." Ibid. Here, in contrast, Florida is Held: The Court of Appeals erred in refusing to enforce the forum-selection clause. Pp.499 U. S. 590-597. not such a forum, nor -- given the location of Mrs. Shute's accident -- is this dispute an essentially local one inherently more suited to resolution in Washington than in Florida. In light of these distinctions, and because containing a forum clause like the one here at issue benefit in the form of reduced fares reflecting the savings that the cruise line enjoys by limiting the fora in which it may be sued. Pp. 499 U. S. 590-594.
Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585 (1990)
No. 89-1647
Decided April 17, 1991
THE NINTH CIRCUIT
(b) The Court of Appeals' conclusion that the clause here at issue should not be enforced because the Shutes are incapable of pursuing this litigation in Florida is not justified by The Bremen Court's statement that
Conflicts of Law Full Text of Cases Atty. De Castro PLM College of Law
the Shutes do not claim lack of notice of the forum clause, they have not satisfied the "heavy burden of proof," ibid. required to set aside the clause on grounds of inconvenience. Pp. 499 U. S. 594-595. headquarters in Miami, Fla. Petitioner then prepared the tickets and sent them to respondents in the State of Washington. The face of each ticket, at its left-hand lower corner, contained this admonition:
(c) Although forum selection clauses contained in form passage contracts are subject to judicial scrutiny for fundamental fairness, there is no indication that petitioner selected Florida to discourage cruise passengers from pursuing legitimate claims or obtained the Shutes' accession to the forum clause by fraud or overreaching. P. 499 U. S. 595.
"SUBJECT TO CONDITIONS OF CONTRACT ON LAST PAGES [bb]IMPORTANT![eb] PLEASE READ CONTRACT -- ON LAST PAGES 1, 2, 3"
App. 15. The following appeared on "contract page 1" of each ticket:
"TERMS AND CONDITIONS OF PASSAGE CONTRACT TICKET" (d) By its plain language, the forum selection clause at issue does not violate 46 U.S.C. App. 183c, which, inter alia, prohibits a vessel owner from inserting in any contract a provision depriving a claimant of a trial "by court of competent jurisdiction" for loss of life or personal injury resulting from negligence. Pp. 499 U. S. 595-597. ****
"3. (a) The acceptance of this ticket by the person or persons named hereon as passengers shall be deemed to be an acceptance and agreement by each of them of all of the terms and conditions of this Passage Contract Ticket."
897 F.2d 377 (CA9 1990), reversed.
BLACKMUN, J., delivered the opinion of the Court, in which REHNQUIST, C.J., and WHITE, O'CONNOR, SCALIA, KENNEDY, and SOUTER, JJ., joined. STEVENS, J., filed a dissenting opinion, in which MARSHALL, J., joined, post, p. 499 U. S. 597.
****
"8. It is agreed by and between the passenger and the Carrier that all disputes and matters whatsoever arising under, in connection with or incident to this Contract
Page 499 U. S. 587
Page 499 U. S. 588
JUSTICE BLACKMUN delivered the opinion of the Court.
shall be litigated, if at all, in and before a Court located in the State of Florida, U.S.A. to the exclusion of the Courts of any other state or country."
In this admiralty case we primarily consider whether the United States Court of Appeals for the Ninth Circuit correctly refused to enforce a forum selection clause contained in tickets issued by petitioner Carnival Cruise Lines, Inc., to respondents Eulala and Russel Shute.
Id. at 16.
The last quoted paragraph is the forum selection clause at issue. I II The Shutes, through an Arlington, Wash., travel agent, purchased passage for a 7-day cruise on petitioner's ship, the TROPICALE. Respondents paid the fare to the agent, who forwarded the payment to petitioner's Respondents boarded the TROPICALE in Los Angeles, Cal. The ship sailed to Puerto Vallarta, Mexico, and then returned to Los Angeles. While the ship was in international waters off the Mexican coast, respondent
Eulala Shute was injured when she slipped on a deck mat during a guided tour of the ship's galley. Respondents filed suit against petitioner in the United States District Court for the Western District of Washington, claiming that Mrs. Shute's injuries had been caused by the negligence of Carnival Cruise Lines and its employees. Id. at 4. We granted certiorari to address the question whether the Court of Appeals was correct in holding that the District Court should hear respondents' tort claim against petitioner. 498 U.S. 807-808 (1990). Because we find the forum selection clause to be dispositive of this question, we need not consider petitioner's constitutional argument as to personal jurisdiction. See Ashwander v. TVA, 297 U. S. 288, 297 U. S. 347 (1936) (Brandeis, J., concurring) ("
Petitioner moved for summary judgment, contending that the forum clause in respondents' tickets required the Shutes to bring their suit against petitioner in a court in the State of Florida. Petitioner contended, alternatively, that the District Court lacked personal jurisdiction over petitioner because petitioner's contacts with the State of Washington were insubstantial. The District Court granted the motion, holding that petitioner's contacts with Washington were constitutionally insufficient to support the exercise of personal jurisdiction. See App. to Pet.
I t is not the habit of the Court to decide questions of a constitutional nature unless
Page 499 U. S. 590
absolutely necessary to a decision of the case,'" quoting Burton v. United States, 196 U. S. 283, 196 U. S. for Cert. 60a. 295 (1905)). The Court of Appeals reversed. Reasoning that, "but for" petitioner's solicitation of business in Washington, III respondents would not have taken the cruise and Mrs. Shute would not have been injured, the court concluded that petitioner had sufficient contacts with Washington to justify the District Court's exercise of personal jurisdiction. 897 F.2d 377, 385-386 (CA9 1990). * We begin by noting the boundaries of our inquiry. First, this is a case in admiralty, and federal law governs the enforceability of the forum selection clause we scrutinize. See Archawski v. Nanioti, 350 U. S. 532, 350 U. S. 533 (1956); The Moses Taylor, 4 Wall. 411, 71 U. S. 427 (1867); Tr. of Oral Arg. 36-37, 12, 47-48. Cf. Stewart Page 499 U. S. 589 Organization, Inc. v. Ricoh Corp., 487 U. S. 22, 487 U. S. 28-29 (1988). Second, we do not address the Turning to the forum selection clause, the Court of Appeals acknowledged that a court concerned with the enforceability of such a clause must begin its analysis with The Bremen v. Zapata Off-Shore Co., 407 U. S. 1 (1972), where this Court held that forum selection clauses, although not "historically . . . favored," are "prima facie valid." Id. at407 U. S. 9-10. See 897 F.2d at 388. The appellate court concluded that the forum clause should not be enforced because it "was not freely bargained for." Id. at 389. As an "independent justification" for refusing to enforce the clause, the Court of Appeals noted that there was evidence in the record to indicate that "the Shutes are physically and financially incapable of pursuing this litigation in Florida," and that the enforcement of the clause would operate to deprive them of their day in court, and thereby contravene this Within this context, respondents urge that the forum clause should not be enforced because, contrary to this Court's holding in The Bremen. 897 F.2d at 389. Court's teachings in The Bremen, the clause was not the product of negotiation, and enforcement effectively question whether respondents had sufficient notice of the forum clause before entering the contract for passage. Respondents essentially have conceded that they had notice of the forum selection provision. Brief for Respondent 26 ("The respondents do not contest the incorporation of the provisions nor [sic] that the forum selection clause was reasonably communicated to the respondents, as much as three pages of fine print can be communicated."). Additionally, the Court of Appeals evaluated the enforceability of the forum clause under the assumption, although "doubtful," that respondents could be deemed to have had knowledge of the clause. See 897 F.2d at 389 and n. 11.
would deprive respondents of their day in court. Additionally, respondents contend that the clause violates the Limitation of Vessel Owner's Liability Act, 46 U.S.C. App. 183c. We consider these arguments in turn. 407 U.S. at 407 U. S. 12-13 (footnote omitted). The Court further generalized that,
"in the light of present-day commercial realities and expanding international trade, we conclude that the forum clause should control absent a strong showing that it should be set aside."
IV
Id. at 407 U. S. 16. The Court did not define precisely the circumstances that would make it unreasonable for a court to enforce a forum clause. Instead, the Court discussed a number of factors that made it reasonable to enforce the clause at issue inThe Bremen and
Both petitioner and respondents argue vigorously that the Court's opinion in The Bremen governs this case, and each side purports to find ample support for its position in that
Page 499 U. S. 591
Page 499 U. S. 592
opinion's broad-ranging language. This seeming paradox derives in large part from key factual differences between this case and The Bremen, differences that preclude an automatic and simple application of The Bremen's general principles to the facts here.
that, presumably, would be pertinent in any determination whether to enforce a similar clause.
In this respect, the Court noted that there was
"strong evidence that the forum clause was a vital part of the agreement, and [that] it would be unrealistic to think that the parties did not conduct their negotiations, including fixing the monetary terms, with the consequences of the forum clause figuring prominently in their calculations."
In The Bremen, this Court addressed the enforceability of a forum selection clause in a contract between two business corporations. An American corporation, Zapata, made a contract with Unterweser, a German corporation, for the towage of Zapata's ocean-going drilling rig from Louisiana to a point in the Adriatic Sea off the coast of Italy. The agreement provided that any dispute arising under the contract was to be resolved in the London Court of Justice. After a storm in the Gulf of Mexico seriously damaged the rig, Zapata ordered Unterweser's ship to tow the rig to Tampa, Fla., the nearest point of refuge. Thereafter, Zapata sued Unterweser in admiralty in federal court at Tampa. Citing the forum clause, Unterweser moved to dismiss. The District Court denied Unterweser's motion, and the Court of Appeals for the Fifth Circuit, sitting en banc on rehearing, and by a sharply divided vote, affirmed. 446 F.2d 907 (1971).
Id. at 407 U. S. 14 (footnote omitted). Further, the Court observed that it was not "dealing with an agreement between two Americans to resolve their essentially local disputes in a remote alien forum," and that, in such a case,
"the serious inconvenience of the contractual forum to one or both of the parties might carry greater weight in determining the reasonableness of the forum clause."
Id. at 407 U. S. 17. The Court stated that, even where the forum clause establishes a remote forum for resolution of conflicts, "the party claiming [unfairness] should bear a heavy burden of proof." Ibid.
This Court vacated and remanded, stating that, in general,
"a freely negotiated private international agreement, unaffected by fraud, undue influence, or overweening bargaining power, such as that involved here, should be given full effect."
In applying The Bremen, the Court of Appeals in the present litigation took note of the foregoing "reasonableness" factors and rather automatically decided that the forum selection clause was unenforceable because, unlike the parties in The Bremen,respondents are not business persons, and did not negotiate the
terms of the clause with petitioner. Alternatively, the Court of Appeals ruled that the clause should not be enforced because enforcement effectively would deprive respondents of an opportunity to litigate their claim against petitioner. of Appeals' determination that a nonnegotiated forum selection clause in a form ticket contract is never enforceable simply because it is not the subject of bargaining. Including a reasonable forum clause in a form contract of this kind well may be permissible for several reasons: first, a cruise line has a special interest in limiting the fora in which it potentially could be subject to suit. Because a cruise ship typically carries passengers from many locales, it is not unlikely that a mishap on a cruise could subject the cruise line to "far from routine transaction between companies of two different nations contemplating the tow of an extremely costly piece of equipment from Louisiana across the Gulf of Mexico and the Atlantic Ocean, through the Mediterranean Sea to its final destination in the Adriatic Sea." Page 499 U. S. 594 407 U.S. at 407 U. S. 13. These facts suggest that, even apart from the evidence of negotiation regarding the forum clause, it was entirely reasonable for the Court in The effect of dispelling any confusion about where suits arising from the contract must be brought and defended, sparing litigants the time and expense of pretrial motions to determine the correct forum, and conserving Page 499 U. S. 593 judicial resources that otherwise would be devoted to deciding those motions. See Stewart Organization, 487 U.S. at 487 U. S. 33(concurring opinion). Finally, it stands to reason that passengers who purchase tickets containing a forum clause like that at issue in this case benefit in the form of reduced fares reflecting the savings that the cruise line enjoys by limiting the fora in which it may be sued. Cf. Northwestern Nat. Ins. Co. In contrast, respondents' passage contract was purely routine, and doubtless nearly identical to every commercial passage contract issued by petitioner and most other cruise lines. See, e.g., Hodes v. S.N.C. Achille Lauro ed Altri-Gestione, 858 F.2d 905, 910 (CA3 1988), cert. dism'd, 490 U.S. 1001 (1989). In this context, it would be entirely unreasonable for us to assume that respondents -- or any other cruise passenger -- would negotiate with petitioner the terms of a forum-selection clause in an ordinary commercial cruise ticket. Common sense dictates that a ticket of this kind will be a form contract the terms of which are not subject to negotiation, and that an individual purchasing the ticket will not have bargaining parity with the cruise line. But by ignoring the crucial differences in the business contexts in which the respective contracts were executed, the Court of Appeals' analysis seems to us to have distorted somewhat this Court's holding in The Bremen. We also do not accept the Court of Appeals' "independent justification" for its conclusion that The Bremen dictates that the clause should not be enforced because "[t]here is evidence in the record to indicate that the Shutes are physically and financially incapable of pursuing this litigation in Florida." 897 F.2d, at 389. We do not defer to the Court of Appeals' findings of fact. In dismissing the case for lack of personal jurisdiction over petitioner, the District Court made no finding regarding the physical and financial impediments to the Shutes' pursuing their case in Florida. The Court of Appeals' conclusory reference to the record provides no basis for this Court to validate the finding of inconvenience. Furthermore, the Court of Appeals did not place in proper context this Court's statement in The Bremen that In evaluating the reasonableness of the forum clause at issue in this case, we must refine the analysis of The Bremen to account for the realities of form passage contracts. As an initial matter, we do not adopt the Court v. Donovan, 916 F.2d 372, 378 (CA7 1990). litigation in several different fora. See The Bremen, 407 U.S. at 407 U. S. 13 and n. 15. Additionally, a clause establishing ex ante the forum for dispute resolution has the salutary
The Bremen concerned a
Bremen to have expected Unterweser and Zapata to have negotiated with care in selecting a forum for the resolution of disputes arising from their special towing contract.
"the serious inconvenience of the contractual forum to one or both of the parties might carry greater weight in determining the reasonableness of the forum clause." "It shall be unlawful for the . . . owner of any vessel transporting passengers between ports of the United States or between any such port and a foreign port to insert in any rule, regulation, contract, or agreement any provision or limitation (1) purporting, in the event of loss of life or bodily injury arising from the negligence or fault of such owner or his servants, to relieve such owner . . . from liability, or from liability beyond any stipulated amount, for such loss or injury, or (2) purporting in such event to lessen, weaken, or avoid the right of any claimant to a trial by court of competent
407 U.S. at 407 U. S. 17. The Court made this statement in evaluating a hypothetical "agreement between two Americans to resolve their essentially local disputes in a remote alien forum." Ibid. In the present case, Florida is not a "remote alien forum," nor -- given the fact that Mrs. Shute's accident occurred off the coast of Mexico -is this dispute an essentially local one inherently more suited to resolution in the State of Washington than in Florida. In
Page 499 U. S. 596
Page 499 U. S. 595
jurisdiction on the question of liability for such loss or injury, or the measure of damages therefor. All such provisions or limitations contained in any such rule, regulation, contract, or agreement are declared to be against public policy and shall be null and void and of no effect."
light of these distinctions, and because respondents do not claim lack of notice of the forum clause, we conclude that they have not satisfied the "heavy burden of proof,"ibid. required to set aside the clause on grounds of inconvenience.
By its plain language, the forum selection clause before us does not take away respondents' right to "a trial by [a] court of competent jurisdiction," and thereby contravene the explicit proscription of 183c. Instead, the clause states specifically that actions arising out of the passage contract shall be brought "if at all," in a court "located in the State of Florida," which, plainly, is a "court of competent jurisdiction" within the meaning of the statute.
It bears emphasis that forum selection clauses contained in form passage contracts are subject to judicial scrutiny for fundamental fairness. In this case, there is no indication that petitioner set Florida as the forum in which disputes were to be resolved as a means of discouraging cruise passengers from pursuing legitimate claims. Any suggestion of such a bad faith motive is belied by two facts: petitioner has its principal place of business in Florida, and many of its cruises depart from and return to Florida ports. Similarly, there is no evidence that petitioner obtained respondents' accession to the forum clause by fraud or overreaching. Finally, respondents have conceded that they were given notice of the forum provision and, therefore, presumably retained the option of rejecting the contract with impunity. In the case before us, therefore, we conclude that the Court of Appeals erred in refusing to enforce the forum selection clause.
Respondents appear to acknowledge this by asserting that, although the forum clause does not directly prevent the determination of claims against the cruise line, it causes plaintiffs unreasonable hardship in asserting their rights, and therefore violates Congress' intended goal in enacting 183c. Significantly, however, respondents cite no authority for their contention that Congress' intent in enacting 183c was to avoid having a plaintiff travel to a distant forum in order to litigate. The legislative history of 183c suggests, instead, that this provision was enacted in response to passenger ticket conditions purporting to limit the shipowner's liability for negligence or to remove the issue of liability from the scrutiny of any court by means of
Respondents also contend that the forum selection clause at issue violates 46 U.S.C. App. 183c. That statute, enacted in 1936, see 49 Stat. 1480, provides:
a clause providing that "the question of liability and the measure of damages shall be determined by arbitration."See S.Rep. No. 2061, 74th Cong., 2d Sess. 6 (1936); H.R.Rep. No. 2517, 74th Cong., 2d Sess., 6
(1936). See also Safety of Life and Property at Sea: Hearings Before the Committee on Merchant Marine and Fisheries, 74th Cong., 2d Sess., pt. 4, pp. 20, 36-37, 57, 109-110, 119 (1936). There was no prohibition of a forum selection clause. Because the clause before us allows for judicial resolution of claims against petitioner and does most meticulous passenger is likely to become aware of the forum selection provision. I have therefore appended to this opinion a facsimile [omitted] of the relevant text, using the type size that actually appears in the ticket itself. A careful reader will find the forum selection clause in the eighth of the twenty-five numbered paragraphs.
Page 499 U. S. 597
Of course, many passengers, like the respondents in this case, see ante at 499 U. S. 587, will not have an opportunity to read paragraph 8 until they have actually purchased their tickets. By this point, the passengers will already have accepted the condition set forth in paragraph 16(a), which provides that "[t]he Carrier shall
not purport to limit petitioner's liability for negligence, it does not violate 183c.
not be liable to make any refund to passengers in respect of . . . tickets wholly or partly not used by a passenger." Not knowing whether or not that provision is legally enforceable, I assume that the average passenger would accept the risk of having to file suit in Florida in the event of an injury, rather than canceling
The judgment of the Court of Appeals is reversed.
It is so ordered
-- without a refund -- a planned vacation at the last minute. The fact that the cruise line can reduce its litigation costs, and therefore its liability insurance premiums, by forcing this choice on its passengers does not, in my opinion, suffice to render the
* The Court of Appeals had filed an earlier opinion also reversing the District Court and ruling that the District Court had personal jurisdiction over the cruise line, and that the forum selection clause in the tickets was unreasonable, and was not to be enforced. 863 F.2d 1437 (CA9 1988). That opinion, however, was withdrawn when the court certified to the Supreme Court of Washington the question whether the Washington long-arm statute, Wash.Rev.Code 4.28.185 (1988), conferred personal jurisdiction over Carnival Cruise Lines for the claim asserted by the Shutes. See 872 F.2d 930 (CA9 1989). The Washington Supreme Court answered the certified question in the affirmative on the ground that the Shutes' claim "arose from" petitioner's advertisement in Washington and the promotion of its cruises there. 113 Wash.2d 763, 783 P.2d 78 (1989). The Court of Appeals then "refiled" its opinion "as modified herein." See 897 F.2d at 380, n. 1.
Page 499 U. S. 598
provision reasonable. Cf. Steven v. Fidelity Casualty Co. of New York, 58 Cal.2d 862, 883, 27 Cal.Rptr. 172, 186, 377 P.2d 284, 298 (1962) (refusing to enforce limitation on liability in insurance policy because insured "must purchase the policy before he even knows its provisions").
Even if passengers received prominent notice of the forum selection clause before they committed the cost of the cruise, I would remain persuaded that the clause was unenforceable under traditional principles of federal admiralty law, and is "null and void" under the terms of Limited Liability Act, 49 Stat. 1480, as amended, 46 U.S.C. App. 183c, which was enacted in 1936 to invalidate expressly stipulations limiting shipowners' liability
JUSTICE STEVENS, with whom JUSTICE MARSHALL joins, dissenting.
The Court prefaces its legal analysis with a factual statement that implies that a purchaser of a Carnival Cruise Lines passenger ticket is fully and fairly notified about the existence of the choice of forum clause in the fine print on the back of the ticket. See ante at 499 U. S. 587-588. Even if this implication were accurate, I would disagree with the Court's analysis. But, given the Court's preface, I begin my dissent by noting that only the
for negligence.
Exculpatory clauses in passenger tickets have been around for a long time. These clauses are typically the product of disparate bargaining power between the carrier and the passenger, and they undermine the strong
public interest in deterring negligent conduct. For these reasons, courts long before the turn of the century consistently held such clauses unenforceable under federal admiralty law. Thus, in a case involving a ticket provision purporting to limit the shipowner's liability for the negligent handling of baggage, this Court wrote: contracts offered on a take-or-leave basis by a party with stronger bargaining power to a party with weaker power. Some commentators have questioned whether contracts of adhesion can justifiably be enforced at all under traditional contract theory because the adhering party generally enters into them without manifesting knowing and voluntary consent to all their terms. See, e.g., Rakoff, Contracts of Adhesion: An Essay in Reconstruction, 96 Harv.L.Rev. 1173, 1179-1180 (1983); Slawson, Mass Contracts: Lawful Fraud in California, 48 S.Cal.L.Rev. 1, 1213 (1974); K. Llewellyn, The Common Law Tradition 370-371 (1960).
"It is settled in the courts of the United States that exemptions limiting carriers from responsibility for the negligence of themselves or their servants are both unjust and unreasonable, and will be deemed as wanting in the element of voluntary assent; and, besides, that such conditions are in conflict with public policy. This doctrine was announced so long ago, and has been so frequently reiterated, that it is elementary. We content ourselves with referring to the cases of the Baltimore & Ohio &c. Railway v. Voigt, 176 U. S. 498, 176 U. S. 505, 176 U. S. 507, and Knott v. Botany Mills, 179 U. S. 69, 179 U. S. 71 [(1900)], where the previously adjudged cases are referred to and the principles
The common law, recognizing that standardized form contracts account for a significant portion of all commercial agreements, has taken a less extreme position, and instead subjects terms in contracts of adhesion to scrutiny for reasonableness. Judge J. Skelly Wright set out the state of the law succinctly in Williams v. Walker-Thomas Furniture Co., 121 U.S.App.D.C. 315, 319-320, 350 F.2d 445, 449-450 (1965) (footnotes omitted):
Page 499 U. S. 599
by them expounded are restated."
"Ordinarily, one who signs an agreement without full knowledge of its terms might be held to assume the risk that he has entered a one-sided bargain. But when a party of little bargaining power, and hence little real
The Kensington, 183 U. S. 263, 183 U. S. 268 (1902).
choice, signs a commercially unreasonable contract with little or no knowledge of its terms, it is hardly likely that his consent, or even an objective manifestation of his consent,
Clauses limiting a carrier's liability or weakening the passenger's right to recover for the negligence of the carrier's employees come in a variety of forms. Complete exemptions from liability for negligence or limitations on the amount of the potential damage recovery, [Footnote 1] requirements that notice of claims be filed within an unreasonably short period of time, [Footnote 2] provisions mandating a choice of law that is favorable to the defendant in negligence cases, [Footnote 3] and forum selection clauses are all similarly designed to put a thumb on the carrier's side of the scale of justice. [Footnote 4]
Page 499 U. S. 601
was ever given to all of the terms. In such a case, the usual rule that the terms of the agreement are not to be questioned should be abandoned and the court should consider whether the terms of the contract are so unfair that enforcement should be withheld."
Page 499 U. S. 600
See also Steven, 58 Cal.2d at 879-883, 27 Cal.Rptr. at 183-185, 377 P.2d at 295-297;Henningsen v. Bloomfield Motors, Inc., 32 N.J. 358, 161 A.2d 69 (1960).
Forum selection clauses in passenger tickets involve the intersection of two strands of traditional contract law that qualify the general rule that courts will enforce the terms of a contract as written. Pursuant to the first strand, courts traditionally have reviewed with heightened scrutiny the terms of contracts of adhesion, form The second doctrinal principle implicated by forum selection clauses is the traditional rule that "contractual provisions, which seek to limit the place or court in which an action may . . . be brought, are invalid as contrary to public policy." See Dougherty, Validity of Contractual Provision Limiting Place or Court in Which Action May
Be Brought, 31 A.L.R.4th 404, 409, 3 (1984). See also Home Insurance Co. v. Morse, 20 Wall. 445,87 U. S. 451 (1874). Although adherence to this general rule has declined in recent years, particularly following our decision in The Bremen v. Zapata Off-Shore Co., 407 U. S. 1 (1972), the prevailing rule is still that forum selection clauses are not enforceable if they were not freely bargained for, create additional expense for one party, or deny one party a remedy. See 31 A.L.R.4th, at 409-438 (citing cases). A forum selection clause in a standardized passenger ticket would clearly have been unenforceable under the common law before our decision in The Bremen, see 407 U.S. at 407 U. S. 9, and n. 10, and, in my opinion, remains unenforceable under the prevailing rule today. Page 499 U. S. 603 the question of liability and the measure of damages shall be determined by arbitration.The amendment to chapter 6 of title 48 of the Revised Statutes proposed to be made by section 2 of the committee amendment is intended to, and in the opinion of the committee will, put a stop to all such practices and practices of a like character."
H.R.Rep. No. 2517, 74th Cong., 2d Sess., 6-7 (1936) (emphasis added); see alsoS.Rep. No. 2061, 74th Cong., 2d Sess., 6-7 (1936).
The Bremen, which the Court effectively treats as controlling this case, had nothing to say about stipulations printed on the back of passenger tickets. That case involved the enforceability of a forum selection clause in a freely negotiated international agreement between two large corporations providing for the towage of a vessel from the Gulf of Mexico to the Adriatic Sea. The Court recognized that such towage agreements had generally been held unenforceable in American
The intent to "put a stop to all such practices and practices of a like character" was effectuated in the second clause of the statute. It reads:
"It shall be unlawful for the manager, agent, master, or owner of any vessel transporting passengers between ports of the United States or between any such port and a foreign port to insert in any rule, regulation, contract, or agreement any provision or limitation (1) purporting, in the event of loss of life or bodily injury arising from the negligence or fault of such owner or his servants, to relieve such owner, master, or agent from liability, or from liability beyond any stipulated amount, for such loss or injury, or (2) purporting in such event to
Page 499 U. S. 602
courts, [Footnote 5] but held that the doctrine of those cases did not extend to commercial arrangements between parties with equal bargaining power. The federal statute that should control the disposition of the case before us today was enacted in 1936, when the general rule denying enforcement of forum selection clauses was indisputably widely accepted. The principal subject of the statute concerned the limitation of shipowner liability, but, as the following excerpt from the House Report explains, the section that is relevant to this case was added as a direct response to shipowners' ticketing practices.
lessen, weaken, or avoid the right of any claimant to a trial by court of competent jurisdiction on the question of liability for such loss or injury, or the measure of damages therefor. All such provisions or limitations contained in any such rule, regulation, contract, or agreement are declared to be against public policy and shall be null and void and of no effect."
46 U.S.C. App. 183c (emphasis added).
"During the course of the hearings on the bill (H.R. 9969) there was also brought to the attention of the committee a practice of providing on the reverse side of steamship tickets that, in the event of damage or injury caused by the negligence or fault of the owner or his servants, the liability of the owner shall be limited to a stipulated amount, in some cases $5,000, and in others substantially lower amounts, or that in such event
The stipulation in the ticket that Carnival Cruise sold to respondents certainly lessens or weakens their ability to recover for the slip and fall incident that occurred off the west coast of Mexico during the cruise that originated and terminated in Los Angeles, California. It is safe to assume that the witnesses -- whether other passengers or members of the crew -- can be assembled with less expense and inconvenience at a west coast forum than in a Florida court several thousand miles from the scene of the accident.
A liberal reading of the 1936 statute is supported by both its remedial purpose and by the legislative history's general condemnation of "all such practices." Although the statute does not specifically mention forum selection clauses, its language is broad enough to encompass them. The absence of a Page 499 U. S. 605
tickets. Even without the benefit of the statute, I would continue to apply the general rule that prevailed prior to our decision in The Bremen to forum selection clauses in passenger tickets.
Page 499 U. S. 604
I respectfully dissent.
specific reference is adequately explained by the fact that such clauses were already unenforceable under common law, and would not often have been used by carriers, which were relying on stipulations that purported to exonerate them from liability entirely. Cf. Moskal v. United States, 498 U. S. 103, 498 U. S. 110113 (1990).
[Footnote 1]
See 46 U.S.C. App. 183c:
"It shall be unlawful for the . . . owner of any vessel transporting passengers between ports of the United States or between any such port and a foreign port to insert in any rule, regulation, contract, or agreement any provision or limitation (1) purporting, in the event of loss of life or bodily injury arising from the negligence or fault of such owner or his servants, to relieve such owner . . . from liability, or from liability beyond any stipulated amount, for such loss or injury. . . ."
The Courts of Appeals, construing an analogous provision of the Carriage of Goods by Sea Act, 46 U.S.C. App. 1300 et seq., have unanimously held invalid as limitations on liability forum selection clauses requiring suit in foreign jurisdictions. See, e.g., Hughes Drilling Fluids v. M/V Luo Fu Shan, 852 F.2d 840 (CA5 1988), cert. denied, 489 U.S. 1033 (1989); Union Ins. Soc. of Canton, Ltd. v. S.S. Elikon, 642 F.2d 721, 72425 (CA4 1981); Indussa Corp. v. S.S. Ranborg, 377 F.2d 200, 203-204 (CA2 1967). Commentators have also endorsed this view. See, e.g., G. Gilmore & C. Black, The Law of Admiralty 145, and n. 23 (2nd ed.1975); Mendelsohn, Liberalism, Choice of Forum Clauses and the Hague Rules, 2 J. of Maritime Law & Comm. 661, 663-666 (1971). The forum selection clause here does not mandate suit in a foreign jurisdiction, and therefore arguably might have less of an impact on a plaintiff's ability to recover. See Fireman's Fund American Ins. Cos. v. Puerto Rican Forwarding Co., 492 F.2d 1294 (CA1 1974). However, the plaintiffs in this case are not large corporations, but individuals, and the added burden on them of conducting a trial at the opposite end of the country is likely proportional to the additional cost to a large corporation of conducting a trial overseas. [Footnote 6]
[Footnote 2]
See 46 U.S.C. App. 183b(a):
"It shall be unlawful for the manager, agent, master, or owner of any sea-going vessel (other than tugs, barges, fishing vessels and their tenders) transporting passengers or merchandise or property from or between ports of the United States and foreign ports to provide by rule, contract, regulation, or otherwise a shorter period for giving notice of, or filing claims for loss of life or bodily injury, than six months, and for the institution of suits on such claims, than one year, such period for institution of suits to be computed from the day when the death or injury occurred."
Under these circumstances, the general prohibition against stipulations purporting "to lessen, weaken, or avoid" the passenger's right to a trial certainly should be construed to apply to the manifestly unreasonable stipulation in these passengers'
See also 49 U.S.C. 11707(e) ("A carrier or freight forwarder may not provide by rule, contract, or otherwise, a period of less than 9 months for filing a claim against it under this section and a period of less than 2 years for bringing a civil action against it under this section").
10
[Footnote 3]
See, e.g., The Kensington, 183 U. S. 263, 183 U. S. 269 (1902) (refusing to enforce clause requiring that all disputes under contract for passage be governed by Belgian law because such law would have favored the shipowner in violation of United States public policy).
[Footnote 4]
All these clauses will provide passengers who purchase tickets containing them with a "benefit in the form of reduced fares reflecting the savings that the cruise line enjoys by limiting [its exposure to liability]." See ante at 499 U. S. 594. Under the Court's reasoning, all these clauses, including a complete waiver of liability, would be enforceable, a result at odds with longstanding jurisprudence.
[Footnote 5]
"In [Carbon Black Export, Inc. v. The Monrosa, 254 F.2d 297 (CA5 1958), cert. dismissed, 359 U. S. 180 (1959),] the Court of Appeals had held a forum selection clause unenforceable, reiterating the traditional view of many American courts that 'agreements in advance of controversy whose object is to oust the jurisdiction of the courts are contrary to public policy, and will not be enforced.' 254 F.2d at 300-301."
The Bremen v. Zapata Off-Shore Co., 407 U. S. 1, 407 U. S. 6 (1972).
[Footnote 6]
The Court does not make clear whether the result in this case would also apply if the clause required Carnival passengers to sue in Panama, the country in which Carnival is incorporated.
11
428 F. 2d 888 and 446 F. 2d 907, vacated and remanded. U.S. Supreme Court
BURGER, C. J., delivered the opinion of the Court, in which BRENNAN, STEWART, WHITE, MARSHALL, BLACKMUN, POWELL, and REHNQUIST, JJ., joined. WHITE, J., filed a concurring statement, post, p. 407 U. S. 20. DOUGLAS, J., filed a dissenting opinion, post, p. 407 U. S. 20.
The Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972)
The Bremen v. Zapata Off-Shore Co. Page 407 U. S. 2 No. 71-322 MR. CHIEF JUSTICE BURGER delivered the opinion of the Court. Argued March 21, 1972 We granted certiorari to review a judgment of the United States Court of Appeals for the Fifth Circuit declining Decided June 12, 1972 to enforce a forum selection clause governing disputes arising under an international towage contract between 407 U.S. 1 petitioners and respondent. The circuits have differed in their approach to such clauses. [Footnote 1] For the reasons stated hereafter, we vacate the judgment of the Court of Appeals.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
In November, 1967, respondent Zapata, a Houston-based American corporation, contracted with petitioner Unterweser, a German corporation, to tow Zapata's ocean-going, self-elevating drilling rig Chaparral from
Syllabus
Louisiana to a point off Ravenna, Italy, in the Adriatic Sea, where Zapata had agreed to drill certain wells.
Petitioner Unterweser made an agreement to tow respondent's drilling rig from Louisiana to Italy. The contract contained a forum-selection clause providing for the litigation of any dispute in the High Court of Justice in London. When the rig under tow was damaged in a storm, respondent instructed Unterweser to tow the rig to Tampa, the nearest port of refuge. There, respondent brought suit in admiralty against petitioners. Unterweser invoked the forum clause in moving for dismissal for want of jurisdiction and brought suit in the English court, which ruled that it had jurisdiction under the contractual forum provision. The District Court, relying on Carbon Black Export, Inc. v. The Monrosa, 254 F. 2d 297, held the forum-selection clause unenforceable, and refused
Zapata had solicited bids for the towage, and several companies, including Unterweser, had responded. Unterweser was the low bidder and Zapata requested it to submit a contract, which it did. The contract submitted by Unterweser contained the following provision, which is at issue in this case:
"Any dispute arising must be treated before the London Court of Justice. "
Page 407 U. S. 3
In addition, the contract contained two clauses purporting to exculpate Unterweser from liability for damages to to decline jurisdiction on the basis of forum non conveniens. The Court of Appeals affirmed. the towed barge. [Footnote 2] Held: The forum-selection clause, which was a vital part of the towing contract, is binding on the parties unless respondent can meet the heavy burden of showing that its enforcement would be unreasonable, unfair, or unjust. Pp. 407 U. S. 8-20
12
After reviewing the contract and making several changes, but without any alteration in the forum selection or exculpatory clauses, a Zapata vice-president executed the contract and forwarded it to Unterweser in Germany, where Unterweser accepted the changes, and the contract became effective. about to expire, [Footnote 5] but the United States District Court in Tampa had not yet ruled on Unterweser's motion to dismiss or stay Zapata's action. On July 2, 1968, confronted with difficult alternatives, Unterweser filed an action to limit its liability in the District Court in Tampa. That court entered the customary injunction against proceedings outside the limitation court, and Zapata refiled its initial claim in the limitation action. [Footnote 6]
On January 5, 1968, Unterweser's deep sea tug Bremen departed Venice, Louisiana, with the Chaparral in tow bound for Italy. On January 9, while the flotilla was in international waters in the middle of the Gulf of Mexico, a severe storm arose. The sharp roll of the Chaparral in Gulf waters caused its elevator legs, which had been raised for the voyage, to break off and fall into the sea, seriously damaging the Chaparral. In this emergency situation, Zapata instructed the Bremen to tow its damaged rig to Tampa, Florida, the nearest port of refuge.
Page 407 U. S. 6
It was only at this juncture, on July 29, after the six-month period for filing the limitation action had run, that the District Court denied Unterweser's January motion to dismiss or stay Zapata's initial action. In denying the motion, that court relied on the prior decision of the Court of Appeals in Carbon Black Export, Inc. v. The Monrosa, 254 F.2d 297 (CA5 1958), cert. dismissed, 359 U. S. 180 (1959). In that case, the Court of Appeals had held a forum selection clause unenforceable, reiterating the traditional view of many American courts that
On January 12, Zapata, ignoring its contract promise to litigate "any dispute arising" in the English courts, commenced a suit in admiralty in the United States
Page 407 U. S. 4
"agreements in advance of controversy whose object is to oust the jurisdiction of the courts are contrary to public policy, and will not be enforced."
District Court at Tampa, seeking $3,500,000 damages against Unterweser in personamand the Bremen in rem, alleging negligent towage and breach of contract. [Footnote 3] Unterweser responded by invoking the forum clause of the towage contract, and moved to dismiss for lack of jurisdiction or on forum non conveniens grounds, or, in the alternative, to stay the action pending submission of the dispute to the "London Court of Justice." Shortly thereafter, in February, before the District Court had ruled on its motion to stay or dismiss the United States action, Unterweser commenced an action against Zapata seeking damages for breach of the towage contract in the High Court of Justice in London, as the contract provided; Zapata appeared in that court to contest jurisdiction, but its challenge was rejected, the English courts holding that the contractual forum provision conferred jurisdiction. [Footnote 4]
254 F.2d at 300-301. [Footnote 7] Apparently concluding that it was bound by theCarbon Black case, the District Court gave the forum selection clause little, if any, weight. Instead, the court treated the motion to dismiss under normal forum non conveniens doctrine applicable in the absence of such a clause, citing Gulf Oil Corp. v. Gilbert, 330 U. S. 501 (1947). Under that doctrine "unless the balance is strongly in favor of the defendant, the plaintiff's choice of forum should rarely be disturbed." Id. at330 U. S. 508. The District Court concluded: "The balance of conveniences here is not strongly in favor of [Unterweser] and [Zapata's] choice of forum should not be disturbed."
Thereafter, on January 21, 1969, the District Court denied another motion by Unterweser to stay the limitation action pending determination of the controversy in the High Court of Justice in London, and granted Zapata's motion to restrain Unterweser from litigating
Page 407 U. S. 5
In the meantime, Unterweser was faced with a dilemma in the pending action in the United States court at Tampa. The six-month period for filing action to limit its liability to Zapata and other potential claimants was
Page 407 U. S. 7
13
further in the London court. The District Judge ruled that, having taken jurisdiction in the limitation proceeding, he had jurisdiction to determine all matters relating to the controversy. He ruled that Unterweser should be required to "do equity" by refraining from also litigating the controversy in the London court, not only for the reasons he had previously stated for denying Unterweser's first motion to stay Zapata's action, but also because Unterweser had invoked the United States court's jurisdiction to obtain the benefit of the Limitation Act. "[t]he district court was entitled to consider that remanding Zapata to a foreign forum, with no practical contact with the controversy, could raise a bar to recovery by a United States citizen which its own convenient courts would not countenance. [Footnote 9]"
We hold, with the six dissenting members of the Court of Appeals, that far too little weight and effect were given to the forum clause in resolving this controversy. For at least two decades, we have witnessed an expansion of overseas commercial activities by business enterprises based in the United States. The barrier of distance that, once tended to confine a business concern to a modest territory no longer does so. Here we see an American
On appeal, a divided panel of the Court of Appeals affirmed, and, on rehearing en banc, the panel opinion was adopted, with six of the 14 en banc judges dissenting. As had the District Court, the majority rested on the Carbon Black decision, concluding that, "at the very least,'" that case stood for the proposition that a forum selection clause "`will not be enforced unless the selected state would provide a more convenient forum than the state in which suit is brought.'" From that premise, the Court of Appeals proceeded to conclude that, apart from the forum selection clause, the District Court did not abuse its discretion in refusing to decline jurisdiction on the basis of forum non conveniens. It noted that (1) the flotilla never "escaped the Fifth Circuit's mare nostrum, and the casualty occurred in close proximity to the district court"; (2) a considerable number of potential witnesses, including Zapata crewmen, resided in the Gulf Coast area; (3) preparation for the voyage and inspection and repair work had been performed in the Gulf area; (4) the testimony of the Bremen crew was available by way of deposition; (5) England had no interest in or contact with the controversy other than the forum selection clause. The Court of Appeals majority further noted that Zapata was a United States citizen and "[t]he discretion
Page 407 U. S. 9
company with special expertise contracting with a foreign company to tow a complex machine thousands of miles across seas and oceans. The expansion of American business and industry will hardly be encouraged if, notwithstanding solemn contracts, we insist on a parochial concept that all disputes must be resolved under our laws and in our courts. Absent a contract forum, the considerations relied on by the Court of Appeals would be persuasive reasons for holding an American forum convenient in the traditional sense, but in an era of expanding world trade and commerce, the absolute aspects of the doctrine of the Carbon Black case have little place, and would be a heavy hand indeed on the future development of international commercial dealings by Americans. We cannot have trade and commerce in world markets and international waters exclusively on our terms, governed by our laws, and resolved in our courts.
Page 407 U. S. 8
Forum selection clauses have historically not been favored by American courts. Many courts, federal and state, have declined to enforce such clauses on the ground that they were "contrary to public policy," or that
of the district court to remand the case to a foreign forum was consequently limited" -- especially since it appeared likely that the English courts would enforce the exculpatory clauses. [Footnote 8] In the Court of Appeals' view, enforcement of such clauses would be contrary to public policy in American courts under Bisso v. Inland Waterways Corp., 349 U. S. 85 (1955), and Dixilyn Drilling Corp. v. Crescent Towing & Salvage Co., 372 U. S. 697 (1963). Therefore,
their effect was to "oust the jurisdiction" of the court. [Footnote 10] Although
Page 407 U. S. 10
this view apparently still has considerable acceptance, other courts are tending to adopt a more hospitable attitude toward forum selection clauses. This view, advanced in the well reasoned dissenting opinion in the
14
instant case, is that such clauses are prima facievalid, and should be enforced unless enforcement is shown by the resisting party to be "unreasonable" under the circumstances. [Footnote 11] We believe this is the correct doctrine to be followed by federal district courts sitting in admiralty. It is merely the other side of the proposition recognized by this Court in National Equipment Rental, Ltd. v. Szukhent, 375 U. S. 311 (1964), holding that in federal courts a party may validly consent to be sued in a jurisdiction the power and business of a particular court, and has little place in an era when all courts are overloaded and when businesses, once essentially local, now operate in world markets. It reflects something of a provincial attitude regarding the fairness of other tribunals. No one seriously contends in this case that the forum selection clause "ousted" the District Court of jurisdiction over Zapata's action. The threshold question is whether that court should have exercised its jurisdiction to do more than give effect to the legitimate expectations of the parties, manifested in their freely negotiated agreement, by specifically enforcing the forum clause. where he cannot be found for service of process through contractual designation of an "agent" for receipt of process in that jurisdiction. In so holding, the Court stated: There are compelling reasons why a freely negotiated private international agreement, unaffected by fraud, undue influence, or overweening bargaining power, [Footnote 14] such "[I]t is settled . . . that parties to a contract may agree in advance to submit to the jurisdiction of a given court, to permit notice to be served by the opposing party, or even to waive notice altogether." Page 407 U. S. 13
Page 407 U. S. 11
Id. at 375 U. S. 315-316. This approach is substantially that followed in other common law countries, including England. [Footnote 12] It is the view advanced by noted scholars, and that adopted by the Restatement of the Conflict of Laws. [Footnote 13] It accords with ancient concepts of freedom of contract, and reflects an appreciation of the expanding horizons of American contractors who seek business in all parts of the world. Not surprisingly, foreign businessmen prefer, as do we, to
as that involved here, should be given full effect. In this case, for example, we are concerned with a far from routine transaction between companies of two different nations contemplating the tow of an extremely costly piece of equipment from Louisiana across the Gulf of Mexico and the Atlantic Ocean, through the Mediterranean Sea to its final destination in the Adriatic Sea. In the course of its voyage, it was to traverse the waters of many jurisdictions. The Chaparral could have been damaged at any point along the route, and there were countless possible ports of refuge. That the accident occurred in the Gulf of Mexico and the barge was
Page 407 U. S. 12
towed to Tampa in an emergency were mere fortuities. It cannot be doubted for a moment that the parties sought to provide for a neutral forum for the resolution of any disputes arising during the tow. Manifestly, much uncertainty and possibly great inconvenience to both parties could arise if a suit could be maintained in any jurisdiction in which an accident might occur or if jurisdiction were left to any place where the Bremen or Unterweser might happen to be found. [Footnote 15] The elimination of all such uncertainties by agreeing in advance on a forum acceptable to both parties is an indispensable element in international trade,
have disputes resolved in their own courts, but, if that choice is not available, then in a neutral forum with expertise in the subject matter. Plainly, the courts of England meet the standards of neutrality and long experience in admiralty litigation. The choice of that forum was made in an arm's length negotiation by experienced and sophisticated businessmen, and, absent some compelling and countervailing reason, it should be honored by the parties and enforced by the courts.
The argument that such clauses are improper because they tend to "oust" a court of jurisdiction is hardly more than a vestigial legal fiction. It appears to rest at core on historical judicial resistance to any attempt to reduce
Page 407 U. S. 14
15
commerce, and contracting. There is strong evidence that the forum clause was a vital part of the agreement, [Footnote 16] and it would be unrealistic to think that the parties did not conduct their negotiations, including fixing the monetary terms, with the consequences of the forum clause figuring prominently in their calculations. Under these circumstances, as Justice Karminski reasoned in sustaining jurisdiction over Zapata in the High Court of Justice, "[t]he force of an agreement for litigation in this country, freely entered into between two competent parties, seems to me to be very powerful." "[W]e should be careful not to over-emphasize the strength of the [Bisso] policy. . . . [T]wo concerns underlie the rejection of exculpatory agreements: that they may be produced by overweening bargaining power; and that they do not sufficiently discourage negligence. . . . Here, the conduct in question is that of a foreign party Page 407 U. S. 15 occurring in international waters outside our jurisdiction. The evidence disputes any notion of overreaching in the contractual agreement. And, for all we know, the uncertainties and dangers in the new field of transoceanic towage of oil rigs were so great that the tower was unwilling to take financial responsibility for the risks, and the parties thus allocated responsibility for the voyage to the tow. It is equally possible that the contract price took this factor into account. I conclude that we should not invalidate the forum selection clause here unless we are firmly convinced that we would thereby significantly encourage negligent conduct within the boundaries of the United States." Page 407 U. S. 16
American waters, and those considerations are not controlling in an international commercial agreement. Speaking for the dissenting judges in the Court of Appeals, Judge Wisdom pointed out:
Thus, in the light of present-day commercial realities and expanding international trade, we conclude that the forum clause should control absent a strong showing that it should be set aside. Although their opinions are not altogether explicit, it seems reasonably clear that the District Court and the Court of Appeals placed the burden on Unterweser to show that London would be a more convenient forum than Tampa, although the contract expressly resolved that issue. The correct approach would have been to enforce the forum clause specifically unless Zapata could clearly show that enforcement would be unreasonable and unjust, or that the clause was invalid for such reasons as fraud or overreaching. Accordingly, the case must be remanded for reconsideration.
428 F.2d at 907-908. (Footnotes omitted.)
Courts have also suggested that a forum clause, even though it is freely bargained for and contravenes no We note, however, that there is nothing in the record presently before us that would support a refusal to enforce the forum clause. The Court of Appeals suggested that enforcement would be contrary to the public policy of the forum under Bisso v. Inland Waterways Corp., 349 U. S. 85 (1955), because of the prospect that the English courts would enforce the clauses of the towage contract purporting to exculpate Unterweser from liability for damages to the Chaparral. A contractual choice of forum clause should be held unenforceable if enforcement would contravene a strong public policy of the forum in which suit is brought, whether declared by statute or by judicial decision. See, e.g., Boyd v. Grand Trunk W. R. Co., 338 U. S. 263 (1949). It is clear, however, that whatever the proper scope of the policy expressed in Bisso, [Footnote 17] it does not reach this case. Bisso rested on considerations with respect to the towage business strictly in Page 407 U. S. 17 important public policy of the forum, may nevertheless be "unreasonable" and unenforceable if the chosen forum is seriously inconvenient for the trial of the action. Of course, where it can be said with reasonable assurance that, at the time they entered the contract, the parties to a freely negotiated private international commercial agreement contemplated the claimed inconvenience, it is difficult to see why any such claim of inconvenience should be heard to render the forum clause unenforceable.
We are not here dealing with an agreement between two Americans to resolve their essentially local disputes in a remote alien forum. In such a case, the serious inconvenience of the contractual forum to one or both of the parties might carry greater weight in determining the reasonableness of the forum clause. The remoteness
16
of the forum might suggest that the agreement was an adhesive one, or that the parties did not have the particular controversy in mind when they made their agreement; yet even there, the party claiming should bear a heavy burden of proof. [Footnote 18] Similarly, selection of a remote forum to apply differing foreign law to an essentially American controversy might contravene an important public policy of the forum. For example, so long as Bisso governs American courts with respect to the towage business in American waters, it would quite arguably be improper to permit an American tower to avoid that policy by providing a foreign forum for resolution of his disputes with an American towee. forced to litigate in London. Indeed, it cannot even be assumed that it would be placed to the expense of transporting its witnesses to London. It is not unusual for important issues in international admiralty cases to be dealt with by deposition. Both the District Court and the Court of Appeals majority appeared satisfied that Unterweser could receive a fair hearing in Tampa by using deposition testimony of its witnesses from distant places, and there is no reason to conclude that Zapata could not use deposition testimony to equal advantage if forced to litigate in London, as it bound itself to do. Nevertheless, to allow Zapata opportunity to carry its heavy burden of showing not only that the balance of convenience is strongly in favor of trial in Tampa (that is, that it will be far more inconvenient for Zapata to litigate in London than it will be for Unterweser to litigate in Tampa), but also that a London trial will be so manifestly and gravely inconvenient to Zapata that it will be effectively deprived of a meaningful day in court, we remand for further proceedings.
This case, however, involves a freely negotiated international commercial transaction between a German and an American corporation for towage of a vessel from the Gulf of Mexico to the Adriatic Sea. As noted, selection of a London forum was clearly a reasonable effort to bring vital certainty to this international transaction, and to provide a neutral forum experienced and capable in the resolution of admiralty litigation. Whatever "inconvenience" Zapata would suffer by being forced to litigate in the contractual forum as it agreed to do was clearly
Zapata's remaining contentions do not require extended treatment. It is clear that Unterweser's action in filing its limitation complaint in the District Court in Tampa was, so far as Zapata was concerned, solely a defensive measure made necessary as a response to Zapata's breach of the forum clause of the contract. When the sixmonth statutory period for filing an action to limit its liability had almost run without the District Court's having ruled on Unterweser's initial motion to dismiss or stay Zapata's action pursuant to the forum clause,
Page 407 U. S. 18
foreseeable at the time of contracting. In such circumstances, it should be incumbent on the party seeking to escape his contract to show that trial in the contractual forum will be so gravely difficult and inconvenient that he will, for all practical purposes, be deprived of his day in court. Absent that, there is no basis for concluding that it would be unfair, unjust, or unreasonable to hold that party to his bargain.
Unterweser had no other prudent alternative but to protect itself by filing for limitation of its liability. [Footnote 20] Its action in so doing was a direct consequence
Page 407 U. S. 20
In the course of its ruling on Unterweser's second motion to stay the proceedings in Tampa, the District Court did make a conclusory finding that the balance of convenience was "strongly" in favor of litigation in Tampa. However, as previously noted, in making that finding, the court erroneously placed the burden of proof on Unterweser to show that the balance of convenience was strongly in its favor. [Footnote 19] Moreover, the finding falls far short of a conclusion that Zapata would be effectively deprived of its day in court should it be
of Zapata's failure to abide by the forum clause of the towage contract. There is no basis on which to conclude that this purely necessary defensive action by Unterweser should preclude it from relying on the forum clause it bargained for.
For the first time in this litigation, Zapata has suggested to this Court that the forum clause should not be construed to provide for an exclusive forum or to include in remactions. However, the language of the clause is
Page 407 U. S. 19
17
clearly mandatory and all-encompassing; the language of the clause in the Cabon Black case was far different. [Footnote 21] The Bremen was arrested by a United States marshal acting pursuant to Zapata's complaint immediately upon her arrival in Tampa. The tug was subsequently released when Unterweser furnished security in the amount of $3,500;000.
The judgment of the Court of Appeals is vacated, and the case is remanded for further proceedings consistent with this opinion.
[Footnote 4]
Vacated and remanded.
Zapata appeared specially and moved to set aside service of process outside the country. Justice Karminski of the High Court of Justice denied the motion on the ground the contractual choice of forum provision conferred jurisdiction, and would be enforced absent a factual showing it would not be "fair and right" to do so. He did
[Footnote 1]
Compare, e.g., Central Contraction Co. v. Maryland Casualty Co., 367 F.2d 341 (CA3 1966), and Wm. H. Muller & Co. v. Swedish American Line Ltd., 224 F.2d 806 (CA2)cert. denied, 350 U.S. 903 (1955), with Carbon Black Export, Inc. v. The Monrosa, 254 F.2d 297 (CA5 1958), cert. dismissed, 359 U. S. 180 (1959).
not believe Zapata had made such a showing, and held that it should be required to "stick to [its] bargain." App. 206, 211, 213. The Court of Appeal dismissed an appeal on the ground that Justice Karminski had properly applied the English rule. Lord Justice Willmer stated that rule as follows:
[Footnote 2]
"The law on the subject, I think, is not open to doubt. . . . It is always open to parties to stipulate . . . that a particular Court shall have jurisdiction over any dispute arising out of their contract. Here, the parties chose to stipulate that disputes were to be referred to the 'London Court,' which I take as meaning the High Court in this
The General Towage Conditions of the contract included the following:
"1. . . . [Unterweser and its] masters and crews are not responsible for defaults and/or errors in the navigation of the tow."
country.Prima facie, it is the policy of the Court to hold parties to the bargain into which they have entered. . . . But that is not an inflexible rule, as was shown, for instance, by the case of The Fehmarn, [1957] 1 Lloyd's Rep. 511; (C.A.) [1957] 2 Lloyd's Rep. 551. . . ."
"2. . . ."
"b) Damages suffered by the towed object are in any case for account of its Owners."
"I approach the matter, therefore, in this way, that the Court has a discretion, but it is a discretion which, in the ordinary way and in the absence of strong reason to the contrary, will be exercised in favour of holding parties
In addition, the contract provided that any insurance of the Chaparral was to be "for account of" Zapata. to their bargain. The question is whether sufficient circumstances have been shown to exist in this case to Unterweser's initial telegraphic bid had also offered to "arrange insurance covering towage risk for rig if make it desirable, on the grounds of balance of convenience, that proceedings should not take place in this desired." As Zapata had chosen to be self-insured on all its rigs, the loss in this case was not compensated by country. . . ." insurance. [1968] 2 Lloyd's Rep. 158, 162-163. [Footnote 3] [Footnote 5]
18
46 U.S.C. 183, 185. See generally G. Gilmore & C. Black, Admiralty 115 (1957). The Court of Appeals also indicated in passing that, even if it took the view that choice of forum clauses were enforceable unless "unreasonable," it was "doubtful" that enforcement would be proper here, because the exculpatory clauses would deny Zapata relief to which it was "entitled," and because England was "seriously In its limitation complaint, Unterweser stated it "reserve[d] all rights" under its previous motion to dismiss or stay Zapata's action, and reasserted that the High Court of Justice was the proper forum for determining the entire controversy, including its own right to limited liability, in accord with the contractual forum clause. Unterweser later counterclaimed, setting forth the same contractual cause of action as in its English action and a further cause of action for salvage arising out of the Bremen's services following the casualty. In its counterclaim, Unterweser again asserted that the High Court of Justice in London was the proper forum for determining all aspects of the controversy, including its counterclaim. [Footnote 10] inconvenient" for trial of the action.
[Footnote 6]
Many decisions reflecting this view are collected in Annot. 56 A.L.R.2d 300, 306-320 (1957), and Later Case Service (1967).
For leading early cases, see, e.g., Nute v. Hamilton Mutual Ins. Co., 72 Mass. (6 Gray) 174 (1856); Nashua River Paper Co. v. Hammermill Paper Co., 223 Mass. 8, 111 N.E. 678 (1916); Benson v. Eastern Bldg. & Loan Assn., 174 N.Y. 83, 66 N.E. 627 (1903).
[Footnote 7]
The Carbon Black court went on to say that it was, in any event, unnecessary for it to reject the more liberal position taken in Wm. H. Muller & Co. v. Swedish American Line Ltd., 224 F.2d 806 (CA2), cert. denied, 350 U.S. 903 (1955), because the case before it had a greater nexus with the United States than that in Muller.
The early admiralty cases were in accord. See, e.g., Wood & Selick, Inc. v. Compagnie Generale Transatlantique, 43 F.2d 941 (CA2 1930); The Ciano, 58 F.Supp. 65 (ED Pa.1944); Kuhnhold v. Compagnie Generale Transatlantique, 251 F. 387 (SDNY 1918);Prince Steam-Shipping Co. v. Lehman, 39 F. 704 (SDNY 1889).
[Footnote 8]
The record contains an undisputed affidavit of a British solicitor stating an opinion that the exculpatory clauses of the contract would be held "prima facie valid and enforceable" against Zapata in any action maintained in England in which Zapata alleged that defaults or errors in Unterweser's tow caused the casualty and damage to theChaparral.
In Insurance Co. v. Morse, 20 Wall. 445 (1874), this Court broadly stated that "agreements in advance to oust the courts of the jurisdiction conferred by law are illegal and void." Id. at 87 U. S. 451. But the holding of that case was only that the State of Wisconsin could not by statute force a foreign corporation to "agree" to surrender its federal statutory right to remove a state court action to the federal courts as a condition of doing business in Wisconsin. Thus, the case is properly understood as one in which a state statutory requirement
In addition, it is not disputed that, while the limitation fund in the District Court in Tampa amounts to $1,390,000, the limitation fund in England would be only slightly in excess of $80,000 under English law.
was viewed as imposing an unconstitutional condition on the exercise of the federal right of removal. See, e.g., Wisconsin v. Philadelphia & Reading Coal Co., 241 U. S. 329 (1916).
[Footnote 9]
As Judge Hand noted in Krenger v. Pennsylvania R. Co., 174 F.2d 556 (CA2 1949), even at that date, there was, in fact, no "absolute taboo" against such clauses. See, e.g., Mittenthal v. Mascagni, 183 Mass.19, 66
19
N.E. 425 (1903); Daley v. People's Bldg., Loan & Sav. Assn., 178 Mass. 13, 59 N.E. 452 (1901) (Holmes, J.). See also Cerro de Pasco Copper Corp. v. Knut Knutsen, O.A.S., 187 F.2d 990 (CA2 1951). Restatement (Second) of the Conflict of Laws 80 (1971); Reese, The Contractual Forum: Situation in the United States, 13 Am.J.Comp.Law 187 (1964); A. Ehrenzweig, Conflict of Laws 41 (1962). See also Model Choice of Forum Act (National Conference of Commissioners on Uniform State Laws 1968).
[Footnote 11]
E.g., Central Contracting Co. v. Maryland Casualty Co., 367 F.2d 341 (CA3 1966);Anastasiadis U.S.S. Little John, 346 F.2d 281 (CA5 1965) (by implication); Wm. H. Muller & Co. v. Swedish American Line Ltd., 24 F.2d 806 (CA2), cert. denied;. 350 U.S. 903 (1955); Cerro de Pasco Copper Corp. v. Knut Knutsen, O.A.S., 187 F.2d 990 (CA2 1951); Central Contracting Co. v. C. E. Youngdahl & Co., 418 Pa. 122, 209 A.2d 810 (1965).
[Footnote 14]
The record here refutes any notion of overweening bargaining power. Judge Wisdom, dissenting in the Court of Appeals, noted:
"Zapata has neither presented evidence of nor alleged fraud or undue bargaining power in the agreement. Unterweser was only one of several companies bidding on the project. No evidence contradicts its Managing Director's affidavit that it specified English courts 'in an effort to meet Zapata Off-Shore Company half way.' Zapata's Vice President has declared by affidavit that no specific negotiations concerning the forum clause took place. But this was not simply a form contract with boilerplate language that Zapata had no power to alter. The towing of an oil rig across the Atlantic was a new business. Zapata did make alterations to the contract submitted by Unterweser. The forum clause could hardly be ignored. It is the final sentence of the agreement,
The Muller case was overruled in Indussa Corp. U.S.S. Ranborg, 377 F.2d 200 (CA2 1967), insofar as it held that the forum clause was not inconsistent with the "lessening of liability" provision of the Carriage of Goods by Sea Act, 46 U.S.C. 1303(8), which was applicable to the transactions in Muller, Indussa, and Carbon Black. That Act is not applicable in this case.
[Footnote 12]
In addition to the decision of the Court of Appeal in the instant case, Unterweser Reederei G.m.b.H. v. Zapata Off-Shore Co. [The Chaparral], [1968] 2 Lloyd's Rep. 158 (C.A.), see e.g., Mackender v. Feldia A.G., [1967] 2 Q.B. 590 (C.A.); The Fehmarn,[1958] 1 W.L.R. 159 (C.A.); Law v. Garrett, [1878] 8 Ch.D. 26 (C.A.); The Eleftheria,[1970] P. 94. As indicated by tho clear statements in The Eleftheria and of Lord Justice Willmer in this case, supra, n 4, the decision of the trial court calls for an exercise of discretion. See generally A. Dicey & J. Morris, The Conflict of Laws 979-980, 1087-1088 (8th ed.1967); Cowen & Mendes da Costa, The Contractual Forum: Situation in England and the British Commonwealth, 13 Am.J.Comp.Law 179 (1964); Reese, The Contractual Forum: Situation in the United States, id. at 187, 190 n. 13; Graupner, Contractual Stipulations Conferring Exclusive Jurisdiction Upon Foreign Courts in the Law of England and Scotland, 59 L.Q.Rev. 227 (1943).
immediately preceding the date and the parties' signatures. . . ."
428 F.2d 888, 907.
[Footnote 15]
At the very least, the clause was an effort to eliminate all uncertainty as to the nature, location, and outlook of the forum in which these companies of differing nationalities might find themselves. Moreover, while the contract here did not specifically provide that the substantive law of England should be applied, it is the general rule in English courts that the parties are assumed, absent contrary indication, to have designated the forum with the view that it should apply its own law. See, e.g., Tzortzis v. Monark Line A/B,[1968] 1 W.L.R. 406 (C.A.); see generally 1 T. Carver, Carriage by Sea 496-497 (12th ed.1971); G. Cheshire, Private International Law 193 (7th ed.1965); A. Dicey & J. Morris, The Conflict of Laws 705, 1046 (8th ed.1967); Collins, Arbitration Clauses and Forum Selecting Clauses in the Conflict of Laws: Some Recent Developments in England, 2
[Footnote 13]
20
J.Mar.L. & Comm. 363, 365-370 and n. 7 (1971). It is therefore reasonable to conclude that the forum clause was also an effort to obtain certainty as to the applicable substantive law. [Footnote 18]
See, e.g., Model Choice of Forum Act 3(3), supra, n 13, comment:
The record contains an affidavit of a Managing Director of Unterweser stating that Unterweser considered the choice of forum provision to be of "overriding importance" to the transaction. He stated that Unterweser towage contracts ordinarily provide for exclusive German jurisdiction and application of German law, but that, "[i]n this instance, in an effort to meet [Zapata] half-way, [Unterweser] proposed the London Court of Justice. Had this provision not been accepted by [Zapata], [Unterweser] would not have entered into the towage contract. . . ."
"On rare occasions, the state of the forum may be a substantially more convenient place for the trial of a particular controversy than the chosen state. If so, the present clause would permit the action to proceed. This result will presumably be in accord with the desires of the parties. It can be assumed that they did not have the particular controversy in mind when they made the choice of forum agreement, since they would not consciously have agreed to have the action brought in an inconvenient place."
[Footnote 19] He also stated that the parties intended, by designating the London forum, that English law would be applied. A responsive affidavit by Hoyt Taylor, a vice-president of Zapata, denied that there were any discussions between Zapata and Unterweser concerning the forum clause or the question of the applicable law. Applying the proper burden of proof, Justice Karminski, in the High Court of Justice at London, made the following findings, which appear to have substantial support in the record:
[Footnote 16]
"[Zapata] pointed out that in this case the balance of convenience so far as witnesses were concerned pointed in the direction of having the case heard and tried in the United States District Court at Tampa in Florida
See nn. 14-15 supra. Zapata has denied specifically discussing the forum clause with Unterweser, but, as Judge Wisdom pointed out, Zapata made numerous changes in the contract without altering the forum clause, which could hardly have escaped its attention. Zapata is clearly not unsophisticated in such matters. The contract of its wholly owned subsidiary with an Italian corporation covering the contemplated drilling operations in the Adriatic Sea provided that all disputes were to be settled by arbitration in London under English law, and contained broad exculpatory clauses. App. 306-311.
because the probability is that most, but not necessarily all, of the witnesses will be American. The answer, as it seems to me, is that a substantial minority, at least, of witnesses are likely to be German. The tug was a German vessel, and was, as far as I know, manned by a German crew. . . . Where they all are now or are likely to be when this matter is litigated I do not know, because the experience of the Admiralty Court here strongly points out that maritime witnesses, in the course of their duties, move about freely. The homes of the German crew presumably are in Germany. There is probably a balance of numbers in favour of the Americans, but not, as I am inclined to think, a very heavy balance."
[Footnote 17]
Dixilyn Drilling Corp. v. Crescent Towing & Salvage Co., 372 U. S. 697 (1963) (per curiam), merely followed Bisso and declined to subject its rule governing towage contracts in American waters to "indeterminate exceptions" based on delicate analysis of the facts of each case. See 372 U.S. at 372 U. S. 698 (Harlan, J., concurring).
App. 212. It should also be noted that, if the exculpatory clause is enforced in the English courts, many of Zapata's witnesses on the questions of negligence and damage may be completely unnecessary.
[Footnote 20]
21
Zapata has suggested that Unterweser was not in any way required to file its "affirmative" limitation complaint, because it could just as easily have pleaded limitation of liability by way of defense in Zapata's initial action, either before or after the six-month period. That course of action was not without risk, however, that Unterweser's attempt to limit its liability by answer would be held invalid. See G. Gilmore & C. Black, Admiralty 115 (1957). We do not believe this hazardous option in any way deprived Unterweser's limitation complaint of its essentially defensive character so far as Zapata was concerned. Petitioners, having previously moved the District Court to dismiss, filed a complaint in that court seeking exoneration or limitation of liability as provided in 46 U.S.C. 185. Respondent filed its claim in the limitation proceedings, asserting the same cause of action as in its original action. Petitioners then filed objections to respondent's claim and counterclaimed against respondent, alleging the same claims embodied in its English action, plus an additional salvage claim.
Respondent moved for an injunction against petitioners' litigating further in the English case, and the District Court granted the injunction pending determination of the limitation action. Petitioners moved to stay their own limitation proceeding pending a resolution of the suit in the English court. That motion was denied. 296 F.Supp. 733.
[Footnote 21]
See 359 U.S. at 359 U. S. 182.
MR. JUSTICE WHITE, concurring. That was the posture of the case as it reached the Court of Appeals, petitioners appealing from the last two I concur in the opinion and judgment of the Court except insofar as the opinion comments on the issues which are remanded to the District Court. In my view, these issues are best left for consideration by the District Court in the first instance. Chief Justice Taft, in Hartford Accident Co. v. Southern Pacific, 273 U. S. 207, 273 U. S. 214, in discussing the Limitation of Liability Act, said that MR. JUSTICE DOUGLAS, dissenting. "the great object of the statute was to encourage shipbuilding, and to induce the investment of money in this Petitioner Unterweser contracted with respondent to tow respondent's drilling barge from Louisiana to Italy. The towage contract contained a "forum selection clause" branch of industry, by limiting the venture of those who build the ship to the loss of the ship itself or her freight then pending, in cases of damage or wrong, happening without the privity or orders. The Court of Appeals affirmed. 428 F.2d 888, 446 F.2d 907.
Page 407 U. S. 21
Page 407 U. S. 22
providing that any dispute must be litigated before the High Court of Justice in London, England. While the barge was being towed in the Gulf of Mexico, a casualty was suffered. The tow made for Tampa Bay, he nearest port, where respondent brought suit for damages in the District Court.
knowledge of the ship owner, and by the fault or neglect of the master or other persons on board; that the origin of this proceeding for limitation of liability is to be found in the general maritime law, differing from the English maritime law; and that such a proceeding is entirely within the constitutional grant of power to Congress to establish courts of admiralty and maritime jurisdiction."
Petitioners sued respondent in the High Court of Justice in London, which denied respondent's motion to dismiss.
Chief Justice Taft went on to describe how the owner of a vessel who, in case the vessel is found at fault, may limit his liability to the value of the vessel and may bring all claimants "into concourse in the proceeding, by
22
monition," and they may be enjoined from suing the owner and the vessel on such claims in any other court. Id. at 273 U. S. 215. evidence in the present record that it is enforceable in England. That policy was first announced in Bisso v. Inland Waterways Corp., 349 U. S. 85, and followed in Boston Metals Co. v. The Winding Gulf, 349 U. S. 122; Dixilyn, supra; Gray v. Johanesson, 287 F.2d 852 (CA5); California Co. v. Jumonville, 327 F.2d 988 (CA5); American S.S. Co. v. Great Lakes Towing Co., 333 F.2d 426 (CA7); D. R. Kincaid, Ltd. v. Trans-Pacific "[T]his Court has, by its rules and decisions, given the statute a very broad and equitable construction for the purpose of carrying out its purpose and for facilitating a settlement of the whole controversy over such losses as are comprehended within it, and that all the ease with which rights can be adjusted in equity is intended to be given to the proceeding. It is the administration of equity in an admiralty court. . . . The proceeding partakes in a way of the features of a bill to enjoin a multiplicity of suits, a bill in the nature of an interpleader, and a creditor's bill. It looks to a complete and just disposition of a many-cornered controversy, and is applicable to proceedings in remagainst the ship, as well as to proceedings in personam against the owner, the limitation extending to the owner's property as well as to his person." Moreover, the casualty occurred close to the District Court, a number of potential witnesses, including respondent's crewmen, reside in that area, and the inspection and repair work were done there. The testimony of the tower's crewmen, residing in Germany, is already available by way of depositions taken in the proceedings. Id. at 273 U. S. 215-216. Page 407 U. S. 24 The Limitation Court is a court of equity, and, traditionally, an equity court may enjoin litigation in another court where equitable considerations indicate that the other litigation might prejudice the proceedings in the Limitation Court. Petitioners' petition for limitation All in all, the District Court judge exercised his discretion wisely in enjoining petitioners from pursuing the litigation in England. * Towing, Inc., 367 F.2d 857 (CA9);A. L. Mechling Barge Lines, Inc. v. Derby Co., 399 F.2d 304 (CA5). Cf. United States v. Seckinger, 397 U. S. 203. Although the casualty occurred on the high seas, the Bissodoctrine is nonetheless applicable. The Scotland, 105 U. S. 24; The Belgenland, 114 U. S. 355; The Gylfe v. The Trujillo, 209 F.2d 386 (CA2).
Chief Justice Taft concluded:
Page 407 U. S. 23
I would affirm the judgment below.
subjects them to the full equitable powers of the Limitation Court.
* It is said that, because these parties specifically agreed to litigate their disputes before the London Court of Justice, the District Court, absent "unreasonable" circumstances, should have honored that choice by
Respondent is a citizen of this country. Moreover, if it were remitted to the English court, its substantive rights would be adversely affected. Exculpatory provisions in the towage control provide (1) that petitioners, the masters and the crews "are not responsible for defaults and/or errors in the navigation of the tow" and (2) that "[d]amages suffered by the towed object are in any case for account of its Owners."
declining to exercise its jurisdiction. The forum selection clause, however, is part and parcel of the exculpatory provision in the towing agreement which, as mentioned in the text, is not enforceable in American courts. For only by avoiding litigation in the United States could petitioners hope to evade the Bisso doctrine.
Judges in this country have traditionally been hostile to attempts to circumvent the public policy against Under our decision in Dixilyn Drilling Corp v. Crescent Towing & Salvage Co., 372 U. S. 697, 372 U. S. 698, "a contract which exempts the tower from liability for its own negligence" is not enforceable, though there is exculpatory agreements. For example, clauses specifying that the law of a foreign place (which favors such releases) should control have regularly been ignored. Thus, in The Kensington, 183 U. S. 263, 183 U. S. 276,
23
the Court held void an exemption from liability despite the fact that the contract provided that it should be construed under Belgian law, which was more tolerant. And see E. Gerli & Co. v. Cunard S.S. Co., 48 F.2d 115, 117 (CA2);Oceanic Steam Nav. Co. v. Corcoran, 9 F.2d 724, 731 (CA2); In re Lea Fabrics, Inc., 226 F.Supp. 232, 237 (NJ); F. A. Straus & Co. v. Canadian P. R. Co., 254 N.Y. 407, 173 N.E. 564; Siegelman v. Cunard White Star, 221 F.2d 189, 199 (CA2) (Frank, J., dissenting). 6A A. Corbin on Contracts 1446 (1962).
The instant stratagem of specifying a foreign forum is essentially the same as invoking a foreign law of construction, except that the present circumvention also requires the American party to travel across an ocean to seek relief. Unless we are prepared to overrule Bisso, we should not countenance devices designed solely for the purpose of evading its prohibition.
It is argued, however, that one of the rationales of the Bisso doctrine, "to protect those in need of goods or services from being overreached by others who have power to drive hard bargains" (349 U.S. at 349 U. S. 91), does not apply here, because these parties may have been of equal bargaining stature. Yet we have often adopted prophylactic rules rather than attempt to sort the core cases from the marginal ones. In any event, the other objective of the Bisso doctrine, to "discourage negligence by making wrongdoers pay damages" (ibid.) applies here and in every case, regardless of the relative bargaining strengths of the parties.
24
unsuccessful in solving the problem, headquarters terminated the franchise and ordered the franchisees to U.S. Supreme Court vacate the premises. They refused, and continued to operate the restaurant. Appellant then brought a diversity action in Federal District Court in Florida, alleging that the franchisees had breached their franchise obligations Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985) and requesting damages and injunctive relief. The franchisees claimed that, because they were Michigan Burger King Corp. v. Rudzewicz residents and because appellant's claim did not "arise" within Florida, the District Court lacked personal jurisdiction over them. But the court held that the franchisees were subject to personal jurisdiction pursuant to Florida's long-arm statute, which extends jurisdiction to any person, whether or not a citizen or resident of the Argued January 8, 1985 State, who breaches a contract in the State by failing to perform acts that the contract requires to be performed there. Thereafter, the court entered judgment against the franchisees on the merits. The Court of Appeals reversed, holding that "[j]urisdiction under these circumstances would offend the fundamental fairness 471 U.S. 462 which is the touchstone of due process."
No. 83-2097
Decided May 20, 1985
APPEAL FROM THE UNITED STATES COURT OF APPEALS FOR THE
Held: The District Court's exercise of jurisdiction pursuant to Florida's long-arm statute did not violate the Due Process Clause of the Fourteenth Amendment. Pp. 471 U. S. 471-487.
ELEVENTH CIRCUIT
Syllabus
Page 471 U. S. 463
Appellant is a Florida corporation whose principal offices are in Miami. It conducts most of its restaurant business through a franchise operation, under which franchisees are licensed to use appellant's trademarks and service marks in leased standardized restaurant facilities for a period of 20 years. The governing contracts provide that the franchise relationship is established in Miami and governed by Florida law, and call for payment of all required monthly fees and forwarding of all relevant notices to the Miami headquarters. The Miami headquarters sets policy and works directly with the franchisees in attempting to resolve major problems. Day-to-day monitoring of franchisees, however, is conducted through district offices that, in turn, report to the Miami headquarters. Appellee is a Michigan resident who, along with another Michigan resident, entered into a 20-year franchise contract with appellant to operate a restaurant in Michigan. Subsequently, when the restaurant's patronage declined, the franchisees fell behind in their monthly payments. After extended negotiations among the franchisees, the Michigan district office, and the Miami headquarters proved
(a) A forum may assert specific jurisdiction over a nonresident defendant where an alleged injury arises out of or relates to actions by the defendant himself that are purposeful directed toward forum residents, and where jurisdiction would not otherwise offend "fair play and substantial justice." Jurisdiction in these circumstances may not be avoided merely because the defendant did not physically enter the forum. Pp. 471 U. S. 471-478.
(b) An individual's contract with an out-of-state party cannot alone automatically establish sufficient minimum contacts in the other party's home forum. Instead, the prior negotiations and contemplated future consequences, along with the terms of the contract and the parties' actual course of dealing, must be evaluated to determine whether a defendant purposefully established minimum contacts within the forum. Pp.471 U. S. 478-479.
25
(c) Here, appellee established a substantial and continuing relationship with appellant's Miami headquarters, and received fair notice from the contract documents and the course of dealings that he might be subject to suit in Florida. The District Court found that appellee is an "experienced and sophisticated" businessman who did not act under economic duress or disadvantage imposed by appellant, and appellee has pointed to no other factors that would establish the unconstitutionality of Florida's assertion of jurisdiction. Pp. 471 U. S. 479-487. A
Burger King Corporation is a Florida corporation whose principal offices are in Miami. It is one of the world's largest restaurant organizations, with over 3,000 outlets in the 50 States, the Commonwealth of Puerto Rico, and 8 foreign nations. Burger King conducts approximately 80% of its business through a franchise operation that the company styles the "Burger King System" -- "a comprehensive restaurant format and operating system for the sale of uniform and quality food products." App. 46. [Footnote 1] Burger King licenses its franchisees to use its trademarks and service marks for a period of 20 years, and leases standardized restaurant facilities to them for the same term. In addition, franchisees acquire a variety of proprietary information concerning the "standards, specifications, procedures and methods for operating
724 F.2d 1505, reversed and remanded.
BRENNAN, J., delivered the opinion of the Court, in which BURGER, C.J., and MARSHALL, BLACKMUN, REHNQUIST, and O'CONNOR, JJ., joined. STEVENS, J., filed a dissenting opinion, in which WHITE, J., joined, post, p. 471 U. S. 487. POWELL, J., took no part in the consideration or decision of the case.
Page 471 U. S. 465
JUSTICE BRENNAN delivered the opinion of the Court.
a Burger King Restaurant." Id. at 52. They also receive market research and advertising assistance; ongoing training in restaurant management; [Footnote 2] and accounting, cost-control, and inventory-control guidance. By permitting franchisees to tap into Burger King's established national reputation and to benefit from proven procedures for dispensing standardized fare, this system enables them to go into the restaurant business with significantly lowered barriers to entry. [Footnote 3]
The State of Florida's long-arm statute extends jurisdiction to "[a]ny person, whether or not a citizen or resident of this state," who, inter alia, "[b]reach[es] a contract in this state by failing to perform acts required by the contract to be performed in this state," so long as the cause of action
Page 471 U. S. 464 In exchange for these benefits, franchisees pay Burger King an initial $40,000 franchise fee and commit arises from the alleged contractual breach. Fla.Stat. 48.193 (1)(g) (Supp.1984). The United States District Court for the Southern District of Florida, sitting in diversity, relied on this provision in exercising personal jurisdiction over a Michigan resident who allegedly had breached a franchise agreement with a Florida corporation by failing to make required payments in Florida. The question presented is whether this exercise of long-arm jurisdiction offended "traditional conception[s] of fair play and substantial justice" embodied in the Due Process Clause of the Fourteenth Amendment.International Shoe Co. v. Washington, 326 U. S. 310, 320 (1945). "[u]niformity of service, appearance, and quality of product is essential to the preservation of the Burger King image and the benefits accruing therefrom to both Franchisee and Franchisor." themselves to payment of monthly royalties, advertising and sales promotion fees, and rent computed in part from monthly gross sales. Franchisees also agree to submit to the national organization's exacting regulation of virtually every conceivable aspect of their operations. [Footnote 4] Burger King imposes these standards and undertakes its rigid regulation out of conviction that
Id. at 31.
26
Burger King oversees its franchise system through a two-tiered administrative structure. The governing contracts Miami. Even before the final agreements were signed, however, the parties began to disagree over sitedevelopment fees, building design, computation of monthly rent, and whether the franchisees would be able to assign their liabilities to a corporation they had formed. [Footnote 6] During these disputes, Rudzewicz and MacShara negotiated both with the Birmingham district office and with the Miami headquarters. [Footnote 7] provide that the franchise relationship is established in Miami and governed by Florida law, and call for payment of all required fees and forwarding of all relevant notices to the Miami headquarters. [Footnote 5] The Miami headquarters sets policy and works directly with its franchisees in attempting to resolve major problems. See nn. 7 9 infra. Day-to-day monitoring of franchisees, however, is conducted through a network of 10 district offices which, in turn, report to the Miami headquarters. Page 471 U. S. 468 The instant litigation grows out of Burger King's termination of one of its franchisees, and is aptly described by the franchisee as "a divorce proceeding among commercial partners." 5 Record 4. The appellee John Rudzewicz, a Michigan citizen and resident, is the senior partner in a Detroit accounting firm. In 1978, he was approached by Brian MacShara, the son of a business acquaintance, who suggested that they jointly apply to Burger King for a franchise in the Detroit area. MacShara proposed to serve as the manager of the restaurant if Rudzewicz would put up the investment capital; in exchange, the two would evenly share the profits. Believing that MacShara's idea offered attractive investment and tax-deferral opportunities, Rudzewicz agreed to the venture. 6 id. at 438-439, 444, 460. The Drayton Plains facility apparently enjoyed steady business during the summer of 1979, but patronage declined after a recession began later that year. Rudzewicz and MacShara soon fell far behind in their monthly payments to Miami. Headquarters sent notices of default, and an extended period of negotiations began among the franchisees, the Birmingham district office, and the Miami headquarters. After several Burger King officials in Miami had engaged in prolonged but ultimately unsuccessful negotiations with the franchisees by mail and by telephone, [Footnote 9] headquarters terminated the franchise and ordered Rudzewicz and MacShara to vacate the premises. They refused, and continued to occupy and operate the facility as a Burger King restaurant. Rudzewicz and MacShara jointly applied for a franchise to Burger King's Birmingham, Michigan, district office in the autumn of 1978. Their application was forwarded to Burger King's Miami headquarters, which entered into a preliminary agreement with them in February, 1979. During the ensuing four months, it was agreed that Rudzewicz and MacShara would assume operation of an existing facility in Drayton Plains, Michigan. MacShara attended the prescribed management courses in Miami during this period, seen. 2 supra, and the franchisees purchased $165,000 worth of restaurant equipment from Burger King's Davmor Industries division in B With some misgivings, Rudzewicz and MacShara finally obtained limited concessions from the Miami headquarters, [Footnote 8] signed the final agreements, and commenced operations in June, 1979. By signing the final agreements, Rudzewicz obligated himself personally to payments exceeding $1 million over the 20year franchise relationship.
Page 471 U. S. 466
Burger King commenced the instant action in the United States District Court for the Southern District of Florida in May, 1981, invoking that court's diversity jurisdiction pursuant to 28 U.S.C. 1332(a) and its original jurisdiction over federal trademark disputes pursuant to 1338(a). [Footnote 10] Burger King alleged that Rudzewicz and MacShara had breached their franchise obligations "within [the jurisdiction of] this district court" by failing to make the required payments "at plaintiff's place of business in Miami, Dade County, Florida," 6, App. 121, and also charged that they were tortiously infringing
Page 471 U. S. 467
27
Page 471 U. S. 469 judgment, concluding that the District Court could not properly exercise personal jurisdiction over Rudzewicz pursuant to Fla.Stat. 48.193(1)(g) (Supp.1984) because
its trademarks and service marks through their continued, unauthorized operation as a Burger King restaurant, 35-53, App. 130-135. Burger King sought damages, injunctive relief, and costs and attorney's fees. Rudzewicz and MacShara entered special appearances and argued, inter alia, that, because they were Michigan residents, and because Burger King's claim did not "arise" within the Southern District of Florida, the District Court lacked personal jurisdiction over them. The District Court denied their motions after a hearing, holding that, pursuant to Florida's long-arm statute,
"the circumstances of the Drayton Plains franchise and the negotiations which led to it left Rudzewicz bereft of reasonable notice and financially unprepared for the prospect of franchise litigation in Florida."
Burger King Corp. v. MacShara, 724 F.2d 1505, 1513 (1984). Accordingly, the panel majority concluded that "[j]urisdiction under these circumstances would offend the fundamental fairness which is the touchstone of due process." Ibid. .
"a nonresident Burger King franchisee is subject to the personal jurisdiction of this Court in actions arising out of its franchise agreements."
Burger King appealed the Eleventh Circuit's judgment to this Court pursuant to 28 U.S.C. 1254(2), and we postponed probable jurisdiction. 469 U.S. 814 (1984). Because it is unclear whether the Eleventh Circuit actually held that Fla.Stat. 48.193(1)(g) (Supp.1984) itself is unconstitutional as applied to the circumstances of this case, we conclude that jurisdiction by appeal does not properly lie, and therefore dismiss the appeal. [Footnote 12] Treating the jurisdictional
Id. at 138. Rudzewicz and MacShara then filed an answer and a counterclaim seeking damages for alleged violations by Burger King of Michigan's Franchise Investment Law, Mich.Comp.Laws 445.1501 et seq. (1979).
After a 3-day bench trial, the court again concluded that it had "jurisdiction over the subject matter and the parties to this cause." App. 159. Finding that Rudzewicz and MacShara had breached their franchise agreements with Burger King and had infringed Burger King's trademarks and service marks, the court entered judgment against them, jointly and severally, for $228,875 in contract damages. The court also ordered them "to immediately close Burger King Restaurant Number 775 from continued operation or to immediately give the keys and possession of said restaurant to Burger King Corporation," id. at 163, found that they had failed to prove any of the required elements of their counterclaim, and awarded costs and attorney's fees to Burger King.
Page 471 U. S. 471
statement as a petition for a writ of certiorari, see 28 U.S.C. 2103, we grant the petition, and now reverse.
II
The Due Process Clause protects an individual's liberty interest in not being subject to the binding judgments of a
Rudzewicz appealed to the Court of Appeals for the Eleventh Circuit. [Footnote 11] A divided panel of that Circuit reversed the
Page 471 U. S. 472
forum with which he has established no meaningful "contacts, ties, or relations."International Shoe Co. v. Washington, 326 U.S. at 326 U. S. 319. [Footnote 13] By requiring that individuals have "fair warning that a
Page 471 U. S. 470
28
particular activity may subject [them] to the jurisdiction of foreign sovereign," Shaffer v. Heitner, 433 U. S. 186, 433 U. S. 218 (1977) (STEVENS, J., concurring in judgment), the Due Process Clause Virginia, 339 U. S. 643, 339 U. S. 647 (1950). See also McGee v. International Life Insurance Co., 355 U. S. 220, 355 U. S. 222-223 (1957).
"gives a degree of predictability to the legal system that allows potential defendants to structure their primary conduct with some minimum assurance as to where that conduct will and will not render them liable to suit,"
We have noted several reasons why a forum legitimately may exercise personal jurisdiction over a nonresident who "purposefully directs" his activities toward forum residents. A State generally has a "manifest interest" in providing its residents with a convenient forum for redressing injuries inflicted by out-of-state actors. Id. at 355 U. S. 223; see also Keeton v. Hustler Magazine, Inc., supra, at 465 U. S. 776. Moreover,
World-Wide Volkswagen Corp. v. Woodson, 444 U. S. 286, 444 U. S. 297 (1980).
Where a forum seeks to assert specific jurisdiction over an out-of-state defendant who has not consented to suit there, [Footnote 14] this "fair warning" requirement is satisfied if the defendant has "purposefully directed" his activities at residents of the forum, Keeton v. Hustler Magazine, Inc., 465 U. S. 770, 465 U. S. 774 (1984), and the litigation results from alleged injuries that "arise out of or relate to" those activities,Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U. S. 408, 466 U. S. 414
where individuals "purposefully derive benefit" from their interstate activities, Kulko v. California Superior Court,
Page 471 U. S. 474
436 U. S. 84, 436 U. S. 96 (1978), it may well be unfair to allow them to escape having to account in other States for consequences that arise proximately from such activities; the Due Process Clause may not readily be wielded as a territorial shield to avoid interstate obligations that have been voluntarily assumed. And
Page 471 U. S. 473
(1984). [Footnote 15] Thus
because
"[t]he forum State does not exceed its powers under the Due Process Clause if it asserts personal jurisdiction over a corporation that delivers its products into the stream of commerce with the expectation that they will be purchased by consumers in the forum State"
"modern transportation and communications have made it much less burdensome for a party sued to defend himself in a State where he engages in economic activity,"
it usually will not be unfair to subject him to the burdens of litigating in another forum for disputes relating to and those products subsequently injure forum consumers. World-Wide Volkswagen Corp. v. Woodson, supra, at 444 U. S. 297-298. Similarly, a publisher who distributes magazines in a distant State may fairly be held accountable in that forum for damages resulting there from an allegedly defamatory story. Keeton v. Hustler Magazine, Inc., supra; see also Calder v. Jones, 465 U. S. 783 (1984) (suit against author and editor). And with respect to interstate contractual obligations, we have emphasized that parties who "reach out beyond one state and create continuing relationships and obligations with citizens of another state" are subject to regulation and sanctions in the other State for the consequences of their activities. Travelers Health Assn. v. Notwithstanding these considerations, the constitutional touchstone remains whether the defendant purposefully established "minimum contacts" in the forum State.International Shoe Co. v. Washington, supra, at 326 U. S. 316. Although it has been argued that foreseeability of causing injury in another State should be sufficient to establish such contacts there when policy considerations so require, [Footnote 16] the Court has consistently held that this kind of foreseeability is not a "sufficient benchmark" for exercising personal jurisdiction. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. at 444 U. S. 295. Instead, such activity. McGee v. International Life Insurance Co., supra,at 355 U. S. 223.
29
"the foreseeability that is critical to due process analysis . . . is that the defendant's conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there." there, and, because his activities are shielded by "the benefits and protections" of the forum's laws, it is presumptively not unreasonable to require him to submit to the burdens of litigation in that forum as well.
Id. at 444 U. S. 297. In defining when it is that a potential defendant should "reasonably anticipate" out-of-state litigation, the Court frequently has drawn from the reasoning of Hanson v. Denckla, 357 U. S. 235, 357 U. S. 253 (1958):
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
"The unilateral activity of those who claim some relationship with a nonresident defendant cannot satisfy the requirement of contact with the forum State. The application
Page 471 U. S. 475
consistently rejected the notion that an absence of physical contacts can defeat personal jurisdiction there. Keeton v. Hustler Magazine, Inc., supra, at 465 U. S. 774-775; see also Calder v. Jones, 465 U.S. at 465 U. S. 788-790; McGee v. International Life Insurance Co., 355 U.S. at 355 U. S. 222-223. Cf. Hoopeston Canning Co. v. Cullen, 318 U. S. 313, 318 U. S. 317 (1943)
of that rule will vary with the quality and nature of the defendant's activity, but it is essential in each case that there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws."
This "purposeful availment" requirement ensures that a defendant will not be haled into a jurisdiction solely as a result of "random," "fortuitous," or "attenuated" contacts,Keeton v. Hustler Magazine, Inc., 465 U.S. at 465 U. S. 774; World-Wide Volkswagen Corp. v. Woodson, supra, at 444 U. S. 299, or of the "unilateral activity of another party or a third person," Helicopteros Nacionales de Colombia, S.A. v. Hall, supra, at466 U. S. 417. [Footnote 17] Jurisdiction is proper, however, where the contacts proximately result from actions by the defendant himself that create a "substantial connection" with the forum State. McGee v. International Life Insurance Co., supra, at355 U. S. 223; see also Kulko v. California Superior Court, supra, at 436 U. S. 94 n. 7. [Footnote 18] Thus where the defendant "deliberately" has
Once it has been decided that a defendant purposefully established minimum contacts within the forum State, these contacts may be considered in light of other factors to determine whether the assertion of personal jurisdiction would comport with "fair play and substantial justice." International Shoe Co. v. Washington, 326 U.S. at 326 U. S. 320. Thus,
Page 471 U. S. 477
courts in "appropriate case[s]" may evaluate "the burden on the defendant," "the forum State's interest in adjudicating the dispute," "the plaintiff's interest in obtaining convenient and effective relief," "the interstate judicial system's interest in obtaining the most efficient resolution of controversies," and the "shared interest of
Page 471 U. S. 476
the several States in furthering fundamental substantive social policies." World-Wide Volkswagen Corp. v. Woodson, 444 U.S. at 444 U. S. 292. These considerations sometimes serve to establish the reasonableness of jurisdiction upon a lesser showing of minimum contacts than would otherwise be required. See, e.g., Keeton v. Hustler Magazine, Inc., supra, at 465 U. S. 780; Calder v. Jones, supra, at 465 U. S. 788-
engaged in significant activities within a State, Keeton v. Hustler Magazine, Inc., supra,at 465 U. S. 781, or has created "continuing obligations" between himself and residents of the forum, Travelers Health Assn. v. Virginia, 339 U.S. at 339 U. S. 648, he manifestly has availed himself of the privilege of conducting business
30
789; McGee v. International Life Insurance Co., supra, at 355 U. S. 223-224. On the other hand, where a defendant who purposefully has directed his activities at forum residents seeks to defeat jurisdiction, he must present a compelling case that the presence of some other considerations would render jurisdiction unreasonable. Most such considerations usually may be accommodated through means short of finding jurisdiction unconstitutional. For example, the potential clash of the forum's law with the "fundamental substantive social policies" of another State may be accommodated through application of the forum's choiceof-law rules. [Footnote 19] Similarly, a defendant claiming substantial inconvenience may seek a change of venue. [Footnote 20] Nevertheless, minimum requirements inherent in the concept of "fair play and substantial 318 U.S. at 318 U. S. 316. Instead, we have emphasized the need for a "highly realistic" approach that recognizes that a "contract" is believe the answer clearly is that it cannot. The Court long ago rejected the notion that personal jurisdiction might turn on "mechanical" tests, International Shoe Co. v. Washington, supra, at 326 U. S. 319, or on "conceptualistic . . . theories of the place of contracting or of performance," Hoopeston Canning Co. v. Cullen,
Page 471 U. S. 479
"ordinarily but an intermediate step serving to tie up prior business negotiations with future consequences which themselves are the real object of the business transaction."
Page 471 U. S. 478
justice" may defeat the reasonableness of jurisdiction even if the defendant has purposefully engaged in forum activities. World-Wide Volkswagen Corp. v. Woodson, supra, at 444 U. S. 292; see also Restatement (Second) of Conflict of Laws 36-37 (1971). As we previously have noted, jurisdictional rules may not be employed in such a way as to make litigation "so gravely difficult and inconvenient" that a party unfairly is at a "severe disadvantage" in comparison to his opponent. The Bremen v. Zapata Off-Shore Co., 407 U. S. 1, 407 U. S. 18 (1972) (re forum-selection provisions); McGee v. International Life Insurance Co., supra, at 355 U. S. 223-224.
Id. at 318 U. S. 316-317. It is these factors -- prior negotiations and contemplated future consequences, along with the terms of the contract and the parties' actual course of dealing -- that must be evaluated in determining whether the defendant purposefully established minimum contacts within the forum.
In this case, no physical ties to Florida can be attributed to Rudzewicz other than MacShara's brief training course in Miami. [Footnote 22] Rudzewicz did not maintain offices in Florida and, for all that appears from the record, has never even visited there. Yet this franchise dispute grew directly out of "a contract which had a substantialconnection with that State." McGee v. International Life Insurance Co., 355 U.S. at 355 U. S. 223 (emphasis added). Eschewing the option of operating an independent local enterprise, Rudzewicz deliberately "reach[ed] out beyond" Michigan and negotiated with a Florida corporation for the purchase of a
(1)
long-term franchise and
Applying these principles to the case at hand, we believe there is substantial record evidence supporting the District Court's conclusion that the assertion of personal jurisdiction over Rudzewicz in Florida for the alleged breach of his franchise agreement did not offend due process. At the outset, we note a continued division among lower courts respecting whether and to what extent a contract can constitute a "contact" for purposes of due process analysis. [Footnote 21] If the question is whether an individual's contract with an out-of-state party alone can automatically establish sufficient minimum contacts in the other party's home forum, we
Page 471 U. S. 480
the manifold benefits that would derive from affiliation with a nationwide organization.Travelers Health Assn. v. Virginia, 339 U.S. at 339 U. S. 647. Upon approval, he entered into a carefully structured 20-year relationship that envisioned continuing and wide-reaching contacts with Burger King in Florida. In light of Rudzewicz' voluntary acceptance of the long-term and exacting regulation of his business from Burger King's Miami
31
headquarters, the "quality and nature" of his relationship to the company in Florida can in no sense be viewed as "random," "fortuitous," or "attenuated." Hanson v. Denckla, 357 U.S. at 357 U. S. 253; Keeton v. Hustler Magazine, Inc., 465 U.S. at 465 U. S. 774; World-Wide Volkswagen Corp. v. Woodson, 444 U.S. at 444 U. S. 299. Rudzewicz' refusal to make the contractually required payments in Miami, and his continued use of Burger King's trademarks and confidential business information after his termination, caused foreseeable injuries to the corporation in Florida. For these reasons it was, at the very least, presumptively reasonable for Rudzewicz to be called to account there for such injuries. Moreover, we believe the Court of Appeals gave insufficient weight to provisions in the various franchise documents providing that all disputes would be governed by Florida law. The franchise agreement, for example, stated:
"This Agreement shall become valid when executed and accepted by BKC at Miami, Florida; it shall be deemed made and entered into in the State of Florida and shall be governed and construed under and in accordance with the laws of the State of Florida. The choice of law designation does not require that all suits concerning this Agreement be filed in Florida."
The Court of Appeals concluded, however, that, in light of the supervision emanating from Burger King's district office in Birmingham, Rudzewicz reasonably believed that "the Michigan office was, for all intents and purposes, the embodiment of Burger King," and that he therefore had no "reason to anticipate a Burger King suit outside of Michigan." 724 F.2d at 1511. See also post at 471 U. S. 488-489 (STEVENS, J., dissenting). This reasoning overlooks substantial record evidence indicating that Rudzewicz most certainly knew that he was affiliating himself with an enterprise based primarily in Florida. The contract documents themselves emphasize that Burger King's operations are conducted and supervised from the Miami headquarters, that all relevant notices and payments must be sent there, and that the agreements were made in and enforced from Miami. See n 5, supra. Moreover, the parties' actual course of dealing repeatedly confirmed that
App. 72. See also n 5, supra. The Court of Appeals reasoned that choice-of-law provisions are irrelevant to the question of personal jurisdiction, relying on Hanson v. Denckla for the proposition that "the center of gravity for choice-of-law purposes does not necessarily confer the sovereign prerogative to assert jurisdiction." 724 F.2d at 1511-1512, n. 10, citing 357 U.S. at 357 U. S. 254. This reasoning misperceives the import of the quoted proposition. The Court in Hanson and subsequent cases has emphasized that choice-of-law analysis -- which focuses on all elements of a transaction, and not simply on the defendant's conduct -- is distinct from minimum-contacts jurisdictional analysis -- which focuses at the threshold
Page 471 U. S. 482
decisionmaking authority was vested in the Miami headquarters,
solely on the defendant's purposeful connection to the forum. [Footnote 23] Nothing in our cases, however, suggests that a choice-of-law provision should be ignored in considering whether a defendant has "purposefully invoked the benefits and protections of a State's laws" for jurisdictional purposes. Although such
Page 471 U. S. 481
and that the district office served largely as an intermediate link between the headquarters and the franchisees. When problems arose over building design, site-development fees, rent computation, and the defaulted payments, Rudzewicz and MacShara learned that the Michigan office was powerless to resolve their disputes, and could only channel their communications to Miami. Throughout these disputes, the Miami headquarters and the Michigan franchisees carried on a continuous course of direct communications by mail and by telephone, and it was the Miami headquarters that made the key negotiating decisions out of which the instant litigation arose. See nn. 7 9supra.
a provision, standing alone, would be insufficient to confer jurisdiction, we believe that, when combined with the 20-year interdependent relationship Rudzewicz established with Burger King's Miami headquarters, it reinforced his deliberate affiliation with the forum State and the reasonable foreseeability of possible litigation there. As Judge Johnson argued in his dissent below, Rudzewicz "purposefully availed himself of the benefits and protections of Florida's laws" by entering into contracts expressly providing that those laws would govern franchise disputes. 724 F.2d at 1513. [Footnote 24]
32
(2) 490 (STEVENS, J., dissenting). Rudzewicz presented many of these arguments to the District Court, contending that Burger King was guilty of misrepresentation, fraud, and duress; that it gave insufficient notice in its dealings with him; and that the contract was one of adhesion. See 4 Record 687-691. After a 3-day bench trial, the District Court found that Burger King had made no misrepresentations, that Rudzewicz and MacShara "were and are experienced and sophisticated businessmen," and that "at no time" did they "ac[t] Page 471 U. S. 483 under economic duress or disadvantage imposed by" Burger King. App. 157-158. See also 7 Record 648-649. Federal Rule of Civil Procedure 52(a) requires that "[f]indings of fact shall not be set aside unless clearly erroneous," and neither Rudzewicz nor the Court of Appeals has pointed to record evidence that would support a "definite and firm conviction" that the District Court's findings are mistaken. United States v. United States Gypsum Co., 333 U. S. 364, 333 U. S. 395 (1948). See also
Nor has Rudzewicz pointed to other factors that can be said persuasively to outweigh the considerations discussed above, and to establish the unconstitutionality of Florida's assertion of jurisdiction. We cannot conclude that Florida had no "legitimate interest in holding [Rudzewicz] answerable
on a claim related to" the contacts he had established in that State. Keeton v. Hustler Magazine, Inc., 465 U.S. at 465 U. S. 776; see also McGee v. International Life Insurance Co., 355 U.S. at 465 U. S. 223 (noting that State frequently will have a "manifest interest in providing effective means of redress for its residents"). [Footnote 25] Moreover, although Rudzewicz has argued at some length that Michigan's Franchise Investment Law, Mich.Comp.Laws 445.1501 et seq. (1979), governs many aspects of this franchise relationship, he has not demonstrated how Michigan's acknowledged interest might possibly render jurisdiction in
Page 471 U. S. 485
Florida unconstitutional. [Footnote 26] Finally, the Court of Appeals' assertion that the Florida litigation "severely impaired [Rudzewicz'] ability to call Michigan witnesses who might be essential to his defense and counterclaim," 724 F.2d at 1512-1513, is wholly without support in the record. [Footnote 27] And even to the extent that it is inconvenient
Anderson v. Bessemer City, 470 U. S. 564, 470 U. S. 573-576 (1985). To the contrary, Rudzewicz was represented by counsel throughout these complex transactions and, as Judge Johnson observed in dissent below, was himself an experienced accountant
"who for five months conducted negotiations with Burger King over the terms of the franchise and lease agreements, and who obligated himself personally to contracts requiring over time payments that exceeded $1 million."
Page 471 U. S. 484
for a party who has minimum contacts with a forum to litigate there, such considerations most frequently can be accommodated through a change of venue. Seen 20, supra. Although the Court has suggested that inconvenience may at some point become so substantial as to achieve constitutional magnitude, McGee v. International Life Insurance Co., supra, at 355 U. S. 223, this is not such a case. 724 F.2d at 1514. Rudzewicz was able to secure a modest reduction in rent and other concessions from Miami headquarters, see nn. 8 9 supra; moreover, to the extent that Burger King's terms were inflexible, Rudzewicz presumably decided that the advantages of affiliating with a national organization provided sufficient commercial benefits to offset the detriments. The Court of Appeals also concluded, however, that the parties' dealings involved "a characteristic disparity of bargaining power" and "elements of surprise," and that Rudzewicz "lacked fair notice" of the potential for litigation in Florida because the contractual provisions suggesting to the contrary were merely "boilerplate declarations in a lengthy printed contract." 724 F.2d at 1511-1512, and n. 10. See also post at 471 U. S. 489III
Notwithstanding these considerations, the Court of Appeals apparently believed that it was necessary to reject jurisdiction in this case as a prophylactic measure, reasoning that an affirmance of the District Court's
33
judgment would result in the exercise of jurisdiction over "out-of-state consumers to collect payments due on modest personal purchases" and would "sow the seeds of default judgments against franchisees owing smaller debts." 724 F.2d at 1511. We share the Court of Appeals' broader concerns, and therefore reject any talismanic jurisdictional formulas; "the For the reasons set forth above, however, these dangers are not present in the instant case. Because Rudzewicz established a substantial and continuing relationship with Burger King's Miami headquarters, received fair notice from the contract documents and the course of dealing that he might be subject to suit in Florida, and has failed to demonstrate how jurisdiction in that forum would otherwise be fundamentally unfair, we conclude that the District Court's exercise of jurisdiction pursuant to Fla.Stat. 48.193(1)(g) (Supp.1984) did not offend due process. The judgment of the Court of Appeals is accordingly reversed, and the case is facts of each case must [always] be weighed" in determining whether personal jurisdiction would comport with "fair play and substantial justice." [Footnote 28] Kulko v. California Superior Court, 436 U.S. at 436 U. S. 92. [Footnote 29] The "quality and nature" of an interstate transaction may sometimes be so "random," "fortuitous," or "attenuated" [Footnote 30] that it cannot fairly be said that the potential defendant "should reasonably anticipate being haled into court" in another jurisdiction. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. at 444 U. S. 297; see also n 18, supra. We also have emphasized that jurisdiction may not be grounded on a contract whose terms have been obtained through "fraud, undue influence, or overweening bargaining power," and whose application would render litigation "so gravely difficult and inconvenient that [a party] will for all practical purposes be deprived of his day in court." The Bremen v. Zapata Off-Shore Co., 407 U.S. at 407 U. S. 12, 407 U. S. 18. Cf. Fuentes v. Shevin,407 U. S. 67, 407 U. S. 94-96 (1972); National Equipment Rental, Ltd. v. Szukhent,375 U. S. 311, 375 U. S. 329 (1964) (Black, J., dissenting) (jurisdictional rules may not be employed against small consumers so as to "crippl[e] their defense"). Just as the Due Process Clause allows flexibility in ensuring that commercial actors are not effectively "judgment proof" for the consequences of obligations they voluntarily assume in other States, McGee v. International Life Insurance Mandatory training seminars are conducted at Burger King University in Miami and at Whopper College Co., 355 U.S. at 355 U. S. 223, so too does it prevent rules that would unfairly enable them to obtain default Regional Training Centers around the country. See id. at 39; 6 Record 540-541. judgments against unwitting customers. Cf. United States v. Rumely, 345 U. S. 41,345 U. S. 44 (1953) (courts must not be "blind'" to what "`[a]ll others can see and understand'"). [Footnote 3] App. 43. Burger King's standard Franchise Agreement further defines this system as It is so ordered. remanded for further proceedings consistent with this opinion.
Page 471 U. S. 486
JUSTICE POWELL took no part in the consideration or decision of this case.
[Footnote 1]
"a restaurant format and operating system, including a recognized design, decor, color scheme and style of building, uniform standards, specifications and procedures of operation, quality and uniformity of products and services offered, and procedures for inventory and management control. . . ."
[Footnote 2]
Page 471 U. S. 487
See App. 43-44. See generally H. Brown, Franchising Realities and Remedies 6-7, 16-17 (2d ed.1978).
[Footnote 4]
34
See, e.g., App. 24-25, 26 (range, "quality, appearance, size, taste, and processing" of menu items), 31 ("standards of service and cleanliness"), 32 (hours of operation), 47 ("official mandatory restaurant operating standards, specifications and procedures"), 48-50 (building layout, displays, equipment, vending machines, service, hours of operation, uniforms, advertising, and promotion), 53 (employee training), 55-56 (accounting and auditing requirements), 59 (insurance requirements). Burger King also imposes extensive standards governing franchisee liability, assignments, defaults, and termination. See id. at 61-74. They were able to secure a $10,439 reduction in rent for the third year. App. 82; 5 Record 222-223; 6 id. at 500. [Footnote 5] [Footnote 9] See id. at 10-11, 37, 43, 72-73, 113. See infra at 471 U. S. 481. Miami's policy was to "deal directly" with franchisees when they began to encounter financial difficulties, and to [Footnote 6] involve district office personnel only when necessary. 5 id. at 95. In the instant case, for example, the Miami office handled all credit problems, ordered cost-cutting measures, negotiated for a partial refinancing of the franchisees' debts, communicated directly with the franchisees in attempting to resolve the dispute, and was responsible for all termination matters. See 2 id. at 59-69; 5 id. at 84-89, 94-95, 97-98, 100-103, 116-128, 151152, 158, 163; 6 id. at 395-397, 436-438, 510-511, 524-525. district office had "very little" decisionmaking authority, and accordingly turned directly to headquarters in seeking to resolve their disputes. 5id. at 292. See generally App. 5-6; 5 Record 167-168, 174-179, 182-184, 198-199, 217-218, 264-265, 292-294; 6 id. at 314-316, 363, 373, 416, 463, 496.
[Footnote 8]
The latter two matters were the major areas of disagreement. Notwithstanding that Burger King's franchise offering advised that minimum rent would be based on a percentage of "approximated capitalized site acquisition and construction costs," id. at 23, Rudzewicz assumed that rent would be a function solely of renovation costs, and he thereby underestimated the minimum monthly rent by more than $2,000. The District Court found Rudzewicz' interpretation "incredible." 7 Record 649.
[Footnote 10]
With respect to assignment, Rudzewicz and MacShara had formed RMBK Corp. with the intent of assigning to it all of their interest and liabilities in the franchise. Consistent with the contract documents, however, Burger King insisted that the two remain personally liable for their franchise obligations. See App. 62, 109. Although the franchisees contended that Burger King officials had given them oral assurances concerning assignment, the District Court found that, pursuant to the parol evidence rule, any such assurances "even if they had been made and were misleading, were joined and merged" into the final agreement. 7 Record 648.
Rudzewicz and MacShara were served in Michigan with summonses and copies of the complaint pursuant to Federal Rule of Civil Procedure 4. 2 id. at 102-103.
[Footnote 11]
MacShara did not appeal his judgment. See Burger King Corp. v. MacShara, 724 F.2d 1505, 1506, n. 1 (CA11 1984). In addition, Rudzewicz entered into a compromise with Burger King and waived his right to appeal the District Court's finding of trademark infringement and its entry of injunctive relief. See 4 Record 804-816. Accordingly, we need not address the extent to which the tortious act provisions of Florida's long-arm
[Footnote 7]
Although Rudzewicz and MacShara dealt with the Birmingham district office on a regular basis, they communicated directly with the Miami headquarters in forming the contracts; moreover, they learned that the
statute, see Fla.Stat. 48.193(1)(b) (Supp.1984), may constitutionally extend to out-of-state trademark
35
infringement. Cf. Calder v. Jones, 465 U. S. 783, 465 U. S. 788-789 (1984) (tortious out-of-state conduct); Keeton v. Hustler Magazine, Inc., 465 U. S. 770, 465 U. S. 776 (1984) (same). "[j]urisdiction under these circumstances would offend the fundamental fairness which is the touchstone of due process." 724 F.2d at 1513.
[Footnote 12]
Of course, if it were clear under Florida law that 48.193(1)(g) governed every transaction falling within its literal terms, there could be no objection to a stipulation that merely recognized this established construction. But the Florida Supreme Court has not ruled on the breadth of 48.193 (1)(g), and several state appellate courts have held that the provision extends only to the limits of the Due Process Clause. See, e.g., Scordilis v. Drobnicki, 443 So.2d 411, 412-414 (Fla.App.1984); Lakewood Pipe of Texas, Inc. v. Rubaii, 379 So.2d 475, 477 (Fla.App.1979), appeal dism'd, 383 So.2d 1201 (Fla.1980); Osborn v. University Society, Inc., 378 So.2d 873, 874 (Fla.App.1979). If 48.193(1)(g) is construed and applied in accordance with due process limitations as a matter of state law, then an appeal is improper, because the statute cannot be "invalid as repugnant to
The District Court had found both that Rudzewicz fell within the reach of Florida's long-arm statute, and that the exercise of jurisdiction was constitutional. The Court of Appeals did not consider the statutory question, however, because, as Burger King acknowledged at argument, that court "accepted the parties' stipulation" that 48.193 reached Rudzewicz "in lieu of [making] a determination of what Florida law provides." Tr. of Oral Arg. 12. Burger King contends that an appeal is proper "on the basis of the Circuit Court's holding that, given that stipulation, the statute was unconstitutional as applied." Id. at 13 (emphasis added).
We disagree. Our
the Constitution . . . of the United States," 28 U.S.C. 1254(2), since its boundaries are defined by, rather than being in excess of, the Due Process Clause. See, e.g., Calder v. Jones, supra, at 465 U. S. 787-788, n. 7; Kulko v. California Superior Court, 436 U. S. 84, 436 U. S. 90, and n. 4 (1978).
"overriding policy, historically encouraged by Congress, of minimizing the mandatory docket of this Court in the interests of sound judicial administration,"
Gonzalez v. Automatic Employees Credit Union, 419 U. S. 90, 419 U. S. 98 (1974) (construing 28 U.S.C. 1253), would be threatened if litigants could obtain an appeal through the expedient of stipulating to a particular construction of state law where state law might, in fact, be in harmony with the Federal Constitution. Jurisdiction under 28 U.S.C. 1254(2) is properly invoked only where a court of appeals squarely has "held" that a state statute is unconstitutional on its face or as applied; jurisdiction does not lie if the decision might rest on other grounds. Public Service Comm'n v. Batesville Telephone Co., 284 U. S. 6, 284 U. S. 7 (1931) (per curiam). Consistent with "our practice of strict construction" of 1254(2), Fornaris v. Ridge Tool Co., 400 U. S. 41,400 U. S. 42, n. 1 (1970) (per curiam), we believe that an appeal cannot lie where a court of appeals' judgment rests solely on the stipulated applicability of state law. Rather, it must be reasonably clear that the court independently concluded that the challenged statute governs the case, and held the statute itself unconstitutional as so applied. The Court of Appeals did neither in this case, concluding simply that
[Footnote 13]
Although this protection operates to restrict state power, it "must be seen as ultimately a function of the individual liberty interest preserved by the Due Process Clause," rather than as a function "of federalism concerns." Insurance Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456 U. S. 694, 456 U. S. 702703, n. 10 (1982).
[Footnote 14]
We have noted that, because the personal jurisdiction requirement is a waivable right, there are a "variety of legal arrangements" by which a litigant may give "express or implied consent to the personal jurisdiction of the court." Insurance Corp. of Ireland v. Compagnie des Bauxites de Guinee, supra, at 456 U. S. 703. For example, particularly in the commercial context, parties frequently stipulate in advance to submit their controversies for resolution within a particular jurisdiction. See National Equipment Rental, Ltd. v.
36
Szukhent, 375 U. S. 311 (1964). Where such forum-selection provisions have been obtained through "freely negotiated" agreements and are not "unreasonable and unjust," The Bremen v. Zapata Off-Shore Co., 407 U. S. 1, 407 U. S. 15 (1972), their enforcement does not offend due process. [Footnote 18]
So long as it creates a "substantial connection" with the forum, even a single act can support jurisdiction. McGee v. International Life Insurance Co., 355 U.S. at 355 U. S. 223. The Court has noted, however, that "some single or occasional acts" related to the forum may not be sufficient to establish jurisdiction if "their nature and quality and the circumstances of their commission" create only an "attenuated" affiliation with the forum. International Shoe Co. v. Washington, 326 U. S. 310, 326 U. S. 318 (1945);World-
[Footnote 15]
"Specific" jurisdiction contrasts with "general" jurisdiction, pursuant to which
"a State exercises personal jurisdiction over a defendant in a suit not arising out of or related to the defendant's contacts with the forum."
Wide Volkswagen Corp. v. Woodson, 444 U.S. at 444 U. S. 299. This distinction derives from the belief that, with respect to this category of "isolated" acts, id. at 444 U. S. 297, the reasonable foreseeability of litigation in the forum is substantially diminished.
Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. at 466 U. S. 414, n. 9; see also Perkins v. Benguet Consolidated Mining Co., 342 U. S. 437 (1952).
[Footnote 19]
[Footnote 16]
See Allstate Insurance Co. v. Hague, 449 U. S. 302, 449 U. S. 307-313 (1981) (opinion of BRENNAN, J.). See generally Restatement (Second) of Conflict of Laws 6, 9 (1971).
See, e.g., World-Wide Volkswagen Corp. v. Woodson, 444 U. S. 286, 444 U. S. 299(1980) (BRENNAN, J., dissenting); Shaffer v. Heitner, 433 U. S. 186, 433 U. S. 219(1977) (BRENNAN, J., concurring in part and dissenting in part).
[Footnote 20]
See, e.g., 28 U.S.C. 1404(a) ("For the convenience of parties and witnesses, in the interest of justice, a [Footnote 17] district court may transfer any civil action to any other district or division where it might have been brought"). This provision embodies in an expanded version the common law doctrine of forum non conveniens, under which a court in appropriate circumstances may decline to exercise its jurisdiction in the interest of the "easy, expeditious and inexpensive" resolution of a controversy in another forum. See Gulf Oil Corp. v. Gilbert, 330 U. S. 501, 330 U. S. 508-509 (1947).
Applying this principle, the Court has held that the Due Process Clause forbids the exercise of personal jurisdiction over an out-of-state automobile distributor whose only tie to the forum resulted from a customer's decision to drive there, World-Wide Volkswagen Corp. v. Woodson, supra; over a divorced husband sued for child support payments whose only affiliation with the forum was created by his former spouse's decision to settle there, Kulko v. California Superior Court, 436 U. S. 84 (1978); and over a trustee whose only connection with the forum resulted from the settlor's decision to exercise her power of appointment there, Hanson v. Denckla, 357 U. S. 235(1958). In such instances, the defendant has had no "clear notice that it is subject to suit" in the forum, and thus no opportunity to "alleviate the risk of burdensome litigation" there. World-Wide Volkswagen Corp. v. Woodson, supra, at 444 U. S. 297.
[Footnote 21]
See, e.g., Lakeside Bridge & Steel Co. v. Mountain State Construction Co., 445 U. S. 907, 909-910 (1980) (WHITE, J., dissenting from denial of certiorari) (collecting cases); Brewer, Jurisdiction in Single Contract
37
Cases, 6 U.Ark.Little Rock L.J. 1, 7-11, 13 (1983); Note, Long-Arm Jurisdiction in Commercial Litigation: When is a Contract a Contact?, 61 B.U.L.Rev. 375, 384-388 (1981). The lease also provided for binding arbitration in Miami of certain condemnation disputes, id. at 113, and Rudzewicz conceded the validity of this provision at oral argument, Tr. of Oral Arg. 37. Although it does not govern the instant dispute, this provision also should have made it apparent to the franchisees that they were dealing directly with the Miami headquarters, and that the Birmingham district office was not,"for all intents and The Eleventh Circuit held that MacShara's presence in Florida was irrelevant to the question of Rudzewicz' minimum contacts with that forum, reasoning that "Rudzewicz and MacShara never formed a partnership" and "signed the agreements in their individual capacities." 724 F.2d at 1513, n. 14. The two did jointly form a corporation through which they were seeking to conduct the franchise, however. See n 6, supra.They were required to decide which one of them would travel to Florida to satisfy the training requirements so that they could commence business, and Rudzewicz participated in the decision that MacShara would go there. We have previously noted that, when commercial activities are "carried on in behalf of" an out-of-state party those activities may sometimes be ascribed to the party, International Shoe Co. v. Washington, 326 U. S. 310, 326 U. S. 320 (1945), at least where he is a "primary participan[t]" in the enterprise and has acted purposefully in directing those activities,Calder v. Jones, 465 U.S. at 465 U. S. 790. Because MacShara's matriculation at Burger King University is not pivotal to the disposition of this case, we need not resolve the permissible bounds of such attribution. Rudzewicz has failed to show how the District Court's exercise of jurisdiction in this case might have been at all inconsistent with Michigan's interests. To the contrary, the court found that Burger King had fully complied [Footnote 23] with Michigan law, App. 159, and there is nothing in Michigan's franchise Act suggesting that Michigan would attempt to assert exclusive jurisdiction to resolve franchise disputes affecting its residents. In any event, minimum-contacts analysis presupposes that two or more States may be interested in the outcome of a dispute, and the process of resolving potentially conflicting "fundamental substantive social policies," WorldWide Volkswagen Corp. v. Woodson,444 U.S. at 444 U. S. 292, can usually be accommodated through choice-of-law rules, rather than through outright preclusion of jurisdiction in one forum. See n19, supra. In addition, the franchise agreement's disclaimer that the "choice of law designation does not require that all suits concerning this Agreement be filed in Florida," App. 72 (emphasis added), reasonably should have suggested to Rudzewicz that, by negative implication, such suits could be filed there. [Footnote 27] [Footnote 25] purposes, the embodiment of Burger King." 724 F.2d at 1511.
[Footnote 22]
Complaining that "when Burger King is the plaintiff, you won't have it your way,' because it sues all franchisees in Miami," Brief for Appellee 19, Rudzewicz contends that Florida's interest in providing a convenient forum is negligible, given the company's size and ability to conduct litigation anywhere in the country. We disagree. Absent compelling considerations, cf. McGee v. International Life Insurance Co., 355 U.S. at 355 U. S. 223, a defendant who has purposefully derived commercial benefit from his affiliations in a forum may not defeat jurisdiction there simply because of his adversary's greater net wealth.
[Footnote 26]
Hanson v. Denckla, 357 U.S. at 357 U. S. 253-254. See also Keeton v. Hustler Magazine, Inc., 465 U.S. at 465 U. S. 778; Kulko v. California Superior Court, 436 U.S. at 436 U. S. 98; Shaffer v. Heitner, 433 U.S. at 433 U. S. 215.
[Footnote 24]
The only arguable instance of trial inconvenience occurred when Rudzewicz had difficulty in authenticating some corporate records; the court offered him as much time as would be necessary to secure the requisite
38
authentication from the Birmingham district office, and Burger King ultimately stipulated to their authenticity rather than delay the trial.See 7 Record 574-575, 578-579, 582, 598-599. did not prepare his French fries, shakes, and hamburgers in Michigan, and then deliver them into the stream of commerce "with the expectation that they [would] be purchased by consumers in" Florida. Ante at 471 U. S. 473. To the contrary, appellee did business only in Michigan, his business, property, and payroll taxes were payable in that State, and he sold all of his products there. We do not mean to suggest that the jurisdictional outcome will always be the same in franchise cases. Some franchises may be primarily intrastate in character or involve different decisionmaking structures, such that a franchisee should not reasonably anticipate out-of-state litigation. Moreover, commentators have argued that franchise relationships may sometimes involve unfair business practices in their inception and operation. See H. Brown, Franchising Realities and Remedies 4-5 (2d ed.1978). For these reasons, we reject Burger King's suggestion for "a general rule, or at least a presumption, that participation in an interstate franchise relationship" represents consent to the jurisdiction of the franchisor's principal place of business. Brief for Appellant 46. Throughout the business relationship, appellee's principal contacts with appellant were with its Michigan office. Notwithstanding its disclaimer, ante at 471 U. S. 478, the Court seems ultimately to rely on nothing more than standard boilerplate language contained in various documents, ante at 471 U. S. 481,
[Footnote 28]
Page 471 U. S. 488
to establish that appellee "purposefully availed himself of the benefits and protections of Florida's laws.'" Ante at 471 U. S. 482. Such superficial analysis creates a potential for unfairness not only in negotiations between franchisors and their franchisees but, more significantly, in the resolution of the disputes that inevitably arise from time to time in such relationships.
[Footnote 29]
This approach does, of course, preclude clear-cut jurisdictional rules. But any inquiry into "fair play and substantial justice" necessarily requires determinations "in which few answers will be written in black and white. The greys are dominant, and, even among them, the shades are innumerable.'" Kulko v. California Superior Court, 436 U.S. at436 U. S. 92.
Judge Vance's opinion for the Court of Appeals for the Eleventh Circuit adequately explains why I would affirm the judgment of that court. I particularly find the following more persuasive than what this Court has written today:
"Nothing in the course of negotiations gave Rudzewicz reason to anticipate a Burger King suit outside of Michigan. The only face-to-face or even oral contact Rudzewicz had with Burger King throughout months of protracted negotiations was with representatives of the Michigan office. Burger King had the Michigan office interview Rudzewicz and MacShara, appraise their application, discuss price terms, recommend the site which the defendants finally agreed to, and attend the final closing ceremony. There is no evidence that Rudzewicz
[Footnote 30]
Hanson v. Denckla, 357 U.S. at 357 U. S. 253; Keeton v. Hustler Magazine, Inc., 465 U.S. at 465 U. S. 774; World-Wide Volkswagen Corp. v. Woodson, 444 U.S. at 444 U. S. 299.
JUSTICE STEVENS, with whom JUSTICE WHITE joins, dissenting.
ever negotiated with anyone in Miami or even sent mail there during negotiations. He maintained no staff in the state of Florida, and as far as the record reveals, he has never even visited the state."
In my opinion, there is a significant element of unfairness in requiring a franchisee to defend a case of this kind in the forum chosen by the franchisor. It is undisputed that appellee maintained no place of business in Florida, that he had no employees in that State, and that he was not licensed to do business there. Appellee
"The contracts contemplated the startup of a local Michigan restaurant whose profits would derive solely from food sales made to customers in Drayton Plains. The sale, which involved the use of an intangible trademark
39
in Michigan and occupancy of a Burger King facility there, required no performance in the state of Florida. Under the contract, the local Michigan district office was responsible for providing all of the services due Rudzewicz, including advertising and management consultation. Supervision, moreover, emanated from that office alone. To Rudzewicz, the Michigan office was for all intents and purposes the embodiment Page 471 U. S. 490
in some respects to vary from the more favorable terms agreed to in earlier discussions. In fact, the final contract required a minimum monthly rent computed on a base far in excess of that discussed in oral negotiations. Burger King resisted price concessions, only to sue Rudzewicz far from home. In doing so, it severely impaired his ability to call Michigan witnesses who might be essential to his defense and counterclaim."
Page 471 U. S. 489
of Burger King. He had reason to believe that his working relationship with Burger King began and ended in Michigan, not at the distant and anonymous Florida headquarters. . . ."
"In sum, we hold that the circumstances of the Drayton Plains franchise and the negotiations which led to it left Rudzewicz bereft of reasonable notice and financially unprepared for the prospect of franchise litigation in Florida. Jurisdiction under these circumstances would offend the fundamental fairness which is the touchstone of due process."
"Given that the office in Rudzewicz' home state conducted all of the negotiations and wholly supervised the contract, we believe that he had reason to assume that the state of the supervisory office would be the same state in which Burger King would file suit. Rudzewicz lacked fair notice that the distant corporate headquarters which insulated itself from direct dealings with him would later seek to assert jurisdiction over him in the courts of its own home state. . . ."
724 F.2d 1505, 1511-1513 (1984) (footnotes omitted).
Accordingly, I respectfully dissent.
"Just as Rudzewicz lacked notice of the possibility of suit in Florida, he was financially unprepared to meet its added costs. The franchise relationship in particular is fraught with potential for financial surprise. The device of the franchise gives local retailers the access to national trademark recognition which enables them to compete with better-financed, more efficient chain stores. This national affiliation, however, does not alter the fact that the typical franchise store is a local concern serving at best a neighborhood or community. Neither the revenues of a local business nor the geographical range of its market prepares the average franchise owner for the cost of distant litigation. . . ."
"The particular distribution of bargaining power in the franchise relationship further impairs the franchisee's financial preparedness. In a franchise contract, 'the franchisor normally occupies [the] dominant role.' . . ."
"We discern a characteristic disparity of bargaining power in the facts of this case. There is no indication that Rudzewicz had any latitude to negotiate a reduced rent or franchise fee in exchange for the added risk of suit in Florida. He signed a standard form contract whose terms were nonnegotiable and which appeared
40
required respondent to answer. 8 Thereafter, the parties submitted their respesctive memoranda in support of their respective contentions. 9 G.R. No. L-37750 May 19, 1978 SWEET LINES, INC., petitioner, vs. HON. BERNARDO TEVES, Presiding Judge, CFI of Misamis Oriental Branch VII, LEOVIGILDO TANDOG, JR., and ROGELIO TIRO, respondents. Filiberto Leonardo, Abelardo C. Almario & Samuel B. Abadiano for petitioner. Leovigildo Vallar for private respondents. Petitioner contends thaty Condition No. 14 is valid and enforceable, since private respndents acceded to tit when they purchased passage tickets at its Cagayan de Oro branch office and took its vessel M/S "Sweet Town" for passage to Tagbilaran, Bohol that the condition of the venue of actions in the City of Cebu is proper since venue may be validly waived, citing cases; 10 that is an effective waiver of venue, valid and binding as such, since it is printed in bold and capital letters and not in fine print and merely assigns the place where the action sing from the contract is institution likewise citing cases; 11 and that condition No. 14 is unequivocal and mandatory, the words and phrases "any and all", "irrespective of where it is issued," and "shag" leave no doubt that the intention of Condition No. 14 is to fix the venue in the City of Cebu, to the exclusion of other places; that the orders of the respondent Judge are an unwarranted departure from established jurisprudence governing the case; and that he acted without or in excess of his jurisdiction in is the orders complained of. 12 On the other hand, private respondents claim that Condition No. 14 is not valid, that the same is not an essential element of the contract of carriage, being in itself a different agreement which requires the mutual consent of the parties to it; that they had no say in its preparation, the existence of which they could not refuse, hence, they had no choice but to pay for the tickets and to avail of petitioner's shipping facilities out of necessity; that the carrier "has been exacting too much from the public by inserting impositions in the passage tickets too burdensome to bear," that the condition which was printed in fine letters is an imposition on the riding public and does not bind respondents, citing cases; 13 that while venue 6f actions may be transferred from one province to another, such arrangement requires the "written agreement of the parties", not to be imposed unilaterally; and that assuming that the condition is valid, it is not exclusive and does not, therefore, exclude the filing of the action in Misamis Oriental,14 There is no question that there was a valid contract of carriage entered into by petitioner and private respondents and that the passage tickets, upon which the latter based their complaint, are the best evidence thereof. All the essential elements of a valid contract, i.e., consent, cause or consideration and object, are present. As held inPeralta de Guerrero, et al. v. Madrigal Shipping Co., Inc., 15 It is a matter of common knowledge that whenever a passenger boards a ship for transportation from one place to another he is issued a ticket by the shipper which has all the elements of a written contract, Namely: (1) the consent of the contracting parties manifested by the fact that the passenger boards the ship and the shipper consents or accepts him in the ship for transportation; (2) cause or consideration which is the fare paid by the passenger as stated in the ticket; (3) object, which is the transportation of the passenger from the place of departure to the place of destination which are stated in the ticket. It should be borne in mind, however, that with respect to the fourteen (14) conditions one of which is "Condition No. 14" which is in issue in this case printed at the back of the passage tickets, these are commonly known as "contracts of adhesion," the validity and/or enforceability of which will have to be determined by the peculiar circumstances obtaining in each case and the nature of the conditions or terms sought to be enforced. For, "(W)hile generally, stipulations in a contract come about after deliberate drafting by the parties thereto, ... there are certain contracts almost all the provisions of which have been drafted only by one party, usually a corporation. Such contracts are called contracts of adhesion, because the only Presented thus for Our resolution is a question is aquestion which, to all appearances, is one of first impression, to wit Is Condition No. 14 printed at the back of the petitioner's passage tickets purchased by private respondents, which limits the venue of actions arising from the contract of carriage to theCourt of First Instance of Cebu, valid and enforceable? Otherwise stated, may a common carrier engaged in inter-island shipping stipulate thru condition printed at the back of passage tickets to its vessels that any and all actions arising out of the ocntract of carriage should be filed only in a particular province or city, in this case the City of Cebu, to the exclusion of all others?
SANTOS, J.: This is an original action for Prohibition with Pre Injunction filed October 3, 1973 to restrain respondent Judge from proceeding further with Civil Case No. 4091, entitled Leovigildo D. Tandog, Jr. and Rogelio Tiro v. Sweet Lines, Inc." after he denied petitioner's Motion to Dismiss the complaint, and the Motion for Reconsideration of said order. 1 Briefly, the facts of record follow. Private respondents Atty. Leovigildo Tandog and Rogelio Tiro, a contractor by professions, bought tickets Nos. 0011736 and 011737 for Voyage 90 on December 31, 1971 at the branch office of petitioner, a shipping company transporting inter-island passengers and cargoes, at Cagayan de Oro City. Respondents were to board petitioner's vessel, M/S "Sweet Hope" bound for Tagbilaran City via the port of Cebu. Upon learning that the vessel was not proceeding to Bohol, since many passengers were bound for Surigao, private respondents per advice, went to the branch office for proper relocation to M/S "Sweet Town". Because the said vessel was already filled to capacity, they were forced to agree "to hide at the cargo section to avoid inspection of the officers of the Philippine Coastguard." Private respondents alleged that they were, during the trip," "exposed to the scorching heat of the sun and the dust coming from the ship's cargo of corn grits," and that the tickets they bought at Cagayan de Oro City for Tagbilaran were not honored and they were constrained to pay for other tickets. In view thereof, private respondents sued petitioner for damages and for breach of contract of carriage in the alleged sum of P10,000.00 before respondents Court of First Instance of Misamis Oriental. 2 Petitioner moved to dismiss the complaint on the ground of improper venue. This motion was premised on the condition printed at the back of the tickets, i.e., Condition No. 14, which reads: 14. It is hereby agreed and understood that any and all actions arising out of the conditions and provisions of this ticket, irrespective of where it is issued, shall be filed in the competent courts in the City of Cebu. 3 The motion was denied by the trial court. 4 Petitioner moved to reconnsider the order of denial, but no avail. 5Hence, this instant petition for prohibition for preliminary injunction, 'alleging that the respondent judge has departed from the accepted and usual course of judicial preoceeding" and "had acted without or in excess or in error of his jurisdicton or in gross abuse of discretion. 6 In Our resolution of November 20, 1973, We restrained respondent Judge from proceeding further with the case and required respondent to comment. 7 On January 18, 1974, We gave due course to the petition and
41
participation of the party is the signing of his signature or his 'adhesion' thereto. Insurance contracts, bills of lading, contracts of make of lots on the installment plan fall into this category" 16 By the peculiar circumstances under which contracts of adhesion are entered into namely, that it is drafted only by one party, usually the corporation, and is sought to be accepted or adhered to by the other party, in this instance the passengers, private respondents, who cannot change the same and who are thus made to adhere thereto on the "take it or leave it" basis certain guidelines in the determination of their validity and/or enforceability have been formulated in order to that justice and fan play characterize the relationship of the contracting parties. Thus, this Court speaking through Justice J.B.L. Reyes in Qua Chee Gan v. Law Union and Rock Insurance Co., 17 and later through Justice Fernando in Fieldman Insurance v. Vargas, 18 held The courts cannot ignore that nowadays, monopolies, cartels and concentration of capital endowed with overwhelm economic power, manage to impose upon parties d with them y prepared 'agreements' that the weaker party may not change one whit his participation in the 'agreement' being reduced to the alternative 'to take it or leave it,' labelled since Raymond Saleilles 'contracts by adherence' (contracts d' adhesion) in contrast to those entered into by parties bargaining on an equal footing. Such contracts (of which policies of insurance and international bill of lading are prime examples) obviously cap for greater strictness and vigilance on the part of the courts of justice with a view to protecting the weaker party from abuses and imposition, and prevent their becoming traps for the unwary. To the same effect and import, and, in recognition of the character of contracts of this kind, the protection of the disadvantaged is expressly enjoined by the New Civil Code In all contractual property or other relations, when one of the parties is at a disadvantage on account of his moral dependence, ignorance indigence, mental weakness, tender age and other handicap, the courts must be vigilant for his protection. 19 Considered in the light Of the foregoing norms and in the context Of circumstances Prevailing in the interisland ship. ping industry in the country today, We find and hold that Condition No. 14 printed at the back of the passage tickets should be held as void and unenforceable for the following reasons first, under circumstances obligation in the inter-island ship. ping industry, it is not just and fair to bind passengers to the terms of the conditions printed at the back of the passage tickets, on which Condition No. 14 is Printed in fine letters, and second, Condition No. 14 subverts the public policy on transfer of venue of proceedings of this nature, since the same will prejudice rights and interests of innumerable passengers in different s of the country who, under Condition No. 14, will have to file suits against petitioner only in the City of Cebu. 1. It is a matter of public knowledge, of which We can take judicial notice, that there is a dearth of and acute shortage in inter- island vessels plying between the country's several islands, and the facilities they offer leave much to be desired. Thus, even under ordinary circumstances, the piers are congested with passengers and their cargo waiting to be transported. The conditions are even worse at peak and/or the rainy seasons, when Passengers literally scramble to whatever accommodations may be availed of, even through circuitous routes, and/or at the risk of their safety their immediate concern, for the moment, being to be able to board vessels with the hope of reaching their destinations. The schedules are as often as not if not more so delayed or altered. This was precisely the experience of private respondents when they were relocated to M/S "Sweet Town" from M/S "Sweet Hope" and then any to the scorching heat of the sun and the dust coming from the ship's cargo of corn grits, " because even the latter was filed to capacity. Under these circumstances, it is hardly just and proper to expect the passengers to examine their tickets received from crowded/congested counters, more often than not during rush hours, for conditions that may be printed much charge them with having consented to the conditions, so printed, especially if there are a number of such conditions m fine print, as in this case. 20 Again, it should be noted that Condition No. 14 was prepared solely at the ms of the petitioner, respondents had no say in its preparation. Neither did the latter have the opportunity to take the into account prior to the purpose chase of their tickets. For, unlike the small print provisions of contracts the common example of contracts of adherence which are entered into by the insured in his awareness of said conditions, since the insured is afforded the op to and co the same, passengers of inter-island v do not have the same chance, since their alleged adhesion is presumed only from the fact that they purpose chased the tickets. It should also be stressed that slapping companies are franchise holders of certificates of public convenience and therefore, posses a virtual monopoly over the business of transporting passengers between the ports covered by their franchise. This being so, shipping companies, like petitioner, engaged in inter-island shipping, have a virtual monopoly of the business of transporting passengers and may thus dictate their terms of passage, leaving passengers with no choice but to buy their tickets and avail of their vessels and facilities. Finally, judicial notice may be taken of the fact that the bulk of those who board these inter-island vested come from the low-income groups and are less literate, and who have little or no choice but to avail of petitioner's vessels. 2. Condition No. 14 is subversive of public policy on transfers of venue of actions. For, although venue may be changed or transferred from one province to another by agreement of the parties in writing t to Rule 4, Section 3, of the Rules of Court, such an agreement will not be held valid where it practically negates the action of the claimants, such as the private respondents herein. The philosophy underlying the provisions on transfer of venue of actions is the convenience of the plaintiffs as well as his witnesses and to promote 21 the ends of justice. Considering the expense and trouble a passenger residing outside of Cebu City would incur to prosecute a claim in the City of Cebu, he would most probably decide not to file the action at all. The condition will thus defeat, instead of enhance, the ends of justice. Upon the other hand, petitioner has branches or offices in the respective ports of call of its vessels and can afford to litigate in any of these places. Hence, the filing of the suit in the CFI of Misamis Oriental, as was done in the instant case, will not cause inconvenience to, much less prejudice, petitioner. Public policy is ". . . that principle of the law which holds that no subject or citizen can lawfully do that which has a tendency to be injurious to the public or against the public good ... 22 Under this principle" ... freedom of contract or private dealing is restricted by law for the good of the public. 23 Clearly, Condition No. 14, if enforced, will be subversive of the public good or interest, since it will frustrate in meritorious cases, actions of passenger cants outside of Cebu City, thus placing petitioner company at a decided advantage over said persons, who may have perfectly legitimate claims against it. The said condition should, therefore, be declared void and unenforceable, as contrary to public policy to make the courts accessible to all who may have need of their services. WHEREFORE, the petition for prohibition is DISMISS. ED. The restraining order issued on November 20, 1973, is hereby LIFTED and SET ASIDE. Costs against petitioner. Fernando (Chairman), Aquino, Concepcion, Jr., JJ., concur. Antonio, J., reserves his vote.
42
G.R. No. 72494 August 11, 1989 HONGKONG AND SHANGHAI BANKING CORPORATION, petitioner, vs. JACK ROBERT SHERMAN, DEODATO RELOJ and THE INTERMEDIATE APPELLATE COURT, respondents. Quiason, Makalintal, Barot & Torres for petitioner. Alejandro, Aranzaso & Associates for private respondents. In a Motion to Dismiss filed on December 14, 1984, the defendants seek the dismissal of the complaint on two grounds, namely: 1. That the court has no jurisdiction over the subject matter of the complaint; and 2. That the court has no jurisdiction over the persons of the defendants. In the light of the Opposition thereto filed by plaintiff, the Court finds no merit in the motion. "On the first ground, defendants claim that by virtue of the provision in the Guarantee (the actionable document) which reads This guarantee and all rights, obligations and liabilities arising hereunder shall be construed and determined under and may be enforced in accordance with the laws of the Republic of Singapore. We hereby agree that the courts in Singapore shall have jurisdiction over all disputes arising under this guarantee, the Court has no jurisdiction over the subject matter of the case. The Court finds and concludes otherwise. There is nothing in the Guarantee which says that the courts of Singapore shall have jurisdiction to the exclusion of the courts of other countries or nations. Also, it has long been established in law and jurisprudence that jurisdiction of courts is fixed by law; it cannot be conferred by the will, submission or consent of the parties. On the second ground, it is asserted that defendant Robert' , Sherman is not a citizen nor a resident of the Philippines. This argument holds no water. Jurisdiction over the persons of defendants is acquired by service of summons and copy of the complaint on them. There has been a valid service of summons on both defendants and in fact the same is admitted when said defendants filed a 'Motion for Extension of Time to File Responsive Pleading on December 5, 1984. WHEREFORE, the Motion to Dismiss is hereby DENIED. SO ORDERED. A motion for reconsideration of the said order was filed by private respondents which was, however, denied (p. 66,Rollo). Private respondents then filed before the respondent Intermediate Appellate Court (now Court of Appeals) a petition for prohibition with preliminary injunction and/or prayer for a restraining order (pp. 39-48, Rollo). On August 2, 1985, the respondent Court rendered a decision (p. 37, Rollo), the dispositive portion of which reads: WHEREFORE, the petition for prohibition with preliminary injuction is hereby GRANTED. The respondent Court is enjoined from taking further cognizance of the case and to dismiss the same for filing with the proper court of Singapore which is the proper forum. No costs. SO ORDERED.
MEDIALDEA, J.: This is a petition for review on certiorari of the decision of the Intermediate Appellate Court (now Court of Appeals) dated August 2, 1985, which reversed the order of the Regional Trial Court dated February 28,1985 denying the Motion to Dismiss filed by private respondents Jack Robert Sherman and Deodato Reloj. A complaint for collection of a sum of money (pp. 49-52, Rollo) was filed by petitioner Hongkong and Shanghai Banking Corporation (hereinafter referred to as petitioner BANK) against private respondents Jack Robert Sherman and Deodato Reloj, docketed as Civil Case No. Q-42850 before the Regional Trial Court of Quezon City, Branch 84. It appears that sometime in 1981, Eastern Book Supply Service PTE, Ltd. (hereinafter referred to as COMPANY), a company incorporated in Singapore applied with, and was granted by, the Singapore branch of petitioner BANK an overdraft facility in the maximum amount of Singapore dollars 200,000.00 (which amount was subsequently increased to Singapore dollars 375,000.00) with interest at 3% over petitioner BANK prime rate, payable monthly, on amounts due under said overdraft facility; as a security for the repayment by the COMPANY of sums advanced by petitioner BANK to it through the aforesaid overdraft facility, on October 7, 1982, both private respondents and a certain Robin de Clive Lowe, all of whom were directors of the COMPANY at such time, executed a Joint and Several Guarantee (p. 53, Rollo) in favor of petitioner BANK whereby private respondents and Lowe agreed to pay, jointly and severally, on demand all sums owed by the COMPANY to petitioner BANK under the aforestated overdraft facility. The Joint and Several Guarantee provides, inter alia, that: This guarantee and all rights, obligations and liabilities arising hereunder shall be construed and determined under and may be enforced in accordance with the laws of the Republic of Singapore. We hereby agree that the Courts of Singapore shall have jurisdiction over all disputes arising under this guarantee. ... (p. 33-A, Rollo). The COMPANY failed to pay its obligation. Thus, petitioner BANK demanded payment of the obligation from private respondents, conformably with the provisions of the Joint and Several Guarantee. Inasmuch as the private respondents still failed to pay, petitioner BANK filed the above-mentioned complaint. On December 14,1984, private respondents filed a motion to dismiss (pp 54-56, Rollo) which was opposed by petitioner BANK (pp. 58-62, Rollo). Acting on the motion, the trial court issued an order dated February 28, 1985 (pp, 64-65, Rollo), which read as follows:
43
The motion for reconsideration was denied (p. 38, Rollo), hence, the present petition. The main issue is whether or not Philippine courts have jurisdiction over the suit. The controversy stems from the interpretation of a provision in the Joint and Several Guarantee, to wit: (14) This guarantee and all rights, obligations and liabilites arising hereunder shall be construed and determined under and may be enforced in accordance with the laws of the Republic of Singapore. We hereby agree that the Courts in Singapore shall have jurisdiction over all disputes arising under this guarantee. ... (p. 53-A, Rollo) In rendering the decision in favor of private respondents, the Court of Appeals made, the following observations (pp. 35-36, Rollo): There are significant aspects of the case to which our attention is invited. The loan was obtained by Eastern Book Service PTE, Ltd., a company incorporated in Singapore. The loan was granted by theSingapore Branch of Hongkong and Shanghai Banking Corporation. The Joint and Several Guarantee was also concluded in Singapore. The loan was in Singaporean dollars and the repayment thereof also in the same currency. The transaction, to say the least, took place in Singporean setting in which the law of that country is the measure by which that relationship of the parties will be governed. xxx xxx xxx Contrary to the position taken by respondents, the guarantee agreement compliance that any litigation will be before the courts of Singapore and that the rights and obligations of the parties shall be construed and determined in accordance with the laws of the Republic of Singapore. A closer examination of paragraph 14 of the Guarantee Agreement upon which the motion to dismiss is based, employs in clear and unmistakeable (sic) terms the word 'shall' which under statutory construction is mandatory. Thus it was ruled that: ... the word 'shall' is imperative, operating to impose a duty which may be enforced (Dizon vs. Encarnacion, 9 SCRA 714).lwph1.t There is nothing more imperative and restrictive than what the agreement categorically commands that 'all rights, obligations, and liabilities arising hereunder shall be construed and determined under and may be enforced in accordance with the laws of the Republic of Singapore.' While it is true that "the transaction took place in Singaporean setting" and that the Joint and Several Guarantee contains a choice-of-forum clause, the very essence of due process dictates that the stipulation that "[t]his guarantee and all rights, obligations and liabilities arising hereunder shall be construed and determined under and may be enforced in accordance with the laws of the Republic of Singapore. We hereby agree that the Courts in Singapore shall have jurisdiction over all disputes arising under this guarantee" be liberally construed. One basic principle underlies all rules of jurisdiction in International Law: a State does not have jurisdiction in the absence of some reasonable basis for exercising it, whether the proceedings are in rem quasi in rem or in personam. To be reasonable, the jurisdiction must be based on some minimum contacts that will not offend traditional notions of fair play and substantial justice (J. Salonga, Private International Law, 1981, p. 46). Indeed, as pointed-out by petitioner BANK at the outset, the instant case presents a very odd situation. In the ordinary habits of life, anyone would be disinclined to litigate before a foreign tribunal, with more reason as a defendant. However, in this case, private respondents are Philippine residents (a fact which was not disputed by them) who would rather face a complaint against them before a foreign court and in the process incur considerable expenses, not to mention inconvenience, than to have a Philippine court try and resolve the case. Private respondents' stance is hardly comprehensible, unless their ultimate intent is to evade, or at least delay, the payment of a just obligation. The defense of private respondents that the complaint should have been filed in Singapore is based merely on technicality. They did not even claim, much less prove, that the filing of the action here will cause them any unnecessary trouble, damage, or expense. On the other hand, there is no showing that petitioner BANK filed the action here just to harass private respondents. In the case of Polytrade Corporation vs. Blanco, G.R. No. L-27033, October 31, 1969, 30 SCRA 187, it was ruled: ... An accurate reading, however, of the stipulation, 'The parties agree to sue and be sued in the Courts of Manila,' does not preclude the filing of suits in the residence of plaintiff or defendant. The plain meaning is that the parties merely consented to be sued in Manila. Qualifying or restrictive words which would indicate that Manila and Manila alone is the venue are totally absent therefrom. We cannot read into that clause that plaintiff and defendant bound themselves to file suits with respect to the last two transactions in question only or exclusively in Manila. For, that agreement did not change or transfer venue. It simply is permissive. The parties solely agreed to add the courts of Manila as tribunals to which they may resort. They did not waive their right to pursue remedy in the courts specifically mentioned in Section 2(b) of Rule 4. Renuntiatio non praesumitur. This ruling was reiterated in the case of Neville Y. Lamis Ents., et al. v. Lagamon, etc., et al., G.R. No. 57250, October 30, 1981, 108 SCRA 740, where the stipulation was "[i]n case of litigation, jurisdiction shall be vested in the Court of Davao City." We held: Anent the claim that Davao City had been stipulated as the venue, suffice it to say that a stipulation as to venue does not preclude the filing of suits in the residence of plaintiff or defendant under Section 2 (b), Rule 4, Rules of Court, in the absence of qualifying or restrictive words in the agreement which would indicate that the place named is the only venue agreed upon by the parties. Applying the foregoing to the case at bar, the parties did not thereby stipulate that only the courts of Singapore, to the exclusion of all the rest, has jurisdiction. Neither did the clause in question operate to divest Philippine courts of jurisdiction. In International Law, jurisdiction is often defined as the light of a State to exercise authority over persons and things within its boundaries subject to certain exceptions. Thus, a State does not assume jurisdiction over travelling sovereigns, ambassadors and diplomatic representatives of other States, and foreign military units stationed in or marching through State territory with the permission of the latter's authorities. This authority, which finds its source in the concept of sovereignty, is exclusive within and throughout the domain of the State. A State is competent to take hold of any judicial matter it sees fit by making its courts and agencies assume jurisdiction over all kinds of cases brought before them (J. Salonga, Private International Law, 1981, pp. 37-38).lwph1.t As regards the issue on improper venue, petitioner BANK avers that the objection to improper venue has been waived. However, We agree with the ruling of the respondent Court that:
44
While in the main, the motion to dismiss fails to categorically use with exactitude the words 'improper venue' it can be perceived from the general thrust and context of the motion that what is meant is improper venue, The use of the word 'jurisdiction' was merely an attempt to copy-cat the same word employed in the guarantee agreement but conveys the concept of venue. Brushing aside all technicalities, it would appear that jurisdiction was used loosely as to be synonymous with venue. It is in this spirit that this Court must view the motion to dismiss. ... (p. 35, Rollo). At any rate, this issue is now of no moment because We hold that venue here was properly laid for the same reasons discussed above. The respondent Court likewise ruled that (pp. 36-37, Rollo): ... In a conflict problem, a court will simply refuse to entertain the case if it is not authorized by law to exercise jurisdiction. And even if it is so authorized, it may still refuse to entertain the case by applying the principle of forum non conveniens. ... However, whether a suit should be entertained or dismissed on the basis of the principle of forum non conveniensdepends largely upon the facts of the particular case and is addressed to the sound discretion of the trial court (J. Salonga, Private International Law, 1981, p. 49).lwph1.t Thus, the respondent Court should not have relied on such principle. Although the Joint and Several Guarantee prepared by petitioner BANK is a contract of adhesion and that consequently, it cannot be permitted to take a stand contrary to the stipulations of the contract, substantial bases exist for petitioner Bank's choice of forum, as discussed earlier. Lastly, private respondents allege that neither the petitioner based at Hongkong nor its Philippine branch is involved in the transaction sued upon. This is a vain attempt on their part to further thwart the proceedings below inasmuch as well-known is the rule that a defendant cannot plead any defense that has not been interposed in the court below. ACCORDINGLY, the decision of the respondent Court is hereby REVERSED and the decision of the Regional Trial Court is REINSTATED, with costs against private respondents. This decision is immediately executory. SO ORDERED. Narvasa, Cruz, Gancayco and Gri;o-Aquino, JJ., concur.
45
46
U.S. Supreme Court (a) The activities in question established between the State and the corporation sufficient contacts or ties to make it reasonable and just, and in conformity to the due process requirements of the Fourteenth Amendment, for the State to enforce against the corporation an obligation arising out of such activities. P. 326 U. S. 320. International Shoe v. State of Washington (b) In such a suit to recover payments due to the unemployment compensation fund, service of process upon No. 107 one of the corporation's salesmen within the State, and notice sent by registered mail to the corporation at its home office, satisfies the requirements of due process. P. 326 U. S. 320.
International Shoe v. State of Washington, 326 U.S. 310 (1945)
Argued November 14, 1945
Decided December 3, 1945
Page 326 U. S. 311
326 U.S. 310
3. The tax imposed by the state unemployment compensation statute -- construed by the state court, in its application to the corporation, as a tax on the privilege of employing salesmen within the State -- does not
APPEAL FROM THE SUPREME COURT OF WASHINGTON
violate the due process clause of the Fourteenth Amendment. P. 326 U. S. 321.
Syllabus
22 Wash.2d 146, 154 P.2d 801, affirmed.
Activities within a State of salesmen in the employ of a foreign corporation, exhibiting samples of merchandise and soliciting orders from prospective buyers to be accepted or rejected by the corporation at a point outside the State, were systematic and continuous, and resulted in a large volume of interstate business. A statute of the State requires employers to pay into the state unemployment compensation fund a specified percentage of the wages paid for the services of employees within the State.
APPEAL from a judgment upholding the constitutionality of a state unemployment compensation statute as applied to the appellant corporation.
MR. CHIEF JUSTICE STONE delivered the opinion of the Court.
The questions for decision are (1) whether, within the limitations of the due process clause of the Fourteenth Amendment, appellant, a Delaware corporation, has, by its activities in the State of Washington, rendered itself amenable to proceedings in the courts of that state to recover unpaid contributions to the state
Held:
1. In view of 26 U.S.C. 1606(a) , providing that no person shall be relieved from compliance with a state law requiring payments to an unemployment fund on the ground that he is engaged in interstate commerce, the fact that the corporation is engaged in interstate commerce does not relieve it from liability for payments to the state unemployment compensation fund. P. 326 U. S. 315.
unemployment compensation fund exacted by state statutes, Washington Unemployment Compensation Act, Washington Revised Statutes, 9998-103a through 9998-123a, 1941 Supp., and (2) whether the state can exact those contributions consistently with the due process clause of the Fourteenth Amendment.
The statutes in question set up a comprehensive scheme of unemployment compensation, the costs of which 2. The activities in behalf of the corporation render it amenable to suit in courts of the State to recover payments due to the state unemployment compensation fund. P. 326 U. S. 320. are defrayed by contributions required to be made by employers to a state unemployment compensation fund.
47
Page 326 U. S. 312 P.2d 801. Appellant in each of these courts assailed the statute as applied, as a violation of the due process clause of the Fourteenth Amendment, and as imposing a constitutionally prohibited burden on interstate commerce. The cause comes here on appeal under 237(a) of the Judicial Code, 28 U.S.C. 344(a), appellant assigning as error that the challenged statutes, as applied, infringe the due process clause of the Fourteenth Amendment and the commerce clause.
The contributions are a specified percentage of the wages payable annually by each employer for his employees' services in the state. The assessment and collection of the contributions and the fund are administered by appellees. Section 14(c) of the Act (Wash.Rev.Stat., 1941 Supp., 9998-114c) authorizes appellee Commissioner to issue an order and notice of assessment of delinquent contributions upon prescribed personal service of the notice upon the employer if found within the state, or, if not so found, by mailing the notice to the employer by registered mail at his last known address. That section also authorizes the Commissioner to collect the assessment by distraint if it is not paid within ten days after service of the notice. By 14e and 6b, the order of assessment may be administratively reviewed by an appeal tribunal within the office of unemployment upon petition of the employer, and this determination is, by 6i, made subject to judicial review on questions of law by the state Superior Court, with further right of appeal in the state Supreme Court, as in other civil cases.
The facts, as found by the appeal tribunal and accepted by the state Superior Court and Supreme Court, are not in dispute. Appellant is a Delaware corporation, having its principal place of business in St. Louis, Missouri, and is engaged in the manufacture and sale of shoes and other footwear. It maintains places of business in several states other than Washington, at which its manufacturing is carried on and from which its merchandise is distributed interstate through several sales units or branches located outside the State of Washington.
Appellant has no office in Washington, and makes no contracts either for sale or purchase of merchandise there. It maintains no stock of merchandise in that state, and makes there no deliveries of goods in intrastate commerce. During the years from 1937 to 1940, now in question, appellant employed eleven to thirteen salesmen under direct supervision and control of sales managers located in St. Louis. These salesmen resided in Washington; their principal activities were confined to that state, and they were compensated by commissions based upon the amount of their sales. The commissions for each year totaled more than $31,000. Appellant supplies its salesmen with a line of samples, each consisting of one shoe of a pair, which
In this case, notice of assessment for the years in question was personally served upon a sales solicitor employed by appellant in the State of Washington, and a copy of the notice was mailed by registered mail to appellant at its address in St. Louis, Missouri. Appellant appeared specially before the office of unemployment, and moved to set aside the order and notice of assessment on the ground that the service upon appellant's salesman was not proper service upon appellant; that appellant was not a corporation of the State of Washington, and was not doing business within the state; that it had no agent within the state upon whom service could be made; and that appellant is not an employer, and does not furnish employment within the meaning of the statute.
Page 326 U. S. 314
they display to prospective purchasers. On occasion, they rent permanent sample rooms, for exhibiting samples, in business buildings, or rent rooms in hotels or business buildings temporarily for that purpose. The
The motion was heard on evidence and a stipulation of facts by the appeal tribunal, which denied the motion
cost of such rentals is reimbursed by appellant.
Page 326 U. S. 313
The authority of the salesmen is limited to exhibiting their samples and soliciting orders from prospective buyers, at prices and on terms fixed by appellant. The salesmen transmit the orders to appellant's office in St. Louis for acceptance or rejection, and, when accepted, the merchandise for filling the orders is shipped f.o.b.
and ruled that appellee Commissioner was entitled to recover the unpaid contributions. That action was affirmed by the Commissioner; both the Superior Court and the Supreme Court affirmed. 22 Wash.2d 146, 154
48
from points outside Washington to the purchasers within the state. All the merchandise shipped into Washington is invoiced at the place of shipment, from which collections are made. No salesman has authority to enter into contracts or to make collections. It is no longer debatable that Congress, in the exercise of the commerce power, may authorize the states, in specified ways, to regulate interstate commerce or impose burdens upon it. Kentucky Whip & Collar Co. v. Illinois Central R. Co., 299 U. S. 334;Perkins v. Pennsylvania, 314 U.S. 586; Standard Dredging Corp. v. Murphy, 319 U. S. 306, 319 U. S. 308; Hooven & Allison Co. v. Evatt, 324 U. S. 652, 324 U. S. 679;Southern Pacific Co. v. Arizona, 325 U. S. 761, 325 U. S. 769.
The Supreme Court of Washington was of opinion that the regular and systematic solicitation of orders in the state by appellant's salesmen, resulting in a continuous flow of appellant's product into the state, was sufficient to constitute doing business in the state so as to make appellant amenable to suit in its courts. But it was also of opinion that there were sufficient additional activities shown to bring the case within the rule, frequently stated, that solicitation within a state by the agents of a foreign corporation plus some additional activities there are sufficient to render the corporation amenable to suit brought in the courts of the state to enforce an obligation arising out of its activities there. International Harvester Co. v. Kentucky, 234 U. S. 579, 234 U. S. 587;People's Tobacco Co. v. American Tobacco Co., 246 U. S. 79, 246 U. S. 87; Frene v. Louisville Cement Co., 77 U.S.App.D.C. 129, 134 F.2d 511, 516. The court found such additional activities in the salesmen's display of samples sometimes in permanent display rooms, and the salesmen's residence within the state, continued over a period of years, all resulting in a
Appellant also insists that its activities within the state were not sufficient to manifest its "presence" there, and that, in its absence, the state courts were without jurisdiction, that, consequently, it was a denial of due process for the state to subject appellant to suit. It refers to those cases in which it was said that the mere solicitation of orders for the purchase of goods within a state, to be accepted without the state and filled by shipment of the purchased goods interstate, does not render the corporation seller amenable to suit within the state. See Green v. Chicago, B. & Q. R. Co., 205 U. S. 530,205 U. S. 533; International Harvester Co. v. Kentucky, supra, 234 U. S. 586-587;Philadelphia
Page 326 U. S. 316
& Reading R. Co. v. McKibbin, 243 U. S. 264, 243 U. S. 268; People's Tobacco Co. v. American Tobacco Co., Page 326 U. S. 315 supra, 246 U. S. 87. And appellant further argues that, since it was not present within the state, it is a denial of due process to subject it to taxation or other money exaction. It thus denies the power of the state to lay the tax or to subject appellant to a suit for its collection.
substantial volume of merchandise regularly shipped by appellant to purchasers within the state. The court also held that the statute, as applied, did not invade the constitutional power of Congress to regulate interstate commerce, and did not impose a prohibited burden on such commerce.
Historically, the jurisdiction of courts to render judgment in personam is grounded on their de facto power over the defendant's person. Hence, his presence within the territorial jurisdiction of a court was prerequisite to its rendition of a judgment personally binding him. Pennoyer v. Neff, 95 U. S. 714, 95 U. S. 733. But now that thecapias ad respondendum has given way to personal service of summons or other form of notice, due process requires only that, in order to subject a defendant to a judgmentin personam, if he be not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend "traditional notions of fair play and substantial justice." Milliken v. Meyer, 311 U. S. 457, 311
Appellant's argument, renewed here, that the statute imposes an unconstitutional burden on interstate commerce need not detain us. For 53 Stat. 1391, 26 U.S.C. 1606(a) provides that
"No person required under a State law to make payments to an unemployment fund shall be relieved from compliance therewith on the ground that he is engaged in interstate or foreign commerce, or that the State law does not distinguish between employees engaged in interstate or foreign commerce and those engaged in intrastate commerce."
49
U. S. 463. See Holmes, J., in McDonald v. Mabee, 243 U. S. 90, 243 U. S. 91.Compare Hoopeston Canning Co. v. Cullen, 318 U. S. 313, 318 U. S. 316, 318 U. S. 319. See Blackmer v. United States, 284 U. S. 421; Hess v. Pawloski, 274 U. S. 352;Young v. Masci, 289 U. S. 253. , corporate agent, or even his conduct of single or isolated items of activities in a state in the corporation's behalf, are not enough to subject it to suit on causes of action unconnected with the activities there. St. Clair v. Cox, supra, 106 U. S. 359, 106 U. S. 360; Old Wayne Life Assn. v. McDonough, 204 U. S. 8, 204 U. S. 21; Frene v. Louisville Cement Co., supra, 515, and cases cited. To require the corporation in such circumstances to defend the suit away from its home or other jurisdiction where it carries on more substantial activities has been thought to lay too great and unreasonable a burden on the corporation to comport with due process.
Since the corporate personality is a fiction, although a fiction intended to be acted upon as though it were a fact, Klein v. Board of Supervisors, 282 U. S. 19, 282 U. S. 24, it is clear that, unlike an individual, its "presence" without, as well as within, the state of its origin can be manifested only by activities carried on in its behalf by those who are authorized to act for it. To say that the corporation is so far "present" there as to satisfy due process requirements, for purposes of taxation or the maintenance of suits against it in the courts of the state, is to beg the question to be decided. For the terms "present" or "presence" are
Page 326 U. S. 318
While it has been held, in cases on which appellant relies, that continuous activity of some sorts within a state is not enough to support the demand that the corporation be amenable to suits unrelated to that activity, Old Wayne Life Assn. v. McDonough, supra; Green v. Chicago, B. & Q. R. Co., supra; Simon v. Southern R. Co., 236 U. S. 115; People's Tobacco Co. v. American Tobacco Co., supra; cf. Davis v. Farmers Co-operative Co., 262 U. S. 312, 262 U. S. 317, there have been instances in which the continuous corporate operations within a state were thought so substantial and of such a nature as to justify suit against it on causes of action arising from dealings entirely distinct from those activities. See Missouri, K. & T. R. Co. v. Reynolds, 255 U.S. 565;Tauza v. Susquehanna Coal Co., 220 N.Y. 259, 115 N.E. 915; cf. St. Louis S.W. R. Co. v. Alexander, supra.
Page 326 U. S. 317
used merely to symbolize those activities of the corporation's agent within the state which courts will deem to be sufficient to satisfy the demands of due process. L. Hand, J., in Hutchinson v. Chase & Gilbert, 45 F.2d 139, 141. Those demands may be met by such contacts of the corporation with the state of the forum as make it reasonable, in the context of our federal system of government, to require the corporation to defend the particular suit which is brought there. An "estimate of the inconveniences" which would result to the corporation from a trial away from its "home" or principal place of business is relevant in this connection. Hutchinson v. Chase & Gilbert, supra, 141.
"Presence" in the state in this sense has never been doubted when the activities of the corporation there have not only been continuous and systematic, but also give rise to the liabilities sued on, even though no consent to be sued or authorization to an agent to accept service of process has been given. St. Clair v. Cox, 106 U. S. 350, 106 U. S. 355; Connecticut Mutual Co. v. Spratley, 172 U. S. 602, 172 U. S. 610-611;Pennsylvania Lumbermen's Ins. Co. v. Meyer, 197 U. S. 407, 197 U. S. 414-415;Commercial Mutual Co. v. Davis, 213 U. S. 245, 213 U. S. 255-256; International Harvester Co. v. Kentucky, supra; cf. St. Louis S.W. R. Co. v. Alexander, 227 U. S. 218. Conversely, it has been generally recognized that the casual presence of the
Finally, although the commission of some single or occasional acts of the corporate agent in a state sufficient to impose an obligation or liability on the corporation has not been thought to confer upon the state authority to enforce it, Rosenberg Bros. & Co. v. Curtis Brown Co., 260 U. S. 516, other such acts, because of their nature and quality and the circumstances of their commission, may be deemed sufficient to render the corporation liable to suit. Cf. Kane v. New Jersey, 242 U. S. 160; Hess v. Pawloski, supra; Young v. Masci, supra. True, some of the decisions holding the corporation amenable to suit have been supported by resort to the legal fiction that it has given its consent to service and suit, consent being implied from its presence in the state through the acts of its authorized agents. Lafayette Insurance Co. v. French, 18 How. 404, 59 U. S. 407; St.
50
Clair v. Cox, supra, 106 U. S. 356; Commercial Mutual Co. v. Davis, supra, 213 U. S. 254; Washington v. Superior Court, 289 U. S. 361, 289 U. S. 364-365. But, more realistically, it may be said that those authorized acts were of such a nature as to justify the fiction. Smolik v. Philadelphia & Page 326 U. S. 320
Applying these standards, the activities carried on in behalf of appellant in the State of Washington were neither irregular nor casual. They were systematic and continuous throughout the years in question. They resulted in a large volume of interstate business, in the course of which appellant received the benefits and protection of the laws of the state, including the right to resort to the courts for the enforcement of its rights. The obligation which is here sued upon arose out of those very activities. It is evident that these operations establish sufficient contacts or ties with the state of the forum to make it reasonable and just, according to our
Page 326 U. S. 319
Reading Co., 222 F. 148, 151. Henderson, The Position of Foreign Corporations in American Constitutional Law, 94-95.
It is evident that the criteria by which we mark the boundary line between those activities which justify the subjection of a corporation to suit and those which do not cannot be simply mechanical or quantitative. The test is not merely, as has sometimes been suggested, whether the activity, which the corporation has seen fit to procure through its agents in another state, is a little more or a little less. St. Louis S.W. R. Co. v. Alexander, supra, 227 U. S. 228; International Harvester Co. v. Kentucky, supra,234 U. S. 587. Whether due process is satisfied must depend, rather, upon the quality and nature of the activity in relation to the fair and orderly administration of the laws which it was the purpose of the due process clause to insure. That clause does not contemplate that a state may make binding a judgment in personam against an individual or corporate defendant with which the state has no contacts, ties, or relations. Cf. Pennoyer v. Neff, supra; Minnesota Commercial Assn. v. Benn, 261 U. S. 140.
traditional conception of fair play and substantial justice, to permit the state to enforce the obligations which appellant has incurred there. Hence, we cannot say that the maintenance of the present suit in the State of Washington involves an unreasonable or undue procedure.
We are likewise unable to conclude that the service of the process within the state upon an agent whose activities establish appellant's "presence" there was not sufficient notice of the suit, or that the suit was so unrelated to those activities as to make the agent an inappropriate vehicle for communicating the notice. It is enough that appellant has established such contacts with the state that the particular form of substituted service adopted there gives reasonable assurance that the notice will be actual. Connecticut Mutual Co. v. Spratley, supra, 172 U. S. 618, 172 U. S. 619; Board of Trade v. Hammond Elevator Co., 198 U. S. 424, 198 U. S. 437-438; Commercial Mutual Co. v. Davis, supra, 213 U. S. 254-255. Cf. Riverside Mills v. Menefee, 237
But, to the extent that a corporation exercises the privilege of conducting activities within a state, it enjoys the benefits and protection of the laws of that state. The exercise of that privilege may give rise to obligations, and, so far as those obligations arise out of or are connected with the activities within the state, a procedure which requires the corporation to respond to a suit brought to enforce them can, in most instances, hardly be said to be undue. Compare International Harvester Co. v. Kentucky, supra, with Green v. Chicago, B. & Q. R. Co., supra, and People's Tobacco Co. v. American Tobacco Co., supra. Compare Connecticut Mutual Co. v. Spratley, supra, 172 U. S. 619, 172 U. S. 620, and Commercial Mutual Co. v. Davis, supra, with Old Wayne Life Assn. v. McDonough, supra. See 29 Columbia Law Review, 187-195.
U. S. 189, 237 U. S. 194, 237 U. S. 195; See Knowles v. Gaslight & Coke Co., 19 Wall. 58, 86 U. S. 61;McDonald v. Mabee, supra; Milliken v. Meyer, supra. Nor can we say that the mailing of the notice of suit to appellant by registered mail at its home office was not reasonably calculated to apprise appellant of the suit. Compare Hess v. Pawloski, supra, with McDonald v. Mabee, supra,
Page 326 U. S. 321
243 U. S. 92, and Wuchter v. Pizzutti, 276 U. S. 13, 276 U. S. 19, 276 U. S. 24; cf. Becquet v. MacCarthy, 2 B. & Ad. 951; Maubourquet v. Wyse, 1 Ir.Rep.C.L. 471. See Washington v. Superior Court, supra, 289 U. S. 365.
51
Only a word need be said of appellant's liability for the demanded contributions to the state unemployment fund. The Supreme Court of Washington, construing and applying the statute, has held that it imposes a tax on the privilege of employing appellant's salesmen within the state measured by a percentage of the wages, here, the commissions payable to the salesmen. This construction we accept for purposes of determining the constitutional validity of the statute. The right to employ labor has been deemed an appropriate subject of taxation in this country and England, both before and since the adoption of the Constitution. Steward Machine Co. v. Davis, 301 U. S. 548, 301 U. S. 579, et seq. And such a tax imposed upon the employer for unemployment benefits is within the constitutional power of the states. Carmichael v. Southern Coal Co., 301 U. S. 495, 301 U. S. 508, et seq. Congress, pursuant to its constitutional power to regulate commerce, has expressly provided that a State shall not be prohibited from levying the kind of unemployment compensation tax here challenged. 26 U.S.C. 1600. We have twice decided that this Congressional consent is an adequate answer to a claim that imposition of the tax violates the Commerce Clause. Perkins v. Pennsylvania, 314 U.S. 586, affirming 342 Pa. 529; Standard Dredging Corp. v. Murphy, 319 U. S. 306, 319 U. S. 308. Two determinations by this Court of an issue so palpably without merit are sufficient. Consequently, that part of this appeal which again seeks to raise the question seems so patently frivolous as to make the case a fit candidate for dismissal. Fay v. Crozer, 217 U. S. 455. Nor is the further ground advanced on this appeal, that the State of Washington has denied appellant due process of law, any less devoid of substance. It is my view, therefore, that we should dismiss the appeal as unsubstantial, [Footnote 1]Seaboard Air Line R. Co. v. Watson, 287 U. S. 86, 287 U. S. 90, 287 U. S. 92, and decline the invitation to formulate broad rules as to the meaning of due process, which here would amount to deciding a constitutional question "in advance of the necessity for its decision." Federation of Labor v. McAdory, 325 U. S. 450, 325 U. S. 461.
Appellant having rendered itself amenable to suit upon obligations arising out of the activities of its salesmen in Washington, the state may maintain the present suit in personam to collect the tax laid upon the exercise of the privilege of employing appellant's salesmen within the state. For Washington has made one of those activities which, taken together, establish appellant's "presence" there for purposes of suit the taxable event by which the state brings appellant within the reach of its taxing power. The state thus has constitutional power to lay the tax and to subject appellant to a suit to recover it. The activities which establish its "presence" subject it alike to taxation by the state and to suit to recover the tax. Equitable Life Society v. Pennsylvania, 238 U. S. 143, 238 U. S. 146; cf. International Harvester Co. v. Department of Taxation, 322 U. S. 435, 322 U. S. 442, et seq.; Hoopeston Canning Co. v. Cullen,
Page 326 U. S. 323
Certainly appellant cannot, in the light of our past decisions, meritoriously claim that notice by registered mail and by personal service on its sales solicitors in Washington did not meet the requirements of procedural due process. And the due process clause is not brought in issue any more by appellant's further conceptualistic contention that Washington could not levy a tax or bring suit against the corporation because it did not honor that State with its mystical "presence." For it is unthinkable that the vague due process clause was ever intended to prohibit a State from regulating or taxing a business carried on within its boundaries simply because this is done by agents of a corporation organized and having its headquarters elsewhere. To read
Page 326 U. S. 322
supra, 318 U. S. 316-319; see General Trading Co. v. Tax Comm'n, 322 U. S. 335.
Affirmed.
this into the due process clause would, in fact, result in depriving a State's citizens of due process by taking from the State the power to protect them in their business dealings within its boundaries with representatives of a foreign corporation. Nothing could be more irrational, or more designed to defeat the function of our
MR. JUSTICE JACKSON took no part in the consideration or decision of this case.
MR. JUSTICE BLACK delivered the following opinion.
federative system of government. Certainly a State, at the very least, has power to tax and sue those dealing
52
with its citizens within its boundaries, as we have held before. Hoopeston Canning Co. v. Cullen, 318 U. S. 313. Were the Court to follow this principle, it would provide a workable standard for cases where, as here, no other questions are involved. The Court has not chosen to do so, but instead has engaged in an unnecessary discussion, in the course of which it has announced vague Constitutional criteria applied for the first time to the issue before us. It has thus introduced uncertain elements confusing the simple pattern and tending to curtail the exercise of State powers to an extent not justified by the Constitution. purport to support or could support a holding that a State can tax and sue corporations only if its action comports with this Court's notions of "natural justice." I should have thought the Tenth Amendment settled that.
I believe that the Federal Constitution leaves to each State, without any "ifs" or "buts," a power to tax and to open the doors of its courts for its citizens to sue corporations whose agents do business in those States. Believing that the Constitution gave the States that power, I think it a judicial deprivation to condition its exercise upon this
The criteria adopted, insofar as they can be identified, read as follows: Due Process does permit State courts to "enforce the obligations which appellant has incurred" if
Page 326 U. S. 325
Page 326 U. S. 324
Court's notion of "fair play," however appealing that term may be. Nor can I stretch the meaning of due process so far as to authorize this Court to deprive a State of the right to afford judicial protection to its citizens on the ground that it would be more "convenient" for the corporation to be sued somewhere else.
it be found "reasonable and just according to our traditional conception of fair play and substantial justice." And this, in turn, means that we will "permit" the State to act if, upon
"an 'estimate of the inconveniences' which would result to the corporation from a trial away from its 'home' or principal place of business,"
There is a strong emotional appeal in the words "fair play," "justice," and "reasonableness." But they were not chosen by those who wrote the original Constitution or the Fourteenth Amendment as a measuring rod for this Court to use in invalidating State or Federal laws passed by elected legislative representatives. No one, not even those who most feared a democratic government, ever formally proposed that courts should be given
we conclude that it is "reasonable" to subject it to suit in a State where it is doing business.
It is true that this Court did use the terms "fair play" and "substantial justice" in explaining the philosophy underlying the holding that it could not be "due process of law" to render a personal judgment against a defendant without notice and an opportunity to be heard. Milliken v. Meyer, 311 U. S. 457. In McDonald v. Mabee, 243 U. S. 90, 243 U. S. 91, cited in the Milliken, case, Mr. Justice Holmes, speaking for the Court, warned against judicial curtailment of this opportunity to be heard, and referred to such a curtailment as a denial of "fair play," which even the common law would have deemed "contrary to natural justice." And previous cases had indicated that the ancient rule against judgments without notice had stemmed from "natural justice" concepts. These cases, while giving additional reasons why notice under particular circumstances is inadequate, did not mean thereby that all legislative enactments which this Court might deem to be contrary to natural justice ought to be held invalid under the due process clause. None of the cases
power to invalidate legislation under any such elastic standards. Express prohibitions against certain types of legislation are found in the Constitution, and, under the long-settled practice, courts invalidate laws found to conflict with them. This requires interpretation, and interpretation, it is true, may result in extension of the Constitution's purpose. But that is no reason for reading the due process clause so as to restrict a State's power to tax and sue those whose activities affect persons and businesses within the State, provided proper service can be had. Superimposing the natural justice concept on the Constitution's specific prohibitions could operate as a drastic abridgment of democratic safeguards they embody, such as freedom of speech, press and religion, [Footnote 2] and the right to counsel. This
Page 326 U. S. 326
53
has already happened. Betts v. Brady, 316 U. S. 455. Compare Feldman v. United States, 322 U. S. 487, 322 U. S. 494-503. For application of this natural law concept, whether under the terms "reasonableness," "justice," or "fair play," makes judges the supreme arbiters of the country's laws and practices. Polk Co. v. Glover, 305 U. S. 5,305 U. S. 17-18; Federal Power Commission v. Natural Gas Pipeline Co., 315 U. S. 575, 315 U. S. 600, n. 4. This result, I believe, alters the form of government our Constitution provides. I cannot agree. action, completely or partially withdraw Constitutional protection from these basic freedoms, just as though the First Amendment had never been written.
True, the State's power is here upheld. But the rule announced means that tomorrow's judgment may strike down a State or Federal enactment on the ground that it does not conform to this Court's idea of natural justice. I therefore find myself moved by the same fears that caused Mr. Justice Holmes to say in 1930:
"I have not yet adequately expressed the more than anxiety that I feel at the ever-increasing scope given to the Fourteenth Amendment in cutting down what I believe to be the constitutional rights of the States. As the decisions now stand, I see hardly any limit but the sky to the invalidating of those rights if they happen to strike a majority of this Court as for any reason undesirable."
Baldwin v. Missouri, 281 U. S. 586, 281 U. S. 595.
[Footnote 1]
This Court has, on several occasions, pointed out the undesirable consequences of a failure to dismiss frivolous appeals. Salinger v. United States, 272 U. S. 542, 272 U. S. 544; United Surety Co. v. American Fruit Product Co., 238 U. S. 140; De Bearn v. Safe Deposit & Trust Co., 233 U. S. 24, 233 U. S. 33-34.
[Footnote 2]
These First Amendment liberties -- freedom of speech, press and religion -- provide a graphic illustration of the potential restrictive capacity of a rule under which they are protected at a particular time only because the Court, as then constituted, believes them to be a requirement of fundamental justice. Consequently, under the same rule, another Court, with a different belief as to fundamental justice, could, at least as against State
54
U.S. Supreme Court nonresident natural person to enforce a cause of action which does not arise out of anything done within the State. Pp. 342 U. S. 440-441.
Perkins v. Benguet Consolidated Mining Co., 342 U.S. 437 (1952)
Perkins v. Benguet Consolidated Mining Co.
2. The Due Process Clause of the Fourteenth Amendment also does not prohibit Ohio from granting such relief against a foreign corporation. Old Wayne Life Assn. v. McDonough, 204 U. S. 8, and Simon v. Southern
No. 85
R. Co., 236 U. S. 115, distinguished. Pp. 342 U. S. 441-447.
Argued November 27-28, 1951
3. As a matter of federal due process, the business done by the corporation in Ohio was sufficiently substantial and of such a nature as to permit Ohio to entertain the cause of action against it, though the cause of action arose from activities entirely distinct from its activities in Ohio. Pp. 342 U. S. 447-449.
Decided March 3, 1952
342 U.S. 437 4. It not clearly appearing, under the Ohio practice as to the effect of the syllabus, whether the Supreme Court CERTIORARI TO THE SUPREME COURT OF OHIO of Ohio rested its decision on Ohio law or on the Fourteenth Amendment, the cause is remanded to that court for further proceedings in the light of the opinion of this Court. Pp. 342 U. S. 441-449.
Syllabus
A foreign corporation, owning gold and silver mines in the Philippine Islands, temporarily carried on in Ohio (during the Japanese occupation of the Philippines) a continuous and systematic, but limited, part of its general business -- consisting of directors' meetings, business correspondence, banking, stock transfers, payment of salaries, purchasing of machinery, etc. While engaged in doing such business in Ohio, its president was served with summons in an action in personam against the corporation filed in an Ohio state court by a nonresident of Ohio. The cause of action did not arise in Ohio, and did not relate to the corporation's activities there. A judgment sustaining a motion to quash the service was affirmed by the State Supreme Court.
155 Ohio St. 116, 98 N.E.2d 33, vacated and remanded.
Page 342 U. S. 438
In two actions in an Ohio state court, the trial court sustained a motion to quash the service on the respondent foreign corporation. The Court of Appeals of Ohio affirmed, 88 Ohio App. 118, 95 N.E.2d 5, as did the State Supreme Court, 155 Ohio St. 116, 98 N.E.2d 33. This Court granted certiorari. 342 U.S. 808. Judgment vacated and cause remanded, p. 342 U. S. 449.
MR. JUSTICE BURTON delivered the opinion of the Court.
Held:
This case calls for an answer to the question whether the Due Process Clause of the Fourteenth Amendment to the Constitution of the United States precludes Ohio from subjecting a foreign corporation to the jurisdiction of its courts in this action in personam. The corporation has been carrying on in Ohio a continuous and systematic, but limited, part of its general business. Its president, while engaged in doing such business in
1. The Federal Constitution does not compel Ohio to open its courts to such a case -- even though Ohio permits a complainant to maintain a proceeding in personam in its courts against a properly served
55
Ohio, has been served with summons in this proceeding. The cause of action sued upon did not arise in Ohio and does not relate to the corporation's activities there. For the reasons hereafter stated, we hold that the Fourteenth Amendment leaves Ohio free to take or decline jurisdiction over the corporation. in the instant case through regular service of summons upon its president while he was in Ohio acting in that capacity. Accordingly, there can be no jurisdictional objection based upon a lack of notice to a responsible representative of the corporation.
After extended litigation elsewhere, [Footnote 1] petitioner, Idonah Slade Perkins, a nonresident of Ohio, filed two actions in personam in the Court of Common Pleas of Clermont
The answer to the question of whether the state courts of Ohio are open to a proceeding in personam, against an amply notified foreign corporation, to enforce a cause of action not arising in Ohio and not related to the business or activities of the corporation in that State rests entirely upon the law of Ohio, unless the Due Process Clause of the Fourteenth Amendment compels a decision either way.
Page 342 U. S. 439
County, Ohio, against the several respondents. Among those sued is the Benguet Consolidated Mining Company, here called the mining company. It is styled a "sociedad anonima" under the laws of the Philippine Islands, where it owns and has operated profitable gold and silver mines. In one action, petitioner seeks approximately $68,400 in dividends claimed to be due her as a stockholder. In the other, she claims $2,500,000 damages, largely because of the company's failure to issue to her certificates for 120,000 shares of its stock. The suggestion that federal due process compels the State to open its courts to such a case has no substance.
"Provisions for making foreign corporations subject to service in the state is a matter of legislative discretion, and a failure to provide for such service is not a denial of due process. Still less is it incumbent upon a state in furnishing such process to make the jurisdiction over the foreign corporation wide enough to include the adjudication of transitory actions not arising in the state."
In each case, the trial court sustained a motion to quash the service of summons on the mining company. Ohio Com.Pl., 99 N.E.2d 515. The Court of Appeals of Ohio affirmed that decision, 88 Ohio App. 118, 95 N.E.2d 5, as did the Supreme Court of Ohio, 155 Ohio St. 116, 98 N.E.2d 33. The cases were consolidated, and we granted certiorari in order to pass upon the conclusion voiced within the court below that federal due process required the result there reached. 342 U.S. 808.
Missouri P. R. Co. v. Clarendon Co., 257 U. S. 533, 257 U. S. 535.
Page 342 U. S. 441
Also without merit is the argument that, merely because Ohio permits a complainant to maintain a proceeding in personam in its courts against a properly served nonresident natural person to enforce a cause
We start with the holding of the Supreme Court of Ohio, not contested here, that, under Ohio law, the mining company is to be treated as a foreign corporation. [Footnote 2] Actual notice of the proceeding was given to the corporation
of action which does not arise out of anything done in Ohio, therefore the Constitution of the United States compels Ohio to provide like relief against a foreign corporation.
A more serious question is presented by the claim that the Due Process Clause of the Fourteenth Amendment Page 342 U. S. 440 prohibits Ohio from granting such relief against a foreign corporation. The syllabus in the report of the case below, while denying the relief sought, does not indicate whether the Supreme Court of Ohio rested its decision on Ohio law or on the Fourteenth Amendment. The first paragraph of that syllabus is as follows:
56
"1. The doing of business in this state by a foreign corporation, which has not appointed a statutory agent upon whom service of process against the corporation can be made in this state or otherwise consented to service of summons upon it in actions brought in this state, will not make the corporation subject to service of summons in an action in personam brought in the courts of this state to enforce a cause of action not arising in this state, and in no way related to the business or activities of the corporation in this state." Page 342 U. S. 444
responsible representative of the foreign corporation. In each case, the public official who was served with process in an attempt to bind the foreign corporation was held to lack the necessary authority to accept service so as to bind it in a proceeding to enforce a cause of action arising outside of the state of the forum. See 204 U.S. at 204 U. S. 22-23, and 236 U.S. at 236 U. S. 130. The necessary result was a finding of inadequate service in each case and a conclusion that the foreign corporation was not bound by it. The same would be true today in a like proceeding where the only service had and the only notice given was that directed to a public official who had no authority, by statute or otherwise, to accept it in that kind of a proceeding. At the time of rendering the above decisions, this Court was aided, in reaching its conclusion as to the limited scope of the statutory authority of the public officials, by this Court's conception that the Due
155 Ohio St. 116, 117, 98 N.E.2d 33, 34.
If the above statement stood alone, it might mean that the decision rested solely upon the law of Ohio. In support of that possibility, we are told that, under the rules and practice of the Supreme Court of Ohio, only the syllabus necessarily carries the approval of that court. [Footnote 3] As
Page 342 U. S. 442
Process Clause of the Fourteenth Amendment precluded a state from giving its public officials authority to accept service in terms broad enough to bind a foreign corporation in proceedings against it to enforce an obligation arising outside of the state of the forum. That conception now has been modified by the rationale adopted in later decisions, and particularly in International Shoe Co. v. Washington, 326 U. S. 310.
we understand the Ohio practice, the syllabus of its Supreme Court constitutes the official opinion of that court, but it must be read in the light of the facts and issues of the case.
Page 342 U. S. 443 Today, if an authorized representative of a foreign corporation be physically present in the state of the forum The only opinion accompanying the syllabus of the court below places the concurrence of its author unequivocally upon the ground that the Due Process Clause of the Fourteenth Amendment prohibits the Ohio courts from exercising jurisdiction over the respondent corporation in this proceeding. [Footnote 4] That opinion is an official part of the report of the case. The report, however, does not disclose to what extent, if any, the other members of the court may have shared the view expressed in that opinion. Accordingly, for us to allow the judgment to stand as it is would risk an affirmance of a decision which might have been decided differently if the court below had felt free under our decisions to do so. Page 342 U. S. 445 and be there engaged in activities appropriate to accepting service or receiving notice on its behalf, we recognize that there is no unfairness in subjecting that corporation to the jurisdiction of the courts of that state through such service of process upon that representative. This has been squarely held to be so in a proceeding in personam against such a corporation, at least in relation to a cause of action
arising out of the corporation's activities within the state of the forum. [Footnote 5]
The cases primarily relied on by the author of the opinion accompanying the syllabus below are Old Wayne Life Assn. v. McDonough, 204 U. S. 8, and Simon v. Southern R. Co., 236 U. S. 115. Unlike the case at bar, no actual notice of the proceedings was received in those cases by a
The essence of the issue here, at the constitutional level, is a like one of general fairness to the corporation. Appropriate tests for that are discussed in International Shoe Co. v. Washington, supra, at 326 U. S. 317-320. The amount and kind of activities which must be carried on by the foreign corporation in the state of the forum
57
so as to make it reasonable and just to subject the corporation to the jurisdiction of that state are to be determined in each case. The corporate activities of a foreign corporation which, under state statute, make it necessary for it to secure a license and to designate a statutory agent upon whom process may be served provide a helpful, but not a conclusive, test. For example, the state of the forum may by statute require a foreign mining corporation to secure a license in order lawfully to carry on there such functional intrastate operations as those of mining or refining ore. On the other hand, if the same corporation carries on, in that state, other continuous and systematic corporate activities as it did here -- consisting of directors' meetings, business correspondence, banking, stock transfers, payment of salaries, purchasing of machinery, etc. -those activities are enough to make it fair and reasonable to subject that corporation to proceedings in personam in that state, at least insofar as the proceedings in personam seek to enforce [245,] 213 U. S. 254; Washington v. Superior Court, 289 U. S. 361, 289 U. S. 364-365. But, more realistically, it may be said that those authorized acts were of such a nature as to justify the fiction. Smolik v. Philadelphia & Reading Co., 222 F. 148, 151. Henderson, The Position of Foreign Corporations in American Constitutional Law 94, 95." through the acts of its authorized agents. Lafayette Insurance Co. v. French, 18 How. 404, 59 U. S. 407; St. Clair v. Cox, supra, 106 U.S. [350,] 106 U. S. 356; Commercial Mutual Accident Co. v. Davis, supra, 213 U.S.
Page 342 U. S. 447
". . . Whether due process is satisfied must depend, rather, upon the quality and nature of the activity in relation to the fair and orderly administration of the laws which it was the purpose of the due process clause to insure. That clause does not contemplate that a state may make binding a judgment in personam against an individual or corporate defendant with which the state has no contacts, ties, or relations. Cf. 95 U. S. Neff,
Page 342 U. S. 446
causes of action relating to those very activities or to other activities of the corporation within the state.
supra, [95 U.S. 714]; Minnesota Commercial Assn. v. Benn,261 U. S. 140."
The instant case takes us one step further to a proceeding in personam to enforce a cause of action not arising out of the corporation's activities in the state of the forum. Using the tests mentioned above, we find no requirement of federal due process that either prohibits Ohio from opening its courts to the cause of action here presented or compels Ohio to do so. This conforms to the realistic reasoning in International Shoe Co. v. Washington, supra, at 326 U. S. 318-319:
It remains only to consider in more detail the issue of whether, as a matter of federal due process, the business done in Ohio by the respondent mining company was sufficiently substantial and of such a nature as to permit Ohio to entertain a cause of action against a foreign corporation where the cause of action arose from activities entirely distinct from its activities in Ohio. See International Shoe Co. v. Washington, supra, at 326 U. S. 318.
". . . there have been instances in which the continuous corporate operations within a state were thought so substantial and of such a nature as to justify suit against it on causes of action arising from dealings entirely distinct from those activities. See Missouri, K. & T. R. Co. v. Reynolds, 255 U.S. 565; [Footnote 6] Tauza v. Susquehanna Coal Co., 220 N.Y. 259, 115 N.E. 915; cf. 227 U. S. Louis S.W. R. Co. v. Alexander, supra, [227 U.S. 218]."
The Ohio Court of Appeals summarized the evidence on the subject. 88 Ohio App. at 119-125, 95 N.E.2d at 69. From that summary, the following facts are substantially beyond controversy: the company's mining properties were in the Philippine Islands. Its operations there were completely halted during the occupation of the Islands by the Japanese. During that interim, the president, who was also the general manager and principal stockholder of the company, returned to his home in Clermont County, Ohio. There, he maintained an office in
". . . some of the decisions holding the corporation amenable to suit have been supported by resort to the legal fiction that it has given its consent to service and suit, consent being implied from its presence in the state
Page 342 U. S. 448
58
which he conducted his personal affairs and did many things on behalf of the company. He kept there office files of the company. He carried on there correspondence relating to the business of the company and to its employees. He drew and distributed there salary checks on behalf of the company, both in his own favor as president and in favor of two company secretaries who worked there with him. He used and maintained in Clermont County, Ohio, two active bank accounts carrying substantial balances of company funds. A bank in Hamilton County, Ohio, acted as transfer agent for the stock of the company. Several directors' meetings were held at his office or home in Clermont County. From that office, he supervised policies dealing with the rehabilitation of the corporation's properties in the Philippines, and he dispatched funds to cover purchases of machinery for such rehabilitation. Thus, he carried on in Ohio a continuous and systematic supervision of the necessarily limited wartime activities of the company. He there discharged his duties as president and general manager, both during the occupation of the company's properties by the Japanese and immediately thereafter. While no mining properties in Ohio were owned or operated by the company, many of its wartime activities were directed from Ohio and were being given the personal attention of its president in that State at the time he was served with summons. Consideration of the circumstances which, under the law of Ohio, ultimately will determine whether the courts of that State will choose to take jurisdiction over the corporation is reserved for the courts of that State. Without reaching that issue of state policy, we conclude that, under the circumstances above recited, it would not violate federal due process for Ohio either to take or decline jurisdiction of the corporation in this proceeding. This relieves the Ohio courts of the restriction relied upon in the opinion [Footnote 2] [Footnote 1]
See Perkins v. Perkins, 57 Phil.R. 205; Harden v. Benguet Consolidated Mining Co., 58 Phil.R. 141; Perkins v. Guaranty Trust Co., 274 N.Y. 250, 8 N.E.2d 849; Perkins v. Benguet Consolidated Mining Co., 55 Cal.App.2d 720, 132 P.2d 70, rehearing denied,55 Cal.App.2d 774, 132 P.2d 102, cert. denied, 319 U.S. 774; 60 Cal.App.2d 845, 141 P.2d 19, cert. denied, 320 U.S. 803, 815; Perkins v. First National Bank of Cincinnati,Com.Pl., Hamilton County, Ohio, 79 N.E.2d 159.
Ohio requires a foreign corporation to secure a license to transact "business" in that State, Throckmorton's Ohio Code, 1940, 8625-4, and to appoint a "designated agent" upon whom process may be served, 8625-2, 8625-5. The mining company has neither secured such a license nor designated such an agent. While this may make it subject to penalties and handicaps, this does not prevent it from transacting business or being sued. 8625-25. If it has a "managing agent" in Ohio, service may be made upon him. 11290. Such service is a permissive alternative to service on the corporation through its president or other chief officer. 11288. Lively v. Picton, 218 F. 401, 406-407. The evidence as to the business activities of the corporation in Ohio is summarized by the Ohio Court of Appeals. 88 Ohio App. 118, 119-125, 95 N.E.2d 5, 6-9. That court held that such activities did not constitute the transaction of business referred to in the Code. In its syllabus, however, the Supreme Court of Ohio, without passing upon the sufficiency of such acts for the above statutory purpose, and without defining its use of the term, affirmed the judgment dismissing the complaint and assumed that what the corporation had done in Ohio constituted "doing business" to an extent sufficient to be
Page 342 U. S. 449
accompanying the syllabus below, and which may have influenced the judgment of the court below.
recognized in reaching its decision.
Accordingly, the judgment of the Supreme Court of Ohio is vacated, and the cause is remanded to that court for further proceedings in the light of this opinion. [Footnote 7]
[Footnote 3]
In 1858, the Supreme Court of Ohio promulgated the following rule: It is so ordered. "A syllabus of the points decided by the Court in each case shall be stated, in writing, by the Judge assigned MR. JUSTICE BLACK concurs in the result. to deliver the opinion of the Court, which shall be confined to the points of law, arising from the facts of the
59
case, that have been determined by the Court. And the syllabus shall be submitted to the Judges concurring therein for revisal, before publication thereof, and it shall be inserted in the book of reports without alteration, unless by the consent of the Judges concurring therein." v. Radich, supra; Perkins v. Bright, 109 Ohio St. 14, 19-20, 141 N.E. 689, 690-691; In re Poage, 87 Ohio St. 72, 82-83, 100 N.E. 125, 127-128.
[Footnote 4]
5 Ohio St. vii.
"However, the doing of business in a state by a foreign corporation, which has not appointed a statutory agent upon whom service of process against the corporation can be made in that state or otherwise consented to service of summons upon it in actions brought in that state, will not make the corporation subject to service of summons in an action in personam brought in the courts of that state to enforce a cause of action in no way related to the business or activities of the corporation in that state. Old Wayne Mutual Life Assn. of Indianapolis v. McDonough, 204 U. S. 8, 204 U. S. 22-23;Simon v. Southern Ry. Co., 236 U. S. 115, 236 U. S. 129-130 and 236 U. S. 132. See also Pennsylvania Fire Ins. Co. of Philadelphia v. Gold Issue Mining & Milling Co., 243 U. S. 93, 243 U. S. 95-96; Robert Mitchell Furniture Co. v. Selden Breck Construction Co., 257 U. S. 213, 257 U. S. 215-216; International Shoe Co. v. Washington, 326 U. S. 310, 326 U. S. 319-320."
This policy has been recognized by statute. Bates Ohio R.S. 427, as amended, 103 Ohio Laws 1913, 1483, and 108 Ohio Laws 1919, 1483. It appears now in Throckmorton's Ohio Code, 1940, 1483, as follows:
"Whenever it has been thus decided to report a case for publication, the syllabus thereof shall be prepared by the judge delivering the opinion, and approved by a majority of the members of the court, and the report may be per curiam, or if an opinion be reported, the same shall be written in as brief and concise form as may be consistent with a clear presentation of the law of the case. . . . Only such cases as are hereafter reported in accordance with the provisions of this section shall be recognized by and receive the official sanction of any court within the state."
"An examination of the opinions of the Supreme Court of the United States in the foregoing cases will clearly disclose that service of summons in such an instance would be void as wanting in due process of law."
There are many references to this practice, both in the syllabi and opinions written for the Supreme Court of Ohio. Typical of these is the following:
155 Ohio St. 116, 119-120, 98 N.E.2d 33, 35.
"It has long been the rule of this court that the syllabus contains the law of the case. It is the only part of the opinion requiring the approval of all the members concurring in the judgment. Where the judge writing an opinion discusses matters or gives expression to his views on questions not contained in the syllabus, it is merely the personal opinion of that judge."
[Footnote 5]
". . . The obligation which is here sued upon arose out of those very activities. It is evident that these operations establish sufficient contacts or ties with the state of the forum to make it reasonable and just, according to our traditional conception of fair play and substantial justice, to permit the state to enforce the obligations which appellant has incurred there. Hence, we cannot say that the maintenance of the present suit in the Washington involves an unreasonable or undue procedure."
State ex rel. Donahey v. Edmondson, 89 Ohio St. 93, 107-108, 105 N.E. 269, 273.
See also Williamson Heater Co. v. Radich, 128 Ohio St. 124, 190 N.E. 403; Baltimore & O. R. Co. v. Baillie, 112 Ohio St. 567, 148 N.E. 233. A syllabus must be read in the light of the facts in the case, even where brought out in the accompanying opinion, rather than in the syllabus itself. See Williamson Heater Co.
International Shoe Co. v. Washington, supra, at 326 U. S. 320.
[Footnote 6]
60
This citation does not disclose the significance of this decision, but light is thrown upon it by the opinions of the state court below. Reynolds v. Missouri, K. & T. R. Co., 224 Mass. 379, 113 N.E. 413; 228 Mass. 584, 117 N.E. 913. In addition to the cases cited in the text, see Barrow S.S. Co. v. Kane, 170 U. S. 100; Pennsylvania Fire Insurance Co. v. Gold Issue Mining Co., 243 U. S. 93 (statutory agent appointed); Philadelphia & Reading R. Co. v. McKibbin, 243 U. S. 264, 243 U. S. 268-269 (question left open). "You have decided this case on an adequate state ground, denying service, which you had a right to do, but [Footnote 7] you don't have to do it if you don't want to, as far as the decisions of this Court are concerned." law." 306 U.S. at 306 U. S. 514. In the instant case, a clear statement of the state law is made by the court in the syllabus. Only Judge Taft has summoned the erroneous view of this Court's decisions to his support of the adequate state ground approved by the whole court.
What we are saying to Ohio is:
For like procedure followed under somewhat comparable circumstances, see State Tax Comm'n v. Van Cott, 306 U. S. 511.
I think what we are doing is giving gratuitously an advisory opinion to the Ohio Supreme Court. I would dismiss the writ as improvidently granted.
MR. JUSTICE MINTON, with whom THE CHIEF JUSTICE joins, dissenting.
As I understand the practice in Ohio, the law as agreed to by the court is stated in the syllabus. If an opinion is filed, it expresses the views of the writer of the opinion and of those who may join him as to why the law was so declared in the syllabus. Judge Taft alone filed an opinion in the instant case.
The law as declared in the syllabus, which is the whole court speaking, is clearly based upon adequate state grounds. Judge Taft, in his opinion, expresses the view that the opinions of this Court on due process grounds require the court to declare the law as stated in the syllabus. As the majority opinion of this Court points out, this is an erroneous view of this Court's decisions.
"This brings the situation clearly within the settled rule whereby this Court will not review a State court decision resting on an adequate and independent nonfederal ground even though the State court may have also summoned to its support an erroneous view of federal law."
Radio Station WOW v. Johnson, 326 U. S. 120, 326 U. S. 129.
The case of State Tax Comm'n v. Van Cott, 306 U. S. 511, is not this case. There, the case was not clearly decided on an adequate state ground, but the state ground and the federal ground were so interwoven that this Court was "unable to conclude that the judgment rests upon an independent interpretation of the state
61
G.R. No. 103493 June 19, 1997 PHILSEC INVESTMENT CORPORATION, BPI-INTERNATIONAL FINANCE LIMITED, and ATHONA HOLDINGS, N.V., petitioners, vs. THE HONORABLE COURT OF APPEALS, 1488, INC., DRAGO DAIC, VENTURA O. DUCAT, PRECIOSO R. PERLAS, and WILLIAM H. CRAIG, respondents. and embarrass him." For this reason, the U.S. court imposed so-called Rule 11 sanctions on PHILSEC and AYALA and ordered them to pay damages to Guevarra. On April 10, 1987, while Civil Case No. H-86-440 was pending in the United States, petitioners filed a complaint "For Sum of Money with Damages and Writ of Preliminary Attachment" against private respondents in the Regional Trial Court of Makati, where it was docketed as Civil Case No. 16563. The complaint reiterated the allegation of petitioners in their respective counterclaims in Civil Action No. H-86-440 of the United States District Court of Southern Texas that private respondents committed fraud by selling the property at a price 400 percent more than its true value of US$800,000.00. Petitioners claimed that, as a result of private respondents' fraudulent misrepresentations, ATHONA, PHILSEC, and AYALA were induced to enter into the Agreement and to purchase the Houston property. Petitioners prayed that private respondents be ordered to return to ATHONA the excess payment of US$1,700,000.00 and to pay damages. On April 20, 1987, the trial court issued a writ of preliminary attachment against the real and personal properties of private respondents. 2 Private respondent Ducat moved to dismiss Civil Case No. 16563 on the grounds of (1) litis pendentia, vis-avisCivil Action No. H-86-440 filed by 1488, Inc. and Daic in the U.S., (2) forum non conveniens, and (3) failure of petitioners PHILSEC and BPI-IFL to state a cause of action. Ducat contended that the alleged overpricing of the property prejudiced only petitioner ATHONA, as buyer, but not PHILSEC and BPI-IFL which were not parties to the sale and whose only participation was to extend financial accommodation to ATHONA under a separate loan agreement. On the other hand, private respondents 1488, Inc. and its president Daic filed a joint "Special Appearance and Qualified Motion to Dismiss," contending that the action being in personam, extraterritorial service of summons by publication was ineffectual and did not vest the court with jurisdiction over 1488, Inc., which is a non-resident foreign corporation, and Daic, who is a non-resident alien. On January 26, 1988, the trial court granted Ducat's motion to dismiss, stating that "the evidentiary requirements of the controversy may be more suitably tried before the forum of the litis pendentia in the U.S., under the principle in private international law of forum non conveniens," even as it noted that Ducat was not a party in the U.S. case. A separate hearing was held with regard to 1488, Inc. and Daic's motion to dismiss. On March 9, 1988, the trial court 3 granted the motion to dismiss filed by 1488, Inc. and Daic on the ground of litis pendentia considering that the "main factual element" of the cause of action in this case which is the validity of the sale of real property in the United States between defendant 1488 and plaintiff ATHONA is the subject matter of the pending case in the United States District Court which, under the doctrine of forum non conveniens, is the better (if not exclusive) forum to litigate matters needed to determine the assessment and/or fluctuations of the fair market value of real estate situated in Houston, Texas, U.S.A. from the date of the transaction in 1983 up to the present and verily, . . . (emphasis by trial court) The trial court also held itself without jurisdiction over 1488, Inc. and Daic because they were nonresidents and the action was not an action in rem or quasi in rem, so that extraterritorial service of summons was ineffective. The trial court subsequently lifted the writ of attachment it had earlier issued against the shares of stocks of 1488, Inc. and Daic. Petitioners appealed to the Court of Appeals, arguing that the trial court erred in applying the principle of litis pendentia and forum non conveniens and in ruling that it had no jurisdiction over the defendants, despite the previous attachment of shares of stocks belonging to 1488, Inc. and Daic.
MENDOZA, J.: This case presents for determination the conclusiveness of a foreign judgment upon the rights of the parties under the same cause of action asserted in a case in our local court. Petitioners brought this case in the Regional Trial Court of Makati, Branch 56, which, in view of the pendency at the time of the foreign action, dismissed Civil Case No. 16563 on the ground of litis pendentia, in addition to forum non conveniens. On appeal, the Court of Appeals affirmed. Hence this petition for review on certiorari. The facts are as follows: On January 15, 1983, private respondent Ventura O. Ducat obtained separate loans from petitioners Ayala International Finance Limited (hereafter called AYALA) 1 and Philsec Investment Corporation (hereafter called PHILSEC) in the sum of US$2,500,000.00, secured by shares of stock owned by Ducat with a market value of P14,088,995.00. In order to facilitate the payment of the loans, private respondent 1488, Inc., through its president, private respondent Drago Daic, assumed Ducat's obligation under an Agreement, dated January 27, 1983, whereby 1488, Inc. executed a Warranty Deed with Vendor's Lien by which it sold to petitioner Athona Holdings, N.V. (hereafter called ATHONA) a parcel of land in Harris County, Texas, U.S.A., for US$2,807,209.02, while PHILSEC and AYALA extended a loan to ATHONA in the amount of US$2,500,000.00 as initial payment of the purchase price. The balance of US$307,209.02 was to be paid by means of a promissory note executed by ATHONA in favor of 1488, Inc. Subsequently, upon their receipt of the US$2,500,000.00 from 1488, Inc., PHILSEC and AYALA released Ducat from his indebtedness and delivered to 1488, Inc. all the shares of stock in their possession belonging to Ducat. As ATHONA failed to pay the interest on the balance of US$307,209.02, the entire amount covered by the note became due and demandable. Accordingly, on October 17, 1985, private respondent 1488, Inc. sued petitioners PHILSEC, AYALA, and ATHONA in the United States for payment of the balance of US$307,209.02 and for damages for breach of contract and for fraud allegedly perpetrated by petitioners in misrepresenting the marketability of the shares of stock delivered to 1488, Inc. under the Agreement. Originally instituted in the United States District Court of Texas, 165th Judicial District, where it was docketed as Case No. 85-57746, the venue of the action was later transferred to the United States District Court for the Southern District of Texas, where 1488, Inc. filed an amended complaint, reiterating its allegations in the original complaint. ATHONA filed an answer with counterclaim, impleading private respondents herein as counterdefendants, for allegedly conspiring in selling the property at a price over its market value. Private respondent Perlas, who had allegedly appraised the property, was later dropped as counterdefendant. ATHONA sought the recovery of damages and excess payment allegedly made to 1488, Inc. and, in the alternative, the rescission of sale of the property. For their part, PHILSEC and AYALA filed a motion to dismiss on the ground of lack of jurisdiction over their person, but, as their motion was denied, they later filed a joint answer with counterclaim against private respondents and Edgardo V. Guevarra, PHILSEC's own former president, for the rescission of the sale on the ground that the property had been overvalued. On March 13, 1990, the United States District Court for the Southern District of Texas dismissed the counterclaim against Edgardo V. Guevarra on the ground that it was "frivolous and [was] brought against him simply to humiliate
62
On January 6, 1992, the Court of Appeals 4 affirmed the dismissal of Civil Case No. 16563 against Ducat, 1488, Inc., and Daic on the ground of litis pendentia, thus: The plaintiffs in the U.S. court are 1488 Inc. and/or Drago Daic, while the defendants are Philsec, the Ayala International Finance Ltd. (BPI-IFL's former name) and the Athona Holdings, NV. The case at bar involves the same parties. The transaction sued upon by the parties, in both cases is the Warranty Deed executed by and between Athona Holdings and 1488 Inc. In the U.S. case, breach of contract and the promissory note are sued upon by 1488 Inc., which likewise alleges fraud employed by herein appellants, on the marketability of Ducat's securities given in exchange for the Texas property. The recovery of a sum of money and damages, for fraud purportedly committed by appellees, in overpricing the Texas land, constitute the action before the Philippine court, which likewise stems from the same Warranty Deed. The Court of Appeals also held that Civil Case No. 16563 was an action in personam for the recovery of a sum of money for alleged tortious acts, so that service of summons by publication did not vest the trial court with jurisdiction over 1488, Inc. and Drago Daic. The dismissal of Civil Case No. 16563 on the ground offorum non conveniens was likewise affirmed by the Court of Appeals on the ground that the case can be better tried and decided by the U.S. court: The U.S. case and the case at bar arose from only one main transaction, and involve foreign elements, to wit: 1) the property subject matter of the sale is situated in Texas, U.S.A.; 2) the seller, 1488 Inc. is a non-resident foreign corporation; 3) although the buyer, Athona Holdings, a foreign corporation which does not claim to be doing business in the Philippines, is wholly owned by Philsec, a domestic corporation, Athona Holdings is also owned by BPI-IFL, also a foreign corporation; 4) the Warranty Deed was executed in Texas, U.S.A. In their present appeal, petitioners contend that: 1. THE DOCTRINE OF PENDENCY OF ANOTHER ACTION BETWEEN THE SAME PARTIES FOR THE SAME CAUSE (LITIS PENDENTIA) RELIED UPON BY THE COURT OF APPEALS IN AFFIRMING THE TRIAL COURT'S DISMISSAL OF THE CIVIL ACTION IS NOT APPLICABLE. 2. THE PRINCIPLE OF FORUM NON CONVENIENS ALSO RELIED UPON BY THE COURT OF APPEALS IN AFFIRMING THE DISMISSAL BY THE TRIAL COURT OF THE CIVIL ACTION IS LIKEWISE NOT APPLICABLE. 3. AS A COROLLARY TO THE FIRST TWO GROUNDS, THE COURT OF APPEALS ERRED IN NOT HOLDING THAT PHILIPPINE PUBLIC POLICY REQUIRED THE ASSUMPTION, NOT THE RELINQUISHMENT, BY THE TRIAL COURT OF ITS RIGHTFUL JURISDICTION IN THE CIVIL ACTION FOR THERE IS EVERY REASON TO PROTECT AND VINDICATE PETITIONERS' RIGHTS FOR TORTIOUS OR WRONGFUL ACTS OR CONDUCT PRIVATE RESPONDENTS (WHO ARE MOSTLY NON-RESIDENT ALIENS) INFLICTED UPON THEM HERE IN THE PHILIPPINES. We will deal with these contentions in the order in which they are made. First. It is important to note in connection with the first point that while the present case was pending in the Court of Appeals, the United States District Court for the Southern District of Texas rendered judgment 5 in the case before it. The judgment, which was in favor of private respondents, was affirmed on appeal by the Circuit Court of Appeals. 6 Thus, the principal issue to be resolved in this case is whether Civil Case No. 16536 is barred by the judgment of the U.S. court. Private respondents contend that for a foreign judgment to be pleaded as res judicata, a judgment admitting the foreign decision is not necessary. On the other hand, petitioners argue that the foreign judgment cannot be given the effect of res judicata without giving them an opportunity to impeach it on grounds stated in Rule 39, 50 of the Rules of Court, to wit: "want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact." Petitioners' contention is meritorious. While this Court has given the effect of res judicata to foreign judgments in several cases, 7 it was after the parties opposed to the judgment had been given ample opportunity to repel them on grounds allowed under the law. 8 It is not necessary for this purpose to initiate a separate action or proceeding for enforcement of the foreign judgment. What is essential is that there is opportunity to challenge the foreign judgment, in order for the court to properly determine its efficacy. This is because in this jurisdiction, with respect to actions in personam, as distinguished from actions in rem, a foreign judgment merely constitutes prima facieevidence of the justness of the claim of a party and, as such, is subject to proof to the contrary. 9 Rule 39, 50 provides: Sec. 50. Effect of foreign judgments. The effect of a judgment of a tribunal of a foreign country, having jurisdiction to pronounce the judgment is as follows: (a) In case of a judgment upon a specific thing, the judgment is conclusive upon the title to the thing; (b) In case of a judgment against a person, the judgment is presumptive evidence of a right as between the parties and their successors in interest by a subsequent title; but the judgment may be repelled by evidence of a want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact. Thus, in the case of General Corporation of the Philippines v. Union Insurance Society of Canton, Ltd., 10 which private respondents invoke for claiming conclusive effect for the foreign judgment in their favor, the foreign judgment was considered res judicata because this Court found "from the evidence as well as from appellant's own pleadings" 11 that the foreign court did not make a "clear mistake of law or fact" or that its judgment was void for want of jurisdiction or because of fraud or collusion by the defendants. Trial had been previously held in the lower court and only afterward was a decision rendered, declaring the judgment of the Supreme Court of the State of Washington to have the effect of res judicata in the case before the lower court. In the same vein, in Philippines International Shipping Corp. v. Court of Appeals, 12 this Court held that the foreign judgment was valid and enforceable in the Philippines there being no showing that it was vitiated by want of notice to the party, collusion, fraud or clear mistake of law or fact. The prima facie presumption under the Rule had not been rebutted. In the case at bar, it cannot be said that petitioners were given the opportunity to challenge the judgment of the U.S. court as basis for declaring it res judicata or conclusive of the rights of private respondents. The proceedings in the trial court were summary. Neither the trial court nor the appellate court was even furnished copies of the pleadings in the U.S. court or apprised of the evidence presented thereat, to assure a proper determination of whether the issues then being litigated in the U.S. court were exactly the issues raised in this case such that the judgment that might be rendered would constitute res judicata. As the trial court stated in its disputed order dated March 9, 1988. On the plaintiff's claim in its Opposition that the causes of action of this case and the pending case in the United States are not identical, precisely the Order of January 26, 1988 never found that the causes of action of this case and the case pending before the USA Court, were identical. (emphasis added)
63
It was error therefore for the Court of Appeals to summarily rule that petitioners' action is barred by the principle of res judicata. Petitioners in fact questioned the jurisdiction of the U.S. court over their persons, but their claim was brushed aside by both the trial court and the Court of Appeals. 13 Moreover, the Court notes that on April 22, 1992, 1488, Inc. and Daic filed a petition for the enforcement of judgment in the Regional Trial Court of Makati, where it was docketed as Civil Case No. 92-1070 and assigned to Branch 134, although the proceedings were suspended because of the pendency of this case. To sustain the appellate court's ruling that the foreign judgment constitutes res judicata and is a bar to the claim of petitioners would effectively preclude petitioners from repelling the judgment in the case for enforcement. An absurdity could then arise: a foreign judgment is not subject to challenge by the plaintiff against whom it is invoked, if it is pleaded to resist a claim as in this case, but it may be opposed by the defendant if the foreign judgment is sought to be enforced against him in a separate proceeding. This is plainly untenable. It has been held therefore that: [A] foreign judgment may not be enforced if it is not recognized in the jurisdiction where affirmative relief is being sought. Hence, in the interest of justice, the complaint should be considered as a petition for the recognition of the Hongkong judgment under Section 50 (b), Rule 39 of the Rules of Court in order that the defendant, private respondent herein, may present evidence of lack of jurisdiction, notice, collusion, fraud or clear mistake of fact and law, if applicable. 14 Accordingly, to insure the orderly administration of justice, this case and Civil Case No. 92-1070 should be consolidated. 15 After all, the two have been filed in the Regional Trial Court of Makati, albeit in different salas, this case being assigned to Branch 56 (Judge Fernando V. Gorospe), while Civil Case No. 92-1070 is pending in Branch 134 of Judge Ignacio Capulong. In such proceedings, petitioners should have the burden of impeaching the foreign judgment and only in the event they succeed in doing so may they proceed with their action against private respondents. Second. Nor is the trial court's refusal to take cognizance of the case justifiable under the principle of forum non conveniens. First, a motion to dismiss is limited to the grounds under Rule 16, 1, which does not include forum non conveniens. 16 The propriety of dismissing a case based on this principle requires a factual determination, hence, it is more properly considered a matter of defense. Second, while it is within the discretion of the trial court to abstain from assuming jurisdiction on this ground, it should do so only after "vital facts are established, to determine whether special circumstances" require the court's desistance. 17 In this case, the trial court abstained from taking jurisdiction solely on the basis of the pleadings filed by private respondents in connection with the motion to dismiss. It failed to consider that one of the plaintiffs (PHILSEC) is a domestic corporation and one of the defendants (Ventura Ducat) is a Filipino, and that it was the extinguishment of the latter's debt which was the object of the transaction under litigation. The trial court arbitrarily dismissed the case even after finding that Ducat was not a party in the U.S. case. Third. It was error we think for the Court of Appeals and the trial court to hold that jurisdiction over 1488, Inc. and Daic could not be obtained because this is an action in personam and summons were served by extraterritorial service. Rule 14, 17 on extraterritorial service provides that service of summons on a nonresident defendant may be effected out of the Philippines by leave of Court where, among others, "the property of the defendant has been attached within the Philippines." 18 It is not disputed that the properties, real and personal, of the private respondents had been attached prior to service of summons under the Order of the trial court dated April 20, 1987. 19 Fourth. As for the temporary restraining order issued by the Court on June 29, 1994, to suspend the proceedings in Civil Case No. 92-1445 filed by Edgardo V. Guevarra to enforce so-called Rule 11 sanctions imposed on the petitioners by the U.S. court, the Court finds that the judgment sought to be enforced is severable from the main judgment under consideration in Civil Case No. 16563. The separability of Guevara's claim is not only admitted by petitioners, 20 it appears from the pleadings that petitioners only belatedly impleaded Guevarra as defendant in Civil Case No. 16563. 21 Hence, the TRO should be lifted and Civil Case No. 92-1445 allowed to proceed. WHEREFORE, the decision of the Court of Appeals is REVERSED and Civil Case No. 16563 is REMANDED to the Regional Trial Court of Makati for consolidation with Civil Case No. 92-1070 and for further proceedings in accordance with this decision. The temporary restraining order issued on June 29, 1994 is hereby LIFTED. SO ORDERED. Regalado, Romero, Puno and Torres, Jr., JJ., concur.
64
U.S. Supreme Court (a) A state court may exercise personal jurisdiction over a nonresident defendant only so long as there exist "minimum contacts" between the defendant and the forum State.International Shoe Co. v. Washington, 326 U. S. 310. The defendant's contacts with the forum State must be such that maintenance of the suit does not World-Wide Volkwagen Corp. v. Woodson offend traditional notions of fair play and substantial justice, id. at 326 U. S. 316, and the relationship between the defendant and the forum must be such that it is "reasonable . . . to require the corporation to defend the particular suit which is brought there," id. at 326 U. S. 317. The Due Process Clause Argued October 3, 1979 "does not contemplate that a state may make binding a judgment in personam against an individual or Decided January 21, 1980 corporate defendant with which the state has no contacts, ties, or relations."
World-Wide Volkwagen Corp. v. Woodson, 444 U.S. 286 (1980)
No. 78-1078
444 U.S. 286
Id. at 326 U. S. 319. Pp. 444 U. S. 291-294.
CERTIORARI TO THE SUPREME COURT OF OKLAHOMA
(b) Here, there is a total absence in the record of those affiliating circumstances that are a necessary predicate to any exercise of state court jurisdiction. Petitioners carry on no activity whatsoever in Oklahoma; they close no sales and perform no services there, avail
Syllabus
A products liability action was instituted in an Oklahoma st,ate court by respondents husband and wife to recover for personal injuries sustained in Oklahoma in an accident involving an automobile that had been purchased by them in New York while they were New York residents and that was being driven through Oklahoma at the time of the accident. The defendants included the automobile retailer and its wholesaler (petitioners), New York corporations that did no business in Oklahoma. Petitioners entered special appearances, claiming that Oklahoma's exercise of jurisdiction over them would offend limitations on the State's jurisdiction imposed by the Due Process Clause of the Fourteenth Amendment. The trial court rejected petitioners' claims, and they then sought, but were denied, a writ of prohibition in the Oklahoma Supreme Court to restrain respondent trial judge from exercising in personam jurisdiction over them. Page 444 U. S. 287
themselves of none of the benefits of Oklahoma law, and solicit no business there either through salespersons or through advertising reasonably calculated to reach that State. Nor does the record show that they regularly sell cars to Oklahoma residents, or that they indirectly, through others, serve or seek to serve the Oklahoma market. Although it is foreseeable that automobiles sold by petitioners would travel to Oklahoma and that the automobile here might cause injury in Oklahoma, "foreseeability" alone is not a sufficient benchmark for personal jurisdiction under the Due Process Clause. The foreseeability that is critical to due process analysis is not the mere likelihood that a product will find its way into the forum State, but rather is that the defendant's conduct and connection with the forum are such that he should reasonably anticipate being haled into court there. Nor can jurisdiction be supported on the theory that petitioners earn substantial revenue from goods used in Oklahoma. Pp. 444 U. S. 295-299.
Held: Consistently with the Due Process Clause, the Oklahoma trial court may not exercise in personam jurisdiction over petitioners. Pp. 444 U. S. 291-299.
65
585 P.2d 351, reversed. them would offend the limitations on the State's jurisdiction imposed by the Due Process Clause of the Fourteenth Amendment. [Footnote 4]
WHITE, J., delivered the opinion of the Court, in which BURGER, C.J., and STEWART, POWELL, REHNQUIST, and STEVENS, JJ., joined. BRENNAN, J., filed a dissenting opinion, post, p. 444 U. S. 299. MARSHALL, J., filed a dissenting opinion, in which BLACKMUN, J., joined, post, p. 444 U. S. 313. BLACKMUN, J., filed a dissenting opinion,post, p. 444 U. S. 317.
The facts presented to the District Court showed that World-Wide is incorporated and has its business office in New
Page 444 U. S. 289
MR. JUSTICE WHITE delivered the opinion of the Court.
York. It distributes vehicles, parts, and accessories, under contract with Volkswagen, to retail dealers in New York, New Jersey, and Connecticut. Seaway, one of these retail dealers, is incorporated and has its place of business in New York. Insofar as the record reveals, Seaway and World-Wide are fully independent corporations whose relations with each other and with Volkswagen and Audi are contractual only. Respondents adduced no evidence that either World-Wide or Seaway does any business in Oklahoma, ships or sells any products to or in that State, has an agent to receive process there, or purchases advertisements in any media calculated to reach Oklahoma. In fact, as respondents' counsel conceded at oral argument, Tr. of
The issue before us is whether, consistently with the Due Process Clause of the Fourteenth Amendment, an Oklahoma court may exercise in personam jurisdiction over a nonresident automobile retailer and its wholesale distributor in a products liability action, when the defendants' only connection with Oklahoma is the fact that an automobile sold in New York to New York residents became involved in an accident in Oklahoma.
Page 444 U. S. 288
Oral Arg 32, there was no showing that any automobile sold by World-Wide or Seaway has ever entered Oklahoma, with the single exception of the vehicle involved in the present case.
Respondents Harry and Kay Robinson purchased a new Audi automobile from petitioner Seaway Volkswagen, Inc. (Seaway), in Massena, N.Y. in 1976. The following year, the Robinson family, who resided in New York, left that State for a new home in Arizona. As they passed through the State of Oklahoma, another car struck their Audi in the rear, causing a fire which severely burned Kay Robinson and her two children. [Footnote 1]
Despite the apparent paucity of contacts between petitioners and Oklahoma, the District Court rejected their constitutional claim and reaffirmed that ruling in denying petitioners' motion for reconsideration. [Footnote 5] Petitioners then sought a writ of prohibition in the Supreme Court of Oklahoma to restrain the District Judge, respondent Charles S. Woodson, from exercising in personam jurisdiction over them. They renewed their contention that, because they had no "minimal contacts," App. 32, with the State of Oklahoma, the actions of the District Judge were in violation of their rights under the Due Process Clause.
The Robinsons [Footnote 2] subsequently brought a products liability action in the District Court for Creek County, Okla., claiming that their injuries resulted from defective design and placement of the Audi's gas tank and fuel system. They joined as defendants the automobile's manufacturer, Audi NSU Auto Union Aktiengesellschaft (Audi); its importer, Volkswagen of America, Inc. (Volkswagen); its regional distributor, petitioner World-Wide Volkswagen Corp. (World-Wide); and its retail dealer, petitioner Seaway. Seaway and World-Wide entered special appearances, [Footnote 3] claiming that Oklahoma's exercise of jurisdiction over
The Supreme Court of Oklahoma denied the writ, 585 P.2d 351 (1978), [Footnote 6] holding that personal jurisdiction over petitioners was authorized by Oklahoma's "long-arm" statute,
Page 444 U. S. 290
66
Okla.Stat., Tit. 12, 1701.03(a)(4) (1971). [Footnote 7] Although the court noted that the proper approach was to test jurisdiction against both statutory and constitutional standards, its analysis did not distinguish these questions, probably because 1701.03(a)(4) has been interpreted as conferring jurisdiction to the limits permitted by the United States Constitution. [Footnote 8] The court's rationale was contained in the following paragraph, 585 P.2d at 354: S. 306, 339 U. S. 313-314 (1950), and be subject to the personal jurisdiction of the court, International Shoe Co. v. Washington, 326 U. S. 310(1945). In the present case, it is not contended that notice was inadequate; the only question is whether these particular petitioners were subject to the jurisdiction of the Oklahoma courts.
As has long been settled, and as we reaffirm today, a state court may exercise personal jurisdiction over a nonresident defendant only so long as there exist "minimum contacts" between the defendant and the forum State. International Shoe Co. v. Washington, supra at 326 U. S. 316. The concept of minimum contacts, in turn, can be seen to perform two related, but
"In the case before us, the product being sold and distributed by the petitioners is, by its very design and purpose, so mobile that petitioners can foresee its possible use in Oklahoma. This is especially true of the distributor, who has the exclusive right to distribute such automobile in New York, New Jersey and Connecticut. The evidence presented below demonstrated that goods sold and distributed by the petitioners were used in the State of Oklahoma, and, under the facts, we believe it reasonable to infer, given the retail value of the automobile, that the petitioners derive substantial income from automobiles which from time to time are used in the State of Oklahoma. This being the case, we hold that, under the facts presented, the trial court was justified in concluding
Page 444 U. S. 292
distinguishable, functions. It protects the defendant against the burdens of litigating in a distant or inconvenient forum. And it acts to ensure that the States, through their courts, do not reach out beyond the limits imposed on them by their status as coequal sovereigns in a federal system.
Page 444 U. S. 291
The protection against inconvenient litigation is typically described in terms of "reasonableness" or "fairness." We have said that the defendant's contacts with the forum State must be such that maintenance of the suit
that the petitioners derive substantial revenue from goods used or consumed in this State."
"does not offend traditional notions of fair play and substantial justice.'" International Shoe Co. v. Washington, supra at 326 U. S. 316, quoting Milliken v. Meyer, 311 U. S. 457, 311 U. S. 463 (1940). The relationship between the defendant and the forum must be such that it is "reasonable . . . to require the corporation to defend the particular suit which is brought there." 326 U.S. at 326 U. S. 317. Implicit in this emphasis on reasonableness is the understanding that the burden on the defendant, while always a primary concern, will in an appropriate case be considered in light of other relevant factors, including the forum State's interest in
We granted certiorari, 440 U.S. 907 (1979), to consider an important constitutional question with respect to state court jurisdiction and to resolve a conflict between the Supreme Court of Oklahoma and the highest courts of at least four other States. [Footnote 9] We reverse.
II
The Due Process Clause of the Fourteenth Amendment limits the power of a state court to render a valid personal judgment against a nonresident defendant. Kulko v. California Superior Court, 436 U. S. 84, 436 U. S. 91 (1978). A judgment rendered in violation of due process is void in the rendering State and is not entitled to full faith and credit elsewhere. Pennoyer v. Neff, 95 U. S. 714, 95 U. S. 732-733 (1878). Due process requires that the defendant be given adequate notice of the suit, Mullane v. Central Hanover Trust Co., 339 U.
adjudicating the dispute, see McGee v. International Life Ins. Co., 355 U. S. 220, 355 U. S. 223 (1957); the plaintiff's interest in obtaining convenient and effective relief, see Kulko v. California Superior Court, supra at 436 U. S. 92, at least when that interest is not adequately protected by the plaintiff's power to choose the forum, cf. Shaffer v. Heitner, 433 U. S. 186, 433 U. S. 211, n. 37 (1977); the interstate judicial system's
67
interest in obtaining the most efficient resolution of controversies; and the shared interest of the several States in furthering fundamental substantive social policies, see Kulko v. California Superior Court, supra at 436 U. S. 93, 436 U. S. 98. Hence, even while abandoning the shibboleth that "[t]he authority of every tribunal is necessarily restricted by the territorial limits of the State in which it is established,"Pennoyer v. Neff, supra, at 95 U. S. 720, we emphasized that the reasonableness of asserting jurisdiction over the defendant must be assessed "in the context of our federal system of government,"
The limits imposed on state jurisdiction by the Due Process Clause, in its role as a guarantor against inconvenient litigation, have been substantially relaxed over the years. As we noted in McGee v. International Life Ins. Co., supra at 355 U. S. 222-223,
Page 444 U. S. 294
International Shoe Co. v. Washington, 326 U.S. at 326 U. S. 317, and stressed that the Due Process Clause ensures not only fairness, but also the "orderly administration of the laws," id. at 326 U. S. 319. As we noted in Hanson v. Denckla, 357 U. S. 235,357 U. S. 250-251 (1958):
Page 444 U. S. 293
this trend is largely attributable to a fundamental transformation in the American economy:
"Today many commercial transactions touch two or more States, and may involve parties separated by the full continent. With this increasing nationalization of commerce has come a great increase in the amount of business conducted by mail across state lines. At the same time, modern transportation and communication have made it much less burdensome for a party sued to defend himself in a State where he engages in economic activity."
"As technological progress has increased the flow of commerce between the States, the need for jurisdiction over nonresidents has undergone a similar increase. At the same time, progress in communications and transportation has made the defense of a suit in a foreign tribunal less burdensome. In response to these changes, the requirements for personal jurisdiction over nonresidents have evolved from the rigid rule of Pennoyer v. Neff, 95 U. S. 714, to the flexible standard of International Shoe Co. v. Washington,326 U. S. 310. But it is a mistake to assume that this trend heralds the eventual demise of all restrictions on the personal
The historical developments noted in McGee, of course, have only accelerated in the generation since that case was decided.
jurisdiction of state courts. [Citation omitted.] Those restrictions are more than a guarantee of immunity from inconvenient or distant litigation. They are a consequence of territorial limitations on the power of the respective States."
Nevertheless, we have never accepted the proposition that state lines are irrelevant for jurisdictional purposes, nor could we and remain faithful to the principles of interstate federalism embodied in the Constitution. The economic interdependence of the States was foreseen and desired by the Framers. In the Commerce Clause, they provided that the Nation was to be a common market, a "free trade unit" in which the States are debarred from acting as separable economic entities. H. P. Hood Sons, Inc. v. Du Mond,336 U. S. 525, 336 U. S. 538 (1949). But the Framers also intended that the States retain many essential attributes of sovereignty, including, in particular, the sovereign power to try causes in their courts. The sovereignty of each State, in turn, implied a limitation on the sovereignty of all of its sister States -- a limitation express or implicit in both the original scheme of the Constitution and the Fourteenth Amendment.
Thus, the Due Process Clause
"does not contemplate that a state may make binding a judgment in personam against an individual or corporate defendant with which the state has no contacts, ties, or relations."
International Shoe Co. v. Washington, supra at 326 U. S. 319. Even if the defendant would suffer minimal or no inconvenience from being forced to litigate before the tribunals of another State; even if the forum State has a strong interest in applying its law to the controversy; even if the forum State is the most convenient location for litigation, the Due Process Clause, acting as an instrument of interstate federalism, may sometimes act to
68
divest the State of its power to render a valid judgment. Hanson v. Denckla, supra at 357 U. S. 251, 357 U. S. 254. Yet we held that California could not exercise jurisdiction in a child support action over the former husband, who had remained in New York.
Page 444 U. S. 295
If foreseeability were the criterion, a local California tire retailer could be forced to defend in Pennsylvania when a blowout occurs there, see Erlanger Mills, Inc. v. Cohoes Fibre Mills, Inc., 239 F.2d 502, 507 (CA4 1956); a Wisconsin seller of a defective automobile jack could be haled before a distant court for damage
III
Applying these principles to the case at hand, [Footnote 10] we find in the record before us a total absence of those affiliating circumstances that are a necessary predicate to any exercise of state court jurisdiction. Petitioners carry on no activity whatsoever in Oklahoma. They close no sales and perform no services there. They avail themselves of none of the privileges and benefits of Oklahoma law. They solicit no business there either through salespersons or through advertising reasonably calculated to reach the State. Nor does the record show that they regularly sell cars at wholesale or retail to Oklahoma customers or residents, or that they indirectly, through others, serve or seek to serve the Oklahoma market. In short, respondents seek to base jurisdiction on one, isolated occurrence and whatever inferences can be drawn therefrom: the fortuitous circumstance that a single Audi automobile, sold in New York to New York residents, happened to suffer an accident while passing through Oklahoma.
caused in New Jersey, Reilly v. Phil Tolkan Pontiac, Inc., 372 F.Supp. 1205 (NJ 1974); or a Florida soft-drink concessionaire could be summoned to Alaska to account for injuries happening there,see Uppgren v. Executive Aviation Services, Inc., 304 F.Supp. 165, 170-171 (Minn.1969). Every seller of chattels would, in effect, appoint the chattel his agent for service of process. His amenability to suit would travel with the chattel. We recently abandoned the outworn rule of Harris v. Balk, 198 U. S. 215 (1905), that the interest of a creditor in a debt could be extinguished or otherwise affected by any State having transitory jurisdiction over the debtor. Shaffer v. Heitner, 433 U. S. 186 (1977). Having interred the mechanical rule that a creditor's amenability to a quasi in rem action travels with his debtor, we are unwilling to endorse an analogous principle in the present case. [Footnote 11]
Page 444 U. S. 297 It is argued, however, that, because an automobile is mobile by its very design and purpose, it was "foreseeable" that the Robinsons' Audi would cause injury in Oklahoma. Yet "foreseeability" alone has never been a sufficient benchmark for personal jurisdiction under the Due Process Clause. In Hanson v. Denckla, supra, it was no doubt foreseeable that the settlor of a Delaware trust would subsequently move to Florida and seek to exercise a power of appointment there; yet we held that Florida courts could not constitutionally This is not to say, of course, that foreseeability is wholly irrelevant. But the foreseeability that is critical to due process analysis is not the mere likelihood that a product will find its way into the forum State. Rather, it is that the defendant's conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there. See Kulko v. California Superior Court, supra at 436 U. S. 97-98; Shaffer v. Heitner, 433 U.S. at 433 U. S. 216; and see id. at 433 U. S. 217-219 (STEVENS, J., concurring in judgment). Page 444 U. S. 296 The Due Process Clause, by ensuring the "orderly administration of the laws," International Shoe Co. v. Washington, 326 U.S. at326 U. S. 319, gives a degree of predictability to the legal system that allows potential defendants to structure their primary conduct with some minimum assurance as to where that conduct will and will not render them liable to suit.
exercise jurisdiction over a Delaware trustee that had no other contacts with the forum State. In Kulko v. California Superior Court, 436 U. S. 84 (1978), it was surely "foreseeable" that a divorced wife would move to California from New York, the domicile of the marriage, and that a minor daughter would live with the mother.
69
When a corporation "purposefully avails itself of the privilege of conducting activities within the forum State," Hanson v. Denckla, 357 U.S. at 357 U. S. 253, it has clear notice that it is subject to suit there, and can act to alleviate the risk of burdensome litigation by procuring insurance, passing the expected costs on to customers, or, if the risks are too great, severing its connection with the State. Hence if the sale of a product of a manufacturer or distributor such as Audi or Volkswagen is not simply an isolated occurrence, but arises from the efforts of the manufacturer or distributor to serve, directly or indirectly, the market for its product in other States, it is not unreasonable to subject it to suit in one of those States if its allegedly defective merchandise has there been the source of injury to its owner or to others. The forum State does not Page 444 U. S. 299 Page 444 U. S. 298 However, financial benefits accruing to the defendant from a collateral relation to the forum State will not exceed its powers under the Due Process Clause if it asserts personal jurisdiction over a corporation that delivers its products into the stream of commerce with the expectation that they will be purchased by consumers in the forum State. Cf. Gray v. American Radiator & Standard Sanitary Corp., 22 Ill.2d 432, 176 N.E.2d 761 (1961). support jurisdiction if they do not stem from a constitutionally cognizable contact with that State. See Kulko v. California Superior Court, 436 U.S. at436 U. S. 94-95. In our view, whatever marginal revenues petitioners may receive by virtue of the fact that their products are capable of use in Oklahoma is far too attenuated a contact to justify that State's exercise of in personam jurisdiction over them. Oklahoma, others might have been used there also. While this inference seems less than compelling on the facts of the instant case, we need not question the court's factual findings in order to reject its reasoning.
This argument seems to make the point that the purchase of automobiles in New York, from which the petitioners earn substantial revenue, would not occur but for the fact that the automobiles are capable of use in distant States like Oklahoma. Respondents observe that the very purpose of an automobile is to travel, and that travel of automobiles sold by petitioners is facilitated by an extensive chain of Volkswagen service centers throughout the country, including some in Oklahoma. [Footnote 12]
But there is no such or similar basis for Oklahoma jurisdiction over World-Wide or Seaway in this case. Seaway's sales are made in Massena, N. Y. World-Wide's market, although substantially larger, is limited to dealers in New York, New Jersey, and Connecticut. There is no evidence of record that any automobiles distributed by World-Wide are sold to retail customers outside this tristate area. It is foreseeable that the purchasers of automobiles sold by World-Wide and Seaway may take them to Oklahoma. But the mere "unilateral activity of those who claim some relationship with a nonresident defendant cannot satisfy the requirement of contact with the forum State."Hanson v. Denckla, supra, at 357 U. S. 253.
Because we find that petitioners have no "contacts, ties, or relations" with the State of Oklahoma, International Shoe Co. v. Washington, supra, at 326 U. S. 319, the judgment of the Supreme Court of Oklahoma is
Reversed.
[Footnote 1]
The driver of the other automobile does not figure in the present litigation .
In a variant on the previous argument, it is contended that jurisdiction can be supported by the fact that petitioners earn substantial revenue from goods used in Oklahoma. The Oklahoma Supreme Court so found, 585 P.2d at 354-355, drawing the inference that, because one automobile sold by petitioners had been used in
[Footnote 2]
Kay Robinson sued on her own behalf. The two children sued through Harry Robinson as their father and next friend.
[Footnote 3]
70
Volkswagen also entered a special appearance in the District Court, but, unlike World-Wide and Seaway, did not seek review in the Supreme Court of Oklahoma, and is not a petitioner here. Both Volkswagen and Audi remain as defendants in the litigation pending before the District Court in Oklahoma. Fields v. Volkswagen of America, Inc., 555 P.2d 48 (Okla.1976); Carmack v. Chemical Bank New York Trust Co., 536 P.2d 897 (Okla.1975); Hines v. Clendennin, 465 P.2d 460 (Okla.1970).
[Footnote 9]
[Footnote 4]
Cf. Tilley v. Keller Truck & Implement Corp., 200 Kan. 641, 438 P.2d 128 (1968);Granite States Volkswagen, Inc. v. District Court, 177 Colo. 42, 492 P.2d 624 (1972);Pellegrini v. Sachs & Sons, 522 P.2d 704 (Utah 1974); Oliver v. American Motors Corp.,70 Wash.2d 875, 425 P.2d 647 (1967).
The papers filed by the petitioners also claimed that the District Court lacked "venue of the subject matter," App. 9, or "venue over the subject matter," id. at 11.
[Footnote 5]
[Footnote 10]
The District Court's rulings are unreported, and appear at App. 13 and 20.
Respondents argue, as a threshold matter, that petitioners waived any objections to personal jurisdiction by (1) joining with their special appearances a challenge to the District Court's subject matter
[Footnote 6]
jurisdiction, see n 4, supra, and (2) taking depositions on the merits of the case in Oklahoma. The trial court, Five judges joined in the opinion. Two concurred in the result, without opinion, and one concurred in part and dissented in part, also without opinion. however, characterized the appearances as "special," and the Oklahoma Supreme Court, rather than finding jurisdiction waived, reached and decided the statutory and constitutional questions. Cf. Kulko v. California Superior Court, 436 U. S. 84, 436 U. S. 91, n. 5 (1978).
[Footnote 7]
This subsection provides:
[Footnote 11]
"A court may exercise personal jurisdiction over a person, who acts directly or by an agent, as to a cause of action or claim for relief arising from the persons . . . causing tortious injury in this state by an act or omission outside this state if he regularly does or solicits business or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in this state. . . ."
Respondents' counsel, at oral argument, see Tr. of Oral Arg.19-22, 29, sought to limit the reach of the foreseeability standard by suggesting that there is something unique about automobiles. It is true that automobiles are uniquely mobile, see Tyson v. Whitaker & Son, Inc., 407 A.2d 1, 6, and n. 11 (Me.1979) (McKusick, C.J.), that they did play a crucial role in the expansion of personal jurisdiction through the fiction of implied consent, e.g., Hess v. Pawloski, 274 U. S. 352 (1927), and that some of the cases have treated the
The State Supreme Court rejected jurisdiction based on 1701.03(a)(3), which authorizes jurisdiction over any person "causing tortious injury in this state by an act or omission in this state." Something in addition to the infliction of tortious injury was required.
automobile as a "dangerous instrumentality." But today, under the regime of International Shoe, we see no difference for jurisdictional purposes between an automobile and any other chattel. The "dangerous instrumentality" concept apparently was never used to support personal jurisdiction; and to the extent it has relevance today, it bears not on jurisdiction, but on the possible desirability of imposing substantive principles of tort law such as strict liability.
[Footnote 8]
71
[Footnote 12] insure. That clause does not contemplate that a state may make binding a judgment in personam against an individual or corporate defendant with which the state has no contacts, ties, or relations."
As we have noted, petitioners earn no direct revenues from these service centers. See supra at 444 U. S. 289.
MR. JUSTICE BRENNAN, dissenting. *
326 U.S. at 326 U. S. 319 (emphasis added). The existence of contacts, so long as there were some, was merely one way of giving content to the determination of fairness and reasonableness.
The Court holds that the Due Process Clause of the Fourteenth Amendment bars the States from asserting jurisdiction over the defendants in these two cases. In each case, the Court so decides because it fails to find the "minimum contacts" that have been required since International Shoe Co. v. Washington, 326 U. S. 310, 326 U. S. 316(1945). Because I believe that the Court reads International Shoe and its progeny too narrowly, and because I believe that the standards enunciated by those cases may already be obsolete as constitutional boundaries, I dissent. Surely International Shoe contemplated that the significance of the contacts necessary to support jurisdiction would diminish if some other consideration helped establish that jurisdiction would be fair and reasonable. The interests of the State and other parties in proceeding with the case in a particular forum are such considerations. McGee v. International Life Ins. Co., 355 U. S. 220, 355 U. S. 223 (1957), for instance, accorded great importance to a State's "manifest interest in providing effective means of redress" for its citizens. See also Kulko v. California Superior Court, supra at 436 U. S. 92;Shaffer v. Heitner, 433 U. S. I 186, 433 U. S. 208 (1977); Mullane v. Central Hanover Trust Co., 339 U. S. 306, 339 U. S. 313 (1950).
The Court's opinions focus tightly on the existence of contacts between the forum and the defendant. In so doing, they accord too little weight to the strength of the forum State's interest in the case, and fail to explore whether there
Another consideration is the actual burden a defendant
Page 444 U. S. 301
Page 444 U. S. 300
must bear in defending the suit in the forum. McGee, supra. Because lesser burdens reduce the unfairness to the defendant, jurisdiction may be justified despite less significant contacts. The burden, of course, must be of
would be any actual inconvenience to the defendant. The essential inquiry in locating the constitutional limits on state court jurisdiction over absent defendants is whether the particular exercise of jurisdiction offends "traditional notions of fair play and substantial justice.'" International Shoe, supra at 326 U. S. 316, quoting Milliken v. Meyer, 311 U. S. 457, 311 U. S. 463 (1940). The clear focus in International Shoe was on fairness and reasonableness. Kulko v. California Superior Court, 436 U. S. 84, 436 U. S. 92(1978). The Court specifically declined to establish a mechanical test based on the quantum of contacts between a State and the defendant:
constitutional dimension. Due process limits on jurisdiction do not protect a defendant from all inconvenience of travel, McGee, supra at 355 U. S. 224, and it would not be sensible to make the constitutional rule turn solely on the number of miles the defendant must travel to the courtroom. [Footnote 2/1] Instead, the constitutionally significant "burden" to be analyzed relates to the mobility of the defendant's defense. For instance, if having to travel to a foreign forum would hamper the defense because witnesses or evidence or the defendant himself were immobile, or if there were a disproportionately large number of witnesses or amount of evidence that would have to be transported at the defendant's expense, or if being away from home for the duration of the trial would work some special hardship on the defendant, then the Constitution would require special consideration for the defendant's interests.
"Whether due process is satisfied must depend, rather, upon the quality and nature of the activity in relation to the fair and orderly administration of the laws which it was the purpose of the due process clause to
72
That considerations other than contacts between the forum and the defendant are relevant necessarily means that the Constitution does not require that trial be held in the State which has the "best contacts" with the defendant. See Shaffer v. Heitner, supra at 433 U. S. 228 (BRENNAN, J., dissenting). The defendant has no constitutional entitlement to the best forum or, for that matter, to any particular forum. Under even the most restrictive view of International Shoe, several States could have jurisdiction over a particular cause of action. We need only determine whether the forum States in these cases satisfy the constitutional minimum. [Footnote 2/2] against someone who has injured him could, for lack of funds, be entirely unable to bring the cause of action. The plaintiff's residence in the State makes the State one of a very few convenient fora for a personal injury case (the others usually being the defendant's home State and the State where the accident occurred). [Footnote 2/5]
In addition, the burden on the defendant is slight. As Judge Friendly has recognized,Shaffer emphasizes the importance of identifying the real impact of the lawsuit.O'Connor v. Lee-Hy Paving Corp., 579 F.2d 194, 00 (CA2 1978) (upholding the constitutionality of jurisdiction in a very similar case under New York's law after Shaffer). Here the real impact is on the defendant's insurer, which is concededly amenable to suit in the forum State. The defendant is carefully protected from financial liability because the action limits the prayer for damages to the insurance policy's liability limit. [Footnote 2/6] The insurer will handle the case for the
Page 444 U. S. 302
II
In each of these cases, I would find that the forum State has an interest in permitting the litigation to go forward, the litigation is connected to the forum, the defendant is linked to the forum, and the burden of defending is not unreasonable. Accordingly, I would hold that it is neither unfair nor unreasonable to require these defendants to defend in the forum State.
defendant. The defendant is only a nominal party who need be no more active in the case than the cooperation clause of his policy requires. Because of the ease of airline transportation, he need not lose significantly more time than if the case were at home. Consequently, if the suit went forward
Page 444 U. S. 304 A in Minnesota, the defendant would bear almost no burden or expense beyond what he would face if the suit In No. 78-952, a number of considerations suggest that Minnesota is an interested and convenient forum. The action was filed by a bona fide resident of the forum. [Footnote 2/3] Consequently, Minnesota's interests are similar to, even if lesser than, the interests of California in McGee, supra, "in providing a forum for its residents and in regulating the activities of insurance companies" doing business in the State. [Footnote 2/4] Post at 444 U. S. 332. Moreover, Minnesota has "attempted to assert [its] particularized interest in trying such cases in its courts by . . . enacting a special jurisdictional statute." Kulko, supra at 436 U. S. 98; McGee, supra at 355 U. S. 221,355 U. S. 224. As in McGee, a resident forced to travel to a distant State to prosecute an action Finally, even were the relevant inquiry whether there are sufficient contacts between the forum and the named defendant, I would find that such contacts exist. The insurer's presence in Minnesota is an advantage to the Page 444 U. S. 303 defendant that may well have been a consideration in his selecting the policy he did. An insurer with offices in many States makes it easier for the insured to make claims or conduct other business that may become were in his home State. The real impact on the named defendant is the same as it is in a direct action against the insurer, which would be constitutionally permissible. Watson v. Employers Liability Assurance Corp., 348 U. S. 66 (1954);Minichiello v. Rosenberg, 410 F.2d 106, 109-110 (CA2 1968). The only distinction is the formal, "analytica[l] prerequisite," post at 444 U. S. 331, of making the insured a named party. Surely the mere addition of appellant's name to the complaint does not suffice to create a due process violation. [Footnote 2/7]
73
necessary while traveling. It is simply not true that "State Farm's decision to do business in Minnesota was completely adventitious as far as Rush was concerned." Postat 444 U. S. 328-329. By buying a State Farm policy, the defendant availed himself of the benefits he might derive from having an insurance agent in Minnesota who could, among other things, facilitate a suit for appellant against a Minnesota resident. It seems unreasonable to read the Constitution as permitting one to take advantage of his nationwide insurance network but not to be burdened by it. Page 444 U. S. 306
An automobile simply is not a stationary item or one designed to be used in one place. An automobile is intended to be moved around. Someone in the business of selling large numbers of automobiles can hardly plead ignorance of their mobility, or pretend that the automobiles stay put after they are sold. It is not merely that a dealer in automobiles foresees that they will move. Ante at 444 U. S. 295. The dealer actually intends that the purchasers will use the automobiles to travel to distant States where the dealer does not directly "do business." The sale of an automobile does purposefullyinject the vehicle into the stream of interstate commerce so that it can travel to distant States. See Kulko, 436 U.S. at 436 U. S. 94; Hanson v. Denckla, 357 U. S. 235, 357 U. S. 253 (1958).
In sum, I would hold that appellant is not deprived of due process by being required to submit to trial in Minnesota, first because Minnesota has a sufficient interest in and connection
Page 444 U. S. 305
to this litigation and to the real and nominal defendants, and second because the burden on the nominal defendant is sufficiently slight.
This case is similar to Ohio v. Wyandotte Chemicals Corp., 401 U. S. 493 (1971). There we indicated, in the course of denying leave to file an original jurisdiction case, that corporations having no direct contact with Ohio could constitutionally be brought to trial in Ohio because they dumped pollutants into streams outside Ohio's
limits which ultimately, through the action of the water, reached Lake Erie and affected Ohio. No corporate acts, only their consequences, occurred in Ohio. The stream of commerce is just as natural a force as a stream of water, and it was equally predictable that the cars petitioners released would reach distant states. [Footnote 2/10]
In No. 78-1078, the interest of the forum State and its connection to the litigation is strong. The automobile accident underlying the litigation occurred in Oklahoma. The plaintiffs were hospitalized in Oklahoma when they brought suit. Essential witnesses and evidence were in Oklahoma. See Shaffer v. Heitner, 433 U.S. at 433 U. S. 208. The State has a legitimate interest in enforcing its laws designed to keep its highway system safe, and the trial can proceed at least as efficiently in Oklahoma as anywhere else.
The Court accepts that a State may exercise jurisdiction over a distributor which "serves" that State "indirectly" by "deliver[ing] its products into the stream of commerce with the expectation that they will be purchased by consumers in the forum State."Ante at 444 U. S. 297-298. It is difficult to see why the Constitution should distinguish between a case involving
The petitioners are not unconnected with the forum. Although both sell automobiles within limited sales territories, each sold the automobile which, in fact, was driven to Oklahoma, where it was involved in an accident. [Footnote 2/8] It may be true, as the Court suggests, that each sincerely intended to limit its commercial impact to the limited territory, and that each intended to accept the benefits and protection of the laws only of those States within the territory. But obviously these were unrealistic hopes that cannot be treated as an automatic constitutional shield. [Footnote 2/9]
Page 444 U. S. 307
goods which reach a distant State through a chain of distribution and a case involving goods which reach the same State because a consumer, using them as the dealer knew the customer would, took them there.
74
[Footnote 2/11] In each case, the seller purposefully injects the goods into the stream of commerce, and those goods predictably are used in the forum State. [Footnote 2/12] Though its flexible approach represented a major advance, the structure of our society has changed in many significant ways since International Shoe was decided in 1945. Mr. Justice Black, writing for the Court in McGee v. International Life Ins. Co., 355 U. S. 220, 355 U. S. 222(1957), recognized that "a trend is clearly discernible toward expanding the permissible scope of state jurisdiction over foreign corporations and other nonresidents." He explained the trend as follows:
Furthermore, an automobile seller derives substantial benefits from States other than its own. A large part of the value of automobiles is the extensive, nationwide network of highways. Significant portions of that network have been constructed by, and are maintained by, the individual States, including Oklahoma. The States, through their highway programs, contribute in a very direct and important way to the value of petitioners' businesses. Additionally, a network of other related dealerships with their service departments operates throughout the country under the protection of the laws of the various States, including Oklahoma, and enhances the value of petitioners' businesses by facilitating their customers' traveling.
"In part, this is attributable to the fundamental transformation of our national economy over the years. Today, many commercial transactions touch two or more States, and may involve parties separated by the full continent. With this increasing nationalization of commerce has come a great increase in the amount of business conducted by mail across state lines. At the same time, modern transportation and communication have made it much less burdensome for a party sued to defend himself in a State where he engages in economic activity."
Thus, the Court errs in its conclusion, ante at 444 U. S. 299 (emphasis added), that "petitioners have no contacts, ties, or relations'" with Oklahoma. There obviously are contacts, and, given Oklahoma's connection to the litigation, the contacts are sufficiently significant to make it fair and reasonable for the petitioners to submit to Oklahoma's jurisdiction.
Id. at 355 U. S. 222-223. As the Court acknowledges, ante at 444 U. S. 292-293, both the nationalization of commerce and the ease of transportation and communication have accelerated in the generation since 1957. [Footnote 2/13]
III
It may be that affirmance of the judgments in these cases would approach the outer limits of International Shoe's jurisdictional
Page 444 U. S. 309
The model of society on which the International Shoe Court based its opinion is no longer accurate. Business people, no matter how local their businesses, cannot assume that goods remain in the business' locality. Customers and goods can be anywhere else in the country, usually in a matter of hours and always in a
Page 444 U. S. 308
principle. But that principle, with its almost exclusive focus on the rights of defendants, may be outdated. As MR. JUSTICE MARSHALL wrote in Shaffer v. Heitner, 433 U.S. at433 U. S. 212:
matter of a very few days.
In answering the question whether or not it is fair and reasonable to allow a particular forum to hold a trial "'[T]raditional notions of fair play and substantial justice' can be as readily offended by the perpetuation of ancient forms that are no longer justified as by the adoption of new procedures. . . ." binding on a particular defendant, the interests of the forum State and other parties loom large in today's world, and surely are entitled to as much weight as are the interests of the defendant. The "orderly administration of the laws" provides a firm basis for according some protection to the interests of plaintiffs and
International Shoe inherited its defendant focus from Pennoyer v. Neff, 95 U. S. 714(1878), and represented the last major step this Court has taken in the long process of liberalizing the doctrine of personal jurisdiction.
75
States as well as of defendants. [Footnote 2/14] Certainly, I cannot see how a defendant's right to due process is violated if the defendant suffers no inconvenience. See ante at 444 U. S. 294. The Court's opinion in No. 78-1078 suggests that the defendant ought to be subject to a State's jurisdiction only if he has contacts with the State "such that he should reasonably anticipate being haled into court there." [Footnote 2/18] Ante at 444 U. S. 297. There is nothing unreasonable or unfair, however, about recognizing commercial reality. Given the tremendous mobility of goods and people, and the inability of businessmen to control where goods are taken by customers (or retailers), I do not think that the defendant should be in complete control of the geographical stretch of his amenability to suit. Jurisdiction is no longer premised on the Page 444 U. S. 310 notion that nonresident defendants have somehow impliedly consented to suit. People should understand that they are held responsible for the consequences of their actions, and that, in our society, most actions have consequences affecting many States. When an action in fact causes injury in another State, the actor should be prepared to answer for it there unless defending in that State would be unfair for some reason other than "[W]hen a suitor seeks to lodge a suit in a State with a substantial interest in seeing its own law applied to the transaction in question, we could wisely act to minimize conflicts, confusion, and uncertainty by adopting a liberal view of jurisdiction, unless considerations of fairness or efficiency strongly point in the opposite direction. [Footnote 2/16]" In effect, the Court is allowing defendants to assert the sovereign that a state boundary must be crossed. [Footnote 2/19]
The conclusion I draw is that constitutional concepts of fairness no longer require the extreme concern for defendants that was once necessary. Rather, as I wrote in dissent from Shaffer v. Heitner, supra, at 433 U. S. 220 (emphasis added), minimum
contacts must exist "among the parties, the contested transaction, and the forum State." [Footnote 2/15] The contacts between any two of these should not be determinative.
Page 444 U. S. 312
433 U.S. at 433 U. S. 225-226. Mr. Justice Black, dissenting in Hanson v. Denckla, 357 U.S. at 357 U. S. 258250, expressed similar concerns by suggesting that a State should have jurisdiction over a case growing out of a transaction significantly related to that State
rights of their home States. The expressed fear is that, otherwise, all limits on personal jurisdiction would disappear. But the argument's premise is wrong. I would not abolish limits on jurisdiction or strip state boundaries of all significance, see Hanson, supra at357 U. S. 260 (Black, J., dissenting); I would still require the plaintiff to demonstrate sufficient contacts among the parties, the forum, and the litigation to make the forum a reasonable State in which to hold the trial. [Footnote 2/20]
"unless litigation there would impose such a heavy and disproportionate burden on a nonresident defendant that it would offend what this Court has referred to as 'traditional notions of fair play and substantial justice.' [Footnote 2/17]"
I would also, however, strip the defendant of an unjustified veto power over certain very appropriate fora -- a power the defendant justifiably enjoyed long ago when communication and travel over long distances were slow and unpredictable and when notions of state sovereignty were impractical and exaggerated. But I repeat
Assuming
Page 444 U. S. 311
that that is not today's world. If a plaintiff can show that his chosen forum State has a sufficient interest in the litigation (or sufficient contacts with the defendant), then the defendant who cannot show some real injury to a
that a State gives a nonresident defendant adequate notice and opportunity to defend, I do not think the Due Process Clause is offended merely because the defendant has to board a plane to get to the site of the trial.
76
constitutionally protected interest, see O'Connor v. Lee-Hy Paving Corp., 579 F.2d at 201, should have no constitutional excuse not to appear. [Footnote 2/21] To say that these considerations are relevant is a far cry from saying that they are "substituted for . . . contacts with the defendant and the cause of action." Post at 444 U. S. 332. The forum's interest in the litigation is an independent point of inquiry even under traditional readings of International Shoe's progeny. If there is a shift in focus, it is not away from "the relationship among the defendant, the forum, and the litigation."Post at 444 U. S. 332 (emphasis added). Instead, it is a shift within the same accepted relationship from the connections between the defendant and the forum to those between the forum and the litigation. Page 444 U. S. 313 [Footnote 2/5] that the Constitution should not shield the defendants from appearing and defending in the plaintiffs' chosen fora. In every International Shoe inquiry, the defendant, necessarily, is outside the forum State. Thus, it is inevitable that either the defendant or the plaintiff will be inconvenienced. The problem existing at the time of Pennoyer * [This opinion applies also to No. 7952, Rush et al. v. Savchuk, post, p. 444 U. S. 320] v. Neff, 95 U. S. 714(1878), that a resident plaintiff could obtain a binding judgment against an unsuspecting, distant defendant, has virtually disappeared in this age of instant communication and virtually instant travel.
The plaintiffs in each of these cases brought suit in a forum with which they had significant contacts and which had significant contacts with the litigation. I am not convinced that the defendants would suffer any "heavy and disproportionate burden" in defending the suits. Accordingly, I would hold
[Footnote 2/1]
In fact, a courtroom just across the state line from a defendant may often be far more convenient for the defendant than a courtroom in a distant corner of his own State.
[Footnote 2/6]
It is true that the insurance contract is not the subject of the litigation. Post at 444 U. S. 329. But one of the undisputed clauses of the insurance policy is that the insurer will defend this action and pay any damages assessed, up to the policy limit. The very purpose of the contract is to relieve the insured from having to
[Footnote 2/2]
The States themselves, of course, remain free to choose whether to extend their jurisdiction to embrace all defendants over whom the Constitution would permit exercise of jurisdiction.
defend himself, and, under the state statute, there could be no suit absent the insurance contract. Thus, in a real sense, the insurance contract is the source of the suit. See Shaffer v. Heitner,433 U. S. 186, 433 U. S. 207 (1977).
[Footnote 2/3]
The plaintiff asserted jurisdiction pursuant to Minn.Stat. 571.41, subd. 2 (1978), which allows garnishment of an insurer's obligation to defend and indemnify its insured.See post at 444 U. S. 322-323, n. 3, and accompanying text. The Minnesota Supreme Court has interpreted the statute as allowing suit only to the insurance policy's liability limit. The court has held that the statute embodies the rule of Seider v. Roth, 17 N.Y.2d 111, 216 N.E.2d 312 (1966).
[Footnote 2/7]
Were the defendant a real party subject to actual liability, or were there significant noneconomic consequences such as those suggested by the Court's note 20, post at444 U. S. 331, a more substantial connection with the forum State might well be constitutionally required.
[Footnote 2/8] [Footnote 2/4]
77
On the basis of this fact, the state court inferred that the petitioners derived substantial revenue from goods used in Oklahoma. The inference is not without support. Certainly, were use of goods accepted as a relevant contact, a plaintiff would not need to have an exact count of the number of petitioners' cars that are used in Oklahoma. Statistics help illustrate the amazing expansion in mobility since International Shoe. The number of revenue passenger-miles flown on domestic and international flights increased by nearly three orders of magnitude between 1945 (450 million) and 1976 (179 billion). U.S. Department of Commerce, Historical Statistics of the United States, pt. 2, P. 770 (1975); U.S. Department of Commerce, Statistical Abstract of the United States 670 (1978). Automobile vehicle-miles (including passenger cars, buses, and trucks) driven in the United States increased by a relatively modest 500% during the same period, growing from 250 billion in 1945 to 1,409 Moreover, imposing liability in this case would not so undermine certainty as to destroy an automobile dealer's ability to do business. According jurisdiction does not expand liability except in the marginal case where a plaintiff cannot afford to bring an action except in the plaintiff's own State. In addition, these petitioners are represented by insurance companies. They not only could, but did, purchase insurance to protect them should they stand trial and lose the case. The costs of the insurance no doubt are passed on to customers. [Footnote 2/14] billion in 1976. Historical Statistics, supra at 718; Statistical Abstract, supra at 647.
[Footnote 2/9]
The Court has recognized that there are cases where the interests of justice can turn the focus of the jurisdictional inquiry away from the contacts between a defendant and the forum State. For instance, the Court indicated that the requirement of contacts may be greatly relaxed (if indeed any personal contacts would be required) where a plaintiff is suing a nonresident defendant to enforce a judgment procured in another
[Footnote 2/10]
One might argue that it was more predictable that the pollutants would reach Ohio than that one of petitioners' cars would reach Oklahoma. The Court's analysis, however, excludes jurisdiction in a contiguous State such as Pennsylvania as surely as in more distant States such as Oklahoma.
State.Shaffer v. Heitner, 433 U.S. at 433 U. S. 210-211, nn. 36, 37.
[Footnote 2/15]
[Footnote 2/11]
In some cases, the inquiry will resemble the inquiry commonly undertaken in determining which State's law to apply. That it is fair to apply a State's law to a nonresident defendant is clearly relevant in determining whether
For example, I cannot understand the constitutional distinction between selling an item in New Jersey and selling an item in New York expecting it to be used in New Jersey.
it is fair to subject the defendant to jurisdiction in that State. Shaffer v. Heitner, supra at 433 U. S. 225(BRENNAN, J., dissenting); Hanson v. Denckla, 357 U. S. 235, 357 U. S. 258 (1958) (Black, J., dissenting). See n.19, infra.
[Footnote 2/12]
The manufacturer in the case cited by the Court, Gray v. American Radiator & Standard Sanitary Corp., 22 Ill.2d 432, 176 N.E.2d 761 (1961), had no more control over which States its goods would reach than did the petitioners in this case.
[Footnote 2/16]
Such a standard need be no more uncertain than the Court's test
"in which few answers will be written 'in black and white. The greys are dominant and even among them the [Footnote 2/13] shades are innumerable.' Estin v. Estin, 334 U. S. 541, 334 U. S. 545 (1948)."
78
Kulko v. California Superior Court, 436 U. S. 84, 436 U. S. 92 (1978). [Footnote 2/21]
[Footnote 2/17]
Frequently, of course, the defendant will be able to influence the choice of forum through traditional doctrines, such as venue or forum non conveniens, permitting the transfer of litigation. Shaffer v. Heitner, 433 U.S. at 433 U. S. 228, n. 8 (BRENNAN, J., dissenting).
This strong emphasis on the State's interest is nothing new. This Court, permitting the forum to exercise jurisdiction over nonresident claimants to a trust largely on the basis of the forum's interest in closing the trust, stated:
MR. JUSTICE MARSHALL, with whom MR. JUSTICE BLACKMUN joins, dissenting.
"[T]he interest of each state in providing means to close trusts that exist by the grace of its laws and are administered under the supervision of its courts is so insistent and rooted in custom as to establish beyond doubt the right of its courts to determine the interests of all claimants, resident or nonresident, provided its procedure accords full opportunity to appear and be heard."
For over 30 years, the standard by which to measure the constitutionally permissible reach of state court jurisdiction has been well established:
"[D]ue process requires only that in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.'"
Mullane v. Central Hanover Trust Co., 339 U. S. 306, 339 U. S. 313(1950).
[Footnote 2/18]
International Shoe Co. v. Washington, 326 U. S. 310, 326 U. S. 316 (1945), quotingMilliken v. Meyer, 311 U. S. 457, 311 U. S. 463 (1940).
The Court suggests that this is the critical foreseeability rather than the likelihood that the product will go to the forum State. But the reasoning begs the question. A defendant cannot know if his actions will subject him to jurisdiction in another State until we have declared what the law of jurisdiction is.
The corollary, that the Due Process Clause forbids the assertion of jurisdiction over a defendant "with which the state has no contacts, ties, or relations," 326 U.S. at 326 U. S. 319, is equally clear. The concepts of fairness and substantial justice as applied to an evaluation of "the quality and nature of the [defendant's] activity," ibid., are not readily susceptible of further definition, however, and it is not surprising that the
[Footnote 2/19]
One consideration that might create some unfairness would be if the choice of forum also imposed on the defendant an unfavorable substantive law which the defendant could justly have assumed would not apply. See n. 15, supra.
constitutional standard is easier to state than to apply.
This is a difficult case, and reasonable minds may differ as to whether respondents have alleged a sufficient "relationship among the defendant[s], the forum, and the litigation,"Shaffer v. Heitner, 433 U. S. 186, 433 U. S.
[Footnote 2/20]
204 (1977), to satisfy the requirements ofInternational Shoe. I am concerned, however, that the majority has reached its result by taking an unnecessarily narrow view of petitioners' forum-related conduct. The majority asserts that
For instance, in No. 78-952, if the plaintiff were not a bona fide resident of Minnesota when the suit was filed or if the defendant were subject to financial liability, I might well reach a different result. In No. 78-1078, I might reach a different result if the accident had not occurred in Oklahoma.
79
"respondents seek to base jurisdiction on one, isolated occurrence and whatever inferences can be drawn therefrom: the fortuitous circumstance that a single Audi automobile, sold in New York to New York Page 444 U. S. 315
one of only seven regional Audi distributors in the entire country, see Brief for Respondents 2, would scarcely have been surprised to learn that a car sold by then had been driven in Oklahoma on Interstate 44, a heavily traveled transcontinental highway. In the case of the distributor, in particular, the probability that some of the cars it sells will be driven in every one of the contiguous States must amount to a virtual certainty. This
Page 444 U. S. 314
residents, happened to suffer an accident while passing through Oklahoma."
Ante at 444 U. S. 295. If that were the case, I would readily agree that the minimum contacts necessary to sustain jurisdiction are not present. But the basis for the assertion of jurisdiction is not the happenstance that an individual over whom petitioners had no control made a unilateral decision to take a chattel with him to a distant State. Rather, jurisdiction is premised on the deliberate and purposeful actions of the defendants themselves in choosing to become part of a nationwide, indeed a global, network for marketing and servicing automobiles.
knowledge should alert a reasonable businessman to the likelihood that a defect in the product might manifest itself in the forum State -- not because of some unpredictable, aberrant, unilateral action by a single buyer, but in the normal course of the operation of the vehicles for their intended purpose.
It is misleading for the majority to characterize the argument in favor of jurisdiction as one of "foreseeability' alone." Ante at 444 U. S. 295. As economic entities, petitioners reach out from New York, knowingly causing effects in other States and receiving economic advantage both from the ability to cause such effects
Petitioners are sellers of a product whose utility derives from its mobility. The unique importance of the automobile in today's society, which is discussed in MR. JUSTICE BLACKMUN's dissenting
themselves and from the activities of dealers and distributors in other States. While they did not receive revenue from making direct sales in Oklahoma, they intentionally became part of an interstate economic network, which included dealerships in Oklahoma, for pecuniary gain. In light of this purposeful conduct, I do not believe it can be said that petitioners "had no reason to expect to be haled before a[n Oklahoma] court." Shaffer v. Heitner, supra at 433 U. S. 216; see ante at 444 U. S. 297, and Kulko v. California Superior Court, 436 U. S. 84, 436 U. S. 97-98 (1978).
opinion, post at 444 U. S. 318, needs no further elaboration. Petitioners know that their customers buy cars not only to make short trips, but also to travel long distances. In fact, the nationwide service network with which they are affiliated was designed to facilitate and encourage such travel. Seaway would be unlikely to sell many cars if authorized service were available only in Massena, N.Y. Moreover, local dealers normally derive a substantial portion of their revenues from their service operations, and thereby obtain a further economic benefit from the opportunity to service cars which were sold in other States. It is apparent that petitioners have not attempted to minimize the chance that their activities will have effects in other States; on the contrary, they have chosen to do business in a way that increases that chance, because it is to their economic advantage to do so.
The majority apparently acknowledges that, if a product is purchased in the forum State by a consumer, that State may assert jurisdiction over everyone in the chain of distribution. See ante at 444 U. S. 297-298. With this I agree. But I cannot agree that jurisdiction is necessarily lacking if the product enters the State not through the channels of distribution but in the course of its intended use by the consumer. We have recognized
To be sure, petitioners could not know in advance that this particular automobile would be driven to Oklahoma. They must have anticipated, however, that a substantial portion of the cars they sold would travel out of New York. Seaway, a local dealer in the second most populous State, and World-Wide, Page 444 U. S. 316
80
the role played by the automobile in the expansion of our notions of personal jurisdiction. See Shaffer v. Heitner, supra at 433 U. S. 204; Hess v. Pawloski, 274 U. S. 352 (1927). Unlike most other chattels, which may find their way into States far from where they were purchased because their owner takes them there, the intended use of the automobile is precisely as a means of traveling from one place to another. In such a case, it is highly artificial to restrict the concept of the "stream of commerce" to the chain of distribution from the manufacturer to the ultimate consumer. Manifestly, the "quality and nature" of commercial activity is different, for purposes of the International Shoe test, from actions from which a defendant obtains no economic advantage. Commercial activity is more likely to cause effects in a larger sphere, and the actor derives an economic benefit from the activity that makes it fair to require him to answer for his conduct where its effects are felt. The profits may be used to pay the costs of suit, and, knowing that the activity is likely to have effects in other States, the defendant can readily insure against the costs of those effects, thereby sparing himself much of the inconvenience of defending in a distant forum.
I sympathize with the majority's concern that persons ought to be able to structure their conduct so as not to be subject to suit in distant forums. But that may not always be possible. Some activities, by their very nature, may foreclose the option of conducting them in such a way as to avoid subjecting oneself to jurisdiction in multiple forums. This is by no means to say that all sellers of automobiles should be subject to suit everywhere; but a distributor of automobiles to a multistate market and a local automobile dealer who makes himself part of a nationwide network of dealerships can fairly expect that the cars they sell may cause injury in distant States and that they may be called on to defend a resulting lawsuit there.
Of course, the Constitution forbids the exercise of jurisdiction if the defendant had no judicially cognizable contacts with the forum. But as the majority acknowledges, if such contacts are present, the jurisdictional inquiry requires a balancing of various interests and policies. See ante at 444 U. S. 292; Rush v. Savchuk, post at 444 U. S. 332. I believe such contacts are to be found here, and that, considering all of the interests and policies at stake, requiring petitioners to defend this action in Oklahoma is not beyond the bounds of the Constitution. Accordingly, I dissent.
In light of the quality and nature of petitioners' activity, the majority's reliance on Kulko v. California Superior Court, supra, is misplaced. Kulko involved the assertion of state court jurisdiction over a nonresident individual in connection with an action to modify his child custody rights and support obligations. His only contact with the forum State was that he gave his minor child permission to live there with her mother. In holding that the exercise of jurisdiction violated the Due Process Clause, we emphasized that the cause of action, as well as the defendant's actions in relation to the forum State, arose "not from the defendant's commercial transactions in interstate commerce, but rather from his personal,
* Similarly, I believe the Court in Hanson v. Denckla, 357 U. S. 235 (1958), was influenced by the fact that trust administration has traditionally been considered a peculiarly local activity.
MR JUSTICE BLACKMUN, dissenting.
I confess that I am somewhat puzzled why the plaintiffs in this litigation are so insistent that the regional distributor and the retail dealer, the petitioners here, who handled the ill-fated Audi automobile involved in this litigation, be named defendants. It would appear that the manufacturer and the
Page 444 U. S. 317
Page 444 U. S. 318
domestic relations," 436 U.S. at 436 U. S. 97 (emphasis supplied), contrasting Kulko's actions with those of the insurance company in McGee v. International Life Ins. Co.,355 U. S. 220 (1957), which were undertaken for commercial benefit.*
importer, whose subjectability to Oklahoma jurisdiction is not challenged before this Court, ought not to be judgment-proof. It may, of course, ultimately amount to a contest between insurance companies that, once begun, is not easily brought to a termination. Having made this much of an observation, I pursue it no further.
81
For me, a critical factor in the disposition of the litigation is the nature of the instrumentality under consideration. It has been said that we are a nation on wheels. What we are concerned with here is the automobile and its peripatetic character. One need only examine our national network of interstate highways, or make an appearance on one of them, or observe the variety of license plates present not only on those highways but in any metropolitan area, to realize that any automobile is likely to wander far from its place of licensure or from its place of distribution and retail sale. Miles per gallon on the highway (as well as in the city) and mileage per tankful are familiar allegations in manufacturers' advertisements today. To expect that any new automobile will remain in the vicinity of its retail sale -- like the 1914 electric car driven by the proverbial "little old lady" -- is to blink at reality. The automobile is intended for distance, as well as for transportation within a limited area. I would affirm the judgment of the Supreme Court of Oklahoma. Because the Court reverses that judgment, it will now be about parsing every variant in the myriad of motor vehicle fact situations that present themselves. Some will justify jurisdiction and others will not. All will depend on the "contact" that the Court sees fit to perceive in the individual case. It therefore seems to me not unreasonable -- and certainly not unconstitutional and beyond the reach of the principles laid down in International Shoe Co. v. Washington,326 U. S. 310 (1945), and its progeny -- to uphold Oklahoma jurisdiction over this New York distributor and this New York dealer when the accident happened in Oklahoma. I see nothing more unfair for them than for the manufacturer and the importer. All are in the business of providing vehicles that spread out over the highways of our several States. It is not too much to anticipate, at the time of distribution and at the time of retail sale, that this Audi would be in Oklahoma. Moreover, in assessing "minimum contacts," foreseeable use in another State seems to me to be little different from foreseeable resale available. All this contributes to and enhances the business of those engaged professionally in the distribution and sale of automobiles. All this also may benefit defendants in the very lawsuits over which the State asserts jurisdiction.
My position need not now take me beyond the automobile and the professional who does business by way of distributing and retailing automobiles. Cases concerning other instrumentalities will be dealt with as they arise, and in their own contexts.
Page 444 U. S. 319
in another State: yet the Court declares this distinction determinative. Ante at 444 U. S. 297-299.
MR. JUSTICE BRENNAN points out in his dissent, ante at 444 U. S. 307, that an automobile dealer derives substantial benefits from States other than its own. The same is true of the regional distributor. Oklahoma does its best to provide safe roads. Its police investigate accidents. It regulates driving within the State. It provides aid to the victim, and thereby, it is hoped, lessens damages. Accident reports are prepared and made
82
U.S. Supreme Court ASAHI METAL INDUSTRY CO. v. SUPERIOR COURT, 480 U.S. 102 (1987) 480 U.S. 102 ASAHI METAL INDUSTRY CO., LTD. v. SUPERIOR COURT OF CALIFORNIA, SOLANO COUNTY (CHENG SHIN RUBBER INDUSTRIAL CO., LTD., REAL PARTY IN INTEREST) CERTIORARI TO THE SUPREME COURT OF CALIFORNIA No. 85-693. 39 Cal. 3d 35, 702 P.2d 543, reversed and remanded.
JUSTICE O'CONNOR, delivered the opinion of the Court as to Parts I and II-B, concluding that the state court's exercise of personal jurisdiction over petitioner would be unreasonable and unfair in violation of the Due Process Clause. Pp. 113-116. (a) The burden imposed on petitioner by the exercise of state court jurisdiction would be severe, since petitioner would be required not only to traverse the distance between Japan and California, but also to submit [480 U.S. 102, 103] its dispute with Cheng Shin to a foreign judicial system. Such unique burdens should have significant weight in assessing the reasonableness of extending personal jurisdiction over national borders. Pp. 113-114. (b) The interests of Cheng Shin and the forum State in the exercise of jurisdiction over petitioner would be slight, and would be insufficient to justify the heavy burdens placed on petitioner. The only surviving question
Argued November 5, 1986 Decided February 24, 1987
Petitioner manufactures tire valve assemblies in Japan and sells them to several tire manufacturers, including Cheng Shin Rubber Industrial Co. (Cheng Shin). The sales to Cheng Shin, which amounted to at least 100,000 assemblies annually from 1978 to 1982, took place in Taiwan, to which the assemblies were shipped from Japan. Cheng Shin incorporates the assemblies into its finished tires, which it sells throughout the world, including the United States, where 20 percent of its sales take place in California. Affidavits indicated that petitioner was aware that tires incorporating its assemblies would end up in California, but, on the other hand, that it never contemplated that its sales to Cheng Shin in Taiwan would subject it to lawsuits in California. Nevertheless, in 1979, a product liability suit was brought in California Superior Court arising from a motorcycle accident allegedly caused by defects in a tire manufactured by Cheng Shin, which in turn filed a cross-complaint seeking indemnification from petitioner. Although the main suit was eventually settled and dismissed, the Superior Court denied petitioner's motion to quash the summons issued against it. The State Court of Appeal then ordered that the summons be quashed, but the State Supreme Court reversed, finding that petitioner's intentional act of placing its assemblies into the stream of commerce by delivering them to Cheng Shin in Taiwan, coupled with its awareness that some of them would eventually reach California, were sufficient to support state court jurisdiction under the Due Process Clause.
is whether a Japanese corporation should indemnify a Taiwanese corporation on the bases of a sale made in Taiwan and a shipment of goods from Japan to Taiwan. The facts do not demonstrate that it would be more convenient for Cheng Shin to litigate its claim in California rather than in Taiwan or Japan, while California's interests are diminished by Cheng Shin's lack of a California residence and by the fact that the dispute is primarily about indemnity rather than the safety of consumers. While the possibility of being sued in California might create an additional deterrent to petitioner's manufacture of unsafe assemblies, the same effect would result from pressures placed on petitioner by Cheng Shin, whose California sales would subject it to state tort law. Pp. 114-115. (c) The procedural and substantive policies of other nations whose interests are affected by the forum State's assertion of jurisdiction over an alien defendant must be taken into account, and great care must be exercised when considering personal jurisdiction in the international context. Although other nations' interests will differ from case to case, those interests, as well as the Federal Government's interest in its foreign relations policies, will always be best served by a careful inquiry into the reasonableness of the particular assertion of jurisdiction, and an unwillingness to find an alien defendant's serious burdens outweighed where, as here, the interests of the plaintiff and the forum State are minimal. P. 115.
Held: JUSTICE O'CONNOR, joined by THE CHIEF JUSTICE, JUSTICE POWELL, and JUSTICE SCALIA, The judgment is reversed, and the case is remanded. concluded in Parts II-A and III that, even assuming, arguendo, that petitioner was aware that some of the
83
assemblies it sold to Cheng Shin would be incorporated into tires sold in California, the facts do not establish minimum contacts sufficient to render the State's exercise of personal jurisdiction consistent with fair play and substantial justice as required by the Due Process Clause. Since petitioner does not do business, have an office, agents, employees, or property, or advertise or solicit business in California, and since it did not create, control, or employ the distribution system that brought its assemblies to, or design them in anticipation of sales in, California, it did not engage in any action to purposely avail itself of the California market. The "substantial connection" between a defendant and the forum State necessary for a finding of minimum contacts must derive from an action purposely directed toward the [480 U.S. 102, 104] forum State, and the mere placement of a product into the stream of commerce is not such an act, even if done with an awareness that the stream will sweep the product into the forum State absent additional conduct indicating an intent to serve the forum state market. Pp. 108-113, 116. JUSTICE BRENNAN, joined by JUSTICE WHITE, JUSTICE MARSHALL, and JUSTICE BLACKMUN, agreed with the Court's conclusion in Part II-B that the exercise of jurisdiction over petitioner would not comport with "fair play and substantial justice," but disagreed with Part II-A's interpretation of the stream-of-commerce theory, and with the conclusion that petitioner did not purposely avail itself of the California market. As long as a defendant is aware that the final product is being marketed in the forum State, jurisdiction premised on the placement of a product into the stream of commerce is consistent with the Due Process Clause, and no showing of additional conduct is required. Here, even though petitioner did not design or control the distribution system that carried its assemblies into California, its regular and extensive sales to a manufacturer it knew was making regular sales of the final product in California were sufficient to establish minimum contacts with California. Pp. 116-121. This case presents the question whether the mere awareness on the part of a foreign defendant that the JUSTICE STEVENS, joined by JUSTICE WHITE and JUSTICE BLACKMUN, agreed that the California Supreme Court's judgment should be reversed for the reasons stated in Part II-B of the Court's opinion, but did not join Part II-A, for the reasons that (1) the Court's holding that the State's exercise of jurisdiction over petitioner would be "unreasonable and unfair" alone requires reversal, and renders any examination of minimum contacts unnecessary; and (2) even assuming that the "purposeful availment" test should be formulated here, Part II-A misapplies it to the facts of this case since, in its dealings with Cheng Shin, petitioner has arguably engaged in a higher quantum of conduct than the mere placement of a product into the stream of commerce. Pp. 121-122. I On September 23, 1978, on Interstate Highway 80 in Solano County, California, Gary Zurcher lost control of his Honda motorcycle and collided with a tractor. Zurcher was severely injured, and his passenger and wife, Ruth Ann Moreno, was killed. In September 1979, Zurcher filed a product liability action in the Superior Court components it manufactured, sold, and delivered outside the United States would reach the forum State in the stream of commerce constitutes "minimum contacts" between the defendant and the forum State such that the exercise of jurisdiction "does not offend `traditional notions of fair play and substantial justice.'" International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945), quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940). George E. Murphy filed a brief for the California Manufacturers Association as amicus curiae urging affirmance. Ronald R. Haven argued the cause and filed a brief for respondent. * Graydon S. Staring argued the cause for petitioner. With him on the briefs was Richard D. Hoffman. O'CONNOR, J., announced the judgment of the Court and delivered the opinion for a unanimous Court with respect to Part I, the opinion of the Court with respect to Part II-B, in which REHNQUIST, C. J., and BRENNAN, WHITE, MARSHALL, BLACKMUN, POWELL, and STEVENS, JJ., joined, and an opinion with respect to Parts II-A and III, in which REHNQUIST, C. J., and POWELL and SCALIA, JJ., joined. BRENNAN, J., filed an opinion concurring in part and concurring in the judgment, in which WHITE, MARSHALL, and BLACKMUN, JJ., joined, post, p. 116. STEVENS, J., filed an opinion concurring in part and concurring in the judgment, in which WHITE and BLACKMUN, JJ., joined, post, p. 121. [480 U.S. 102, 105]
[ Footnote * ] Briefs of amici curiae urging reversal were filed for Alcan Aluminio Do Brasil, S. A. by Lawrence A. Salibra II; for the American Chamber of Commerce in the United Kingdom et al. by Douglas E. Rosenthal, Donald I. Baker, and Andreas F. Lowenfeld; and for Cassiar Mining Corp. by David Booth Beers and Wendy S. White.
JUSTICE O'CONNOR announced the judgment of the Court and delivered the unanimous opinion of the Court with respect to Part I, the opinion of the Court with respect to Part II-B, in which THE CHIEF JUSTICE, JUSTICE BRENNAN, JUSTICE WHITE, JUSTICE MARSHALL, JUSTICE BLACKMUN, JUSTICE POWELL, and JUSTICE STEVENS join, and an opinion with respect to Parts II-A and III, in which THE CHIEF JUSTICE, JUSTICE POWELL, and JUSTICE SCALIA join.
84
of the State of [480 U.S. 102, 106] California in and for the County of Solano. Zurcher alleged that the 1978 accident was caused by a sudden loss of air and an explosion in the rear tire of the motorcycle, and alleged that the motorcycle tire, tube, and sealant were defective. Zurcher's complaint named, inter alia, Cheng Shin Rubber Industrial Co., Ltd. (Cheng Shin), the Taiwanese manufacturer of the tube. Cheng Shin in turn filed a cross-complaint seeking indemnification from its codefendants and from petitioner, Asahi Metal Industry Co., Ltd. (Asahi), the manufacturer of the tube's valve assembly. Zurcher's claims against Cheng Shin and the other defendants were eventually settled and dismissed, leaving only Cheng Shin's indemnity action against Asahi. Primarily on the basis of the above information, the Superior Court denied the motion to quash summons, California's long-arm statute authorizes the exercise of jurisdiction "on any basis not inconsistent with the Constitution of this state or of the United States." Cal. Civ. Proc. Code Ann. 410.10 (West 1973). Asahi moved to quash Cheng Shin's service of summons, arguing the State could not exert jurisdiction over it consistent with the Due Process Clause of the Fourteenth Amendment. The Court of Appeal of the State of California issued a peremptory writ of mandate commanding the Superior In relation to the motion, the following information was submitted by Asahi and Cheng Shin. Asahi is a Japanese corporation. It manufactures tire valve assemblies in Japan and sells the assemblies to Cheng Shin, and to several other tire manufacturers, for use as components in finished tire tubes. Asahi's sales to Cheng Shin took place in Taiwan. The shipments from Asahi to Cheng Shin were sent from Japan to Taiwan. Cheng Shin bought and incorporated into its tire tubes 150,000 Asahi valve assemblies in 1978; 500,000 in 1979; 500,000 in 1980; 100,000 in 1981; and 100,000 in 1982. Sales to Cheng Shin accounted for 1.24 percent of Asahi's income in 1981 and 0.44 percent in 1982. Cheng Shin alleged that approximately 20 percent of its sales in the United States are in California. Cheng Shin purchases valve assemblies from other suppliers as well, and sells finished tubes throughout the world. [480 U.S. 102, 107] The Supreme Court of the State of California reversed and discharged the writ issued by the Court of Appeal. 39 Cal. 3d 35, 702 P.2d 543 (1985). The court observed: "Asahi has no offices, property or agents in California. It solicits no business in California and has made no direct sales [in California]." Id., at 48, 702 P.2d, at 549. Moreover, "Asahi did not design or control the system of distribution that carried its valve assemblies into California." Id., at 49, 702 P.2d, at 549. Nevertheless, the court found the exercise of In 1983 an attorney for Cheng Shin conducted an informal examination of the valve stems of the tire tubes sold in one cycle store in Solano County. The attorney declared that of the approximately 115 tire tubes in the store, 97 were purportedly manufactured in Japan or Taiwan, and of those 97, 21 valve stems were marked with the circled letter "A", apparently Asahi's trademark. Of the 21 Asahi valve stems, 12 were incorporated into Cheng Shin tire tubes. The store contained 41 other Cheng Shin tubes that incorporated the valve assemblies of other manufacturers. Declaration of Kenneth B. Shepard in Opposition to Motion to Quash Subpoena, App. to Brief for Respondent 5-6. An affidavit of a manager of Cheng Shin whose duties included the purchasing of component parts stated: "`In discussions with Asahi regarding the purchase of valve stem jurisdiction over Asahi to be consistent with the Due Process Clause. It concluded that Asahi knew that some of the valve assemblies sold to Cheng Shin would be incorporated into tire tubes sold in California, and that Asahi benefited indirectly from the sale in California of products incorporating its components. The court considered Asahi's intentional act of placing its components into the stream of commerce - that is, by delivering the components to Cheng Shin in Taiwan - coupled with Asahi's awareness that some of the components would eventually find their way into California, sufficient to form the basis for state court jurisdiction under the Due Process Clause. Court to quash service of summons. The court concluded that "it [480 U.S. 102, 108] would be unreasonable to require Asahi to respond in California solely on the basis of ultimately realized foreseeability that the product into which its component was embodied would be sold all over the world including California." App. to Pet. for Cert. B5-B6. stating: "Asahi obviously does business on an international scale. It is not unreasonable that they defend claims of defect in their product on an international scale." Order Denying Motion to Quash Summons, Zurcher v. Dunlop Tire & Rubber Co., No. 76180 (Super. Ct., Solano County, Cal., Apr. 20, 1983). assemblies the fact that my Company sells tubes throughout the world and specifically the United States has been discussed. I am informed and believe that Asahi was fully aware that valve stem assemblies sold to my Company and to others would end up throughout the United States and in California.'" 39 Cal. 3d 35, 48, n. 4, 702 P.2d 543, 549-550, n. 4 (1985). An affidavit of the president of Asahi, on the other hand, declared that Asahi "`has never contemplated that its limited sales of tire valves to Cheng Shin in Taiwan would subject it to lawsuits in California.'" Ibid. The record does not include any contract between Cheng Shin and Asahi. Tr. of Oral Arg. 24.
85
We granted certiorari, 475 U.S. 1044 (1986), and now reverse. customers, or, if the risks are too great, severing its connection with the State. Hence if the sale of a product of a manufacturer or distributor . . . is not simply an isolated occurrence, but arises from the efforts of the II A The Due Process Clause of the Fourteenth Amendment limits the power of a state court to exert personal jurisdiction over a nonresident defendant. "[T]he constitutional touchstone" of the determination whether an exercise of personal jurisdiction comports with due process "remains whether the defendant purposefully established `minimum contacts' in the [480 U.S. 102, 109] forum State." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474 (1985), quoting International Shoe Co. v. Washington, 326 U.S., at 316 . Most recently we have reaffirmed the oft-quoted reasoning of Hanson v. Denckla, 357 U.S. 235, 253 (1958), that minimum contacts must have a basis in "some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws." Burger King, 471 U.S., at 475 . "Jurisdiction is proper . . . where the contacts proximately result from actions by the defendant himself that create a `substantial connection' with the forum State." Ibid., quoting McGee v. International Life Insurance Co., 355 U.S. 220, 223 (1957) (emphasis in original). manufacturer or distributor to serve, directly or indirectly, the market for its product in other States, it is not unreasonable to subject it to suit in one of those States if its allegedly defective merchandise has there been the source of injury to its owners or to others." Id., at 297. In World-Wide Volkswagen itself, the state court sought to base jurisdiction not on any act of the defendant, but on the foreseeable unilateral actions of the consumer. Since World-Wide Volkswagen, lower courts have been confronted with cases in which the defendant acted by placing a product in the stream of commerce, and the stream eventually swept defendant's product into the forum State, but the defendant did nothing else to purposefully avail itself of the market in the forum State. Some courts have understood the Due Process Clause, as interpreted in World-Wide Volkswagen, to allow an exercise of personal jurisdiction to be based on no more than the defendant's act of placing the product in the stream of commerce. Other courts have understood the Due Process Clause and the above-quoted language in World-Wide Volkswagen to require the action of the defendant to be more purposefully directed at the forum State than the mere act of placing a product in the stream of commerce.
The reasoning of the Supreme Court of California in the present case illustrates the former interpretation of World-Wide Volkswagen. The Supreme Court of California held that, because the stream of commerce eventually brought [480 U.S. 102, 111] some valves Asahi sold Cheng Shin into California, Asahi's awareness that its valves would be sold in California was sufficient to permit California to exercise jurisdiction over Asahi consistent with the requirements of the Due Process Clause. The Supreme Court of California's position was consistent with those courts that have held that mere foreseeability or awareness was a constitutionally sufficient basis for personal jurisdiction if the defendant's product made its way into the forum State while still in the stream of commerce. See Bean Dredging Corp. v. Dredge Technology Corp., 744 F.2d 1081 (CA5 1984); Hedrick v. Daiko Shoji Co., 715 F.2d 1355 (CA9 1983).
Applying the principle that minimum contacts must be based on an act of the defendant, the Court in WorldWide Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980), rejected the assertion that a consumer's unilateral act of bringing the defendant's product into the forum State was a sufficient constitutional basis for personal jurisdiction over the defendant. It had been argued in World-Wide Volkswagen that because an automobile retailer and its wholesale distributor sold a product mobile by design and purpose, they could foresee being haled into court in the distant States into which their customers might drive. The Court rejected this concept of foreseeability as an insufficient basis for jurisdiction under the Due Process Clause. Id., at 295-296. The Court disclaimed, however, the idea that "foreseeability is wholly irrelevant" to personal jurisdiction, concluding that "[t]he forum State does not exceed its powers under the Due Process Clause if it asserts personal jurisdiction over a corporation that delivers its products into the stream of commerce with the expectation that they will be purchased by consumers in the forum State." Id., at 297-298 (citation omitted). The Court reasoned:[480 U.S. 102, 110]
Other courts, however, have understood the Due Process Clause to require something more than that the defendant was aware of its product's entry into the forum State through the stream of commerce in order for the State to exert jurisdiction over the defendant. In the present case, for example, the State Court of Appeal did not read the Due Process Clause, as interpreted by World-Wide Volkswagen, to allow "mere foreseeability that the product will enter the forum state [to] be enough by itself to establish jurisdiction over the distributor and retailer." App. to Pet. for Cert. B5. In Humble v. Toyota Motor Co., 727 F.2d 709 (CA8 1984), an injured car passenger brought suit against Arakawa Auto Body Company, a Japanese corporation that manufactured car seats for Toyota. Arakawa did no business in the United States; it had no office, affiliate, subsidiary, or agent in the United States; it manufactured its component parts outside the United States and delivered them
"When a corporation `purposefully avails itself of the privilege of conducting activities within the forum State,' Hanson v. Denckla, 357 U.S. [235,] 253 [(1958)], it has clear notice that it is subject to suit there, and can act to alleviate the risk of burdensome litigation by procuring insurance, passing the expected costs on to
86
to Toyota Motor Company in Japan. The Court of Appeals, adopting the reasoning of the District Court in that case, noted that although it "does not doubt that Arakawa could have foreseen that its product would find its way into the United States," it would be "manifestly unjust" to require Arakawa to defend itself in the United States. Id., at 710-711, quoting 578 F. Supp. 530, 533 (ND Iowa 1982). See also Hutson v. Fehr Bros., [480 U.S. 102, 112] Inc., 584 F.2d 833 (CA8 1978); see generally Max Daetwyler Corp. v. R. Meyer, 762 F.2d 290, 299 (CA3 1985) (collecting "stream of commerce" cases in which the "manufacturers involved had made deliberate decisions to market their products in the forum state"). We have previously explained that the determination of the reasonableness of the exercise of jurisdiction in each case will depend on an evaluation of several factors. A court must consider the burden on the defendant, the interests of the forum State, and the plaintiff's interest in obtaining relief. It must also weigh in its We now find this latter position to be consonant with the requirements of due process. The "substantial connection," Burger King, 471 U.S., at 475 ; McGee, 355 U.S., at 223 , between the defendant and the forum State necessary for a finding of minimum contacts must come about by an action of the defendant purposefully directed toward the forum State. Burger King, supra, at 476; Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 774 (1984). The placement of a product into the stream of commerce, without more, is not an act of the defendant purposefully directed toward the forum State. Additional conduct of the defendant may indicate an intent or purpose to serve the market in the forum State, for example, designing the product for the market in the forum State, advertising in the forum State, establishing channels for providing regular advice to customers in the forum State, or marketing the product through a distributor who has agreed to serve as the sales agent in the forum State. But a defendant's awareness that the stream of commerce may or will sweep the product into the forum State does not convert the mere act of placing the product into the stream into an act purposefully directed toward the forum State. Certainly the burden on the defendant in this case is severe. Asahi has been commanded by the Supreme Court of California not only to traverse the distance between Asahi's headquarters in Japan and the Superior Court of California in and for the County of Solano, but also to submit its dispute with Cheng Shin to a foreign nation's judicial system. The unique burdens placed upon one who must defend oneself in a foreign legal system should have significant weight in assessing the reasonableness of stretching the long arm of personal jurisdiction over national borders. Assuming, arguendo, that respondents have established Asahi's awareness that some of the valves sold to Cheng Shin would be incorporated into tire tubes sold in California, respondents have not demonstrated any action by Asahi to purposefully avail itself of the California market. Asahi does not do business in California. It has no office, agents, employees, or property in California. It does not advertise or otherwise solicit business in California. It did not create, control, or employ the distribution system that brought its valves to California. Cf. Hicks v. Kawasaki Heavy Industries, [480 U.S. 102, 113] 452 F. Supp. 130 (MD Pa. 1978). There is no evidence that Asahi designed its product in anticipation of sales in California. Cf. Rockwell International Corp. v. Costruzioni Aeronautiche Giovanni Agusta, 553 F. Supp. 328 (ED Pa. 1982). On the basis of these facts, the exertion of personal jurisdiction over Asahi by the Superior Court of California * exceeds the limits of due process. When minimum contacts have been established, often the interests of the plaintiff and the forum in the exercise of jurisdiction will justify even the serious burdens placed on the alien defendant. In the present case, however, the interests of the plaintiff and the forum in California's assertion of jurisdiction over Asahi are slight. All that remains is a claim for indemnification asserted by Cheng Shin, a Tawainese corporation, against Asahi. The transaction on which the indemnification claim is based took place in Taiwan; Asahi's components were shipped from Japan to Taiwan. Cheng Shin has not demonstrated that it is more convenient for it to litigate its indemnification claim against Asahi in California rather than in Taiwan or Japan. A consideration of these factors in the present case clearly reveals the unreasonableness of the assertion of jurisdiction over Asahi, even apart from the question of the placement of goods in the stream of commerce. determination "the interstate judicial system's interest in obtaining the most efficient resolution of controversies; and the shared interest of the several States in furthering fundamental substantive social policies." World-Wide Volkswagen, 444 U.S., at 292 (citations omitted).[480 U.S. 102, 114] B The strictures of the Due Process Clause forbid a state court to exercise personal jurisdiction over Asahi under circumstances that would offend "`traditional notions of fair play and substantial justice.'" International Shoe Co. v. Washington, 326 U.S., at 316 , quoting Milliken v. Meyer, 311 U.S., at 463 .
Because the plaintiff is not a California resident, California's legitimate interests in the dispute have considerably diminished. The Supreme Court of California argued that the State had an interest in "protecting
87
its consumers by ensuring that foreign manufacturers comply with the state's safety standards." 39 Cal. 3d, at 49, 702 P.2d, at 550. The State Supreme Court's definition of California's interest, however, was overly broad. The dispute between Cheng Shin and Asahi is primarily about indemnification rather than safety [480 U.S. 102, 115] standards. Moreover, it is not at all clear at this point that California law should govern the question whether a Japanese corporation should indemnify a Taiwanese corporation on the basis of a sale made in Taiwan and a shipment of goods from Japan to Taiwan. Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 821 822 (1985); Allstate Insurance Co. v. Hague, 449 U.S. 302, 312 -313 (1981). The possibility of being haled into a California court as a result of an accident involving Asahi's components undoubtedly creates an additional deterrent to the manufacture of unsafe components; however, similar pressures will be placed on Asahi by the purchasers of its components as long as those who use Asahi components in their final products, and sell those products in California, are subject to the application of California tort law. It is so ordered. [ Footnote * ] We have no occasion here to determine whether Congress could, consistent with the Due Process Clause of the Fifth Amendment, authorize federal court personal jurisdiction over alien defendants based on the aggregate of national contacts, rather than on the contacts between the defendant and the State in which the federal court sits. See Max Daetwyler Corp. v. R. Meyer, 762 F.2d 290, 293-295 (CA3 1985); DeJames v. Magnificence Carriers, Inc., 654 F.2d 280, 283 (CA3 1981); see also Born, Reflections on Judicial Jurisdiction in International Cases, to be published in 17 Ga. J. Int'l & Comp. L. 1 (1987); Lilly, Jurisdiction Over Domestic and Alien Defendants, 69 Va. L. Rev. 85, 127-145 (1983). Because the facts of this case do not establish minimum contacts such that the exercise of personal jurisdiction is consistent with fair play and substantial justice, the judgment of the Supreme Court of California is reversed, and the case is remanded for further proceedings not inconsistent with this opinion.
World-Wide Volkswagen also admonished courts to take into consideration the interests of the "several States," in addition to the forum State, in the efficient judicial resolution of the dispute and the advancement of substantive policies. In the present case, this advice calls for a court to consider the procedural and substantive policies of other nations whose interests are affected by the assertion of jurisdiction by the California court. The procedural and substantive interests of other nations in a state court's assertion of jurisdiction over an alien defendant will differ from case to case. In every case, however, those interests, as well as the Federal Government's interest in its foreign relations policies, will be best served by a careful inquiry into the reasonableness of the assertion of jurisdiction in the particular case, and an unwillingness to find the serious burdens on an alien defendant outweighed by minimal interests on the part of the plaintiff or the forum State. "Great care and reserve should be exercised when extending our notions of personal jurisdiction into the international field." United States v. First National City Bank, 379 U.S. 378, 404 (1965) (Harlan, J., dissenting). See Born, Reflections on Judicial Jurisdiction in International Cases, to be published in 17 Ga. J. Int'l & Comp. L. 1 (1987). [480 U.S. 102, 116]
JUSTICE BRENNAN, with whom JUSTICE WHITE, JUSTICE MARSHALL, and JUSTICE BLACKMUN join, concurring in part and concurring in the judgment.
I do not agree with the interpretation in Part II-A of the stream-of-commerce theory, nor with the conclusion that Asahi did not "purposely avail itself of the California market." Ante, at 112. I do agree, however, with the Court's conclusion in Part II-B that the exercise of personal jurisdiction over Asahi in this case would not comport with "fair play and substantial justice," International Shoe Co. v. Washington, 326 U.S. 310, 320 (1945). This is one of those rare cases in which "minimum requirements inherent in the concept of `fair play and substantial justice' . . . defeat the reasonableness of jurisdiction even [though] the defendant has purposefully engaged in forum activities." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 477 -478 (1985). I therefore join Parts I and II-B of the Court's opinion, and write separately to explain my disagreement with Part II-A.
Considering the international context, the heavy burden on the alien defendant, and the slight interests of the plaintiff and the forum State, the exercise of personal jurisdiction by a California court over Asahi in this instance would be unreasonable and unfair.
Part II-A states that "a defendant's awareness that the stream of commerce may or will sweep the product into the forum State does not convert the mere act of placing the product into the stream into an act purposefully directed toward [480 U.S. 102, 117] the forum State." Ante, at 112. Under this view, a plaintiff would be required to show "[a]dditional conduct" directed toward the forum before finding the exercise of jurisdiction
III
over the defendant to be consistent with the Due Process Clause. Ibid. I see no need for such a showing, however. The stream of commerce refers not to unpredictable currents or eddies, but to the regular and
88
anticipated flow of products from manufacture to distribution to retail sale. As long as a participant in this process is aware that the final product is being marketed in the forum State, the possibility of a lawsuit there cannot come as a surprise. Nor will the litigation present a burden for which there is no corresponding benefit. A defendant who has placed goods in the stream of commerce benefits economically from the retail sale of the final product in the forum State, and indirectly benefits from the State's laws that regulate and facilitate commercial activity. These benefits accrue regardless of whether that participant directly conducts business in the forum State, or engages in additional conduct directed toward that State. Accordingly, most courts and commentators have found that jurisdiction premised on the placement of a product into the stream of commerce is consistent with the Due Process Clause, and have not required a showing of additional conduct. 1 [480 U.S. 102, 118] "Hence if the sale of a product of a manufacturer or distributor such as Audi or Volkswagen is not simply an isolated occurrence, but arises from the efforts of the manufacturer or distributor to serve, directly or indirectly, the market for its product in other States, it is not unreasonable to subject it to suit in one of those States if its allegedly defective merchandise has there been the source of injury to its owner or to others. The forum State does not exceed its powers under the Due Process Clause if it asserts personal jurisdiction over a corporation that delivers its products into the stream of commerce with the expectation that they will be purchased [480 U.S. 102, 120] by consumers in the forum State." Id., at 297-298 (emphasis added). The Court concluded its illustration by referring to Gray v. American Radiator & Standard Sanitary Corp., 22 Ill. 2d 432, 176 N. E. 2d 761 (1961), a well-known stream-of-commerce case in which the Illinois Supreme Court applied the theory to assert jurisdiction over a component-parts manufacturer that sold no components directly in Illinois, but did sell them to a manufacturer who incorporated them into a final product that was sold in Illinois. 444 U.S., at 297 -298.
The endorsement in Part II-A of what appears to be the minority view among Federal Courts of Appeals2 represents a marked retreat from the analysis in World-Wide Volkswagen v. Woodson, 444 U.S. 286(1980). In that case, "respondents [sought] to base jurisdiction on one, isolated occurrence and whatever inferences can be drawn therefrom: the fortuitous circumstance that a single Audi automobile, sold in New York to New York residents, happened to suffer an accident while passing through Oklahoma." Id., at 295. The Court held that the possibility of an accident in Oklahoma, while to some extent foreseeable in light of the inherent mobility of the automobile, was not enough to establish[480 U.S. 102, 119] minimum contacts between the forum State and the retailer or distributor. Id., at 295-296. The Court then carefully explained: The Court in World-Wide Volkswagen thus took great care to distinguish "between a case involving goods which reach a distant State through a chain of distribution and a case involving goods which reach the same State because a consumer . . . took them there." Id., at 306-307 (BRENNAN, J., dissenting). 3 The California Supreme Court took note of this distinction, and correctly concluded that our holding in World-Wide Volkswagen preserved the stream-of-commerce theory. See App. to Pet. for Cert. C-9, and n. 3, C-13 - C-15; cf. Comment, Federalism, Due Process, and Minimum Contacts: World-Wide Volkswagen Corp v. Woodson, 80 Colum. L. Rev. 1341, 1359-1361, and nn. 140-146 (1980). [480 U.S. 102, 121]
"[T]his is not to say, of course, that foreseeability is wholly irrelevant. But the foreseeability that is critical to due process analysis is not the mere likelihood that a product will find its way into the forum State. Rather, it is that the defendant's conduct and connection with the forum State are such that he should reasonably anticipate being haled into Court there." Id., at 297. The Court reasoned that when a corporation may reasonably anticipate litigation in a particular forum, it cannot claim that such litigation is unjust or unfair, because it "can act to alleviate the risk of burdensome litigation by procuring insurance, passing the expected costs on to consumers, or, if the risks are too great, severing its connection with the State." Ibid.
In this case, the facts found by the California Supreme Court support its finding of minimum contacts. The court found that "[a]lthough Asahi did not design or control the system of distribution that carried its valve assemblies into California, Asahi was aware of the distribution system's operation, and it knew that it would benefit economically from the sale in California of products incorporating its components." App. to Pet. for Cert. C-11. 4 Accordingly, I cannot join the determination in Part II-A that Asahi's regular and extensive sales of component parts to a manufacturer it knew was making regular sales of the final product in California is insufficient to establish minimum contacts with California. Footnotes
To illustrate the point, the Court contrasted the foreseeability of litigation in a State to which a consumer fortuitously transports a defendant's product (insufficient contacts) with the foreseeability of litigation in a State where the defendant's product was regularly sold (sufficient contacts). The Court stated:
[ Footnote 1 ] See, e. g., Bean Dredging Corp. v. Dredge Technology Corp., 744 F.2d 1081 (CA5 1984); Hedrick v. Daiko Shoji Co., 715 F.2d 1355 (CA9 1983); Nelson v. Park Industries, Inc., 717 F.2d 1120, 1126 (CA7 1983), cert. denied, 465 U.S. 1024 (1984); Stabilisierungsfonds fur Wein v. Kaiser Stuhl Wine Distributors Pty. Ltd., 207 U.S. App. D.C. 375, 378, 647 F.2d 200, 203 (1981); Poyner v. Erma Werke Gmbh, 618 F.2d 1186, 1190-1191 (CA6), cert. denied, 449 U.S. 841 (1980); cf. Fidelity & Casualty Co. of New York v. Philadelphia Resins Corp., 766 F.2d 440 (CA10 1985) (endorsing stream-of-commerce theory but finding it inapplicable in instant case), cert. denied, 474 U.S. 1082 (1986); Montalbano v. Easco Hand Tools, Inc., 766
89
F.2d 737 (CA2 1985) (noting potential applicability of stream-of-commerce theory, but remanding for further factual findings). See generally Currie, The Growth of the Long-Arm: Eight [480 U.S. 102, 118] Years of Extended Jurisdiction in Illinois, 1963 U. Ill. Law Forum 533, 546-560 (approving and tracing development of the stream-of-commerce theory); C. Wright & A. Miller, Federal Practice and Procedure 1069, pp. 259-261 (1969) (recommending in effect a stream-of-commerce approach); Von Mehren & Trautman, Jurisdiction to Adjudicate: A Suggested Analysis, 79 Harv. L. Rev. 1121, 1168-1172 (1966) (same). [ Footnote 4 ] Moreover, the Court found that "at least 18 percent of the tubes sold in a particular California motorcycle supply shop contained Asahi valve assemblies," App. to Pet. for Cert. C-11, n. 5, and that Asahi had an ongoing business relationship with Cheng Shin involving average annual sales of hundreds of thousands of valve assemblies, id., at C-2.
[ Footnote 2 ] The Court of Appeals for the Eighth Circuit appears to be the only Court of Appeals to have expressly adopted a narrow construction of the stream-of-commerce theory analogous to the one articulated in Part II-A today, although the Court of Appeals for the Eleventh Circuit has implicitly adopted it. See Humble v. Toyota Motor Co., Ltd., 727 F.2d 709 (CA8 1984); Banton Industries, Inc. v. Dimatic Die & Tool Co., 801 F.2d 1283 (CA11 1986). Two other Courts of Appeals have found the theory inapplicable when only a single sale occurred in the forum State, but do not appear committed to the interpretation of the theory that the Court adopts today. E. g., Chung v. NANA Development Corp., 783 F.2d 1124 (CA4), cert. denied, 479 U.S. 948 (1986); Dalmau Rodriguez v. Hughes Aircraft Co., 781 F.2d 9 (CA1 1986). Similarly, the Court of Appeals for the Third Circuit has not interpreted the theory as JUSTICE O'CONNOR's opinion has, but has rejected stream-of-commerce arguments for jurisdiction when the relationship between the distributor and the defendant "remains in dispute" and "evidence indicating that [defendant] could anticipate either use of its product or litigation in [the forum State] is totally lacking," Max Daetwyler Corp. v. R. Meyer, 762 F.2d 290, 298, 300, n. 13, cert. denied, 474 U.S. 980 (1985), and when the defendant's product was not sold in the forum State and the defendant "did not take advantage of an indirect marketing scheme," DeJames v. Magnificence Carriers, Inc., 654 F.2d 280, 285, cert. denied, 454 U.S. 1085 (1981).
JUSTICE STEVENS, with whom JUSTICE WHITE and JUSTICE BLACKMUN join, concurring in part and concurring in the judgment.
The judgment of the Supreme Court of California should be reversed for the reasons stated in Part II-B of the Court's opinion. While I join Parts I and II-B, I do not join Part II-A for two reasons. First, it is not necessary to the Court's decision. An examination of minimum contacts is not always necessary to determine whether a state court's assertion of personal jurisdiction is constitutional. See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476 -478 (1985). Part II-B establishes, after considering the factors set forth in World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292 (1980), that California's exercise of jurisdiction over Asahi in this case would be "unreasonable and unfair." Ante, at 116. This finding alone requires reversal; this case fits within the rule that "minimum requirements inherent in the concept of `fair play and substantial justice' may defeat [480 U.S. 102, 122] the reasonableness of jurisdiction even if the defendant has purposefully engaged in forum activities." Burger King, 471 U.S., at 477 -478 (quoting International Shoe Co. v. Washington, 326 U.S. 310, 320 (1945)). Accordingly, I see no reason in this case for the plurality to articulate "purposeful direction" or any other test as the nexus between an act of a defendant and the forum State that is necessary to establish minimum contacts.
[ Footnote 3 ] In dissent, I argued that the distinction was without constitutional significance, because in my view the foreseeability that a customer would use a product in a distant State was a sufficient basis for jurisdiction. 444 U.S., at 306 -307, and nn. 11, 12. See also id., at 315 (MARSHALL, J., dissenting) ("I cannot agree that jurisdiction is necessarily lacking if the product enters the State not through the channels of distribution but in the course of its intended use by the consumer"); id., at 318-319 (BLACKMUN, J., dissenting) ("[F]oreseeable use in another State seems to me little different from foreseeable resale in another State"). But I do not read the decision in World-Wide Volkswagen to establish a per se rule against the exercise of jurisdiction where the contacts arise from a consumer's use of the product in a given State, but only a rule against jurisdiction in cases involving "one, isolated occurrence [of consumer use, amounting to] . . . the fortuitous circumstance . . . ." Id., at 295. See Hedrick v. Daiko Shoji Co., 715 F.2d, at 1358-1359. Second, even assuming that the test ought to be formulated here, Part II-A misapplies it to the facts of this case. The plurality seems to assume that an unwavering line can be drawn between "mere awareness" that a component will find its way into the forum State and "purposeful availment" of the forum's market. Ante, at 112. Over the course of its dealings with Cheng Shin, Asahi has arguably engaged in a higher quantum of conduct than "[t]he placement of a product into the stream of commerce, without more . . . ." Ibid. Whether or not this conduct rises to the level of purposeful availment requires a constitutional determination that is affected by the volume, the value, and the hazardous character of the components. In most circumstances I would be inclined to conclude that a regular course of dealing that results in deliveries of over 100,000 units annually over a period of several years would constitute "purposeful availment" even though the item delivered to the forum State was a standard product marketed throughout the world. [480 U.S. 102, 123
90
U.S. Supreme Court ultimately holding that the assertion of quasi in rem jurisdiction under the Minnesota garnishment statute complied with the due process standards enunciated in Shaffer v. Heitner, 433 U. S. 186.
Rush v. Savchuk, 444 U.S. 320 (1980)
Rush v. Savchuk
Held: A State may not constitutionally exercise quasi in rem jurisdiction over a defendant who has no forum contacts by attaching the contractual obligation of an insurer licensed to do business in the State to defend
No. 78-952
and indemnify him in connection with the suit. Pp. 444 U. S. 327-333.
Argued October 3, 1979
(a) A State may exercise jurisdiction over an absent defendant only if the defendant has certain minimum contacts with the forum such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice. International Shoe Co. v. Washington, 326 U. S. 310. In determining whether a
Decided January 21, 1980
444 U.S. 320
particular exercise of state court jurisdiction is consistent with due process, the inquiry must focus on "the relationship among the defendant, the forum, and the litigation." Shaffer v. Heitner, supra at 433 U. S. 204. P. 327.
APPEAL FROM THE SUPREME COURT OF MINNESOTA
Syllabus (b) Here, the only affiliating circumstance offered to show a relationship among Rush, Minnesota, and this While a resident of Indiana, appellee was injured in an accident in Indiana while riding as a passenger in a car lawsuit is that Rush's insurance driven by appellant Rush, also an Indiana resident. After moving to Minnesota, appellee commenced this action against Rush in a Minnesota state court, alleging negligence and seeking damages. As Rush had no contacts with Minnesota that would support in personam jurisdiction, appellee attempted to obtain quasi in remjurisdiction by garnishing the contractual obligation of State Farm Mutual Automobile Insurance Co. (State Farm) to defend and indemnify Rush in connection with such a suit. State Farm, which does business in Minnesota, had insured the car, owned by Rush's father, under a liability insurance policy issued in Indiana. Rush was personally served in Indiana, and after State Farm's response to the garnishment summons asserted that it owed the defendant nothing, appellee moved the trial court for permission to file a supplemental complaint making the garnishee, State Farm, a party to the action. Rush and State Farm moved to dismiss the complaint for lack of jurisdiction over the defendant. The trial court denied the motion to dismiss and granted the motion for leave to file the supplemental complaint. The Minnesota Supreme Court affirmed, Page 444 U. S. 321
company does business in the State. However, the fictional presence in Minnesota of State Farm's policy obligation to defend and indemnify Rush -- derived from combining the legal fiction that assigns a situs to a debt, for garnishment purposes, wherever the debtor is found with the legal fiction that a corporation is "present," for jurisdictional purposes, wherever it does business -- cannot be deemed to give the State the power to determine Rush's liability for the out-of-state accident. The mere presence of property in a State does not establish a sufficient relationship between the owner of the property and the State to support the exercise of jurisdiction over an unrelated cause of action, and it cannot be said that the defendant engaged in any purposeful activity related to the forum that would make the exercise of jurisdiction fair, just, or reasonable merely because his insurer does business there. Nor does the policy provide significant contacts between the
91
litigation and the forum, for the policy obligations pertain only to the conduct, not the substance, of the litigation. Pp. 444 U. S. 327-330. On January 13, 1972, two Indiana residents were involved in a single-car accident in Elkhart, Ind. Appellee Savchuk, who was a passenger in the car driven by appellant Rush, was injured. The car, owned by Rush's father, was insured by appellant State Farm Mutual Automobile Insurance Co. (State Farm) under a liability insurance policy issued in Indiana. Indiana's guest statute would have barred a claim by Savchuk. Ind.Code 9-3-3-1 (1976).
(c) Moreover, the requisite minimum contacts with the forum cannot be established under an alternative approach attributing the insurer's forum contacts to the defendant by treating the attachment procedure as the functional equivalent of a direct action against the insurer, and considering the insured a "nominal defendant" in order to obtain jurisdiction over the insurer. The State's ability to exert its power over the "nominal defendant" is analytically prerequisite to the insurer's entry into the case as a garnishee, and if the Constitution forbids the assertion of jurisdiction over the insured based on the policy, then there is no conceptual basis for bringing the "garnishee" into the action. Nor may the Minnesota court attribute State Farm's contacts to Rush by considering the "defending parties" together and aggregating their forum contacts in determining whether it has jurisdiction. The parties' relationships with each other may be significant in evaluating their ties to the forum, but the requirements of International Shoe must be met as to each defendant over whom a state court exercises jurisdiction. Pp. 444 U. S. 330-332.
Savchuk moved with his parents to Minnesota in June, 1973. [Footnote 1] On May 28, 1974, he commenced an action against Rush in the Minnesota state courts. [Footnote 2] As Rush had no contacts with Minnesota that would support in personamjurisdiction, Savchuk attempted to obtain quasi in rem jurisdiction by garnishing State Farm's obligation under the insurance policy to defend and indemnify Rush in connection with such a suit. [Footnote 3] State Farm does business in Minnesota. [Footnote 4] Rush was
Page 444 U. S. 323
personally served in Indiana. The complaint alleged negligence and sought $125,000 in damages. [Footnote 5]
272 N.W.2d 888, reversed. As provided by the state garnishment statute, Savchuk moved the trial court for permission to file a MARSHALL, J., delivered the opinion of the Court, in which BURGER, C.J., and STEWART, WHITE, BLACKMUN, POWELL, and REHNQUIST, JJ., joined. BRENNAN, J.,ante p. 444 U. S. 299, and STEVENS, J., post, p. 444 U. S. 333, filed dissenting opinions. Page 444 U. S. 324 Page 444 U. S. 322 Farm moved to dismiss the complaint for lack of jurisdiction over the defendant. [Footnote 7] The trial court MR. JUSTICE MARSHALL delivered the opinion of the Court. denied the motion to dismiss and granted the motion for leave to file the supplemental complaint. supplemental complaint making the garnishee, State Farm, a party to the action after State Farm's response to the garnishment summons asserted that it owed the defendant nothing. [Footnote 6] Rush and State
This appeal presents the question whether a State may constitutionally exercise quasi in rem jurisdiction over a defendant who has no forum contacts by attaching the contractual obligation of an insurer licensed to do business in the State to defend and indemnify him in connection with the suit.
On appeal, the Minnesota Supreme Court affirmed the trial court's decision. 311 Minn. 480, 245 N.W.2d 624 (1976) (Savchuk I). It held, first, that the obligation of an insurance company to defend and indemnify a nonresident insured under an automobile liability insurance policy is a garnishable res in Minnesota for the purpose of obtaining quasi in rem jurisdiction when the incident giving rise to the action occurs outside
92
Minnesota but the plaintiff is a Minnesota resident when the suit is filed. Second, the court held that the assertion of jurisdiction over Rush was constitutional because he had notice of the suit and an opportunity to defend, his liability was limited to the amount of the policy, and the garnishment procedure may be used only by Minnesota residents. The court expressly recognized that Rush had engaged in no voluntary activity that would justify the exercise of in personam jurisdiction. The court found, however, that considerations of fairness supported the exercise of quasi in remjurisdiction because in accident litigation the insurer controls the defense of the case, State Farm does business in and is regulated by the State, and the State has an interest in protecting its residents and providing them with a forum in which to litigate their claims. in the State was sufficient to permit quasi in rem jurisdiction over the absent defendant. The court also concluded that the exercise of jurisdiction was permissible under the Due Process Clause because, "[v]iewed realistically, the insurer in a case such as the present is in full control of the litigation" and, 990, 238 N.E.2d 319 (1968). The New York court relied on Harris v. Balk,198 U. S. 215 (1905), in holding that the presence of the debt
Page 444 U. S. 326
"where the plaintiff is a resident of the forum state and the insurer is present in and regulated by it, the State has a substantial and continuing relation with the controversy."
Rush appealed to this Court. We vacated the judgment and remanded the cause for further consideration in light of
Simpson v. Loehmann, supra at 311, 234 N.E.2d at 672.
Page 444 U. S. 325
The United States Court of Appeals for the Second Circuit gave its approval to Seider inMinichiello v. Rosenberg, 410 F.2d 106, adhered to en banc, 410 F.2d 117 (1968),cert. denied, 396 U.S. 844 (1969), although on a slightly different rationale. Judge Friendly construed Seider as,
Shaffer v. Heitner, 433 U. S. 186 (1977). 433 U.S. 902 (1977).
On remand, the Minnesota Supreme Court held that the assertion of quasi in remjurisdiction through garnishment of an insurer's obligation to an insured complied with the due process standards enunciated in Shaffer. 272 N.W.2d 888 (1978) (Savchuk II). The court found that the garnishment statute differed from the Delaware stock sequestration procedure held unconstitutional in Shaffer because the garnished property was intimately related to the litigation and the garnishment procedure paralleled the asserted state interest in "facilitating recoveries for resident plaintiffs." 272 N.W.2d at 891. [Footnote 8] This appeal followed. "in effect, a judicially created direct action statute. The insurer doing business in New York is considered the real party in interest, and the nonresident insured is viewed simply as a conduit, who has to be named as a defendant in order to provide a conceptual basis for getting at the insurer."
410 F.2d at 109; see Donawitz v. Danek, 42 N.Y.2d 138, 142, 366 N.E.2d 253, 255 (1977). The court held that New York could constitutionally enact a direct action statute, and that the restriction of liability to the amount of the policy coverage made the policyholder's personal stake in the litigation so slight that the exercise of jurisdiction did not offend due process.
II
The Minnesota Supreme Court held that the Minnesota garnishment statute embodies the rule stated in Seider v. Roth, 17 N.Y.2d 111, 216 N.E.2d 312 (1966), that the contractual obligation of an insurance company to its insured under a liability insurance policy is a debt subject to attachment under state law if the insurer does business in the State. [Footnote 9] Seider jurisdiction was upheld against a due process challenge in Simpson v. Loehmann, 21 N.Y.2d 305, 234 N.E.2d 669 (1967), reargument denied,21 N.Y.2d New York has continued to adhere to Seider. [Footnote 10] New Hampshire has followed Seider if the defendant resides in a Seider jurisdiction, [Footnote 11] but not in other cases. [Footnote 12] Minnesota is the only
93
Page 444 U. S. 327 business to yield the conclusion that the obligation to defend and indemnify is located in the forum for purposes of the garnishment statute. The fictional presence of the policy obligation is deemed to give the State the power to determine the policyholder's liability for the out-of-state accident. [Footnote 14]
other State that has adopted Seider-type jurisdiction. [Footnote 13] The Second Circuit recently reaffirmed its conclusion that Seider does not violate due process after reconsidering the doctrine in light of Shaffer v. Heitner. O'Conner v. Lee-Hy Paving Corp., 579 F.2d 194, cert. denied, 439 U. S. 1034 (1978).
We held in Shaffer that the mere presence of property in a State does not establish a sufficient relationship between the owner of the property and the State to support the exercise of jurisdiction over an unrelated cause of action. The ownership of property in the State is a contact between the defendant and the forum, and
III
In Shaffer v. Heitner, we held that "all assertions of state court jurisdiction must be evaluated according to the standards set forth in International Shoe and its progeny." 433 U.S. at 433 U. S. 212. That is, a State may exercise jurisdiction over an absent defendant only if the defendant has
it may suggest the presence of other ties. 433 U.S. at 433 U. S. 209. Jurisdiction is lacking, however, unless there are sufficient contacts to satisfy the fairness standard of International Shoe.
Here, the fact that the defendant's insurer does business in the forum State suggests no further contacts "certain minimum contacts with [the forum] such that the maintenance of the suit does not offend 'traditional notions' of fair play and substantial justice." between the defendant and the forum, and the record supplies no evidence of any. State Farm's decision to do business in Minnesota
International Shoe Co. v. Washington, 326 U. S. 310, 326 U. S. 316 (1945). In determining whether a particular exercise of state court jurisdiction is consistent with due process, the inquiry must focus on "the relationship among the defendant, the forum, and the litigation." Shaffer v. Heitner, supra, at 433 U. S. 204.
Page 444 U. S. 329
was completely adventitious as far as Rush was concerned. He had no control over that decision, and it is unlikely that he would have expected that, by buying insurance in Indiana, he had subjected himself to suit in
It is conceded that Rush has never had any contacts with Minnesota, and that the auto accident that is the subject of
any State to which a potential future plaintiff might decide to move. In short, it cannot be said that the defendant engaged in any purposeful activity related to the forum that would make the exercise of jurisdiction fair, just, or reasonable, see Kulko v. California Superior Court, 436 U. S. 84, 436 U. S. 93-94 (1978); Hanson v. Denckla, 357 U. S. 235, 357 U. S. 253 (1958), merely because his insurer does business
Page 444 U. S. 328
this action occurred in Indiana and also had no connection to Minnesota. The only affiliating circumstance offered to show a relationship among Rush, Minnesota, and this lawsuit is that Rush's insurance company does business in the State. Seiderconstructed an ingenious jurisdictional theory to permit a State to command a defendant to appear in its courts on the basis of this factor alone. State Farm's contractual obligation to defend and indemnify Rush in connection with liability claims is treated as a debt owed by State Farm to Rush. The legal fiction that assigns a situs to a debt, for garnishment purposes, wherever the debtor is found is combined with the legal fiction that a corporation is "present," for jurisdictional purposes, wherever it does
there.
Nor are there significant contacts between the litigation and the forum. The Minnesota Supreme Court was of the view that the insurance policy was so important to the litigation that it provided contacts sufficient to satisfy due process. [Footnote 15] The insurance policy is not the subject matter of the case, however, nor is it related to the operative facts of the negligence action. The contractual arrangements between the defendant and the
94
insurer pertain only to the conduct, not the substance, of the litigation, and accordingly do not affect the court's jurisdiction unless they demonstrate ties between the defendant and the forum. defendant" is analytically prerequisite to the insurer's entry into the case as a garnishee. If the Constitution forbids the assertion of jurisdiction over the insured based on the policy, then there is no conceptual basis for bringing the "garnishee" into the action. Because the party with forum contacts can only be reached through the out-of-state party, the question of jurisdiction over the nonresident cannot be ignored. [Footnote 19] Moreover, the assumption that the defendant has no real stake in the litigation is far from self-evident. Page 444 U. S. 330 [Footnote 20]
In fact, the fictitious presence of the insurer's obligation in Minnesota does not, without more, provide a basis for concluding that there is any contact in the International Shoesense
between Minnesota and the insured. To say that "a debt follows the debtor" is simply to say that intangible property has no actual situs, and a debt may be sued on wherever there is jurisdiction over the debtor. State Farm is "found," in the sense of doing business, in all 50 States and the District of Columbia. Under appellee's theory, the "debt" owed to Rush would be "present" in each of those jurisdictions simultaneously. It is apparent that such a "contact" can have no jurisdictional significance.
The Minnesota court also attempted to attribute State Farm's contacts to Rush by considering the "defending parties" together and aggregating their forum contacts in determining whether it had jurisdiction. [Footnote 21] The result was the
Page 444 U. S. 332
An alternative approach for finding minimum contacts in Seider-type cases, referred to with approval by the Minnesota Supreme Court, [Footnote 16] is to attribute the insurer's forum contacts to the defendant by treating the attachment procedure as the functional equivalent of a direct action against the insurer. This approach views Seiderjurisdiction as fair both to the insurer, whose forum contacts would support in personam jurisdiction even for an unrelated cause of action, and to the "nominal defendant." Because liability is limited to the policy amount, the defendant incurs no personal liability, [Footnote 17] and the judgment is satisfied from the policy proceeds which are not available to the insured for any purpose other than paying accident claims, the insured is said to have such a slight stake in the litigation as a practical matter that it is not unfair to make him a "nominal defendant" in order to obtain jurisdiction over the insurance company.
assertion of jurisdiction over Rush based solely on the activities of State Farm. Such a result is plainly unconstitutional. Naturally, the parties' relationships with each other may be significant in evaluating their ties to the forum. The requirements ofInternational Shoe, however, must be met as to each defendant over whom a state court exercises jurisdiction.
The justifications offered in support of Seider jurisdiction share a common characteristic: they shift the focus of the inquiry from the relationship among the defendant, the forum, and the litigation to that among the plaintiff, the forum, the insurer, and the litigation. The insurer's contacts with the forum are attributed to the defendant because the policy was taken out in anticipation of such litigation. The State's interests in providing a forum for its residents and in regulating the activities of insurance companies are substituted for its contacts with the defendant and the cause of action. This subtle shift in focus from the defendant to the plaintiff is most evident in the decisions limiting Seider jurisdiction to actions by forum residents on the ground that permitting nonresidents to avail themselves of the procedure would be unconstitutional. [Footnote 22] In other words, the
Seider actions are not equivalent to direct actions, however. [Footnote 18] The State's ability to exert its power over the "nominal
Page 444 U. S. 331
plaintiff's contacts with the forum are decisive in determining whether the defendant's due process rights are violated.
95
Such an approach is forbidden by International Shoe and its progeny. If a defendant has certain judicially cognizable ties with a State, a variety of factors relating to the particular cause of action may be relevant to the determination whether the exercise of jurisdiction would comport with "traditional notions of fair play and substantial justice."See McGee v. International Life Ins. Co., 355 U. S. 220 (1957); cf. Kulko v. California Superior Court, 436 U.S. at 436 U. S. 98-101. Here, however, the defendant has nocontacts with the forum, and the "(b) If the court shall order the issuance of such summons, if a summons and complaint is filed with the appropriate court and either served on the defendant or delivered to a sheriff for service on the defendant not more than 30 days after the order is signed, and if, upon application to the court it shall appear that" Page 444 U. S. 333 "* * * *" Due Process Clause "(2) The purpose of the garnishment is to establish quasi in rem jurisdiction and that" "does not contemplate that a state may make binding a judgment . . . against an individual or corporate defendant with which the state has no contacts, ties, or relations." "* * * *" "Notwithstanding anything to the contrary herein contained, a plaintiff in any action in a court of record for the recovery of money may issue a garnishee summons before judgment therein in the following instances only:"
"* * * *"
International Shoe Co. v. Washington, 326 U.S. at 326 U. S. 319. The judgment of the Minnesota Supreme Court is, therefore,
"(b) defendant is a nonresident individual, or a foreign corporation, partnership or association."
"(3) The garnishee and the debtor are parties to a contract of suretyship, guarantee, or insurance, because of which the garnishee may be held to respond to any person for the claim asserted against the debtor in the main action."
Reversed.
[For dissenting opinion of MR. JUSTICE BRENNAN, see ante p. 444 U. S. 299.] The Minnesota Supreme Court cited this version of the statute, enacted in 1976, in its opinion in 272 N.W.2d [Footnote 1] 888 (1978) (Savchuk II). The version of the statute that was in effect at the time of the original opinion, 311 Minn. 480, 245 N.W.2d 624 (1976) (Savchuk I), does not differ in any important respect.
Savchuk moved to Pennsylvania after this appeal was filed.
[Footnote 2]
[Footnote 4]
The suit was filed after the 2-year Indiana statute of limitations had run. 272 N.W.2d 888, 891, n. 5 (1978).
State Farm is an Illinois corporation that does business in all 50 States, the District of Columbia, and several Canadian Provinces. The Insurance Almanac 431-432 (1977).
[Footnote 3]
Minnesota Stat. 571.41, subd. 2 (1978), provides in relevant part:
[Footnote 5]
The prayer was later reduced voluntarily to $50,000, the face amount of the policy.
96
[Footnote 6] Baden v. Staples, 45 N.Y.2d 889, 383 N.E.2d 110 (1978). The State has declined, however, to make the attachment procedure available to nonresident plaintiffs.Donawitz v. Danek, 42 N.Y.2d 138, 366 N.E.2d 253 (1977).
Minnesota Stat. 571.495 (1978) requires the garnishee to disclose the amount of his debt to the defendant. Section 571.51 provides in relevant part:
"[I]n all . . . cases where the garnishee denies liability, the judgment creditor may move the court at any time before the garnishee is discharged, on notice to both the judgment debtor and the garnishee, for leave to file a supplemental complaint making the latter a party to the action, and setting forth the facts upon which he claims to charge him; and, if probable cause is shown, such motion shall be granted. . . ."
[Footnote 11]
Forbes v. Boynton, 113 N.H. 617, 313 A.2d 129 (1973). But cf. Rocca v. Kenney, 117 N.H. 1057, 381 A.2d 330 (1977).
[Footnote 12]
Minn.Stat. 571.51 (1978). The party-garnishee is not a defendant.
Camire v. Scieszka, 116 N.H. 281, 358 A.2d 397 (1976).
[Footnote 7]
[Footnote 13]
The motion to dismiss also alleged lack of subject matter jurisdiction, insufficiency of process, and insufficiency of service of process.
The practice has been rejected, based on state law or constitutional grounds, in Belcher v. Government Employees Ins. Co., 282 Md. 718, 387 A.2d 770 (1978); Javorek v. Superior Court, 17 Cal.3d 629, 552 P.2d 728 (1976); Hart v. Cote, 145 N.J.Super. 420, 367 A.2d 1219 (Law Div.1976); Grinnell v. Garrett, 295 So.2d 496 (La.App. 1974);Johnson v. Farmers Alliance Mutual Ins. Co., 499 P.2d 1387 (Okla.1972); State ex rel. Government Employees Ins. Co. v. Lasky, 454 S.W.2d 942 (Mo.App. 1970); Howard v. Allen, 254 S.C. 455, 176 S.E.2d 127 (1970); De Rentiis v. Lewis, 106 R.I. 240, 258 A.2d 464 (1969); Housley v. Anaconda Co., 19 Utah 2d 124, 427 P.2d 390 (1967);Jardine v. Donnelly, 413 Pa. 474, 198 A.2d 513 (1964). See also Tessier v. State Farm Mutual Ins. Co., 458 F.2d 1299 (CA1 1972); Kirchman v. Mikula, 443 F.2d 816 (CA5 1971); Robinson v. O. F. Shearer & Sons, 429 F.2d 83 (CA3 1970); Sykes v. Beal, 392 F.Supp. 1089 (Conn.1975); Ricker v. Lajoie, 314 F.Supp. 401 (Vt.1970).
[Footnote 8]
Minnesota would apply its own comparative negligence law, rather than Indiana's contributory negligence rule. See Schwartz v. Consolidated Freightways Corp., 300 Minn. 487, 221 N.W.2d 665 (1974). Appellants assert that Minnesota would also decline to apply the Indiana guest statute if this case were tried in Minnesota. Juris.Statement 10, n. 2; cf. Savchuk II, supra at 891-892. The constitutionality of a choice of law rule that would apply forum law in these circumstances is not before us. Cf. Home Ins. Co. v. Dick, 281 U. S. 397 (1930).
[Footnote 9] [Footnote 14] 272 N.W.2d at 891. The conclusion that State Farm's obligation under the insurance policy was garnishable property is a matter of [Footnote 10] state law, and therefore is not before us. Assuming that it was garnishable property, the question is what significance that fact has to the relationship among the defendant, the forum, and the litigation.
97
[Footnote 15] domiciled there and which permitted the plaintiff to sue the insurer alone, without naming the insured as a defendant. Id. at 348 U. S. 68, n. 4.
The court explained:
"In the instant case, the insurer's obligation to defend and indemnify, while theoretically separable from the tort action, has no independent value or significance apart from accident litigation. In the accident litigation, however, it is inevitably the focus, determining the rights and obligation [sic] of the insurer, the insured, and practically speaking, the victim."
[Footnote 20]
A party does not extinguish his legal interest in a dispute by insuring himself against having to pay an eventual judgment out of his own pocket. Moreover, the purpose of insurance is simply to make the defendant whole for the economic costs of the lawsuit; but noneconomic factors may also be important to the defendant. Professional malpractice actions, for example, question the defendant's integrity and competence, and may affect his professional standing. Cf. Donawitz v. Danek, 42 N.Y.2d 138, 366 N.E.2d 253 (1977) (medical malpractice action premised on Seider jurisdiction dismissed because plaintiff was a nonresident). Further, one can easily conceive of cases in which the defendant might have a substantial economic stake in Seider litigation -- if, for example, multiple plaintiffs sued in different States for an aggregate amount in
Savchuk II. 272 N.W.2d at 892 (emphasis in original). The court considered the "practical relationship between the insurer and the nominal defendant," ibid. the limitation of liability to the policy amount, and the restriction of the garnishment procedure to resident plaintiffs, and concluded that "the relationship between the defending parties, the litigation, and the forum state," id. at 893, was sufficient to sustain the exercise of jurisdiction.
[Footnote 16]
excess of the policy limits, or if a successful claim would affect the policyholder's insurability. For these reasons, the defendant's interest in the adjudication of his liability cannot reasonably be characterized as de minimis.
Id. at 892-893; but see Savchuk I, 311 Minn. at 488, 245 N.W.2d at 629.
[Footnote 17] [Footnote 21] See Savchuk II, 272 N.W.2d at 892; Simpson v. Loehmann, 21 N.Y.2d 990, 991, 238 N.E.2d 319, 320 (1968). The court stated: [Footnote 18] "We view as relevant the relationship between he defending parties, the litigation, and the forum state. It In Savchuk I, the Minnesota Supreme Court rejected Rush's argument that the garnishment procedure amounted to a direct action, observing: "The defendant, not the insurer, is the party sued. There is nothing in the statute which suggests that the insurer should be named as a defendant." 311 Minn. at 488, 245 N.W.2d at 629. See n6, supra. Savchuk II, 272 N.W.2d at 893 (emphasis added). cannot be said that Minnesota lacks such minimally requisite 'contacts, ties or relations' to those defending parties as to offend the requirements of due process."
[Footnote 19]
[Footnote 22]
Compare the direct action statute upheld in Watson v. Employers Liability Assurance Corp., 348 U. S. 66 (1954), which was applicable only if the accident or injury occurred in the State or the insured was
See, e.g., Farrell v. Piedmont Aviation, Inc., 411 F.2d 812 (CA2 1969); Rintala v. Shoemaker, 362 F.Supp. 1044 (Minn.1973); Donawitz v. Danek, supra; Savchuk I.
98
MR. JUSTICE STEVENS, J., dissenting. same accident. Accord, Minichiello v. Rosenberg, supra, at 112; Note, The Constitutionality of Seider v. Rothafter Shaffer v. Heitner, 78 Colum.L.Rev. 409, 418-419 (1978). But we are not now faced with any problem concerning use of a quasi in rem judgment against an individual defendant personally. I am therefore led to the conclusion that the Federal Constitution does not require the Minnesota courts to dismiss this action.
As the Court notes, appellant Rush had no contact with Minnesota that would support personal jurisdiction over him in that State. Ante at 444 U. S. 322. Moreover, Shaffer v. Heitner, 433 U. S. 186, precludes the assertion of quasi in rem jurisdiction over his property in that forum if the intangible property attached is unrelated to the action. It does not follow, however, that the plaintiff may not obtain quasi in rem jurisdiction over appellant's insurance policy, since his carrier does business in Minnesota and since it has also specifically contracted in the policy attached to defend the very litigation that plaintiff has instituted in Minnesota.
* It seems to me that the possible impact of a default judgment on the reputation of an individual, see ante at 444 U. S. 331, n. 20, who has no contacts whatever with the forum State is far too remote to affect the analysis of the constitutional issue in this case.
In this kind of case, the Minnesota statute authorizing jurisdiction is correctly characterized as the "functional equivalent" of a so-called direct action statute. The impact of the judgment is against the insurer. * I believe such a direct action statute is valid as applied to a suit brought by a forum resident, see Watson v. Employers liability Assurance Corp., 348 U. S. 66, 348 U. S. 72, even if the accident giving rise to the action did not occur in the forum State, see Minichiello v. Rosenberg,
Page 444 U. S. 334
410 F.2d 106 (CA2 1968), cert. denied, 396 U.S. 844, so long as it is understood that the forum may exercise no power whatsoever over the individual defendant. As so understood, it makes no difference whether the insurance company is sued in its own name or, as Minnesota law provides, in the guise of a suit against the individual defendant.
In this case, although appellant Rush may have a contractual obligation to his insurer to appear in court to testify and generally to cooperate in the defense of the lawsuit, it is my understanding that Minnesota law does not compel him to do so through the contempt power or otherwise. Moreover, any judgment formally entered against the individual defendant may only be executed against the proceeds of his insurance policy. In my opinion, it would violate the Due Process Clause to make any use of such a judgment against that individual -for example, by giving the judgment collateral estoppel effect in a later action against him arising from the
99
640 F.2d 77: Hendrik Koster, a Citizen of the Netherlands, Plaintiff-appellee, v. Automark Industries, Incorporated, a Delaware Corporation,defendant-appellant Share| the jurisdiction of that state's courts. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292, 100 S.Ct. 559, 564, 62 L.Ed.2d 490 (1980); International Shoe v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945). 3
United States Court of Appeals, Seventh Circuit. - 640 F.2d 77
Argued Dec. 11, 1980.Decided Feb. 3, 1981
The parties agree that the document alleged to be Automark's contract to purchase up to 600,000 units of Koster's valve cap gauges was executed in Milan, Italy. 1 The Milan meeting between Koster and Automark followed preliminary inquiry and discussion between the two parties during a period of five months. The
John C. Loring, Chicago, Ill., for defendant-appellant.
Thomas B. Cassidy, Martin, Craig, Chester & Sonnenschein, Chicago, Ill., for plaintiff-appellee.
discussion was carried on via mail between Koster's Amsterdam office and Automark's Illinois address. Automark began the exchange of letters in June, 1970 with a one-sentence request for "descriptive material and prices" of Koster's product. Automark subsequently expressed interest in marketing the tire gauges, but
Before SPRECHER, BAUER and WOOD, Circuit Judges.
HARLINGTON WOOD, Jr., Circuit Judge. 1
stated that it needed to know the details of such important factors as Koster's relationship with the Swiss factory that produced the gauges, Koster's present patent rights, and his rights to worldwide distribution of the total output of the Swiss factory. Automark expressly disclaimed willingness to negotiate and conclude a contract through the mail.2 In early November, 1970, Automark's vice-president, J. L. Bohmrich, wrote that he would like to meet with Koster in Amsterdam or at the Swiss factory during a European trip Bohmrich planned to take later in the month. Koster replied that he would instead be willing to meet in Milan, and would telephone Bohmrich's Illinois office to make arrangements. As noted, the Milan meeting resulted in execution of the document involved in this case. So far as the record shows, Automark never ordered Koster's gauges, and Koster never shipped any gauges. 4
This diversity case involves the appeal of defendant Automark Industries, Inc. ("Automark"), a corporation doing business in Illinois, from the district court's determination on motion for summary judgment in favor of plaintiff Hendrik Koster, a citizen of the Netherlands. The district court's decision granted enforcement of a default judgment obtained in district court in Amsterdam by Koster against Automark in a case brought on a claimed breach of contract. Finding that Automark did not have sufficient contact with the Netherlands to vest that country's courts with personal jurisdiction over Automark so as to permit enforcement of the default judgment in United States courts, we reverse. 2
Whether a court may, under American law, assert jurisdiction over a foreign defendant-company depends upon whether the company "purposefully avails itself of the privilege of conducting activities within the forum State." Shaffer v. Heitner, 433 U.S. 186, 216, 97 S.Ct. 2569, 2586, 53 L.Ed.2d 683 (1977). This means that the company must pass a threshold of minimum contacts with the forum state so that it is fair to subject it to
The business contacts described above are insufficient to reach the minimum level needed to satisfy due process requirements prerequisite to enforcement of the Dutch default judgment. A recent opinion of this court, Lakeside Bridge & Steel Co. v. Mountain State Construction Co., 597 F.2d 596 (7th Cir. 1979), thoroughly analyzed the due process requirements of minimum contacts in concluding that a federal court
100
sitting in a diversity case arising in Wisconsin did not have personal jurisdiction of a West Virginia defendant. Whether it be Wisconsin or the Netherlands, the standard of minimum contacts is the same. See generally Somportex Limited v. Philadelphia Chewing Gum Corp., 453 F.2d 435, 440 (3d Cir. 1971), cert. denied 405 U.S. 1017, 92 S.Ct. 1294, 31 L.Ed.2d 479 (1972). The facts in the Lakeside case were similar to those involved here, and if anything, presented a more compelling case for recognizing personal jurisdiction. 5 Lakeside, 597 F.2d at 604, the court notes that such contacts cannot be held to satisfy jurisdictional requirements, otherwise "(u)se of the interstate telephone and mail service to communicate with (an out-ofstate) plaintiff, if constituting contacts supporting jurisdiction, would give jurisdiction to any state into which communications were directed." Such a result would make virtually every business subject to suit in any state with which it happened to communicate in some manner. That clearly would not satisfy the demands of due process. 8 In Lakeside, the defendant construction company had ordered structural assemblies from plaintiff Lakeside, a Wisconsin company. Several letters and telephone calls had been exchanged between the two businesses, and a contract concluded by mail. The assemblies were delivered, and Lakeside sued when the defendant withheld part of the purchase price. The court assumed that the defendant believed that Lakeside would perform the contract in Wisconsin, the forum state. Focusing on the nature and quality of the contacts between the two companies, the court nevertheless concluded that Wisconsin could not assert jurisdiction over the West Virginia company because the defendant's Wisconsin contacts did not show that it "purposefully avail(ed) itself of the privilege of conducting activities within the forum state." 597 F.2d at 603. 6 Lakeside emphasizes that "the best interests of the international and state systems" of commerce should be considered when making determinations about minimum contacts in individual cases. 597 F.2d at 603, quoting Restatement (Second) of Conflict of Laws 37, Comment a (1971). This consideration weighs in favor of Automark, since it "is based on the proposition that '(a) state should not improperly impinge upon the interests of other states by trying in its courts a case with which it has no adequate relationship.' " 597 F.2d at 603, quoting Restatement, supra, 24, Comment b. The Netherlands lacks an adequate relationship to defendant's presence and conduct to justify trial of the case in that country. The interests of international business are better served by protecting potential international purchasers from being unreasonably called to defend suits commenced in foreign courts which lack jurisdiction according to our recognized standards of due process. The document at issue in the case before us was executed in Italy and involved the purchase of goods manufactured in Switzerland. While the document contains language that might be construed as an 9 agreement to pay, which payment Koster claims was to take place in the Netherlands, such a promise even if so interpreted is not sufficient contact to confer personal jurisdiction. Kulko v. California Superior Court, 436 U.S. 84, 93 n.6, 98 S.Ct. 1690, 1697, n.6, 56 L.Ed.2d 132 (1978) (child-support payments required under separation agreement to spouse living in California insufficient contact to confer jurisdiction on that state). 7 Moreover, the Lakeside opinion stresses that where the nature of a defendant's business contact in the forum state does not involve activities dangerous to persons and property, the propriety of vesting personal jurisdiction in that state must be considered in light of its relationship with the defendant other than that at issue in the lawsuit. 597 F.2d at 603. The purchase and shipment of valve gauges is not a dangerous activity. And here, there are no allegations that Automark had any relationship with the Netherlands beyond the letters, In comparison to the facts in the Lakeside case, Automark's only contacts with the Netherlands were eight letters, and possibly a telegram and a transatlantic telephone call all preliminary to the meeting in Italy. In telegram and telephone call involved in its business contact with Koster. See 597 F.2d at 603 n.12.
101
10 And the other case relied upon by the district judge, Cook Associates, Inc. v. Colonial Broach & Machine Co., 14 Ill.App.3d 965, 304 N.E.2d 27 (1973), dealt with a service contract involving an out-of-state company that On these facts, Automark did not have the minimum contacts necessary to show that it purposefully utilized had used the services of an Illinois employment agency via a single telephone call. This satisfied the the privilege to conduct business activities in the Netherlands sufficient to confer on that country's courts requirements for minimum contacts under the circumstances of that case since "that call was all that was personal jurisdiction over Automark. The district court concluded that cases decided under the Illinois long-arm necessary for defendant to achieve its (business) purpose", i. e., obtaining the names of prospective statute, Ill.Rev.Stat.Ch. 110, 17(a), supported his finding that Automark satisfied the requirement of minimum employees. 14 Ill.App.3d at 970, 304 N.E.2d 27. The conclusion and performance of the contract were carried contacts to support the Dutch court's jurisdiction. We disagree. We note that the Illinois courts have held that out in Illinois via that telephone call, unlike the situation before us where neither activity occurred in the the state long-arm statute is intended to assert jurisdiction over non-resident defendants only "to the extent Netherlands. permitted by the due process clause." Colony Press, Inc. v. Fleeman, 17 Ill.App.3d 14, 19, 308 N.E.2d 78 (1974). The Lakeside court's discussion of the application of Wisconsin's long-arm statute to a decision on the basis of federal due process rights is pertinent. The court noted that the Wisconsin law "was intended by the state legislature to reach only so far as permitted by the due process clause.... In these circumstances we are interpreting the statute, not ruling on its constitutionality, when we decide the due process question; yet we are of course not bound by the (state courts') determination of that federal question".597 F.2d at 599. Likewise, in the case before us we are not bound by Illinois judicial determinations on the requirements of due process to support personal jurisdiction. This is especially true where we are considering the powers of a court in a jurisdiction other than Illinois. 11 There apparently was some disagreement before the district court as to where this document was executed, since it bears the handwritten words "Scope (Koster's company) Amsterdam, Neth." The briefs of both parties on appeal agree that the document was executed in Milan, Italy 13
Absent personal jurisdiction over Automark in the Dutch case that resulted in a default judgment, the courts of this country lack jurisdiction to enforce the foreign default judgment. The decision of the district court accordingly is reversed and the case is remanded with directions to dismiss the complaint.3 1
At any rate, the cases relied upon by the district court for its determination that the Dutch court was vested with personal jurisdiction do not detract from our holding here. Thus, in Colony Press, supra, the state court noted that the "essential points" for purposes of its determination that an Ohio corporation was subject to a suit brought in Illinois courts by an Illinois company were that the contract was accepted in Illinois and performance
The text of the handwritten document, which serves as the alleged contract, reads as follows:
"We agree to purchase up to 600,000 pieces of Amico valve cap gauges bulkpacked from you at $0.11 each C.I.T. N.Y. within the 12 mos. period beginning 1/1/71."
It is signed by Automark's vice-president. It is questionable whether the document represents a valid contract, thereunder was expected to occur wholly within that state. 17 Ill.App.3d at 18, 308 N.E.2d 78. As our as it contains no corresponding promise by Koster. In light of our disposition of this case, however, we need discussion indicates, the document involved in this case was executed in Italy, and the goods to which it not reach the question of the sufficiency of the document to satisfy the prerequisites to a binding contract. related were to be produced in Switzerland: the Netherlands was not the situs of either activity. 2 12
102
Automark's letter to Koster of September 22, 1970 reads in pertinent part as follows: In a somewhat analogous situation, many states in this country have statutory provisions whereby notice of a lawsuit arising from an automobile accident in the forum state may be served on a non-resident defendant by delivery to the forum state's Secretary of State. Under that procedure, due process requires an additional step. The Secretary in turn must serve notice on the defendant through certified mail or other means reasonably calculated to result in actual notice. Wuchter v. Pizzutti, 276 U.S. 13, 19, 48 S.Ct. 259, 260, 72 L.Ed. 446 If and when we get into a program with you, it will be because we have met you personally and come to a meeting of the minds and because we have subsequently committed major marketing funds and energies to an AMICO program. The district court stated, quite correctly, that certified mail, the method used in the case before us, generally is sufficient to fulfill due process requirements regardless of actual notice. While this analysis is fine so far as it If you are interested in a "hit and miss", "catch as catch can" program (unfortunately these are American colloquial expressions but I do not know what to replace them with), then we have no place in your program and you should proceed without us. 3 goes, it ignores the Wuchter conclusion that a statutory provision is not reasonably calculated to provide notice unless its terms relating to the sending of notice are mandatory. Thus, in Wuchter, even though the defendant received actual notice of the lawsuit when the forum state's Secretary in fact mailed the summons, "(n)ot having been directed by the statute (actual notice via the Secretary's mailing) cannot, therefore, supply constitutional validity to the statute or to service under it." 276 U.S. at 24, 48 S.Ct. at 262. Here, there is Automark raised another issue which because of our resolution of the case becomes a collateral matter nothing in the Dutch statute that requires the Dutch Department of Foreign Affairs to serve process on a foreign defendant by certified mail or any other reasonable means. That the Department as a matter of practice may exercise its discretion to serve process in some reasonable manner is not dispositive, since "(t)he right of a citizen to due process of law must rest upon a basis more substantial than favor or discretion." Roller v. Holly, 176 U.S. 306, 409, 20 S.Ct. 410, 418, 44 L.Ed. 520 (1900). Compare Boivin v. Talcott, 102 F.Supp. 979 (N.D.Ohio 1951) (refusing to enforce Canadian default judgment where actual notice but no mandatory form of serving process other than discretion of Canadian court). An affidavit appended to Koster's brief on appeal states that "Dutch law" requires that the Department serve the summons on a defendant once it receives notice of the lawsuit. The conclusory and vague terms of the affidavit render it of no use in dealing with the issue of the statute's requirements, since the affidavit does not say whether the "Dutch law" referred to is delineated in a part of the statute not in the record, is a formal regulation or body of case law, or is an informal matter of practice. (1928).
Anyone who will conclude a major international marketing program by mail is not, in our opinion, worth doing business with and we wonder why you are so anxious to sign up anyone so long as it is done in a matter of days.
Automark contends that the Dutch statute governing service of process on defendants who reside in foreign countries provides insufficient assurances of actual notice to comport with American due process requirements. Absence of personal jurisdiction in the Netherlands courts would prevent a court in this country from enforcing a judgment rendered in the Netherlands. Hilton v. Guyot, 159 U.S. 113, 184, 202, 16 S.Ct. 139, 151, 158, 40 L.Ed. 95 (1895). The provisions of the Dutch statute that are pertinent here require that when a foreign defendant is named in a case that will be tried in the Netherlands, process notifying the defendant must be served on the Dutch Department of Foreign Affairs. The Dutch statute, as it appears in the record, contains no provision requiring the Department to follow up by serving notice to the foreign defendant. The issue of service is of particular significance in this case because, although a summons apparently was mailed, Automark insists it never received notice of the Dutch lawsuit and thus was unable to defend its interests in the case that resulted in default.
103
Under these circumstances the Dutch default judgment could not be enforced in our courts.
104
U.S. Supreme Court action on the ground offorum non conveniens. Relying on the test set forth in Gulf Oil Corp. v. Gilbert, 330 U. S. 501, and analyzing the "private interest factors" affecting the litigants' convenience and the "public interest factors" affecting the forum's convenience, as set forth in Gilbert, the District Court concluded that Scotland Piper Aircraft Co. v. Reyno was the appropriate forum. However, the Court of Appeals reversed, holding that the District Court had abused its discretion in conducting the Gilbert analysis and that, in any event, dismissal is automatically barred where Argued October 14, 1981 Page 454 U. S. 236 Decided December 8, 1981* the law of the alternative forum is less favorable to the plaintiff than the law of the forum chosen by the plaintiff. 454 U.S. 235 Held: CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR 1. Plaintiffs may not defeat a motion to dismiss on the ground of forum non conveniensmerely by showing that THE THIRD CIRCUIT the substantive law that would be applied in the alternative forum is less favorable to the plaintiffs than that of the chosen forum. The possibility of a change in substantive law should ordinarily not be given conclusive or even substantial weight in the forum non conveniens inquiry. Canada Malting Co. v. Paterson Steamships, Respondent, as representative of the estates of several citizens and residents of Scotland who were killed in Ltd., 285 U. S. 413. Pp. 454 U. S. 247-255. an airplane crash in Scotland during a charter flight, instituted wrongful death litigation in a California state court against petitioners, which are the company that manufactured the plane in Pennsylvania and the company that manufactured the plane's propellers in Ohio. At the time of the crash, the plane was registered in Great Britain and was owned and operated by companies organized in the United Kingdom. The pilot and all of the decedents' heirs and next of kin were Scottish subjects and citizens, and the investigation of the accident was conducted by British authorities. Respondent sought to recover from petitioners on the basis of negligence or strict liability (not recognized by Scottish law), and admitted that the action was filed in the United States because its laws regarding liability, capacity to sue, and damages are more favorable to respondent's position than those of Scotland. On petitioners' motion, the action was removed to a Federal District Court in California and was then transferred to the United States District Court for the Middle District of Pennsylvania, pursuant to 28 U.S.C. 1404(a). The District Court granted petitioners' motion to dismiss the (a) Under Gilbert, supra, dismissal will ordinarily be appropriate where trial in the plaintiff's chosen forum imposes a heavy burden on the defendant or the court, and where the plaintiff is unable to offer any specific reasons of convenience supporting his choice. If substantial weight were given to the possibility of an unfavorable change in law, however, dismissal might be barred even where trial in the chosen forum was plainly inconvenient, and the forum non conveniens doctrine would become virtually useless. Such an approach not only would be inconsistent with the purpose of theforum non conveniens doctrine, but also would pose substantial practical problems, requiring that trial courts determine complex problems in conflict of laws and comparative law, and increasing the flow into American courts of litigation by foreign plaintiffs against American manufacturers. Pp. 454 U. S. 248-252.
Piper Aircraft Co. v. Reyno, 454 U.S. 235 (1981)
No. 8048
Syllabus
105
(b) Nor may an analogy be drawn between forum non conveniens dismissals and transfers between federal courts pursuant to 28 U.S.C. 1404(a), which was construed in Van Dusen v. Barrack, 376 U. S. 612, as precluding a transfer if it resulted in a change in the applicable law. The statute was enacted to permit change of venue between federal courts, and although it was drafted in accordance with the doctrine offorum non conveniens, it was intended to be a revision, rather than a codification of the common law. District courts were given more discretion to transfer under 1404(a) than they had to dismiss on grounds of forum non conveniens. Van Dusen v. Barrack, supra, distinguished. Pp. 454 U. S. 253-254. Scotland, which has a very strong interest in this litigation. The accident occurred there, all of the decedents were Scottish, and apart from petitioners, all potential parties are either Scottish or English. As to respondent's argument that American citizens have an interest in ensuring that American manufacturers are deterred from producing defective products and that additional deterrence might be obtained by trial in the United States where they could be sued on the basis of both negligence and strict liability, any incremental deterrence from trial in an American court is likely to be insignificant and is not sufficient to justify the enormous commitment of judicial time and resources that would be required. Pp.454 U. S. 259-261.
2. The District Court properly decided that the presumption in favor of the plaintiff's forum choice applied with less than maximum force when the plaintiff or (as here) the real parties in interest are foreign. When the plaintiff has chosen the home forum, it is reasonable to assume that the choice is convenient; but when the plaintiff or real parties in interest are foreign, this assumption is much less reasonable, and the plaintiff's choice deserves less deference. Pp. 454 U. S. 255-256.
630 F.2d 149, reversed.
MARSHALL, J., delivered the opinion of the Court, in which BURGER, C.J., and BLACKMUN and REHNQUIST, JJ., joined, and in Parts I and II of which WHITE, J., joined. WHITE J., filed an opinion concurring in part and dissenting in part, post, p. 454 U. S. 261. STEVENS, J., filed a dissenting opinion, in which BRENNAN, J., joined, post, p. 454 U. S. 261. POWELL, J., took no part in the decision of the cases. O'CONNOR, J., took no part in the consideration or decision of the cases.
Page 454 U. S. 237
3. The forum non conveniens determination is committed to the trial court's sound discretion, and may be reversed only when there has been a clear abuse of discretion. Here, the District Court did not abuse its discretion in weighing the private and public interests under the Gilbert analysis, and thereby determining that the trial should be held in Scotland. Pp. 454 U. S. 257-261.
Page 454 U. S. 238
JUSTICE MARSHALL delivered the opinion of the Court.
These cases arise out of an air crash that took place in Scotland. Respondent, acting as representative of the estates of several Scottish citizens killed in the accident, brought wrongful death actions against petitioners
(a) In analyzing the private interest factors, the District Court did not act unreasonably in concluding that fewer evidentiary problems would be posed if the trial were held in Scotland, a large proportion of the relevant evidence being located there. The District Court also correctly concluded that the problems posed by the petitioners' inability to implead potential Scottish third-party defendants -- the pilot's estate, the plane's owners, and the charter company -- supported holding the trial in Scotland. Pp. 454 U. S. 257-259.
that were ultimately transferred to the United States District Court for the Middle District of Pennsylvania. Petitioners moved to dismiss on the ground of forum non conveniens. After noting that an alternative forum existed in Scotland, the District Court granted their motions. 479 F.Supp. 727 (1979). The United States Court of Appeals for the Third Circuit reversed. 630 F.2d 149 (1980). The Court of Appeals based its decision, at least in part, on the ground that dismissal is automatically barred where the law of the alternative forum is less favorable to the plaintiff than the law of the forum chosen by the plaintiff. Because we conclude that the
(b) The District Court's review of the factors relating to the public interest was also reasonable. Even aside from the question whether Scottish law might be applicable in part, all other public interest factors favor trial in
106
possibility of an unfavorable change in law should not, by itself, bar dismissal, and because we conclude that the District Court did not otherwise abuse its discretion, we reverse. In July, 1977, a California probate court appointed respondent Gaynell Reyno administratrix of the estates of the five passengers. Reyno is not related to and does not know any of the decedents or their survivors; she was a legal secretary to the attorney who filed this lawsuit. Several days after her appointment, Reyno commenced separate wrongful A Page 454 U. S. 240 In July, 1976, a small commercial aircraft crashed in the Scottish highlands during the course of a charter flight from death actions against Piper and Hartzell in the Superior Court of California, claiming negligence and strict liability. [Footnote 1] Air Navigation, McDonald, and the estate of the pilot are not parties to this litigation. The Page 454 U. S. 239 survivors of the five passengers whose estates are represented by Reyno filed a separate action in the United Kingdom against Air Navigation, McDonald, and the pilot's estate. [Footnote 2] Reyno candidly admits that the action against Piper and Hartzell was filed in the United States because its laws regarding liability, capacity to sue, and damages are more favorable to her position than are those of Scotland. Scottish law does not recognize strict liability in tort. Moreover, it permits wrongful death actions only when brought by a decedent's The aircraft, a twin-engine Piper Aztec, was manufactured in Pennsylvania by petitioner Piper Aircraft Co. (Piper). The propellers were manufactured in Ohio by petitioner Hartzell Propeller, Inc. (Hartzell). At the time of the crash, the aircraft was registered in Great Britain and was owned and maintained by Air Navigation and Trading Co., Ltd. (Air Navigation). It was operated by McDonald Aviation, Ltd. (McDonald), a Scottish air taxi service. Both Air Navigation and McDonald were organized in the United Kingdom. The wreckage of the plane is now in a hangar in Farnsborough, England. On petitioners' motion, the suit was removed to the United States District Court for the Central District of California. Piper then moved for transfer to the United States District Court for the Middle District of Pennsylvania, pursuant to 28 U.S.C. 1404(a). [Footnote 4] Hartzell moved to dismiss for lack of personal jurisdiction, or in the alternative, to transfer. [Footnote 5] In December, 1977, the District Court quashed service on The British Department of Trade investigated the accident shortly after it occurred. A preliminary report found that the plane crashed after developing a spin, and suggested that mechanical failure in the plane or the propeller was responsible. At Hartzell's request, this report was reviewed by a three-member Review Board, which held a 9-day adversary hearing attended by all interested parties. The Review Board found no evidence of defective equipment and indicated that pilot error may have contributed to the accident. The pilot, who had obtained his commercial pilot's license only three months earlier, was flying over high ground at an altitude considerably lower than the minimum height required by his company's operations manual. B Page 454 U. S. 241 relatives. The relatives may sue only for "loss of support and society." [Footnote 3]
Blackpool to Perth. The pilot and five passengers were killed instantly. The decedents were all Scottish subjects and residents, as are their heirs and next of kin. There were no eyewitnesses to the accident. At the time of the crash, the plane was subject to Scottish air traffic control.
Hartzell and transferred the case to the Middle District of Pennsylvania. Respondent then properly served process on Hartzell.
107
In May, 1978, after the suit had been transferred, both Hartzell and Piper moved to dismiss the action on the ground of forum non conveniens. The District Court granted these motions in October, 1979. It relied on the balancing test set forth by this Court inGulf Oil Corp. v. Gilbert, 330 U. S. 501 (1947), and its companion case, Koster v. Lumbermens Mut. Cas. Co., 330 U. S. 518 (1947). In those decisions, the Court stated that a plaintiff's choice of forum should rarely be disturbed. However, when an alternative forum has jurisdiction to hear the case, and when trial in the chosen forum would "establish . . . oppressiveness and vexation to a defendant . . . out of all proportion to plaintiff's convenience," or when the "chosen forum [is] inappropriate because of considerations affecting the court's own administrative and legal problems," the court may, in the exercise of its sound discretion, dismiss the case. Koster, supra,at 330 U. S. 524. To guide trial court discretion, the Court provided a list of "private interest factors" affecting the convenience of the litigants, and a list of "public interest factors" affecting the convenience of the forum. Gilbert, supra, at 330 U. S. 508-509. [Footnote 6] The District Court reasoned that, because crucial witnesses and evidence were beyond the reach of compulsory process, and because the defendants would not be able to implead potential Scottish third-party defendants, it would be "unfair to make Piper and Hartzell proceed to trial in this forum." Id. Page 454 U. S. 242 Page 454 U. S. 243 After describing our decisions in Gilbert. and Koster, the District Court analyzed the facts of these cases. It began by observing that an alternative forum existed in Scotland; Piper and Hartzell had agreed to submit to the jurisdiction of the Scottish courts and to waive any statute of limitations defense that might be available. It then stated that plaintiffs choice of forum was entitled to little weight. The court recognized that a plaintiff's choice ordinarily deserves substantial deference. It noted, however, that Reyno at 733. The survivors had brought separate actions in Scotland against the pilot, McDonald, and Air Navigation. "[I]t would be fairer to all parties and less costly if the entire case was presented to one jury with available testimony from all relevant witnesses." Ibid. Although the court recognized that, if trial were held in the United States, Piper and Hartzell could file indemnity or contribution actions against the Scottish defendants, it believed that there was a significant risk of inconsistent verdicts. [Footnote 7] "is a representative of foreign citizens and residents seeking a forum in the United States because of the more liberal rules concerning products liability law," The District Court concluded that the relevant public interests also pointed strongly towards dismissal. The court determined that Pennsylvania law would apply to Piper and Scottish law to Hartzell if the case were tried and that in the Middle District of Pennsylvania. [Footnote 8] As a result, "trial in this forum would be hopelessly complex and confusing for a jury." Id. at 734. In addition, the court noted that it was unfamiliar with Scottish law and thus would have to rely upon experts from that country. The court also found that the trial would be 479 F.Supp. at 731.
The District Court next examined several factors relating to the private interests of the litigants, and determined that these factors strongly pointed towards Scotland as the appropriate forum. Although evidence concerning the design, manufacture, and testing of the plane and propeller is located in the United States, the connections with Scotland are otherwise "overwhelming." Id. at 732. The real parties in interest are citizens of Scotland, as were all the decedents. Witnesses who could testify regarding the maintenance of the aircraft, the training of the pilot, and the investigation of the accident -- all essential to the defense -- are in Great Britain. Moreover, all witnesses to damages are located in Scotland. Trial would be aided by familiarity with Scottish topography, and by easy access to the wreckage.
"the courts have been less solicitous when the plaintiff is not an American citizen or resident, and particularly when the foreign citizens seek to benefit from the more liberal tort rules provided for the protection of citizens and residents of the United States."
108
enormously costly and time-consuming; that it would be unfair to burden citizens with jury duty when the Middle District would not be significantly aided by familiarity with Scottish topography, or by viewing the wreckage.
The Court of Appeals also rejected the District Court's analysis of the public interest factors. It found that the District Court gave undue emphasis to the application of Scottish law:
Page 454 U. S. 244
of Pennsylvania has little connection with the controversy; and that Scotland has a substantial interest in the outcome of the litigation.
"'the mere fact that the court is called upon to determine and apply foreign law does not present a legal problem of the sort which would justify the dismissal of a case otherwise properly before the court.'"
In opposing the motions to dismiss, respondent contended that dismissal would be unfair because Scottish law was less favorable. The District Court explicitly rejected this claim. It reasoned that the possibility that dismissal might lead to an unfavorable change in the law did not deserve significant weight; any deficiency in the foreign law was a "matter to be dealt with in the foreign forum." Id. at 738.
Id. at 163 (quoting Hoffman v. Goberman, 420 F.2d 423, 427 (CA3 1970)). In any event, it believed that Scottish law need not be applied. After conducting its own choice of law analysis, the Court of Appeals determined that American law would govern the actions against both Piper and Hartzell. [Footnote 10] The same choice of law analysis apparently led it to conclude that Pennsylvania and Ohio, rather than Scotland, are the jurisdictions with the greatest policy interests in the dispute, and that all other public interest factors favored trial in the United States. [Footnote 11]
On appeal, the United States Court of Appeals for the Third Circuit reversed and remanded for trial. The decision to reverse appears to be based on two alternative grounds. First, the Court held that the District Court abused its discretion in conducting the Gilbert analysis. Second, the Court held that dismissal is never appropriate where the law of the alternative forum is less favorable to the plaintiff. Page 454 U. S. 246
In any event, it appears that the Court of Appeals would have reversed even if the District Court had properly balanced the public and private interests. The court stated:
The Court of Appeals began its review of the District Court's Gilbert analysis by noting that the plaintiff's choice of forum deserved substantial weight, even though the real parties in interest are nonresidents. It then rejected the District Court's balancing of the private interests. It found that Piper and Hartzell had failed adequately to support their claim that key witnesses would be unavailable if trial were held in the United States: they had never specified the witnesses they would call and the testimony these witnesses would provide. The Court of Appeals gave little weight to the fact that Piper and Hartzell would not be able to implead potential Scottish third-party defendants, reasoning that this difficulty would be "burdensome" but not "unfair," 630 F.2d at 162. [Footnote 9] Finally, the court stated that resolution of the suit
"[I]t is apparent that the dismissal would work a change in the applicable law so that the plaintiff's strict liability claim would be eliminated from the case. But . . . a dismissal forforum non conveniens, like a statutory transfer, 'should not, despite its convenience, result in a change in the applicable law.' Only when American law is not applicable, or when the foreign jurisdiction would, as a matter of its own choice of law, give the plaintiff the benefit of the claim to which she is entitled here, would dismissal be justified."
630 F.2d at 163-164 (footnote omitted) (quoting DeMateos v. Texaco, Inc., 562 F.2d 895, 899 (CA3 1977), cert. denied, 435 U.S. 904 (1978)). In other words, the court decided that dismissal is automatically barred if it would lead to a change in the applicable law unfavorable to the plaintiff.
Page 454 U. S. 245
109
We granted certiorari in these cases to consider the questions they raise concerning the proper application of the doctrine of forum non conveniens. 450 U.S. 909 (1981). [Footnote 12] It is true that Canada Malting was decided before Gilbert, and that the doctrine offorum non conveniens was not fully crystallized until our decision in that case. [Footnote 13] However, Gilbert in no way affects the validity of Canada Malting. Indeed,
Page 454 U. S. 247
II
Page 454 U. S. 249
The Court of Appeals erred in holding that plaintiffs may defeat a motion to dismiss on the ground of forum non conveniens merely by showing that the substantive law that would be applied in the alternative forum is less favorable to the plaintiffs than that of the present forum. The possibility of a change in substantive law should ordinarily not be given conclusive or even substantial weight in the forum non conveniens inquiry.
by holding that the central focus of the forum non conveniens inquiry is convenience,Gilbert implicitly recognized that dismissal may not be barred solely because of the possibility of an unfavorable change in law. [Footnote 14] Under Gilbert, dismissal will ordinarily be appropriate where trial in the plaintiff's chosen forum imposes a heavy burden on the defendant or the court, and where the plaintiff is unable to offer any specific reasons of convenience supporting his choice. [Footnote 15] If substantial weight were given to the possibility
We expressly rejected the position adopted by the Court of Appeals in our decision inCanada Malting Co. v. Paterson Steamships, Ltd., 285 U. S. 413 (1932). That case arose out of a collision between two vessels in American waters. The Canadian owners of cargo lost in the accident sued the Canadian owners of one of the vessels in Federal District Court. The cargo owners chose an American court in large part because the relevant American liability rules were more favorable than the Canadian rules. The District Court dismissed on grounds of forum non conveniens. The plaintiffs argued that dismissal was inappropriate because Canadian laws were less favorable to them. This Court nonetheless affirmed:
of an unfavorable change in law, however, dismissal might be barred even where trial in the chosen forum was plainly inconvenient.
The Court of Appeals' decision is inconsistent with this Court's earlier forum non conveniens decisions in another respect. Those decisions have repeatedly emphasized the need to retain flexibility. In Gilbert, the Court refused to identify specific circumstances "which will justify or require either grant or denial of remedy." 330 U.S. at330 U. S. 508. Similarly, in Koster, the Court rejected the contention that, where a trial would involve inquiry into the internal affairs of a foreign corporation, dismissal was always appropriate. "That is one,
"We have no occasion to enquire by what law the rights of the parties are governed, as we are of the opinion
but only one, factor which may show convenience." 330 U.S. at 330 U. S. 527. And in Williams v. Green Bay & Western R. Co., 326 U. S. 549, 326 U. S. 557 (1946), we stated that we would not lay down a rigid rule to govern discretion, and that "[e]ach case turns on its facts." If central emphasis were
Page 454 U. S. 248
that, under any view of that question, it lay within the discretion of the District Court to decline to assume jurisdiction over the controversy. . . . '[T]he court will not take cognizance of the case if justice would be as well done by remitting the parties to their home forum.'" Page 454 U. S. 250
placed on any one factor, the forum non conveniens doctrine would lose much of the very flexibility that makes it so valuable.
Id. at 285 U. S. 419-420 (quoting Charter Shipping Co. v. Bowring, Jones & Tidy, Ltd.,281 U. S. 515, 281 U. S. 517 (1930)). The Court further stated that "[t]here as no basis for the contention that the District Court abused its discretion." 285 U.S. at 285 U. S. 423.
In fact, if conclusive or substantial weight were given to the possibility of a change in law, the forum non conveniens doctrine would become virtually useless. Jurisdiction and venue requirements are often easily
110
satisfied. As a result, many plaintiffs are able to choose from among several forums. Ordinarily, these plaintiffs will select that forum whose choice of law rules are most advantageous. Thus, if the possibility of an unfavorable change in substantive law is given substantial weight in the forum non conveniens inquiry, dismissal would rarely be proper. comparative law. As we stated in Gilbert, the public interest factors point towards dismissal where the court would be required to "untangle problems in conflict of laws, and in law foreign to itself." 330 U.S. at 330 U. S. 509.
Upholding the decision of the Court of Appeals would result in other practical problems. At least where the foreign plaintiff named an American manufacturer as defendant, [Footnote 17] a court could not dismiss the case on grounds of forum non
Except for the court below, every Federal Court of Appeals that has considered this question after Gilbert has held that dismissal on grounds of forum non conveniens may be granted even though the law applicable in the alternative forum is less favorable to the plaintiff's chance of recovery. See, e.g., Pain v. United Technologies Corp., 205 U.S.App.D.C. 229, 248-249, 637 F.2d 775, 794-795 (1980); Fitzgerald v. Texaco, Inc.,521 F.2d 448, 453 (CA2 1975), cert. denied, 423 U.S. 1052 (1976); Anastasiadis v. S.S. Little John, 346 F.2d 281, 283 (CA5 1965), cert. denied, 384 U.S. 920 (1966). [Footnote 16] Several courts have relied expressly on Canada Malting to hold that the possibility of an unfavorable change of law should not, by itself, bar dismissal. See Fitzgerald
Page 454 U. S. 252
conveniens where dismissal might lead to an unfavorable change in law. The American courts, which are already extremely attractive to foreign plaintiffs, [Footnote 18] would become even more attractive. The flow of litigation into the United States would increase and further congest already crowded courts. [Footnote 19]
Page 454 U. S. 253
Page 454 U. S. 251
The Court of Appeals based its decision, at least in part, on an analogy between dismissals on grounds of forum non conveniens and transfers between federal courts pursuant to 1404(a). In Van Dusen v. Barrack, 376 U. S. 612 (1964), this Court ruled that a 1404(a) transfer should not result in a change in the
v. Texaco, Inc., supra; Anglo-American Grain Co. v. The SIT Mina D'Amico, 169 F.Supp. 908 (ED Va.1959).
The Court of Appeals' approach is not only inconsistent with the purpose of the forum non conveniens doctrine, but also poses substantial practical problems. If the possibility of a change in law were given substantial weight, deciding motions to dismiss on the ground of forum non conveniens would become quite difficult. Choice of law analysis would become extremely important, and the courts would frequently be required to interpret the law of foreign jurisdictions. First, the trial court would have to determine what law would apply if the case were tried in the chosen forum, and what law would apply if the case were tried in the alternative forum. It would then have to compare the rights, remedies, and procedures available under the law that would be applied in each forum. Dismissal would be appropriate only if the court concluded that the Law applied by the alternative forum is as favorable to the plaintiff as that of the chosen forum. The doctrine offorum non conveniens, however, is designed in part to help courts avoid conducting complex exercises in
applicable law. Relying on dictum in an earlier Third Circuit opinion interpreting Van Dusen, the court below held that that principle is also applicable to a dismissal on forum non conveniens grounds. 630 F.2d at 164, and n. 51 (citing DeMateos v. Texaco, Inc., 562 F.2d at 899). However, 1404(a) transfers are different than dismissals on the ground of forum non conveniens.
Congress enacted 1404(a) to permit change of venue between federal courts. Although the statute was drafted in accordance with the doctrine offorum non conveniens, see Revisor's Note, H.R.Rep. No. 308, 80th Cong., 1st Sess., A132 (1947); H.R.Rep. No. 2646, 79th Cong., 2d Sess., A127 (1946), it was intended to be a revision, rather than a codification of the common law. Norwood v. Kirkpatrick, 349 U. S. 29 (1955). District courts were given more discretion to transfer under 1404(a) than they had to dismiss on grounds of forum non conveniens. Id. at 349 U. S. 31-32.
111
The reasoning employed in Van Dusen v. Barrack is simply inapplicable to dismissals on grounds of forum non conveniens. That case did not discuss the common law doctrine. Rather, it focused on "the construction and application" of 1404(a). 376 U.S. at 376 U. S. 613. [Footnote 20] Emphasizing the remedial plaintiff's choice of forum was appropriate. Furthermore, we do not believe that the District Court abused its discretion in weighing the private and public interests.
Page 454 U. S. 254
The District Court acknowledged that there is ordinarily a strong presumption in favor of the plaintiff's choice of forum, which may be overcome only when the private and public interest factors clearly point towards trial in the alternative forum. It held, however, that the presumption applies with less force when the plaintiff or real parties in interest are foreign.
purpose of the statute, Barrack concluded that Congress could not have intended a transfer to be accompanied by a change in law. Id. at 376 U. S. 622. The statute was designed as a "federal housekeeping measure," allowing easy change of venue within a unified federal system. Id. at 376 U. S. 613. The Court feared that, if a change in venue were accompanied by a change in law, forum-shopping parties would take unfair advantage of the relaxed standards for transfer. The rule was necessary to ensure the just and efficient operation of the statute. [Footnote 21]
The District Court's distinction between resident or citizen plaintiffs and foreign plaintiffs is fully justified. In Koster, the Court indicated that a plaintiff's choice of forum is entitled to greater deference when the plaintiff has chosen the home forum. 330 U.S. at330 U. S. 524. [Footnote 23] When the home forum has
We do not hold that the possibility of an unfavorable change in law should never be a relevant consideration in a forum non conveniens inquiry. Of course, if the remedy provided by the alternative forum is so clearly inadequate or unsatisfactory that it is no remedy at all, the unfavorable change in law may be given substantial weight; the district court may conclude that dismissal would not be in the interests of justice. [Footnote 22] In these cases, however, the remedies that
Page 454 U. S. 256
been chosen, it is reasonable to assume that this choice is convenient. When the plaintiff is foreign, however, this assumption is much less reasonable. Because the central purpose of any forum non conveniens inquiry is to ensure that the trial is convenient, a foreign plaintiff's choice deserves less deference. [Footnote 24]
Page 454 U. S. 255
Page 454 U. S. 257
would be provided by the Scottish courts do not fall within this category. Although the relatives of the decedents may not be able to rely on a strict liability theory, and although their potential damages award may be smaller, there is no danger that they will be deprived of any remedy or treated unfairly.
The forum non conveniens determination is committed to the sound discretion of the trial court. It may be reversed only when there has been a clear abuse of discretion; where the court has considered all relevant public and private interest factors, and where its balancing of these factors is reasonable, its decision deserves substantial deference. Gilbert, 330 U.S. at 330 U. S. 511-512; Koster, 330 U.S. at 330 U. S. 531.
III
Here, the Court of Appeals expressly acknowledged that the standard of review was one of abuse of discretion. In examining the District Court's analysis of the public and private interests, however, the Court of Appeals seems to have lost sight of this rule, and substituted its own judgment for that of the District Court.
The Court of Appeals also erred in rejecting the District Court's Gilbert analysis. The Court of Appeals stated that more weight should have been given to the plaintiff's choice of forum, and criticized the District Court's analysis of the private and public interests. However, the District Court's decision regarding the deference due
(1)
112
In analyzing the private interest factors, the District Court stated that the connections with Scotland are "overwhelming." 479 F.Supp. at 732. This characterization may be somewhat exaggerated. Particularly with respect to the question of relative ease of access to sources of proof, the private interests point in both directions. As respondent emphasizes, records concerning the design, manufacture, and testing of the propeller and plane are located in the United States. She would have greater access to sources of proof relevant to her strict liability and negligence theories if trial were held here. [Footnote 25] However, the District Court did not act McDonald is crucial to the presentation of petitioners' defense. If Piper and Hartzell can show that the accident was caused not by a design defect, but rather by the negligence of the pilot, the plane's owners, or the charter company, they will be relieved of all liability. It is true, of course, that, if Hartzell and Piper were found liable after a trial in the United States, they could institute an action for indemnity or contribution against these parties in Scotland. It would be far more convenient, however, to resolve all claims in one trial. The Court of Appeals rejected this argument. Forcing petitioners to rely on actions for indemnity or contributions would be "burdensome," but not "unfair." 630 F.2d at 162. Finding that trial in the plaintiff's chosen forum would be burdensome, however, is sufficient to support dismissal on grounds of forum non conveniens. [Footnote 28]
Page 454 U. S. 258
unreasonably in concluding that fewer evidentiary problems would be posed if the trial were held in Scotland. A large proportion of the relevant evidence is located in Great Britain.
(2)
The District Court's review of the factors relating to the public interest was also reasonable. On the basis of its
The Court of Appeals found that the problems of proof could not be given any weight because Piper and Hartzell failed to describe with specificity the evidence they would not be able to obtain if trial were held in the United States. It suggested that defendants seeking forum non conveniens dismissal must submit affidavits identifying the witnesses they would call and the testimony these witnesses would provide if the trial were held in the alternative forum. Such detail is not necessary. [Footnote 26] Piper and Hartzell have moved for dismissal precisely because many crucial witnesses are located beyond the reach of compulsory process, and thus are difficult to identify or interview. Requiring extensive investigation would defeat the purpose of their motion. Of course, defendants must provide enough information to enable the District Court to balance the parties' interests. Our examination of the record convinces us that sufficient information
Page 454 U. S. 260
choice of law analysis, it concluded that, if the case were tried in the Middle District of Pennsylvania, Pennsylvania law would apply to Piper and Scottish law to Hartzell. It stated that a trial involving two sets of laws would be confusing to the jury. It also noted its own lack of familiarity with Scottish law. Consideration of these problems was clearly appropriate under Gilbert; in that case, we explicitly held that the need to apply foreign law pointed towards dismissal. [Footnote 29]
The Court of Appeals found that the District Court's choice of law analysis was incorrect, and that American law would apply to both Hartzell and Piper. Thus, lack of familiarity with foreign law would not be a problem. Even if the Court of Appeals' conclusion is correct, however, all other public interest factors favored trial in
Page 454 U. S. 259
Scotland.
was provided here. Both Piper and Hartzell submitted affidavits describing the evidentiary problems they would face if the trial were held in the United States. [Footnote 27]
Scotland has a very strong interest in this litigation. The accident occurred in its airspace. All of the decedents were Scottish. Apart from Piper and Hartzell, all potential plaintiffs and defendants are either Scottish or English. As we stated in Gilbert, there is "a local interest in having localized controversies decided at home." 330 U.S. at 330 U. S. 509. Respondent argues that American citizens have an interest in ensuring that
The District Court correctly concluded that the problems posed by the inability to implead potential third-party defendants clearly supported holding the trial in Scotland. Joinder of the pilot's estate, Air Navigation, and
113
American manufacturers are deterred from producing defective products, and that additional deterrence might be obtained if Piper and Hartzell were tried in the United States, where they could be sued on the basis of both negligence and strict liability. However, the incremental deterrence that would be gained if this trial were held in an The pilot's estate has also filed suit in the United Kingdom against Air Navigation, McDonald, Piper, and Page 454 U. S. 261 Hartzell. Avco-Lycoming, Inc., the manufacturer of the plane's engines, was also named as a defendant. It was subsequently dismissed from the suit by stipulation.
[Footnote 2]
American court is likely to be insignificant. The American interest in this accident is simply not sufficient to justify the enormous commitment of judicial time and resources that would inevitably be required if the case were to be tried here.
[Footnote 3]
See Affidavit of Donald Ian Kerr MacLeod, App. A19 (affidavit submitted to District Court by petitioners describing Scottish law). Suits for damages are governed by The Damages (Scotland) Act 1976.
IV [Footnote 4] The Court of Appeals erred in holding that the possibility of an unfavorable change in law bars dismissal on the ground of forum non conveniens. It also erred in rejecting the District Court's Gilbert analysis. The District Court properly decided that the presumption in favor of the respondent's forum choice applied with less than maximum force because the real parties in interest are foreign. It did not act unreasonably in deciding that the private interests pointed towards trial in Scotland. Nor did it act unreasonably in deciding that the public interests favored trial in Scotland. Thus, the judgment of the Court of Appeals is [Footnote 5] Section 1404(a) provides:
"For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought."
Reversed.
The District Court concluded that it could not assert personal jurisdiction over Hartzell consistent with due process. However, it decided not to dismiss Hartzell because the corporation would be amenable to process in
JUSTICE POWELL took no part in the decision of these cases.
Pennsylvania.
JUSTICE O'CONNOR took no part in the consideration or decision of these cases.
[Footnote 6]
* Together with No. 80-883, Hartzell Propeller, Inc. v. Reyno, Personal Representative of the Estates of Fehilly et al., also on certiorari to the same court.
The factors pertaining to the private interests of the litigants included the
"relative ease of access to sources of proof; availability of compulsory process for attendance of unwilling, and [Footnote 1] the cost of obtaining attendance of willing, witnesses; possibility of view of premises, if view would be
114
appropriate to the action; and all other practical problems that make trial of a case easy, expeditious and inexpensive." The court claimed that the risk of inconsistent verdicts was slight because Pennsylvania and Scotland both adhere to principles of res judicata.
Gilbert, 330 U.S. at 330 U. S. 508. The public factors bearing on the question included the administrative difficulties flowing from court congestion; the "local interest in having localized controversies decided at home"; the interest in having the trial of a diversity case in a forum that is at home with the law that must govern the action; the avoidance of unnecessary problems in conflict of laws, or in the application of foreign law; and the unfairness of burdening citizens in an unrelated forum with jury duty. Id. at 330 U. S. 509.
[Footnote 10]
The Court of Appeals agreed with the District Court that California choice of law rules applied to Piper, and that Pennsylvania choice of law rules applied to Hartzell, see n 8,supra. It did not agree, however, that California used a "governmental interests" analysis and that Pennsylvania used a "significant contacts" analysis. Rather, it believed that both jurisdictions employed the "false conflicts" test. Applying this test, it concluded that Ohio and Pennsylvania had a greater policy interest in the dispute than Scotland, and that American law would apply to both Piper and Hartzell.
[Footnote 7]
The District Court explained that inconsistent verdicts might result if petitioners were held liable on the basis of strict liability here, and then required to prove negligence in an indemnity action in Scotland. Moreover, even if the same standard of liability applied, there was a danger that different juries would find different facts and produce inconsistent results.
[Footnote 11]
The court's reasoning on this point is somewhat unclear. It states:
"We have held that, under the applicable choice of law rules, Pennsylvania and Ohio are the jurisdictions with [Footnote 8] the greatest policy interest in this dispute. It follows that the other public interest factors that should be considered under the Supreme Court cases of Gilbert and Koster favor trial in this country, rather than Scotland."
Under Klaxon v. Stentor Electric Mfg. Co., 313 U. S. 487 (1941), a court ordinarily must apply the choice of law rules of the State in which it sits. However, where a case is transferred pursuant to 28 U.S.C. 1404(a), it must apply the choice of law rules of the State from which the case was transferred. Van Dusen v. Barrack, 376 U. S. 612(1946). Relying on these two cases, the District Court concluded that California choice of law rules would apply to Piper, and Pennsylvania choice of law rules would apply to Hartzell. It further concluded that California applied a "governmental interests" analysis in resolving choice of law problems, and that Pennsylvania employed a "significant contacts" analysis. The court used the "governmental interests" analysis to determine that Pennsylvania liability rules would apply to Piper, and the "significant contacts" analysis to determine that Scottish liability rules would apply to Hartzell.
630 F.2d at 171. The Court of Appeals concluded as part of its choice of law analysis that the United States had the greatest policy interest in the dispute. See n 10, supra.It apparently believed that this conclusion necessarily implied that theforum non conveniens public interest factors pointed toward trial in the United States.
[Footnote 12]
We granted certiorari in No. 80 848 to consider the question
[Footnote 9]
115
"[w]hether, in an action in federal district court brought by foreign plaintiffs against American defendants, the plaintiffs may defeat a motion to dismiss on the ground offorum non conveniens merely by showing that the substantive law that would be applied if the case were litigated in the district court is more favorable to them than the law that would be applied by the courts of their own nation." Applied in the Federal Courts in Matters of Admiralty, 35 Cornell L.Q. 12 (1949). In Williams v. Green Bay & Western R. Co., 326 U. S. 549 (1946), the Court first indicated that motions to dismiss on grounds of forum non conveniens could be made in federal diversity actions. The doctrine became firmly established when Gilbertand Koster were decided one year later.
We granted certiorari in No. 80-883 to consider the question whether
In previous forum non conveniens decisions, the Court has left unresolved the question whether, under Erie R. Co. v. Tompkins, 304 U. S. 64 (1938), state or federal law offorum non conveniens applies in a diversity case. Gilbert, 330 U.S. at 330 U. S. 509;Koster, 330 U.S. at 330 U. S. 529; Williams v. Green Bay & Western R. Co., supra, at326 U. S. 551, 326 U. S. 558-559. The Court did not decide this issue, because the same
"a motion to dismiss on grounds offorum non conveniens [should] be denied whenever the law of the alternate forum is less favorable to recovery than that which would be applied by the district court."
In this opinion, we begin by considering whether the Court of Appeals properly held that the possibility of an unfavorable change in law automatically bars dismissal. 454 U. S. infra. Since we conclude that the Court of Appeals erred, we then consider its review of the District Court's Gilbert analysis to determine whether dismissal was otherwise appropriate. 454 U. S. infra. We believe that it is necessary to discuss the Gilbertanalysis in order to properly dispose of the cases.
result would have been reached in each case under federal or state law. The lower courts in these cases reached the same conclusion: Pennsylvania and California law onforum non conveniens dismissals are virtually identical to federal law. See 630 F.2d at 158. Thus, here also, we need not resolve the Erie question.
[Footnote 14]
The questions on which certiorari was granted are sufficiently broad to justify our discussion of the District Court's Gilbert analysis. However, even if the issues we discuss in 454 U. S. our consideration of these issues is not inappropriate. An order limiting the grant of certiorari does not operate as a jurisdictional bar. We may consider questions outside the scope of the limited order when resolution of those questions is necessary for the proper disposition of the case. See Olmstead v. United States, 277 U. S. 438 (1928); McCandless v. Furlaud, 293 U. S. 67 (1934); Redrup v. New York, 386 U. S. 767 (1967).
See also Williams v. Green Bay & Western R. Co. at 326 U. S. 555, n. 4 (citing with approval a Scottish case that dismissed an action on the ground of forum non conveniens despite the possibility of an unfavorable change in law).
[Footnote 15]
In other words, Gilbert held that dismissal may be warranted where a plaintiff choose a particular forum not because it is convenient, but solely in order to harass the defendant or take advantage of favorable law. This is precisely the situation in which the Court of Appeals' rule would bar dismissal.
[Footnote 13]
The doctrine of forum non conveniens has a long history. It originated in Scotland, seeBraucher, The Inconvenient Federal Forum, 60 Harv.L.Rev. 908, 909-911 (1947), and became part of the common law of many States, see id. at 911-912; Blair, The Doctrine of Forum Non Conveniens in Anglo-American Law, 29 Colum.L.Rev. 1 (1929). The doctrine was also frequently applied in federal admiralty actions. See, e.g., Canada Malting Co. v. Paterson Steamships, Ltd.; see also Bickel, The Doctrine of Forum Non Conveniens As
[Footnote 16]
Cf. Dahl v. United Technologies Corp., 632 F.2d 1027, 1032 (CA3 1980) (dismissal affirmed where "Norwegian substantive law will predominate the trial of this case and the mere presence of a count pleaded under Connecticut law, but which may have little chance of success, does not warrant a different
116
conclusion"). But see DeMateos v. Texaco, Inc., 562 F.2d 895, 899 (CA3 1977) (dictum) (principle that 1404(a) transfer should not result in change in law is no less applicable to dismissal on grounds of forum non conveniens), cert. denied, 435 U.S. 904 (1978). The court below relied on the dictum in DeMateos in reaching its decision. See infra at 454 U. S. 253-254. In holding that the possibility of a change in law unfavorable to the plaintiff should not be given substantial [Footnote 17] weight, we also necessarily hold that the possibility of a change in law favorable to defendant should not be considered. Respondent suggests that Piper and Hartzell filed the motion to dismiss not simply because trial in the United States would be inconvenient, but also because they believe the laws of Scotland are more favorable. She argues that this should be taken into account in the analysis of the private interests. We recognize, of course, that Piper and Hartzell may be engaged in reverse forum-shopping. However, this possibility ordinarily should not enter into a trial court's analysis of the private interests. If the defendant is able to overcome the presumption in favor of plaintiff by showing that trial in the chosen forum would be unnecessarily burdensome, dismissal is appropriate -- regardless of the fact that defendant may also be First, all but 6 of the 50 American States -- Delaware, Massachusetts, Michigan, North Carolina, Virginia, and Wyoming -- offer strict liability. 1 CCH Prod.Liability Rep. 4016 (1981). Rules roughly equivalent to American strict liability are effective in France, Belgium, and Luxembourg. West Germany and Japan have a strict liability statute for pharmaceuticals. However, strict liability remains primarily an American innovation. Second, the tort plaintiff may choose, at least potentially, from among 50 jurisdictions if he decides to file suit in the United States. Each of these jurisdictions applies its own set of malleable choice of law rules. Third, jury trials are almost always available in the United States, while they are never provided in civil law jurisdictions. G. Gloss, Comparative Law 12 (1979); J. Merryman, The Civil Law Tradition 121 (1969). Even in the United Kingdom, most civil actions are not tried before a jury. 1 G. Keeton, The United Kingdom: The Development of its Laws and Constitutions 309 (1955). Fourth, unlike most foreign jurisdictions, American courts allow contingent attorney's fees, and do not tax losing parties with their opponents' attorney's fees. R. Schlesinger, Comparative Law: Cases, Text, Materials 275-277 (3d ed.1970); Orban, Product Liability: A Comparative Legal Restatement -- Foreign National Law and the EEC Directive, 8 Ga.J.Int'l & Comp.L. 342, 393 (1978). [Footnote 20] motivated by a desire to obtain a more favorable forum. Cf. Kloeckner Reederei und Kohlenhandel v. A/S Hakedal, 210 F.2d 754, 757 (CA2) (defendant not entitled to dismissal on grounds of forum non conveniens solely because the law of the original forum is less favorable to him than the law of the alternative forum), cert. dism'd by stipulation, 348 U.S. 801 (1954). Fifth, discovery is more extensive in American than in foreign courts. R. Schlesinger, supra, at 307, 310, and n. 33.
[Footnote 19]
In fact, the defendant might not even have to be American. A foreign plaintiff seeking damages for an accident that occurred abroad might be able to obtain service of process on a foreign defendant who does business in the United States. Under the Court of Appeals' holding, dismissal would be barred if the law in the alternative forum were less favorable to the plaintiff -- even though none of the parties are American, and even though there is absolutely no nexus between the subject matter of the litigation and the United States.
[Footnote 18]
Barrack at least implicitly recognized that the rule it announced for transfer under 1404(a) was not the common law rule. It cited several decisions under 1404(a) in which lower courts had been "strongly inclined to protect plaintiffs against the risk that transfer might be accompanied by a prejudicial change in applicable state laws." 376 U.S. at 376 U. S. 630, n. 26. These decisions frequently rested on the assumption that a change in law would have been unavoidable under common law forum non conveniens, but could be avoided under 1404(a). See, e.g., Greve v. Gibraltar Enterprises, Inc., 85 F.Supp. 410, 414 (NM 1949).
[Footnote 21]
117
The United States Court of Appeals for the Second Circuit has expressly rejected the contention that rules governing transfers pursuant to 1404(a) also govern forum non conveniens dismissals. Schertenleib v. Traum, 589 F.2d 1156 (1978). As the District Court correctly noted in its opinion, 479 F.Supp. at 731; see also n 10,supra, the lower federal courts have routinely given less weight to a foreign plaintiff's choice of forum. See, e.g., Founding Church of Scientology v. Verlag, 175 U.S.App.D.C. 402, 408, 536 F.2d 429, 435 (1976); Paper Operations Consultants Int'l, Ltd. v. SS Hong Kong Amber, 513 F.2d 667, 672 (CA9 1975); Fitzgerald v. Texaco, Inc., 521 F.2d 448, 451 (CA2 1975), cert. denied, 423 U.S. 1052 (1976); Mobil Tankers Co. v. Mene Grande Oil Co., 363 F.2d At the outset of any forum non conveniens inquiry, the court must determine whether there exists an alternative forum. Ordinarily, this requirement will be satisfied when the defendant is "amenable to process" in the other jurisdiction. Gilbert, 330 U.S. at 330 U. S. 506-507. In rare circumstances, however, where the remedy offered by the other forum is clearly unsatisfactory, the other forum may not be an adequate alternative, and the initial requirement may not be satisfied. Thus, for example, dismissal would not be appropriate where the alternative forum does not permit litigation of the subject matter of the dispute. Cf. Phoenix Canada Oil Co., Ltd. v. Texaco, Inc., 78 F.R.D. 445 (Del.1978) (court refuses to dismiss, where alternative forum is Ecuador, it is unclear whether Ecuadorean tribunal will hear the case, and there is no generally codified Ecuadorean legal remedy for the unjust enrichment and tort claims asserted). A citizen's forum choice should not be given dispositive weight, however. See Pain v. United Technologies Corp., 205 U.S.App.D.C. 229, 252-253, 637 F.2d 775, 796-797 (1980); Mizokami Bros. of Arizona, Inc. v. Baychem Corp., 556 F.2d 975 (CA9 1977),cert. denied, 434 U.S. 1035 (1978). Citizens or residents deserve somewhat more deference than foreign plaintiffs, but dismissal should not be automatically barred when a plaintiff has filed suit in his home forum. As always, if the balance of conveniences suggests that trial in the chosen forum would be unnecessarily burdensome for the defendant or the court, dismissal is proper. 611, 614 (CA3), cert. denied, 385 U.S. 945 (1966);Ionescu v. E. F. Hutton & Co. (France), 465 F.Supp. 139 (SDNY 1979); Michell v. General Motors Corp., 439 F.Supp. 24, 27 (ND Ohio 1977).
[Footnote 22]
[Footnote 23]
[Footnote 24]
In Koster, we stated that,
See Pain v. United Technologies Corp., supra, at 253, 637 F.2d at 797 (citizenship and residence are proxies for convenience); see also Note, Forum Non Conveniens and American Plaintiffs in the Federal Courts, 47 U.
"[i]n any balancing of conveniences, a real showing of convenience by a plaintiff who has sued in his home forum will normally outweigh the inconvenience the defendant may have shown."
Chi.L.Rev. 373, 382 383 (1980).
Respondent argues that since plaintiffs will ordinarily file suit in the jurisdiction that offers the most favorable 330 U.S. at 330 U. S. 524. See also Swift & Co. Packers v. Compania Colombiana del Caribe, 339 U. S. 684, 339 U. S. 697 (1950) ("suit by a United States citizen against a foreign respondent brings into force considerations very different from those in suits between foreigners"); Canada Malting Co. v. Paterson Steamships, Ltd., 285 U.S. at285 U. S. 421 ("[t]he rule recognizing an unqualified discretion to decline jurisdiction in suits in admiralty between foreigners appears to be supported by an unbroken line of decisions in the lower federal courts"). [Footnote 25] law, establishing a strong presumption in favor of both home and foreign plaintiffs will ensure that defendants will always be held to the highest possible standard of accountability for their purported wrongdoing. However, the deference accorded a plaintiff's choice of forum has never been intended to guarantee that the plaintiff will be able to select the law that will govern the case. See supra at 454 U. S. 247-250.
118
In the future, where similar problems are presented, district courts might dismiss subject to the condition that defendant corporations agree to provide the records relevant to the plaintiff's claims. See Pain v. United Technologies Corp., 205 U.S.App.D.C. at 244, 637 F.2d at 790 (relying on similar argument in approving dismissal of action arising out of helicopter crash that took place in Norway).
[Footnote 26]
[Footnote 29]
The United States Court of Appeals for the Second Circuit has expressly rejected such a requirement. Fitzgerald v. Texaco, Inc., supra, at 451, n. 3. In other cases, dismissals have been affirmed despite the failure to provide detailed affidavits. See Farmanfarmaian v. Gulf Oil Corp., 437 F.Supp. 910, 924 (SDNY 1977), aff'd., 588 F.2d 880 (CA2 1978). And in a decision handed down two weeks after the decision in this case, another Third Circuit panel affirmed a dismissal without mentioning such a requirement. See Dahl v. United Technologies Corp., 632 F.2d 1027 (1980).
Many forum non conveniens decisions have held that the need to apply foreign law favors dismissal. See, e.g., Calavo Growers of California v. Belgium, 632 F.2d 963, 967 (CA2 1980), cert. denied, 449 U.S. 1084 (1981); Schertenleib v. Traum, 589 F.2d at 1165. Of course, this factor alone is not sufficient to warrant dismissal when a balancing of all relevant factors shows that the plaintiff's chosen forum is appropriate. See, e.g., Founding Church of Scientology v. Verlag, 175 U.S.App.D.C. at 409, 536 F.2d at 436;Burt v. Isthmus Development Co., 218 F.2d 353, 357 (CA5), cert. denied, 349 U.S. 922 (1955).
The Court of Appeals apparently relied on an analogy to motions to transfer under 28 U.S.C. 1404(a). 630 F.2d at 160-161. It cited Marbury-Pattillo Construction Co. v. Bayside Warehouse Co., 490 F.2d 155, 158 (CA5 1974), and Texas Gulf Sulphur Co. v. Ritter, 371 F.2d 145, 148 (CA10 1967), which suggest an affidavit requirement in the 1404(a) context. As we have explained, however, dismissals on grounds of forum non conveniens and 1404(a) transfers are not directly comparable. See supra at 454 U. S. 253-254.
JUSTICE WHITE, concurring in part and dissenting in part.
I join Parts I and II of the Court's opinion. However, like JUSTICE BRENNAN and JUSTICE STEVENS, I would not proceed to deal with the issues addressed in 454 U. S.To that extent, I am in dissent.
JUSTICE STEVENS, with whom JUSTICE BRENNAN joins, dissenting.
[Footnote 27]
In No. 80 848, only one question is presented for review to this Court:
See Affidavit of Ronald C. Scott, App. to Pet. for Cert. of Hartzell Propeller, Inc., A75; Affidavit of Charles J. McKelvey, App. to Pet. for Cert. of Piper Aircraft Co. 1f. The affidavit provided to the District Court by Piper states that it would call the following witnesses: the relatives of the decedents; the owners and employees of McDonald; the persons responsible for the training and licensing of the pilot; the persons responsible for servicing and maintaining the aircraft; and two or three of its own employees involved in the design and manufacture of the aircraft.
"Whether, in an action in federal district court brought by foreign plaintiffs against American defendants, the plaintiffs may defeat a motion to dismiss on the ground of
Page 454 U. S. 262
forum non conveniens merely by showing that the substantive law that would be applied if the case were litigated in the district court is more favorable to them than the law that would be applied by the courts of their own nation."
[Footnote 28] Pet. for Cert. in No. 80-848, p. i. In No. 8083, the Court limited its grant of certiorari,see 450 U.S. 909, to the same question:
119
"Must a motion to dismiss on grounds of forum non conveniens be denied whenever the law of the alternate forum is less favorable to recovery than that which would be applied by the district court?"
Pet. for Cert. in No. 80-883, p. i. I agree that this question should be answered in the negative. Having decided that question, I would simply remand the case to the Court of Appeals for further consideration of the question whether the District Court correctly decided that Pennsylvania was not a convenient forum in which to litigate a claim against a Pennsylvania company that a plane was defectively designed and manufactured in Pennsylvania.
120
U.S. Supreme Court 3. Important considerations in the application of the doctrine of forum non conveniens,from the standpoint of litigants, are relative ease of access to sources of proof, availability of compulsory process for attendance of unwilling witnesses, cost of obtaining attendance Gulf Oil Corp. v. Gilbert Page 330 U. S. 502 No. 93 of willing witnesses, possibility of view of the premises if that be appropriate, and all other practical problems Argued December 18, 19, 1946 that make trial of a case easy, expeditious, and inexpensive. P.330 U. S. 508.
Gulf Oil Corp. v. Gilbert, 330 U.S. 501 (1947)
Decided March 10, 1947
4. Considerations of public interest in applying the doctrine include the undesirability of piling up litigation in congested centers, the burden of jury duty on people of a community having no relation to the litigation, the local interest in having localized controversies decided at home, and the unnecessary injection of problems in
330 U.S. 501
CERTIORARI TO THE CIRCUIT COURT OF APPEALS
conflict of laws. Pp. 330 U. S. 508-509.
FOR THE SECOND CIRCUIT
Syllabus
Applying the doctrine of forum non conveniens, a district court dismissed a tort action in New York arising out of events occurring in Virginia. 62 F.Supp. 291. The Circuit Court of Appeals reversed. 153 F.2d 883. This Court granted certiorari. 328 U.S. 830.Reversed, p. 330 U. S. 512.
1. A federal district court has power to dismiss an action at law pursuant to the doctrine of forum non conveniens -- at least where its jurisdiction is based on diversity of citizenship and the state courts have such power. Pp. 330 U. S. 502-509, 330 U. S. 512.
MR. JUSTICE JACKSON delivered the opinion of the Court.
2. A resident of Virginia brought an action in a federal district court in New York City against a Pennsylvania corporation qualified to do business in both Virginia and New York (where it had designated agents to receive service of process) to recover damages for destruction of plaintiff's public warehouse and its contents in Virginia by fire resulting from defendant's negligence. The court had jurisdiction (based solely on diversity of citizenship), and the venue was correct, but all events in litigation had taken place in Virginia, most of the witnesses resided there, and both state and federal courts in Virginia were available to plaintiff and were able to obtain jurisdiction of defendant. Applying the doctrine of forum non conveniens, the court dismissed the suit.
The questions are whether the United States District Court has inherent power to dismiss a suit pursuant to the doctrine of forum non conveniens and, if so, whether that power was abused in this case.
The respondent-plaintiff brought this action in the Southern District of New York, but resides at Lynchburg, Virginia, where he operated a public warehouse. He alleges that the petitioner-defendant, in violation of the ordinances of Lynchburg, so carelessly handled a delivery of gasoline to his warehouse tanks and pumps as to cause
Held: it did not abuse its discretion in doing so. Pp. 330 U. S. 509-512.
Page 330 U. S. 503
121
an explosion and fire which consumed the warehouse building to his damage of $41,889.10, destroyed merchandise and fixtures to his damage of $3,602.40, caused injury to his business and profits of $20,038.27, and burned the property of customers in his custody under warehousing agreements to the extent of $300,000. He asks judgment of $365,529.77, with costs and disbursements, and interest from the date of fire. The action clearly is one in tort. "Obviously, the proposition that a court having jurisdiction must exercise it is not universally true -- else the The petitioner-defendant is a corporation organized under the laws of Pennsylvania, qualified to do business in both Virginia and New York, and it has designated officials of each state as agents to receive service of process. When sued in New York, the defendant, invoking the doctrine of forum non conveniens, claimed that the appropriate place for trial is Virginia, where the plaintiff lives and defendant does business, where all events in litigation took place, where most of the witnesses reside, and where both state and federal courts are available to plaintiff, and are able to obtain jurisdiction of the defendant. Canada Malting Co., Ltd. v. Paterson Steamships, Ltd., 285 U. S. 413, 285 U. S. 422-423. admiralty court could never decline jurisdiction on the ground that the litigation is between foreigners. Nor is it true of courts administering other systems of our law. Courts of equity and of law also occasionally decline, in the interest of justice, to exercise jurisdiction where the suit is between aliens or nonresidents, or where, for kindred reasons, the litigation can more appropriately be conducted in a foreign tribunal." question whether it must do so. Indeed, the doctrine of forum non conveniens can never apply if there is absence of jurisdiction or mistake of venue.
This Court, in one form of words or another, has repeatedly recognized the existence of the power to decline jurisdiction in exceptional circumstances. As formulated by Mr. Justice Brandeis, the rule is:
The case, on its merits, involves no federal question, and was brought in the United States District Court solely because of diversity in citizenship of the parties. Because of the character of its jurisdiction and the holdings of and under Erie Railroad Co. v. Tompkins, 304 U. S. 64, the District Court considered that the law of New York as toforum non conveniens applied, and that it required the case to be left to Virginia courts. [Footnote 1] It therefore dismissed.
We later expressly said that a state court "may, in appropriate cases, apply the doctrine of forum non conveniens." Broderick v. Rosner, 294 U. S. 629, 294 U. S. 643; Williams v. North Carolina, 317 U. S. 287, 317 U. S. 294, n. 5. Even where federal rights binding on state courts under the Constitution are sought to be adjudged, this Court has sustained state courts in a refusal to entertain a litigation between a nonresident and a foreign corporation or between two foreign corporations. Douglas v. New York, N.H. & H. R. Co., 279 U. S. 377; Anglo-American Provision Co. v.
The Circuit Court of Appeals disagreed as to the applicability of New York law, took a restrictive view of the application of the entire doctrine in federal courts, and, one judge dissenting, reversed. [Footnote 2] The case is here on certiorari. 328 U.S. 830. Page 330 U. S. 505
Davis Provision Co. No. 1, 191 U. S. 373. It has held the use of an inappropriate forum in one case an unconstitutional burden on interstate commerce. Davis v. Farmers' Cooperative Equity Co., 262 U. S. 312. On substantially forum non conveniensgrounds, we have required federal courts to relinquish decision of cases
Page 330 U. S. 504
within their jurisdiction where the court would have to participate in the administrative policy of a state. Railroad Commission v. Rowan & Nichols Oil Co., 311 U. S. 570; Burford v. Sun Oil Co., 319 U. S. 315; but cf. Meredith v. Winter Haven, 320 U. S. 228. And, most recently, we decided Williams v. Green Bay &
It is conceded that the venue statutes of the United States permitted the plaintiff to commence his action in the Southern District of New York, and empower that court to entertain it. [Footnote 3] But that does not settle the
122
Western R. Co., 326 U. S. 549, in which the Court, without questioning the validity of the doctrine, held it had been applied in that case without justification. [Footnote 4] jurisdiction, not that the plaintiff's choice cannot be questioned. The defendant's consent to be sued extends only to give the court jurisdiction of the person; it assumes that the court, having the parties before it, will apply all the applicable law, including, in those cases where it is appropriate, its discretionary judgment as to whether the suit should be entertained. In all cases in which the doctrine of forum non conveniens comes into
It is true that, in cases under the Federal Employers' Liability Act, we have held that plaintiff's choice of a forum cannot be defeated on the basis of forum non conveniens.But this was because the special venue act under which those cases are brought was believed to require it. Baltimore & Ohio R. Co. v. Kepner, 314 U. S. 44; Miles v. Illinois Central R. Co., 315 U. S. 698. Those decisions do not purport to modify the doctrine as to other cases governed by the general venue statutes.
Page 330 U. S. 507
play, it presupposes at least two forums in which the defendant is amenable to process; the doctrine furnishes criteria for choice between them.
Page 330 U. S. 506
II
But the court below says that
The principle of forum non conveniens is simply that a court may resist imposition upon its jurisdiction even when jurisdiction is authorized by the letter of a general venue statute. These statutes are drawn with a necessary generality, and usually give a plaintiff a choice of courts, so that he may be quite sure of some place in which to pursue his remedy. But the open door may admit those who seek not simply justice, but perhaps justice blended with some harassment. A plaintiff sometimes is under temptation to resort to a strategy of forcing the trial at a most inconvenient place for an adversary, even at some inconvenience to himself.
"The Kepner case . . . warned against refusal of jurisdiction in a particular case controlled by congressional act; here, the only difference is that congressional act, plus judicial interpretation (under the Neirbo case), spells out the result."
153 F.2d at 885. The Federal Employers' Liability Act, however, which controlled decision in the Kepner case, specifically provides where venue may be had in any suit on a cause of action arising under that statute. What the court below refers to as "congressional act, plus judicial interpretation" is the general statute of venue in diversity suits, plus our decision that it gives the defendant "a personal privilege respecting the venue, or place of suit, which he may assert, or may waive at his election," Neirbo Co. v. Bethlehem Shipbuilding Corp., Ltd., 308 U. S. 165, 308 U. S. 168. The Federal Employers' Liability Act, as interpreted by Kepner, increases the number of places where the defendant may be sued, and makes him accept the plaintiff's choice. The Neirbocase is only a declaration that, if the defendant, by filing consent to be sued, waives its privilege to be sued at its place of residence, it may be sued in the federal courts at the place where it has consented to be sued. But the general venue statute plus the Neirbointerpretation do not add up to a declaration that the court must respect the choice of the plaintiff, no matter what the type of suit or issues involved. The two, taken together, mean only that the defendant may consent to be sued, and it is proper for the federal court to take
Many of the states have met misuse of venue by investing courts with a discretion to change the place of trial on various grounds, such as the convenience of witnesses and the ends of justice. [Footnote 5] The federal law contains no such express criteria to guide the district court in exercising its power. But the problem is a very old one affecting the administration of the courts as well as the rights of litigants, and, both in England and in this country, the common law worked out techniques and criteria for dealing with it. [Footnote 6]
Page 330 U. S. 508
Wisely, it has not been attempted to catalogue the circumstances which will justify or require either grant or denial of remedy. The doctrine leaves much to the discretion of the court to which plaintiff resorts, and
123
experience has not shown a judicial tendency to renounce one's own jurisdiction so strong as to result in many abuses. [Footnote 7] The law of New York as to the discretion of a court to apply the doctrine of forum non conveniens, and as to the standards that guide discretion is, so far as here involved, the same as the federal rule. Murnan v. Wabash Ry. Co., 246 N.Y. 244, 158 N.E. 508;Wedemann v. United States Trust Co.. 258 N.Y. 315, 179 N.E. 712; see Gregonis v. Philadelphia & Reading Coal & Iron Co., 235 N.Y. 152, 139 N.E. 223. It would not be profitable therefore to pursue inquiry as to the source from which our rule must flow.
If the combination and weight of factors requisite to given results are difficult to forecast or state, those to be considered are not difficult to name. An interest to be considered, and the one likely to be most pressed, is the private interest of the litigant. Important considerations are the relative ease of access to sources of proof; availability of compulsory process for attendance of unwilling, and the cost of obtaining attendance of willing, witnesses; possibility of view of premises, if view would be appropriate to the action, and all other practical problems that make trial of a case easy, expeditious, and inexpensive. There may also be questions as to the enforceability of a judgment if one is obtained. The court will weigh relative advantages and obstacles to fair trial. It is often said that the plaintiff may not, by choice of an inconvenient forum, "vex," "harass," or "oppress" the defendant by inflicting upon him expense or trouble not necessary to his own right to pursue his remedy. [Footnote 8] But, unless the balance is strongly in favor of the defendant, the plaintiff's choice of forum should rarely be disturbed.
III
Turning to the question whether this is one of those rather rare cases where the doctrine should be applied, we look first to the interests of the litigants.
The plaintiff himself is not a resident of New York, nor did any event connected with the case take place there, nor does any witness with the possible exception of experts live there. No one connected with that side of the case save counsel for the plaintiff resides there, and he has candidly told us that he was retained by insurance companies interested presumably because of subrogation. His affidavits and argument are devoted to controverting claims as to defendant's inconvenience, rather than to showing that the present forum serves
Factors of public interest also have place in applying the doctrine. Administrative difficulties follow for courts when litigation is piled up in congested centers instead of being handled at its origin. Jury duty is a burden that ought not to be imposed upon the people of a community
any convenience
Page 330 U. S. 510
Page 330 U. S. 509
of his own, with one exception. The only justification for trial in New York advanced here is one rejected by the district court and is set forth in the brief as follows:
which has no relation to the litigation. In cases which touch the affairs of many persons, there is reason for holding the trial in their view and reach, rather than in remote parts of the country where they can learn of it by report only. There is a local interest in having localized controversies decided at home. There is an appropriateness, too, in having the trial of a diversity case in a forum that is at home with the state law that must govern the case, rather than having a court in some other forum untangle problems in conflict of laws, and in law foreign to itself. "This Court can readily realize that an action of this type, involving as it does a claim for damages in an amount close to $400,000, is one which may stagger the imagination of a local jury which is surely unaccustomed to dealing with amounts of such a nature. Furthermore, removed from Lynchburg, the respondent will have an opportunity to try this case free from local influences and preconceived notions which make it difficult to procure a jury which has no previous knowledge of any of the facts herein."
124
This unproven premise that jurors of New York live on terms of intimacy with $400,000 transactions is not an assumption we easily make. Nor can we assume that a jury from Lynchburg and vicinity would be "staggered" by contemplating the value of a warehouse building that stood in their region, or of merchandise and fixtures such as were used there, nor are they likely to be staggered by the value of chattels which the people of that neighborhood put in storage. It is a strange argument on behalf of a Virginia plaintiff that the community which gave him patronage to make his business valuable is not capable of furnishing jurors who know the value of the goods they store, the building they are stored in, or the business their patronage creates. And there is no specification of any local influence, other than accurate knowledge of local conditions, that would make a fair trial improbable. The net of this is that we cannot say the District Court was bound to entertain a provincial fear of the provincialism of a Virginia jury. That leaves the Virginia plaintiff without even a suggested reason for transporting this suit to New York. Page 330 U. S. 512 litigants. Nor is it necessarily cured by the statement of plaintiff's counsel that he will see to getting many of the witnesses to the trial, and that some of them "would be delighted to come to New York to testify." There may be circumstances where such a proposal should be given weight. In others, the offer may not turn out to be as generous as defendant or court might suppose it to be. Such matters are for the District Court to decide in exercise of a sound discretion.
The court likewise could well have concluded that the task of the trial court would be simplified by trial in Virginia.
If trial was in a state court, it could apply its own law to events occurring there. If in federal court by reason of diversity of citizenship, the court would apply the law of its own state in which it is likely to be experienced. The course of adjudication in New York federal court might be beset with conflict of laws problems all avoided if the case is litigated in Virginia, where it arose.
Page 330 U. S. 511
Defendant points out that not only the plaintiff, but every person who participated in the acts charged to be negligent, resides in or near Lynchburg. It also claims a need to interplead an alleged independent contractor which made the delivery of the gasoline and which is a Virginia corporation domiciled in Lynchburg, that it cannot interplead in New York. There also are approximately 350 persons residing in and around Lynchburg who stored with plaintiff the goods for the damage to which he seeks to recover. The extent to which they have left the community since the fire and the number of them who will actually be needed is in dispute. The complaint alleges that defendant's conduct violated Lynchburg ordinances. Conditions are said to require proof by firemen and by many others. The learned and experienced trial judge was not unaware that litigants generally manage to try their cases with fewer witnesses than they predict in such motions as this. But he was justified in concluding that this trial is likely to be long, and to involve calling many witnesses, and that Lynchburg, some 400 miles from New York, is the source of all proofs for either side, with possible exception Gilbert v. Gulf Oil Corp., 62 F.Supp. 291. of experts. Certainly to fix the place of trial at a point where litigants cannot compel personal attendance and may be forced to try their cases on deposition is to create a condition not satisfactory to court, jury, or most [Footnote 2] MR. JUSTICE REED and MR. JUSTICE BURTON dissent. They do not set out the factual reasons for their dissent, since the Court's affirmance of Koster v. Lumbermens Mutual casualty Co., 330 U. S. 518, would control. We are convinced that the District Court did not exceed its powers or the bounds of its discretion in dismissing plaintiff's complaint and remitting him to the courts of his own community. The Circuit Court of Appeals took too restrictive a view of the doctrine as approved by this Court. Its judgment is
Reversed.
[Footnote 1]
125
Gilbert v. Gulf Oil Corp., 153 F.2d 883. See Dainow, The Inappropriate Forum, 29 Ill.L.Rev. 867, 889.
[Footnote 3]
[Footnote 8]
See 28 U.S.C. 112; Neirbo Co. v. Bethlehem Shipbuilding Corp., Ltd., 308 U. S. 165.
See Blair, The Doctrine of Forum Non Conveniens in Anglo-American Law, 29 Col.L.Rev. 1.
[Footnote 4]
MR. JUSTICE BLACK, dissenting.
The doctrine did not originate in federal, but in state, courts. This Court, in recognizing and approving it by name, has never indicated that it was rejecting application of the doctrine to law actions which had been an integral and necessary part of evolution of the doctrine. And cf. Slater v. Mexican National R. Co., 194 U. S. 120. Wherever it is applied in courts of other jurisdictions, its application does not depend on whether the action is at law, Collard v. Beach, 93 App.Div. 339, 87 N.Y.S. 884; Murnan v. Wabash Ry. Co., 246 N.Y. 244, 158 N.E. 508; Jackson & Sons v. Lumbermen's Mutual Casualty Co., 86 N.H. 341, 168 A. 895; or in equity, Langfelder v. Universal Laboratories, 293 N.Y. 200, 56 N.E.2d 550; Egbert v. Short, 2 Ch. 250. See footnote 1, Koster v. (American) Lumbermens Mutual Casualty Co., post, 330 U. S. 518.
The defendant corporation is organized under the laws of Pennsylvania, but is qualified to do business and maintains an office in New York. Plaintiff is an individual residing and doing business in Virginia. The accident in which plaintiff alleges to have been damaged occurred in Lynchburg, Virginia. Plaintiff brought this action in the Federal District Court in New York. Section 11 of the Judiciary Act of 1789, 1 Stat. 78, carried over into the Judicial Code, 24, 28 U.S.C. 41(1), confers jurisdiction upon federal district courts of all actions at law between citizens of different states. The Court does not suggest that the federal district court in New York lacks jurisdiction under this statute, or that the venue was improper in this case. 28 U.S.C. 112. Cf. 308 U. S. v.
[Footnote 5]
Page 330 U. S. 513
See Foster, Place of Trial -- Interstate Application of Intrastate Methods of Adjustment, 44 Harv.L.Rev. 41, 47, 62.
Bethlehem Shipbuilding Corp., 308 U. S. 165. But it holds that a district court may abdicate its jurisdiction when a defendant shows to the satisfaction of a district court that it would be more convenient and less vexatious for the defendant if the trial were held in another jurisdiction. Neither the venue statute nor the statute which has governed jurisdiction since 1789 contains any indication or implication that a federal district
[Footnote 6]
See Logan v. Bank of Scotland, [1906] 1 K.B. 141; cf. La Societe du Gaz de Paris v. La Societe Anonyme de Navigation "Les Armateurs Francais," [1926] Sess.Cas. (H.L.) 13.Collard v. Beach, 93 App.Div. 339, 87 N.Y.S. 884; Jackson & Sons v. Lumbermen's Mutual Casualty Co., 86 N.H. 341, 168 A. 895; see Pietraroia v. New Jersey & Hudson R. & Ferry Co., 197 N.Y. 434, 91 N.E. 120; Great Western Railway Co. of Canada v. Miller, 19 Mich. 305.
court, once satisfied that jurisdiction and venue requirements have been met, may decline to exercise its jurisdiction. Except in relation to the exercise of the extraordinary admiralty and equity powers of district courts, this Court has never before held contrary to the general principle that
"the courts of the United States are bound to proceed to judgment and to afford redress to suitors before them in every case to which their jurisdiction extends. They cannot abdicate their authority or duty in any case in
[Footnote 7]
favor of another jurisdiction."
126
Hyde v. Stone, 20 How. 170, 61 U. S. 175, quoted with approval in Chicot County v. Sherwood, 148 U. S. 529, 148 U. S. 534. See also Dennick v. Railroad Co., 103 U. S. 11; Baltimore & O. R. Co. v. Kepner, 314 U. S. 44; Evey v. Mexican Cent. R. Co., 81 F. 294. [Footnote 2/1] Never until today has this Court held, in actions for money damages for violations of common law or statutory rights, that a district court can abdicate its statutory duty to exercise its jurisdiction for the alleged convenience of the defendant to a lawsuit. Compare Slater v. Mexican National R. Co., 194 U. S. 120. No such discretionary authority to decline to decide a case, however, has, before today, been vested in federal courts in actions for money judgments deriving from statutes or the common law. [Footnote 2/3] To engraft the doctrine of forum non conveniens upon the statutes fixing jurisdiction and proper venue in the district courts in such actions seems to me to be far more than the mere filling in of the interstices of those statutes. [ Footnote 2/4]
It may be that a statute should be passed authorizing the federal district courts to decline to try so-called common law cases according to the convenience of the parties. But whether there should be such a statute, and determination of its scope and the safeguards which should surround it, are, in my judgment, questions of policy which Congress should decide. There are strong arguments presented by the Court in its opinion why federal courts exercising their common law jurisdiction should have the discretionary powers which equity
For reasons peculiar to the special problems of admiralty and to the extraordinary remedies of equity, the courts exercising admiralty and equity powers have been permitted
Page 330 U. S. 514
at times to decline to exercise their jurisdiction. Canada Malting Co. v. Paterson S.S. Co., 285 U. S. 413; Rogers v. Guaranty Trust Co., 288 U. S. 123; cf. Williams v. Green Bay & W. R. Co., 326 U. S. 549. This exception is rooted in the kind of relief which these courts grant and the kinds of problems which they solve. See Meredith v. Winter Haven, 320 U. S. 228, 320 U. S. 235; Burford v. Sun Oil Co., 319 U. S. 315, 319 U. S. 333 n. 29. Courts of equity developed to afford relief where a money judgment in the common law courts provided no adequate remedy for an injured person. [Footnote 2/2] From the beginning of equitable jurisdiction up to now, the chancery courts have generally granted or withheld their special remedies at their discretion, and "courts of admiralty . . . act upon enlarged principles of equity." O'Brien v. Miller, 168 U. S. 287,168 U. S. 297. But this Court has, on many occasions, severely restricted the discretion of district courts to decline to grant even the extraordinary equitable remedies.Meredith v. Winter Haven, supra, and cases there cited, 320 U.S. at 320 U. S. 234-235. Previously, federal courts have not generally been allowed the broad and indefinite discretion to dispose even of equity cases solely on a trial court's judgment of the relative convenience of the forum for the parties themselves. For a major factor in these equity decisions has been the relative ability of the forum to shape and execute its equitable remedy. Cf. Rogers v. Guaranty Trust Co., supra.
courts have always possessed in dispensing equitable relief. I think equally strong arguments could be advanced to show that they should not. For any individual or corporate defendant who does part of his business in states other than the one in which he
Page 330 U. S. 516
is sued will almost invariably be put to some inconvenience to defend himself. It will be a poorly represented multistate defendant who cannot produce substantial evidence and good reasons fitting the rule now adopted by this Court tending to establish that the forum of action against him is most inconvenient. The Court's new rule will thus clutter the very threshold of the federal courts with a preliminary trial of fact concerning the relative convenience of forums. The preliminary disposition of this factual question will, I believe, produce the very kind of uncertainty, confusion, and hardship which stalled and handicapped persons seeking compensation for maritime injuries following this Court's decision in Southern Pacific Co. v. Jensen, 244 U. S. 205. The broad and indefinite discretion left to federal courts to decide the question of convenience from the welter of factors which are relevant to such a judgment will inevitably produce a complex of close and indistinguishable decisions from which accurate prediction of the proper forum will become difficult, if not impossible. Yet plaintiffs will be asked
Page 330 U. S. 515
127
"to determine with certainty before bringing their actions that factual question over which courts regularly divide among themselves and within their own membership. As penalty for error, the injured individual may not only suffer serious financial loss through the delay and expense of litigation, but discover that his claim has been barred by the statute of limitations in the proper forum while he was erroneously pursuing it elsewhere." [Footnote 2/2]
Although the distinction between actions at law and suits in equity in federal courts has been abolished by the adoption of the single form of civil action, Rule 2, F.R.C.P., see 1 Moore, Federal Practice (1938) c. 2, there remains to federal courts the same discretion, no more and no less, in the exercise of special equitable remedies as existed before the adoption of the federal rules. Neither the rules, the statutes, tradition, nor practical considerations justify application of equitable discretion to actions for money judgments based on common law or statutory rights.
Davis v. Department of Labor & Industries, 317 U. S. 249, 317 U. S. 254.
This very case illustrates the hazards of delay. It must be begun anew in another forum after the District Court, the Circuit Court of Appeals, and now this Court have had their time-consuming say as to the relative convenience of the forum in which the plaintiff chose to seek redress. Whether the statute of limitations has run
[Footnote 2/3]
This Court, whose jurisdiction is primarily appellate, has held that it need not exercise its constitutionally granted original jurisdiction even at common law where there is another suitable forum. Georgia v. Pennsylvania R. Co., 324 U. S. 439, 324 U. S. 464-465. But the Constitution, not Congress, fixes this Court's jurisdiction. And it was this Court's duty to interpret its constitutional jurisdiction. It is the duty of Congress to fix the jurisdiction of the district courts by statute. It did so. It is not the duty of this Court to amend that statute.
Page 330 U. S. 517
against the plaintiff we do not know. The convenience which the individual defendant will enjoy from the Court's new rule of forum non conveniens in law actions may be thought to justify its inherent delays, uncertainties, administrative complications, and hardships. But, in any event, Congress has not yet said so, and I do not think that this Court should, 150 years after the passage of the Judiciary Act, fill in what it thinks is a deficiency in the deliberate policy which Congress adopted. [Footnote 2/5] Whether the doctrine of forum non conveniens is good or bad, I should wait for Congress to adopt it.
[Footnote 2/4]
"I recognize without hesitation that judges do and must legislate, but they can do so only interstitially; they are confined from molar to molecular motions." Holmes, J., dissenting in Southern Pacific Co. v. Jensen, 244 U. S. 205, 244 U. S. 218. See alsodissenting opinion, State Tax Commission v. Aldrich, 316 U. S. 174, 316 U. S. 185, and authorities there collected.
MR. JUSTICE RUTLEDGE joins in this opinion.
[Footnote 2/1]
In Mondou v. New York, N.H. & H. R. Co., 223 U. S. 1, 223 U. S. 58, it was stated that:
[Footnote 2/5]
"The existence of the jurisdiction creates an implication of duty to exercise it, and that its exercise may be onerous, does not militate against that implication."
The very law review articles which are relied upon to document this theory of a federal rule of forum non conveniens reveal that judicial adoption of this theory without a new act of Congress would be an unwarranted judicial innovation. Foster, Place of Trial -- Interstate Application of Intrastate Methods of Adjustment, 44
Cf. Douglas v. New York, N.H. & H. R. Co., 279 U. S. 377, 279 U. S. 388.
128
Harv.L.Rev. 41, 52; Blair, The Doctrine of Forum Non Conveniens in Anglo-American Law, 29 Col.L.Rev. 1, 18. For Instance, it is stated that,
"No matter how little dispute there is as to the desirability of such legislation, there is comparatively little chance of overcoming legislative inertia and securing its passage unless some accident happens to focus attention upon it. The best hope is that the courts will feel free to take appropriate action without specific legislation authorizing them to do so."
Foster, supra, at 52.
129
LUECK v. SUNDSTRAND CORPORATION Klaus LUECK; Martin G. Alexander; Maree Gray; Ian Gray; Petra Gray; Elle Gray; Peter Roberts; William McGrory; Murray Brown; Dean L. Mason; John Austin; Shayne A. Blake; David S. Green; Robyn Keall, individually and as special representative of the Estate of Jonathan P. Keall; Jill Dixon, individually and as special representative of the Estate of Reginald Dixon; Barbara White, individually and as special representative of the Estate of David John White; Lucille White; Maxwell White; Paul John Cameron, Plaintiffs-Appellants, v. SUNDSTRAND CORPORATION; Honeywell Corporation; Hydraulic Units, Inc., dba Dowty Aerospace; Messier-Dowty International; Dehavilland, Inc., Defendants-Appellees. On June 5, 1995, Ansett New Zealand (Ansett) Flight 703 took off from Auckland with an intended destination of Palmerston North, New Zealand. The commuter flight carried 21 persons-three crew members and 18 passengers. All of the passengers were citizens of New Zealand, except for one who was a citizen of the United States. As the flight approached Palmerston North, the flight crew prepared for landing. The No.99-15961 landing gear of the aircraft failed to lower hydraulically, so the pilot and co-pilot were forced to lower the landing gear manually. While the flight crew focused on lowering the landing gear, the aircraft flew toward the hilly terrain leading into Palmerston North. Although the aircraft's GPWS emitted an alarm four seconds before the aircraft hit the ground, the crew was unable to avoid the accident. The aircraft crashed into the ground, killing one member of the flight crew and three passengers and injuring all others on board. Steven D. Copple,Copple, Chamberlin, Boehm, & Murphy, Phoenix, Arizona, for the plaintiffs-appellants.Terry O'Reilly and Gary L. Simms, O'Reilly, Collins & Danko, Menlo Park, California, for the plaintiffsappellants.James H. Marburger, Gust Rosenfeld, Phoenix, Arizona, for defendant-appellee Sundstrand Corporation.James A. Teilborg, Teilborg, Sanders & Park, Phoenix, Arizona for defendants-appellees Hydraulic Units, Inc., and Messier-Dowty International.Thad T. Dameris, Vinson & Elkins, Houston, Texas, for defendant-appellee Messier-Dowty International.James W. Hunt and Alan H. Collier, Mendes & Mount, Los Angeles, California, for defendant-appellee Honeywell Corporation.Edward R. Glady, Goodwin Raup, Phoenix, Arizona, for defendant-appellee deHavilland, Inc.Richard Clark Coyle and Kevin C. Osborn, Perkins Coie, Seattle, Washington, for defendant-appellee deHavilland, Inc. New Zealand's Transport Accident Investigation Commission (the Commission) investigated the causes and circumstances of the accident. The Commission Report ultimately identified the following causal factors of the accident: adequate alternative forum and that the public and private factors weighed in favor of dismissal. The district court agreed with Defendants. We have jurisdiction under 28 U.S.C. 1291, and we affirm.
I.BACKGROUND
A.Flight 703 and the Ensuing Investigation
Argued and Submitted Oct. 6, 2000. -- January 08, 2001 Before: SCHROEDER, Chief Judge, BEEZER and PAEZ, Circuit Judges.
The aircraft, a de Havilland DHC-8, was manufactured in Canada by defendant de Havilland, a Canadian corporation and a division of Boeing of Canada, Ltd., a subsidiary of The Boeing Company. The GPWS was manufactured by defendant Sundstrand Corporation in Washington State.1 The GPWS was purchased by Ansett and installed on the aircraft by de Havilland. The GPWS operated through the use of a radio altimeter, which was manufactured by defendant Honeywell in Arizona.
Plaintiffs appeal the district court's dismissal of their suit on the basis of forum non conveniens. Plaintiffs, citizens of New Zealand, are victims of an airplane crash in New Zealand, on a New Zealand carrier. Plaintiffs allege that the radio altimeter of the Ground Proximity Warning System (GPWS) malfunctioned during flight and was a causal factor of the accident. Defendants, the Canadian manufacturer of the aircraft and the American manufacturers of the GPWS and the radio altimeter, argued that New Zealand was an
the Captain not ensuring the aircraft intercepted and maintained the approach profile during the conduct of the non-precision instrument approach, the Captain's perseverance with his decision to get the undercarriage lowered without discontinuing the instrument approach, the Captain's distraction from the primary task of flying the aircraft safely during the First Officer's endeavours to correct an undercarriage malfunction, the First Officer not executing a Quick Reference Handbook procedure in the correct sequence, and the shortness of the [GPWS] warning.
130
The Commission evaluated the aircraft's radio altimeter and GPWS. Factory simulations on the GPWS indicated that at least 12 additional seconds of warning should have been provided by the system. The Commission found that the GPWS had been maintained properly by Ansett and that the radio altimeter retrieved from the crash site was operating normally. However, the Commission concluded that the GPWS warning was insufficient for the aircraft to be extricated from its perilous position. The Commission could not establish the cause of the failure of the GPWS to give an earlier warning, but speculated that the only reliable scenario was related to a loss of radio altimeter tracking. The Commission asked Canada's transportation ministry to look into the performance of the GPWS and radio altimeter. Because the GPWS and radio altimeter were manufactured in the United States, Canada then asked the FAA to examine the performance of these components. The FAA investigation was conducted in Washington and Arizona. Plaintiffs Lueck, Alexander, Maree Gray, Ian Gray, Petra Gray, Elle Gray, Roberts, McGrory, Brown, Mason, Austin, Blake, Green, and Cameron were all injured in the crash. The families of those who were killed, Keall, Dixon, and White, are also plaintiffs. All but two of the plaintiffs filed claims with the ACC and have received compensation, alleging negligence and requesting exemplary damages. Plaintiffs are also pursuing a lawsuit against Ansett in New Zealand. Their claims against Ansett for compensatory damages were dismissed by the court as statutorily barred by New Zealand's accident compensation scheme, see McGrory v. Ansett New Zealand Ltd., 2 N.Z.L.R. 328 (1998), but their claims against Ansett for exemplary damages were allowed to go forward, as these claims are not barred by the Act, see id. The trial court judge's decision was affirmed by the New Zealand Court of Appeal in McGrory. B.New Zealand's Accident Compensation System The defendants in this case are each responsible for manufacturing parts of the landing gear or the GPWS of In 1972, the New Zealand legislature passed the Accident Compensation Act (the Act), amended in 1982, 1992, and 1998, which provides coverage, on a no-fault basis, for those who suffer personal injury arising from accidents. The Act bars civil claims for damages, Accident Compensation Act, 1972, 5 (N.Z.), Accident
2
C.Plaintiffs' Efforts to Be Compensated for Their Losses
the deHavilland aircraft. With the exception of defendant deHavilland, all are American corporations. Plaintiffs brought suit against Defendants in federal district court for the District of Arizona, alleging strict liability, negligence, and breach of warranty. They did not allege gross negligence or seek punitive damages. Defendants moved to dismiss the action, arguing that New Zealand provides a remedy for Plaintiffs' injuries and is a more convenient location for the suit. The district court granted the motion and dismissed the action. The only American citizen onboard the flight, who was the only American plaintiff in this suit, settled his claims after Plaintiffs filed their notice of appeal to this Court. Thus, all of the remaining plaintiffs are New Zealand citizens.
Compensation Act, 1982, 27 (N.Z.), Accident Rehabilitation and Compensation Insurance Act, 1992, 14 (N.Z.), and instead provides for benefits from the Accident Rehabilitation and Compensation Insurance Corporation (ACC). Under the 1972 Act, those benefits include[ ][all] medical and rehabilitative expenses, compensation for eighty percent of lost earnings as long as disability continued, and lump-sum payments of up to $27,000 (N.Z.) for non-economic losses Richard S. Miller, An Analysis and Critique of the 1992 Changes to New Zealand's Accident Compensation Scheme, 52 Md. L.Rev. 1070, 1070 (1993) (citing 1982 Act, Parts V-VII). Under the 1992 Act, the compensation for lost earnings remains at 80 percent of the claimant's former salary, but is capped at $1,179 (N.Z.) per week. Id. at 1074 (citing 1992 Act, 39(1), 48, 70). But the 1992 amendments eliminated the lump-sum payments for non-economic losses. Id. at 1074-75. Instead, the Act now provides for a quarterly allowance based on the degree of the claimant's disability. Id. at 1075 (citing 1992 Act, 54). Medical expenses continue to be covered.
II.DISCUSSION
A district court has discretion to decline to exercise jurisdiction in a case where litigation in a foreign forum would be more convenient for the parties. Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 504, 67 S.Ct. 839, 91 L.Ed. 1055 (1947). In dismissing an action on forum non conveniens grounds the court must examine: (1) whether an adequate alternative forum exists, and (2) whether the balance of private and public interest factors favors dismissal. Piper Aircraft Co. v. Reyno, 454 U.S. 235, 254 n. 22, 257, 102 S.Ct. 252, 70 L.Ed.2d 419 (1981); Gulf Oil, 330 U.S. at 507-09, 67 S.Ct. 839; Ceramic Corp. of America v. Inka Maritime Corp., 1 F.3d 947, 949 (9th Cir.1993); Lockman Found. v. Evangelical Alliance Mission, 930 F.2d 764, 767 (9th Cir.1991). We have
Under the 1992 Act, plaintiffs may sue for damages for mental distress not resulting from physical injury. Id. at 1072 (citing 1992 Act, 4(1), 8(3)). The Act also permits suits for punitive or exemplary damages. Id. at 1072 n. 15 (citing Auckland City Council v. Blundell, 1 N.Z.L.R. 732, 739 (1986); Donselaar v. Donselaar, 1 N.Z.L.R. 97, 104-07 (1982)).
131
also held that a district court must make a choice of law determination in considering whether to dismiss the action. Alpha Therapeutic Corp. v. Nippon Hoso Kyokai, 199 F.3d 1078, 1090 (9th Cir.1999). court was not required to ask whether Plaintiffs could bring this lawsuit in New Zealand, but rather, whether New Zealand offers a remedy for their losses. The district court did not abuse its discretion in finding that an adequate remedy is available in New Zealand. The defendant bears the burden of proving the existence of an adequate alternative forum. Cheng v. Boeing Co., 708 F.2d 1406, 1411 (9th Cir.1983). The Supreme Court has held that, where the plaintiff is a United States citizen, the defendant must satisfy a heavy burden of proof: The foreign forum must provide the plaintiff with some remedy for his wrong in order for the alternative forum to be adequate. As with the other requirements of a forum non conveniens dismissal, the burden of showing the existence of an adequate alternative forum is the defendant's. Cheng, 708 F.2d at 1411. [A]plaintiff's choice of forum is entitled to greater deference when the plaintiff has chosen the home forum When the home forum has been chosen, it is reasonable to assume that this choice is convenient. When the plaintiff is foreign, however, the assumption is much less reasonable. However, it is only in rare circumstances where the remedy provided by the alternative forum is so clearly inadequate or unsatisfactory, that it is no remedy at all, that this requirement is not met. Lockman Found., 930 F.2d at 768 (quoting Piper Aircraft, 454 U.S. at 254, 102 S.Ct. 252); see also Ceramic Corp., 1 F.3d at 949.
Piper Aircraft, 454 U.S. at 256, 102 S.Ct. 252 (citation omitted). Therefore, the Court held, a foreign plaintiff's choice deserves less deference. Id. But, as this court stated recently in Ravelo Monegro v. Rosa, 211 F.3d 509, 514 (9th Cir.2000), petition for cert. filed, 69 U.S.L.W. 3346 (Nov. 7, 2000) (No. 00-755), less deference is not the same thing as no deference.
In Piper Aircraft, the Supreme Court held that a foreign country was not an inadequate forum merely because its laws offered the plaintiff a lesser remedy than he could expect to receive in the United States court system. There, the suit stemmed from the crash of a chartered aircraft in Scotland. The victims of the accident were Scottish, and the companies which owned and operated the aircraft and the air taxi service were incorporated in the United Kingdom. The plaintiff was the administratrix, appointed by a California probate court, of the estates of the five passengers. She was not related to any of the passengers. Relatives of the decedents had filed suit against the owners of the aircraft and air taxi service in the United Kingdom. The defendants in the American suit were the American manufacturers of the propeller and the aircraft. An inquiry into the causes of the crash found no evidence that the equipment was defective and concluded that pilot error may have caused the accident as the pilot had little experience and was flying the aircraft at a lower altitude than that recommended in the airline's operations manual. Piper Aircraft, 454 U.S. at 239, 102 S.Ct. 252.
A forum non conveniens determination is committed to the sound discretion of the district court. Gemini Capital Group, Inc. v. Yap Fishing Corp., 150 F.3d 1088, 1091 (9th Cir.1998); Creative Tech., Ltd. v. Aztech Sys. Pte., Ltd., 61 F.3d 696, 699 (9th Cir.1995). The district court's decision may be reversed only when there has been a clear abuse of discretion; where the court has considered all relevant public and private interest factors, and where its balancing of these factors is reasonable, its decision deserves substantial deference. Creative Tech., 61 F.3d at 699; see also Ceramic Corp., 1 F.3d at 949.
A.Adequate Alternative Forum
The first requirement for a forum non conveniens dismissal is that an adequate alternative forum is available to the plaintiff. The Supreme Court has held that an alternative forum ordinarily exists when the defendant is amenable to service of process in the foreign forum. Piper Aircraft, 454 U.S. at 254 n. 22, 102 S.Ct. 252; Contact Lumber Co. v. P.T. Moges Shipping Co., 918 F.2d 1446, 1449 (9th Cir.1990). This threshold test is met here because Defendants have indicated that they are amenable to service of process in New Zealand.
Plaintiff brought suit against the defendants in the United States because Scottish law did not recognize strict liability in tort. Furthermore, Scottish law only permitted wrongful death actions when brought by a decedent's relatives, and, even then, the relatives could only recover for the loss of support and society of the decedent. Id. at 240, 102 S.Ct. 252. Plaintiff brought suit in the United States because its laws regarding liability, capacity to sue, and damages [were] more favorable to her position than are those of Scotland. Id.
Plaintiffs argue that New Zealand offers no remedy for their losses because it has legislated tort law out of existence. Plaintiffs' argument, however, relies on a misdirected forum non conveniens inquiry. The district
132
The Supreme Court reversed the Third Circuit, which had found that, where the law of the purported alternative forum is less favorable to the plaintiff, dismissal on forum non conveniens grounds is inappropriate. Because plaintiffs usually bring suit in the forum with the most favorable law, the Supreme Court found, the doctrine would be severely undercut by such a bright-line rule. Furthermore, by allowing dismissal to be avoided solely by showing the foreign forum's law was less favorable, the Third Circuit had failed to consider the whole picture and weigh the numerous factors which had previously been held to underlie the forum non conveniens analysis. The Court stated that the Circuit's ruling was contrary to the main purpose of the forum non conveniens doctrine: convenience. Id. at 249-51, 102 S.Ct. 252. The Supreme Court also noted that such a ruling would have the negative effect of requiring district courts to interpret the law of foreign jurisdictions; this outcome is diametrically opposed to another of the doctrine's purposes, as it was designed in part to help courts avoid conducting complex exercises in comparative law. Id. at 251, 102 S.Ct. 252. Lastly, we observe that several other courts have found New Zealand's accident compensation system to provide an adequate alternative remedy. In re Silicone Gel Breast Implants Products Liability Litigation, 887 F.Supp. 1469 (N.D.Ala.1995), involved wrongful death and personal injury actions against breast-implant manufacturers. The district court in that case found that those plaintiffs who were residents of New Zealand and had their implant performed in that country had an adequate remedy in New Zealand if they could either use the court system or pursue administrative remedies under the Act. 887 F.Supp. at 1475. That court clearly held that [r]elegation of a claimant to an administrative forum for compensation [does] not, in and of itself, preclude dismissal based on forum non conveniens. Id. Stonnell v. Int'l Harvester Co., 132 Ill.App.3d 1043, 88 Ill.Dec. 203, 478 N.E.2d 518 (1985), involved the death in New Zealand of a 17-year-old New Zealand citizen who had been using a tractor manufactured in Great Britain. The Illinois appellate court found that the parents' wrongful death action could be dismissed on the basis of forum non conveniens because the parents could receive compensation under the Act. See id. at 1045, 88 Ill.Dec. 203, 478 N.E.2d In this case, Plaintiffs' attorney has candidly admitted that the impetus for the lawsuit is money: United States law offers Plaintiffs a greater potential remedy for their losses than New Zealand law. A jury trial in the United States on these facts could yield significantly higher awards to Plaintiffs than the compensation they will receive from the ACC. Under Piper Aircraft, however, it is clear that this argument fails. 518 (Although the amount of compensation payable may not equal the damages plaintiffs could recover in an action brought under the Illinois Wrongful Death Act, that possibility does not render New Zealand an unavailable forum.). We agree with these other courts, which have found New Zealand's administrative remedy to be adequate.
The effect of Piper Aircraft is that a foreign forum will be deemed adequate unless it offers no practical remedy for the plaintiff's complained of wrong. A New Zealand remedy is unquestionably available here. According to the complaint, the losses for which Plaintiffs seek compensation are their physical injuries sustained in the accident and the resulting loss of earnings. Plaintiffs do not dispute that they can file and have filed claims with the ACC for these losses; nor do they dispute that they have received compensation from the ACC for these losses. Although New Zealand law does not permit Plaintiffs to maintain this exact suit, New Zealand, through its no-fault accident compensation scheme, has provided and continues to provide a remedy for Plaintiffs' losses.3 Plaintiffs have not shown that this type of administrative remedy is so inadequate that it is tantamount to no remedy at all. The forum non conveniens analysis does not look to the precise source of the plaintiff's remedy, so we will not require the alternative forum to offer a judicial remedy. Cf. Jeha v. Arabian American Oil Co., 751 F.Supp. 122, 125 (S.D.Tex.1990) (holding that a quasi-judicial special commission, made up of a judge, a legal adviser, a university professor, and two physicians, and designated to handle medical malpractice claims in Saudi Arabia, constitutes an adequate alternative forum), aff'd 936 F.2d 569 (5th Cir.1991) (unpublished table decision).
B.The Balance of Public and Private Factors
Ordinarily, a plaintiff's choice of forum will not be disturbed unless the private interest and the public interest factors strongly favor trial in a foreign country. Gulf Oil, 330 U.S. at 509, 67 S.Ct. 839. We have further held that a foreign plaintiff's choice of forum merits less deference than that of a plaintiff who resides in the selected forum, and the showing required for dismissal is reduced. Gemini Capital, 150 F.3d at 1091. [I]f the balance of conveniences suggests that trial in the chosen forum would be unnecessarily burdensome for the defendant or the court, dismissal is proper. Lockman Found., 930 F.2d at 767 (quoting Piper Aircraft, 454 U.S. at 255 n. 23, 102 S.Ct. 252).
1.The Private Interest Factors
Courts consider the following private interest factors:
(1)the residence of the parties and the witnesses;
133
(2)the forum's convenience to the litigants; We have said previously that a court's focus should not rest on the number of witnesses or quantity of evidence in each locale. Rather, a court should evaluate the materiality and importance of the anticipated (3)access to physical evidence and other sources of proof; [evidence and] witnesses' testimony and then determine[ ] their accessibility and convenience to the forum. Gates Learjet Corp. v. Jensen, 743 F.2d 1325, 1335-36 (9th Cir.1984).
(4)whether unwilling witnesses can be compelled to testify;
(5)the cost of bringing witnesses to trial;
Both the United States evidence and the New Zealand evidence are crucial to this dispute. At trial, the manufacturing of the components will be considered, as will the post crash tests which were conducted. However, the performance of the components during Flight 703 is ultimately in issue, and, for that reason, the New Zealand evidence relating to the accident is essential to this suit as well. The New Zealand evidence
(6)the enforceability of the judgment; and
(7)all other practical problems that make trial of a case easy, expeditious and inexpensive.
will go to the liability of Defendants for the crash, because the jury will need to consider the performance of the equipment in relation to the performance of the flight crew. As Defendants note, evidence relating to
Gulf Oil, 330 U.S. at 508, 67 S.Ct. 839; Contact Lumber, 918 F.2d at 1449. The district court should look to any or all of the above factors which are relevant to the case before it, giving appropriate weight to each. Id. It should consider them together in arriving at a balanced conclusion. Id.
Plaintiffs' injuries, medical expenses, and loss of earnings, are crucial to the damages portion of this suit, and these witnesses and documents, although under Plaintiffs' control, are all in New Zealand. Finally, when the jury determines damages, it will consider the relative fault of Defendants and Ansett. Plaintiffs suggest that, because Arizona has done away with joint and several liability, Defendants need not worry about Ansett because defendants will be responsible only for their fair share. Defendants' fair share, however, can only be determined in relation to Ansett's liability. For these reasons, records relating to the flight crew and their performance during the flight will be necessary.
Plaintiffs and Defendants each find a different forum to be more convenient because each party focuses on different evidence and witnesses. Plaintiffs focus on the evidence relating to the testing of the radio altimeter and GPWS, which occurred in the United States, so they argue Arizona is a more convenient forum. Defendants, on the other hand, focus on the evidence relating to the crash itself and Plaintiffs' ongoing medical care, so they contend that New Zealand is a more convenient forum.
Although crucial documents and witnesses exist in both fora, the private interest factors are not in equipoise. The documents and witnesses in the United States are all under the control of Plaintiffs and Defendants, so they can be brought to court, no matter the forum. The documents and witnesses in New Zealand, however, are not so easily summoned to the United States. Though some of the New Zealand evidence is under Plaintiffs' control, including Plaintiffs' medical and employment records, many of the New Zealand documents and witnesses are under the control of the New Zealand government or Ansett. The district court does not have the power to order the production or appearance of such evidence and witnesses. Plaintiffs claim that their access to proof would suffer if the case moved to New Zealand, because the unit of defendant Sundstrand which is responsible for the GPWS has been acquired by a different corporation, AlliedSignal. They argue that a New Zealand court could not compel the production of documents and witnesses under the control of AlliedSignal, a third-party to the suit. Defendants successfully rebut this argument. AlliedSignal has agreed to produce any documents and make available any witnesses in New Zealand which it would have been required to produce in the United States.
Specifically, Plaintiffs reference: (1) documents regarding the manufacturing and testing of the GPWS and radio altimeter (located in Washington and Arizona); (2) documents and witnesses regarding FAA compliance testing of the GPWS (Washington); and (3) evidence relating to the crash, including the flight data recorder, cockpit voice recorder, crash site drawings and photographs, all of which Plaintiffs say is transportable to Arizona. Documents and witnesses regarding the maintenance of the GPWS, they argue, are not necessary because this is not in issue.
Defendants, on the other hand, list numerous witnesses and evidence which are located in New Zealand, including the aircraft wreckage, the flight crew, crash investigators, Plaintiffs, Plaintiffs' doctors and employers, airline and aircraft records, investigation records, and records regarding the qualifications of the flight crew and their employment. They also note the relevance of the documents and witnesses listed by Plaintiffs that are located in the United States and Canada.
134
It is clear that evidence important to this dispute exists in both the United States and New Zealand.4 However, because the district court cannot compel production of much of the New Zealand evidence, whereas the parties control, and therefore can bring, all the United States evidence to New Zealand, the private interest factors weigh in favor of dismissal. forum: Honeywell, which manufactured the radio altimeter in issue. The citizens of Arizona certainly have an interest in the manufacturing of defective products by corporations located in their forum. However, this interest is slight compared to the time and resources the district court in Arizona would expend if it were to retain jurisdiction over this dispute. Furthermore, the interest in New Zealand regarding this suit is extremely high. The crash involved a New Zealand airline carrying New Zealand passengers. The accident and its Furthermore, as noted above, Plaintiffs are maintaining a suit against Ansett, the carrier, in New Zealand. Ansett, though not a party to this suit, controls documents and witnesses that are relevant to this dispute. Although Plaintiffs characterize the instant suit as focusing on the GPWS rather than the accident, the fact is that both this and the Ansett lawsuits revolve around the causes of the accident. Therefore, a significant number of the same witnesses will be needed in both proceedings and much the same evidence will have to be presented to both courts. Currently, the main difference is that Defendants are not parties to the Ansett suit. If they are brought into that suit, all the evidence under their control would have to be produced in New Zealand. Defendants, who have brought this motion, are willing to cooperate in the production of evidence. Given the existence of the related proceedings, it is all the more clear that the private interest factors weigh in favor of dismissal. This court has held that [b]efore dismissing a case for forum non conveniens, a district court must first make a choice of law determination. Zipfel v. Halliburton Co., 832 F.2d 1477, 1482 (9th Cir.1987), amended on other grounds by 861 F.2d 565 (9th Cir.1988). However, the choice of law analysis is only determinative when the case involves a United States statute requiring venue in the United States, such as the Jones Act or 2.The Public Interest Factors the Federal Employers' Liability Act. See Creative Tech., 61 F.3d at 700. The Jones Act, 46 U.S.C.App. 688(a), and the Federal Employers' Liability Act, 45 U.S.C. 56, contain special provisions mandating venue Courts consider the following public interest factors: in the United States district courts. Creative Tech., 61 F.3d at 700. The purpose of a choice of law inquiry in a forum non conveniens analysis is to determine if one of these statutes would apply. See id.5 C.Choice of Law Analysis aftermath, including the accident investigation, the post-investigation activity, and the various legal proceedings including an ongoing criminal probe, have all received significant attention by the local media. Because the local interest in this lawsuit is comparatively low, the citizens of Arizona should not be forced to bear the burden of this dispute.
(1)local interest of lawsuit;
(2)the court's familiarity with governing law;
Where no such law is implicated, the choice of law determination is given much less deference on a forum non conveniens inquiry. Because there is no arguably applicable law that would end the forum non conveniens inquiry [in this case], no potentially dispositive choice of law determination need have been made. Lockman Found., 930 F.2d at 771; see also Gemini Capital, 150 F.3d at 1092 (This case does not
(3)burden on local courts and juries;
(4)congestion in the court; and
implicate any United States law which mandates venue in the United States district courts. Consequently, the applicability of United States law to the various causes of action should ordinarily not be given conclusive
(5)the costs of resolving a dispute unrelated to this forum.
or even substantive weight.) (quoting Piper Aircraft, 454 U.S. at 247, 102 S.Ct. 252).6
Piper Aircraft, 454 U.S. at 259-61, 102 S.Ct. 252; Gulf Oil, 330 U.S. at 508-09, 67 S.Ct. 839.
Accordingly, because New Zealand provides an adequate alternative forum and based on the balance of public and private factors, we find that the district court did not abuse its discretion in dismissing this suit on forum non conveniens grounds. The dismissal of this action is AFFIRMED.
The public interest factors weigh against maintenance of this action in Arizona. None of the remaining plaintiffs are citizens or residents of the United States. One of the defendants is a citizen of the chosen
135
FOOTNOTES
1. The division of Sundstrand which manufactured the GPWS has since been acquired by AlliedSignal corporation.
2. The 1992 amendment renamed the Act as the Accident Rehabilitation and Compensation Insurance Act. The 1998 amendments, the Accident Insurance Act, only affect workplace accidents. Graeme Peters, Insurance D-Day is Looming, 1999 WL 19819017, Evening Post, June 19, 1999, at 15.
3. Plaintiffs could apparently also bring a punitive damages action in a New Zealand court, even though they did not ask for punitive damages in this case.
4. There is also relevant evidence in Canada; but because that evidence must be transported regardless of the ultimate forum, it does not affect the outcome of this case.
5. We do not read this court's decision in Alpha Therapeutic as creating a broader role for the choice of law inquiry. Alpha Therapeutic relied on Contact Lumber, 918 F.2d 1446, for the proposition that the district court must make a choice of law determination. 199 F.3d at 1090. But Contact Lumber clearly limited the choice of law inquiry to statutes like the Jones Act, which mandate venue in a United States district court. Because Contact Lumber involved a statute that did not bar dismissal on forum non conveniens grounds, the court held that even assuming the applicability of U.S. law, appellants have no entitlement to have their case heard in a U.S. court. 918 F.2d at 1451.
6. The choice of law inquiry would, nevertheless, counsel in favor of dismissing the suit. The district court found it would likely be required to interpret and apply New Zealand law, law with which it is unfamiliar. Despite the preemption of most litigation over personal injury arising from accident, because New Zealand law is likely to apply in this suit, the choice of law determination weighs in favor of dismissal.
PAEZ, Circuit Judge:
136
RAVELO MONEGRO v. ROSA Yan Carlos RAVELO MONEGRO; Nelson Rolando Gonzalez Sosa; Franklin Alvares Galvez; Rafael Micael De La Cruz; Francisco De Los Santos Heredia; Porfirio Alfred Vasquez Mota; Manuel Acevedo; Angel Esteban Guillen Solano; Carlos Celedonio Sujilio; Edelmiro Reyes Santana; Ignacio Henriquez De La Rosa; Fernando Romero; Tulio Miguel Lizardo Nolosco, Plaintiffs-Appellants, v. Luis ROSA; Jack Hiatt; San Francisco Baseball Associates, L.P., dba San Francisco Giants, DefendantsAppellees. league teams in the United States. Underscoring this potential for transfer, many of the contracts contained addenda stating salaries in Bellingham, Washington, Scottsdale, Arizona, and Shreveport, Louisiana.
Playing for the San Francisco Giants or some other United States team was the plaintiffs' common goal. All thirteen plaintiffs claim that Rosa expressly conditioned their continued employment and/or reassignment to United States teams upon their submitting to his sexual advances, and that Rosa appropriated part of their earnings or signing bonuses for his own use. They also allege that the Giants' management knew or had reason to know of Rosa's misconduct. In April 1998, plaintiffs initiated this suit against the Giants, Rosa and Hiatt.
No.98-16846.
Argued and Submitted Dec. 6, 1999 -- May 03, 2000 Before: BRIGHT,PREGERSON and W. FLETCHER, Circuit Judges.1
In June 1997, plaintiffs had brought substantially similar allegations to the attention of authorities in the Dominican Republic. As a result of their complaints, a combined criminal and civil suit against the Giants and Rosa is now pending in the Dominican Republic. Noting the pendency of this parallel proceeding, the defendants moved in June 1998 to dismiss plaintiffs' complaint on the alternative grounds of forum non
David Becht and Daniel Fuchs, Adams Nye Sinuni Walker, San Francisco, California, for the plaintiffsappellants.Nancy E. Pritikin, Philip L. Ross, and Tram Anh-Frank, Littler Mendelson, San Francisco, California, for defendants-appellees Jack Hiatt and San Francisco Baseball Associates, L.P.
conveniens and abstention. The district court granted the defendants' motion on the ground of forum non conveniens. Plaintiffs timely appeal.
II
Plaintiffs brought suit in the United States District Court for the Northern District of California against the San Francisco Baseball Associates (the Giants), the Giants' Latin America scout, Luis Rosa, and the Giants' Minor League Coordinator, Jack Hiatt, for violations of federal and state law including sexual harassment, sexual battery, wrongful termination, fraud and conversion. The district court dismissed plaintiffs' action on the ground of forum non conveniens, concluding that the Dominican Republic was the better forum for the suit. We have jurisdiction under 28 U.S.C. 1291, and we reverse.
A forum non conveniens determination is committed to [the] sound discretion of the trial court, and may be reversed only when there has been a clear abuse of discretion. Creative Tech., Ltd. v. Aztech Sys. Pte Ltd., 61 F.3d 696, 699 (9th Cir.1995). A district court may abuse its discretion by relying on an erroneous view of the law, by relying on a clearly erroneous assessment of the evidence, or by striking an unreasonable balance of relevant factors. See K.V. Mart Co. v. United Food & Commercial Workers Int'l Union, Local 324, 173 F.3d 1221, 1223 (9th Cir.1999); Creative Tech., 61 F.3d at 699.
III
The thirteen plaintiffs are aspiring professional baseball players who live in the Dominican Republic. When they were between sixteen and twenty years old, they were recruited by Luis Rosa, the Giants' former Latin America scout. At Rosa's instigation, each player signed a seven-year minor league contract with the Giants. Although the contracts initially provided that all the plaintiffs would play baseball for the San Pedro Giants in the Dominican Republic, the contracts could be assigned, and the players transferred, to minor or major
A threshold issue is whether, under Erie Railroad v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), a forum non conveniens motion in federal court is governed by federal or state law. The Supreme Court expressly avoided deciding this issue in Piper Aircraft v. Reyno, 454 U.S. 235, 248 n. 13, 102 S.Ct. 252, 70 L.Ed.2d 419 (1981). Since Piper, however, several circuits have held that a forum non conveniens motion in federal court is governed by federal law. See Rivendell Forest Prods. Ltd. v. Canadian Pac. Ltd., 2 F.3d
137
990, 992 (10th Cir.1993); Royal Bed & Spring Co. v. Famossul Industria e Comercio de Moveis, Ltda., 906 F.2d 45, 50 (1st Cir.1990); In re Air Crash Disaster Near New Orleans, La., 821 F.2d 1147, 1159 (5th Cir.1987) (en banc), vacated on other grounds, 490 U.S. 1032, 109 S.Ct. 1928, 104 L.Ed.2d 400 (1989), prior opinion reinstated in relevant part, 883 F.2d 17 (5th Cir.1989); Sibaja v. Dow Chem. Co., 757 F.2d 1215, 1219 (11th Cir.), cert. denied, 474 U.S. 948, 106 S.Ct. 347, 88 L.Ed.2d 294 (1985). But see In Re Air Crash Disaster, 821 F.2d at 1180-86 (Higginbotham, J., concurring in the judgment) (arguing that state forum non conveniens law should apply to diversity actions in federal court); Weiss v. Routh, 149 F.2d 193, 195 (2d Cir.1945) (L. Hand, J.) (stating that state law should control a federal court's assertion of jurisdiction). We join these circuits and hold that federal rather than state law governs. We agree with the Fifth Circuit's conclusion that the interests of the federal forum in self-regulation, in administrative independence, and in self-management are more important than any interest in uniformity between the federal and state forums in a single state. In re Air Crash Disaster, 821 F.2d at 1159. Our conclusion is reinforced by the Supreme Court's statement in American Dredging Co. v. Miller, 510 U.S. 443, 114 S.Ct. 981, 127 L.Ed.2d 285 (1994), that the doctrine [of forum non conveniens] is one of procedure rather than substance. Id. at 453, 114 S.Ct. 981 (upholding the application in state court of a state forum non conveniens rule in a Jones Act admiralty case). The first type of case was common in federal courts before the adoption of 28 U.S.C. 1404(a) in 1948. For example, in Gilbert, decided just before the passage of 1404(a), a Virginia plaintiff sued Pennsylvania-based Gulf Oil in the Southern District of New York based on Gulf's allegedly negligent delivery of gasoline and an ensuing explosion at Gilbert's Virginia warehouse. Gilbert, 330 U.S. at 502-03, 67 S.Ct. 839. In upholding a forum non conveniens dismissal, the Court articulated a number of private and public interest factors relevant in assessing whether exceptional circumstances justified a forum non conveniens dismissal. Id. at 504, 67 S.Ct. 839. Private interest factors included the relative ease of access to sources of proof, the availability of compulsory process for unwilling witnesses, the comparative cost of obtaining willing witnesses, the possibility of a view of any affected premises, the ability to enforce any judgment eventually obtained, and all other practical problems that make trial of a case easy, expeditious and inexpensive. Id. at 508, 67 S.Ct. 839. Public interest factors included court congestion, the unfairness of burdening citizens in an unrelated forum with jury duty, the interest in having localized controversies decided at home, the interest in trying the case in a forum familiar with the applicable law, and the interest in avoiding unnecessary conflicts of laws. See id. at We note, however, that the result in this case would likely be the same if we applied California's law of forum non conveniens. See Cal.Civ.Proc.Code 410.30. When the Supreme Court reserved the Erie issue in Piper, it observed that California and federal forum non conveniens laws were virtually identical. Piper, 454 U.S. at 249 n. 13, 102 S.Ct. 252. While this statement was almost certainly untrue when made, see 2 B. Witkin, California Procedure Jurisdiction 304-306 (3d ed.1985); Holmes v. Syntex Labs., 156 Cal.App.3d 372, 202 Cal.Rptr. 773 (1984), it appears to have become true since then. See Stangvik v. Shiley, Inc., 54 Cal.3d 744, 1 Cal.Rptr.2d 556, 819 P.2d 14 (Cal.1991). Rather than requiring dismissal and refiling of a suit where the alternative forum is another federal court, 1404(a) now allows transfer of a case from one federal district court to another for the convenience of parties and witnesses in the interest of justice. 28 U.S.C. 1404(a). Section 1404(a) thus serves as a statutory substitute for forum non conveniens in federal court when the alternative forum is within the territory of the United States. The doctrine of forum non conveniens survives in federal court only when the alternative forum is in a foreign country. As a consequence, a forum non conveniens motion in a Gilbert-type case is IV now rare, for foreign plaintiffs seeking to avoid their home forums by filing in the United States do not typically sue in a forum with little or no relation to either the defendant or the action. Indeed, foreign plaintiffs typically There are two types of cases in which forum non conveniens dismissals have been deemed appropriate in federal court. In the first type, now rarely encountered, a foreign or domestic plaintiff chooses a forum with little or no relation to either the defendant or the action in order to disadvantage the defendant. See, e.g., Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 67 S.Ct. 839, 91 L.Ed. 1055 (1947); Koster v. Lumbermens Mut. Cas. Co., 330 U.S. 518, 67 S.Ct. 828, 91 L.Ed. 1067 (1947). In the second type, now more commonly In Piper, the Supreme Court adapted the analytic structure of Gilbert to take into account the special characteristics of a case in which a foreign plaintiff sues an American defendant in its home forum. Piper arose out of the crash of a small plane in the Scottish highlands that killed the Scottish pilot and five Scottish bring such suits in the quintessentially convenient forum for the defendant-the defendant's home forum. 508-09, 67 S.Ct. 839. encountered, a foreign plaintiff chooses the home forum of an American defendant in an action that has little or no relation to the United States in order to take advantage of more favorable American procedural or substantive rules. See, e.g., Piper, 454 U.S. 235, 102 S.Ct. 252, 70 L.Ed.2d 419.
138
passengers. Gaynell Reyno was appointed as administratrix of the estates of several of the passengers for the purpose of filing a wrongful death action in California state court against Piper Aircraft and Hartzell Propeller, the manufacturers of the plane and its propeller. Defendants removed the case to federal district court in California under 28 U.S.C. 1441. Pursuant to 28 U.S.C. 1404(a) and 1406(a),2 defendants then secured its transfer to the Middle District of Pennsylvania, the home of Piper's manufacturing plant. Second, unlike Piper, there are no possible co-defendants or third-party defendants who could not be made to appear in the American forum. Indeed, quite the opposite problem exits in this case: If this suit were dismissed in favor of a suit in the Dominican Republic, it is not clear that defendant Rosa would appear, or Even though the action was now brought in Piper's home forum, the Pennsylvania district court granted defendants' motion to dismiss under forum non conveniens, finding that a combination of the public and private interest factors derived from Gilbert overwhelmingly favored the Scottish forum. The decedents were Scottish; all the real plaintiffs in interest and witnesses were Scottish; trial would be aided by local familiarity with Scottish geography; and crucial evidence in Scotland was beyond the reach of the district court's compulsory process. Further, there was a significant risk of inconsistent verdicts because there was a separate action filed in Scotland, and defendants Piper and Hartzell could not reduce or eliminate that risk by impleading as third-party defendants the charter company and the estate of the pilot. Finally, the district court stressed that it was unfamiliar with Scottish law, and that since different law applied to different defendants, a trial in the United States would be hopelessly complex and confusing. See Reyno v. Piper Aircraft Co., 479 F.Supp. 727, 732-34 (M.D.Pa.1979). Third, unlike Piper, there is no showing that access to proof-even aside from Rosa's testimony-would be In sustaining the district court's dismissal, the Supreme Court generally endorsed the district court's reliance on the Gilbert factors, but gave special attention to two factors peculiar to a case brought in the United States against American defendants by a foreign plaintiff. First, the possibility of less favorable substantive law in the plaintiff's home forum should ordinarily not be given conclusive or even substantial weight in the forum non conveniens inquiry. Piper, 454 U.S. at 247, 102 S.Ct. 252. Second, in contrast to the strong
3
sufficient skill they would be able to play professional baseball in the United States, possibly in San Francisco for the Giants themselves.
could be compelled to appear, in that forum. Although the relative ability of the forums to compel the attendance of significant unwilling witnesses at trial is an important private interest factor, see 17 James Wm. Moore et al., Moore's Federal Practice 111.74[3][c][iii] (3d ed.1997), the district court did not accord this factor any weight because Rosa agreed to participate in legal proceedings in the Dominican Republic. The plaintiffs expressed concern that Rosa's agreement was feigned. Indeed, in their Rule 60(b) motion in the district court for reconsideration of the dismissal, plaintiffs produced affidavits from two people who recount that Rosa told them he did not plan to return to the Dominican Republic where he faces possible imprisonment. Despite this concern, the district court did not make its forum non conveniens dismissal contingent upon Rosa's participation in the proceeding in the Dominican Republic, either by so ordering in its original dismissal or by amending its dismissal order in response to plaintiffs' Rule 60(b) motion.
easier in the Dominican Republic. The Giants asserted in their motion to dismiss in the district court that the costs of bringing witnesses to California would be significantly greater than litigating the matter in the Dominican Republic, and that United States citizens have much easier access to the Dominican Republic than Dominican Republic citizens have to enter the United States. But there is no evidence to support these assertions. Indeed, the only evidence before the district court was a declaration tending to show the opposite, stating that visas would be readily available to plaintiffs.
presumption in favor of a domestic plaintiff's forum choice, a foreign plaintiff's choice deserves less deference. Id. at 256, 102 S.Ct. 252.
In Cheng v. Boeing Co., 708 F.2d 1406 (9th Cir.1983), this court noted that the standard to be applied [to a V motion for dismissal on the ground of forum non conveniens] is whether defendants have made a clear showing of facts which establish such oppression and vexation of a defendant as to be out of proportion to This case is unlike Piper in a number of respects. First, unlike Piper, plaintiffs' chosen forum is more than merely the American defendants' home forum. It is also a forum with a substantial relation to the action. Plaintiffs allege that the Giants, through their agent, Rosa, solicited and entered into contracts with the plaintiffs. Based on these contracts, plaintiffs formed the legitimate expectation that if they demonstrated plaintiff's convenience, which may be shown to be slight or nonexistent Id. at 1410. The record in this case indicates the district court misunderstood this standard: rather than treating forum non conveniens as an exceptional tool to be employed sparingly, the district court perceived it as a doctrine that compels plaintiffs to choose the optimal forum for their claim. We recognize that the Supreme Court in Piper held that a foreign
139
plaintiff's [forum] choice deserves less deference than the forum choice of a domestic plaintiff. But less deference is not the same thing as no deference. See Lony v. E.I DuPont de Nemours & Co., 886 F.2d 628, 633 (3d Cir.1989). We hold that it was an abuse of discretion for the district court to deny plaintiffs their choice of federal district court in San Francisco as their forum.
VI
The decision of the district court is therefore REVERSED, and the case is REMANDED for further proceedings consistent with this opinion.
FOOTNOTES
2. The suit against Hartzell was transferred under 1406 rather than 1404(a) because of a lack of personal jurisdiction over Hartzell in California.
3. Note that the difference in substantive law will not be relevant to transfer under 28 U.S.C. 1404(a), the statutory replacement for domestic forum non conveniens in federal courts. A transfer under 1404(a) results in a change of courtrooms, not a change of law. See Van Dusen v. Barrack, 376 U.S. 612, 636-37, 84 S.Ct. 805, 11 L.Ed.2d 945 (1964); see also Ferens v. John Deere Co., 494 U.S. 516, 524-25, 110 S.Ct. 1274, 108 L.Ed.2d 443 (1990).
W. FLETCHER, Circuit Judge:
140
U.S. Supreme Court any case is the law of the State. And whether the law of the State shall be declared by its legislature in a statute or by its highest court in a decision is not a matter of federal concern. P. 304 U. S. 78.
Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938)
Erie Railroad Co. v. Tompkins
4. In disapproving the doctrine of Swift v. Tyson, the Court does not hold unconstitutional 34 of the Federal Judiciary Act of 1789 or any other Act of Congress. It merely declares that, by applying the doctrine of that
No. 367
case, rights which are reserved by the Constitution to the several States have been invaded. P. 304 U. S. 79.
Argued January 31, 1938
Decided April 25, 1938
Page 304 U. S. 65
304 U.S. 64
CERTIORARI, 302 U.S. 671, to review the affirmance of a judgment recovered against the railroad company in an action for personal injuries. The accident was in Pennsylvania. The action was in New York, jurisdiction being based on diversity of citizenship
CERTIORARI TO THE CIRCUIT COURT OF APPEALS
FOR THE SECOND CIRCUIT Page 304 U. S. 69 Syllabus MR. JUSTICE BRANDEIS delivered the opinion of the Court. 1. The liability of a railroad company for injury caused by negligent operation of its train to a pedestrian on a much-used, beaten path on its right-of-way along and near the rails depends, in the absence of a federal or state statute, upon the unwritten law of the State where the accident occurred. Pp. 304 U. S. 71 et seq. The question for decision is whether the oft-challenged doctrine of Swift v. Tyson[Footnote 1] shall now be disapproved.
2. A federal court exercising jurisdiction over such a case on the ground of diversity of citizenship, is not free to treat this question as one of so-called "general law," but must apply the state law as declared by the highest state court. Swift v. Tyson, 16 Pet. 1, overruled. Id.
Tompkins, a citizen of Pennsylvania, was injured on a dark night by a passing freight train of the Erie Railroad Company while walking along its right of way at Hughestown in that State. He claimed that the accident occurred through negligence in the operation, or maintenance, of the train; that he was rightfully on the premises as licensee because on a commonly used beaten footpath which ran for a short distance alongside
3. There is no federal general common law. Congress has no power to declare substantive rules of common law applicable in a State whether they be local in their nature or "general," whether they be commercial law or a part of the law of torts. And no clause in the Constitution purports to confer such a power upon the federal courts. Except in matters governed by the Federal Constitution or by Acts of Congress, the law to be applied in
the tracks, and that he was struck by something which looked like a door projecting from one of the moving cars. To enforce that claim, he brought an action in the federal court for southern New York, which had jurisdiction because the company is a corporation of that State. It denied liability, and the case was tried by a jury.
141
Page 304 U. S. 70 "The laws of the several States, except where the Constitution, treaties, or statutes of the United States otherwise require or provide, shall be regarded as rules of decision in trials at common law, in the courts of the United States, in cases where they apply."
The Erie insisted that its duty to Tompkins was no greater than that owed to a trespasser. It contended, among other things, that its duty to Tompkins, and hence its liability, should be determined in accordance with the Pennsylvania law; that, under the law of Pennsylvania, as declared by its highest court, persons who use pathways along the railroad right of way -- that is, a longitudinal pathway, as distinguished from a crossing -are to be deemed trespassers, and that the railroad is not liable for injuries to undiscovered trespassers resulting from its negligence unless it be wanton or willful. Tompkins denied that any such rule had been established by the decisions of the Pennsylvania courts, and contended that, since there was no statute of the State on the subject, the railroad's duty and liability is to be determined in federal courts as a matter of general law.
Because of the importance of the question whether the federal court was free to disregard the alleged rule of the Pennsylvania common law, we granted certiorari.
First. Swift v. Tyson, 16 Pet. 1, 41 U. S. 18, held that federal courts exercising jurisdiction on the ground of diversity of citizenship need not, in matters of general jurisprudence, apply the unwritten law of the State as declared by its highest court; that they are free to exercise an independent judgment as to what the common law of the State is -- or should be, and that, as there stated by Mr. Justice Story:
"the true interpretation of the thirty-fourth section limited its application to state laws strictly local, that is to say, The trial judge refused to rule that the applicable law precluded recovery. The jury brought in a verdict of $30,000, and the judgment entered thereon was affirmed by the Circuit Court of Appeals, which held, 90 F.2d 603, 604, that it was unnecessary to consider whether the law of Pennsylvania was as contended, because the question was one not of local, but of general, law, and that, to the positive statutes of the state, and the construction thereof adopted by the local tribunals, and to rights and titles to things having a permanent locality, such as the rights and titles to real estate, and other matters immovable and intraterritorial in their nature and character. It never has been supposed by us that the section did apply, or was intended to apply, to questions of a more general nature, not at all dependent upon local statutes or local usages of a fixed and permanent operation, as, for example, to the construction of ordinary contracts or other written instruments, and especially to questions of general commercial law, where the state tribunals are called upon to perform the like functions as ourselves, that is, to ascertain upon general reasoning and legal analogies what is the true exposition of the contract or
"upon questions of general law, the federal courts are free, in the absence of a local statute, to exercise their independent judgment as to what the law is, and it is well settled that the question of the responsibility of a railroad for injuries caused by its servants is one of general law. . . . Where the public has made open and notorious use of a railroad right of way for a long period of time and without objection, the company owes to persons on such permissive pathway a duty of care in the operation of its trains. . . . It is likewise generally recognized law that a jury may find that negligence exists toward a pedestrian using a permissive path on the railroad right of way if he is hit by some object projecting from the side of the train. "
Page 304 U. S. 72
instrument, or what is the just rule furnished by the principles of commercial law to govern the case."
Page 304 U. S. 71
The Court, in applying the rule of 34 to equity cases, in Mason v. United States, 260 U. S. 545, 260 U. S. 559, said: "The statute, however, is merely declarative of the rule which would exist in the absence of the
The Erie had contended that application of the Pennsylvania rule was required, among other things, by 34 of the Federal Judiciary Act of September 24, 1789, c. 20, 28 U.S.C. 725, which provides:
statute." [Footnote 2] The federal courts assumed, in the broad field of "general law," the power to declare rules of decision which Congress was confessedly without power to enact as statutes. Doubt was repeatedly
142
expressed as to the correctness of the construction given 34, [Footnote 3] and as to the soundness of the rule which it introduced. [Footnote 4] But it was the more recent research of a competent scholar, who examined the original document, which established that the construction given to it by the Court was erroneous, and that the purpose of the section was merely to make certain that, in all matters except those in which some federal law is controlling, line of demarcation between the province of general law and that of local law developed a new well of uncertainties. [Footnote 8]
On the other hand, the mischievous results of the doctrine had become apparent. Diversity of citizenship jurisdiction was conferred in order to prevent apprehended discrimination in state courts against those not citizens of the State. Swift v. Tysonintroduced grave discrimination by noncitizens against citizens. It made rights enjoyed under the unwritten "general law" vary according to whether enforcement was sought in the state
Page 304 U. S. 73
the federal courts exercising jurisdiction in diversity of citizenship cases would apply as their rules of decision the law of the State, unwritten as well as written. [Footnote 5]
Page 304 U. S. 75
Criticism of the doctrine became widespread after the decision of Black & White Taxicab Co. v. Brown & Yellow Taxicab Co., 276 U. S. 518. [Footnote 6] There, Brown and Yellow, a Kentucky corporation owned by Kentuckians, and the Louisville and Nashville Railroad, also a Kentucky corporation, wished that the former should have the exclusive privilege of soliciting passenger and baggage transportation at the Bowling Green, Kentucky, railroad station, and that the Black and White, a competing Kentucky corporation, should be prevented from interfering with that privilege. Knowing that such a contract would be void under the common law of Kentucky, it was arranged that the Brown and Yellow reincorporate under the law of Tennessee, and that the contract with the railroad should be executed there. The suit was then brought by the Tennessee corporation in the federal court for western Kentucky to enjoin competition by the Black and White; an injunction issued by the District Court
or in the federal court, and the privilege of selecting the court in which the right should be determined was conferred upon the noncitizen. [Footnote 9] Thus, the doctrine rendered impossible equal protection of the law. In attempting to promote uniformity of law throughout the United States, the doctrine had prevented uniformity in the administration of the law of the State.
The discrimination resulting became, in practice, far-reaching. This resulted in part from the broad province accorded to the so-called "general law" as to which federal courts exercised an independent judgment. [Footnote 10] In addition to questions of purely commercial law, "general law" was held to include the obligations under contracts entered into and to be performed within the State, [Footnote 11] the extent to which a carrier operating within a State may stipulate for exemption from liability for his own negligence or that of his employee; [Footnote 12] the liability for torts committed within the State upon person resident or property located there, even where the question of liability
Page 304 U. S. 74
was sustained by the Court of Appeals, and this Court, citing many decisions in which the doctrine of Swift v. Tyson had been applied, affirmed the decree.
Page 304 U. S. 76
depended upon the scope of a property right conferred by the State [Footnote 13] and the right to exemplary or punitive damages. [Footnote 14] Furthermore, state decisions construing local deeds, [Footnote 15] mineral conveyances, [Footnote 16] and even devises of real estate [Footnote 17] were disregarded. [Footnote 18]
Second. Experience in applying the doctrine of Swift v. Tyson had revealed it defects, political and social, and the benefits expected to flow from the rule did not accrue. Persistence of state courts in their own opinions on questions of common law prevented uniformity; [Footnote 7] and the impossibility of discovering a satisfactory
143
In part, the discrimination resulted from the wide range of persons held entitled to avail themselves of the federal rule by resort to the diversity of citizenship jurisdiction. Through this jurisdiction, individual citizens willing to remove from their own State and become citizen of another might avail themselves of the federal rule. [Footnote 19] And, without even change of residence, a corporate citizen of often advanced in judicial opinions of this court to control a conflicting law of a State. I admit that learned judges have fallen into the habit of repeating this doctrine as a convenient mode of brushing aside the law of a State in conflict with their views. And I confess that, moved and governed by the authority of the great names of those judges, I have, myself, in many instances, unhesitatingly and confidently, but I think now erroneously, repeated the same doctrine. But, notwithstanding the great names which may be cited in favor of the doctrine, and notwithstanding the frequency with which the doctrine has been reiterated, there stands, as a perpetual the State could avail itself of the federal rule by reincorporating under the laws of another State, as was done in the Taxicab case. protest against its repetition, the Constitution of the United States, which recognizes and preserves the autonomy and independence of the States -- independence in their legislative and independence
Page 304 U. S. 77
The injustice and confusion incident to the doctrine of Swift v. Tyson have been repeatedly urged as reasons for abolishing or limiting diversity of citizenship jurisdiction. [Footnote 20] Other legislative relief has been proposed. [Footnote 21] If only a question of statutory construction were involved, we should not be prepared to abandon a doctrine so widely applied throughout nearly a century. [Footnote 22] But the unconstitutionality
Page 304 U. S. 79
in their judicial departments. Supervision over either the legislative or the judicial action of the States is in no case permissible except as to matters by the Constitution specifically authorized or delegated to the United States. Any interference with either, except as thus permitted, is an invasion of the authority of the State and,
Page 304 U. S. 78
to that extent, a denial of its independence."
of the course pursued has now been made clear, and compels us to do so.
The fallacy underlying the rule declared in Swift v. Tyson is made clear by Mr. Justice Holmes. [Footnote 23] The doctrine rests upon the assumption that there is "a transcendental body of law outside of any particular State but obligatory within it unless and until changed by statute," that federal courts have the power to use their judgment as to what the rules of common law are, and that, in the federal courts, "the parties are entitled to an independent judgment on matters of general law":
Third. Except in matters governed by the Federal Constitution or by Acts of Congress, the law to be applied in any case is the law of the State. And whether the law of the State shall be declared by its Legislature in a statute or by its highest court in a decision is not a matter of federal concern. There is no federal general common law. Congress has no power to declare substantive rules of common law applicable in a State, whether they be local in their nature or "general," be they commercial law or a part of the law of torts. And no clause in the Constitution purports to confer such a power upon the federal courts. As stated by Mr. Justice Field when protesting in Baltimore & Ohio R. Co. v. Baugh, 149 U. S. 368, 149 U. S. 401, against ignoring the Ohio common law of fellow servant liability:
"but law in the sense in which courts speak of it today does not exist without some definite authority behind it. The common law so far as it is enforced in a State, whether called common law or not, is not the common law generally, but the law of that State existing by the authority of that State without regard to what it may have been in England or anywhere else. . . ."
"I am aware that what has been termed the general law of the country -- which is often little less than what the judge advancing the doctrine thinks at the time should be the general law on a particular subject -- has been
"the authority and only authority is the State, and, if that be so, the voice adopted by the State as its own [whether it be of its Legislature or of its Supreme Court] should utter the last word."
144
Thus, the doctrine of Swift v. Tyson is, as Mr. Justice Holmes said, 134, 46 U. S. 140; by Mr. Justice Nelson in Williamson v. Berry, 8 How. 495, 49 U. S. 550, 49 U. S. 558; by Mr. Justice Campbell in Pease v. Peck, 18 How. 595, 59 U. S. 599,59 U. S. 600, and by Mr. Justice Miller in Gelpcke v. City of Dubuque, 1 Wall. 175, 68 U. S. 207, and Butz v. City of Muscatine, 8 Wall. 575, 75 U. S. 585. Vigorous attack upon the entire doctrine was made by Mr. Justice Field in Baltimore & Ohio R. Co. v. In disapproving that doctrine, we do not hold Baugh,149 U. S. 368, 149 U. S. 390, and by Mr. Justice Holmes in Kuhn v. Fairmont Coal Co.,215 U. S. 349, 215 U. S. 370, and in the Taxicab Case, 276 U.S. at 276 U. S. 532.
"an unconstitutional assumption of powers by courts of the United States which no lapse of time or respectable array of opinion should make us hesitate to correct."
Page 304 U. S. 80
unconstitutional 34 of the Federal Judiciary Act of 1789 or any other Act of Congress. We merely declare that, in applying the doctrine, this Court and the lower courts have invaded rights which, in our opinion, are reserved by the Constitution to the several States.
[Footnote 2]
In Hawkins v. Barney's Lessee, 5 Pet. 457, 30 U. S. 464, it was stated that 34
"has been uniformly held to be no more than a declaration of what the law would have been without it: to-wit, Fourth. The defendant contended that, by the common law of Pennsylvania as declared by its highest court in Falchetti v. Pennsylvania R. Co., 307 Pa. 203; 160 A. 859, the only duty owed to the plaintiff was to refrain from willful or wanton injury. The plaintiff denied that such is the Pennsylvania law. [Footnote 24] In support of their respective contentions the parties discussed and cited many decisions of the Supreme Court of the State. The Circuit Court of Appeals ruled that the question of liability is one of general law, and on that ground declined to decide the issue of state law. As we hold this was error, the judgment is reversed and the case remanded to it for further proceedings in conformity with our opinion. See also Bank of Hamilton v. Dudley's Lessee, 2 Pet. 492, 27 U. S. 525. Compare Jackson v. Chew, 12 Wheat. 153, 25 U. S. 162, 25 U. S. 168; Livingston v. Moore, 7 Pet. 469, 32 U. S. 542. that the lex loci must be the governing rule of private right, under whatever jurisdiction private right comes to be examined."
[Footnote 3]
Pepper, The Border Land of Federal and State Decisions (1889) 57; Gray, The Nature and Sources of Law (1909 ed.) 533-34; Trickett, Non-Federal Law Administered in Federal Courts (1906) 40 Am.L.Rev. 819, 821-24.
Reversed.
MR. JUSTICE CARDOZO took no part in the consideration or decision of this case.
[Footnote 1]
[Footnote 4]
16 Pet. 1 (1842). Leading cases applying the doctrine are collected in Black & White Taxicab Co. v. Brown & Yellow Taxicab Co., 276 U. S. 518, 276 U. S. 530, 276 U. S. 531. Dissent from its application or extension was expressed as early as 1845 by Mr. Justice McKinley (and Mr. Chief Justice Taney) in Lane v. Vick, 3 How. 464, 44 U. S. 477. Dissenting opinions were also written by Mr. Justice Daniel in Rowan v. Runnels, 5 How.
Street, Is There a General Commercial Law of the United States (1873) 21 Am.L.Reg. 473; Hornblower, Conflict between State and Federal Decisions (1880) 14 Am.L.Rev. 211; Meigs, Decisions of the Federal Courts on Questions of State Law (1882) 8 So.L.Rev. (n.s.) 452, (1911) 45 Am.L.Rev. 47; Heiskell, Conflict between Federal and State Decisions (1882) 16 Am.L.Rev. 743; Rand, Swift v. Tyson versus Gelpcke v.
145
Dubuque (1895) 8 Harv.L.Rev. 328, 341-43; Mills, Should Federal Courts Ignore State Laws (1900) 34 Am.L.Rev. 51; Carpenter, Court Decisions and the Common Law (1917) 17 Col.L.Rev. 593, 602-603. [Footnote 8]
Compare 2 Warren, The Supreme Court in United States History (rev. ed.1935) 89:
[Footnote 5]
"Probably no decision of the Court has ever given rise to more uncertainty as to legal rights, and though doubtless intended to promote uniformity in the operation of business transactions, its chief effect has been to render it difficult for business men to know in advance to what particular topic the Court would apply the doctrine. . . ."
Charles Warren, New Light on the History of the Federal Judiciary Act of 1789 (1923) 37 Harv.L.Rev. 49, 5152, 81-88, 108.
[Footnote 6]
Shelton, Concurrent Jurisdiction -- Its Necessity and its Dangers (1928) 15 Va.L.Rev. 137; Frankfurter, Distribution of Judicial Power Between Federal and State Courts (1928) 13 Corn.L.Q. 499, 524-30; Johnson, State Law and the Federal Courts (1929) 17 Ky.L.J. 355; Fordham, The Federal Courts and the Construction of Uniform State Laws (1929) 7 N.C.L.Rev. 423; Dobie, Seven Implications of Swift v. Tyson (1930) 16 Va.L.Rev. 225; Dawson, Conflict of Decisions between State and Federal Courts in Kentucky, and the Remedy (1931) 20 Ky.L.J. 1; Campbell, Is Swift v. Tyson an Argument for or against Abolishing Diversity of Citizenship Jurisdiction (1932) 18 A.B.A.J. 809; Ball, Revision of Federal Diversity Jurisdiction (1933) 28 Ill.L.Rev. 356, 362-64; Fordham, Swift v. Tyson and the Construction of State Statutes (1935) 41 W.Va. L.Q. 131.
The Federal Digest, through the 1937 volume, lists nearly 1000 decisions involving the distinction between questions of general and of local law.
[Footnote 9]
It was even possible for a nonresident plaintiff defeated on a point of law in the highest court of a State nevertheless to win out by taking a nonsuit and renewing the controversy in the federal court. Compare Gardner v. Michigan Cent. R. Co., 150 U. S. 349; Harrison v. Foley, 206 Fed. 57 (C.C.A. 8); Interstate Realty & Inv. Co. v. Bibb County, 293 Fed. 721 (C.C.A. 5); see Mills, supra, note 4 at 52.
[Footnote 10]
[Footnote 7]
For a recent survey of the scope of the doctrine, see Sharp & Brennan, The Application of the Doctrine of Swift v. Tyson since 1900 (1929) 4 Ind.L.J. 367.
Compare Mr. Justice Miller in Gelpcke v. City of Dubuque, 1 Wall. 175, 68 U. S. 209. The conflicts listed in Holt, The Concurrent Jurisdiction of the Federal and State Courts (1888) 160 et seq. cover twenty-eight pages. See also Frankfurter, supra, note 6 at 524-530; Dawson, supra, note 6; Note Aftermath of the Supreme Court's Stop, Look and Listen Rule (1930) 43 Harv.L.Rev. 926; cf. Yntema and Jaffin, Preliminary Analysis of Concurrent Jurisdiction (1931) 79 U. of Pa.L.Rev. 869, 881-86. Moreover, as pointed out by Judge Augustus N. Hand in Cole v. Pennsylvania R. Co., 43 F.2d 953, 956-57, decisions of this Court on common law questions are less likely than formerly to promote uniformity. [Footnote 12] [Footnote 11]
Black & White Taxicab Co. v. Brown & Yellow Taxicab Co., 276 U. S. 518; Rowan v. Runnels, 5 How. 134, 46 U. S. 139; Boyce v. Tabb, 18 Wall. 546, 85 U. S. 548;Johnson v. Chas. D. Norton Co., 159 Fed. 361 (C.C.A. 6); Keene Five Cent Sav. Bank v. Reid, 123 Fed. 221 (C.C.A. 8).
146
Railroad Co. v. Lockwood, 17 Wall. 357, 84 U. S. 367-368; Liverpool & G. W. Stearn Co. v. Phenix Ins. Co., 129 U. S. 397, 129 U. S. 443; Eels v. St. Louis, K. & N.W. Ry. Co., 52 Fed. 903 (C.C.S.D. Iowa); Fowler v. Pennsylvania R. Co., 229 Fed. 373 (C.C.A. 2). Lane v. Vick, 3 How. 464, 44 U. S. 476; Barber v. Pittsburgh, F. W. & C. R. Co., 166 U. S. 83, 166 U. S. 99100; Messinger v. Anderson, 171 Fed. 785, 791-792 (C.C.A. 6),reversed on other grounds, 225 U. S. 225 U.S. 436; Knox & Lewis v. Alwood, 228 Fed. 753 (S.D.Ga.).
[Footnote 13]
[Footnote 18]
Chicago v. Robbins, 2 Black 418, 67 U. S. 428. Compare 77 U. S. Milwaukee, 10 Wall. 497, 77 U. S. 506507; Yeates v. Illinois Cent. R. Co., 137 Fed. 943 (C.C.N.D.Ill.);Curtis v. Cleveland, C.C. & St. L. Ry. Co., 140 Fed. 777 (C. G. E.D.Ill.). See also Hough v. Railway Co., 100 U. S. 213, 100 U. S. 226; Baltimore & Ohio R. Co. v. Baugh, 149 U. S. 368; Gardner v. Michigan Cent. R. Co., 150 U. S. 349, 150 U. S. 358; Beutler v. Grand Trunk Junction Ry. Co., 224 U. S. 85; Baltimore & Ohio R. Co. v. Goodman, 275 U. S. 66; Pokora v. Wabash Ry. Co., 292 U. S. 98; Cole v. Pennsylvania R. Co., 43 F. (2d) 953 (C.C.A. 2).
Compare, also, 49 U. S. Berry, 8 How. 495; Watson v. Tarpley, 18 How. 517; Gelpcke v. City of Dubuqe, 1 Wall. 175.
[Footnote 19]
See Cheever v. Wilson, 9 Wall. 108, 76 U. S. 123; Robertson v. Carson, 19 Wall. 94, 86 U. S. 106-107; Morris v. Gilmer, 129 U. S. 315, 129 U. S. 328; Dickerman v. Northern Trust Co., 176 U. S. 181, 176 U. S. 192; Williamson v. Osenton, 232 U. S. 619, 232 U. S. 625.
[Footnote 14] [Footnote 20] Lake Shore & M. S. Ry. Co. v. Prentice, 147 U. S. 101, 147 U. S. 106; Norfolk & P. Traction Co. v. Miller, 174 Fed. 607 (C.C.A. 4); Greene v. Keithley, 86 F. (2d) 239 (C.C.A. 8). See, e.g., Hearings Before a Subcommittee of the Senate Committee on the Judiciary on S. 937, S. 939, and S. 3243, 72d Cong., 1st Sess. (1932) 6-8; Hearing Before the House Committee on the Judiciary on H.R. [Footnote 15] 10594, H.R. 4526, and H.R. 11508, 72d Cong., 1st Sess., ser. 12 (1932) 97-104; Sen.Rep. No. 530, 72d Cong., 1st Sess. (1932) 4-6; Collier, A Plea Against Jurisdiction Because of Diversity (1913) 76 Cent.L.J. 263, 264, 266; Frankfurter, supra, note 6; Ball supra, note 6; Warren Corporations and Diversity of Citizenship (1933) 19 Va.L.Rev. 661, 686.
Foxcroft v. Mallet, 4 How. 353, 45 U. S. 379; Midland Valley R. Co. v. Sutter, 28 F. (2d) 163 (C.C.A. 8); Midland Valley R. Co. v. Jarvis, 29 F. (2d) 539 (C.C.A. 8).
[Footnote 16]
Kuhn v. Fairmont Coal Co., 215 U. S. 349; Mid-Continent Petroleum Corp. v. Sauder,67 F. (2d) 9, 12 (G. C.A. 10), reversed on other grounds, 292 U. S. 272.
[Footnote 21]
Thus, bills which would abrogate the doctrine of Swift v. Tyson have been introduced. S. 4333, 70th Cong., 1st Sess.; S. 96, 71st Cong., 1st Sess.; H.R. 8094, 72d Cong., 1st Sess. See also Mills, supra, note 4 at 68-69; Dobie, supra, note 6 at 241; Frankfurter, supra, note 6 at 530; Campbell, supra, note 6 at 811. State statutes on conflicting questions of "general law" have also been suggested. See Heiskell, supra,note 4 at 760; Dawson, supra, note 6; Dobie supra, note 6 at 241.
[Footnote 17]
147
[Footnote 22] approaching and had time and space enough to step aside and so avoid danger. To justify his failure to get out of the way, he says that, upon many other occasions he had safely walked there while trains passed.
The doctrine has not been without defenders. See Eliot, The Common Law of the Federal Courts (1902) 36 Am.L.Rev. 498, 523-25; A. B. Parker, The Common Law Jurisdiction of the United States Courts (1907) 17 Yale L.J. 1; Schofield, Swift v. Tyson:Uniformity of Judge-Made State Law in State and Federal Courts (1910) 4 Ill.L.Rev. 533; Brown, The Jurisdiction of the Federal Courts Based on Diversity of Citizenship (1929) 78 U. of Pa.L.Rev. 179, 189-91; J. J. Parker, The Federal Jurisdiction and Recent Attacks Upon It (1932) 18 A.B.A.J. 433, 438; Yntema, The Jurisdiction of the Federal Courts in Controversies Between Citizens of Different States (1933) 19 A.B.A.J. 71, 74-75; Beutel, Common Law Judicial Technique and the Law of Negotiable Instruments -- Two Unfortunate Decisions (1934) 9 Tulane L.Rev. 64.
Invoking jurisdiction on the ground of diversity of citizenship, plaintiff, a citizen and resident of Pennsylvania, brought this suit to recover damages against defendant, a New York corporation, in the federal court for the southern district of that State. The issues were whether negligence of defendant was a proximate cause of his injuries and whether negligence of plaintiff contributed. He claimed that, by hauling the car with the open door, defendant violated a duty to him. The defendant insisted that it violated no duty and that plaintiff's injuries were caused by his own negligence. The jury gave him a verdict on which the trial court entered judgment; the circuit court of appeals affirmed. 90 F (2d) 603.
[Footnote 23]
Defendant maintained, citing Falchetti v. Pennsylvania R. Co., 307 Pa. 203, 160 A. 859, and Koontz v. B. & O. R. Co., 309 Pa. 122, 163 A. 212, that the only duty owed plaintiff was to refrain from willfully or wantonly injuring him; it argued that the courts of Pennsylvania had so ruled with respect to persons using a customary longitudinal path, as distinguished from one crossing the track. The plaintiff insisted that the Pennsylvania
Kuhn v. Fairmont Coal Co., 215 U. S. 349, 215 U. S. 370-372; Black & White Taxicab Co. v. Brown & Yellow Taxicab Co., 276 U. S. 518, 276 U. S. 532-536.
[Footnote 24]
decisions did not establish the rule for which the defendant contended. Upon that issue, the circuit court of appeals said (p. 604):
Tompkins also contended that the alleged rule of the Falchetti case is not, in any event, applicable here because he was struck at the intersection of the longitudinal pathway and a transverse crossing. The court below found it unnecessary to consider this contention, and we leave the question open.
"We need not go into this matter since the defendant concedes that the great weight of authority in other states is to the contrary. This concession is fatal to its contention, for upon questions of general law the federal courts are free, in absence of a local statute, to exercise their independent judgment as to what the law is, and it is well settled that the question of the responsibility of a railroad for injuries caused by its servants is one of
MR. JUSTICE BUTLER.
The case presented by the evidence is a simple one. Plaintiff was severely injured in Pennsylvania. While walking on defendant's right of way along a much-used path at the end of the crossties of its main track, he came into collision with an open door swinging from the side of a car in a train going in the opposite direction. Having been warned by whistle and headlight, he saw the locomotive
general law.
Page 304 U. S. 82
Upon that basis the court held the evidence sufficient to sustain a finding that plaintiff's injuries were caused by the negligence of defendant. It also held the question of contributory negligence one for the jury."
Page 304 U. S. 81
148
Defendant's petition for writ of certiorari presented two questions: whether its duty toward plaintiff should have been determined in accordance with the law as found by the highest court of Pennsylvania, and whether the evidence conclusively showed plaintiff guilty of contributory negligence. Plaintiff contends that, as always heretofore held by this Court, the issues of negligence and contributory negligence are to be determined by general law against which local decisions may not be held conclusive; that defendant relies on a solitary Pennsylvania case of doubtful applicability and that, even if the decisions of the courts of that State were deemed controlling, the same result would have to be reached. "In the ordinary use of language it will hardly be contended that the decisions of Courts constitute laws. They are, at most, only evidence of what the laws are, and not of themselves laws. They are often reexamined, reversed, and qualified by the Courts themselves, whenever they are found to be either defective, or illfounded, or otherwise incorrect. The laws of a state are more usually understood to mean the rules and enactments promulgated by the legislative authority thereof, or long established local customs having the force of laws. In all the various cases, which have hitherto come before us for decision, this Court have uniformly supposed that the true interpretation of the thirty-fourth section limited its application to state laws strictly local, that is to say, to the positive statutes of the state, and the construction thereof adopted by the local tribunals, and to rights and titles to things having a permanent locality, such as the rights and titles to real estate, and other matters immovable and intraterritorial in their nature and character. It never has been supposed by us that the section did apply, or was designed to apply, to questions of a more general nature, not at all dependent upon local statutes or local usages of a fixed and permanent operation, as, for example, to the construction of ordinary contracts or other written instruments, and especially to questions of general commercial law, where the state tribunals are called upon to perform the like functions as ourselves, that is, to The opinion just announced states that ascertain upon general reasoning and legal analogies, what is the true exposition of the contract or instrument, or what is the just rule furnished by the principles of commercial law to govern the case. And we have not now the slightest difficulty in holding that this section, upon its true intendment and construction, is strictly limited to local statutes and local usages of the character That case involved the construction of the Judiciary Act of 1789, 34: Page 304 U. S. 84 "The laws of the several states, except where the Constitution, treaties, or statutes of the United States otherwise require or provide, shall be regarded as rules of decision in trials at common law in the courts of before stated, and does not extend to contracts and other instruments of a commercial nature, the true interpretation and effect whereof are to be sought not in the decisions of the local tribunals, but in the general Page 304 U. S. 83 principles and doctrines of commercial jurisprudence. Undoubtedly, the decisions of the local tribunals upon such subjects are entitled to, and will receive, the most deliberate attention and respect of this Court; but they cannot furnish positive rules, or conclusive authority, by which our own judgments are to be bound up and Expressing the view of all the members of the Court, Mr. Justice Story said (p. 18): governed."
No constitutional question was suggested or argued below or here. And as a general rule, this Court will not consider any question not raised below and presented by the petition. Olson v. United States, 292 U. S. 246, 292 U. S. 262. Johnson v. Manhattan Ry. Co., 289 U. S. 479, 289 U. S. 494. Gunning v. Cooley, 281 U. S. 90, 281 U. S. 98. Here it does not decide either of the questions presented but, changing the rule of decision in force since the foundation of the Government, remands the case to be adjudged according to a standard never before deemed permissible.
"the question for decision is whether the oft-challenged doctrine of Swift v. Tyson[1842, 16 Pet. 1] shall now be disapproved."
the United States in cases where they apply."
149
(Italics added.) No more unqualified application of the doctrine can be found than in decisions of this Court speaking through Mr. Justice Holmes. United Zinc Co. v. Britt, 258 U. S. 268.Baltimore & Ohio R. Co. v. Goodman, 275 U. S. 66, 275 U. S. 70. Without in the slightest departing from that doctrine, but implicitly applying it, the strictness of the rule laid down in the Goodman case was somewhat ameliorated by Pokora v. Wabash Ry. Co., 292 U. S. 98.
The doctrine of that case has been followed by this Court in an unbroken line of decisions. So far as appears, it was not questioned until more than 50 years later, and then by a single judge. [Footnote 2/1] Baltimore & Ohio R. Co. v. Baugh, 149 U. S. 368, 149 U. S. 390. In that case, Mr. Justice Brewer, speaking for the Court, truly said (p. 149 U. S. 373):
"Whatever differences of opinion may have been expressed have not been on the question whether a matter of general law should be settled by the independent judgment of this court, rather than through an adherence to the decisions of the state courts, but upon the other question, whether a given matter is one of local or of general law."
Whenever possible, consistently with standards sustained by reason and authority constituting the general law, this Court has followed applicable decisions of state courts.Mutual Life Ins. Co. v. Johnson, 293 U. S. 335, 293 U. S. 339. See Burgess v. Seligman, 107 U. S. 20, 107 U. S. 34. Black & White Taxicab Co. v. Brown & Yellow Taxicab Co., supra, 276 U. S. 530. Unquestionably the issues of negligence and contributory negligence upon which decision of this case
And since that decision, the division of opinion in this Court has been one of the same character as it was before. In 1910, Mr. Justice Holmes, speaking for himself and two other Justices, dissented from the holding that a Page 304 U. S. 86
depends are questions of general law. Hough v. Railway Co., 100 U. S. 213, 100 U. S. 226. Lake Shore & M. S. Ry. Co. v. Prentice, 147 U. S. 101. Baltimore & Ohio R. Co. v. Baugh, supra. Gardner v. Michigan Central R. Co., 150 U. S. 349, 150 U. S. 358.Central Vermont Ry. Co. v. White, 238 U. S. 507, 238 U. S.
Page 304 U. S. 85
court of the United States was bound to exercise its own independent judgment in the construction of a conveyance made before the state courts had rendered an authoritative decision as to its meaning and effect. Kuhn v. Fairmont Coal Co., 215 U. S. 349. But that dissent accepted (p. 215 U. S. 371) as "settled" the doctrine of Swift v. Tyson, and insisted (p. 215 U. S. 372) merely that the case under consideration was, by nature and necessity, peculiarly local.
512. Baltimore & Ohio R. Co. v. Goodman, supra. Pokora v. Wabash Ry. Co., supra.
While amendments to 34 have from time to time been suggested, the section stands as originally enacted. Evidently Congress has intended throughout the years that the rule of decision as construed should continue to govern federal courts in trials at common law. The opinion just announced suggests that Mr. Warren's research has established that, from the beginning, this Court has erroneously construed 34. But that author's
Thereafter, as before, the doctrine was constantly applied. [Footnote 2/2] In Black & White Taxicab Co. v. Brown & Yellow Taxicab Co., 276 U. S. 518, three judges dissented. The writer of the dissent, Mr. Justice Holmes, said, however (p. 276 U. S. 535):
"New Light on the History of the Federal Judiciary Act of 1789" does not purport to be authoritative, and was intended to be no more than suggestive. The weight to be given to his discovery has never been discussed at this bar. Nor does the opinion indicate the ground disclosed by the research. In his dissenting opinion in theTaxicab case, Mr. Justice Holmes referred to Mr. Warren's work, but failed to persuade the Court that "laws" as used in 34 included varying and possibly ill-considered rulings by the courts of a State on
"I should leave Swift v. Tyson undisturbed, as I indicated in Kuhn v. Fairmont Coal Co.,but I would not allow it to spread the assumed dominion into new fields."
150
questions of common law. See, e.g., Swift v. Tyson, supra,117 [argument of counsel -- omitted]. It well may be that, if the Court should now call for argument of counsel on the basis of Mr. Warren's research, it would adhere to the construction it has always put upon 34. Indeed, the opinion in this case so indicates. For it declares: otherwise, indicate precisely the principle or provision of the Constitution held to have been transgressed, and fully disclose the reasons and authorities found to warrant the conclusion of invalidity. These safeguards against the improvident use of the great power to invalidate legislation are so well grounded and familiar that statement of reasons or citation of authority to support them is no longer necessary. But see, e.g.: 36 U. S. Warren Bridge, 11 Pet. 420, 36 U. S. 553; Township of Pine Grove v. Talcott, 19 Wall. 666, 86 U. S. 673; Chicago & G. T. Ry. Co. v. Wellman, 143 U. S. 339, 143 U. S. 345;
"If only a question of statutory construction were involved, we should not be prepared to abandon a doctrine so widely applied throughout a century. But the unconstitutionality of the course pursued has now been made clear, and compels us to do so."
Page 304 U. S. 88
This means that, so far as concerns the rule of decision now condemned, the Judiciary Act of 1789, passed to establish judicial
Baker v. Grice, 169 U. S. 284, 169 U. S. 292; Martin v. District of Columbia, 205 U. S. 135, 205 U. S. 140.
So far as appears, no litigant has ever challenged the power of Congress to establish the rule as construed. It has so long endured that its destruction now without appropriate deliberation cannot be justified. There is nothing in the opinion to suggest that consideration of any constitutional question is necessary to a decision of the case. By way of reasoning, it contains nothing that requires the conclusion reached. Admittedly, there is no authority to support that conclusion. Against the protest of those joining in this opinion, the Court declines to assign the case for reargument. It may not justly be assumed that the labor and argument of counsel for the parties would not disclose the right conclusion and aid the Court in the statement of reasons to support it. Indeed, it would have been appropriate to give Congress opportunity to be heard before divesting it of power to prescribe rules of decision to be followed in the courts of the United States. See Myers v. United States, 272 U. S. 52, 272 U. S. 176.
Page 304 U. S. 87
courts to exert the judicial power of the United States, and especially 34 of that Act as construed, is unconstitutional; that federal courts are now bound to follow decisions of the courts of the State in which the controversies arise, and that Congress is powerless otherwise to ordain. It is hard to foresee the consequences of the radical change so made. Our opinion in the Taxicab case cites numerous decisions of this Court which serve in part to indicate the field from which it is now intended forever to bar the federal courts. It extends to all matters of contracts and torts not positively governed by state enactments. Counsel searching for precedent and reasoning to disclose common law principles on which to guide clients and conduct litigation are, by this decision, told that, as to all of these questions, the decisions of this Court and other federal courts are no longer anywhere authoritative.
The course pursued by the Court in this case is repugnant to the Act of Congress of August 24, 1937, 50 Stat. 751. It declares:
This Court has often emphasized its reluctance to consider constitutional questions, and that legislation will not be held invalid as repugnant to the fundamental law if the case may be decided upon any other ground. In view of grave consequences liable to result from erroneous exertion of its power to set aside legislation, the Court should move cautiously, seek assistance of counsel, act only after ample deliberation, show that the question is before the Court, that its decision cannot be avoided by construction of the statute assailed or
"That whenever the constitutionality of any Act of Congress affecting the public interest is drawn in question in any court of the United States in any suit or proceeding to which the United States, or any agency thereof, or any officer or employee thereof, as such officer or employee, is not a party, the court having jurisdiction of the suit or proceeding shall certify such fact to the Attorney General. In any such case, the court shall permit the
151
United States to intervene and become a party for presentation of evidence (if evidence is otherwise receivable in such suit or proceeding) and argument upon the question of the constitutionality of such Act. In any such suit or proceeding, the United States shall, subject to the applicable provisions of law, have all the rights of a resulting from that construction] compels" abandonment of the doctrine so long applied, and then near the end Page 304 U. S. 89 of the last page the Court states that it does not hold 34 unconstitutional, but merely that, in applying the doctrine of Swift v. Tysonconstruing it, this Court and the lower courts have invaded rights which are reserved by the Constitution to the several States. But, plainly through the form of words employed, the substance of the decision appears; it strikes down as unconstitutional 34 as construed by our decisions; it divests the Congress of power to prescribe rules to be followed by federal courts when deciding questions of general law. In that broad field it compels this and the lower federal courts to follow decisions of the courts of a particular State. after discussion, it declares (pp. 304 U. S. 77-78) that "the unconstitutionality of the course pursued [meaning the rule of decision
Page 304 U. S. 90
party and the liabilities of a party as to court costs to the extent necessary for a proper presentation of the facts and law relating to the constitutionality of such Act."
That provision extends to this Court. 5. If defendant had applied for and obtained the writ of certiorari upon the claim that, as now held, Congress has no power to prescribe the rule of decision, 34 as construed, it would have been the duty of this Court to issue the prescribed certificate to the Attorney General in order that the United States might intervene and be heard on the constitutional question. Within the purpose of the statute and its true intent and meaning, the constitutionality of that measure has been "drawn in question." Congress intended to give the United States the right to be heard in every case involving constitutionality of an Act affecting the public interest. In view of the rule that, in the absence of challenge of constitutionality, statutes will not here be invalidated on that ground, the Act of August 24, 1937, extends to cases where constitutionality is first "drawn in question" by the Court. No extraordinary or unusual action by the Court after submission of the cause should be permitted to frustrate the wholesome purpose of that Act. The duty it imposes ought here to be willingly assumed. If it were doubtful whether this case is within the scope of the Act, the Court should give the United States opportunity to intervene and, if so advised, to present argument on the constitutional question, for undoubtedly it is one of great public importance. That would be to construe the Act according to its meaning.
I am of opinion that the constitutional validity of the rule need not be considered, because under the law, as found by the courts of Pennsylvania and generally throughout the country, it is plain that the evidence required a finding that plaintiff was guilty of negligence that contributed to cause his injuries and that the judgment below should be reversed upon that ground.
MR. JUSTICE McREYNOLDS concurs in this opinion.
[Footnote 2/1]
Mr. Justice Field filed a dissenting opinion, several sentences of which are quoted in the decision just announced. The dissent failed to impress any of his associates. It assumes that adherence to 34 as construed involves a supervision over legislative or judicial action of the states. There is no foundation for that suggestion. Clearly, the dissent of the learned Justice rests upon misapprehension of the rule. He joined in applying the doctrine for more than a quarter of a century before his dissent. The reports do not disclose that he objected to it in any later case. Cf. Oakes v. Mase, 165 U. S. 363.
The Court's opinion in its first sentence defines the question to be whether the doctrine of Swift v. Tyson shall now be disapproved; it recites (p. 304 U. S. 72) that Congress is without power to prescribe rules of decision that have been followed by federal courts as a result of the construction of 34 in Swift v. Tyson, and since;
152
[Footnote 2/2] federal courts would be compelled to follow state decisions. There was sufficient doubt about the matter in 1789 to induce the first Congress to legislate. No former opinions of this Court have passed upon it. Mr. Justice Holmes evidently saw nothing "unconstitutional" which required the overruling of Swift v. Tyson, for he said in the very opinion quoted by the majority, "I should leave Swift v. Tyson undisturbed, as I indicated in Kuhn v. Fairmont Coal Co., but I would not allow it to spread the assumed dominion into new fields." Black & MR. JUSTICE REED. White Taxicab Co. v. Brown & Yellow Taxicab Co., 276 U. S. 518, 276 U. S. 535. If the opinion commits this Court to the position that the Congress is without power to declare what rules of substantive law shall govern the federal courts, that conclusion also seems questionable. The line between procedural and substantive law is hazy, but no one doubts federal power over procedure. Wayman v. Southard, 10 Wheat. 1. The Judiciary Article and the "necessary and proper" clause of Article One may fully authorize legislation, such as this The "doctrine of Swift v. Tyson," as I understand it, is that the words "the laws," as used in 34, line one, of the Federal Judiciary Act of September 24, 1789, do not include in their meaning "the decisions of the local tribunals." Mr. Justice Story, in deciding that point, said (16 Pet. 41 U. S. 19): In this Court, stare decisis, in statutory construction, is a useful rule, not an inexorable command. Burnett v. Coronado Oil & Gas Co., 285 U. S. 393, dissent, p. 285 U. S. 406, note 1. Compare Read v. Bishop of Page 304 U. S. 91 Lincoln, [1892] A.C. 644, 655; London Street Tramways Co. v. London County Council, [1898] A.C. 375, 379. It seems preferable to overturn an established construction of an Act of Congress, rather than, in the circumstances of this case, to interpret the Constitution. Cf. United States v. Delaware & Hudson Co., 213 U. S. 366. section of the Judiciary Act.
In Salem Trust Co. v. Manufacturers' Finance Co., 264 U. S. 182, Mr. Justice Holmes and Mr. Justice Brandeis concurred (p. 264 U. S. 200) in the judgment of the Court upon a question of general law on the ground that the rights of the parties were governed by state law.
I concur in the conclusion reached in this case, in the disapproval of the doctrine ofSwift v. Tyson, and in the reasoning of the majority opinion except insofar as it relies upon the unconstitutionality of the "course pursued" by the federal courts.
"Undoubtedly, the decisions of the local tribunals upon such subjects are entitled to, and will receive, the most deliberate attention and respect of this Court; but they cannot furnish positive rules, or conclusive authority, by which our own judgments are to be bound up and governed."
To decide the case now before us and to "disapprove" the doctrine of Swift v. Tysonrequires only that we say that the words "the laws" include in their meaning the decisions of the local tribunals. As the majority opinion shows, by its reference to Mr. Warren's researches and the first quotation from Mr. Justice Holmes, that this Court is now of the view that "laws" includes "decisions," it is unnecessary to go further and declare that the "course pursued" was "unconstitutional," instead of merely erroneous.
There is no occasion to discuss further the range or soundness of these few phrases of the opinion. It is sufficient now to call attention to them and express my own nonacquiescence.
The "unconstitutional" course referred to in the majority opinion is apparently the ruling in Swift v. Tyson that the supposed omission of Congress to legislate as to the effect of decisions leaves federal courts free to interpret general law for themselves. I am not at all sure whether, in the absence of federal statutory direction,
153
Republic of the Philippines SUPREME COURT FIRST DIVISION G.R. No. 120077 October 13, 2000 By virtue of a "management agreement"9 with the Palace Hotel (Wang Fu Company Limited), MHICL10 trained the personnel and staff of the Palace Hotel at Beijing, China. Now the facts. During his employment with the Mazoon Printing Press in the Sultanate of Oman, respondent Santos received a letter dated May 2, 1988 from Mr. Gerhard R. Shmidt, General Manager, Palace Hotel, Beijing, China. Mr. Schmidt informed respondent Santos that he was recommended by one Nestor Buenio, a friend of his. Mr. Shmidt offered respondent Santos the same position as printer, but with a higher monthly salary and increased benefits. The position was slated to open on October 1, 1988.11 On May 8, 1988, respondent Santos wrote to Mr. Shmidt and signified his acceptance of the offer. On May 19, 1988, the Palace Hotel Manager, Mr. Hans J. Henk mailed a ready to sign employment contract to respondent Santos. Mr. Henk advised respondent Santos that if the contract was acceptable, to return the same to Mr. Henk in Manila, together with his passport and two additional pictures for his visa to China. On May 30, 1988, respondent Santos resigned from the Mazoon Printing Press, effective June 30, 1988, under the pretext that he was needed at home to help with the family's piggery and poultry business. On June 4, 1988, respondent Santos wrote the Palace Hotel and acknowledged Mr. Henk's letter. Respondent Santos enclosed four (4) signed copies of the employment contract (dated June 4, 1988) and notified them that he was going to arrive in Manila during the first week of July 1988. The employment contract of June 4, 1988 stated that his employment would commence September 1, 1988 for a period of two years.12 It provided for a monthly salary of nine hundred dollars (US$900.00) net of taxes, payable fourteen (14) times a year.13 On June 30, 1988, respondent Santos was deemed resigned from the Mazoon Printing Press. (3) Order of March 30, 1995.6 Denying the motion for reconsideration of the petitioners. On July 1, 1988, respondent Santos arrived in Manila. In May, 1988, private respondent Marcelo Santos (hereinafter referred to as "Santos") was an overseas worker employed as a printer at the Mazoon Printing Press, Sultanate of Oman. Subsequently, in June 1988, he was directly hired by the Palace Hotel, Beijing, People's Republic of China and later terminated due to retrenchment. Petitioners are the Manila Hotel Corporation (hereinafter referred to as "MHC") and the Manila Hotel International Company, Limited (hereinafter referred to as "MHICL"). When the case was filed in 1990, MHC was still a government-owned and controlled corporation duly organized and existing under the laws of the Philippines. MHICL is a corporation duly organized and existing under the laws of Hong Kong.7 MHC is an "incorporator" of MHICL, owning 50% of its capital stock.8 On November 5, 1988, respondent Santos left for Beijing, China. He started to work at the Palace Hotel.14 Subsequently, respondent Santos signed an amended "employment agreement" with the Palace Hotel, effective November 5, 1988. In the contract, Mr. Shmidt represented the Palace Hotel. The Vice President (Operations and Development) of petitioner MHICL Miguel D. Cergueda signed the employment agreement under the word "noted". From June 8 to 29, 1989, respondent Santos was in the Philippines on vacation leave. He returned to China and reassumed his post on July 17, 1989. On July 22, 1989, Mr. Shmidt's Executive Secretary, a certain Joanna suggested in a handwritten note that respondent Santos be given one (1) month notice of his release from employment.
THE MANILA HOTEL CORP. AND MANILA HOTEL INTL. LTD., petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, ARBITER CEFERINA J. DIOSANA AND MARCELO G. SANTOS,respondents. PARDO, J.: The case before the Court is a petition for certiorari1 to annul the following orders of the National Labor Relations Commission (hereinafter referred to as "NLRC") for having been issued without or with excess jurisdiction and with grave abuse of discretion:2 (1) Order of May 31, 1993.3 Reversing and setting aside its earlier resolution of August 28, 1992.4 The questioned order declared that the NLRC, not the Philippine Overseas Employment Administration (hereinafter referred to as "POEA"), had jurisdiction over private respondent's complaint; (2) Decision of December 15, 1994. Directing petitioners to jointly and severally pay private respondent twelve thousand and six hundred dollars (US$ 12,600.00) representing salaries for the unexpired portion of his contract; three thousand six hundred dollars (US$3,600.00) as extra four months salary for the two (2) year period of his contract, three thousand six hundred dollars (US$3,600.00) as "14th month pay" or a total of nineteen thousand and eight hundred dollars (US$19,800.00) or its peso equivalent and attorney's fees amounting to ten percent (10%) of the total award; and
5
154
On August 10, 1989, the Palace Hotel informed respondent Santos by letter signed by Mr. Shmidt that his employment at the Palace Hotel print shop would be terminated due to business reverses brought about by the political upheaval in China.15 We quote the letter:16 "After the unfortunate happenings in China and especially Beijing (referring to Tiannamen Square incidents), our business has been severely affected. To reduce expenses, we will not open/operate printshop for the time being. "We sincerely regret that a decision like this has to be made, but rest assured this does in no way reflect your past performance which we found up to our expectations." "Should a turnaround in the business happen, we will contact you directly and give you priority on future assignment." On September 5, 1989, the Palace Hotel terminated the employment of respondent Santos and paid all benefits due him, including his plane fare back to the Philippines. On October 3, 1989, respondent Santos was repatriated to the Philippines. On October 24, 1989, respondent Santos, through his lawyer, Atty. Ednave wrote Mr. Shmidt, demanding full compensation pursuant to the employment agreement. On November 11, 1989, Mr. Shmidt replied, to wit:17 His service with the Palace Hotel, Beijing was not abruptly terminated but we followed the onemonth notice clause and Mr. Santos received all benefits due him. "For your information the Print Shop at the Palace Hotel is still not operational and with a low business outlook, retrenchment in various departments of the hotel is going on which is a normal management practice to control costs. "When going through the latest performance ratings, please also be advised that his performance was below average and a Chinese National who is doing his job now shows a better approach. "In closing, when Mr. Santos received the letter of notice, he hardly showed up for work but still enjoyed free accommodation/laundry/meals up to the day of his departure." On February 20, 1990, respondent Santos filed a complaint for illegal dismissal with the Arbitration Branch, National Capital Region, National Labor Relations Commission (NLRC). He prayed for an award of nineteen thousand nine hundred and twenty three dollars (US$19,923.00) as actual damages, forty thousand pesos (P40,000.00) as exemplary damages and attorney's fees equivalent to 20% of the damages prayed for. The complaint named MHC, MHICL, the Palace Hotel and Mr. Shmidt as respondents. The Palace Hotel and Mr. Shmidt were not served with summons and neither participated in the proceedings before the Labor Arbiter.18 On June 27, 1991, Labor Arbiter Ceferina J. Diosana, decided the case against petitioners, thus:19 "WHEREFORE, judgment is hereby rendered: "1. directing all the respondents to pay complainant jointly and severally; "a) $20,820 US dollars or its equivalent in Philippine currency as unearned salaries; "b) P50,000.00 as moral damages; "c) P40,000.00 as exemplary damages; and "d) Ten (10) percent of the total award as attorney's fees. "SO ORDERED." On July 23, 1991, petitioners appealed to the NLRC, arguing that the POEA, not the NLRC had jurisdiction over the case. On August 28, 1992, the NLRC promulgated a resolution, stating:20 "WHEREFORE, let the appealed Decision be, as it is hereby, declared null and void for want of jurisdiction. Complainant is hereby enjoined to file his complaint with the POEA. "SO ORDERED." On September 18, 1992, respondent Santos moved for reconsideration of the afore-quoted resolution. He argued that the case was not cognizable by the POEA as he was not an "overseas contract worker."21 On May 31, 1993, the NLRC granted the motion and reversed itself. The NLRC directed Labor Arbiter Emerson Tumanon to hear the case on the question of whether private respondent was retrenched or dismissed.22 On January 13, 1994, Labor Arbiter Tumanon completed the proceedings based on the testimonial and documentary evidence presented to and heard by him.23 Subsequently, Labor Arbiter Tumanon was re-assigned as trial Arbiter of the National Capital Region, Arbitration Branch, and the case was transferred to Labor Arbiter Jose G. de Vera.24 On November 25, 1994, Labor Arbiter de Vera submitted his report.25 He found that respondent Santos was illegally dismissed from employment and recommended that he be paid actual damages equivalent to his salaries for the unexpired portion of his contract.26 On December 15, 1994, the NLRC ruled in favor of private respondent, to wit:27 "WHEREFORE, finding that the report and recommendations of Arbiter de Vera are supported by substantial evidence, judgment is hereby rendered, directing the respondents to jointly and severally pay complainant the following computed contractual benefits: (1) US$12,600.00 as salaries for the unexpired portion of the parties' contract; (2) US$3,600.00 as extra four (4) months
155
salary for the two (2) years period (sic) of the parties' contract; (3) US$3,600.00 as "14th month pay" for the aforesaid two (2) years contract stipulated by the parties or a total of US$19,800.00 or its peso equivalent, plus (4) attorney's fees of 10% of complainant's total award. "SO ORDERED." On February 2, 1995, petitioners filed a motion for reconsideration arguing that Labor Arbiter de Vera's recommendation had no basis in law and in fact.28 On March 30, 1995, the NLRC denied the motion for reconsideration.29 Hence, this petition.30 On October 9, 1995, petitioners filed with this Court an urgent motion for the issuance of a temporary restraining order and/or writ of preliminary injunction and a motion for the annulment of the entry of judgment of the NLRC dated July 31, 1995.31 On November 20, 1995, the Court denied petitioner's urgent motion. The Court required respondents to file their respective comments, without giving due course to the petition.32 On March 8, 1996, the Solicitor General filed a manifestation stating that after going over the petition and its annexes, they can not defend and sustain the position taken by the NLRC in its assailed decision and orders. The Solicitor General prayed that he be excused from filing a comment on behalf of the NLRC33 On April 30,1996, private respondent Santos filed his comment.34 On June 26, 1996, the Court granted the manifestation of the Solicitor General and required the NLRC to file its own comment to the petition.35 On January 7, 1997, the NLRC filed its comment. The petition is meritorious. I. Forum Non-Conveniens The NLRC was a seriously inconvenient forum. We note that the main aspects of the case transpired in two foreign jurisdictions and the case involves purely foreign elements. The only link that the Philippines has with the case is that respondent Santos is a Filipino citizen. The Palace Hotel and MHICL are foreign corporations. Not all cases involving our citizens can be tried here. The employment contract. Respondent Santos was hired directly by the Palace Hotel, a foreign employer, through correspondence sent to the Sultanate of Oman, where respondent Santos was then employed. He was hired without the intervention of the POEA or any authorized recruitment agency of the government.36 Under the rule of forum non conveniens, a Philippine court or agency may assume jurisdiction over the case if it chooses to do so provided: (1) that the Philippine court is one to which the parties may conveniently resort to; (2) that the Philippine court is in a position to make an intelligent decision as to the law and the facts; and (3) that the Philippine court has or is likely to have power to enforce its decision.37 The conditions are unavailing in the case at bar. Not Convenient. We fail to see how the NLRC is a convenient forum given that all the incidents of the case from the time of recruitment, to employment to dismissal occurred outside the Philippines. The inconvenience is compounded by the fact that the proper defendants, the Palace Hotel and MHICL are not nationals of the Philippines. Neither .are they "doing business in the Philippines." Likewise, the main witnesses, Mr. Shmidt and Mr. Henk are non-residents of the Philippines. No power to determine applicable law. Neither can an intelligent decision be made as to the law governing the employment contract as such was perfected in foreign soil. This calls to fore the application of the principle of lex loci contractus (the law of the place where the contract was made).38 The employment contract was not perfected in the Philippines. Respondent Santos signified his acceptance by writing a letter while he was in the Republic of Oman. This letter was sent to the Palace Hotel in the People's Republic of China. No power to determine the facts. Neither can the NLRC determine the facts surrounding the alleged illegal dismissal as all acts complained of took place in Beijing, People's Republic of China. The NLRC was not in a position to determine whether the Tiannamen Square incident truly adversely affected operations of the Palace Hotel as to justify respondent Santos' retrenchment. Principle of effectiveness, no power to execute decision. Even assuming that a proper decision could be reached by the NLRC, such would not have any binding effect against the employer, the Palace Hotel. The Palace Hotel is a corporation incorporated under the laws of China and was not even served with summons. Jurisdiction over its person was not acquired. This is not to say that Philippine courts and agencies have no power to solve controversies involving foreign employers. Neither are we saying that we do not have power over an employment contract executed in a foreign country. If Santos were an "overseas contract worker", a Philippine forum, specifically the POEA, not the NLRC, would protect him.39 He is not an "overseas contract worker" a fact which he admits with conviction.40 Even assuming that the NLRC was the proper forum, even on the merits, the NLRC's decision cannot be sustained. II. MHC Not Liable Even if we assume two things: (1) that the NLRC had jurisdiction over the case, and (2) that MHICL was liable for Santos' retrenchment, still MHC, as a separate and distinct juridical entity cannot be held liable. True, MHC is an incorporator of MHICL and owns fifty percent (50%) of its capital stock. However, this is not enough to pierce the veil of corporate fiction between MHICL and MHC. Piercing the veil of corporate entity is an equitable remedy. It is resorted to when the corporate fiction is used to defeat public convenience, justify wrong, protect fraud or defend a crime. 41 It is done only when a corporation is a mere alter ego or business conduit of a person or another corporation.
156
In Traders Royal Bank v. Court of Appeals,42 we held that "the mere ownership by a single stockholder or by another corporation of all or nearly all of the capital stock of a corporation is not of itself a sufficient reason for disregarding the fiction of separate corporate personalities." The tests in determining whether the corporate veil may be pierced are: First, the defendant must have control or complete domination of the other corporation's finances, policy and business practices with regard to the transaction attacked. There must be proof that the other corporation had no separate mind, will or existence with respect the act complained of. Second, control must be used by the defendant to commit fraud or wrong. Third, the aforesaid control or breach of duty must be the proximate cause of the injury or loss complained of. The absence of any of the elements prevents the piercing of the corporate veil.43 It is basic that a corporation has a personality separate and distinct from those composing it as well as from that of any other legal entity to which it may be related.44 Clear and convincing evidence is needed to pierce the veil of corporate fiction.45 In this case, we find no evidence to show that MHICL and MHC are one and the same entity. III. MHICL not Liable Respondent Santos predicates MHICL's liability on the fact that MHICL "signed" his employment contract with the Palace Hotel. This fact fails to persuade us. First, we note that the Vice President (Operations and Development) of MHICL, Miguel D. Cergueda signed the employment contract as a mere witness. He merely signed under the word "noted". When one "notes" a contract, one is not expressing his agreement or approval, as a party would.46 In Sichangco v. Board of Commissioners of Immigration,47 the Court recognized that the term "noted" means that the person so noting has merely taken cognizance of the existence of an act or declaration, without exercising a judicious deliberation or rendering a decision on the matter. Mr. Cergueda merely signed the "witnessing part" of the document. The "witnessing part" of the document is that which, "in a deed or other formal instrument is that part which comes after the recitals, or where there are no recitals, after the parties (emphasis ours)."48 As opposed to a party to a contract, a witness is simply one who, "being present, personally sees or perceives a thing; a beholder, a spectator, or eyewitness."49 One who "notes" something just makes a "brief written statement"50 a memorandum or observation. Second, and more importantly, there was no existing employer-employee relationship between Santos and MHICL. In determining the existence of an employer-employee relationship, the following elements are considered:51 "(1) the selection and engagement of the employee; In all these cases, an employer-employee relationship is an indispensable jurisdictional requirement. "(2) the payment of wages; "(3) the power to dismiss; and "(4) the power to control employee's conduct." MHICL did not have and did not exercise any of the aforementioned powers. It did not select respondent Santos as an employee for the Palace Hotel. He was referred to the Palace Hotel by his friend, Nestor Buenio. MHICL did not engage respondent Santos to work. The terms of employment were negotiated and finalized The jurisdiction of labor arbiters and the NLRC under Article 217 of the Labor Code is limited to disputes arising from an employer-employee relationship which can be resolved by reference to the Labor Code, or other labor statutes, or their collective bargaining agreements.54 "To determine which body has jurisdiction over the present controversy, we rely on the sound judicial principle that jurisdiction over the subject matter is conferred by law and is determined by the allegations of the complaint irrespective of whether the plaintiff is entitled to all or some of the claims asserted therein."55 through correspondence between respondent Santos, Mr. Schmidt and Mr. Henk, who were officers and representatives of the Palace Hotel and not MHICL. Neither did respondent Santos adduce any proof that MHICL had the power to control his conduct. Finally, it was the Palace Hotel, through Mr. Schmidt and not MHICL that terminated respondent Santos' services. Neither is there evidence to suggest that MHICL was a "labor-only contractor." 52 There is no proof that MHICL "supplied" respondent Santos or even referred him for employment to the Palace Hotel. Likewise, there is no evidence to show that the Palace Hotel and MHICL are one and the same entity. The fact that the Palace Hotel is a member of the "Manila Hotel Group" is not enough to pierce the corporate veil between MHICL and the Palace Hotel. IV. Grave Abuse of Discretion Considering that the NLRC was forum non-conveniens and considering further that no employer-employee relationship existed between MHICL, MHC and respondent Santos, Labor Arbiter Ceferina J. Diosana clearly had no jurisdiction over respondent's claim in NLRC NCR Case No. 00-02-01058-90. Labor Arbiters have exclusive and original jurisdiction only over the following:53 "1. Unfair labor practice cases; "2. Termination disputes; "3. If accompanied with a claim for reinstatement, those cases that workers may file involving wages, rates of pay, hours of work and other terms and conditions of employment; "4. Claims for actual, moral, exemplary and other forms of damages arising from employeremployee relations; "5. Cases arising from any violation of Article 264 of this Code, including questions involving legality of strikes and lockouts; and "6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other claims, arising from employer-employee relations, including those of persons in domestic or household service, involving an amount exceeding five thousand pesos (P5,000.00) regardless of whether accompanied with a claim for reinstatement."
157
The lack of jurisdiction of the Labor Arbiter was obvious from the allegations of the complaint. His failure to dismiss the case amounts to grave abuse of discretion.56 V. The Fallo WHEREFORE, the Court hereby GRANTS the petition for certiorari and ANNULS the orders and resolutions of the National Labor Relations Commission dated May 31, 1993, December 15, 1994 and March 30, 1995 in NLRC NCR CA No. 002101-91 (NLRC NCR Case No. 00-02-01058-90). No costs. Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. Nos. 90306-07 July 30, 1990 K.K. SHELL SEKIYU OSAKA HATSUBAISHO and FU HING OIL CO., LTD., petitioners, vs. THE HONORABLE COURT OF APPEALS, ATLANTIC VENUS CO., S.A., and THE VESSEL M/V "ESTELLA",respondents. Hernandez, Velicaria Vibar & Santiago for petitioners. Cesar C. Cruz & Partners for private respondents The trial court allowed the intervention of Fu Hing and K.K. Shell on June 19,1987 and August 11, 1987, respectively. Writs of preliminary attachment were issued on August 25, 1987 upon posting of the appropriate bonds. Upon the posting of counterbonds, the writs of attachment were discharged on September 3, 1987. Atlantic and the MV Estella moved to dismiss the complaints-inintervention filed by Fu Hing and K.K. Shell. In the meantime, Atlantic and the AWU Estella filed a petition in the Court of Appeals against the trial court judge, Kumagai, NSS and Keihin, docketed as CA-G.R. SP No. 12999, which sought the annulment of the orders of the trial court dated April 30, 1987 and August 11, 1987. Among others, the omnibus order dated August 11, 1987 denied the motion to reconsider the order allowing Fu Hing's intervention and granted K.K. Shell's motion to intervene. Again Fu Hing and K.K. Shell intervened, CA-G.R. SP No. 12999 was consolidated with another case (CA-G.R. SP No. 12341). Fu Hing and K.K. Shell intervened in CA-G.R. SP No. 12999. In a decision dated June 14, 1989, the Court of Appeals annulled the orders of the trial court and directed it to cease and desist from proceeding with the case. According to the Court of Appeals, Fu Hing and K.K. Shell were not suppliers but sub-agents of NSS, hence they were bound by the Agency Agreement between Crestamonte and NSS, particularly, the choice of forum clause, which provides: 12.0-That this Agreement shall be governed by the Laws of Japan. Any matters, disputes, and/or differences arising between the parties hereto concerned regarding this Agreement shall be subject exclusively to the jurisdiction of the District Courts of Japan. Thus, concluded the Court of Appeals, the trial court should have disallowed their motions to intervene. A motion for reconsideration was filed by Fu Hing and K.K. Shell but this was denied by the Court of Appeals. Hence this petition; In this case, we shall review the decision of the Court of Appeals only insofar as it relate to the intervention of K.K. Shell. Fu Hing Oil Co., Ltd. filed a motion to withdraw as co-petitioner on March 7, 1990, alleging that an NSS and Keihin Narasaki Corporation (hereinafter referred to a Keihin filed complaints-in-intervention. On May 19,1987, petitioner Fu Hing Oil Co., Ltd. (hereinafter referred to as Fu Hing"), a corporation organized in Hong Kong and not doing business in the Philippines, filed a motion for leave to intervene with an attached complaint-in-intervention, alleging that Fu Hing supplied marine diesel oil/fuel to the MV Estella and incurred barge expenses for the total sum of One Hundred Fifty-two Thousand Four Hundred Twelve Dollars and FiftySix Cents (US$152,412.56) but such has remained unpaid despite demand and that the claim constitutes a maritime lien. The issuance of a writ of attachment was also prayed for. On July 16, 1987, petitioner K.K. Shell Sekiyu Osaka Hatsubaisho (hereinafter referred to as K.K. Shell"), a corporation organized in Japan and not doing business in the Philippines, likewise filed a motion to intervene with an attached complaint-in-intervention, alleging that upon request of NSS, Crestamonte's general agent in Japan, K.K. Shell provided and supplied marine diesel oil/fuel to the W Estella at the ports of Tokyo and Mutsure in Japan and that despite previous demands Crestamonte has failed to pay the amounts of Sixteen Thousand Nine Hundred Ninety-Six Dollars and Ninety- Six Cents (US$16,996.96) and One Million Yen (Y1,000,000.00) and that K.K. Shell's claim constitutes a maritime lien on the MV Estella. The complaint-inintervention sought the issuance of a writ of preliminary attachment.
CORTES, J: Ordinarily, the Court will not disturb the factual findings of the Court of Appeals, these being considered final and conclusive. However, when its factual conclusions are manifestly mistaken, the Court will step in to correct the misapprehension [De la Cruz v. Sosing, 94 Phil. 26 (1953); Castillo v. Court of Appeals, G.R. No. L-48290, September 29, 1983, 124 SCRA 808.] This case is one such instance calling for the Court's review of the facts. On January 7,1987, Kumagai Kaiun Kaisha, Ltd. (hereinafter referred to as Kumagai), a corporation formed and existing under the laws of Japan, filed a complaint for the collection of a sum of money with preliminary attachment against Atlantic Venus Co., S.A. (hereinafter referred to as "Atlantic"), a corporation registered in Panama, the vessel MV Estella and Crestamonte Shipping Corporation (hereinafter referred to as "Crestamonte"), a Philippine corporation. Atlantic is the owner of the MV Estella. The complaint, docketed as Civil Case No. 8738930 of the Regional Trial Court, Branch XIV, Manila alleged that Crestamonte, as bareboat charterer and operator of the MV Estella, appointed N.S. Shipping Corporation (hereinafter referred to as "NSS"), a Japanese corporation, as its general agent in Japan. The appointment was formalized in an Agency Agreement. NSS in turn appointed Kumagai as its local agent in Osaka, Japan. Kumagai supplied the MV Estella with supplies and services but despite repeated demands Crestamonte failed to pay the amounts due.
158
amicable settlement had been reached with private respondents. The Court granted the motion on March 19, 1990. After considering the pleadings filed by the parties and the arguments raised therein, the Court finds reversible error on the part of the Court of Appeals in so far; as it disallowed petitioners' intervention in the case before the trial court and ordered the latter to cease and desist from proceeding with the case. 1. A reading of the Agency Agreement fails to support the conclusion that K.K. Shell is a sub-agent of NSS and is, therefore, bound by the agreement. The body of the Agency Agreement entered into by and between Crestamonte (referred to in the agreement as "Owner") and NSS ("Agent") provides: WITNESSETH That the OWNER has appointed and by these presents hereby appoints the AGENT as its General Agents for all Japan in connection with the Owner's vessels and/or providing suitable vessels for Japan Ports under the following terms and conditions: 1.0 - In general, the Agent will abide by the Owner's decisions regarding the mode of operations of the vessels in Japan and that all cargo bookings, vessel's fixtures/charters, etc. by the Agent, shall always be subject to the prior approval and consent of the Owners. 2.0 - That the Agent shall provide for the necessary services required for the husbanding of the Owner's vessels in all Japan Ports and issue Bill(s) of Lading to Shippers in the form prescribed by the Owners. 3.0 - That the Agent shall be responsible for fixing south-bound cargoes with revenues sufficient to cover ordinary liner operation expenses such as bunkers, additives, lubricating oil, water, running repairs, drydocking expenses, usual port disbursement accounts, cargo handling charges including stevedorage, provisions and ship's stores and cash advance to crew (excluding crew provisions). The Agent expressly agrees that the Owner's cash flow in Japan shall be essentially the Agent's responsibility, and should the revenue for south-bound cargoes as abovementioned be insufficient to cover the aforesaid expenses, the Agent shall provide credit to the extent of the vessels' requirements, provided however that said obligation shall be secured by the Owner committing at least forty-eight (48) mailings of Japan/Philippines liner service per year. The Agent shall settle, in behalf of the Owner, all outstanding payments for the operation costs on Owner's liner service carried forward from the present Owner's agent, subject to approval of Owner's Representative in Japan in regard to amount and nature thereof. 4.0- That the agent shall furnish office space of approximately thirty (30) square meters for the exclusive use of the Owner and its representatives, within the premises of the Agent's office, free of charge. 8.0 That the Agent shall be responsible for the due collection of and due payment to the Owner of all outward freight prepaid for cargo without delay upon the sailing of each vessel from the port. The Agent shall be also responsible for the due collection of all inward freight payable at the port against delivery unless otherwise instructed by the Owner to the contrary. 9.0 The account statements supported by vouchers in two copies itemized for each service and/or supply for each vessel, shall be forwarded by the Agent to the Owner promptly after the departure of each vessel but in no case later than 60 days thereafter. 10.0 That the freightage to be collected by the Agent in Japan shall be paid to the Owner after deducting the total amount of disbursements incurred in Japan. 11.0 That this Agreement takes effect as of April 15, 1983 and shall remain in force unless terminated by either party upon 60 days notice. 12.0 That this Agreement shall be governed by the Laws of Japan. Any matters, disputes, and/or differences arising between the parties hereto concerned regarding this reement shall be subject exclusively to the jurisdiction of the District Courts of Japan. [Annex "G" of the Petition, Rollo, pp. 100-104.] No express reference to the contracting of sub-agents or the applicability of the terms of the agreement, particularly the choice-of-forum clause, to sub-agents is made in the text of the agreement. What the contract clearly states are NSS' principal duties, i.e., that it shall provide for the necessary services required for the husbanding of Crestamonte's vessels in Japanese ports (section 2.0) and shall be responsible for fixing southbound cargoes with revenues sufficient to cover ordinary expenses (section 3.0).itc-asl Moreover, the complaint-in-intervention filed by K.K. Shell merely alleges that it provided and supplied the MV Estella with marine diesel oil/fuel, upon request of NSS who was acting for and as duly appointed agent of Crestamonte [Rollo, pp. 116117.] There is thus no basis for the Court of Appeal's finding, as regards K.K Shell in relation to its intervention in Civil Case No. 87-38930, that "the sub-agents admitted in their pleadings that they were appointed as local agent/sub-agent or representatives by NSS by virtue of said Agency Agreement" [Decision, p. 7; Rollo, p. 33.] What the Court of Appeals could have been referring to was K.K. Shell's Urgent Motion for Leave to Intervene dated February 24, 1987 in another case (Civil Case No. 86-38704) in another court and involving other vessels (NW Ofelia and MV Christina C), where it was alleged that K.K. Shell is "one of the representatives of NS Shipping Corporation for the supply of bunker oil, fuel oil, provisions and other necessaries to vessels of which NS Shipping Corporation was the general agent." [Comment, p. 17; Rollo, p. 274.] However, this allegation does not conclusively establish a sub-agency between NSS and K.K. Shell. It is 5.0 That the responsibilities of the Agent in regard to the cargo shall begin, in the case of imports into the territory of Japan, from the time such cargo has left the ship's tackles, and shall cease, in case of export, upon completion of loading. 6.0 That the remuneration of the Agent from the Owner shall be as follows: xxx xxx xxx 7.0 That the Agent shall exert best efforts to recommend to Owners stevedoring and other expenses incurred in connection with work on board the Owner's vessels, as well as customs house charges, pilotage, harbour dues, cables, etc. which are for Owner's account, on the cheapest possible terms. Owners shall decide and may appoint through the Agent the services described herein.
159
therefore surprising how the Court of Appeals could have come to the conclusion, just on the basis of the Agency Agreement and the pleadings filed in the trial court, that "Crestamonte is the principal, NSS is the agent and ... Fu Hing and K.K Shell are the sub-agents." [Decision, p. 6; Rollo, p. 32.] In view of the inconclusiveness of the Agency Agreement and the pleadings filed in the trial court, additional evidence, if there be any, would still have to be presented to establish the allegation that K.K. Shell is a subagent of NSS. In the same vein, as the choice-of-forum clause in the agreement (paragraph 12.0) has not been conclusively shown to be binding upon K.K. Shell, additional evidence would also still have to be presented to establish this defense, K.K. Shell cannot therefore, as of yet, be barred from instituting an action in the Philippines. 2. Private respondents have anticipated the possibility that the courts will not find that K.K. Shell is expressly bound by the Agency Agreement, and thus they fall back on the argument that even if this were so, the doctrine offorum non conveniens would be a valid ground to cause the dismissal of K.K. Shell's complaint-inintervention. K.K. Shell counters this argument by invoking its right as maritime lienholder. It cites Presidential Decree No. 1521, the Ship Mortgage Decree of 1978, which provides: SEC. 21. Maritime Lien for Necessaries; person entitled to such lien-Any person furnishing repairs, supplies, to wage, use of dry dock or marine railway, or other necessaries, to any vessel, whether foreign or domestic, upon the order of the owner of such vessel, or of a person authorized by the owner, shall have a maritime lien on the vessel, which may be enforced by suit in rem, and it shall be necessary to allege or prove that credit was given to the vessel. Private respondents on the other hand argue that even if P.D. No. 1521 is applicable, K.K. Shell cannot rely on the maritime lien because the fuel was provided not exclusively for the benefit of the MV Estella, but for the benefit of Crestamonte in general. Under the law it must be established that the credit was extended to the vessel itself. Now, this is a defense that calls precisely for a factual determination by the trial court of who benefitted from the delivery of the fuel. Hence, again, the necessity for the reception of evidence before the trial court. In other words, considering the dearth of evidence due to the fact that the private respondents have yet to file their answer in the proceedings below and trial on the merits is still to be conducted, whether or not petitioners are indeed maritime lienholders and as such may enforce the lien against the MV Estella are matters that still have to be established. Neither are we ready to rule on the private respondents' invocation of the doctrine of forum non conveniens, as the exact nature of the relationship of the parties is still to be established. We leave this matter to the sound discretion of the trial court judge who is in the best position, after some vital facts are established, to determine whether special circumstances require that his court desist from assuming jurisdiction over the suit. It was clearly reversible error on the. part of the Court of Appeals to annul the trial court's orders, insofar as K.K. Shell is concerned, and order the trial court to cease and desist from proceeding with Civil Case No. 8738930. There are still numerous material facts to be established in order to arrive at a conclusion as to the true nature of the relationship between Crestamonte and K.K. Shell and between NSS and K.K. Shell. The best recourse would have been to allow the trial court to proceed with Civil Case No. 87-38930 and consider whatever defenses may be raised by private respondents after they have filed their answer and evidence to support their conflicting claims has been presented. The Court of Appeals, however, substituted its judgment for that of the trial court and decided the merits of the case, even in the absence of evidence, on the pretext of reviewing an interlocutory order. WHEREFORE, the petition is GRANTED and the decision of the Court of Appeals is REVERSED in CA-G.R. SP No. 12999, insofar as it annulled the order of the August 11, 1987 and directed the trial court to cease and desist from proceeding with Civil Case No. 87-38930. SO ORDERED. Fernan, C.J., Gutierrez, Jr., Feliciano and Bidin, JJ., concur.
160
161
U.S. Supreme Court Gulf Oil Corp. v. Gilbert, 330 U.S. 501 (1947) 153 F.2d 883, reversed. Gulf Oil Corp. v. Gilbert No. 93 Argued December 18, 19, 1946 Decided March 10, 1947 330 U.S. 501 CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE SECOND CIRCUIT Page 330 U. S. 503 Syllabus 1. A federal district court has power to dismiss an action at law pursuant to the doctrine of forum non conveniens -- at least where its jurisdiction is based on diversity of citizenship and the state courts have such power. Pp. 330 U. S. 502-509, 330 U. S. 512. 2. A resident of Virginia brought an action in a federal district court in New York City against a Pennsylvania corporation qualified to do business in both Virginia and New York (where it had designated agents to receive service of process) to recover damages for destruction of plaintiff's public warehouse and its contents in Virginia by fire resulting from defendant's negligence. The court had jurisdiction (based solely on diversity of citizenship), and the venue was correct, but all events in litigation had taken place in Virginia, most of the witnesses resided there, and both state and federal courts in Virginia were available to plaintiff and were able to obtain jurisdiction of defendant. Applying the doctrine of forum non conveniens, the court dismissed the suit. Held: it did not abuse its discretion in doing so. Pp. 330 U. S. 509-512. 3. Important considerations in the application of the doctrine of forum non conveniens, from the standpoint of litigants, are relative ease of access to sources of proof, availability of compulsory process for attendance of unwilling witnesses, cost of obtaining attendance chanroblesvirtualawlibrary Page 330 U. S. 502 of willing witnesses, possibility of view of the premises if that be appropriate, and all other practical problems that make trial of a case easy, expeditious, and inexpensive. P. 330 U. S. 508. 4. Considerations of public interest in applying the doctrine include the undesirability of piling up litigation in congested centers, the burden of jury duty on people of a community having no relation to the litigation, the an explosion and fire which consumed the warehouse building to his damage of $41,889.10, destroyed merchandise and fixtures to his damage of $3,602.40, caused injury to his business and profits of $20,038.27, and burned the property of customers in his custody under warehousing agreements to the extent of $300,000. He asks judgment of $365,529.77, with costs and disbursements, and interest from the date of fire. The action clearly is one in tort. The petitioner-defendant is a corporation organized under the laws of Pennsylvania, qualified to do business in both Virginia and New York, and it has designated officials of each state as agents to receive service of process. When sued in New York, the defendant, invoking the doctrine of forum non conveniens, claimed that the appropriate place for trial is Virginia, where the plaintiff lives and defendant does business, where all events in litigation took place, where most of the witnesses reside, and where both state and federal courts are available to plaintiff, and are able to obtain jurisdiction of the defendant. The case, on its merits, involves no federal question, and was brought in the United States District Court solely because of diversity in citizenship of the parties. Because of the character of its jurisdiction and the holdings of and under Erie Railroad Co. v. Tompkins, 304 U. S. 64, the District Court considered that the law of New York as to forum non conveniens applied, and that it required the case to be left to Virginia courts. [Footnote 1] It therefore dismissed. The Circuit Court of Appeals disagreed as to the applicability of New York law, took a restrictive view of the application of the entire doctrine in federal courts, and, one judge dissenting, reversed. [Footnote 2] The case is here on certiorari. 328 U.S. 830. chanroblesvirtualawlibrary Page 330 U. S. 504 I The respondent-plaintiff brought this action in the Southern District of New York, but resides at Lynchburg, Virginia, where he operated a public warehouse. He alleges that the petitioner-defendant, in violation of the ordinances of Lynchburg, so carelessly handled a delivery of gasoline to his warehouse tanks and pumps as to cause chanroblesvirtualawlibrary Applying the doctrine of forum non conveniens, a district court dismissed a tort action in New York arising out of events occurring in Virginia. 62 F.Supp. 291. The Circuit Court of Appeals reversed. 153 F.2d 883. This Court granted certiorari. 328 U.S. 830. Reversed, p. 330 U. S. 512. MR. JUSTICE JACKSON delivered the opinion of the Court. The questions are whether the United States District Court has inherent power to dismiss a suit pursuant to the doctrine of forum non conveniens and, if so, whether that power was abused in this case. local interest in having localized controversies decided at home, and the unnecessary injection of problems in conflict of laws. Pp. 330 U. S. 508-509.
162
It is conceded that the venue statutes of the United States permitted the plaintiff to commence his action in the Southern District of New York, and empower that court to entertain it. [Footnote 3] But that does not settle the question whether it must do so. Indeed, the doctrine of forum non conveniens can never apply if there is absence of jurisdiction or mistake of venue. This Court, in one form of words or another, has repeatedly recognized the existence of the power to decline jurisdiction in exceptional circumstances. As formulated by Mr. Justice Brandeis, the rule is: "Obviously, the proposition that a court having jurisdiction must exercise it is not universally true -- else the admiralty court could never decline jurisdiction on the ground that the litigation is between foreigners. Nor is it true of courts administering other systems of our law. Courts of equity and of law also occasionally decline, in the interest of justice, to exercise jurisdiction where the suit is between aliens or nonresidents, or where, for kindred reasons, the litigation can more appropriately be conducted in a foreign tribunal." Canada Malting Co., Ltd. v. Paterson Steamships, Ltd., 285 U. S. 413, 285 U. S. 422-423. We later expressly said that a state court "may, in appropriate cases, apply the doctrine of forum non conveniens." Broderick v. Rosner,294 U. S. 629, 294 U. S. 643; Williams v. North Carolina, 317 U. S. 287, 317 U. S. 294, n. 5. Even where federal rights binding on state courts under the Constitution are sought to be adjudged, this Court has sustained state courts in a refusal to entertain a litigation between a nonresident and a foreign corporation or between two foreign corporations. Douglas v. New York, N.H. & H. R. Co., 279 U. S. 377; Anglo-American Provision Co. v. chanroblesvirtualawlibrary Page 330 U. S. 505 Davis Provision Co. No. 1, 191 U. S. 373. It has held the use of an inappropriate forum in one case an unconstitutional burden on interstate commerce. Davis v. Farmers' Cooperative Equity Co., 262 U. S. 312. On substantially forum non conveniens grounds, we have required federal courts to relinquish decision of cases within their jurisdiction where the court would have to participate in the administrative policy of a state. Railroad Commission v. Rowan & Nichols Oil Co., 311 U. S. 570; Burford v. Sun Oil Co., 319 U. S. 315; but cf. Meredith v. Winter Haven, 320 U. S. 228. And, most recently, we decided Williams v. Green Bay & Western R. Co., 326 U. S. 549, in which the Court, without questioning the validity of the doctrine, held it had been applied in that case without justification. [Footnote 4] It is true that, in cases under the Federal Employers' Liability Act, we have held that plaintiff's choice of a forum cannot be defeated on the basis of forum non conveniens. But this was because the special venue act under which those cases are brought was believed to require it. Baltimore & Ohio R. Co. v. Kepner, 314 U. S. 44; Miles v. Illinois Central R. Co., 315 U. S. 698. Those decisions do not purport to modify the doctrine as to other cases governed by the general venue statutes. chanroblesvirtualawlibrary Page 330 U. S. 506 But the court below says that "The Kepner case . . . warned against refusal of jurisdiction in a particular case controlled by congressional act; here, the only difference is that congressional act, plus judicial interpretation (under the Neirbo case), spells out the result." 153 F.2d 885. The Federal Employers' Liability Act, however, which controlled decision in the Kepner case, specifically provides where venue may be had in any suit on a cause of action arising under that statute. What the court below refers to as "congressional act, plus judicial interpretation" is the general statute of venue in If the combination and weight of factors requisite to given results are difficult to forecast or state, those to be considered are not difficult to name. An interest to be considered, and the one likely to be most pressed, is the private interest of the litigant. Important considerations are the relative ease of access to sources of proof; availability of compulsory process for attendance of unwilling, and the cost of obtaining attendance of willing, witnesses; possibility of view of premises, if view would be appropriate to the action, and all other practical problems that make trial of a case easy, expeditious, and inexpensive. There may also be questions as to the enforceability of a judgment if one is obtained. The court will weigh relative advantages and obstacles to fair trial. It is often said that the plaintiff may not, by choice of an inconvenient forum, "vex," "harass," or "oppress" the defendant by inflicting upon him expense or trouble not necessary to his own right to pursue his remedy. diversity suits, plus our decision that it gives the defendant "a personal privilege respecting the venue, or place of suit, which he may assert, or may waive at his election," Neirbo Co. v. Bethlehem Shipbuilding Corp., Ltd.,308 U. S. 165, 308 U. S. 168. The Federal Employers' Liability Act, as interpreted by Kepner, increases the number of places where the defendant may be sued, and makes him accept the plaintiff's choice. The Neirbo case is only a declaration that, if the defendant, by filing consent to be sued, waives its privilege to be sued at its place of residence, it may be sued in the federal courts at the place where it has consented to be sued. But the general venue statute plus the Neirbo interpretation do not add up to a declaration that the court must respect the choice of the plaintiff, no matter what the type of suit or issues involved. The two, taken together, mean only that the defendant may consent to be sued, and it is proper for the federal court to take jurisdiction, not that the plaintiff's choice cannot be questioned. The defendant's consent to be sued extends only to give the court jurisdiction of the person; it assumes that the court, having the parties before it, will apply all the applicable law, including, in those cases where it is appropriate, its discretionary judgment as to whether the suit should be entertained. In all cases in which the doctrine of forum non conveniens comes into chanroblesvirtualawlibrary Page 330 U. S. 507 play, it presupposes at least two forums in which the defendant is amenable to process; the doctrine furnishes criteria for choice between them. II The principle of forum non conveniens is simply that a court may resist imposition upon its jurisdiction even when jurisdiction is authorized by the letter of a general venue statute. These statutes are drawn with a necessary generality, and usually give a plaintiff a choice of courts, so that he may be quite sure of some place in which to pursue his remedy. But the open door may admit those who seek not simply justice, but perhaps justice blended with some harassment. A plaintiff sometimes is under temptation to resort to a strategy of forcing the trial at a most inconvenient place for an adversary, even at some inconvenience to himself. Many of the states have met misuse of venue by investing courts with a discretion to change the place of trial on various grounds, such as the convenience of witnesses and the ends of justice. [Footnote 5] The federal law contains no such express criteria to guide the district court in exercising its power. But the problem is a very old one affecting the administration of the courts as well as the rights of litigants, and, both in England and in this country, the common law worked out techniques and criteria for dealing with it. [Footnote 6]chanroblesvirtualawlibrary Page 330 U. S. 508 Wisely, it has not been attempted to catalogue the circumstances which will justify or require either grant or denial of remedy. The doctrine leaves much to the discretion of the court to which plaintiff resorts, and experience has not shown a judicial tendency to renounce one's own jurisdiction so strong as to result in many abuses. [Footnote 7]
163
[Footnote 8] But, unless the balance is strongly in favor of the defendant, the plaintiff's choice of forum should rarely be disturbed. Factors of public interest also have place in applying the doctrine. Administrative difficulties follow for courts when litigation is piled up in congested centers instead of being handled at its origin. Jury duty is a burden that ought not to be imposed upon the people of a community chanroblesvirtualawlibrary Page 330 U. S. 509 which has no relation to the litigation. In cases which touch the affairs of many persons, there is reason for holding the trial in their view and reach, rather than in remote parts of the country where they can learn of it by report only. There is a local interest in having localized controversies decided at home. There is an appropriateness, too, in having the trial of a diversity case in a forum that is at home with the state law that must govern the case, rather than having a court in some other forum untangle problems in conflict of laws, and in law foreign to itself. The law of New York as to the discretion of a court to apply the doctrine of forum non conveniens, and as to the standards that guide discretion is, so far as here involved, the same as the federal rule. Murnan v. Wabash Ry. Co., 246 N.Y. 244, 158 N.E. 508; Wedemann v. United States Trust Co.. 258 N.Y. 315, 179 N.E. 712; see Gregonis v. Philadelphia & Reading Coal & Iron Co., 235 N.Y. 152, 139 N.E. 223. It would not be profitable therefore to pursue inquiry as to the source from which our rule must flow. III Turning to the question whether this is one of those rather rare cases where the doctrine should be applied, we look first to the interests of the litigants. The plaintiff himself is not a resident of New York, nor did any event connected with the case take place there, nor does any witness with the possible exception of experts live there. No one connected with that side of the case save counsel for the plaintiff resides there, and he has candidly told us that he was retained by insurance companies interested presumably because of subrogation. His affidavits and argument are devoted to controverting claims as to defendant's inconvenience, rather than to showing that the present forum serves any convenience chanroblesvirtualawlibrary Page 330 U. S. 510 of his own, with one exception. The only justification for trial in New York advanced here is one rejected by the district court and is set forth in the brief as follows: "This Court can readily realize that an action of this type, involving as it does a claim for damages in an amount close to $400,000, is one which may stagger the imagination of a local jury which is surely unaccustomed to dealing with amounts of such a nature. Furthermore, removed from Lynchburg, the respondent will have an opportunity to try this case free from local influences and preconceived notions which make it difficult to procure a jury which has no previous knowledge of any of the facts herein." This unproven premise that jurors of New York live on terms of intimacy with $400,000 transactions is not an assumption we easily make. Nor can we assume that a jury from Lynchburg and vicinity would be "staggered" by contemplating the value of a warehouse building that stood in their region, or of merchandise and fixtures such as were used there, nor are they likely to be staggered by the value of chattels which the people of that neighborhood put in storage. It is a strange argument on behalf of a Virginia plaintiff that the community which gave him patronage to make his business valuable is not capable of furnishing jurors who know the value of We are convinced that the District Court did not exceed its powers or the bounds of its discretion in dismissing plaintiff's complaint and remitting him to the courts of his own community. The Circuit Court of Appeals took too restrictive a view of the doctrine as approved by this Court. Its judgment is Reversed. MR. JUSTICE REED and MR. JUSTICE BURTON dissent. They do not set out the factual reasons for their dissent, since the Court's affirmance of Koster v. Lumbermens Mutual casualty Co., 330 U. S. 518, would control. Defendant points out that not only the plaintiff, but every person who participated in the acts charged to be negligent, resides in or near Lynchburg. It also claims a need to interplead an alleged independent contractor which made the delivery of the gasoline and which is a Virginia corporation domiciled in Lynchburg, that it cannot interplead in New York. There also are approximately 350 persons residing in and around Lynchburg who stored with plaintiff the goods for the damage to which he seeks to recover. The extent to which they have left the community since the fire and the number of them who will actually be needed is in dispute. The complaint alleges that defendant's conduct violated Lynchburg ordinances. Conditions are said to require proof by firemen and by many others. The learned and experienced trial judge was not unaware that litigants generally manage to try their cases with fewer witnesses than they predict in such motions as this. But he was justified in concluding that this trial is likely to be long, and to involve calling many witnesses, and that Lynchburg, some 400 miles from New York, is the source of all proofs for either side, with possible exception of experts. Certainly to fix the place of trial at a point where litigants cannot compel personal attendance and may be forced to try their cases on deposition is to create a condition not satisfactory to court, jury, or most litigants. Nor is it necessarily cured by the statement of plaintiff's counsel that he will see to getting many of the witnesses to the trial, and that some of them "would be delighted to come to New York to testify." There may be circumstances where such a proposal should be given weight. In others, the offer may not turn out to be as generous as defendant or court might suppose it to be. Such matters are for the District Court to decide in exercise of a sound discretion. The court likewise could well have concluded that the task of the trial court would be simplified by trial in Virginia. chanroblesvirtualawlibrary Page 330 U. S. 512 If trial was in a state court, it could apply its own law to events occurring there. If in federal court by reason of diversity of citizenship, the court would apply the law of its own state in which it is likely to be experienced. The course of adjudication in New York federal court might be beset with conflict of laws problems all avoided if the case is litigated in Virginia, where it arose. the goods they store, the building they are stored in, or the business their patronage creates. And there is no specification of any local influence, other than accurate knowledge of local conditions, that would make a fair trial improbable. The net of this is that we cannot say the District Court was bound to entertain a provincial fear of the provincialism of a Virginia jury. That leaves the Virginia plaintiff without even a suggested reason for transporting this suit to New York. chanroblesvirtualawlibrary Page 330 U. S. 511
164
U.S. Supreme Court Travelers Health Assn. v. Virginia, 339 U.S. 643 (1950) Travelers Health Association v. Virginia No. 76 Argued November 15, 1949 Reargued April 17, 1950 Decided June 5, 1950 339 U.S. 643 APPEAL FROM THE SUPREME COURT OF APPEALS OF VIRGINIA Syllabus In a proceeding under 6 of the Virginia "Blue Sky Law," the State Corporation Commission ordered an Association, located in Nebraska and engaged in the mail order health insurance business, and its treasurer (appellants here) to cease and desist from further offerings or sales of certificates of insurance to Virginia residents until the Association had complied with the Act by furnishing information as to its financial condition, consenting to suit against it by service of process on the Secretary of the Commonwealth, and obtaining a permit. Notice of the proceeding was served on appellants by registered mail, as authorized by 6 when other forms of service are unavailable. They appeared specially, challenged the jurisdiction of the State, and moved to quash the service of summons. On recommendations from Virginia members, the Association for many years had been issuing insurance certificates to residents of Virginia, and it had approximately 800 members there. It had caused claims for losses to be investigated, and the Virginia courts were open to it for the enforcement of obligations of certificate holders.
165
Held: 1. The State has power to issue a cease and desist order to enforce at least the requirement that the Association consent to suit against it by service of process on the Secretary of the Commonwealth. Pp. 339 U. S. 646-647. 2. The contacts and ties of appellants with Virginia residents, together with that State's interest in faithful observance of the certificate obligations, justify subjecting appellants to cease and desist proceedings under 6. Pp. 339 U. S. 647-648. 3. Virginia's subjection of the Association to the jurisdiction of the State Commission in a 6 proceeding is consistent with fair play and substantial justice, and is not offensive to the Due Process Clause of the Fourteenth Amendment. P. 339 U. S. 649. 4. The power of the State to subject the Association to the jurisdiction of the State Commission and to authorize a cease and chanroblesvirtualawlibrary Page 339 U. S. 644 desist order under 6 is not vitiated by the fact that business activities carried on outside of the State are affected. P. 339 U. S. 650. 5. Service of process on appellants by registered mail did not violate the requirements of due process. Pp. 339 U. S. 650-651. 188 Va. 877, 51 S.E.2d 263, affirmed. An order of the Virginia Corporation Commission requiring appellants to cease and desist from offering and issuing, without a permit, certificates of insurance to residents of the State, was affirmed by the Supreme Court of Appeals. 188 Va. 877, 51 S.E.2d 263. On appeal to this Court, affirmed, p. 339 U. S. 651. MR. JUSTICE BLACK delivered the opinion of the Court. In an effort to protect its citizens from "unfairness, imposition and fraud" in sales of certificates of insurance and other forms of securities, the Virginia "Blue Sky Law" requires those selling or offering such securities to obtain a permit from the State Corporation Commission. [Footnote 1] Applicants for permits must meet comprehensive conditions: they must, for example, provide detailed information chanroblesvirtualawlibrary Page 339 U. S. 645 concerning their solvency, and must agree that suits can be filed against them in Virginia by service of process on the Secretary of the Commonwealth. [Footnote 2] While violation of the Act is a misdemeanor punishable by criminal sanctions, 6 provides another method for enforcement. After notice and a hearing "on the merits," the State Corporation Commission is authorized to issue a cease and desist order restraining violations of the Act. The section also provides for service by registered mail where other types of service are unavailable "because the offering is by advertisement and/or solicitation through periodicals, mail, telephone, telegraph, radio, or other means of communication from beyond the limits of the State. . . ." The highest court of Virginia rejected contentions that this section violates constitutional requirements of due process, and the case is properly here on appeal under 28 U.S.C. 1257(2). In this case, cease and desist proceedings under 6 were instituted by the State Corporation Commission against Travelers Health Association and against R. E. Pratt, as treasurer of the Association and in his personal capacity. Having received notice by registered mail only, they appeared "specially" for "the sole purpose of objecting to the alleged jurisdiction of the Virginia and of its State Corporation Commission, and of moving to set aside and quash service of summons. . . ." The agreed stipulation of facts and certain exhibits offered by the state can be summarized as follows: The appellant Travelers Health Association was incorporated in Nebraska as a nonprofit membership association in 1904. Since that time, its only office has been located in Omaha, from which it has conducted a mail order health insurance business. New members pay an initiation fee and obligate themselves to pay periodic chanroblesvirtualawlibrary Page 339 U. S. 646 assessments at the Omaha office. The funds so collected are used for operating expenses and sick benefits to members. The Association has no paid agents; its new members are usually obtained through the unpaid activities of those already members, who are encouraged to recommend the Association to friends and submit their names to the home office. The appellant Pratt in Omaha mails solicitations to these prospects. He encloses blank applications which, if signed and returned to the home office with the required fee, usually result in election of applicants as members. Certificates are then mailed, subject to return within 10 days "if not satisfactory." Travelers has solicited Virginia members in this manner since 1904, and has caused many sick benefit claims to be investigated. When these proceedings were instituted, it had approximately 800 Virginia members. The Commission, holding that the foregoing facts supported the state's power to act in 6 proceedings, overruled appellants' objection to jurisdiction and their motion to quash service. The Association and its treasurer were ordered to cease and desist from further solicitations or sales of certificates to Virginia residents "through medium of any advertisement from within or from without the state, and/or through the mails or otherwise, by intra- or interstate communication, . . . unless and until" it obtained authority in accordance with the "Blue Sky Law." This order was affirmed by the Virginia Court of Appeals. 188 Va. 877, 882, 51 S.E.2d 263, 271. Appellants do not question the validity of the Virginia law "to the extent that it provides that individual and corporate residents of other states shall not come into the State for the purpose of doing business there without first submitting to the regulatory authority of the State." As to such state power see, e.g., Hall v. Geiger-Jones Co., 242 U. S. 539. Their basic contention is that all their activities take place in Nebraska, and that consequently chanroblesvirtualawlibrary
166
Page 339 U. S. 647 Virginia has no power to reach them in cease and desist proceedings to enforce any part of its regulatory law. We cannot agree with this general due process objection, for we think the state has power to issue a "cease and desist order" enforcing at least that regulatory provision requiring the Association to accept service of process by Virginia claimants on the Secretary of the Commonwealth. Appellants' chief reliance for the due process contention is on Minnesota Commercial Men's Assn. v. Benn, 261 U. S. 140. There, a Minnesota association obtained members in Montana by the same mail solicitation process used by Travelers to get Virginia members. The certificates issued to Montana members also reserved the right to investigate claims, although the Court pointed out that Benn's claim had not been investigated. This Court held that, since the contracts were "executed and to be performed" in Minnesota, the Association was not "doing business" in Montana, and therefore could not be sued in Montana courts unless "consent" to Montana suits could be implied. The Court found the circumstances under which the insurance transactions took place insufficient to support such an implication. But where business activities reach out beyond one state and create continuing relationships and obligations with citizens of another state, courts need not resort to a fictional "consent" in order to sustain the jurisdiction of regulatory agencies in the latter state. And, in considering what constitutes "doing business" sufficiently to justify regulation in the state where the effects of the "business" are felt, the narrow grounds relied on by the Court in the Benn case cannot be deemed controlling. In Osborn v. Ozlin, 310 U. S. 53, 310 U. S. 62, we recognized that a state has a legitimate interest in all insurance policies protecting its residents against risks, an interest which the state can protect even though the "state action may have repercussions beyond state lines. . . ." And in 318 U. S. 316, we rejected the contention, based on the Benn case, among others, that a state's power to regulate must be determined by a "conceptualistic discussion of theories of the place of contracting or of performance." Instead, we accorded "great weight" to the "consequences" of the contractual obligations in the state where the insured resided and the "degree of interest" that state had in seeing that those obligations were faithfully carried out. And in International Shoe Co. v. Washington,@ 326 U. S. 310, 326 U. S. 316, this Court, after reviewing past cases, concluded: "due process requires only that, in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.'" Measured by the principles of the Osborn, Hoopeston, and International Shoe cases, the contacts and ties of appellants with Virginia residents, together with that state's interest in faithful observance of the certificate obligations, justify subjecting appellants to cease and desist proceedings under 6. The Association did not engage in mere isolated or short-lived transactions. Its insurance certificates, systematically and widely delivered in Virginia following solicitation based on recommendations of Virginians, create continuing obligations between the Association and each of the many certificate holders in the state. Appellants have caused claims for losses to be investigated, and the Virginia courts were available to them in seeking to enforce obligations created by the group of certificates. See International Shoe Co. v. Washington, supra, at 326 U. S. 320. Moreover, if Virginia is without power to require this Association to accept service of process on the Secretary of the Commonwealth, the only forum for injured certificate holders might be Nebraska. Health benefit chanroblesvirtualawlibrary Page 339 U. S. 649 claims are seldom so large that Virginia policyholders could afford the expense and trouble of a Nebraska law suit. In addition, suits on alleged losses can be more conveniently tried in Virginia, where witnesses would most likely live and where claims for losses would presumably be investigated. Such factors have been given great weight in applying the doctrine of forum non conveniens. See Gulf Oil Corp. v. Gilbert, 330 U. S. 501, 330 U. S. 508. And prior decisions of this Court have referred to the unwisdom, unfairness, and injustice of permitting policyholders to seek redress only in some distant state where the insurer is incorporated. [Footnote 3] The Due Process Clause does not forbid a state to protect its citizens from such injustice. There is, of course, one method by which claimants could recover from appellants in Virginia courts without the aid of substituted service of process: certificate holders in Virginia could all be garnished to the extent of their obligations to the Association. See Huron Holding Corporation v. Lincoln Mine Operating Co., 312 U. S. 183, 312 U. S. 193. While such an indirect procedure would undeniably be more troublesome to claimants than the plan adopted by the state in its "Blue Sky Law," it would clearly be even more harassing to the Association and its Virginia members. Metaphysical concepts of "implied consent" and "presence" in a state should not be solidified into a constitutional barrier against Virginia's simple, direct, and fair plan for service of process on the Secretary of the Commonwealth. We hold that Virginia's subjection of this Association to the jurisdiction of that state's Corporation Commission in a 6 proceeding is consistent with "fair play and substantial justice," and is not offensive to the Due Process Clause. chanroblesvirtualawlibrary Page 339 U. S. 650 Appellants also contend that 6 as here applied violates due process because the Commission order attempts to "destroy or impair" their right to make contracts in Nebraska with Virginia residents. Insofar as this contention can be raised in a special appearance merely to contest jurisdiction, it is essentially the same as the due process issue discussed above. For reasons just given, Virginia has power to subject Travelers to the jurisdiction of its Corporation Commission, and its cease and desist provisions designed to accomplish this purpose "cannot be attacked merely because they affect business activities which are carried on outside the state." Hoopeston Canning Co. v. Cullen, supra, at 318 U. S. 320-321. See also Osborn v. Ozlin, 310 U. S. 53, 310 U. S. 62. These two opinions make clear that Allgeyer v. Louisiana, 165 U. S. 578, requires no different result. Appellants concede that, in the Osborn and Hoopeston cases, we sustained state laws providing protective standards for policyholders in those states, even though compliance with those standards by the insurance companies could have repercussions on similar out-of-state contracts. It is argued, however, that those cases are distinguishable because they both involved companies which were "licensed to do business in the state of the forum and were actually doing business within the state. . . ." But, while Hoopeston Canning Co. had done business in New York under an old law, it brought the case here to challenge certain provisions of a new licensing law with which it had to comply if it was to do business there in the future. Thus, it was seeking the same kind of relief that appellants seek here, and for the same general purpose. What we there said as to New York's power is equally applicable to Virginia's power here. It is also suggested that service of process on appellants by registered mail does not meet due process requirements. chanroblesvirtualawlibrary Page 339 U. S. 651 What we have said answers this contention insofar as it alleges a lack of state jurisdiction because appellants were served outside Virginia. If service by mail is challenged as not providing adequate and reasonable notice, the contention has been answered byInternational Shoe Co. v. Washington, supra, at 326 U. S. 320-321. See also Mullane v. Central Hanover Bank, 339 U. S. 306.
167
The due process questions we have already discussed are the only alleged errors relied on in appellants' brief, [Footnote 4] and appellants' special appearance only challenged state jurisdiction and the service of process. We therefore have no occasion to discuss the scope of the Commission's order, or the methods by which the state might attempt to enforce it. [Footnote 5] Affirmed.
168
Page 444 U. S. 287 U.S. Supreme Court World-Wide Volkwagen Corp. v. Woodson, 444 U.S. 286 (1980) World-Wide Volkwagen Corp. v. Woodson No. 78-1078 Argued October 3, 1979 Decided January 21, 1980 444 U.S. 286 CERTIORARI TO THE SUPREME COURT OF OKLAHOMA Syllabus A products liability action was instituted in an Oklahoma st,ate court by respondents husband and wife to recover for personal injuries sustained in Oklahoma in an accident involving an automobile that had been purchased by them in New York while they were New York residents and that was being driven through Oklahoma at the time of the accident. The defendants included the automobile retailer and its wholesaler (petitioners), New York corporations that did no business in Oklahoma. Petitioners entered special appearances, claiming that Oklahoma's exercise of jurisdiction over them would offend limitations on the State's jurisdiction imposed by the Due Process Clause of the Fourteenth Amendment. The trial court rejected petitioners' claims, and they then sought, but were denied, a writ of prohibition in the Oklahoma Supreme Court to restrain respondent trial judge from exercising in personam jurisdiction over them. Held: Consistently with the Due Process Clause, the Oklahoma trial court may not exercise in personam jurisdiction over petitioners. Pp.444 U. S. 291-299. (a) A state court may exercise personal jurisdiction over a nonresident defendant only so long as there exist "minimum contacts" between the defendant and the forum State. International Shoe Co. v. Washington, 326 U. S. 310. The defendant's contacts with the forum State must be such that maintenance of the suit does not offend traditional notions of fair play and substantial justice, id. at 326 U. S. 316, and the relationship between the defendant and the forum must be such that it is "reasonable . . . to require the corporation to defend the particular suit which is brought there," id. at 326 U. S. 317. The Due Process Clause "does not contemplate that a state may make binding a judgment in personam against an individual or corporate defendant with which the state has no contacts, ties, or relations." Id. at 326 U. S. 319. Pp. 444 U. S. 291-294. (b) Here, there is a total absence in the record of those affiliating circumstances that are a necessary predicate to any exercise of state court jurisdiction. Petitioners carry on no activity whatsoever in Oklahoma; they close no sales and perform no services there, avail chanroblesvirtualawlibrary themselves of none of the benefits of Oklahoma law, and solicit no business there either through salespersons or through advertising reasonably calculated to reach that State. Nor does the record show that they regularly sell cars to Oklahoma residents, or that they indirectly, through others, serve or seek to serve the Oklahoma market. Although it is foreseeable that automobiles sold by petitioners would travel to Oklahoma and that the automobile here might cause injury in Oklahoma, "foreseeability" alone is not a sufficient benchmark for personal jurisdiction under the Due Process Clause. The foreseeability that is critical to due process analysis is not the mere likelihood that a product will find its way into the forum State, but rather is that the defendant's conduct and connection with the forum are such that he should reasonably anticipate being haled into court there. Nor can jurisdiction be supported on the theory that petitioners earn substantial revenue from goods used in Oklahoma. Pp. 444 U. S. 295-299. 585 P.2d 351, reversed. WHITE, J., delivered the opinion of the Court, in which BURGER, C.J.,and STEWART, POWELL, REHNQUIST, and STEVENS, JJ., joined. BRENNAN, J., filed a dissenting opinion, post, p. 444 U. S. 299. MARSHALL, J., filed a dissenting opinion, in which BLACKMUN, J., joined,post, p. 444 U. S. 313. BLACKMUN, J., filed a dissenting opinion, post, p. 444 U. S. 317. MR. JUSTICE WHITE delivered the opinion of the Court. The issue before us is whether, consistently with the Due Process Clause of the Fourteenth Amendment, an Oklahoma court may exercisein personam jurisdiction over a nonresident automobile retailer and its wholesale distributor in a products liability action, when the defendants' only connection with Oklahoma is the fact that an automobile sold in New York to New York residents became involved in an accident in Oklahoma. chanroblesvirtualawlibrary Page 444 U. S. 288 I Respondents Harry and Kay Robinson purchased a new Audi automobile from petitioner Seaway Volkswagen, Inc. (Seaway), in Massena, N.Y. in 1976. The following year, the Robinson family, who resided in New York, left that State for a new home in Arizona. As they passed through the State of Oklahoma, another car struck their Audi in the rear, causing a fire which severely burned Kay Robinson and her two children. [Footnote 1] The Robinsons [Footnote 2] subsequently brought a products liability action in the District Court for Creek County, Okla., claiming that their injuries resulted from defective design and placement of the Audi's gas tank and fuel system. They joined as defendants the automobile's manufacturer, Audi NSU Auto Union Aktiengesellschaft (Audi); its importer, Volkswagen of America, Inc. (Volkswagen); its regional distributor, petitioner World-Wide Volkswagen Corp. (World-Wide); and its retail dealer, petitioner Seaway. Seaway and World-Wide entered special appearances, [Footnote 3] claiming that Oklahoma's exercise of jurisdiction over them would offend the limitations on the State's jurisdiction imposed by the Due Process Clause of the Fourteenth Amendment. [Footnote 4] The facts presented to the District Court showed that World-Wide is incorporated and has its business office in New chanroblesvirtualawlibrary Page 444 U. S. 289
169
York. It distributes vehicles, parts, and accessories, under contract with Volkswagen, to retail dealers in New York, New Jersey, and Connecticut. Seaway, one of these retail dealers, is incorporated and has its place of business in New York. Insofar as the record reveals, Seaway and World-Wide are fully independent corporations whose relations with each other and with Volkswagen and Audi are contractual only. Respondents adduced no evidence that either World-Wide or Seaway does any business in Oklahoma, ships or sells any products to or in that State, has an agent to receive process there, or purchases advertisements in any media calculated to reach Oklahoma. In fact, as respondents' counsel conceded at oral argument, Tr. of Oral Arg 32, there was no showing that any automobile sold by World-Wide or Seaway has ever entered Oklahoma, with the single exception of the vehicle involved in the present case. Despite the apparent paucity of contacts between petitioners and Oklahoma, the District Court rejected their constitutional claim and reaffirmed that ruling in denying petitioners' motion for reconsideration. [Footnote 5] Petitioners then sought a writ of prohibition in the Supreme Court of Oklahoma to restrain the District Judge, respondent Charles S. Woodson, from exercising in personam jurisdiction over them. They renewed their contention that, because they had no "minimal contacts," App. 32, with the State of Oklahoma, the actions of the District Judge were in violation of their rights under the Due Process Clause. The Supreme Court of Oklahoma denied the writ, 585 P.2d 351 (1978), [Footnote 6] holding that personal jurisdiction over petitioners was authorized by Oklahoma's "long-arm" statute, chanroblesvirtualawlibrary Page 444 U. S. 290 Okla.Stat., Tit. 12, 1701.03(a)(4) (1971). [Footnote 7] Although the court noted that the proper approach was to test jurisdiction against both statutory and constitutional standards, its analysis did not distinguish these questions, probably because 1701.03(a)(4) has been interpreted as conferring jurisdiction to the limits permitted by the United States Constitution. [Footnote 8] The court's rationale was contained in the following paragraph, 585 P.2d at 354: "In the case before us, the product being sold and distributed by the petitioners is, by its very design and purpose, so mobile that petitioners can foresee its possible use in Oklahoma. This is especially true of the distributor, who has the exclusive right to distribute such automobile in New York, New Jersey and Connecticut. The evidence presented below demonstrated that goods sold and distributed by the petitioners were used in the State of Oklahoma, and, under the facts, we believe it reasonable to infer, given the retail value of the automobile, that the petitioners derive substantial income from automobiles which from time to time are used in the State of Oklahoma. This being the case, we hold that, under the facts presented, the trial court was justified in concluding Page 444 U. S. 291 this trend is largely attributable to a fundamental transformation in the American economy: that the petitioners derive substantial revenue from goods used or consumed in this State." We granted certiorari, 440 U.S. 907 (1979), to consider an important constitutional question with respect to state court jurisdiction and to resolve a conflict between the Supreme Court of Oklahoma and the highest courts of at least four other States. [Footnote 9] We reverse. II The Due Process Clause of the Fourteenth Amendment limits the power of a state court to render a valid personal judgment against a nonresident defendant. Kulko v. California Superior Court, 436 U. S. 84, 436 U. S. 91 (1978). A judgment rendered in violation of due process is void in the rendering State and is not entitled to full faith and credit elsewhere. Pennoyer v. Neff, 95 U. S. 714, 95 U. S. 732-733 (1878). Due process requires that the defendant be given adequate notice of the suit, Mullane v. Central Hanover Trust Co., 339 U. The historical developments noted in McGee, of course, have only accelerated in the generation since that case was decided. Nevertheless, we have never accepted the proposition that state lines are irrelevant for jurisdictional purposes, nor could we and remain faithful to the principles of interstate federalism embodied in the Constitution. The economic interdependence of the States was foreseen and desired by the Framers. In the Commerce Clause, "Today many commercial transactions touch two or more States, and may involve parties separated by the full continent. With this increasing nationalization of commerce has come a great increase in the amount of business conducted by mail across state lines. At the same time, modern transportation and communication have made it much less burdensome for a party sued to defend himself in a State where he engages in economic activity." S. 306,339 U. S. 313-314 (1950), and be subject to the personal jurisdiction of the court, International Shoe Co. v. Washington, 326 U. S. 310(1945). In the present case, it is not contended that notice was inadequate; the only question is whether these particular petitioners were subject to the jurisdiction of the Oklahoma courts. As has long been settled, and as we reaffirm today, a state court may exercise personal jurisdiction over a nonresident defendant only so long as there exist "minimum contacts" between the defendant and the forum State. International Shoe Co. v. Washington, supra at326 U. S. 316. The concept of minimum contacts, in turn, can be seen to perform two related, but chanroblesvirtualawlibrary Page 444 U. S. 292 distinguishable, functions. It protects the defendant against the burdens of litigating in a distant or inconvenient forum. And it acts to ensure that the States, through their courts, do not reach out beyond the limits imposed on them by their status as coequal sovereigns in a federal system. The protection against inconvenient litigation is typically described in terms of "reasonableness" or "fairness." We have said that the defendant's contacts with the forum State must be such that maintenance of the suit "does not offend traditional notions of fair play and substantial justice.'" International Shoe Co. v. Washington, supra at 326 U. S. 316, quoting Milliken v. Meyer, 311 U. S. 457, 311 U. S. 463(1940). The relationship between the defendant and the forum must be such that it is "reasonable . . . to require the corporation to defend the particular suit which is brought there." 326 U.S. at 326 U. S. 317. Implicit in this emphasis on reasonableness is the understanding that the burden on the defendant, while always a primary concern, will in an appropriate case be considered in light of other relevant factors, including the forum State's interest in adjudicating the dispute, see McGee v. International Life Ins. Co., 355 U. S. 220, 355 U. S. 223 (1957); the plaintiff's interest in obtaining convenient and effective relief, see Kulko v. California Superior Court, supra at 436 U. S. 92, at least when that interest is not adequately protected by the plaintiff's power to choose the forum, cf. Shaffer v. Heitner, 433 U. S. 186, 433 U. S. 211, n. 37 (1977); the interstate judicial system's interest in obtaining the most efficient resolution of controversies; and the shared interest of the several States in furthering fundamental substantive social policies, see Kulko v. California Superior Court, supra at 436 U. S. 93, 436 U. S. 98. The limits imposed on state jurisdiction by the Due Process Clause, in its role as a guarantor against inconvenient litigation, have been substantially relaxed over the years. As we noted in McGee v. International Life Ins. Co., supra at 355 U. S. 222-223, chanroblesvirtualawlibrary Page 444 U. S. 293
170
they provided that the Nation was to be a common market, a "free trade unit" in which the States are debarred from acting as separable economic entities. H. P. Hood Sons, Inc. v. Du Mond, 336 U. S. 525, 336 U. S. 538(1949). But the Framers also intended that the States retain many essential attributes of sovereignty, including, in particular, the sovereign power to try causes in their courts. The sovereignty of each State, in turn, implied a limitation on the sovereignty of all of its sister States -- a limitation express or implicit in both the original scheme of the Constitution and the Fourteenth Amendment. Hence, even while abandoning the shibboleth that "[t]he authority of every tribunal is necessarily restricted by the territorial limits of the State in which it is established," Pennoyer v. Neff, supra, at 95 U. S. 720, we emphasized that the reasonableness of asserting jurisdiction over the defendant must be assessed "in the context of our federal system of government," chanroblesvirtualawlibrary Page 444 U. S. 294 International Shoe Co. v. Washington, 326 U.S. at 326 U. S. 317, and stressed that the Due Process Clause ensures not only fairness, but also the "orderly administration of the laws," id. at 326 U. S. 319. As we noted in Hanson v. Denckla, 357 U. S. 235, 357 U. S. 250-251 (1958): "As technological progress has increased the flow of commerce between the States, the need for jurisdiction over nonresidents has undergone a similar increase. At the same time, progress in communications and transportation has made the defense of a suit in a foreign tribunal less burdensome. In response to these changes, the requirements for personal jurisdiction over nonresidents have evolved from the rigid rule of Pennoyer v. Neff, 95 U. S. 714, to the flexible standard of International Shoe Co. v. Washington, 326 U. S. 310. But it is a mistake to assume that this trend heralds the eventual demise of all restrictions on the personal jurisdiction of state courts. [Citation omitted.] Those restrictions are more than a guarantee of immunity from inconvenient or distant litigation. They are a consequence of territorial limitations on the power of the respective States." Thus, the Due Process Clause "does not contemplate that a state may make binding a judgment in personam against an individual or corporate defendant with which the state has no contacts, ties, or relations." International Shoe Co. v. Washington, supra at 326 U. S. 319. Even if the defendant would suffer minimal or no inconvenience from being forced to litigate before the tribunals of another State; even if the forum State has a strong interest in applying its law to the controversy; even if the forum State is the most convenient location for litigation, the Due Process Clause, acting as an instrument of interstate federalism, may sometimes act to divest the State of its power to render a valid judgment. Hanson v. Denckla, supra at 357 U. S. 251, 357 U. S. 254. chanroblesvirtualawlibrary Page 444 U. S. 295 III Applying these principles to the case at hand, [Footnote 10] we find in the record before us a total absence of those affiliating circumstances that are a necessary predicate to any exercise of state court jurisdiction. Petitioners carry on no activity whatsoever in Oklahoma. They close no sales and perform no services there. They avail themselves of none of the privileges and benefits of Oklahoma law. They solicit no business there either through salespersons or through advertising reasonably calculated to reach the State. Nor does the record show that they regularly sell cars at wholesale or retail to Oklahoma customers or residents, or that they indirectly, through others, serve or seek to serve the Oklahoma market. In short, respondents seek to base jurisdiction on one, isolated occurrence and whatever inferences can be drawn therefrom: the fortuitous circumstance that a single Audi automobile, sold in New York to New York residents, happened to suffer an accident while passing through Oklahoma. It is argued, however, that, because an automobile is mobile by its very design and purpose, it was "foreseeable" that the Robinsons' Audi would cause injury in Oklahoma. Yet "foreseeability" alone has never been a sufficient benchmark for personal jurisdiction under the Due Process Clause. In Hanson v. Denckla, supra, it was no doubt foreseeable that the settlor of a Delaware trust would subsequently move to Florida and seek to exercise a power of appointment there; yet we held that Florida courts could not constitutionally chanroblesvirtualawlibrary Page 444 U. S. 296 exercise jurisdiction over a Delaware trustee that had no other contacts with the forum State. In Kulko v. California Superior Court, 436 U. S. 84 (1978), it was surely "foreseeable" that a divorced wife would move to California from New York, the domicile of the marriage, and that a minor daughter would live with the mother. Yet we held that California could not exercise jurisdiction in a child support action over the former husband, who had remained in New York. If foreseeability were the criterion, a local California tire retailer could be forced to defend in Pennsylvania when a blowout occurs there,see Erlanger Mills, Inc. v. Cohoes Fibre Mills, Inc., 239 F.2d 502, 507 (CA4 1956); a Wisconsin seller of a defective automobile jack could be haled before a distant court for damage caused in New Jersey, Reilly v. Phil Tolkan Pontiac, Inc., 372 F.Supp. 1205 (NJ 1974); or a Florida soft-drink concessionaire could be summoned to Alaska to account for injuries happening there, see Uppgren v. Executive Aviation Services, Inc., 304 F.Supp. 165, 170-171 (Minn.1969). Every seller of chattels would, in effect, appoint the chattel his agent for service of process. His amenability to suit would travel with the chattel. We recently abandoned the outworn rule of Harris v. Balk, 198 U. S. 215 (1905), that the interest of a creditor in a debt could be extinguished or otherwise affected by any State having transitory jurisdiction over the debtor.Shaffer v. Heitner, 433 U. S. 186 (1977). Having interred the mechanical rule that a creditor's amenability to a quasi in rem action travels with his debtor, we are unwilling to endorse an analogous principle in the present case. [Footnote 11] chanroblesvirtualawlibrary Page 444 U. S. 297 This is not to say, of course, that foreseeability is wholly irrelevant. But the foreseeability that is critical to due process analysis is not the mere likelihood that a product will find its way into the forum State. Rather, it is that the defendant's conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there. See Kulko v. California Superior Court, supra at 436 U. S. 97-98; Shaffer v. Heitner, 433 U.S. at 433 U. S. 216; and see id. at 433 U. S. 217-219 (STEVENS, J., concurring in judgment). The Due Process Clause, by ensuring the "orderly administration of the laws," International Shoe Co. v. Washington, 326 U.S. at 326 U. S. 319, gives a degree of predictability to the legal system that allows potential defendants to structure their primary conduct with some minimum assurance as to where that conduct will and will not render them liable to suit. When a corporation "purposefully avails itself of the privilege of conducting activities within the forum State," Hanson v. Denckla, 357 U.S. at 357 U. S. 253, it has clear notice that it is subject to suit there, and can act to alleviate the risk of burdensome litigation by procuring insurance, passing the expected costs on to customers, or, if the risks are too great, severing its connection with the State. Hence if the sale of a product of a manufacturer or distributor such as Audi or Volkswagen is not simply an isolated occurrence, but arises from the efforts of the manufacturer or distributor to serve, directly or indirectly, the market for its product in other States, it is not unreasonable to subject it to suit in one of those States if its allegedly defective merchandise has there been the source of injury to its owner or to others. The forum State does not chanroblesvirtualawlibrary
171
Page 444 U. S. 298 exceed its powers under the Due Process Clause if it asserts personal jurisdiction over a corporation that delivers its products into the stream of commerce with the expectation that they will be purchased by consumers in the forum State. Cf. Gray v. American Radiator & Standard Sanitary Corp., 22 Ill.2d 432, 176 N.E.2d 761 (1961). But there is no such or similar basis for Oklahoma jurisdiction over World-Wide or Seaway in this case. Seaway's sales are made in Massena, N. Y. World-Wide's market, although substantially larger, is limited to dealers in New York, New Jersey, and Connecticut. There is no evidence of record that any automobiles distributed by World-Wide are sold to retail customers outside this tristate area. It is foreseeable that the purchasers of automobiles sold by World-Wide and Seaway may take them to Oklahoma. But the mere "unilateral activity of those who claim some relationship with a nonresident defendant cannot satisfy the requirement of contact with the forum State." Hanson v. Denckla, supra, at 357 U. S. 253. In a variant on the previous argument, it is contended that jurisdiction can be supported by the fact that petitioners earn substantial revenue from goods used in Oklahoma. The Oklahoma Supreme Court so found, 585 P.2d at 354-355, drawing the inference that, because one automobile sold by petitioners had been used in Oklahoma, others might have been used there also. While this inference seems less than compelling on the facts of the instant case, we need not question the court's factual findings in order to reject its reasoning. This argument seems to make the point that the purchase of automobiles in New York, from which the petitioners earn substantial revenue, would not occur but for the fact that the automobiles are capable of use in distant States like Oklahoma. Respondents observe that the very purpose of an automobile is to travel, and that travel of automobiles sold by petitioners is facilitated by an extensive chain of Volkswagen service centers throughout the country, including some in Oklahoma. [Footnote 12] chanroblesvirtualawlibrary Page 444 U. S. 299 However, financial benefits accruing to the defendant from a collateral relation to the forum State will not support jurisdiction if they do not stem from a constitutionally cognizable contact with that State. See Kulko v. California Superior Court, 436 U.S. at 436 U. S. 94-95. In our view, whatever marginal revenues petitioners may receive by virtue of the fact that their products are capable of use in Oklahoma is far too attenuated a contact to justify that State's exercise of in personam jurisdiction over them. Because we find that petitioners have no "contacts, ties, or relations" with the State of Oklahoma, International Shoe Co. v. Washington, supra, at 326 U. S. 319, the judgment of the Supreme Court of Oklahoma is Reversed. SCHMIDT v. DRISCOLL HOTEL, INC. 249 Minn. 376 (1957) 82 N.W. (2d) 365 HERBERT G. SCHMIDT, A MINOR, BY HIS MOTHER AND NATURAL GUARDIAN, MATIE T. SCHMIDT, v. DRISCOLL HOTEL, INC., d.b.a. THE HOOK-EM-COW BAR AND CAFE. No. 36,973. Supreme Court of Minnesota. April 12, 1957. Daniel T. Cody, J.M. Daly, Lipschultz, Altman, Geraghty & Mulally, and H.E. Cochrane, for appellant. Hoffmann, Donahue & Graff and T. Eugene Thompson, for respondent.
THOMAS GALLAGHER, JUSTICE. Plaintiff, Herbert G. Schmidt, a minor, instituted this action by his mother and natural guardian, Matie T. Schmidt, against the Driscoll Hotel, Inc., doing business as The Hook-Em-Cow Bar and Cafe in South St. Paul, for damages alleged to have resulted from defendant's illegal sale of intoxicants to one John Sorrenson. The complaint alleged that defendant illegally sold intoxicating liquors to Sorrenson to the extent of causing him to become intoxicated in defendant's establishment in South St. Paul so that shortly thereafter, as a proximate result thereof, plaintiff sustained injuries when an automobile driven by Sorrenson, in which plaintiff was a passenger, was caused to turn over near Prescott, Wisconsin. Defendant denied the material allegations of the complaint and alleged that it failed to state a claim against it. Subsequently, it moved to dismiss the action on the ground that the pleadings failed to state a claim against the defendant and that the court lacked jurisdiction. On April 28, 1956, the trial court made its order granting defendant's motion. In the order granting the same, the trial court determined that "No penalty by way of collecting damages arose under M.S.A. 340.95 [Civil Damage Act], unless the injury was inflicted in the state. No civil action to collect the penalty arose unless the illegal sale in the state was followed by an injury in the state. * * * M.S.A. 340.95 does not provide for extraterritorial effect, * * *." This is an appeal from the judgment entered pursuant to the foregoing order. [ 249 Minn. 379 ]
172
6. In arriving at this conclusion, we have in mind decisions of a number of jurisdictions which have reached similar results in situations, which, though not involving civil damage acts, presented factual circumstances comparable to those here. Gordon v. Parker (D. Mass.) 83 F.Supp. 40; Levy v. Daniels' U-Drive Auto Renting Co. Inc. 108 Conn. 333, 143 A. 163, 61 A.L.R. 846; Moore v. Pywell, 29 App. D.C. 312, 9 L.R.A. (N.S.) 1078; Gratz v. Claughton (2 Cir.) 187 F.2d 46; Caldwell v. Gore, 175 La. 501, 143 So. 387; see, Ehrenzweig, The Place of Acting in Intentional Multistate Torts: Law and Reason Versus the Restatement, 36 Minn. L. Rev. 1; Rheinstein,The Place of Wrong: A Study in the Method of Case Law, 19 Tulane L. Rev. 4; Id. 165. In Gordon v. Parker, supra, an action for alienation of affections was instituted in Massachusetts by plaintiff, who, with his wife, was domiciled in Pennsylvania. Therein it appeared that defendant's wrongful acts had taken place in Massachusetts, and accordingly plaintiff sought the application of a Massachusetts statute relating to alienation of affections. Defendant contended that, since the matrimonial domicile of the parties was in Pennsylvania, which accordingly was the place where the ultimate wrong was done to plaintiff, only Pennsylvania law could be applied. In denying this contention and applying the Massachusetts statute, the court stated (83 F.Supp. 42): "This is not a situation in which the interests of Pennsylvania plainly outweigh those of Massachusetts. The social order of each is implicated. As the place of matrimonial domicil, Pennsylvania has an interest in whether conduct in any part of the world is held to affect adversely the marriage relationship between its domiciliaries. But, as the place where the alleged * * * wrongdoer lives, Massachusetts also has an interest. She is concerned with conduct [ 249 Minn. 382 ] within her borders which in her view lowers the standards of the community where they occur. She also is concerned when her citizens intermeddle with other people's marriages." 7. We recognize that the courts of Illinois (Eldridge v. Don Beachcomber, Inc. 342 Ill.App. 151, 95 N.E.2d 512, 22 A.L.R. [2d] 1123) and New York (Goodwin v. Young, 34 Hun 252) have reached opposite conclusions in construing civil damage acts similar to 340.95. However, we feel that the situations presented in such cases, as well as that presented here, do not compel application of Restatement, Conflict of Laws, 377 and 378, and that our determination that other principles apply will better afford Minnesota citizens the protection which the Civil Damage Act intended for them.
1. M.S.A. 340.14, subd. 1, provides: "No intoxicating liquor shall be sold * * * to any person obviously intoxicated * * *." M.S.A. 340.95, commonly known as the Civil Damage Act, provides that: "Every * * * person who is injured in person or property, * * * by any intoxicated person, or by the intoxication of any person, has a right of action, in his own name, against any person who, by illegally selling, bartering or giving intoxicating liquors, caused the intoxication of such person, for all damages, sustained; * * *." We have recently held this provision to be essentially remedial in nature although penal in its characteristics. Adamson v. Dougherty, 248 Minn. 535, 81 N.W.2d 110. 2. It is defendant's position that the action is governed by the law of torts and that, since the last act in the series of events for which plaintiff instituted his action occurred in Wisconsin, which has no Civil Damage Act similar to 340.95,1the latter can have no application in determining plaintiff's rights or defendant's liability. In support thereof defendant cites Restatement, Conflict of Laws, 377, which states: "The place of wrong is in the state where the last event necessary to make an actor liable for an alleged tort takes place." And 378, which states: "The law of the place of wrong determines whether a person has sustained a legal injury." 3. The allegations of the complaint by which we are bound for the purposes of this appeal make clear that plaintiff's damages are the result of two distinct wrongs one committed by defendant in Minnesota when it sold Sorrenson intoxicating liquors in violation of M.S.A. 340.14, subd. 1; and one committed by Sorrenson in Wisconsin when his negligence caused the car in which plaintiff was riding to turn over. It cannot be disputed that, had plaintiff's action been against Sorrenson for his negligence, his rights would be governed by the law of Wisconsin applicable in tort actions of this kind. Sohm v. Sohm, 212 Minn. 316, 3 N.W.2d 496; Hardgrove v. Bade, [ 249 Minn. 380 ] 190 Minn. 523, 252 N.W. 334. But, even if at the time of the accident there had been in effect in Wisconsin a statute similar to 340.95, it is doubtful if it could be applied to ascertain plaintiff's rights against defendant since there is nothing here to support a claim that defendant ever consented to be bound by Wisconsin law. See, Scheer v. Rockne Motors Corp. (2 Cir.) 68 F.2d 942; Young v. Masci, 289 U.S. 253, 53 S.Ct. 599, 77 L. ed. 1158. 4. From the foregoing, it would follow that, if the principles expressed in Restatement, Conflict of Laws, 377 and 378, are held applicable to multistate fact situations like the present, then neither the laws of the state where the last event necessary to create tort liability took place nor the laws of the state where the liquor dealer's violations of the liquor statutes occurred would afford an injured party any remedy against the offending liquor dealer for the injuries which resulted from his statutory violations. The result would be that here both the interest of Wisconsin in affording whatever remedies it deems proper for those injured there as the result of foreign violations of liquor laws (Watson v. Employers Lia. Assur. Corp. 348 U.S. 66, 75 S.Ct. 166, 99 L. ed. 74), and the interest of Minnesota in admonishing a liquor dealer whose violation of its statutes was the cause of such injuries; and in providing for the injured party a remedy therefor under the Civil Damage Act would become ineffective. See, Levy v. Daniels' U-Drive Auto Renting Co. Inc. 108 Conn. 333, 143 A. 163, 61 A.L.R. 846; Gordon v. Parker (D. Mass.) 83 F.Supp. 40. 5. We feel that the principles in Restatement, Conflict of Laws, 377 and 378, should not be held applicable to fact situations such as the present to bring about the result described and that a determination to the opposite effect would be more in conformity with principles of equity and justice. Here all parties involved were residents of Minnesota. Defendant was licensed under its laws and required to operate its establishment in compliance therewith. Its violation of the Minnesota statutes occurred here, and its wrongful conduct was complete within Minnesota when, as a result thereof, Sorrenson became intoxicated before leaving its establishment. The [ 249 Minn. 381 ] consequential harm to plaintiff, a Minnesota citizen, accordingly should be compensated for under M.S.A. 340.95 which furnishes him a remedy against defendant for its wrongful acts. By this construction, no greater burden is placed upon defendant than was intended by 340.95.
Reversed.
173
307 F.2d 845 BANCO NACIONAL DE CUBA, Appellant, v. Peter L. F. SABBATINO, as Receiver, and F. Shelton Parr, William F. Prescott, Emet Whitlock, Lawrence H. Dixon, H. Bartow Farr, Elizabeth C. Prescott, FabioFreyre and Helen G. Downs, co-partners doing business as Farr, Whitlock & Co.,Appellees. No. 226, Docket 27268. United States Court of Appeals Second Circuit. Argued Jan. 3, 1962. Decided July 6, 1962. Rabinowitz & Boudin, New York City (Victor Rabinowitz, Leonard B. Boudin, Michael B. Standard, Mary Kaufman, New York City, of counsel), for appellant. Harold L. Fisher and Ross J. DiLorenzo, Brooklyn, N.Y. (Harold L. Fisher, Brooklyn, N.Y., Joseph Slavin, New York City, of counsel), for appellee Sabbatino. Choate, Mitchell, Baker & Nelson, New York City (Robert L. Augenblick, Winthrop S. Emmet, New York City, of counsel), for appellee Farr-Whitlock.
174
John G. Laylin, Washington, D.C., (Covington & Burling, Ky P. Ewing, Jr., R. Markham Ball, Washington, D.C., of counsel), for Cuban-American Sugar Co. and Cuban American Sugar Mills Co., amici curiae. Before WATERMAN, KAUFMAN and MARSHALL, Circuit Judges. 8 WATERMAN, Circuit Judges. 1 The plaintiff, the financial agent of the Government of Cuba, appeals from a summary judgment entered in the United States District Court for the Southern District of New York, dismissing its complaint against the defendant Peter L. F. Sabbatino, the New York Temporary Receiver, who is holding the proceeds of a certain shipment of sugar, and against the defendant Farr, Whitlock & Co., the commodity broker which negotiated the sale of the sugar in this country, for the conversion of the bills of lading and the sales proceeds of this sugar shipment. 2 In February and July 1960, Farr, Whitlock entered into contracts with General Sugar Estates, Inc., a whollyowned Cuban subsidiary of Compania Azucarera Vertientes-Camaguey de Cuba (C.A.V.) for the purchase of Cuban sugar. C.A.V. is organized under the laws of Cuba, but over ninety per cent of its shareholders are residents of the United States. Pursuant to these contracts, between 6:00 A.M. on August 6, 1960, and 1:00 P.M. on August 9, 1960, 22,000 bags of sugar were loaded aboard the German vessel S.S. Hornfels standing offshore at the Cuban port of Jucaro. The exact distance offshore is not known. 3 On the first day of that loading, August 6, the Castro Government, at the seat of the government in Havana, issued Executive Power Resolution No. 1 under Law No. 851. The resolution proclaimed: 4 'In pursuance of the powers vested in us, in accordance with the provisions of Law No. 851, of July 6, 1960, we hereby, 5 'RESOLVE: 6 'FIRST: To order the nationalization, through compulsory expropriation, and, therefore, the adjudication in fee simple to the Cuban State, of all the property and enterprises located in the national territory, and the rights and interests resulting from the exploitation of such property and enterprises, owned by the juridical persons who are nationals of the United States of North America, or operators of enterprises in which nationals of said country have a predominating interest, as listed below, * * *' 13 After August 6 the consent of the Cuban government was required before sugar-carrying ships could leave Cuban waters. To obtain this consent, on August 11 Farr, Whitlock entered into contracts with Banco Para el Commercio Exterior de Cuba, as the representative of the Castro government. The terms of these 12 'WHEREAS, in the face of such developments the undersigned, being fully conscious of their great historical responsibility and in legitimate defense of the national economy are duty bound to adopt the measures deemed necessary to counteract the harm done by the aggression inflicted upon our nation.' 11 'WHEREAS, this action constitutes a reiteration of the continued conduct of the government of the United States of North America, intended to prevent the exercise of its sovereignty and its integral development by our people thereby serving the base interests of the North American trusts, which have hindered the growth of our economy and the consolidation of our political freedom. 10 'WHEREAS, the Chief Executive of the Government of the United States of North America, making use of said exceptional powers, and assuming an obvious attitude of economic and political aggression against our country, has reduced the participation of Cuban sugars in the North American market with the unquestionable design to attack Cuba and its revolutionary process. 9 'WHEREAS, the attitude assumed by the Government and the Legislative Power of the United States of North America, of continued aggression, for political purposes, against the basic interests of the Cuban economy, as evidenced by the amendment to the Sugar Act adopted by the Congress of said country, whereby exceptional powers were conferred upon the President of said nation to reduce the participation of Cuban sugars in the sugar market of said country, as a weapon of political action against Cuba, was considered as the fundamental justification of said law. 'WHEREAS, Law No. 851, of July 6, 1960, published in the Official Gazette of July 7, 1960, authorized the undersigned to provide, through joint resolutions, whenever they deem it advisable in order to defend the national interests, for the nationalization through compulsory expropriation, of the property or enterprises owned by physical and corporate persons who are nationals of the United States of North America, and the enterprises in which such persons have any interest or participation, even though they have been organized under the Cuban laws. 7 Followed a list of the twenty-six companies to be seized, number 22 on the list being C.A.V. The purpose of Law No. 851 and the resolution of expropriation was set forth in the resolution as follows:
175
contracts were identical with those in the earlier contracts between Farr, Whitlock and the subsidiary of C.A.V. With he permission of the Cuban regime the sugar-laden S.S. Hornfels sailed for its destination, Casablanca, Morocco. 14 Banco Para el Commercio Exterior assigned the bills of lading for this sugar shipment to the plaintiff, which in turn sent them to Societe Generale, a French bank which acted as the plaintiff's agent in New York. The plaintiff instructed Societe Generale to deliver the bills of lading and a sight draft in the sum of $175,250.69 to Farr, Whitlock in return for payment of the draft. On August 26, 1960, as instructed, Societe Generale presented the documents to Farr, Whitlock for payment, but the broker refused to accept them, giving as its reason the fact that one of the three necessary copies of the shipping documents was missing. 15 Meanwhile, on August 16, a shareholder of C.A.V. brought an action in the New York Supreme Court, Kings County, pursuant to N.Y.Civ.Prac.Act, 977-b for the appointment of a receiver for the assets of C.A.V. in New York.1 That same day the New York court ex parte appointed the present defendant Sabbatino as Temporary Receiver. A certified copy of the order appointing the Temporary Receiver was served on Farr, Whitlock on August 23. 16 On Friday, August 26, the same day on which Societe Generale first tried to make delivery of the shipping documents and receive payment for the plaintiff, officers of C.A.V. advised Farr, Whitlock orally and in writing that C.A.V., not the Cuban government or its agencies, was the true owner of the sugar covered by the bills of lading in the hands of Societe Generale.2C.A.V. enclosed in its letter to Farr, Whitlock a notice of the appointment of the Temporary Receiver. Later that day Farr, Whitlock and C.A.V. entered into an agreement by which Farr, Whitlock promised to retain any proceeds it might receive from the sugar shipment here involved until it was compelled by a court order to turn them over to the Receiver or anyone else. C.A.V. promised to indemnify Farr, Whitlock against any claims with respect to the sugar, except a claim by the Receiver; to defendant any suit against Farr, Whitlock involving the sugar or the proceeds therefrom, except a proceeding by the Receiver; and to pay Farr, Whitlock ten per cent of the sum of $175,000 if C.A.V. ever obtained that sum. 17 Monday morning, August 29, 1960, Societe Generale again presented the draft to Farr, Whitlock, this time with all the necessary documents. The plaintiff claims that Farr, Whitlock informed Societe Generale that it would take the documents for inspection and that a representative of the French bank might return later that day for payment. Farr, Whitlock claims on the other hand, that Societe Generale presented the documents in the usual manner and that no conversation took place. In either event, the same day Farr, Whitlock negotiated the bills of lading to its customer and received payment of the purchase price in the amount of $175,250.69. 18 23 Sabbatino moved to dismiss the plaintiff's complaint as to him and the broker's cross-claim for failure to obtain permission to sue him from the court which appointed the Receiver. Farr, Whitlock moved to dismiss the Cuban bank's action against it because of alleged lack of jurisdiction over the subject matter. The plaintiff moved for summary judgment against both defendants. Farr, Whitlock moved for summary 22 The defendant Farr, Whitlock answered, and filed a cross-claim for judgment over against the defendant Sabbatino in the amount of $173,936.31, being the sum which the broker had paid to the Receiver, should the plaintiff recover judgment against Farr, Whitlock. The commodity broker also raised a counterclaim in the amount of $412,807.12 based on an unrelated shipment of Cuban sugar. 21 The plaintiff filed its complaint in the present action in the United States District Court for the Southern District of New York on October 10, 1960, and amended it on October 31 in the light of the New York court's order of October 24, referred to in the preceding paragraph. In the amended complaint, the Cuban bank alleged that Farr, whitlock's refusal either to return the bills of lading or to pay over the proceeds of the sale to Societe Generale was a conversion of the bills and of the proceeds. The plaintiff asked the federal court to enter judgment for it against Farr, Whitlock in the amount of $175,250.69 and to enjoin Sabbatino from exercising jurisdiction over the sums paid to him. 20 On October 24, 1960, the Supreme Court of New York, Kings County, ordered Farr, Whitlock to transfer the proceeds less $1,314.38, commissions due the broker, or a total of $173,936.31, to Sabbatino, broker, or a total of $173,936.31 to Sabbatino, the court's determination as to the rightful owner of the proceeds. The commodity broker transferred the proceeds as the state court ordered. 19 About two hours later Farr, Whitlock was served with an order of the Supreme Court of New York, Kings County, enjoining it from taking any action which might result in removing assets claimed by C.A.V. out of the State of New York. That same day Farr, Whitlock notified the French bank by letter that the sugar broker had notice of the appointment of the receiver for C.A.V.'s New York assets, that C.A.V. claimed the sugar proceeds here involved, that the broker had received formal notification of a motion in the New York court to vacate the receivership,3 and that Farr, whitlock had been served with the order mentioned in the preceding sentence. Therefore, the letter stated, Farr, Whitlock was obliged to retain the proceeds until directed by a competent court to give them up. Societe Generale formally protested the non-payment of the draft. A representative of Societe Generale returned to Farr, Whitlock's office at 3:00 P.M. that day to receive payment of the draft. He was informed, the plaintiff maintains, that the bills of lading had been negotiated and that Farr, Whitlock had received the proceeds but that it would not turn over the proceeds to Societe Generale because C.A.V. claimed them.
176
judgment against the Receiver in the event that the plaintiff obtained summary judgment against Farr, Whitlock. The district court below treated all these motions in a single, scholarly opinion, reported at D.C., 193 F.Supp. 375 (1961). It denied the broker's motion to dismiss, holding that it had jurisdiction over the subject matter and, on the plaintiff's motion for summary judgment, granted judgment for the defendants, thereby rendering the other motions moot. The plaintiff then appealed to this court. 24 Inasmuch as they are presently involved in several cases with issues similar to those in this case, we allowed the Cuban-American Sugar Company and its wholly-owned subsidiary, the Cuban American Sugar Mills Company, to file a brief as amici curiae. 25 This appeal raises very important and difficult legal questions in the fields of international relations, statefederal relations, and judicial-executive relations. 26 In its complaint the plaintiff invoked federal jurisdiction on the basis of diversity of citizenship between itself and the defendants, 28 U.S.C. 1332, and on the basis of the presence of a federal question 28 U.S.C. 1331. As the plaintiff is a Cuban corporation and the defendants are citizens of New York, New Jersey, and Florida, the diversity jurisdiction of the federal court was established. We need not decide whether jurisdiction could have also been grounded on the federal question jurisdiction of the district court. 27 But Farr, Whitlock contends that the jurisdiction of the federal court was defective in another respect. Because a court without jurisdiction has no power to adjudicate upon the merits of a controversy, the first question to be resolved in an orderly consideration of the numberous questions raised in this litigation is whether the court below was correct in denying Farr, Whitlock's motion to dismiss the complaint against it on the ground that the federal court lacked jurisdiction over the subject matter. Farr, Whitlock's motion was based on the proposition that, as the proceeds of the sale had been turned over to a New York state court and as that court had perfected its jurisdiction either in rem or quasi in rem over those proceeds before the U.S. District Court had perfected its jurisdiction over the parties, the U.S. District Court lacked jurisdiction over the subject matter. See Penn Gen. Cas. Co. v. Pennsylvania, 294 U.S. 189, 196, 55 S.Ct. 386, 79 L.Ed. 850 (1935); Harkin v. Brundage,276 U.S. 36, 43-45, 48 S.Ct. 268, 72 L.Ed. 457 (1928). It has long been established that the court which first obtains jurisdiction over a particular res is entitled to retain that jurisdiction to the exclusion of other courts. See Hagan v. Lucas, 35 U.S. (10 Pet.) 400 (1836); Taylor v. Carryl, 61 U.S. (20 How.) 583, 597 (1858); Freeman v. Howe, 65 U.S. (24 How.) 450 (1861); Hart & Wechsler, the Federal Courts and The Federal System 1073 (1953). 28 But if the action brought in the federal court is an in personam action that does not interfere with the state court's jurisdiction over the fund it holds, the federal court has jurisdiction to adjudicate the rights of the parties. United States v. Bank of New York & Trust Co., 296 U.S. 463, 477, 56 S.Ct. 343, 80 L.Ed. 331 33 'The doctrine of Abstention, under which a District Court may decline to exercise or postpone the exercise of its jurisdiction, is an extraordinary any narrow exception to the duty of a District Court to adjudicate a controversy properly before it. Abdication of the obligation to decide cases can be justified under this doctrine only in the exceptional circumstances where the order to the parties to repair to the state court 32 Farr, Whitlock further contends, however, that even if the federal district court for the Southern District of New York did have jurisdiction to decide this case, it should have, in its sound discretion, in view of the pending state court litigation, abstained from entering a judgment. But the Supreme Court has announced: 31 The plaintiff in the present case in an in personam action seeks a money judgment for damages against Farr, Whitlock for conversion. The fund in the hands of the New York State court need not be interfered with by a judgment for the plaintiff against Farr, Whitlock personally. Therefore, the state court's control of the sale proceeds has not preempted the jurisdiction of the federal court over the subject matter of the present litigation, and the court below was correct in holding that it had jurisdiction to decide the controversy between the parties. 30 For cases applying this rule where an in rem or quasi in rem action preceded an in personam one see Markham v. Allen, 326 U.S. 490, 66 S.Ct. 296, 99 L.Ed. 256 (1945) (state action followed by federal one); United States v. Klein, 303 U.S. 276, 58 S.Ct. 536, 82 L.Ed. 840 (1938) (federal action followed by state one); Commonwealth Trust Co. v. Bradford, 297 U.S. 613, 56 S.Ct. 600, 80 L.Ed. 920 (1936) (state action followed by federal one). 29 'But a controversy is not a thing, and a controversy over a mere question of personal liability does not involve the possession or control of a thing, and an action brought to enforce such a liability does not tend to impair or defeat the jurisdiction of the court in which a prior action for the same cause is pending. Each court is free to proceed in its own way and in its own time, without reference to the proceedings in the other court. Whenever a judgment is rendered in one of the courts and pleaded in other, the effect of that judgment is to be determined by the application of the principles of res adjudicata by the court in which the action is still pending in the orderly exercise of its jurisdiction, as it would determine any other question of fact or law arising in the progress of the case. The rule, therefore, has become generally established that where the action first brought is in personam and seeks only a personal judgment, another action for the same cause in another jurisdiction is not precluded.' (1936); Stanton v. Embrery, 3 Otto 548, 93 U.S. 548, 23 L.Ed. 983 (1877). This is so even if the issues in the state court case and in the federal court case are identical. The rule is well stated in the leading case of Kline v. Burke Construction Co., 260 U.S. 226, 230, 43 S.Ct. 79, 81, 67 L.Ed. 226 (1922), where both relevant actions were in personam actions:
177
would clearly serve an important countervailing interest.' (County of Allegheny v. Frank Mashuda Company, 360 U.S. 185, 188-189, 79 S.Ct. 1060, 1062, 3 L.Ed.2d 1163 (1959).) 34 Abstention has been approved when it permits the federal court to avoid reaching a decision of constitutional magnitude, or when state court determination of relevant issues of state law would present the federal constitutional issue in a different posture. City of Meridian v. Southern Bell Tel. & Tel. Co., 358 U.S. 639, 79 S.Ct. 455, 3 L.Ed.2d 562 (1959); Leiter Minerals, Inc. v. United States, 352 U.S. 220, 77 S.Ct. 287, 1 L.Ed.2d 267 (1957); Spector Motor Service, Inc. v. McLaughlin, 323 U.S. 101, 65 S.Ct. 152, 89 L.Ed. 101 (1944); Railroad Comm'n of Texas v. Pullman Co., 312 U.S. 496, 61 S.Ct. 643, 85 L.Ed. 971 (1941). It has also been approved when decision by the federal court would unduly strain the relationship between the state and federal jurisdictions. See, e.g., Burford v. Sun Oil Co., 319 U.S. 315, 63 S.Ct. 1098, 87 L.Ed. 1424 (1943); Alabama Pub. Serv. Comm'n v. Southern Ry., 341 U.S. 341, 71 S.Ct. 762, 95 L.Ed. 1002 (1951). But the mere adjudication by a federal court of a particular issue identical with an issue involved in pending litigation in a state court has never been considered so irritable to state prerogatives as to constitute a ground for federal abstention, even though the proceeding in the state court became truncated through an application of the rules of res judicata or collateral estoppel. Moreover, as this controversy involves our national foreign affairs, it is certainly appropriate for its determination to be made on the merits by a court of the United States. The court below properly exercised its discretion in declining to abstain from its duty of adjudication.4 35 Since the federal court had jurisdiction to decide the merits of the controversy between the Cuban national bank and Farr, Whitlock, we now come to a consideration of those merits. The substantive issues raised by the plaintiff's claims against the state-court-appointed receiver are identical with those raised against Farr, whitlock. as we have jurisdiction to adjudicate those substantive issues, we find it unnecessary and unwise at this time, in light of the decision we reach on the merits, to go into the question of the power of a federal court to enjoin a state appointed receiver. 36 As federal court jurisdiction over the present case rests upon the diversity of citizenship of the parties, we look, initially at least, to the law of the State of New to defermine the litigants' rights. To recover judgment on a theory of conversion, the plaintiff must establish title, possession or right to possession, or some property interest in the subject matter which plaintiff claims the defendants converted to their own use and which provides the basis for the lawsuit. Kaufman v. Simons Motor Sales Co.,261 N.Y. 146, 184 N.E. 739 (1933); Johnson v. Blaney, 198 N.Y. 312, 91 N.E. 721 (1910). Since the plaintiff's alleged rights in the bills of lading and in the proceeds received from the sugar depend upon plaintiff's prior ownership of the sugar the determination of whether Farr, whitlock is a converter depends upon whether C.A.V. or the Government of Cuba owned the sugar when it left Cuba. Under the ordinary rules of conflict of laws, title to this sugar would be determined by the law of Cuba, namely, the decreeof expropriation of August 6, 1960.5 See Restatement, Conflict of Laws 260 (1934); cf. M. Salimoff & Co. v. Standard Oil Co., 262 N.Y. 220, 186 N.E. 679, 89 A.L.R. 345 (1933). The appellees, however, attack this decree as invalid under (1) 41 40 'Every sovereign State is bound to respect the independence of every other sovereign State, and the courts of one country will not sit in judgment on the acts of the government of another done within its own territory. Redress of grievances by reason of such acts must be obtained through the means open to be availed of any sovereign powers as between themselves' (168 U.S. at 252, 18 S.Ct. at 84). 39 The first case in the Supreme Court clearly to recognize the doctrine was Underhill v. Hernandez, 168 U.S. 250, 18 S.Ct. 83, 42 L.Ed. 456 (1897). In that case the plaintiff sued the commander of a revolutionary army in Venezuela for damages suffered from an alleged false imprisonment and assault perpetrated by the defendant's soldiers during Venezuelan hostilities. The United States subsequently recognized the revolutionary government under which the defendant acted. The Supreme Court refused to consider the plaintiff's contentions on the merits. The Court states: 38 The act of state doctrine has had a place in American jurisprudence for a very long time. It may date from the Supreme Court's decision in Hudson v. Guestier, 8 U.S. (4 Cranch) 293 (1808), in which the Court held that it could not review the correctness of a seizure by a foreign power within the territorial jurisdiction of that sovereign 'unless the court passing the sentence loses its jurisdiction by some circumstance which the law of nations can notice.' 37 The appellant, on the other hand, asserts that irrespective of the appellees' the expropriation decree we must decide in appellant's favor because under the Act of State Doctrine this court may not inquire into the validity of the Cuban decree. The Act of State Doctrine, briefly stated, holds that American courts will not pass on the validity of the acts of foreign governments performed in their capacities as sovereigns within their own territories. The actions of foreign nations accorded this respect may be executive, legislative, or judicial in nature, althrough court judgments, because they ordinarily involve the resolution of private disputes and do not ordinarily reflect high state policy, do not usually come within this category. Restatement, Foreign Relations Law of the United States 41,. comment c (Proposed Official Draft, 1962). This doctrine is one of the conflict of laws rules applied by American courts; it is not itself a rule of international law. Id., comments b, g; Zander, The Act of State Doctrine, 53 Am.J.Int'l L. 826, 837, 844 (1959). But see Falk, Toward a Theory of the Participation of Domestic Courts in the International Legal Order: a Critique of Banco Nacional de Cuba v. Sabbatino, 16 Rutgers L.Rev. 1, 34-35 (1961).6 The act of state doctrine stems from the concept of the immunity of the sovereign because 'the sovereign can do no wrong.' See Note, The Castro Government in American Courts: Sovereign Immunity and the Act of State Doctrine, 75 Harv.L.Rev. 1607, 1608 (1962). the municipal law of Cuba, (2) the public policy of the forum, and (3) the rules and principles of international law. The appellant, on the other
178
Another case in the history of the act of state doctrine was the well-known opinion of Mr. Justice Holmes in American Banana Co. v. United Fruit Co., 213 U.S. 347, 29 S.Ct. 511, 53 L.Ed. 826 (1909). The plaintiff alleged that the defendant conspired with the Government of Costa Rica to deprive the plaintiff of its plantation and railroad in that country. As in Underhill, the Court refused to entertain the plaintiff's substantive contentions. Mr. Justice Holmes, for the Court, explained that a sovereign within its territorial jurisdiction could not itself commit an unlawful act because the sovereign's act within its own boundaries was the law there.7 42 The Supreme Court further developed the doctrine in two decisions rendered in 1918. In Oetjen v. Central Leather Co., 246 U.S. 297, 38 S.Ct. 309, 62 L.Ed. 726 (1918) the plaintiff, a citizen of Mexico, sought to replevy certain hides which Pancho Villa as General Carranza's 'Commander of the North' had seized from the plaintiff during the Mexican Civil War of 1913 and later had sold to the defendant. The Court refused to grant relief to the plaintiff for several reasons: the foreign relations of the United States were committed to the legislative and executive branches of the Government, recognition of Carranza's government de jure validated all its acts from the beginning of its existence, the sovereignty of a foreign government must be respected within its jurisdiction, and reexamination of the acts of one nation's government within its own territorial limits by the courts of another nation would interfere with friendly relations between governments. The Court relegated the plaintiff to whatever remedies he might have in the courts of Mexico or to whatever results he might obtain by diplomatic negotiation. Toward the end of its opinion the Court stated: 43 'It is not necessary to consider, as the New Jersey court did, the validity of the levy of the contribution made by the Mexican commanding general, under rules of international law applicable to the situation, since the subject is not open to reexamination by this or any other American court' (246 U.S. at 304, 38 S.Ct. 309, 311). 44 The other case of that year was Ricaud v. American Metal Co., 246 U.S. 304, 38 S.Ct. 312, 62 L.Ed. 733 (1918). Another one of Carranza's generals had seized a large consignment of lead bullion from a Mexican mining company and had sold it to the defendants. Claiming that he had purchased the bullion from the mining company prior to the seizuer, the plaintiff, an American citizen, sought to recover it from the defendant. me, 163 F.2d 246 (2 Cir.), cert. denied, as it had stated in Oetjen v. Central Leather Co., supra, the Supreme Court denied the relief which the plaintiff sought.8 45 The act of state doctrine has been recognized and applied by this and other courts. See e.g., Republic of Cuba v. Pons, 294 F.2d 925 (D.C.Cir.1961), cert. denied, 368 U.S. 960 (1962); Bernstein v. Van Heyghen Freres Societe Anonyme, 163 F.2d 246 (2 Cir.), Bernstein 332 U.S. 772, 68 S.Ct. 88, 92 LEd. 357 (1947); United States ex rel. Von Heyman v. Watkins, 159 F.id 650 (2 Cir. 1947); Banco de Espana v. Federal Reserve Bank, 114 F.2d 438 (2 Cir.1940); The Claveresk, 246 F. 276 (2 Cir.1920); Hewitt v. Speyer, 250 F. 367 (2 Cir. 1919); Eastern States Petroleum Co. v. Asiatic Petroleum Corporation, 28 F.Supp. 279 (S.D.N.Y.1939); M. Salimoff & Co. v. Standard Oil Co., 262 N.Y. 220, 186 N.E. 679, 89 A.L.R. 345 (1933); 49 'The Department of State has not, in the Bahia de Nipe case or elsewhere, done anything inconsistent with the position taken on the Cuban nationalization by Secretary Herter. Whether or not these nationalizations will in the future be given effect in the United States is, of course, for the courts to determine. Since the Sabbatino case and other similar cases are at present before the courts, any comments on this question 48 This exception is applicable to the case before us. While the case has been pending we have been enlightened, as the court was in the Bernstein case, supra, as to the attitude of the Department of State. In a letter, dated October 18, 1961, addressed to counsel for the amici in this case, the Legal Adviser to the State Department asserted: 47 However, when the executive branch of our Government announces that it does not oppose inquiry by American courts into the ligality of foreign acts, an exception to the judicial abnegation required by the act of state doctrine has arisen and has been recognized both in this circuit and elsewhere. In Bernstein v. N.V. Nederlandsche-Amerikaansche Stoomvaart-Maatschappij, 210 F.2d 375 (2 Cir.1954) (per curiam), when we received word from the State Department that it was State Department policy to permit American courts to pass on the validity of acts done by Naxz officials, our court rescinded its earlier mandate by which, based upon the act of state doctrine, we had prevented the district court from questioning the validity of the acts of the German Nazi government. See 173 F.2d 71 (2 Cir. 1949). See also Bernstein v. Van Heyghen Freres, S.A., 163 F.2d 246, 252 (2 Cir.), cert denied, 332 U.S. 772, 68 S.Ct. 88, 92 L.Ed. 357 (1947); Restatement, Foreign Relations Law of the United States 44 (Proposed Official Draft, 1962); Kane v. National Institute of Agrarian Reform, (Fla.Cir.Ct) 18 Fla.Supp. 116; Association of the Bar of the City of New York, Committee on International Law, Report, A Reconsideration of the Act of State Doctrine in United States Courts 13 (May 1959); Zander, The Act of State Doctrine, 53 Am.J.Int'l L. 826 (1959). 46 The policies and theories underlying this doctrine of judicial abnegation seem to be these: The desire by the judiciary to avoid possible conflict with or embarrassment to the executive and legislative branches of our Government in our dealings with foreign nations, see e.g., Wulfsohn v. Russian Socialist Federated Soviet Republic, 234 N.Y. 372, 138 N.E. 24 (1923); a positivistic concept of territorial sovereignty, see e.g., American Banana Co. v. United Fruit Co., supra; and a fear of hampering international trade by rendering titles insecure, see e.g., Banco de Espana v. Federal Resserve Bank,supra. It has also been suggested that the remoteness of American courts from the circumstances surrounding the making of the foreign decree and the provincial attitude taken by most municipal courts make American courts unsuitable tribunals for judging the validity of acts committed by foreign sovereigns within their territorial limits. See Reeves, Act of State Doctrine and the Rule of Law-- A Reply, 54 Am.J.Int'l L. 141, 144-48 (1960); Falk,supra at 10. See, generally, Zander, The Act of State Doctrine, 53 Am.J.Int'l L. 826, 834 (1939); Falk, supra at 31-32. Holzer v. Deutsche Reichbahn-Gesell-schaft, 277 N.Y. 474, 14 N.E.2d 798 (1938); Dougherty v. Equitable Life Assur. Co., 266 N.Y. 71, 193 N.E. 897 (1934).
179
by the Department of State would be out of place at this time. As you yourself point out, statememts by the executive branch are highly susceptible of misconstruction.' 50 In a subsequent letter, dated November 14, 1961, the Under secretary of State for Economic Affairs stated: 51 'I have carefully considered your letter and have discussed it with the Legal Adviser. Our conclusion, in which the Secretary concurs, is that the Department should not comment on matters pending before the courts.' 56 52 On April 13, 1961, the State Department told the litigants in Kane v. National Institute of Agrarian Reform, (Fla.Cir.Ct.) (1961) 18 Fla.Supp. 116, a case that involved another confiscation by the Castro Cuban government of Americanowned property in Cuba: 'Efect in U.S. of Decrees, etc. of Castro regime is question for court in which case heard.' These statements are somewhat ambiguous, perhaps intentionally so. But at the least they express a belief on the part of those responsible for the conduct of our foreign affairs that the courts here should decide the status here of Cuban decrees. Of course, if there is no good reason for abstention, a cort should recognize and accept its fundamental responsibility to decide a case before it in accordance with whatever substantive norms may be relevant; and when, as here, the State Department is willing for the court to adjudicate the rights of the parties, one of the basic reasons for the act of state doctrine-- the danger that independent judicial decisions might interfere with this country's foreign relations-- is inapplicable to support abstention. The broad statements in cases such as Oetjen v. Central Leather Co.,246 U.S. 297, 38 S.Ct 309, 62 L.Ed. 726 (1918) and Shapleigh v. Mier, 299 U.S. 468, 57 S.Ct. 261, (1937) could not have been intended by the Supreme Court to require a judicial avoidance of judicial responsibility in a case where the State Department has expressed a lack of concern as to the outcome of the litigation. 53 But even though we perceive no danger to American foreign policy from a determination by an american court of the merits of this litigation presently before us, perhaps there is some other ground that compels us to accept without question the validity of the Cuban decree here involved. With this in mind we turn to a consideration of the appellees' three-pronged attack upon the validity of that decree of expropriation. The appellees first claim that the decree is invalid under the law of Cuba because the Cuban government falled to comply with the formal requisite of its publication in the Official Gazette of Cuba. But in American Banana Co. v. United Fruit Co., supra, and other similar cases, was apparently held held the acts of a foreign soverage could not be invalid under its own law. Therefore, we will reject the appellees' contention, based upon Cuban law, that we should hold the decree ineffective because of a claimed invalidity under that law. 54 57 Thus we turn to a consideration of the appellees' third contention, that the appellant's title is invalid under international law. Although the law of nations is a hazy concept, its rules are more limited in scope than are the public policy concepts of a particular nation within the family of nations. Moreover, if we apply international law to the present case, we find that the reasons put forward in support of the act of state doctrine are either inapplicable or insufficient to preclude us from inquiring into the validity of the Cuban decree on the limited basis of an inquiry as to the decree's consistency with international rules of law. First, as pointed out earlier in the opinion, the State Department has no desire to interfere here with independent decision by the judiciary. Second, the very propositio that something known as international law exists carries with it the implication that national sovereignty is not absolute but is limited, where the international law impinges, by the dictates of this international law. Eagleton, Responsibility of States in International Law 65 (1928). See Sohn & Baxter, Convention on State Responsibility art. 2 (Draft No. 12, 1961). Third, when an agency of the expropriating country instead of some third party is the litigant relying upon the The right to just compensation in return for property taken by the government is certainly well established in American jurisprudence. It is even protected by the Constitution, Amend. V. Therefore, it is likely that any taking of one's property without provision for adequate compensation is contrary to the public policy of this forum, as Cardozo, J. defined that concept. See Vladikavkazsky Ry. v. New York Trust Co., 263 N.Y. 369, 189 N.E. 456, 91 A.L.R. 1426 (1934). But we are aware of the admonition that public policy is an 'unruly horse.' The concept has proved to be a very difficult one to confine when one seeks to apply it. We are not entirely certain what the American public would consider to be the proper policy of the United States with respect to expropriation of the property of aliens by foreign sovereigns when the property has its situs within th foreign countries. Also, decision of this case based upon the public policy of this forum is undesirable because reliance upon such a basis for decision results in a nationalistic, or municipal, solution of a problem that is clearly international. See Zander, supra at 848. Finally, inasmuch as the decision in the present case is reachable by taking advantage of an exception to the long-established act of state doctrine, we find it wiser, when given the opportunity of relying upon alternative grounds for decision, to base our result on the ground which appears to us to be the narrower exception to that doctrine. 55 'The courts are not free to refuse to enforce a foreign right at the pleasure of the judges, to suit the individual notion of expediency or fairness. They do not close their doors, unless help would violate some fundamental principle of justice, some prevalent conception of good morals, some deep-rooted tradition of the common weal.' (224 N.Y. at 111, 120 N.E. at 202). Also, we decline to adopt appellees' second contention, that this court should not enforce the Cuban decree because it is contrary to American public policy. Judge (later Justice) Cardozo in his famous opinion in Loucks v. Standard Oil co., 224 N.Y. 99, 120 N.E. 198 (1918), defined the type of local public policy which requires that the forum not enforce a foreign created right. He said:
180
expropriation for its title, the problem of preserving the security of the titles to property that is the subject of international trade is not presented. See Falk, supra at 15. Fourth, this court is not so unfamiliar with the legal, political, and social circumstances surrounding the Castro government's seizure of C.A.V. as to be incompetent to pass on its validity under international law. Finally, although it can be argued that nationalistic prejudice could affect decision in cases of this sort, it is also often claimed that other biases in various obnoxious forms are present in the minds of judges in other types of cases. judges are properly admonished when reminded that judicial duty requires that controversies be decided fairly and without passion, but we also have a duty not to excuse ourselves from exercising the duty of decision when parties and subject matter are properly before us. Thus neither reason nor precedent precludes this court from considering the appellees' contentions, based upon international law concpts, that the court below should be affirmed. 58 Farr, whitlock contends that the decree of August 6, 1960, nationalizing the Cuban property owned by American corporations was a violation of international law on three gounds: Adequate compensation was not provided; the purpose of the seizure was retaliation against the United States; and the expropriation was discriminatory in operation. The Supreme Court has said: 62 59 'International law is part of our law, and must be ascertained and administered by the Courts of justice of appropriate jurisdiction, as often as questions of right depending upon it are duly presented for their determination.' (The Paquete Habana, 175 U.S. 677, 700, 20 S.Ct. 290, 299, 44 L.Ed. 320 (1900).) 60 See The Nereide, 9 Cranch 388, 13 U.S. 388, 3 L.Ed. 769 (1915); United States v. Smith, 5 Wheat 153, 18 U.S. 153, 5 L.Ed. 57 (1820); The Scotia, 14 Wall., 170, 20 L.Ed. 822, 81 U.S. 170 (1871); 1 Oppenheim, International Law 41-42 (8th ed. 1955). In the absence of any relevant treaty, enactment of the legislature, act of the executive, or controlling judicial decision, we have been told to draw the guiding concepts of international law from the customs and usages of civilized nations. The Paquete Habana, supra. It would seem that this statement requires at least one qualification. International law is derived indeed from the customs and usages of civilized nations, but its concepts are subject to generally accepted principles of morality whether most men live by these principles or not. See Statute of the International Court of Justice art. 38, 1946-47 U.N. Yearbook 843. But see The Antelope, 10 Wheat 66, 23 U.S. 66, 6 L.Ed. 268 (1825). Judges of municipal courts, the bulk of whose decisions involve questions under a domestic law derived from a long-established and increasingly elaborate national legal system, will often find themselves unfamiliar with the ratiocination necessary for decision in this area, where recognized precedent and accepted authority are acant. Anyone who undertakes a search for the principles of international law cannot help but be aware of the nebulous nature of the substance we call international law. See Rado, Czechoslovak Nationalization Decrees: Some International Aspects, 41 Am.J.Int'l L. 795, 797 (1947). The lack of effective international remedies doubtless contributes to this state of affairs. See Falk, Toward a The appellant argues that the Cuban decree against C. A. V. did not violate international law because C. A. V. was organized under the laws of Cuba. It is generally accepted, as appellant says, that acts of a state directed against its own nationals do not give rise to questions of international law. Zander, The Act of State Doctrine, 53 Am.J. Int'l Law 826, 836 (1959); 1 Oppenheim, International Law, 268 n. 2 (8th ed. 1955); Friedman, Expropriation in International Law 163 (1953); see M. Salimoff & Co. v. Standard Oil Co., 262 N.Y. 220, 186 N.E. 679 (1933). But over ninety per cent of C. A. V.'s shareholders were United States nationals; and the Cuban decree which expropriated C. A. V.'s property clearly indicated that the property was seized because C. A. V. was owned and controlled by Americans. When a foreign state treats a corporation in a particular way because of the nationality of its shareholders, it would be inconsistent for us in passing on teh validity of that treatment to look only to the 'nationality' of the corporate fiction. The more frequent practice in international litigation and negotiation seems to be that the nationality of the corporation is disregarded when it is different from the nationality of most of the corporation's shareholders. See El Triunfo, 2 Moore, International Law 649-51, (1902) Foreign Rel. U.S. 859-73; Tlahualilo, 5 Hackworth, International Law 842, (1913) Foreign Rel. U.S. 993; Alsop (1910) Foreign Rel. U.S. 138-89, (1911) id. 38; Charbonnage Frederic Henri S. A. v. Germany, (1919-22) Ann.Dig. 227; Baron de Neuflize v. Germany, (1927-28) Ann.Dig. 323-24; Romano-Americana, 5 Hackworth, International Law, 702-05, (1926) 2 Foreign Rel. U.S. 313, (1928) 2 Foreign Rel U.S. 957, (1929) 3 Foreign Rel. U.S. 757; Friedman, op. cit. supra at 171; Delagoa Bay, 2 Moore, International Arbitration 1865, 1874, (1902) Foreign Rel. U.S. 848, 849. Thus we shall place no significance for present purposes on the fact that C. A. V. was chartered in Cuba. 61 One pitfall into which we could stumble would be the identification as a fundamental principle of international law of some principle which in truth is only an aspect of the public policy of our own nation and not a principle so cherished by other civilized peoples. In avoiding such an identification we must take a more cosmopolitan view of things and recognize that the rule of law which we municipally announce must be a rule applicable to sovereignties with social and economic patterns very different from our own. See Sorensen, The International Court of Justice: Its Role in Contemporary International Relations, 14 Int'l Org. 261, 273 (1960). Castaneda, The Underdeveloped Nations and the Development of International Law, 15 Int'l Org. 38-44 (1961); Isaacson, International Law and Public Policy, 1961 (unpublished paper in Yale Law School Library). With these principles in mind, we proceed to a consideration of whether the decree under which the appellant claims it received good title to the sugar was in violation of international law. Theory of the Participation of Domestic Courts in the International Legal Order: a Critique of Banco Nacional de Cuba v. Sabbatino, 16 Rutgers L.Rev. 1, 2 & n. 3(1961). But until the day of capable international adjudication among countries, the municipal courts must be the custodians of the concepts of international law, and they must expound, apply and develop that law whenever they are called upon to do so. See Lauterpacht, Re Helbert Wagg: A. Further Comment, 5 Int'l & Comp.L.Q. 301 (4th Ser.1956); Falk, supra at 2.
181
63 The first aspect of the nationalization of C. A. V.'s property which the appellees ask us to consider is the fact that the decree authorizing the seizure did not provide for the payment of adequate compensation.9 The patent inadequacy of the remuneration for the property seized is set forth in the provisions of Law 851, under which the decree of expropriation was issued. See State Dept. Note No. 397, July 16, 1960 (to Cuban Ministry of Foreign Relations). An illusory compensation took the form of an issue of Cuban Government Bonds having terms of not less than thirty years and bearing interest at less than two per cent per annum. This interest was to be paid exclusively out of a fund to be set up by the appellant bank which fund would consist of twenty-five per cent of the foreign exchange received by Cuba from its annual sales to the United States of Cuban sugar in excess of three million Spanish long tons at a price of not less than 5.75 cents per English pound (f.a.s). The bonds were also to be amortized out of this fund under authority vested in the President of Cuba to decide to what extent the bonds would be amortized over a period of not less than thirty years. The Cuban President and Prime Minister were to select the appraisers who would value the expropriated property for compensation purposes. It is unclear whether the bonds would be paid at maturity if the fund were insufficient to cover payment. The possibility that there would be any fund at all was little more than a travesty. For the ten years immediately preceding the nationalization of C. A. V.'s property the average price this country paid to Cuba for raw sugar never exceeded 5.50 cents per English pound (f.a.s.), see H.R.Rep. 1746, 86th Cong., 2d Sess. 16 (1960); but to finance the fund the Cuban Government demanded 5.75 cents per pound, only one quarter of which would go into the fund. Moreover, in only one of the immediately preceding ten years had Cuba sold this country more than three million Spanish long tons of 2,272 English pounds each and in only three years out of the whole period from 1934 through 1959 had she sold us that much sugar, see H.R.Rep. 1746, supra at 5; but contributions would be made into the fund only out of yearly sales to the United States in excess of three million Spanish tons. In short, there would be no interest and no amortization, full compensation at maturity of the bonds would be highly unlikely, and there would be no market value for the bonds. 64 But is the failure to provide adequate compensation for the compulsory taking of the property of a domestically chartered corporation owned by alien stockholders a violation of international law? The constitutions of most of the states in the Western Hemisphere contain language which appears to uphold the right of the owner to receive just compensation upon a governmental taking of private property. Lord McNair stated as one postulate of international law: 65 'The nationalization must be accompanied either by contemporaneous payment of adequate compensation or effective measures which ensure and make certain its prompt payment.' McNair, The Seizure of Property and Enterprises in Indonesia, 6 Netherlands Int'l L.Rev. 218, 243 (1959). 66 71 Instead, we narrow the question for decision to the following: Is it a violation of international law for a country to fail to pay adequate compensation for the property it seizes from a particular class of aliens, when the purpose for the seizure of the property is to retaliate against the homeland of those aliens and when the result of such seizure is to discriminate against them only. To answer this more limited question we must now consider the retaliatory purpose and the discriminatory operation of the nationalization 70 But some writers have asserted that the payment of adequate compensation is not required by international law. Friedman, Exproriation in International Law 206 (1953); Baade, Indonesian Nationalization Measures before Foreign Courts-- A Reply, 54 Am.J.Int'l L. 801, 803-04 (1960); Williams, International Law and the Property of Aliens, Brit.Yb.Int'l L. 1 (1928); see Brierly, Law of Nations 178 (2d ed. 1936); Isaacson, International Law and Public Policy 1961 (unpublished paper in Yale Law School Library). Cf. Baade, supra at 834. Tremendous social and cultural changes are occurring in many parts of the world today. Many countries have acted upon the principle that, in order to carry out desired economic and social reforms of vast magnitude, they must have the right to seize private property without providing compensation for the taking. They argue that because of the paucity of funds in their governmental coffers it would be impossible to carry out large-scale measures in the name of social welfare if they had to provide immediate, or even delayed, compensation. The Reporter of the Restatement, Foreign Relations Law of the United States frankly admits that some states including ones in Latin America other than Cuba, do not recognize any requirement to pay compensation.13 It is commonplace in many parts of the world for a country not to pay for what it takes. See Falk, supra at 32. Since it is unnecessary for this court in the present case to decide whether a government's failure, in and of itself, to pay adequate compensation for the property it takes is a breach of international responsibility, we decline at this time to attempt a resolution of that difficult question. 69 A number of decisions by international tribunals have upheld the principle that just compensation should be provided.11 And it appears that most of the writers on the subject have asserted that just compensation for governmental taking is a requirement of international law.12 68 '(b) it is not accompanied by payment of just compensation or, under the law and practice of the state in effect at the time of taking, there is not reasonable provision for the determination and payment of just compensation * * *' 67 '190. Thwn Taking is Wrongful Under International Law'The taking by a state of property of an alien is wrongful under international law if * * * The United States Department of State has asserted this proposition to foreign countries on numerous occasions.10 The Restatement, Foreign Relations Law of the United States 190(b) (Proposed Official Draft 1962) is to the same effect:
182
decree are closely related should appear obvious that these two features of the decree are closely related to one another. 72 The history of the relations between the United States and the Castro government in the period immediately preceding the decree of expropriation, as well as the words of the decree itself, demonstrate that one of the fundamental purposes of the confiscation was retaliation against this country. On July 6, 1960, Congress amended the Sugar Act of 1948, 61 Stat. 922 (1947), as amended, 7 U.S.C.A. 1100-61, so as to permit the President to reduce the sugar quota allotted to Cuba for the period extending through March 31, 1961. 74 Stat. 330 (1960); as amended 7 U.S.C.A. 1158. Under the law as it stood before this amendment, Cuba would have had the option to supply sugar to this country in excess of the basic quota allotted to her, since sugar growers in this country were finding it impossible to fill the quota allotted to them. 70 Stat. 219 (1956), 7 U.S.C.A. 1114(a). See 106 Cong. Record 14680 (1960) (remarks of Senator Long). The Secretary of State testified before the House Committee on Agriculture that the purpose of the amendment was to secure an adequate supply of sugar. He said that Cuba, which had in the past provided about one-third of the sugar consumed in the United States, might not remain a reliable source of sugar because of the increasing diversification of her economy, and because of her commitments to supply sugar to certain Communist countries. He added that 'other circumstances' also made it appropriate for Congress to pass the legislation. Hearings Before House Committee on Agriculture on H.R. 12311, H.R. 12534, and H.R. 12624, 86th Cong., 2d Sess. 3-5 (1960). Other legislative history made it abundantly clear that the main purpose of the amendment was to impose a sanction against an unfriendly nation. E.g., 106 Cong.Recrod 15228-48, 15744-29 (1960). On the day following the passage of this legislation, July 7, 1960, the President greatly reduced the sugar quota allotted to Cuba. Proclamation No. 3355, 25 Red.Reg. 6414 (1960), 7 U.S.C.A. 1158 note. 73 In Havana on the same day that the congress of the United States passed the amendment to the Sugar Act of 1948 by which a reduction in Cuba's sugar quota was authorized, the Cuban Council of Ministers promulgated Law No. 851, which gave the President and Prime Minister of Cuba joint authority to expropriate American property in Cuba. That this law was promulgated as an answer to the amendment to the American Sugar Act is clear from its preamble.14 Then, on August 6, 1960, pursuant to Law No. 851, Executive Power Resolution No. 1 was issued, expropriating the Cuban assets of C. A. V., along with the assets of twenty-five other corporations owned by United States nationals. The preamble of the executive resolution included language almost identical with that in Law No. 851. See supra at 849. Thus we have no doubt that one of the basic reasons for the seizure here involved was to retaliate against the reduction by the United States in the sugar quota it had allotted to Cuba. 74 Several authorities have announced that confiscation of the property of the nationals of a particular country without the payment of compensation when done as an act of retaliation is contrary to international law. The American Branch of the International Law Association's Committee on Nationalization of Property has stated: 'Under International law, a State may not take foreign interests as a measure of political reprisal.' 79 The appellant seeks to justify retaliatory confiscation by the Cuban government by asserting that the United States was the first offender against international law by an attempt to coerce Cuba through the reduction of American purchases of Cuban sugar. If the United States had seized Cuban assets in this country without compensating the owners, we might find some merit in this contention, for then Cuba would be treating American nationals exacely as the United States was treating Cuban nationals. Cf. Restatement, Foreign Relations Law of the United States, 205 (Proposed Official Draft, 1962). But, whether she was wise or unwise, fair or unfair, in what she did, the United States did not breach a rule of international law in deciding, for whatever reason she deemed sufficient, the sources from which she 78 See Seidl-Hohenveldern, Title to Confiscated Foreign Property and Public International Law, 56 Am.J.Int'l Law 507, 509-10 (1962); Falk, supra, at 9; see also Netherlands note to Indonesia, December 18, 1959, 54 Am.J.Int'l L. 484, 485-86 (1960); Senembah Maatschappij N.V. v. Republiek Indonesie Bank Indonesia and De Twentsche Bank N.V., Court of Appeals of Amsterdam, (1959) Nederlandse Jurisprudentie 218 (No. 73), aff'd, (1959) Nederlandse Jurisprudentie 855 (No. 350). Unlike the situation presented by a failure to pay adequate compensation for expropriated property when the expropriation is part of a scheme of general social improvement, confiscation without compensation when the expropriation is an act of reprisal does not have significant support among disinterested international law commentators from any country. And despite our best efforts to deal fairly with political and social doctrines vastly different from out own, we also cannot find any reasonable justification for such procedure. Peacetime seizure of the property of nationals of a particular country, as an act of reprisal against that country, appears to this court to be contrary to generally accepted principles of morality throughout the world. 77 'Italian courts must refuse ot apply in Italy any foreign law which decrees an expropoiation, not for reasons of public interest, but for purely political persecutory, discriminatory, racial and confiscatory motives.' 76 And in Anglo-Iranian Oil Co. v. S.U.P.O.R. Co., Italian Civil Court of Rome, 1954, (1955) Int'l L.Rep. 23, 42, the court stated: 75 'In my opinion the absence of a bona fide, social or economic purpose involving the property nationalized is vital and alone suffices to render unlawful the (Indonesian) Nationalization Act of 1958 * * *' McNair, The Seizure of Property and Enterprises in Indonesia, 6 Netherlands Int'l L.Rev. 218, 243 (1959). American Branch of the International Law Association, Proceedings and Committee Reports 68 (1957-58). Restatement, Foreign Relations Law of the United States 205 & Ill. 1 (Proposed Official Draft 1962) supports this proposition. Lord McNair declared in regard to Indonesian seizures of Dutch property during the dispute between the Netherlands and Indonesia over control of Dutch New Guinea:
183
would buy her sugar. We cannot find any established principle of international jurisprudence that requires a nation to continue buying commodities from an unfriendly source. Accordingly it follows that the amendment to the Sugar Act of 1948 did not excuse Cuba's prima facie breach of international law. 80 We come now to the issue of whether this retaliation involved a discrimination against United States nationals of such a nature as to render the expropriation invalid under international law. By referring only to United States nationals, Law No. 851 and the decree of expropriation issued thereunder would appear to be discriminatory, since retaliation against a person's homeland is not a reasonable basis for a distinction in treatment. But the appellant points out that under the Agrarian Reform Law and the Urban Reform Law, the Castro government confiscated the property of persons who were not United States nationals; and that the sugar enterprises owned by Cubans were expropriated on October 13, 1960, under yet another law, Law No. 890. Under the Agrarian Reform Law and the Urban Reform Law all large land holdings and multifamily dwellings were nationalized. These latter two pieces of legislation are of little relevance to the present case because of the substantial differences, in both policy and effect, between the nationalization of real estate as such and the nationalization of the means of production as such. But the seizure of Cuban-owned sugar enterprises on October 13, 1960, does bear directly upon whether the Cuban government discriminated against American-owned corporations, for it is obvious, of course, that the confiscation of Cuban-owned enterprises was not part of an effort by the Cuban government to retaliate against the United States. If the ultimate effect of all the expropriations by the Castro Cuban government was to treat Cuban-owned enterprises and American-owned enterprises exactly alike, it would be difficult for this court to find discrimination against American nationals. And, perhaps, international law is not violated when equal treatment is accorded aliens and natives, regardless of the quality of the treatment or the motives behind that treatment. See Williams, International Law and the Property of Aliens, 9 Brit. Yb. Int'l L. 1, 15 (1928). But see Restatement, Foreign Relations Law of the United States 169 & Comment a (Proposed Official Draft, 1962). Foachiri, Expropriation and International Law, 6 Brit. Yb. Int'l L. 159, 160 (1925); Kaeckenbeeck, The Protection of Vested Rights in International Law, 17 Brit. Yb. Int'l L. 1, 16 (1936); 2 Hyde International Law 876 (1945). 81 But there was a difference between the treatment of American-owned sugar enterprises and Cuban-owned sugar enterprises. American-owned sugar enterprises were expropriated on August 6, 1960; Cubanowned sugar enterprises were not seized until October 13, 1960. A short lapse of time between similar provisions in the same program, standing alone, would not create discrimination. But the difference in time here is quite significant, because the shipment of sugar involved in this case left Cuba and was sold abroad between August 6 and October 13. And this difference of ten weeks' time stems directly from the efforts of the Cuban government to retaliate against the United States and its sugar-buying policy. Since we have held above that seizure of the assets of nationals of an unfriendly sovereign as part of a scheme of reprisal against that country is illegal under international law, it follows that a difference in the treatment accorded those nationals based upon reprisal is discriminatory. Therefore, at least with respect to the shipment of sugar here in question, the Cuban government discriminated against United States nationals. 84 But that is not the end of the matter. We must consider whether the one whose property has been thus expropriated has no recourse except against the expropriator to obtain the just compensation not paid to him, or whether he may attack in the courts of the United States the validity of the expropriator's title. Compare Domke, Foreign Nationalizations, 55 Am.J.Int'l L. 585, 610-15 (1961), and Wortley, Indonesian Nationalization Measures-- an Intervention, id. at 680, with Baade, Indonesian Nationalization Measures Before Foreign Courts-- A Reply, 54 Am.J.Int'l L. 801 (1960). If the appellant's title was not rendered void, Farr, Whitlock was guilty of conversion of the bills of lading and the proceeds of the sale even though C.A.V. has not been compensated for the taking. It has been argued that the wrong under international standards is not in the taking but in the failure to pay compensation for the taking. It has been pointed out, moreover, that international tribunals have never granted restitution of the property taken. Therefore, the argument runs, the expropriator possesses good title to the property seized subject to a duty to pay damages for the injury caused. But international tribunals are not the sole custodians of international law. As we stated earlier in this opinion, municipal courts also play a part in the development of that body of law. See Coerper, The Act of State Doctrine in the Light of the Sabbatino Case, 56 Am.J.Int'l L. 143, 147 (1962); Falk, supra at 2. Furthermore, municipal courts are competent to give a restitutory remedy. In fact, the New York court which holds the proceeds from the sale of sugar involved in the present case is in such a position. We need not at present go into the question whether the granting of this type of remedy is a feature of international law or of domestic law. But we do suggest that the failure of an international 83 Since the Cuban decree of expropriation not only failed to provide adequate compensation but also involved a retaliatory purpose and a discrimination against United States nationals, we hold that the decree was in violation of international law. 82 When a state treats aliens of a particular country discriminatorily to their detriment, that state violates international law. Restatement, Foreign Relations Law of the United States, 170 & Ill. 2 (Proposed Official Draft, 1962); British Claims in the Spanish Zone of Morocco (1925) 2 U.N.Rep.Int'l Arb.Awards 615, 647 (Britain/Spain); Standard Oil Tankers Case, 22 Am.J. Int'l L. 404, 419-20 (1928); United States note to Romania, 19 Dep't State Bull. 408 (1948); Netherlands note to Indonesia, December 18, 1959, 54 Am.J. Int'l L. 484, 485-87 (1960); Rolin, 6 Netherlands Int'l L.Rev. 260, 269 (1959); Foighel, Nationalization: A Study in the Protection of Alien Property in International Law, 47 (1957); Van Hecke, Confiscation, Expropriation and the Conflict of Laws, 4 Int'l L.Q. 345 (1951); Sohn, in Proceedings and Committee Reports of the American Branch of the International Law Association 1959-1960, at 31; Verdross, Die Nationalisierung Nederlandischer Unternechmungen in Indonesien Im Lichte Des Volkerrects, 6 Netherlands Int'l L.Rev. 278 (1959). See also The Oscar Chinn Case, P.C.I.J. ser. A/B No. 63 (1934), 3 Hudson, World Court Reports 416, 438. Certain circumstances may exist which would permit a state to treat all aliens differently from its own citizens, but those circumstances are not present in this case. See Restatement, Foreign Relations Law of the United States 170, comment a (Proposed Official Draft, 1962).
184
tribunal to give a remedy of this tupe results from the inability of that kind of court to enforce its awards and is not a result of the dictates of substantive international law principles.15 85 Refusal by municipal courts of one sovereignty to sanction the action of a foreign state done contrary to the law of nations will often be the only deterrent to such violations. More important, the only relief open to persons injured by a confiscation will often be the invalidation of the confiscating country's title to the confiscated goods by decree of a court of another country. See Note, The Castro Government in American Courts: Sovereign Immunity and the Act of State Doctrine, 75 Harv.L.Rev. 1607, 1617-18 (1962). This is particularly true in the present case because Art. 6 of Law No. 851 explicitly precludes review of the confiscation by the Cuban courts. And no aid appears to be available through diplomatic channels to the injured parties. Therefore, we conclude that, since the Cuban decree violated international law, the appellant's title is invalid and the district court was correct in dismissing the complaint.16 86 Judgment affirmed. Petition for Writ of Mandamus to the United States District Court for the Central District of California. D.C. No. CV-96-06419. Before: HALL, and T.G. NELSON, Circuit Judges, and WINMILL,* District Judge. T.G. NELSON, Circuit Judge: 1 Credit Suisse and Swiss Bank Corporation (the "Banks") petition this court for a writ of mandamus, prohibition or other appropriate extraordinary relief from the district court's denial of the Banks' motion to dismiss the action Rosales et al. v. Credit Suisse and Swiss Bank Corp., No. CV 96-6419 (C.D.Cal.) (Real, J.) ("Rosales action"). We have jurisdiction pursuant to 28 U.S.C. 1651(a). Because the relief sought in the Rosales action would violate the act of state doctrine, we grant the petition. 130 F.3d 1342 97 Cal. Daily Op. Serv. 9042, 97 Daily Journal D.A.R. 14,617 CREDIT SUISSE; Swiss Bank Corporation, Petitioners, v. UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA, Respondent, Loretta Ann Rosales; Hilda Narciso, Real Parties in Interest. No. 97-70193. 3 United States Court of Appeals, Ninth Circuit. 4 B. Post-Judgment Enforcement Proceeding-The Hilao Action 2 In Multi-District Litigation ("MDL") Case No. 840 (D.Hawaii), 9,539 victims of human rights violations won a $1,964,005,859.90 judgment against the Estate of Ferdinand E. Marcos ("Estate" or "Marcos Estate"). The judgment included an injunction restraining the Estate and its agents, representatives and aiders and abettors from transferring or otherwise conveying any funds or assets held on behalf of or for the benefit of the Estate pending satisfaction of the judgment. I. A. The Multi-District Litigation Stephen E. Becker, Shaw, Pitman, Potts & Trowbridge, Washington, DC, for amicus. Robert A. Swift, Kohn, Swift & Graf, Philadelphia, Pennsylvania, and Jon M. Van Dyke, Honolulu Hawaii, for real parties in interest. Michael H. Rauch, Fried, Frank, Harris, Shriver & Jacobson, New York City, for petitioner Credit Suisse; Paul J. Bschorr, Dewey Ballantine, New York City, and Matthew M. Walsh, Dewey Ballantine, Los Angeles, California, for petitioner Swiss Bank. Argued and Submitted Aug. 5, 1997. Decided Dec. 3, 1997.
185
In an attempt to collect on the judgment, the plaintiffs in the MDL case registered their judgment in the Central District of California. See Hilao v. Estate of Marcos, 95 F.3d 848, 850 (9th Cir.1996). Writs of execution and notices of levy were thereafter delivered to the Banks' offices in California.1 The notices of levy purported to levy against deposit accounts in the name of Ferdinand E. Marcos or twenty-six of his alleged aliases or pseudonyms. Id. None of these deposit accounts were maintained at the California offices of either Bank. Id. 5 After the plaintiffs indicated that they were seeking assets and information from the Banks' offices in Switzerland, both Banks filed motions to vacate and quash the notices of levy. Id. The district court denied the Banks' motions and sua sponte entered an order directing the Banks to deposit into the Registry of the United States District Court for the Central District of California "as an interpleader proceeding all assets in the possession of the BANKS that are the subject matter of this proceeding." Id. at 851. The Banks appealed and we reversed. Id. at 856. 6 We first held that, pursuant to Fed.R.Civ.P. 69(a),2 the post-judgment enforcement proceeding had to comply with California law. Id. at 853. California law requires "personal service" of a notice of levy on a deposit account to be made at the branch or office of the financial institution at which the account is actually carried. Id. Because none of the Estate's assets were held in deposit accounts located in California, the service of the notice of levy at the Banks' California offices was ineffective. Id. at 853-54. The district court should have therefore granted the Banks' motions to vacate and quash the levies. Id. at 854. 7 Second, we held that because Rule 69(a) "essentially limits a district court's mechanism for enforcement of a money judgment to a writ of execution, the court had no authority to order the Banks to deposit the contested funds into the court registry." Id. at 856. In coming to this conclusion, we noted that although the Banks had previously been found to be "agents and representatives" of the Marcos Estate, the significance of this finding was "outweighed by the fact that the Banks were not parties before the court in the case in which the finding was made." Id. at 855. C. The Rosales Action 14 8 Following our decision in Hilao, counsel for the plaintiffs3 filed the Rosales action directly against the Banks, seeking the following relief: (1) an injunction restraining the Banks from transferring or otherwise conveying any funds or assets held by the Banks on behalf of the Marcos Estate, except as ordered by the district court; and (2) a declaration that the Chinn assignment4 is valid and binding on the Banks. 9 The Banks filed a motion to dismiss the Rosales action pursuant to Fed.R.Civ.P. 12(b) on the ground that, among other things, the injunctive and declaratory relief sought in the action would violate the act of state doctrine. The district court denied the Banks' motion to dismiss, and the Banks' subsequent motion for 16 The district court's denial of the Banks' motion to dismiss is not a "final decision" within the meaning of 28 U.S.C. 1291,6 and it is therefore not immediately reviewable. See Catlin v. United States, 324 U.S. 229, 15 A. No Other Adequate Means to Obtain Desired Relief The Banks argue applicability of only the first three Bauman guidelines. We will limit our review to those three guidelines, since the remaining guidelines do not affect our analysis. 13 Bauman, 557 F.2d at 654-55 (citations omitted). None of these guidelines is determinative and all five guidelines need not be satisfied at once for a writ to issue. Valenzuela-Gonzalez, 915 F.2d at 1279. In fact, rarely will a case arise where all these guidelines point in the same direction or where each guideline is even relevant or applicable. Bauman, 557 F.2d at 655. 12 (1) The party seeking the writ has no other adequate means, such as a direct appeal, to attain the relief he or she desires. (2) The petitioner will be damaged or prejudiced in a way not correctable on appeal. (This guideline is closely related to the first.) (3) The district court's order is clearly erroneous as a matter of law. (4) The district court's order is an oft-repeated error, or manifests a persistent disregard of the federal rules. (5) The district court's order raises new and important problems, or issues of law of first impression. 11 In determining whether a writ should issue, this court looks to five specific guidelines, known as the "Bauman guidelines": 10 A writ of mandamus "has traditionally been used in the federal courts only to confine an inferior court to a lawful exercise of its prescribed jurisdiction or to compel it to exercise its authority when it is its duty to do so." Bauman v. United States Dist. Court, 557 F.2d 650, 654 (9th Cir.1977) (quotations omitted). "[O]nly exceptional circumstances amounting to a judicial usurpation of power will justify the invocation of this extraordinary remedy." Id. (quotations omitted). Before a writ will issue, this court must be "firmly convinced that the district court has erred and that the petitioner's right to the writ is clear and indisputable." Valenzuela-Gonzalez v. United States Dist. Court, 915 F.2d 1276, 1279 (9th Cir.1990) (citation and quotations omitted). II. certification for interlocutory appeal.5 The Banks then filed the present petition, requesting this court to issue a writ of mandamus compelling the district court to vacate its denial of the motion to dismiss, and directing the district court to dismiss the action.
186
236, 65 S.Ct. 631, 635, 89 L.Ed. 911 (1945). Furthermore, because the district court denied the Banks' motion for certification for interlocutory appeal under 28 U.S.C. 1292(b), permissive interlocutory appeal is not available. The Banks thus have no other means of obtaining immediate review of the denial of their motion to dismiss. See Valenzuela-Gonzalez, 915 F.2d at 1279 (holding that there was no other adequate means to obtain review following district court's denial of 1292(b) motion); Christensen v. United States Dist. Court, 844 F.2d 694, 696 (9th Cir.1988) (granting mandamus relief where district court refused to certify question for immediate appeal). 17 B. Damage or Prejudice to Petitioner Not Correctable on Appeal 18 The district court issued an order, stayed by this court, compelling the Banks to respond to the plaintiffs' discovery requests. These discovery requests include interrogatories seeking detailed information about accounts purportedly located in Switzerland and requests to produce a wide variety of documents maintained at the Banks' Switzerland offices. It is undisputed that provision of the requested information, and production of the requested documents, would violate Swiss banking secrecy and other laws which carry criminal penalties. The district court's order compelling the Banks to respond to the discovery requests therefore places the Banks in the position of having to choose between being in contempt of court for failing to comply with the district court's order, or violating Swiss banking secrecy and penal laws by complying with the order. Requiring the Banks to choose between being in contempt of court and violating Swiss law clearly constitutes severe prejudice that could not be remedied on direct appeal. 19 C. Order Clearly Erroneous as a Matter of Law-Act of State Doctrine 20 The classic statement of the act of state doctrine is found in Underhill v. Hernandez, 168 U.S. 250, 252, 18 S.Ct. 83, 84, 42 L.Ed. 456 (1897), where Justice Fuller stated for the Court: 21 Every sovereign State is bound to respect the independence of every other sovereign State, and the courts of one country will not sit in judgment on the acts of the government of another done within its own territory. Redress of grievances by reason of such acts must be obtained through the means open to be availed of by sovereign powers as between themselves. 27 22 Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 416, 84 S.Ct. 923, 934, 11 L.Ed.2d 804 (1964) (quoting Underhill, 168 U.S. at 252, 18 S.Ct. at 84). Although once viewed as an expression of international law, resting on considerations of international comity and expediency, the act of state doctrine is currently viewed as a "consequence of domestic separation of powers, reflecting 'the strong sense of the Judicial Branch that its engagement in the task of passing on the validity of foreign acts of state may hinder' the conduct of foreign affairs." W.S. Kirkpatrick & Co., Inc. v. Environmental Tectonics Corp., 28 Switzerland's act of issuing first the Executive Order and then the cantonal freeze orders pursuant to IMAC was "paradigmatically sovereign in nature; it is not [the type of act] that a private person can exercise." Callejo v. Bancomer, S.A., 764 F.2d 1101, 1116 (5th Cir.1985). The Executive and subsequent cantonal orders were, therefore, clearly an "official act of a foreign sovereign performed within its own territory." W.S. Kirkpatrick, 493 U.S. at 405, 110 S.Ct. at 704. 26 After ensuring that the Philippine government's request complied with IMAC, the Swiss Federal Office of Police forwarded the request for assistance to the enforcement authorities of the cantons in which the Marcos bank accounts were maintained-Geneva, Fribourg and Zurich-with instructions to take provisional measures immediately.10 Pursuant to IMAC procedures which require the cantonal authorities to execute the instructions of the Swiss federal government, cantonal orders were immediately issued freezing all assets belonging directly or indirectly to Marcos and/or his family. These cantonal orders, which superseded the previously issued Executive Order, were appealed and affirmed by judgments of the Swiss Federal Supreme Court, the highest court in Switzerland. The cantonal freeze orders remain in effect today. 25 Shortly thereafter, the Philippine government formally requested, pursuant to the Swiss Federal Act on Mutual Assistance in Criminal Matters ("IMAC"),8 that the Government of Switzerland freeze all assets held in Switzerland that belonged to Marcos and his family pending the outcome of a criminal investigation and prosecution in the Philippines.9 The Philippine government also requested assistance in obtaining evidence about the amount and nature of the Marcos assets held in Switzerland and the circumstances under which such assets were deposited. 1. Official Act of a Foreign Sovereign 24 In 1986, when Ferdinand E. Marcos left power, the Swiss Federal Council,7 the highest governing body in the Swiss Executive Branch, issued an Executive Order freezing all assets of the Marcos family that were held in Switzerland. The Federal Council, expecting the Philippine government to seek recovery of funds deposited by Marcos and his family in Switzerland, issued the freeze order to ensure that the funds did not disappear before the Philippine government had an opportunity to act. 23 Under this current view, an action will be barred only if: (1) there is an "official act of a foreign sovereign performed within its own territory"; and (2) "the relief sought or the defense interposed [in the action would require] a court in the United States to declare invalid the [foreign sovereign's] official act." Id. at 405, 110 S.Ct. at 704. Int'l, 493 U.S. 400, 404, 110 S.Ct. 701, 704, 107 L.Ed.2d 816 (1990) (quoting Banco Nacional, 376 U.S. at 423, 84 S.Ct. at 937).
187
2. Relief Sought Would Require a United States Court to Declare "Invalid" a Foreign Sovereign's Official Act 29 In the Rosales action, the MDL plaintiffs seek relief including: (1) an injunction restraining the Banks from transferring or otherwise conveying any funds or assets held by the Banks on behalf of the Marcos Estate except as ordered by the district court; and (2) a declaration that the Chinn assignment is valid and binding on the Banks. Both of these forms of relief would not only require a United States court to question the validity of the freeze orders, but would also "render nugatory" Switzerland's attempts to render legal assistance to The Republic of the Philippines by protecting the Estate assets. See Callejo, 764 F.2d at 1116. The relief sought therefore violates the act of state doctrine, and the district court's refusal to dismiss the action was clearly erroneous as a matter of law. 35 30 The injunction sought by the plaintiffs would compel the Banks to hold any assets of the Marcos Estate subject to the district court's further orders. It is clear that the district court plans on taking control of any Estate assets held by the Banks, even though those assets are currently frozen pursuant to official orders of Swiss authorities. Any order from the district court compelling the Banks to transfer or otherwise convey Estate assets would be in direct contravention of the Swiss freeze orders. Subjecting Estate assets held by the Banks to the district court's further orders would thus allow a United States court to question and, in fact, "declare invalid the official act of a foreign sovereign." W.S. Kirkpatrick, 493 U.S. at 405, 110 S.Ct. at 704. Issuance of the injunctive relief sought would therefore violate the act of state doctrine. 31 A declaration by a United States court that the Chinn assignment is valid and binding on the Banks would also violate the act of state doctrine. The assignment purports to assign to Robert Swift, counsel for the MDL plaintiffs, all of the Estate's "right, title and interest in and to bank accounts maintained in Switzerland." The assignment directs entities having authority over such bank accounts "to perform all necessary acts to effect the transfer of the above bank accounts forthwith." 32 A declaration that this assignment is valid and binding on the Banks would be a declaration that the Banks must transfer all Estate assets held by the Banks to Swift "forthwith." Such a declaration would not only contradict, and therefore declare invalid, the Swiss freeze orders, but would also require the Banks to disregard the Swiss orders. 33 United States courts are "bound to respect the independence of every other sovereign State," including Switzerland. See Underhill, 168 U.S. at 252, 18 S.Ct. at 84. If the MDL plaintiffs want to contest the legality of the Swiss freeze orders, seek a declaration of the validity of the Chinn assignment as against the Syllabus THE THIRD CIRCUIT Pennhurst State School and Hospital v. Halderman No. 81-2101 Argued February 22, 1983 Reargued October 3, 1983 Decided January 23, 1984 465 U.S. 89 CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR U.S. Supreme Court Pennhurst State Sch. v. Halderman, 465 U.S. 89 (1984) * 36 The Petition for Writ of Mandamus is GRANTED. This court retains jurisdiction over this case. Any motions for vacation or modification of this order shall be filed with the clerk of this court. 34 The clerk of this court is directed to issue a writ of mandamus directing the district court to vacate its denial of the Banks' motion to dismiss, and to dismiss the action Rosales et al. v. Credit Suisse and Swiss Bank Corp., No. CV 96-6419 (C.D.Cal.) (Real, J.); and further directing the district court to refrain from taking any further action in the Rosales action or any other case involving any or all of the Real Parties in Interest and any assets of the Estate of Ferdinand E. Marcos held or claimed to be held by the Banks. III. Banks, or seek an injunction compelling the Banks to turn over the assets, they should do so via the Swiss judicial system. See Miller v. United States, 955 F.Supp. 795, 798 (N.D.Ohio 1996).
188
Respondent Halderman, a resident of petitioner Pennhurst State School and Hospital, a Pennsylvania institution for the care of the mentally retarded, brought a class action in Federal District Court against Pennhurst, certain of its officials, the Pennsylvania Department of Public Welfare, and various state and county officials (also petitioners). It was alleged that conditions at Pennhurst violated various federal constitutional and statutory rights of the class members as well as their rights under the Pennsylvania Mental Health and Mental Retardation Act of 1966 (MH/MR Act). Ultimately, the District Court awarded injunctive relief based in part on the MH/MR Act, which was held to provide a right to adequate habilitation. The Court of Appeals affirmed, holding that the MH/MR Act required the State to adopt the "least restrictive environment" approach for the care of the mentally retarded, and rejecting petitioners' argument that the Eleventh Amendment barred a federal court from considering this pendent state law claim. The court reasoned that, since that Amendment did not bar a federal court from granting prospective injunctive relief against state officials on the basis of federal claims, citing Ex parte Young,209 U. S. 123, the same result obtained with respect to a pendent state law claim. Held: The Eleventh Amendment prohibited the District Court from ordering state officials to conform their conduct to state law. Pp. 465 U. S. 97-124. (a) The principle of sovereign immunity is a constitutional limitation on the federal judicial power established in Art. III of the Constitution. The Eleventh Amendment bars a suit against state officials when the State is the real, substantial party in interest, regardless of whether the suit seeks damages or injunctive relief. The Court in Ex parte Young, supra, recognized an important exception to this general rule: a suit challenging the federal constitutionality of a state official's action is not one against the State. Pp. 465 U. S. 97-103. (b) In Edelman v. Jordan, 415 U. S. 651, this Court recognized that the need to promote the supremacy of federal law that is the basis ofYoung must be accommodated to the constitutional immunity of the States. Thus, the Court declined to extend the Young doctrine to chanroblesvirtualawlibrary Page 465 U. S. 90 encompass retroactive relief, for to do so would effectively eliminate the States' constitutional immunity. Edelman's distinction between prospective and retroactive relief fulfilled Young's underlying purpose of vindicating the supreme authority of federal law while at the same time preserving to an important degree the States' constitutional immunity. But this need to reconcile competing interests is wholly absent when a plaintiff alleges that a state official has violated state law. In such a case, the entire basis for the doctrine of Young andEdelman disappears. A federal court's grant of relief against state officials on the basis of state law, whether prospective or retroactive, does not vindicate the supreme authority of federal law. When a federal court instructs state officials on how to conform their conduct to state law, this conflicts directly with the principles of federalism that underlie the Eleventh Amendment. Pp. 465 U. S. 103-106. (c) The dissenters' view is that an allegation that official conduct is contrary to a state statute would suffice to override the State's protection from injunctive relief under the Eleventh Amendment because such conduct is ultra vires the official's authority. This view rests on fiction, is wrong on the law, and would emasculate the Eleventh Amendment. At least insofar as injunctive relief is sought, an error of law by state officers acting in their official capacity will not suffice to override the sovereign immunity of the State where the relief effectively is against it. Larson v. Domestic & Foreign Commerce Corp., 337 U. S. 682. Under the dissenters' view, the ultra vires doctrine, a narrow and questionable exception, would swallow the general rule that a suit is against the State if the relief will run against it. Pp. 465 U. S. 106-117. (d) The principle that a claim that state officials violated state law in carrying out their official responsibilities is a claim against the State that is protected by the Eleventh Amendment applies as well to state law claims brought into federal court under pendent jurisdiction. Pp.465 U. S. 117-121. (e) While it may be that applying the Eleventh Amendment to pendent state law claims results in federal claims' being brought in state court or in bifurcation of claims, such considerations of policy cannot override the constitutional limitation on the authority of the federal judiciary to adjudicate suits against a State. Pp. 465 U. S. 121-123. (f) The judgment below cannot be sustained on the basis of the state law obligation of petitioner county officials, since any relief granted against these officials on the basis of the MH/MR Act would be partial and incomplete, at best. Such an ineffective enforcement of state law would not appear to serve the purposes of efficiency, convenience, and fairness that must inform the exercise of pendent jurisdiction. Pp. 465 U. S. 123124. 673 F.2d 647, reversed and remanded. chanroblesvirtualawlibrary Page 465 U. S. 91 POWELL, J., delivered the opinion of the Court, in which BURGER, C.J.,and WHITE, REHNQUIST, and O'CONNOR, JJ., joined. BRENNAN, J., filed a dissenting opinion, post, p. 465 U. S. 125. STEVENS, J., filed a dissenting opinion, in which BRENNAN, MARSHALL, and BLACKMUN,JJ., joined, post, p. 465 U. S. 126. JUSTICE POWELL delivered the opinion of the Court. This case presents the question whether a federal court may award injunctive relief against state officials on the basis of state law. chanroblesvirtualawlibrary Page 465 U. S. 92 I This litigation, here for the second time, concerns the conditions of care at petitioner Pennhurst State School and Hospital, a Pennsylvania institution for the care of the mentally retarded. See Pennhurst State School and Hospital v. Halderman, 451 U. S. 1 (1981). Although the litigation's history is set forth in detail in our prior opinion, see id. at 451 U. S. 5-10, it is necessary for purposes of this decision to review that history. This suit originally was brought in 1974 by respondent Terri Lee Halderman, a resident of Pennhurst, in the District Court for the Eastern District of Pennsylvania. Ultimately, plaintiffs included a class consisting of all persons who were or might become residents of Pennhurst; the Pennsylvania Association for Retarded Citizens (PARC); and the United States. Defendants were Pennhurst and various Pennhurst officials; the Pennsylvania Department of Public Welfare and several of its officials; and various county commissioners, county mental retardation administrators, and other officials of five Pennsylvania counties surrounding Pennhurst. Respondents' amended complaint charged that conditions at Pennhurst violated the class members' rights under the Eighth and Fourteenth Amendments; 504 of the Rehabilitation Act of 1973, 87 Stat. 394, 29 U.S.C. 794; the Developmentally Disabled Assistance and Bill of Rights Act, 89 Stat. 496, 42 U.S.C. 6001 et seq.; and the Pennsylvania Mental Health and Mental Retardation Act of 1966 (MH/MR Act), Pa.Stat.Ann., Tit. 50, 4101-4704 (Purdon 1969 and Supp.1983-1984). Both damages and injunctive relief were sought. In 1977, following a lengthy trial, the District Court rendered its decision. Halderman v. Pennhurst State School and Hospital, 446 F.Supp. 1295. As noted in our prior opinion, the court's findings were undisputed:
189
"Conditions at Pennhurst are not only dangerous, with the residents often physically abused or drugged by staff members, but also inadequate Page 465 U. S. 93 for the 'habilitation' of the retarded. Indeed, the court found that the physical, intellectual, and emotional skills of some residents have deteriorated at Pennhurst." 451 U.S. at 451 U. S. 7 (footnote omitted). The District Court held that these conditions violated each resident's right to "minimally adequate habilitation" under the Due Process Clause and the MH/MR Act, see 446 F.Supp. at 1314-1318, 1322-1323; "freedom from harm" under the Eighth and Fourteenth Amendments, see id. at 1320-1321; and "nondiscriminatory habilitation" under the Equal Protection Clause and 504 of the Rehabilitation Act, see id. at 1321-1324. Furthermore, the court found that "due process demands that, if a state undertakes the habilitation of a retarded person, it must do so in the least restrictive settingconsistent with that individual's habilitative needs." Id. at 1319 (emphasis added). After concluding that the large size of Pennhurst prevented it from providing the necessary habilitation in the least restrictive environment, the court ordered that "immediate steps be taken to remove the retarded residents from Pennhurst."Id. at 1325. Petitioners were ordered "to provide suitable community living arrangements" for the class members, id. at 1326, and the court appointed a Special Master "with the power and duty to plan, organize, direct, supervise and monitor the implementation of this and any further Orders of the Court." Ibid. [Footnote 1] The Court of Appeals for the Third Circuit affirmed most of the District Court's judgment. Halderman v. Pennhurst State School and Hospital,612 F.2d 84 (1979) (en banc). It agreed that respondents had a right to habilitation in the least restrictive environment, but it grounded this right solely on the "bill of rights" provision in the Developmentally Disabled Assistance and Bill of Rights Act, 42 U.S.C. 6010. See612 F.2d 95-100, 104107. The court did chanroblesvirtualawlibrary Page 465 U. S. 94 not consider the constitutional issues or 504 of the Rehabilitation Act, and while it affirmed the District Court's holding that the MH/MR Act provides a right to adequate habilitation, see id. at 100-103, the court did not decide whether that state right encompassed a right to treatment in the least restrictive setting. On the question of remedy, the Court of Appeals affirmed except as to the District Court's order that Pennhurst be closed. The court observed that some patients would be unable to adjust to life outside an institution, and it determined that none of the legal provisions relied on by respondents precluded institutionalization. Id. at 114115. It therefore remanded for "individual determinations by the [District Court], or by the Special Master, as to the appropriateness of an improved Pennhurst for each such patient," guided by "a presumption in favor of placing individuals in [community living arrangements]." Ibid. [Footnote 2] On remand, the District Court established detailed procedures for determining the proper residential placement for each patient. A team consisting of the patient, his parents or guardian, and his case manager must establish an individual habilitation plan providing for habilitation of the patient in a designated community living arrangement. The plan is subject to review by the Special Master. A second master, called the Hearing Master, is available to conduct hearings, upon request by the resident, his parents, or his advocate, on the question whether the services of Pennhurst would be more beneficial to the resident than the community living arrangement provided in the resident's plan. The Hearing Master then determines where the patient should reside, chanroblesvirtualawlibrary This Court reversed the judgment of the Court of Appeals, finding that 42 U.S.C. 6010 did not create any substantive rights. Pennhurst State School and Hospital v. Halderman, 451 U. S. 1 (1981). We remanded the case to the Court of Appeals to determine if the remedial order could be supported on the basis of state law, the Constitution, or 504 of the Rehabilitation Act. See id. at 451 U. S. 31. [Footnote 4] We also remanded for consideration of whether any relief was available under other provisions of the Developmentally Disabled Assistance and Bill of Rights Act. See id. at 451 U. S. 27-30 (discussing 42 U.S.C. 6011(a), 6063(b)(5) (1976 ed., Supp. V)). On remand, the Court of Appeals affirmed its prior judgment in its entirety. 673 F.2d 647 (1982) (en banc). It determined that, in a recent decision, the Supreme Court of Pennsylvania had "spoken definitively" in holding that the MH/MR Act required the State to adopt the "least restrictive environment" approach for the care of the mentally retarded. Id. at 651 (citing In re Schmidt, 494 Pa. 86, 429 A.2d 631 (1981)). The Court of Appeals concluded that this state statute fully supported its prior judgment, and therefore did not chanroblesvirtualawlibrary Page 465 U. S. 96 reach the remaining issues of federal law. It also rejected petitioners' argument that the Eleventh Amendment barred a federal court from considering this pendent state law claim. The court noted that the Amendment did not bar a federal court from granting prospective injunctive relief against state officials on the basis of federal claims, see 673 F.2d 656 (citing Ex parte Young, 209 U. S. 123 (1908)), and concluded that the same result obtained with respect to a pendent state law claim. It reasoned that, because Siler v. Louisville & Nashville R. Co., 213 U. S. 175 (1909), an important case in the development of the doctrine of pendent jurisdiction, also involved state officials, "there cannot be . . . an Eleventh Amendment exception to that rule." 673 F.2d 658. [Footnote 5] Finally, the court rejected petitioners' argument that it should have abstained from deciding the state law claim under principles of comity, see id. at 659-660, and refused to consider petitioners' objections to the District Court's use of a Special Master, see id. at 651, and n. 10. Three judges dissented in part, arguing that, under principles of federalism and comity, the establishment of a Special Master to supervise compliance was an abuse of discretion. See id. at 662 (Seitz, C.J.,joined by Hunter, J., dissenting in part); ibid. (Garth, J., concurring in part and dissenting as to relief).See also id. at 661 (Aldisert, J., concurring) (seriously questioning the propriety of the order appointing the Special chanroblesvirtualawlibrary Page 465 U. S. 97 Master, but concluding that a retroactive reversal of that order would be meaningless). [Footnote 6] We granted certiorari, 457 U.S. 1131 (1982), and now reverse and remand. II Petitioners raise three challenges to the judgment of the Court of Appeals: (i) the Eleventh Amendment prohibited the District Court from ordering state officials to conform their conduct to state law; (ii) the doctrine of comity prohibited the District Court from issuing its injunctive relief; and (iii) the District Court abused its discretion in appointing two Masters to supervise the decisions of state officials in implementing state law. We need not reach the latter two issues, for we find the Eleventh Amendment challenge dispositive. A Page 465 U. S. 95 subject to possible review by the District Court. See App. 123a-134a (Order of Apr. 24, 1980). [Footnote 3]
190
Article III, 2, of the Constitution provides that the federal judicial power extends, inter alia, to controversies "between a State and Citizens of another State." Relying on this language, this Court in 1793 assumed original jurisdiction over a suit brought by a citizen of South Carolina against the State of Georgia. @ 2 U. S. 325 (1934). The Amendment provides: "The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State. " Page 465 U. S. 98 The Amendment's language overruled the particular result in Chisholm, but this Court has recognized that its greater significance lies in its affirmation that the fundamental principle of sovereign immunity limits the grant of judicial authority in Art. III. Thus, in Hans v. Louisiana, 134 U. S. 1 (1890), the Court held that, despite the limited terms of the Eleventh Amendment, a federal court could not entertain a suit brought by a citizen against his own State. After reviewing the constitutional debates concerning the scope of Art. III, the Court determined that federal jurisdiction over suits against unconsenting States "was not contemplated by the Constitution when establishing the judicial power of the United States." Id. at 134 U. S. 15. See Monaco v. Mississippi, supra, at 292 U. S. 322-323. [Footnote 7] In short, the principle of sovereign immunity is a constitutional limitation on the federal judicial power established in Art. III: "That a State may not be sued without its consent is a fundamental rule of jurisprudence having so important a bearing upon the construction of the Constitution of the United States that it has become established by repeated decisions of this court that the entire judicial power granted by the Constitution does not embrace authority to entertain a suit brought by private parties against a State without consent given: not one brought by citizens of another State, or by citizens or subjects of a foreign State, because of the Eleventh Amendment; and not even one brought by its own citizens, because of the fundamental rule of which the Amendment is but Page 465 U. S. 99 an exemplification." Ex parte State of New York, 256 U. S. 490, 256 U. S. 497 (1921) (emphasis added). [Footnote 8] A sovereign's immunity may be waived, and the Court consistently has held that a State may consent to suit against it in federal court.See, e.g., Clark v. Barnard, 108 U. S. 436, 108 U. S. 447 (1883). We have insisted, however, that the State's consent be unequivocally expressed. See, e.g., Edelman v. Jordan, 415 U. S. 651, 415 U. S. 673 (1974). Similarly, although Congress has power with respect to the rights protected by the Fourteenth Amendment to abrogate the Eleventh Amendment immunity, see Fitzpatrick v. Bitzer, 427 U. S. 445(1976), we have required an unequivocal expression of congressional intent to "overturn the constitutionally guaranteed immunity of the several States." Quern v. Jordan, 440 U. S. 332, 440 U. S. 342 (1979) (holding that 42 U.S.C. 1983 does not override States' Eleventh Amendment immunity). Our reluctance to infer that a State's immunity from suit in the federal courts has been negated stems from recognition of the vital role of the doctrine of sovereign immunity in our federal system. A State's constitutional interest in immunity encompasses not merely whether it may be sued, but where it may be sued. [Footnote 9] As JUSTICE MARSHALL well has noted, "[b]ecause Page 465 U. S. 100 This Court's decisions thus establish that "an unconsenting State is immune from suits brought in federal courts by her own citizens as well as by citizens of another state." Employees, supra, at 411 U. S. 280. There may be a question, however, whether a particular suit in fact is a suit against a State. It is clear, of course, that, in the absence of consent, a suit in which the State or one of its agencies or departments is named as the defendant is proscribed by the Eleventh Amendment. See, e.g., Florida Dept. of Health and Rehabilitative Services v. Florida Nursing Home Assn., 450 U. S. 147 (1981) (per curiam); Alabama v. Pugh, 438 U. S. 781 (1978) (per curiam). This jurisdictional bar applies regardless of the nature of the relief sought. See, e.g., Missouri v. Fiske, 290 U. S. 18, 290 U. S. 27 (1933) ("Expressly applying chanroblesvirtualawlibrary Page 465 U. S. 101 to suits in equity as well as at law, the Amendment necessarily embraces demands for the enforcement of equitable rights and the prosecution of equitable remedies when these are asserted and prosecuted by an individual against a State"). When the suit is brought only against state officials, a question arises as to whether that suit is a suit against the State itself. Although prior decisions of this Court have not been entirely consistent on this issue, certain principles are well established. The Eleventh Amendment bars a suit against state officials when "the state is the real, substantial party in interest." Ford Motor Co. v. Department of Treasury of Indiana, 323 U. S. 459, 323 U. S. 464 (1945). See, e.g., In re Ayers, 123 U. S. 443, 123 U. S. 487-492 (1887); Louisiana v. Jumel,107 U. S. 711, 107 U. S. 720-723, 107 U. S. 727-728 (1883). Thus, "[t]he general rule is that relief sought nominally against an officer is in fact against the sovereign if the decree would operate against the latter." Hawaii v. Gordon, 373 U. S. 57, 373 U. S. 58 (1963) (per curiam). [Footnote 11] And, as when the State itself is named as the chanroblesvirtualawlibrary Page 465 U. S. 102 defendant, a suit against state officials that is in fact a suit against a State is barred regardless of whether it seeks damages or injunctive relief. See Cory v. White, 457 U. S. 85, 457 U. S. 91 (1982). The Court has recognized an important exception to this general rule: a suit challenging the constitutionality of a state official's action is not one against the State. This was the holding in Ex parte Young, 209 U. S. 123 (1908), in which a federal court enjoined the Attorney General of the State of Minnesota from bringing suit to enforce a state statute that allegedly violated the Fourteenth Amendment. This Court held that the Eleventh Amendment did not prohibit issuance of this injunction. The theory of the case was that an unconstitutional enactment is "void," and therefore does not "impart to [the officer] any immunity from responsibility to the supreme authority of the United States." Id. at 209 U. S. 160. Since the State could not authorize the action, of the problems of federalism inherent in making one sovereign appear against its will in the courts of the other, a restriction upon the exercise of the federal judicial power has long been considered to be appropriate in a case such as this." Employees v. Missouri Dept. of Public Health and Welfare, 411 U. S. 279, 411 U. S. 294 (1973) (concurring in result). [Footnote 10] Accordingly, in deciding this case we must be guided by "[t]he principles of federalism that inform Eleventh Amendment doctrine." Hutto v. Finney, 437 U. S. 678, 437 U. S. 691 (1978). B
191
the officer was "stripped of his official or representative character and [was] subjected in his person to the consequences of his individual conduct." Ibid. . While the rule permitting suits alleging conduct contrary to "the supreme authority of the United States" has survived, the theory ofYoung has not been provided an expansive interpretation. Thus, in Edelman v. Jordan, 415 U. S. 61 (1974), the Court emphasized that the Eleventh Amendment bars some forms of injunctive relief against state officials for violation of federal law. Id. at 415 U. S. 666-667. In particular, Edelman held that, when a plaintiff sues a state official alleging a violation of federal law, the federal court chanroblesvirtualawlibrary Page 465 U. S. 103 may award an injunction that governs the official's future conduct, but not one that awards retroactive monetary relief. Under the theory of Young, such a suit would not be one against the State, since the federal law allegation would strip the state officer of his official authority. Nevertheless, retroactive relief was barred by the Eleventh Amendment. III With these principles in mind, we now turn to the question whether the claim that petitioners violated state law in carrying out their official duties at Pennhurst is one against the State, and therefore barred by the Eleventh Amendment. Respondents advance two principal arguments in support of the judgment below. [Footnote 12] First, they contend that, under the doctrine of Edelman v. Jordan, supra, the suit is not against chanroblesvirtualawlibrary Page 465 U. S. 104 the State because the courts below ordered only prospective injunctive relief. Second, they assert that the state law claim properly was decided under the doctrine of pendent jurisdiction. Respondents rely on decisions of this Court awarding relief against state officials on the basis of a pendent state law claim. See, e.g., Siler v. Louisville & Nashville R. Co., 213 U.S. at 213 U. S. 193. We first address the contention that respondents' state law claim is not barred by the Eleventh Amendment because it seeks only prospective relief as defined in Edelman v. Jordan, supra. The Court of Appeals held that, if the judgment below rested on federal law, it could be entered against petitioner state officials under the doctrine established in Edelman and Young even though the prospective financial burden was substantial and ongoing. [Footnote 13] See 673 F.2d 656. The court assumed, and respondents assert, that this reasoning applies as well when the official acts in violation of state law. This argument misconstrues the basis of the doctrine established in Young and Edelman. As discussed above, the injunction in Young was justified, notwithstanding the obvious impact on the State itself, on the view that sovereign immunity does not apply because an official who acts unconstitutionally is "stripped of his official or representative character,"Young, 209 U.S. at 209 U. S. 160. This chanroblesvirtualawlibrary Page 465 U. S. 105 rationale, of course, created the "well-recognized irony" that an official's unconstitutional conduct constitutes state action under the Fourteenth Amendment, but not the Eleventh Amendment. Florida Dept. of State v. Treasure Salvors, Inc., 458 U. S. 670, 458 U. S. 685(1982) (opinion of STEVENS, J.). Nonetheless, the Young doctrine has been accepted as necessary to permit the federal courts to vindicate federal rights and hold state officials responsible to "the supreme authority of the United States." Young, supra, at 209 U. S. 160. As JUSTICE BRENNAN has observed, "Ex parte Young was the culmination of efforts by this Court to harmonize the principles of the Eleventh Amendment with the effective supremacy of rights and powers secured elsewhere in the Constitution." Perez v. Ledesma, 401 U. S. 82, 401 U. S. 106 (1971) (concurring in part and dissenting in part). Our decisions repeatedly have emphasized that the Young doctrine rests on the need to promote the vindication of federal rights. See, e.g., Quern v. Jordan, 440 U.S. at440 U. S. 337; Scheuer v. Rhodes, 416 U. S. 232, 416 U. S. 237 (1974); Georgia Railroad & Banking Co. v. Redwine, 342 U. S. 299, 342 U. S. 304 (1952). The Court also has recognized, however, that the need to promote the supremacy of federal law must be accommodated to the constitutional immunity of the States. This is the significance of Edelman v. Jordan, supra. We recognized that the prospective relief authorized by Young "has permitted the Civil War Amendments to the Constitution to serve as a sword, rather than merely a shield, for those whom they were designed to protect." 415 U.S. at 415 U. S. 664. But we declined to extend the fiction of Young to encompass retroactive relief, for to do so would effectively eliminate the constitutional immunity of the States. Accordingly, we concluded that, although the difference between permissible and impermissible relief "will not in many instances be that between day and night," 415 U.S. at 415 U. S. 667, an award of retroactive relief necessarily "'fall[s] afoul of the Eleventh Amendment Page 465 U. S. 106 if that basic constitutional provision is to be conceived of as having any present force.'" Id. at 415 U. S. 665 (quoting Rothstein v. Wyman, 467 F.2d 226, 237 (CA2 1972) (McGowan, J., sitting by designation), cert. denied, 411 U.S. 921 (1973)). In sum, Edelman's distinction between prospective and retroactive relief fulfills the underlying purpose of Ex parte Young,while at the same time preserving to an important degree the constitutional immunity of the States. This need to reconcile competing interests is wholly absent, however, when a plaintiff alleges that a state official has violated state law. In such a case, the entire basis for the doctrine of Young and Edelman disappears. A federal court's grant of relief against state officials on the basis of state law, whether prospective or retroactive, does not vindicate the supreme authority of federal law. On the contrary, it is difficult to think of a greater intrusion on state sovereignty than when a federal court instructs state officials on how to conform their conduct to state law. Such a result conflicts directly with the principles of federalism that underlie the Eleventh Amendment. We conclude that Young and Edelman are inapplicable in a suit against state officials on the basis of state law. B
192
The contrary view of JUSTICE STEVENS' dissent rests on fiction, is wrong on the law, and, most important, would emasculate the Eleventh Amendment. [Footnote 14] Under his view, an allegation that official conduct is contrary to a state statute would suffice to override the State's protection under that Amendment. The theory is that such conduct is contrary to the official's "instructions," and thus ultra vireshis authority. chanroblesvirtualawlibrary Page 465 U. S. 107 Accordingly, official action based on a reasonable interpretation of any statute might, if the interpretation turned out to be erroneous, [Footnote 15] provide the basis for injunctive relief against the actors in their official capacities. In this case, where officials of a major state department, clearly acting within the scope of their authority, were found not to have improved conditions in a state institution adequately under state law, the dissent's result would be that the State itself has forfeited its constitutionally provided immunity. The theory is out of touch with reality. The dissent does not dispute that the general criterion for determining when a suit is in fact against the sovereign is the effect of the relief sought. See supra at 465 U. S. 101; post at 465 U. S. 146, n. 29. According to the dissent, the relief sought and ordered here -- which in effect was that a major state institution be closed and smaller state institutions be created and expansively funded -did not operate against the State. This view would make the law a pretense. No other court or judge in the 10year history of this litigation has advanced this theory. And the dissent's underlying view that the named defendants here were acting beyond and contrary to their authority cannot be reconciled with reality -- or with the record. The District Court in this case held that the individual defendants "acted in the utmost good faith . . . within the sphere of their official responsibilities," and therefore were entitled to immunity from damages. 446 F.Supp. at 1324 (emphasis added). The named defendants had nothing to gain personally from their conduct; they were not found to have acted willfully or even negligently. See ibid. The court expressly noted that the individual defendants "apparently took every means available to them to reduce the incidents of abuse and injury, but were Page 465 U. S. 108 constantly faced with staff shortages." Ibid. It also found "that the individual defendants are dedicated professionals in the field of retardation who were given very little with which to accomplish the habilitation of the retarded at Pennhurst." Ibid. [Footnote 16] As a result, all the relief ordered by the courts below was institutional and official in character. To the extent chanroblesvirtualawlibrary Page 465 U. S. 109 there was a violation of state law in this case, it is a case of the State itself not fulfilling its legislative promises. [Footnote 17] The dissent bases its view on numerous cases from the turn of the century and earlier. These cases do not provide the support the dissent claims to find. Many are simply miscited. For example, with perhaps one exception, [Footnote 18] none of its Eleventh Amendment cases can be said to hold that injunctive relief could be ordered against state officials for failing to carry out their duties under state statutes. [Footnote 19] And chanroblesvirtualawlibrary Page 465 U. S. 110 the federal sovereign immunity cases the dissent relies on for analogy, while far from uniform, make clear that suit may not be predicated on violations of state statutes that command purely discretionary duties. [Footnote 20] Since it cannot be doubted chanroblesvirtualawlibrary Page 465 U. S. 111 that the statutes at issue here gave petitioners broad discretion in operating Pennhurst, see n 11, supra; see also 446 F.Supp. at 1324, the conduct alleged in this case would not be ultra vires even under the standards of the dissent's cases. [Footnote 21] Thus, while there is language in the early cases that advances the authority-stripping theory advocated by the dissent, this theory had never been pressed as far as JUSTICE STEVENS would do in this case. And when the expansive approach chanroblesvirtualawlibrary Page 465 U. S. 112 of the dissent was advanced, this Court plainly and explicitly rejected it. In Larson v. Domestic & Foreign Commerce Corp., 337 U. S. 682(1949), the Court was faced with the argument that an allegation that a Government official committed a tort sufficed to distinguish the official from the sovereign. Therefore, the argument went, a suit for an injunction to remedy the injury would not be against the sovereign. The Court rejected the argument, noting that it would make the doctrine of sovereign immunity superfluous. A plaintiff would need only to "claim an invasion of his legal rights" in order to override sovereign immunity. Id. at 337 U. S. 693. In the Court's view, the argument "confuse[d] the doctrine of sovereign immunity with the requirement that a plaintiff state a cause of action." Id. at 337 U. S. 692-693. The dissent's theory suffers a like confusion. [Footnote 22] Under the dissent's view, a plaintiff would need only to claim a denial of rights protected or provided by statute in order to override sovereign immunity. Except in rare cases, it would make the constitutional doctrine of sovereign immunity a nullity. chanroblesvirtualawlibrary Page 465 U. S. 113 The crucial element of the dissent's theory was also the plaintiff's central contention in Larson. It is that "[a] sovereign, like any other principal, cannot authorize its agent to violate the law," so that, when the agent does so ,he cannot be acting for the sovereign. Post at465 U. S. 153; see also post at 465 U. S. 142, 465 U. S. 148149, 465 U. S. 158; cf. Larson, supra, at 337 U. S. 693-694 ("It is argued . . . that the commission of a tort cannot be authorized by the sovereign. . . . It is on this contention that the respondent's position fundamentally rests . . ."). It is a view of agency law that the Court in Larson explicitly rejected. [Footnote 23] Larson thus made clear that, at least insofar as injunctive relief is sought, an error of law by state officers acting in their official capacities will not suffice to override the sovereign immunity of the State where the relief effectively is against it. 337 U.S. at 337 U. S. 690, 337 U. S. 695. [Footnote 24] Any resulting disadvantage to the plaintiff was "outweigh[ed]" by "the necessity of permitting the Government chanroblesvirtualawlibrary Page 465 U. S. 114
193
to carry out its functions unhampered by direct judicial intervention." Id. at 337 U. S. 704. If anything, this public need is even greater when questions of federalism are involved. See supra at 465 U. S. 99-100. [Footnote 25] The dissent in Larson made many of the arguments advanced by JUSTICE STEVENS dissent today, and asserted that many of the same cases were being overruled or ignored. chanroblesvirtualawlibrary Page 465 U. S. 115 See 337 U.S. at 337 U. S. 723-728 (Frankfurter, J., dissenting). Those arguments were rejected, and the cases supporting them are moribund. Since Larson was decided in 1949, [Footnote 26] no opinion by any Member of this Court has cited the cases on which the dissent primarily relies for a proposition as broad as the language the dissent quotes. Many, if not most, of these cases have not been relied upon in an Eleventh Amendment context at all. Those that have been so cited have been relied upon only for propositions with which no one today quarrels. [Footnote 27] The plain fact is that the dissent's broad theory, chanroblesvirtualawlibrary Page 465 U. S. 116 if it ever was accepted to the full extent to which it is now pressed, has not been the law for at least a generation. The reason is obvious. Under the dissent's view of the ultra vires doctrine, the Eleventh Amendment would have force only in the rare case in which a plaintiff foolishly attempts to sue the State in its own name, or where he cannot produce some state statute that has been violated to his asserted injury. Thus, the ultra vires doctrine, a narrow and questionable exception, would swallow the general rule that a suit is against the State if the relief will run against it. That result gives the dissent no pause, presumably because of its view that the Eleventh Amendment and sovereign immunity "undoubtedly ru[n] counter to modern democratic notions of the moral responsibility of the State.'" Post at 465 U. S. 164, n. 48 (quoting Great Northern Life Insurance Co. v. Read, 322 U. S. 47, 322 U. S. 59 (1944) (Frankfurter, J., dissenting)). This argument has not been adopted by this Court. See Great Northern Life Insurance Co. v. Read, supra, at 322 U. S. 51 ("Efforts to force, through suits against officials, performance of promises by a state collide directly with the necessity that a sovereign must be free from judicial compulsion in the carrying out of its policies within the limits of the Constitution"); Larson, 337 U.S. at 337 U. S. 704 ("The Government, as representative of the community as a whole, cannot be stopped in its tracks . . ."). Moreover, the argument substantially misses the point with respect to Eleventh Amendment sovereign immunity. As JUSTICE MARSHALL has observed, the Eleventh Amendment's restriction on the federal judicial power is based in large part on "the problems of federalism inherent in making chanroblesvirtualawlibrary Page 465 U. S. 117 Page 465 U. S. 119 one sovereign appear against its will in the courts of the other." Employees v. Missouri Dept. of Public Health and Welfare, 411 U.S. at 411 U. S. 294 (concurring in result). The dissent totally rejects the Eleventh Amendment's basis in federalism. C The reasoning of our recent decisions on sovereign immunity thus leads to the conclusion that a federal suit against state officials on the basis of state law contravenes the Eleventh Amendment when -- as here -- the relief sought and ordered has an impact directly on the State itself. In reaching a contrary conclusion, the Court of Appeals relied principally on a separate line of cases dealing with pendent jurisdiction. The crucial point for the Court of Appeals was that this Court has granted relief against state officials on the basis of a These cases thus did not directly confront the question before us. "[W]hen questions of jurisdiction have been passed on in prior decisions sub silentio, this Court has never considered itself bound when a subsequent case finally brings the jurisdictional issue before us." Hagans v. Lavine, 415 U. S. 528, 415 U. S. 533, n. 5 (1974). [Footnote 29] We therefore view the question as an open one. pendent state law claim. See 673 F.2d 657-658. We therefore must consider the relationship between pendent jurisdiction and the Eleventh Amendment. This Court long has held generally that, when a federal court obtains jurisdiction over a federal claim, it may adjudicate other related claims over which the court otherwise would not have jurisdiction. See, e.g., Mine Workers v. Gibbs, 383 U. S. 715, 383 U. S. 726 (1966);22 U. S. 819-823 (1824). The Court also has held that a federal court may resolve a case solely on the basis of a pendent state law claim, see Siler, 213 U.S. at 213 U. S. 192-193, and that, in fact, the court usually should do so in order to avoid federal constitutional questions, see id.at 213 U. S. 193; Ashwander v. TVA,@ 297 U. S. 288, 297 U. S. 347 (1936) (Brandeis, J., concurring) ("[I]f a case can be decided on either of two grounds, one involving a constitutional question, the other a question of statutory construction or general law, the Court will decide only the latter"). But pendent jurisdiction is a judge-made doctrine inferred from the general language of Art. III. The question presented is whether this doctrine chanroblesvirtualawlibrary Page 465 U. S. 118 may be viewed as displacing the explicit limitation on federal jurisdiction contained in the Eleventh Amendment. As the Court of Appeals noted, in Siler and subsequent cases concerning pendent jurisdiction, relief was granted against state officials on the basis of state law claims that were pendent to federal constitutional claims. In none of these cases, however, did the Court so much as mention the Eleventh Amendment in connection with the state law claim. Rather, the Court appears to have assumed that, once jurisdiction was established over the federal law claim, the doctrine of pendent jurisdiction would establish power to hear the state law claims as well. The Court has not addressed whether that doctrine has a different scope when applied to suits against the State. This is illustrated by Greene v. Louisville & Interurban R. Co., 244 U. S. 499 (1917), in which the plaintiff railroads sued state officials, alleging that certain tax assessments were excessive under the Fourteenth Amendment. The Court first rejected the officials' argument that the Eleventh Amendment barred the federal constitutional claim. It held that Ex parte Young applied to all allegations challenging the constitutionality of official action, regardless of whether the state statute under which the officials purported to act was constitutional or unconstitutional. See 244 U.S. at 244 U. S. 507. Having determined that the Eleventh Amendment did not deprive the federal court of jurisdiction over the Fourteenth Amendment question, the Court declared that the court's jurisdiction extended "to the determination of all questions involved in the case, including questions of state law, irrespective of the disposition that may be made of the federal question, or whether it be found necessary to decide it at all." Id. at 244 U. S. 508. The case then was decided solely on state law grounds. Accord, Louisville & Nashville R. Co. v. Greene, 244 U. S. 522(1917). [Footnote 28] chanroblesvirtualawlibrary
194
As noted, the implicit view of these cases seems to have been that, once jurisdiction is established on the basis of a federal question, no further Eleventh Amendment inquiry is necessary with respect to other claims raised in the case. This is an erroneous view, and contrary to the principles established in our Eleventh Amendment decisions. "The Eleventh Amendment is an explicit limitation of the judicial power of the United States." Missouri v. Fiske, 290 U.S. at 290 U. S. 25. It deprives a federal court of power to decide certain claims against States that otherwise would be within the chanroblesvirtualawlibrary Page 465 U. S. 120 scope of Art. III's grant of jurisdiction. For example, if a lawsuit against state officials under 42 U.S.C. 1983 alleges a constitutional claim, the federal court is barred from awarding damages against the state treasury even though the claim arises under the Constitution.See Quern v. Jordan, 440 U. S. 332 (1979). Similarly, if a 1983 action alleging a constitutional claim is brought directly against a State, the Eleventh Amendment bars a federal court from granting any relief on that claim. See Alabama v. Pugh, 438 U. S. 781 (1978) (per curiam). The Amendment thus is a specific constitutional bar against hearing even federal claims that otherwise would be within the jurisdiction of the federal courts. [Footnote 30] This constitutional bar applies to pendent claims as well. As noted above, pendent jurisdiction is a judge-made doctrine of expediency and efficiency derived from the general Art. III language conferring power to hear all "cases" arising under federal law or between diverse parties. See Mine Workers v. Gibbs, 383 U.S. at 383 U. S. 725. See also Hagans v. Lavine, supra, at 415 U. S. 545 (terming pendent jurisdiction "a doctrine of discretion"). The Eleventh Amendment should not be construed to apply with less force to this implied form of jurisdiction than it does to the explicitly granted power to hear federal claims. The history of the adoption and development of the Amendment, see supra at 465 U. S. 97-100, confirms that it is an independent limitation on all exercises of Art. III power: "the entire judicial power granted by the Constitution does not embrace authority to entertain a suit brought by private parties against a State without consent given," Ex parte State of New York, 256 U.S. at 256 U. S. 497. If we were to hold otherwise, a federal court could award damages against a State on the basis of a pendent claim. Our decision in chanroblesvirtualawlibrary Page 465 U. S. 121 Edelman v. Jordan makes clear that pendent jurisdiction does not permit such an evasion of the immunity guaranteed by the Eleventh Amendment. We there held that "the District Court was correct in exercising pendent jurisdiction over [plaintiffs'] statutory claim," 415 U.S. at 415 U. S. 653, n. 1, but then concluded that the Eleventh Amendment barred an award of retroactive relief on the basis of that pendent claim. Id. at 415 U. S. 678. In sum, contrary to the view implicit in decisions such as Greene v. Louisville & Interurban R. Co., 244 U. S. 499 (1917), neither pendent jurisdiction nor any other basis of jurisdiction may override the Eleventh Amendment. [Footnote 31] A federal court must examine each claim in a case to see if the court's jurisdiction over that claim is barred by the Eleventh Amendment. We concluded above that a claim that state officials violated state law in carrying out their official responsibilities is a claim against the State that is protected by the Eleventh Amendment. See supra at 465 U. S. 106. We now hold that this principle applies as well to state law claims brought into federal court under pendent jurisdiction. D Respondents urge that application of the Eleventh Amendment to pendent state law claims will have a disruptive effect on litigation against state officials. They argue that the "considerations of judicial economy, convenience, and fairness to litigants" that underlie pendent jurisdiction, see Gibbs, supra, at 383 U. S. 726, counsel against a result that may cause litigants to split causes of action between state and federal courts. They also contend that the policy of avoiding unnecessary constitutional decisions will be contravened if plaintiffs choose to forgo their state law claims and sue only in federal court or, alternatively, that the policy of Ex parte Young chanroblesvirtualawlibrary Page 465 U. S. 122 will be hindered if plaintiffs choose to forgo their right to a federal forum and bring all of their claims in state court. It may be that applying the Eleventh Amendment to pendent claims results in federal claims being brought in state court, or in bifurcation of claims. That is not uncommon in this area. Under Edelman v. Jordan, supra, a suit against state officials for retroactive monetary relief, whether based on federal or state law, must be brought in state court. Challenges to the validity of state tax systems under 42 U.S.C. 1983 also must be brought in state court. Fair Assessment in Real Estate Assn., Inc. v. McNary, 454 U. S. 100 (1981). Under the abstention doctrine, unclear issues of state law commonly are split off and referred to the state courts. [Footnote 32] chanroblesvirtualawlibrary Page 465 U. S. 123 In any case, the answer to respondents' assertions is that such considerations of policy cannot override the constitutional limitation on the authority of the federal judiciary to adjudicate suits against a State. See Missouri v. Fiske, 290 U.S. at 290 U. S. 25-26 ("Considerations of convenience open no avenue of escape from the [Amendment's] restriction"). [Footnote 33] That a litigant's choice of forum is reduced "has long been understood to be a part of the tension inherent in our system of federalism." Employees v. Missouri Dept. of Public Health and Welfare, 411 U.S. at 411 U. S. 298 (MARSHALL, J., concurring in result). IV Respondents contend that, regardless of the applicability of the Eleventh Amendment to their state claims against petitioner state officials, the judgment may still be upheld against petitioner county officials. We are not persuaded. Even assuming that these officials are not immune from suit challenging their actions under the MH/MR Act, [Footnote 34] it is clear chanroblesvirtualawlibrary Page 465 U. S. 124 that, without the injunction against the state institutions and officials in this case, an order entered on state law grounds necessarily would be limited. The relief substantially concerns Pennhurst, an arm of the State that is operated by state officials. Moreover, funding for the county mental retardation programs comes almost entirely from the State, see Pa.Stat.Ann., Tit. 50, 4507-4509 (Purdon 1969 and Supp.1983-1984), and the costs of the Masters have been borne by the State, see 446 F.Supp. at 1327. Finally, the MH/MR Act contemplates that the state and county officials will cooperate in operating mental retardation programs. See In re Schmidt, 494 Pa., at 95-96, 429 A.2d at 635-636. In short, the present judgment could not be sustained on the basis of the state law obligations of petitioner county officials. Indeed, any relief granted against the county officials on the basis of the state statute would be partial and incomplete at best. Such an ineffective enforcement of state law would not appear to serve the purposes of efficiency, convenience, and fairness that must inform the exercise of pendent jurisdiction. V
195
The Court of Appeals upheld the judgment of the District Court solely on the basis of Pennsylvania's MH/MR Act. We hold that these federal courts lacked jurisdiction to enjoin petitioner state institutions and state officials on the basis of chanroblesvirtualawlibrary Page 465 U. S. 125 this state law. The District Court also rested its decision on the Eighth and Fourteenth Amendments and 504 of the Rehabilitation Act of 1973. See supra at 465 U. S. 93. On remand, the Court of Appeals may consider to what extent, if any, the judgment may be sustained on these bases. [Footnote 35] The court also may consider whether relief may be granted to respondents under the Developmentally Disabled Assistance and Bill of Rights Act, 42 U.S.C. 6011, 6063 (1976 ed. and Supp. V). The judgment of the Court of Appeals is reversed, and the case is remanded for further proceedings consistent with this opinion. It is so ordered.
196
Sam W. Burgan, Washington, DC, argued the cause for appellant, with whom Frederick R. McDermott, Oxon Hill, MD, was on the briefs. Christopher M. Curran, argued the cause for appellees Central Bank of Jordan, et al., with whom George L. Paul, Washington, DC, was on the brief. John R. Fornaciari, argued the cause for appellee Petra International Banking Corporation, with whom John J. Vecchione, Washington, DC, was on the brief. Before: GINSBURG, ROGERS and TATEL, Circuit Judges. Opinion for the Court filed by Circuit Judge ROGERS. ROGERS, Circuit Judge: 1 Hassan El-Fadl filed suit in the Superior Court of the District of Columbia seeking to recover damages against Petra International [316 U.S.App.D.C. 88] Banking Corporation ("PIBC") for wrongful termination of employment as well as for various tort claims against several Jordanian institutions and officials: the Central Bank of Jordan, its Governor and Deputy Governor, and Petra Bank (together, the "Jordanian defendants").1 The Central Bank of Jordan removed the case to federal district court pursuant to the Federal Sovereign Immunities Act ("FSIA"), 28 U.S.C. 1441(d) (1994). Following the removal, the Jordanian defendants filed a motion to dismiss, and PIBC also filed a motion to dismiss and, in the alternative, for summary judgment. The district court dismissed the complaint as to all defendants. First, the court ruled that the Central Bank, Governor Mohammed Saeed El-Nabulsi, and Deputy Governor Michel Marto (together, the "sovereign defendants") were immune from suit under the FSIA. Second, the court granted Petra Bank's motion to dismiss for lack of personal jurisdiction under the District of Columbia "doing business" and long-arm statutes found in D.C.Code 13-334, 13-422, and 13-423. Third, the court granted PIBC's motion to dismiss 75 F.3d 668: Hassan El-fadl, Appellant v. Central Bank of Jordan, et al., Appellees Share| United States Court of Appeals, District of Columbia Circuit. - 75 F.3d 668 Argued Nov. 14, 1995.Decided Feb. 6, 1996 [316 U.S.App.D.C. 87] Appeal from the United States District Court for the District of Columbia (No. 93cv01895). on forum non conveniens grounds, although the court had personal jurisdiction, because El-Fadl had an available forum in the Jordanian courts. The court denied El-Fadl's motion for reconsideration. 2 On appeal, El-Fadl contends principally that the district court erred in finding that he had an adequate alternative forum available to sue PIBC in Jordan and that the court erred in dismissing, prior to discovery, his claims against Petra Bank for lack of personal jurisdiction in the District of Columbia. He also contends that the district court erred in dismissing his claims against Deputy Governor Marto. Although we find no merit to ElFadl's claim that the court has jurisdiction over Deputy Governor Marto, we reverse the pre-discovery
197
dismissal as to Petra Bank for lack of personal jurisdiction and remand to allow El-Fadl to have discovery of jurisdictional facts. We also reverse and remand the forum non conveniens dismissal of the claims against Petra Bank and PIBC because the defendants failed to show that El-Fadl's claims can be filed in the Jordanian courts. 3 El-Fadl is a Lebanese national who has lived in Jordan since 1982. In his complaint, he alleges that he was employed by PIBC, a subsidiary in the District of Columbia of Petra Bank, a privately owned bank in Jordan. From 1982 to 1989 he was employed by PIBC in Jordan as manager of a regional office for Middle Eastern clients. He had signed a contract under which he "would be permanently employed for life as a senior manager of Petra International Banking Corporation." The defendants maintain that El-Fadl was employed by Petra Bank (not PIBC) as a senior manager with responsibility for currency and precious metals trading. 4 In August 1989, the Central Bank of Jordan announced that it had uncovered widespread financial improprieties at Petra Bank and placed Petra Bank in receivership. Since then, Petra Bank has been run by a Liquidation Committee appointed by the Jordanian government. The Deputy Governor of the Central Bank, Michel Marto, was appointed to administer the liquidation of PIBC, and Marto came to the District of Columbia for that purpose. On September 14, 1989, Marto sent El-Fadl a letter in which PIBC terminated El-Fadl's employment as senior manager of the PIBC office in Amman. As part of the Jordanian authorities' investigation of the Petra Bank scandal, El-Fadl was arrested on October 29, 1989. El-Fadl alleges that the military police detained him for five days and tortured him, until he was released on bail. El-Fadl was prosecuted first in the Military Courts under Martial Law and then in the State Security Court, where he was "declared innocent" on April 9, 1992, which finding was affirmed by the Prime Minister on August 2, 1992. While the charges were pending, El-Fadl [316 U.S.App.D.C. 89] alleges that he was forbidden to leave Jordan. On July 30, 1993, El-Fadl filed suit in the District of Columbia. 5 Sovereign immunity. The district court dismissed the claims against the Central Bank, Governor Nabulsi and Deputy Governor Marto under the FSIA. The court found that the Central Bank was a "foreign state" under the FSIA, 28 U.S.C. 1603(a), and had not waived its sovereign immunity. The court ruled that Nabulsi and Marto were also immune because they were being sued in their official capacities as agents of the Central Bank. The court rejected El-Fadl's arguments that his claims fell under the "non-commercial tort" exception or the "commercial activity" exception to the FSIA. 28 U.S.C. 1604, 1605(a)(2), (5). Personal jurisdiction. The district court granted Petra Bank's motion to dismiss for lack of personal jurisdiction under D.C.Code 13-422, 13-334 or 13-423(a). First, the district court agreed that it lacked general jurisdiction over Petra Bank under D.C.Code 13-422 because Petra Bank was not a "person domiciled in, organized under the laws of, or maintaining his or its principal place of business in, the District of Columbia."4 D.C.CODE ANN. 13-422 (1995). Second, the court agreed with Petra Bank that it was not subject to general jurisdiction for "doing [316 U.S.App.D.C. 90] business" in the District of Columbia under D.C.Code 13-334.5 Neither Petra Bank's maintenance of correspondent banking relationships nor its ownership of more than 70% of the shares in PIBC sufficed for "doing business." Third, the court agreed that it lacked specific jurisdiction over Petra Bank under the District of Columbia long-arm statute because none of An individual can qualify as an "agency or instrumentality of a foreign state." 28 U.S.C. 1603(b) (1994);2 see Chuidian v. Philippine Nat'l Bank, 912 F.2d 1095, 1101-03 (9th Cir.1990). Although El-Fadl claims to be suing Marto in an individual capacity, the only evidence in the record shows that Marto's activities in managing PIBC were neither personal nor private, but were undertaken only on behalf of the Central Bank. Thus, Marto's affidavit states that in connection with the liquidation of PIBC, after being elected Chairman of PIBC and serving as its General Manager, he continued to be employed only at the Central Bank and that his "responsibilities with respect to PIBC were only a very minor part of [his] responsibilities as a Deputy Governor of the Central Bank." El-Fadl points to nothing more than the fact that Marto was Chairman and General Manager of PIBC and sent the letter of termination while he was in the District of Columbia. We therefore affirm the dismissal of the claims against Marto on grounds of sovereign immunity. 3 El-Fadl is not entitled to discovery against Marto because, in light of the evidence that Marto proffered to the district court and the absence of any showing by El-Fadl that Marto was not acting in his official capacity, discovery would " 'frustrate the significance and benefit of entitlement to immunity from suit.' " Foremost-McKesson, Inc. v. Islamic Republic of Iran,905 F.2d 438, 449 (D.C.Cir.1990) (quoting Gould, Inc. v. Pechiney Ugine Kuhlmann, 853 F.2d 445, 451 (6th Cir.1988)). 8 On appeal, El-Fadl has abandoned his claims against the Central Bank and Nabulsi but seeks to maintain his claims against Marto on the ground that Marto was acting not in his official capacity but in an individual capacity as Chairman and General Manager of PIBC. Because El-Fadl failed to present any evidence that Marto was acting outside his official capacity, the district court found that Marto had no "personal interests at stake in connection with Petra [Bank] or PIBC." We affirm. 7 6
198
El-Fadl's claims "arose from" Petra Bank's alleged contacts with the District. D.C.CODE ANN. 13-423(a) (1995). Although El-Fadl had moved to stay dismissal for lack of personal jurisdiction until he had conducted discovery of jurisdictional facts, the district court denied his motion as moot. 9 Raising Issue on Appeal. In his brief on appeal, El-Fadl contends that the district court had personal jurisdiction over Petra Bank. He alleges, citing the long-arm statute, that various general business contacts of Petra Bank with the District of Columbia constitute "transacting any business in the District of Columbia." D.C.CODE ANN. 13-423(a)(1). In addition, he alleges that, by entering into collateral loan agreements in the District, Petra Bank is "contracting to supply services in the District of Columbia." Id. 13-423(a)(2). El-Fadl also alleges that Petra Bank caused him tortious injury in the District of Columbia because he was employed in the District when Petra Bank allegedly tortiously interfered with his employment contract and defamed him. Id. 14-423(a)(3), (4). 10 El-Fadl's brief does not distinguish between "transacting business" under the long-arm statute and "doing business" for purposes of general jurisdiction. See Crane v. Carr, 814 F.2d 758, 763 (D.C.Cir.1987). His reliance on the long-arm statute is misplaced because he has failed to show any connection between the alleged jurisdictional acts and the District of Columbia. Because El-Fadl's claims are not related to any of Petra Bank's general business contacts with the District of Columbia, they cannot confer specific jurisdiction under the long-arm statute. See Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 n. 8, 104 S.Ct. 1868, 1872 n. 8, 80 L.Ed.2d 404 (1984) (Helicol). As to El-Fadl's claims of tortious injury under subsections (a)(3) and (4), it appears unlikely that one living and working in Jordan would be injured in the District of Columbia merely because his employer's principal place of business was located here. In any event, El-Fadl has made no showing that such conduct by Petra Bank was "purposefully directed" at the District of Columbia. See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476, 105 S.Ct. 2174, 2184, 85 L.Ed.2d 528 (1985). Thus, we affirm the district court's holding that it lacked personal jurisdiction under 13-423(a).6 11 On the other hand, El-Fadl's brief repeats the language of what the courts have construed to be the District of Columbia's general jurisdiction statute, D.C.Code 13-334(a), in arguing, as he did in the district court, that "Petra Bank has been doing business in the District of Columbia." Appellant's Brief at 17-20. In support of his contention, he recites a long list of general contacts between Petra Bank and the District of Columbia, see infra Part III(B), and maintains that Petra Bank "had systematically been involved in commercial banking The premise of our adversarial system is that appellate courts do not sit as self-directed boards of legal inquiry and research, but essentially as arbiters of legal questions presented and argued by the parties before them.... Failure to enforce [Rule 28(a)(6) ] will ultimately deprive us in substantial measure of that assistance of counsel which the system assumes--a deficiency that we can perhaps supply by other means, but not without altering the character of our institution. Of course not all legal arguments bearing upon the issue in question will always be identified by counsel, and we are not precluded from supplementing the contentions of counsel through our own deliberation and research. But where counsel has made no attempt to address the issue, we will not remedy the defect.... 15 Federal Rule of Appellate Procedure 28(a)(6) requires the appellant's brief to include an argument, which "must contain the contentions of the appellant on the issues presented, and the reasons therefor, with citations to the authorities, statutes, and parts of the record relied on." In explaining the application of Rule 28(a)(6), this court has stated: 14 Doing business has been interpreted by the District of Columbia Court of Appeals as requiring a "continuing corporate presence", and conducting "substantial business" in the District. The defendants argue that [ElFadl's] conclusory statements alleging that the defendants are doing business in the District within the meaning of 13-334 are not sufficient to constitute the prima facie showing necessary to carry the burden of establishing personal jurisdiction. The Court is inclined to agree. [El-Fadl] has failed to present any evidence to support his position that the court could exercise jurisdiction over the Jordanian defendant pursuant to D.C.Code 13-334. To the contrary, the defendants seem to establish that their presence in the District of Columbia is very limited, and, in the case of Petra Bank, the presence of PIBC in the District is insufficient to create personal jurisdiction over Petra Bank. (emphasis added)7 13 activities in the District of Columbia," "continuously and systematically conducted business in the District of Columbia," and had a "continuous presence and continuing involvement in business activities in the District of Columbia." Id. at 18-20. This is the language of general jurisdiction, directly responsive [316 U.S.App.D.C. 91] to Petra Bank's motion to dismiss for lack of jurisdiction under 13-334. The district court's opinion makes clear that it so understood El-Fadl's arguments, explaining: 12
199
Carducci v. Regan, 714 F.2d 171, 177 (D.C.Cir.1983) (Scalia, J.). Thus, when an appellant "contented itself with conclusory assertions," the "[a]ppellees did not address the merits of the claim at all," and "the issue was not passed upon below," this court "normally will not address claims raised in such a cursory fashion." Texas Rural Legal Aid, Inc. v. Legal Servs. Corp., 940 F.2d 685, 697-98 (D.C.Cir.1991); see also Rollins Envtl. Servs. (NJ) Inc. v. EPA, 937 F.2d 649, 652 n. 2 (D.C.Cir.1991). Nor will the court address issues that are not at all mentioned in the appellant's brief, by contrast with "a situation in which an appellant incorporates by reference or otherwise 'implicitly' raises a generic legal claim." McBride v. Merrell Dow & Pharmaceuticals, Inc., 800 F.2d 1208, 1211 (D.C.Cir.1986). 16 By contrast with the barren claims in Texas Rural Legal Aid, El-Fadl presented in his brief detailed factual assertions in opposition to Petra Bank's assertions, adopted by the district court, that it was not "doing business" in the District of Columbia within the meaning of 13-334. The Jordanian defendants recognized that El-Fadl was again contesting their claim of lack of jurisdiction under 13-334 and have devoted nine pages of the eleven page-section in their brief on personal jurisdiction to a comprehensive analysis of 13334. Jordanian Appellees' Brief at 25-33. As noted, the district court [316 U.S.App.D.C. 92] expressly ruled on the 13-334 arguments by the parties. Nothing in our local version of Rule 28 would require more. D.C.CIR.R. 28(a). 17 The court, in any event, has unquestioned authority to reach the issue of general jurisdiction, even if El-Fadl had waived any reliance on 13-334(a). "When an issue or claim is properly before the court, the court is not limited to the particular legal theories advanced by the parties, but rather retains the independent power to identify and apply the proper construction of governing law." Kamen v. Kemper Fin. Servs., Inc., 500 U.S. 90, 99, 111 S.Ct. 1711, 1718, 114 L.Ed.2d 152 (1991). The Supreme Court has upheld a decision by this court to reach "an issue 'antecedent to ... and ultimately dispositive of' the dispute before it, even an issue the parties fail to identify and brief." United States Nat'l Bank v. Independent Ins. Agents, 508 U.S. 439, 447, 113 S.Ct. 2173, 2178, 124 L.Ed.2d 402 (1993) (quoting Arcadia v. Ohio Power Co., 498 U.S. 73, 77, 111 S.Ct. 415, 418, 112 L.Ed.2d 374 (1990)) (ellipsis in U.S. Nat'l Bank ). In the instant case, resolution of the 13-334(a) basis for personal jurisdiction is potentially dispositive of Petra Bank's motion to dismiss for lack of personal jurisdiction. Moreover, prudential concerns should not lead us to construe El-Fadl's brief as waiving reliance on 13-334(a). Recognizing that "the hard analysis comes in determining when an issue or claim is properly before the court," Independent Ins. Agents v. Clarke, 955 F.2d 731, 742 (D.C.Cir.1992) (Silberman, J., dissenting), rev'd sub nom. United States Nat'l Bank v. Independent Ins. Agents, 508 U.S. 439, 113 S.Ct. 2173, 124 L.Ed.2d 402 (1993), we find that El-Fadl's brief presents both possible bases, general and specific, for personal jurisdiction over Petra Bank. Indeed, El-Fadl asserts, in his statement of issues presented, that Consequently, neither the opposing party, the district court, nor this court has been misled by the fact that ElFadl did not expressly cite D.C.Code 13-334(a) itself in his brief. The "doing business" arguments in ElFadl's brief, in response to the district court's agreement with Petra Bank's 13-334(a) arguments, are presented in the language of general jurisdiction, notwithstanding the misguided attempts by El-Fadl's counsel to link these contacts to the long-arm statute. 8 El-Fadl did not distinguish between specific and general jurisdiction in opposing Petra Bank's motion to dismiss for lack of personal jurisdiction in the district court, and by making the same arguments in his brief on appeal, it is clear that he has not waived his 13-334(a) arguments. Moreover, his failure to cite 13-334(a) in haec verba becomes more understandable in light of "the confusion that sometimes attends the analysis of personal jurisdiction issues," Crane, 814 F.2d at 763, and the misleading organization of the District of Columbia Code. Chapter 4 of title 13 of the District of Columbia Code addresses jurisdiction while chapter 3 of title 13 addresses service of process. Yet, as the district court here recognized, the District of Columbia courts have construed 13-334(a) to be a jurisdictional statute. See supra note 7. Indeed, other district courts in this circuit have acknowledged that 13-334(a) on its face appears to apply only to service of process. See Ross v. Product Dev. Corp., 736 F.Supp. 285, 289 n. 7 (D.D.C.1989); Bayles v. K-Mart Corp., 636 F.Supp. 852, 855 (D.D.C.1986). 18
200
"[t]he District Court erred ... in dismissing claims against a foreign defendant for lack of personal jurisdiction, prior to discovery or a hearing." 19 Declining to reach the issue of general jurisdiction would not further the prudential concerns underlying Federal Rule of Appellate Procedure 28 as articulated in Carducci v. Regan. This court has the benefit of briefing by both parties as well as the ruling of the district court. Cf. United States v. [316 U.S.App.D.C. 93] Dunkel, 927 F.2d 955, 956 (7th Cir.1991) ("A skeletal 'argument', really nothing more than an assertion, does not preserve a claim."). The jurisdictional issue is fully presented to us, with the assistance that counsel can provide. Efficiency in appellate adjudication is not served by letting stand a potentially erroneous decision because counsel for the appellant has failed to cite the title and section number of a statute that both parties address and the district court discussed in its decision on personal jurisdiction. Cf. Mylan Labs., Inc. v. Akzo, N.V., 2 F.3d 56, 60 n. 2 (4th Cir.1993). The lack of any prejudice to the appellee or to the institutional structure of the court from this apparently inadvertent omission strengthens the general proposition that the court should "liberally construe briefs in determining issues presented for review." SEC v. Recile, 10 F.3d 1093, 1096 (5th Cir.1993) (per curiam); accord Federal Sav. & Loan Ins. Corp. v. Haralson, 813 F.2d 370, 373 n. 3 (11th Cir.1987). Any other result would be unduly harsh because the issue involves jurisdiction, thereby jeopardizing a party's right to have the merits of his claims heard before any discovery has taken place. Cf. Sikora v. Brenner, 379 F.2d 134, 136 (D.C.Cir.1967); Rohler v. TRW, Inc., 576 F.2d 1260, 1264 (7th Cir.1978). 20 Discovery of facts for general jurisdiction. As part of his contention that the district court had general jurisdiction over Petra Bank, El-Fadl requests discovery from Petra Bank of jurisdictional facts. In opposing the Jordanian defendants' motion to dismiss for lack of personal jurisdiction, El-Fadl requested the district court to stay ruling on the motion until he had conducted "limited discovery" on "[t]he extent of Petra Bank's business activities in the District of Columbia." In his brief on appeal, El-Fadl maintains that "[q]uestions put to Petra Bank on discovery regarding its business activities in the District of Columbia went unanswered.... At the very least, El-Fadl is entitled to discovery on this matter before it is decided. Crane v. Carr, 814 F.2d 758 (D.C.Cir.1987)." 21 On the present record, El-Fadl has not made a prima facie case that Petra Bank was "doing business" in the District of Columbia. See D.C.CODE ANN. 13-334(a); Edmond v. United States Postal Serv. Gen. Counsel, 949 F.2d 415, 424 (D.C.Cir.1991). For general jurisdiction, the Due Process Clause requires that the Even though El-Fadl's present jurisdictional allegations are insufficient, he has sufficiently demonstrated that it is possible that he could supplement them through discovery. In Crane, 814 F.2d at 760, this court reversed when a plaintiff's case was dismissed "with no opportunity for discovery on the issue of jurisdiction." Because no discovery at all had been allowed, Crane differs from Naartex Consulting Corp. v. Watt, 722 F.2d 779 (D.C.Cir.1983), cert. denied,467 U.S. 1210, 104 S.Ct. 2399, 81 L.Ed.2d 355 (1984), in which the court held that the district court did not abuse its discretion in denying further jurisdictional discovery when the plaintiff had already had " 'ample opportunity' to take discovery." Id. at 788 (quoting Zerilli v. Smith, 656 F.2d 705, 716 (D.C.Cir.1981)); see Edmond v. United States Postal Serv. Gen. Counsel, 953 F.2d 1398, 1401 defendant have "continuous and systematic general business contacts" with the forum. Helicol, 466 U.S. at 416, 104 S.Ct. at 1873; see also Perkins v. Benguet Consol. Mining Co., 342 U.S. 437, 438, 72 S.Ct. 413, 414, 96 L.Ed. 485 (1952). El-Fadl asserts the following facts about Petra Bank's contacts with the District of Columbia: (1) Petra Bank issued a commercial loan of over $500,000 in 1989; (2) in litigation concerning that loan in the D.C. Superior Court, Petra Bank filed a counter-claim; (3) Petra Bank has entered into several "collateral agreements covering loans in the District of Columbia," using a form contract that selects as the governing law the laws of the District of Columbia; (4) Petra Bank owns 70% of PIBC, its District of Columbia subsidiary, with which Petra Bank maintains bank accounts in the District of Columbia; (5) El-Fadl sent millions of dollars by wire transfers through Petra Bank from PIBC offices in Jordan to PIBC's main office in the District of Columbia; and (6) in a deposition for another case, PIBC's general manager, Randolph Old, stated that Petra Bank had "joint loans" with PIBC and that PIBC acted as Petra Bank's "collection agent" in the District of Columbia. The allegations concerning the loan, the consequent litigation, and the collateral agreements are mere isolated and sporadic contacts unrelated to the claims in the instant case. By contrast, 13-334(a) requires a "continuing corporate presence in the forum ... directed at advancing the corporation's objectives." AMAF Int'l Corp., 428 A.2d at 851; see also Helicol, 466 U.S. at 416-17, 104 S.Ct. at 1873. El-Fadl's allegations concerning the relationship between PIBC and Petra Bank attempt to attribute the subsidiary's contacts with the District of Columbia to the parent corporation.9 Although [316 U.S.App.D.C. 94] a parentsubsidiary relationship alone is insufficient, Cannon Mfg. Co. v. Cudahy Packing Co., 267 U.S. 333, 336-37, 45 S.Ct. 250, 251, 69 L.Ed. 634 (1925), if parent and subsidiary "are not really separate entities," I.A.M. Nat'l Pension Fund v. Wakefield Indus., Inc.,699 F.2d 1254, 1259 (D.C.Cir.1983), or one acts as an agent of the other, Wells Fargo & Co. v. Wells Fargo Express Co., 556 F.2d 406, 419 (9th Cir.1977), the local subsidiary's contacts can be imputed to the foreign parent. Yet El-Fadl has shown only that Petra Bank owns the majority of shares in PIBC and that the two corporations have worked together on certain transactions. See Ramamurti v. Rolls-Royce Ltd., 454 F.Supp. 407, 413 (D.D.C.1978), aff'd mem., 612 F.2d 587 (D.C.Cir.1980). 22
201
(D.C.Cir.1992) (R.B. Ginsburg, J., concurring in denial of rehearing en banc). The Crane court held that the plaintiff was "entitled to a fair opportunity to inquire into [the defendant]'s affiliations with the District." 814 F.2d at 764. Similarly, in Edmond, this court held that the district court abused its discretion in denying jurisdictional discovery when the plaintiff had alleged the existence of a conspiracy that would allow the court to attribute the local conspirator's contacts with the District of Columbia to the co-conspirators. 949 F.2d at 425. The Edmond court distinguished Naartex as a case "where the allegations of conspiracy were conclusory." Id.; see also Wyatt v. Kaplan, 686 F.2d 276, 283-84 (5th Cir.1982). 23 Piper Aircraft Co. v. Reyno, 454 U.S. 235, 254 n. 22, 102 S.Ct. 252, 265 n. 22, 70 L.Ed.2d 419 (1981) (citation El-Fadl's request is for initial discovery, limited to jurisdictional facts. His allegations, although they fall short of a prima facie case that Petra Bank was "doing business" in the District of Columbia, are not "conclusory" to the extent that El-Fadl has alleged specific transactions. His theory that Petra Bank may have had further, as yet unknown, connections to the District is not implausible. Petra Bank initially denied having any contacts with the District of Columbia other than as a correspondent bank. If litigation had not fortuitously ensued over Petra Bank's $500,000 commercial loan, El-Fadl would not have been able to challenge the statements by Petra Bank's affiants that it had not extended such loans. A plaintiff faced with a motion to dismiss for lack of personal jurisdiction is entitled to reasonable discovery, lest the defendant defeat the jurisdiction of a federal court by withholding information on its contacts with the forum. 24 Accordingly, we reverse the dismissal of El-Fadl's claims against Petra Bank for lack of personal jurisdiction and remand those claims to the district court in order to allow El-Fadl to conduct reasonable discovery on personal jurisdiction. 25 Forum non conveniens. The district court dismissed El-Fadl's claims against all defendants on the ground of forum non conveniens. In light of the affirmance of the dismissal of the claims against the sovereign defendants on other grounds, El-Fadl's objections to the dismissal on forum non conveniens relate to the remaining defendants, Petra Bank and PIBC. 26 To show the existence of an adequate alternative forum, the defendant "must provide enough information to In deciding a forum non conveniens motion, the district court must first establish that there is an adequate alternative forum: 27 enable the District Court" to evaluate the alternative forum. Piper Aircraft, 454 U.S. at 258, 102 S.Ct. at 267. Because the defendant has the burden of establishing that an adequate alternative forum exists, this court will reverse when "the affidavit through which [the defendant] attempted to meet its burden contains substantial Our review of the grant of a motion to dismiss for forum non conveniens is for abuse of discretion. Piper Aircraft, 454 U.S. at 257, 102 S.Ct. at 266; Pain, 637 F.2d at 781. Although this is a deferential standard of review, the district court abuses its discretion when it fails to consider a material factor or clearly errs in evaluating the factors before it, Mercier, 935 F.2d at 423, or "does not hold the defendants to their burden of persuasion on all elements of the forum non conveniens analysis." Reid-Walen v. Hansen, 933 F.2d 1390, 1394 (8th Cir.1991); see also Lacey v. Cessna Aircraft Co., 862 F.2d 38, 43 (3d Cir.1988). 30 omitted). Only if there is an adequate alternative forum must the court then weigh the relative conveniences to the parties against the presumption of the plaintiff's forum selection. Pain v. United Technologies Corp., 637 F.2d 775, 784 (D.C.Cir.1980), cert. denied, 454 U.S. 1128, 102 S.Ct. 980, 71 L.Ed.2d 116 (1981). "Availability of adequate alternative fora is a threshold test ... in the sense that a forum non conveniens motion cannot be granted unless the test is fulfilled." Friends for All Children, Inc. v. Lockheed Aircraft Corp., 717 F.2d 602, 607 (D.C.Cir.1983). The defendant bears the burden of proving that there is an adequate alternative forum. See, e.g., Mercier v. Sheraton Int'l, Inc., 935 F.2d 419, 423, 425 (1st Cir.1991); In re Air Crash Disaster Near New Orleans, 821 F.2d 1147, 1164 (5th Cir.1987) (en banc), vacated in part on other grounds, 490 U.S. 1032, 109 S.Ct. 1928, 104 L.Ed.2d 400 (1989); Cheng v. Boeing Co., 708 F.2d 1406, 1411 (9th Cir.), cert. denied, 464 U.S. 1017, 104 S.Ct. 549, 78 L.Ed.2d 723 (1983); Schertenleib v. Traum, 589 F.2d 1156, 1160 (2d Cir.1978); see also Watson v. Merrell Dow Pharmaceuticals, Inc., 769 F.2d 354, 357 (6th Cir.1985). 29 At the outset of any forum non conveniens inquiry, the court must determine [316 U.S.App.D.C. 95] whether there exists an alternative forum. Ordinarily, this requirement will be satisfied when the defendant is "amenable to process" in the other jurisdiction. In rare circumstances, however, where the remedy offered by the other forum is clearly unsatisfactory, the other forum may not be an adequate alternative, and the initial requirement may not be satisfied. Thus, for example, dismissal would not be appropriate where the alternative forum does not permit litigation of the subject matter of the dispute. 28
202
gaps." Mercier,935 F.2d at 425. The amount of information that the defendant must provide, in supporting affidavits or other evidence, depends on the facts of the individual case. Lacey, 862 F.2d at 44. Accordingly, the defendant must provide more detailed information if the plaintiff provides evidence that controverts the defendant's evidence. See Camejo v. Ocean Drilling & Exploration, 838 F.2d 1374, 1379-80 & n. 17 (5th Cir.1988). If the record before the court is so "fragmentary" that "it is impossible to make a sound determination" of whether an adequate alternative forum exists, the court will remand for further development of the facts. See C.A. La Seguridad v. Transytur Line, 707 F.2d 1304, 1308-09 (11th Cir.1983). 31 PIBC and Petra Bank could not prove on the present record that Jordan was an adequate alternative forum. PIBC submitted an affidavit from a Jordanian attorney, Rami M. Al-Hadidi, who states that "Jordanian courts are open to El-Fadl to adjudicate these claims against the defendants." Al-Hadidi also explains that the Jordanian Civil Code recognizes various causes of action that El-Fadl has brought. Yet PIBC's expert fails to address various potentially dispositive provisions of Jordanian law that El-Fadl brought to the district court's attention. Given the gap in PIBC's expert's affidavit and the undeveloped state of the record on this issue, the district court erred in finding that PIBC or Petra Bank met its burden of showing that Jordan is an adequate alternative forum. Cf. Mercier, 935 [316 U.S.App.D.C. 96] F.2d at 425; C.A. La Seguridad, 707 F.2d at 1308. 32 El-Fadl maintains that the Jordanian courts lack jurisdiction over claims based on actions taken in connection with the Petra Bank scandal--including actions on which he bases his claims for recovery. He called the district court's attention to a Jordanian statute, Law No. 2 for the year 1992, the Law of Lifting of Responsibility as a Result of Cancellation of the Martial Law (issued Sep. 12, 1991) ("Law No. 2"). As part of the lifting of martial law, Law No. 2 referred "[a]ll lawsuits" then in the military courts to the "competent Courts," except that "[n]otwithstanding the [general] provisions ..., the lawsuits of Petra Bank Company which are currently at the Martial Courts under investigations or trial shall be referred to the State Security Court." Law No. 2 further declared that: 33 All civil and military employees as well as all the other persons who undertook the implementation of the instructions of the Military Administration or had any relation with the implementation thereof at any time during the time when the martial law was in effect shall be discharged from any legal responsibility which resulted or will result from their actions pursuant to the provisions. 34 The district court concluded "that the affidavit submitted by [El-Fadl's] Jordanian attorney does not state unequivocally that [El-Fadl] is barred from bringing this suit in Jordan." Yet the attorney (Tukan) makes [316 U.S.App.D.C. 97] precisely that claim in his affidavit, based on his interpretation of the Jordanian statutes. PIBC and Petra Bank failed to respond with evidence that the Jordanian courts are available to El-Fadl. Petra Bank, which argued only that Resolution No. 4/90 directed El-Fadl's claims to insolvency proceedings, failed to address Law No. 2 altogether. PIBC's only evidence showing that El-Fadl can sue PIBC in Jordan was the conclusory statement in Al-Hadidi's affidavit that "Jordanian courts are open to El-Fadl to adjudicate these claims against the defendants." This conclusory statement--even though not specifically contradicted in Tukan's affidavit as it pertains to PIBC--flies in the face of evidence that El-Fadl may not be able to sue Petra Bank, and the statement is insufficient to show that he can sue PIBC in Jordan. This court will remand when the district court fails to consider a material matter in dispute. See Mercier, 935 F.2d at 423. Moreover, the district court appears to have incorrectly placed the burden of proving the inadequacy of the Jordanian courts upon El-Fadl in stating that: "[A]s the plaintiff [El-Fadl] has failed to demonstrate that this action would be barred in its entirety in Jordan, the Court determines that an adequate alternative forum exists." The district Consequently, if El-Fadl's expert is correct in describing the legal situation in Jordan, the Jordanian courts would appear to be closed to El-Fadl's claims against Petra Bank and perhaps even to claims against PIBC. Then this court would be faced with the "rare circumstance[ ]" in which "the alternative forum does not permit litigation of the subject matter of the dispute." Piper Aircraft,454 U.S. at 254 n. 22, 102 S.Ct. at 265 n. 22. A foreign forum is not inadequate merely because it has less favorable substantive law, id. at 247-55, 102 S.Ct. at 261-65, because it employs different adjudicative procedures, see, e.g., Lockman Found. v. Evangelical Alliance Mission, 930 F.2d 764, 768 (9th Cir.1991), or because of general allegations of corruption in the judicial system. See, e.g., Blanco v. Banco Industrial de Venezuela, 997 F.2d 974, 981-82 (2d Cir.1993). ElFadl's repeated reliance on a State Department report expressing "concern about the impartiality" of the Jordanian court system, for example, is unavailing. But if the foreign forum would deny him access to its judicial system on the claims in his complaint, dismissal on forum non conveniens grounds is inappropriate. See Ceramic Corp. v. Inka Maritime Corp., 1 F.3d 947, 949 (9th Cir.1993). 36 In addition, El-Fadl cited two resolutions regarding Petra Bank. 10 Based on the foregoing legal authorities, ElFadl's expert, a Jordanian attorney named Ibrahim J. Tukan, states in his affidavit that "[t]he above listed laws, decrees, and statutes constitute an absolute prohibition to Mr. El-Fadl to bring his causes of action in Jordan." PIBC's expert, Al-Hadidi, does not address any of these authorities in his affidavit. 35
203
court was required to hold PIBC and Petra Bank to their burden of persuasion on this issue. See ReidWalen,933 F.2d at 1394. 37 For these reasons, we hold that the district court erred in dismissing El-Fadl's claims against Petra Bank and PIBC on forum non conveniens grounds. On remand, the district court should determine the accuracy of ElFadl's uncontroverted characterization of the legal effect of the decrees as they relate to claims against Petra Bank. In determining whether the Jordanian courts provide El-Fadl with an alternative forum, the district court should also determine whether the Jordanian decrees would bar suit against PIBC. In addition, because ElFadl's expert, Tukan, also concluded that El-Fadl's intentional tort claims could not be brought in a civil lawsuit for recovery of damages, but could only be brought in conjunction with a criminal complaint, the district court should determine whether the Jordanian courts are inadequate for that reason. Although this procedural difference may not render El-Fadl's remedy in Jordan inadequate, see Lockman Found., 930 F.2d at 768-69, the district court should consider whether the situation would be different if El-Fadl shows that filing a criminal complaint requires the cooperation of the Jordanian authorities, who worked with the defendants in prosecuting El-Fadl in the military courts. 38 If the district court on remand finds that PIBC and Petra Bank have met their burden to show that Jordan is an adequate alternative forum, and the court again concludes that the balance of private and public interests weighs in favor of forum non conveniens dismissal, "the trial judge must finally ensure that [El-Fadl] can reinstate [his] suit in the alternative forum without undue inconvenience or prejudice." Pain, 637 F.2d at 785. If doubts about the availability of an alternative forum remain due to the difficulties in determining Jordanian law, the district court may dismiss for forum non conveniens, but only if conditioned on the defendants' submitting to jurisdiction in Jordan and on the Jordanian courts' acceptance of the case. See, e.g., Blanco, 997 F.2d at 984; Mercier, 935 F.2d at 426; Baris v. Sulpicio Lines, Inc., 932 F.2d 1540, 1551-52 (5th Cir.1991). Even if the district court determines that there is an available forum, the court may condition a dismissal on PIBC's agreement to be served in the District of Columbia for suit in Jordan.11 39 UNITED AIRLINES, INC., Petitioner vs. COURT OF APPEALS, ANICETO FONTANILLA, in his personal capacity and in behalf of his minor son MYCHAL ANDREW FONTANILLA, Respondents. KAPUNAN, J.: On March 1, 1989, private respondent Aniceto Fontanilla purchased from petitioner United Airlines, through the Philippine Travel Bureau in Manila three (3) "Visit the U.S.A." tickets for himself, his wife and his minor son Mychal for the following routes: a. San Francisco to Washinton (15 April 1989); b. Washington to Chicago (25 April 1989); G.R. No. 124110 April 20, 2001 Republic of the Philippines SUPREME COURT Baguio City FIRST DIVISION Accordingly, we reverse the dismissal of the claims against Petra Bank for lack of personal jurisdiction and remand to allow El-Fadl to conduct discovery of jurisdictional facts; we also reverse the dismissal of the claims against Petra Bank and PIBC on grounds of forum non conveniens, remanding [316 U.S.App.D.C. 98] for a finding whether Petra Bank and PIBC can show that Jordan is an adequate alternative forum; otherwise, we affirm.
204
c. Chicago to Los Angeles (29 April 1989); d. Los Angeles to San Francisco (01 may 1989 for petitioners wife and 05 May 1989 for petitioner and his son). 1 All flights had been confirmed previously by United Airlines. 2 Petitioner United Airlines has a different version of what occurred at the Los Angeles Airport on May 5, 1989. The Fontanillas proceeded to the United States as planned, where they used the first coupon from San Francisco to Washington. On April 24, 1989, Aniceto Fontanilla bought two (2) additional coupons each for himself, his wife and his son from petitioner at its office in Washington Dulles Airport. After paying the penalty for rewriting their tickets, the Fontanillas were issued tickets with corresponding boarding passes with the words "CHECK-IN REQUIRED," for United Airlines Flight No. 1108, set to leave from Los Angeles to San Francisco at 10:30 a.m. on May 5, 1989.3 The cause of the non-boarding of the Fontanillas on United Airlines Flight No. 1108 makes up the bone of contention of this controversy.1wphi1.nt Private respondents version is as follows: Aniceto Fontanilla and his son Mychal claim that on May 5, 1989, upon their arrival at the los Angeles Airport for their flight, they proceeded to united Airlines counter where they were attended by an employee wearing a nameplate bearing the name "LINDA." Linda examined their tickets, punched something into her computer and then told them that boarding would be in fifteen minutes.4 When the flight was called, the Fontanillas proceeded to the plane. To their surprise, the stewardess at the gate did not allow them to board the plane, as they had no assigned seat numbers. They were then directed to go back to the "check-in" counter where Linda subsequently informed them that the flight had been overbooked and asked them to wait.5 The Fontanillas tried to explain to Linda the special circumstances of their visit. However, Linda told them in arrogant manner, "So what, I can not do anything about it."6 Subsequently, three other passengers with Caucasian features were graciously allowed to baord, after the Fontanillas were told that the flight had been overbooked.7 The plane then took off with the Fontanillas baggage in tow, leaving them behind.8 The Fontanillas then complained to Linda, who in turn gave them an ugly stare and rudely uttered, "its not my fault. Its the fault of the company. Just sit down and wait."9 When Mr. Fontanilla reminded Linda of the inconvenience being caused to them, she bluntly retorted, "Who do you think you are? You lousy Flips are good for nothing beggars. You always ask for American aid." After which she remarked "Dont worry about your baggage. Anyway there is nothing in there. What are you doing here anyway? I will report you to immigration. You Filipinos should go home."10 Such rude statements were made in front of other people in the airport causing the Fontanillas to suffer shame, humiliation and embarrassment. The chastening situation even caused the younger Fontanilla to break into tears.11 After some time, Linda, without any explanation, offered the Fontanillas $50.00 each. She simply said "Take it or leave it." This, the Fontanillas declined.12 According to United Airlines, the Fontanillas did not initially go to the check-in counter to get their seat assignments for UA Flight 1108. They instead proceeded to join the queue boarding the aircraft without first securing their seat assignments as required in their ticket and boarding passes. Having no seat assignments, the stewardess at the door of the plane instructed them to go to the check-in counter. When the Fontanillas proceeded to the check-in counter, Linda Allen, the United Airlines Customer Representative at the counter informed them that the flight was overbooked. She booked them on the next available flight and offered them denied boarding compensation. Allen vehemently denies uttering the derogatory and racist words attributed to her by the Fontanillas.14 The incident prompted the Fontanillas to file Civil Case No. 89-4268 for damages before the Regional Trial Court of Makati. After trial on the merits, the trial court rendered a decision, the dispositive portion of which reads as follows: WHEREFORE, judgment is rendered dismissing the complaint. The counterclaim is likewise dismissed as it appears that plaintiffs were not actuated by legal malice when they filed the instant complaint.15 On appeal, the Court of Appeals ruled in favor of the Fontanillas. The appellate court found that there was an admission on the part of United Airlines that the Fontanillas did in fact observe the check-in requirement. It ruled further that even assuming there was a failure to observe the check-in requirement, United Airlines failed to comply with the procedure laid down in cases where a passenger is denied boarding. The appellate court likewise gave credence to the claim of Aniceto Fontanilla that the employees of United Airlines were discourteous and arbitrary and, worse, discriminatory. In light of such treatment, the Fontanillas were entitled to moral damages. The dispositive portion of the decision of the respondent Court of Appeals dated 29 September 1995, states as follows: WHEREFORE, in view of the foregoing, judgment appealed herefrom is hereby REVERSED and SET ASIDE, and a new judgment is entered ordering defendantappellee to pay plaintiff-appellant the following: The Fontanillas then proceeded to the United Airlines customer service counter to plead their case. The male employee at the counter reacted by shouting that he was ready for it and left without saying anything.13 The Fontanillas were not booked on the next flight, which departed for San Francisco at 11:00 a.m. It was only at 12:00 noon that they were able to leave Los Angeles on United Airlines Flight No. 803.
a. b. c.
P200,000.00 as moral damages; P200,000.00 as exemplary damages; P50,000.00 as attorneys fees;
No pronouncement as to costs. SO ORDERED.16 Petitioner United Airlines now comes to this Court raising the following assignments of errors;
205
I RESPONDENT COURT OF APPEALS GRVAELY ERRED IN RULING THAT THE TRIAL COURT WAS WRONG IN FAILING TO CONSIDER THE ALLEGED ADMISSION THAT PRIVATE RESPONDENT OBSERVED THE CHECK-IN REQUIREMENT. II RESPONDENT COURT OF APPEALS GRAVELY ERRED IN RULING THAT PRIVATE RESPONDENTS FAILURE TO CHECK-IN WILL NOT DEFEAT HIS CLAIMS BECAUSE THE DENIED BOARDING RULES WERE NOT COMPLIED WITH. We disagree with the above conclusion reached by respondent Court of Appeals. Paragraph 7 of private respondents complaint states: 7. On May 5, 1989 at 9:45 a.m., plaintiff and his son checked in at defendants designated counter at the airport in Los Angeles for their scheduled flight to San Francisco on defendants Flight No. 1108.20 Responding to the above allegations, petitioner averred in paragraph 4 of its answer, thus: 4. Admits the allegation set forth in paragraph 7 of the complaint except to deny that plaintiff and his son checked in at 9:45 a.m., for lack of knowledge or information at this point in time as to the truth thereof.21 The rule authorizing an answer that the defendant has no knowledge or information sufficient to form a belief as to the truth of an averment giving such answer is asserted is so plainly and necessarily within the defendants knowledge that his averment of ignorance must be palpably untrue.22 Whether or not private respondents checked in at petitioners designated counter at the airport at 9:45 a.m. on May 5, 1989 must necessarily be within petitioners knowledge. While there was no specific denial as to the fact of compliance with the "check-in" requirement by private respondents, petitioner presented evidence to support its contention that there indeed was no compliance. Private respondents then are said to have waived the rule on admission. It not only presented evidence to support its contention that there was compliance with the check-in requirement, it even allowed petitioner to present rebutal evidence. In the case of Yu Chuck vs. "Kong Li Po," we ruled that: The object of the rule is to relieve a party of the trouble and expense in proving in the first instance an alleged fact, the existence or non-existence of which is necessarily within the knowledge of the adverse party, and of the necessity (to his opponents case) of establishing which such adverse party is notified by his opponents pleadings. The plaintiff may, of course, waive the rule and that is what must be considered to have done (sic) by introducing evidence as to the execution of the document and failing to object to the defendants evidence in refutation; all this evidence is now competent and the case must be decided thereupon.23 The determination of the other issues raised is dependent on whether or not there was a breach of contract in bad faith on the part of the petitioner in not allowing the Fontanillas to board United Airlines Flight 1108. On the first issue raised by the petitioner, the respondent Court of Appeals ruled that when Rule 9, Section 1 of the Rules of Court,18 there was an implied admission in petitioners answer in the allegations in the complaint that private respondent and his son observed the "check-in requirement at the Los Angeles Airport." Thus: A perusal of the above pleadings filed before the trial court disclosed that there exist a blatant admission on the part of the defendant-appellee that the plaintiffs-appellants indeed observed the "check-in" requirement at the Los Angeles Airport on May 5, 1989. In view of defendant-appellees admission of plaintiffs-appellants material averment in the complaint. We find no reason why the trial court should rule against such admission.19 It must be remembered that the general rule in civil cases is that the party having the burden of proof of an essential fact must produce a preponderance of evidence thereon.24 Although the evidence adduced by the plaintiff is stronger than that presented by the defendant, a judgment cannot be entered in favor of the former, if his evidence is not sufficient to sustain his cause of action. The plaintiff must rely on the strength of his own evidence and not upon the weakness of the defendants.25 Proceeding from this, and considering the contradictory findings of facts by the Regional Trial Court and the Court of Appeals, the question before this Court is whether or not private respondents were able to prove with adequate evidence his allegations of breach of contract in bad faith.
III RESPONDENT COURT OF APPEALS GRAVELY ERRED IN RULING THAT PRIVATE RESPONDENT IS ENTITLED TO MORAL DAMAGES OF P200,000. IV RESPONDENT COURT OF APPEALS GRAVELY ERRED IN RULING THAT PRIVATE RESPONDENT IS ENTITLED TO EXEMPLARY DAMAGES OF P200,000. V RESPONDENT COURT OF APPEALS GRAVELY ERRED IN RULING THAT PRIVATE RESPONDENT IS ENTITLED TO ATTORNEYS FEES OF P50,000.17
206
We rule in the negative. Time and again, the Court has pronounced that appellate courts should not, unless for strong and cogent reasons, reverse the findings of facts of trial courts. This is so because trial judges are in better position to examine real evidence and at a vantage point to observe the actuation and the demeanor of the witnesses.26While not the sole indicator of the credibility of a witness, it is of such weight that it has been said to be the touchstone of credibility.27 Aniceto Fontanillas assertion that upon arrival at the airport at 9:45 a.m., he immediately proceeded to the check-in counter, and that Linda Allen punched in something into the computer is specious and not supported by the evidence on record. In support of their allegations, private respondents submitted a copy of the boarding pass. Explicitly printed on the boarding pass are the words "Check-In Required." Curiously, the said pass did not indicate any seat number. If indeed the Fontanillas checked in at the designated time as they claimed, why then were they not assigned seat numbers? Absent any showing that Linda was so motivated, we do not buy into private respondents claim that Linda intentionally deceived him, and made him the laughing stock among the passengers.28 Hence, as correctly observed by the trial court: Plaintiffs fail to realize that their failure to check in, as expressly required in their boarding passes, is they very reason why they were not given their respective seat numbers, which resulted in their being denied boarding.29 Neither do we agree with the conclusion reached by the appellate court that private respondents failure to comply with the check-in requirement will not defeat his claim as the denied boarding rules were not complied with. Notably, the appellate court relied on the Code of Federal Regulation Part on Oversales which states: 250.6 Exceptions to eligibility for denied boarding compensation. A passenger denied board involuntarily from an oversold flight shall not be eligible for denied board compensation if: a. The passenger does not comply with the carriers contract of carriage or tariff provisions regarding ticketing, reconfirmation, check-in, and acceptability for transformation. The law of the forum on the subject matter is Economic Regulations No. 7 as amended by Boarding Priority and Denied Board Compensation of the Civil Aeronautics Board which provides that the check-in requirement be complied with before a passenger may claim against a carrier for being denied boarding: Sec. 5. Amount of Denied Boarding Compensation Subject to the exceptions provided hereinafter under Section 6, carriers shall pay to passengers holding confirmed reserved space and who have presented themselves at the proper place and time and fully complied with the carriers check-in and reconfirmation procedures and who are acceptable for carriage under the Carriers tariff but who have been denied boarding for lack of space, a compensation at the rate of: xxx Private respondents narration that they were subjected to harsh and derogatory remarks seems incredulous. However, this Court will not attempt to surmise what really happened, suffice to say, private respondent was not able to prove his cause of action, for as the trial court correctly observed: xxx plaintiffs claim to have been discriminated against and insulted in the presence of several people. Unfortunately, plaintiffs limited their evidence to the testimony of Aniceto Fontanilla, without any corroboration by the people who saw or heard the discriminatory remarks and insults; while such limited testimony could possibly be true, it does not enable the Court to reach the conclusion that plaintiffs have, by a preponderance of evidence, proven that they are entitled to P1,650,000.00 damages from defendant.31 As to the award of moral and exemplary damages, we find error in the award of such by the Court of Appeals. For the plaintiff to be entitled to an award of moral damages arising from a breach of contract of carriage, the carrier must have acted with fraud or bad faith. The appellate court predicated its award on our pronouncement in the case of Zalanea vs. Court of Appeals, supra, where we stated: Existing jurisprudence explicitly states that overbooking amounts to bad faith, entitling passengers concerned to an award of moral damages. In Alitalia Airways vs. Court of Appeals, where passengers with confirmed booking were refused carriage on the last minute, this Court held that when an airline issues a ticket to a passenger confirmed on a particular flight, on a certain date, a contract of carriage arises, and the passenger has every right to except that he would fly on that flight and on that date. If he does not, then the carrier opens itself to a suit for breach of contract of carriage. Where an airline had deliberately overbooked, it took the risk of having to deprive some passengers of their seats in case all of them would show up for check in. For the indignity and inconvenience of being refused a confirmed seat on the last minute, said passenger is entitled to moral damages. (Emphasis supplied). However, the Courts ruling in said case should be read in consonance with existing laws, particularly, Economic Regulations No. 7, as amended, of the Civil Aeronautics Board: Sec. 3. Scope. This regulation shall apply to every Philippine and foreign air carrier with respect to its operation of flights or portions of flights originating from or terminating at, or serving a point within the territory of the Republic of the Philippines insofar as it denies boarding to a passenger on a flight, or portion of a flight inside or outside the Philippines, for which he holds confirmed reserved space. Furthermore, this Regulation is designed to cover only honest mistakes on the part of the carriers and excludes deliberate and willful acts of non-accommodation. Provided, however, that overbooking not exceeding 10% of the seating capacity of the aircraft shall not be considered as a deliberate and willful act of non-accommodation.
The appellate court, however, erred in applying the laws of the United States as, in the case at bar, Philippine law is the applicable law. Although, the contract of carriage was to be performed in the United States, the tickets were purchased through petitioners agent in Manila. It is true that the tickets were "rewritten" in Washington, D.C. however, such fact did not change the nature of the original contract of carriage entered into by the parties in Manila. In the case of Zalanea vs. Court of Appeals,30 this Court applied the doctrine of lex loci contractus. According to the doctrine, as a general rule, the law of the place where a contract is made or entered into governs with respect to its nature and validity, obligation and interpretation. This has been said to be the rule even though the place where the contract was made is different from the place where it is to be performed, and particularly so, if the place of the making and the place of performance are the same. Hence, the court should apply the law of the place where the airline ticket was issued, when the passengers are residents and nationals of the forum and the ticket is issued in such State by the defendant airline.
207
What this Court considers as bad faith is the willful and deliberate overbooking on the part of the airline carrier. The above-mentioned law clearly states that when the overbooking does not exceed ten percent (10%), it is not considered as deliberate and therefore does not amount to bad faith. While there may have been overbooking in this case, private respondents were not able to prove that the overbooking on United Airlines Flight 1108 exceeded ten percent. As earlier stated, the Court is of the opinion that the private respondents were not able to prove that they were subjected to coarse and harsh treatment by the ground crew of united Airlines. Neither were they able to show that there was bad faith on part of the carrier airline. Hence, the award of moral and exemplary damages by the Court of Appeals is improper. Corollarily, the award of attorneys fees is, likewise, denied for lack of any legal and factual basis. WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals in CA-G.R. CV No. 37044 is herebyREVERSED and SET ASIDE. The decision of the Regional Trial Court of Makati City in Civil Case No. 89-4268 dated April 8, 1991 is hereby REINSTATED. SO ORDERED.
208
Republic of the Philippines SUPREME COURT Manila FIRST DIVISION MONDEJAR RESURRECCION D. NAZARENO, JUAN OLINDO, FRANCISCO R. OLIVARES, PEDRO ORBISTA, JR., RICARDO ORDONEZ, ERNIE PANCHO, JOSE PANCHO, GORGONIO P. PARALA, MODESTO PINPIN, JUANITO PAREA, ROMEO I. PATAG, FRANCISCO PINPIN, LEONARDO POBLETE, JAIME POLLOS, DOMINGO PONDALIS, EUGENIO RAMIREZ, LUCIEN M. RESPALL, GAUDENCIO RETANAN, JR., TOMAS B. RETENER, ALVIN C. REYES, RIZALINO REYES, SOLOMON B. REYES, VIRGILIO G. RICAZA, RODELIO RIETA, JR., BENITO RIVERA, JR., BERNARDO J. ROBILLOS, PABLO A. ROBLES, JOSE ROBLEZA, QUIRINO RONQUILLO, AVELINO M. ROQUE, MENANDRO L. SABINO, PEDRO SALGATAR, EDGARDO SALONGA, NUMERIANO SAN MATEO, FELIZARDO DE LOS SANTOS, JR., GABRIEL SANTOS, JUANITO SANTOS, PAQUITO SOLANTE, CONRADO A. SOLIS, JR., RODOLFO SULTAN, ISAIAS TALACTAC, WILLIAM TARUC, MENANDRO TEMPROSA, BIENVENIDO S. TOLENTINO, BENEDICTO TORRES, MAXIMIANO TORRES, FRANCISCO G. TRIAS, SERGIO A. URSOLINO, ROGELIO VALDEZ, LEGORIO E. VERGARA, DELFIN VICTORIA, GILBERT VICTORIA, HERNANE VICTORIANO, FRANCISCO VILLAFLORES, DOMINGO VILLAHERMOSA, ROLANDO VILLALOBOS, ANTONIO VILLAUZ, DANILO VILLANUEVA, ROGELIO VILLANUEVA, ANGEL VILLARBA, JUANITO VILLARINO, FRANCISCO ZARA, ROGELIO AALAGOS, NICANOR B. ABAD, ANDRES ABANES, REYNALDO ABANES, EDUARDO ABANTE, JOSE ABARRO, JOSEFINO ABARRO, CELSO S. ABELANIO, HERMINIO ABELLA, MIGUEL ABESTANO, RODRIGO G. ABUBO, JOSE B. ABUSTAN, DANTE ACERES, REYNALDO S. ACOJIDO, LEOWILIN ACTA, EUGENIO C. ACUEZA, EDUARDO ACUPAN, REYNALDO ACUPAN, SOLANO ACUPAN, MANUEL P. ADANA, FLORENTINO R. AGNE, QUITERIO R. AGUDO, MANUEL P. AGUINALDO, DANTE AGUIRRE, HERMINIO AGUIRRE, GONZALO ALBERTO, JR., CONRADO ALCANTARA, LAMBERTO Q. ALCANTARA, MARIANITO J. ALCANTARA, BENCIO ALDOVER, EULALIO V. ALEJANDRO, BENJAMIN ALEJANDRO, EDUARDO L. ALEJANDRO, MAXIMINO ALEJANDRO, ALBERTO ALMENAR, ARNALDO ALONZO, AMADO ALORIA, CAMILO ALVAREZ, MANUEL C. ALVAREZ, BENJAMIN R. AMBROCIO, CARLOS AMORES, BERNARD P. ANCHETA, TIMOTEO O. ANCHETA, JEOFREY ANI, ELINO P. ANTILLON, ARMANDRO B. ANTIPONO, LARRY T. ANTONIO, ANTONIO APILADO, ARTURO P. APILADO, FRANCISCO APOLINARIO, BARTOLOME M. AQUINO, ISIDRO AQUINO, PASTOR AQUINO, ROSENDO M. AQUINO, ROBERTO ARANGORIN, BENJAMIN O. ARATEA, ARTURO V. ARAULLO, PRUDENCIO ARAULLO, ALEXANDER ARCAIRA, FRANCISCO ARCIAGA, JOSE AREVALO, JUANTO AREVALO, RAMON AREVALO, RODOLFO AREVALO, EULALIO ARGUELLES, WILFREDO P. ARICA, JOSE M. ADESILLO, ANTONIO ASUNCION, ARTEMIO M. ASUNCION, EDGARDO ASUNCION, REXY M. ASUNCION, VICENTE AURELIO, ANGEL AUSTRIA, RICARDO P. AVERILLA, JR., VIRGILIO AVILA, BARTOLOME AXALAN, ALFREDO BABILONIA, FELIMON BACAL, JOSE L. BACANI, ROMULO R. BALBIERAN, VICENTE BALBIERAN, RODOLFO BALITBIT, TEODORO Y. BALOBO, DANILO O. BARBA, BERNARDO BARRO, JUAN A. BASILAN, CEFERINO BATITIS, VIVENCIO C. BAUAN, GAUDENCIO S. BAUTISTA, LEONARDO BAUTISTA, JOSE D. BAUTISTA, ROSTICO BAUTISTA, RUPERTO B. BAUTISTA, TEODORO S. BAUTISTA, VIRGILIO BAUTISTA, JESUS R. BAYA, WINIEFREDO BAYACAL, WINIEFREDO BEBIT, BEN G. BELIR, ERIC B. BELTRAN, EMELIANO BENALES, JR., RAUL BENITEZ, PERFECTO BENSAN, IRENEO BERGONIO, ISABELO BERMUDEZ, ROLANDO I. BERMUDEZ, DANILO BERON, BENJAMIN BERSAMIN, ANGELITO BICOL, ANSELMO BICOL, CELESTINO BICOL, JR., FRANCISCO BICOL, ROGELIO BICOL, ROMULO L. BICOL, ROGELIO BILLIONES, TEOFILO N. BITO, FERNANDO BLANCO, AUGUSTO BONDOC, DOMINGO BONDOC, PEPE S. BOOC, JAMES R. BORJA, WILFREDO BRACEROS, ANGELES C. BRECINO, EURECLYDON G. BRIONES, AMADO BRUGE, PABLITO BUDILLO, ARCHIMEDES BUENAVENTURA, BASILIO BUENAVENTURA, GUILLERMO BUENCONSEJO, ALEXANDER BUSTAMANTE, VIRGILIO BUTIONG, JR., HONESTO P. CABALLA, DELFIN CABALLERO, BENEDICTO CABANIGAN, MOISES CABATAY, HERMANELI CABRERA, PEDRO CAGATAN, JOVEN C. CAGAYAT, ROGELIO L. CALAGOS, REYNALDO V. CALDEJON, OSCAR C. CALDERON, NESTOR D. CALLEJA, RENATO R. CALMA, NELSON T. CAMACHO, SANTOS T. CAMACHO, ROBERTO CAMANA, FLORANTE C. CAMANAG EDGARDO M. CANDA, SEVERINO CANTOS, EPIFANIO A. CAPONPON, ELIAS D. CARILLO, JR., ARMANDO CARREON, MENANDRO M. CASTAEDA, BENIGNO A. CASTILLO, CORNELIO L. CASTILLO, JOSEPH B. CASTILLO, ANSELMO CASTILLO, JOAQUIN CASTILLO, PABLO L. CASTILLO, ROMEO P. CASTILLO, SESINANDO CATIBOG, DANILO CASTRO, PRUDENCIO A. CASTRO, RAMO CASTRO, JR., ROMEO A. DE CASTRO, JAIME B. CATLI, DURANA D. CEFERINO, RODOLFO B. CELIS, HERMINIGILDO CEREZO, VICTORIANO CELESTINO, BENJAMIN CHAN, ANTONIO C. CHUA, VIVENCIO B. CIABAL, RODRIGO CLARETE, AUGUSTO COLOMA, TURIANO CONCEPCION, TERESITO CONSTANTINO, ARMANDO CORALES, RENATO C. CORCUERA, APOLINAR CORONADO, ABELARDO CORONEL, FELIX CORONEL, JR., LEONARDO CORPUZ, JESUS M. CORRALES, CESAR
G.R. No. L-104776 December 5, 1994 BIENVENIDO M. CADALIN, ROLANDO M. AMUL, DONATO B. EVANGELISTA, and the rest of 1,767 NAMED-COMPLAINANTS, thru and by their Attorney-in-fact, Atty. GERARDO A. DEL MUNDO, petitioners, vs. PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION'S ADMINISTRATOR, NATIONAL LABOR RELATIONS COMMISSION, BROWN & ROOT INTERNATIONAL, INC. AND/OR ASIA INTERNATIONAL BUILDERS CORPORATION, respondents. G.R. Nos. 104911-14 December 5, 1994 BIENVENIDO M. CADALIN, ET AL., petitioners, vs. HON. NATIONAL LABOR RELATIONS COMMISSION, BROWN & ROOT INTERNATIONAL, INC. and/or ASIA INTERNATIONAL BUILDERS CORPORATION, respondents. G.R. Nos. 105029-32 December 5, 1994 ASIA INTERNATIONAL BUILDER CORPORATION and BROWN & ROOT INTERNATIONAL, INC., petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, BIENVENIDO M. CADALIN, ROLANDO M. AMUL, DONATO B. EVANGELISTA, ROMEO PATAG, RIZALINO REYES, IGNACIO DE VERA, SOLOMON B. REYES, JOSE M. ABAN, EMIGDIO N. ABARQUEZ, ANTONIO ACUPAN, ROMEO ACUPAN, BENJAMIN ALEJANDRE, WILFREDO D. ALIGADO, MARTIN AMISTAD, JR., ROLANDO B. AMUL, AMORSOLO ANADING, ANTONIO T. ANGLO, VICENTE ARLITA, HERBERT AYO, SILVERIO BALATAZO, ALFREDO BALOBO, FALCONERO BANAAG, RAMON BARBOSA, FELIX BARCENA, FERNANDO BAS, MARIO BATACLAN, ROBERTO S. BATICA, ENRICO BELEN, ARISTEO BICOL, LARRY C. BICOL, PETRONILLO BISCOCHO, FELIX M. BOBIER, DIONISIO BOBONGO, BAYANI S. BRACAMANTE, PABLITO BUSTILLO, GUILLERMO CABEZAS, BIENVENIDO CADALIN, RODOLFO CAGATAN, AMANTE CAILAO, IRENEO CANDOR, JOSE CASTILLO, MANUEL CASTILLO, REMAR CASTROJERES, REYNALDO CAYAS, ROMEO CECILIO, TEODULO CREUS, BAYANI DAYRIT, RICARDO DAYRIT, ERNESTO T. DELA CRUZ, FRANCISCO DE GUZMAN, ONOFRE DE RAMA, IGNACIO DE VERA, MODESTO DIZON, REYNALDO DIZON, ANTONIO S. DOMINGUEZ, GILBERT EBRADA, RICARDO EBRADA, ANTONIO EJERCITO, JR., EDUARTE ERIDAO, ELADIO ESCOTOTO, JOHN ESGUERRA, EDUARDO ESPIRITU, ERNESTO ESPIRITU, RODOLFO ESPIRITU, NESTOR M. ESTEVA, BENJAMIN ESTRADA, VALERIO EVANGELISTA, OLIGARIO FRANCISCO, JESUS GABAWAN, ROLANDO GARCIA, ANGEL GUDA, PACITO HERNANDEZ, ANTONIO HILARIO, HENRY L. JACOB, HONESTO JARDINIANO, ANTONIO JOCSON, GERARDO LACSAMANA, EFREN U. LIRIO LORETO LONTOC, ISRAEL LORENZO, ALEJANDRO LORINO, JOSE MABALAY, HERMIE MARANAN, LEOVIGILDO MARCIAL, NOEL MARTINEZ, DANTE MATREO, LUCIANO MELENDEZ, RENATO MELO, FRANCIS MEDIODIA, JOSE C. MILANES, RAYMUNDO C. MILAY, CRESENCIANO MIRANDA, ILDEFONSO C. MOLINA, ARMANDO B.
209
CORTEMPRATO, FRANCISCO O. CORVERA, FRANCISCO COSTALES, SR., CELEDONIO CREDITO, ALBERTO A. CREUS, ANACLETO V. CRUZ, DOMINGO DELA CRUZ, AMELIANO DELA CRUZ, JR., PANCHITO CRUZ, REYNALDO B. DELA CRUZ, ROBERTO P. CRUZ, TEODORO S. CRUZ, ZOSIMO DELA CRUZ, DIONISIO A. CUARESMA, FELIMON CUIZON, FERMIN DAGONDON, RICHARD DAGUINSIN, CRISANTO A. DATAY, NICASIO DANTINGUINOO, JOSE DATOON, EDUARDO DAVID, ENRICO T. DAVID, FAVIO DAVID, VICTORIANO S. DAVID, EDGARDO N. DAYACAP, JOSELITO T. DELOSO, CELERINO DE GUZMAN, ROMULO DE GUZMAN, LIBERATO DE GUZMAN, JOSE DE LEON, JOSELITO L. DE LUMBAN, NAPOLEON S. DE LUNA, RICARDO DE RAMA, GENEROSO DEL ROSARIO, ALBERTO DELA CRUZ, JOSE DELA CRUZ, LEONARDO DELOS REYES, ERNESTO F. DIATA, EDUARDO A. DIAZ, FELIX DIAZ, MELCHOR DIAZ, NICANOR S. DIAZ, GERARDO C. DIGA, CLEMENTE DIMATULAC, ROLANDO DIONISIO, PHILIPP G. DISMAYA, BENJAMIN DOCTOLERO, ALBERTO STO. DOMINGO, BENJAMIN E. DOZA, BENJAMIN DUPA, DANILO C. DURAN, GREGORIO D. DURAN, RENATO A. EDUARTE, GODOFREDO E. EISMA, ARDON B. ELLO, UBED B. ELLO, JOSEFINO ENANO, REYNALDO ENCARNACION, EDGARDO ENGUANCIO, ELIAS EQUIPANO, FELIZARDO ESCARMOSA, MIGUEL ESCARMOSA, ARMANDO ESCOBAR, ROMEO T. ESCUYOS, ANGELITO ESPIRITU, EDUARDO S. ESPIRITU, REYNALDO ESPIRITU, ROLANDO ESPIRITU, JULIAN ESPREGANTE, IGMIDIO ESTANISLAO, ERNESTO M. ESTEBAN, MELANIO R. ESTRO, ERNESTO M. ESTEVA, CONRADO ESTUAR, CLYDE ESTUYE, ELISEO FAJARDO, PORFIRIO FALQUEZA, WILFREDO P. FAUSTINO, EMILIO E. FERNANDEZ, ARTEMIO FERRER, MISAEL M. FIGURACION, ARMANDO F. FLORES, BENJAMIN FLORES, EDGARDO C. FLORES, BUENAVENTURA FRANCISCO, MANUEL S. FRANCISCO, ROLANDO FRANCISCO, VALERIANO FRANCISCO, RODOLFO GABAWAN, ESMERALDO GAHUTAN, CESAR C. GALANG, SANTIAGO N. GALOSO, GABRIEL GAMBOA, BERNARDO GANDAMON, JUAN GANZON, ANDRES GARCIA, JR., ARMANDO M. GARCIA, EUGENIO GARCIA, MARCELO L. GARCIA, PATRICIO L. GARCIA, JR., PONCIANO G. GARCIA, PONCIANO G. GARCIA, JR., RAFAEL P. GARCIA, ROBERTO S. GARCIA, OSIAS G. GAROFIL, RAYMUNDO C. GARON, ROLANDO G. GATELA, AVELINO GAYETA, RAYMUNDO GERON, PLACIDO GONZALES, RUPERTO H. GONZALES, ROGELIO D. GUANIO, MARTIN V. GUERRERO, JR., ALEXIS GUNO, RICARDO L. GUNO, FRANCISCO GUPIT, DENNIS J. GUTIERREZ, IGNACIO B. GUTIERREZ, ANGELITO DE GUZMAN, JR., CESAR H. HABANA, RAUL G. HERNANDEZ, REYNALDO HERNANDEZ, JOVENIANO D. HILADO, JUSTO HILAPO, ROSTITO HINAHON, FELICISIMO HINGADA, EDUARDO HIPOLITO, RAUL L. IGNACIO, MANUEL L. ILAGAN, RENATO L. ILAGAN, CONRADO A. INSIONG, GRACIANO G. ISLA, ARNEL L. JACOB, OSCAR J. JAPITENGA, CIRILO HICBAN, MAXIMIANO HONRADES, GENEROSO IGNACIO, FELIPE ILAGAN, EXPEDITO N. JACOB, MARIO JASMIN, BIENVENIDO JAVIER, ROMEO M. JAVIER, PRIMO DE JESUS, REYNALDO DE JESUS, CARLOS A. JIMENEZ, DANILO E. JIMENEZ, PEDRO C. JOAQUIN, FELIPE W. JOCSON, FELINO M. JOCSON, PEDRO N. JOCSON, VALENTINO S. JOCSON, PEDRO B. JOLOYA, ESTEBAN P. JOSE, JR., RAUL JOSE, RICARDO SAN JOSE, GERTRUDO KABIGTING, EDUARDO S. KOLIMLIM, SR., LAURO J. LABAY, EMMANUEL C. LABELLA, EDGARDO B. LACERONA, JOSE B. LACSON, MARIO J. LADINES, RUFINO LAGAC, RODRIGO LAGANAPAN, EFREN M. LAMADRID, GUADENCIO LATANAN, VIRGILIO LATAYAN, EMILIANO LATOJA, WENCESLAO LAUREL, ALFREDO LAXAMANA, DANIEL R. LAZARO, ANTONIO C. LEANO, ARTURO S. LEGASPI, BENITO DE LEMOS, JR., PEDRO G. DE LEON, MANOLITO C. LILOC, GERARDO LIMUACO, ERNESTO S. LISING, RENATO LISING, WILFREDO S. LISING, CRISPULO LONTOC, PEDRO M. LOPERA, ROGELIO LOPERA, CARLITO M. LOPEZ, CLODY LOPEZ, GARLITO LOPEZ, GEORGE F. LOPEZ, VIRGILIO M. LOPEZ, BERNARDITO G. LOREJA, DOMINGO B. LORICO, DOMINGO LOYOLA, DANTE LUAGE, ANTONIO M. LUALHATI, EMMANUEL LUALHATI, JR., LEONIDEZ C. LUALHATI, SEBASTIAN LUALHATI, FRANCISCO LUBAT, ARMANDO LUCERO, JOSELITO L. DE LUMBAN, THOMAS VICENTE O. LUNA, NOLI MACALADLAD, ALFREDO MACALINO, RICARDO MACALINO, ARTURO V. MACARAIG, ERNESTO V. MACARAIG, RODOLFO V. MACARAIG, BENJAMIN MACATANGAY, HERMOGENES MACATANGAY, RODEL MACATANGAY, ROMULO MACATANGAY, OSIAS Q. MADLANGBAYAN, NICOLAS P. MADRID, EDELBERTO G. MAGAT, EFREN C. MAGBANUA, BENJAMIN MAGBUHAT, ALFREDO C. MAGCALENG, ANTONIO MAGNAYE, ALFONSO MAGPANTAY, RICARDO C. MAGPANTAY, SIMEON M. MAGPANTAY, ARMANDO M. MAGSINO, MACARIO S. MAGSINO, ANTONIO MAGTIBAY, VICTOR V. MAGTIBAY, GERONIMO MAHILUM, MANUEL MALONZO, RICARDO MAMADIS, RODOLFO MANA, BERNARDO A. MANALILI, MANUEL MANALILI, ANGELO MANALO, AGUILES L. MANALO, LEOPOLDO MANGAHAS, BAYANI MANIGBAS, ROLANDO C. MANIMTIM, DANIEL MANONSON, ERNESTO F. MANUEL, EDUARDO MANZANO, RICARDO N. MAPA, RAMON MAPILE, ROBERTO C. MARANA, NEMESIO MARASIGAN, WENCESLAO MARASIGAN, LEONARDO MARCELO, HENRY F. MARIANO, JOEL MARIDABLE, SANTOS E. MARINO, NARCISO A. MARQUEZ, RICARDO MARTINEZ, DIEGO MASICAMPO, AURELIO MATABERDE, RENATO MATILLA, VICTORIANO MATILLA, VIRGILIO MEDEL, LOLITO M. MELECIO, BENIGNO MELENDEZ, RENER J. MEMIJE, REYNALDO F. MEMIJE, RODEL MEMIJE, AVELINO MENDOZA, JR., CLARO MENDOZA, TIMOTEO MENDOZA, GREGORIO MERCADO, ERNANI DELA MERCED, RICARDO MERCENA, NEMESIO METRELLO, RODEL MEMIJE, GASPAR MINIMO, BENJAMIN MIRANDA, FELIXBERTO D. MISA, CLAUDIO A. MODESTO, JR., OSCAR MONDEDO, GENEROSO MONTON, RENATO MORADA, RICARDO MORADA, RODOLFO MORADA, ROLANDO M. MORALES, FEDERICO M. MORENO, VICTORINO A. MORTEL, JR., ESPIRITU A. MUNOZ, IGNACIO MUNOZ, ILDEFONSO MUNOZ, ROGELIO MUNOZ, ERNESTO NAPALAN, MARCELO A. NARCIZO, REYNALDO NATALIA, FERNANDO C. NAVARETTE, PACIFICO D. NAVARRO, FLORANTE NAZARENO, RIZAL B. NAZARIO, JOSUE NEGRITE, ALFREDO NEPUMUCENO, HERBERT G. NG, FLORENCIO NICOLAS, ERNESTO C. NINON, AVELINO NUQUI, NEMESIO D. OBA, DANILO OCAMPO, EDGARDO OCAMPO, RODRIGO E. OCAMPO, ANTONIO B. OCCIANO, REYNALDO P. OCSON, BENJAMIN ODESA, ANGEL OLASO, FRANCISCO OLIGARIO, ZOSIMO OLIMBO, BENJAMIN V. ORALLO, ROMEO S. ORIGINES, DANILO R. ORTANEZ, WILFREDO OSIAS, VIRGILIO PA-A, DAVID PAALAN, JESUS N. PACHECO, ALFONSO L. PADILLA, DANILO PAGSANJAN, NUMERIANO PAGSISIHAN, RICARDO T. PAGUIO, EMILIO PAKINGAN, LEANDRO PALABRICA, QUINCIANO PALO, JOSE PAMATIAN, GONZALO PAN, PORFIRIO PAN, BIENVENIDO PANGAN, ERNESTO PANGAN, FRANCISCO V. PASIA, EDILBERTO PASIMIO, JR., JOSE V. PASION, ANGELITO M. PENA, DIONISIO PENDRAS, HERMINIO PERALTA, REYNALDO M. PERALTA, ANTONIO PEREZ, ANTOLIANO E. PEREZ, JUAN PEREZ, LEON PEREZ, ROMEO E. PEREZ, ROMULO PEREZ, WILLIAM PEREZ, FERNANDO G. PERINO, FLORENTINO DEL PILAR, DELMAR F. PINEDA, SALVADOR PINEDA, ELIZALDE PINPIN, WILFREDO PINPIN, ARTURO POBLETE, DOMINADOR R. PRIELA, BUENAVENTURA PRUDENTE, CARMELITO PRUDENTE, DANTE PUEYO, REYNALDO Q. PUEYO, RODOLFO O. PULIDO, ALEJANDRO PUNIO, FEDERICO QUIMAN, ALFREDO L. QUINTO, ROMEO QUINTOS, EDUARDO W. RACABO, RICARDO C. DE RAMA, RICARDO L. DE RAMA, ROLANDO DE RAMA, FERNANDO A. RAMIREZ, LITO S. RAMIREZ, RICARDO G. RAMIREZ, RODOLFO V. RAMIREZ, ALBERTO RAMOS, ANSELMO C. RAMOS, TOBIAS RAMOS, WILLARFREDO RAYMUNDO, REYNALDO RAQUEDAN, MANUEL F. RAVELAS, WILFREDO D. RAYMUNDO, ERNESTO E. RECOLASO, ALBERTO REDAZA, ARTHUR REJUSO, TORIBIO M. RELLAMA, JAIME RELLOSA, EUGENIO A. REMOQUILLO, GERARDO RENTOZA, REDENTOR C. REY, ALFREDO S. REYES, AMABLE S. REYES, BENEDICTO R. REYES, GREGORIO B. REYES, JOSE A. REYES, JOSE C. REYES, ROMULO M. REYES, SERGIO REYES, ERNESTO F. RICO, FERNANDO M. RICO, EMMANUEL RIETA, RICARDO RIETA, LEO B. ROBLES, RUBEN ROBLES, RODOLFO ROBLEZA, RODRIGO ROBLEZA, EDUARDO ROCABO, ANTONIO R. RODRIGUEZ, BERNARDO RODRIGUEZ, ELIGIO RODRIGUEZ, ALMONTE ROMEO, ELIAS RONQUILLO, ELISE RONQUILLO, LUIS VAL B. RONQUILLO, REYNOSO P. RONQUILLO, RODOLFO RONQUILLO, ANGEL ROSALES, RAMON ROSALES, ALBERTO DEL ROSARIO, GENEROSO DEL ROSARIO, TEODORICO DEL ROSARIO, VIRGILIO L. ROSARIO, CARLITO SALVADOR, JOSE SAMPARADA, ERNESTO SAN PEDRO, ADRIANO V. SANCHA, GERONIMO M. SANCHA, ARTEMIO B. SANCHEZ, NICASIO SANCHEZ, APOLONIO P. SANTIAGO, JOSELITO S. SANTIAGO, SERGIO SANTIAGO, EDILBERTO C. SANTOS, EFREN S. SANTOS, RENATO D. SANTOS, MIGUEL SAPUYOT, ALEX S. SERQUINA, DOMINADOR P. SERRA, ROMEO SIDRO, AMADO M. SILANG, FAUSTINO D. SILANG, RODOLFO B. DE SILOS, ANICETO G. SILVA, EDGARDO M. SILVA, ROLANDO C. SILVERTO, ARTHUR B. SIMBAHON, DOMINGO SOLANO, JOSELITO C. SOLANTE, CARLITO SOLIS, CONRADO SOLIS, III, EDGARDO SOLIS, ERNESTO SOLIS, ISAGANI M. SOLIS, EDUARDO L. SOTTO, ERNESTO G. STA. MARIA, VICENTE G. STELLA, FELIMON SUPANG, PETER TANGUINOO, MAXIMINO TALIBSAO, FELICISMO P. TALUSIK, FERMIN TARUC, JR., LEVY S. TEMPLO, RODOLFO S. TIAMSON, LEONILO TIPOSO, ARNEL TOLENTINO, MARIO M. TOLENTINO, FELIPE TORRALBA, JOVITO V. TORRES, LEONARDO DE TORRES, GAVINO U. TUAZON, AUGUSTO B. TUNGUIA, FRANCISCO UMALI, SIMPLICIO UNIDA, WILFREDO V. UNTALAN, ANTONIO VALDERAMA, RAMON VALDERAMA, NILO VALENCIANO, EDGARDO C. VASQUEZ, ELPIDIO VELASQUEZ, NESTOR DE VERA, WILFREDO D. VERA, BIENVENIDO VERGARA, ALFREDO VERGARA, RAMON R. VERZOSA, FELICITO P. VICMUNDO, ALFREDO VICTORIANO, TEOFILO P. VIDALLO, SABINO N. VIERNEZ, JESUS J. VILLA, JOVEN VILLABLANCO, EDGARDO G. VILLAFLORES, CEFERINO VILLAGERA, ALEX VILLAHERMOZA, DANILO A. VILLANUEVA, ELITO VILLANUEVA, LEONARDO M. VILLANUEVA, MANUEL R. VILLANUEVA, NEPTHALI VILLAR, JOSE V. VILLAREAL, FELICISIMO VILLARINO, RAFAEL VILLAROMAN, CARLOS VILLENA, FERDINAND VIVO, ROBERTO YABUT, VICENTE YNGENTE, AND ORO C. ZUNIGA,respondents. Gerardo A. Del Mundo and Associates for petitioners.
210
Romulo, Mabanta, Sayoc, Buenaventura, De los Angeles Law Offices for BRII/AIBC. Florante M. De Castro for private respondents in 105029-32. Consolidation of Cases G.R. Nos. 104776 and 105029-32 were originally raffled to the Third Division while G.R. Nos. 104911-14 were raffled to the Second Division. In the Resolution dated July 26, 1993, the Second Division referred G.R. Nos. 104911-14 to the Third Division (G.R. Nos. 104911-14, Rollo, p. 895). In the Resolution dated September 29, 1993, the Third Division granted the motion filed in G.R. Nos. 10491114 for the consolidation of said cases with G.R. Nos. 104776 and 105029-32, which were assigned to the First Division (G.R. Nos. 104911-14, Rollo, pp. 986-1,107; G.R. Nos. 105029-30, Rollo, pp. 369-377, 426-432). In the Resolution dated October 27, 1993, the First Division granted the motion to consolidate G.R. Nos. 10491114 with G.R. No. 104776 (G.R. Nos. 104911-14, Rollo, p. 1109; G.R. Nos. 105029-32, Rollo, p. 1562). I On June 6, 1984, Bienvenido M.. Cadalin, Rolando M. Amul and Donato B. Evangelista, in their own behalf and on behalf of 728 other overseas contract workers (OCWs) instituted a class suit by filing an "Amended Complaint" with the Philippine Overseas Employment Administration (POEA) for money claims arising from their recruitment by AIBC and employment by BRII (POEA Case No. L-84-06-555). The claimants were represented by Atty. Gerardo del Mundo. BRII is a foreign corporation with headquarters in Houston, Texas, and is engaged in construction; while AIBC is a domestic corporation licensed as a service contractor to recruit, mobilize and deploy Filipino workers for overseas employment on behalf of its foreign principals. The amended complaint principally sought the payment of the unexpired portion of the employment contracts, which was terminated prematurely, and secondarily, the payment of the interest of the earnings of the Travel and Reserved Fund, interest on all the unpaid benefits; area wage and salary differential pay; fringe benefits; refund of SSS and premium not remitted to the SSS; refund of withholding tax not remitted to the BIR; penalties for committing prohibited practices; as well as the suspension of the license of AIBC and the accreditation of BRII (G.R. No. 104776, Rollo, pp. 13-14). At the hearing on June 25, 1984, AIBC was furnished a copy of the complaint and was given, together with BRII, up to July 5, 1984 to file its answer. On July 3, 1984, POEA Administrator, upon motion of AIBC and BRII, ordered the claimants to file a bill of particulars within ten days from receipt of the order and the movants to file their answers within ten days from receipt of the bill of particulars. The POEA Administrator also scheduled a pre-trial conference on July 25, 1984. On July 13, 1984, the claimants submitted their "Compliance and Manifestation." On July 23, 1984, AIBC filed a "Motion to Strike Out of the Records", the "Complaint" and the "Compliance and Manifestation." On July 25, 1984, the claimants filed their "Rejoinder and Comments," averring, among other matters, the failure of AIBC and BRII to file their answers and to attend the pre-trial conference on July 25, 1984. The claimants alleged that AIBC and BRII had waived their right to present evidence and had defaulted by failing to file their answers and to attend the pre-trial conference. On October 2, 1984, the POEA Administrator denied the "Motion to Strike Out of the Records" filed by AIBC but required the claimants to correct the deficiencies in the complaint pointed out in the order. On October 10, 1984, claimants asked for time within which to comply with the Order of October 2, 1984 and filed an "Urgent Manifestation," praying that the POEA Administrator direct the parties to submit
QUIASON, J.: The petition in G.R. No. 104776, entitled "Bienvenido M. Cadalin, et. al. v. Philippine Overseas Employment Administration's Administrator, et. al.," was filed under Rule 65 of the Revised Rules of Court: (1) to modify the Resolution dated September 2, 1991 of the National Labor Relations Commission (NLRC) in POEA Cases Nos. L-84-06-555, L-85-10-777, L-85-10-779 and L-86-05-460; (2) to render a new decision: (i) declaring private respondents as in default; (ii) declaring the said labor cases as a class suit; (iii) ordering Asia International Builders Corporation (AIBC) and Brown and Root International Inc. (BRII) to pay the claims of the 1,767 claimants in said labor cases; (iv) declaring Atty. Florante M. de Castro guilty of forum-shopping; and (v) dismissing POEA Case No. L-86-05-460; and (3) to reverse the Resolution dated March 24, 1992 of NLRC, denying the motion for reconsideration of its Resolution dated September 2, 1991 (Rollo, pp. 8-288). The petition in G.R. Nos. 104911-14, entitled "Bienvenido M. Cadalin, et. al., v. Hon. National Labor Relations Commission, et. al.," was filed under Rule 65 of the Revised Rules of Court: (1) to reverse the Resolution dated September 2, 1991 of NLRC in POEA Cases Nos. L-84-06-555, L-85-10-777, L-85-10-799 and L-86-05-460 insofar as it: (i) applied the three-year prescriptive period under the Labor Code of the Philippines instead of the ten-year prescriptive period under the Civil Code of the Philippines; and (ii) denied the "three-hour daily average" formula in the computation of petitioners' overtime pay; and (2) to reverse the Resolution dated March 24, 1992 of NLRC, denying the motion for reconsideration of its Resolution dated September 2, 1991 (Rollo, pp. 8-25; 26-220). The petition in G.R. Nos. 105029-32, entitled "Asia International Builders Corporation, et. al., v. National Labor Relations Commission, et. al." was filed under Rule 65 of the Revised Rules of Court: (1) to reverse the Resolution dated September 2, 1991 of NLRC in POEA Cases Nos. L-84-06-555, L-85-10-777, L-85-10-779 and L-86-05-460, insofar as it granted the claims of 149 claimants; and (2) to reverse the Resolution dated March 21, 1992 of NLRC insofar as it denied the motions for reconsideration of AIBC and BRII (Rollo, pp. 2-59; 61-230). The Resolution dated September 2, 1991 of NLRC, which modified the decision of POEA in four labor cases: (1) awarded monetary benefits only to 149 claimants and (2) directed Labor Arbiter Fatima J. Franco to conduct hearings and to receive evidence on the claims dismissed by the POEA for lack of substantial evidence or proof of employment.
211
simultaneously their position papers, after which the case should be deemed submitted for decision. On the same day, Atty. Florante de Castro filed another complaint for the same money claims and benefits in behalf of several claimants, some of whom were also claimants in POEA Case No. L-84-06-555 (POEA Case No. 8510-779). On October 19, 1984, claimants filed their "Compliance" with the Order dated October 2, 1984 and an "Urgent Manifestation," praying that the POEA direct the parties to submit simultaneously their position papers after which the case would be deemed submitted for decision. On the same day, AIBC asked for time to file its comment on the "Compliance" and "Urgent Manifestation" of claimants. On November 6, 1984, it filed a second motion for extension of time to file the comment. On November 8, 1984, the POEA Administrator informed AIBC that its motion for extension of time was granted. On November 14, 1984, claimants filed an opposition to the motions for extension of time and asked that AIBC and BRII be declared in default for failure to file their answers. On November 20, 1984, AIBC and BRII filed a "Comment" praying, among other reliefs, that claimants should be ordered to amend their complaint. On December 27, 1984, the POEA Administrator issued an order directing AIBC and BRII to file their answers within ten days from receipt of the order. On February 27, 1985, AIBC and BRII appealed to NLRC seeking the reversal of the said order of the POEA Administrator. Claimants opposed the appeal, claiming that it was dilatory and praying that AIBC and BRII be declared in default. On April 2, 1985, the original claimants filed an "Amended Complaint and/or Position Paper" dated March 24, 1985, adding new demands: namely, the payment of overtime pay, extra night work pay, annual leave differential pay, leave indemnity pay, retirement and savings benefits and their share of forfeitures (G.R. No. 104776, Rollo, pp. 14-16). On April 15, 1985, the POEA Administrator directed AIBC to file its answer to the amended complaint (G.R. No. 104776, Rollo, p. 20). On May 28, 1985, claimants filed an "Urgent Motion for Summary Judgment." On the same day, the POEA issued an order directing AIBC and BRII to file their answers to the "Amended Complaint," otherwise, they would be deemed to have waived their right to present evidence and the case would be resolved on the basis of complainant's evidence. On June 5, 1985, AIBC countered with a "Motion to Dismiss as Improper Class Suit and Motion for Bill of Particulars Re: Amended Complaint dated March 24, 1985." Claimants opposed the motions. On September 4, 1985, the POEA Administrator reiterated his directive to AIBC and BRII to file their answers in POEA Case No. L-84-06-555. On September 18, 1985, AIBC filed its second appeal to the NLRC, together with a petition for the issuance of a writ of injunction. On September 19, 1985, NLRC enjoined the POEA Administrator from hearing the labor cases and suspended the period for the filing of the answers of AIBC and BRII. On September 19, 1985, claimants asked the POEA Administrator to include additional claimants in the case and to investigate alleged wrongdoings of BRII, AIBC and their respective lawyers. On October 10, 1985, Romeo Patag and two co-claimants filed a complaint (POEA Case No. L-85-10-777) against AIBC and BRII with the POEA, demanding monetary claims similar to those subject of POEA Case No. L-84-06-555. In the same month, Solomon Reyes also filed his own complaint (POEA Case No. L-85-10779) against AIBC and BRII. On October 17, 1985, the law firm of Florante M. de Castro & Associates asked for the substitution of the original counsel of record and the cancellation of the special powers of attorney given the original counsel. On December 12, 1985, Atty. Del Mundo filed in NLRC a notice of the claim to enforce attorney's lien. On May 29, 1986, Atty. De Castro filed a complaint for money claims (POEA Case No. 86-05-460) in behalf of 11 claimants including Bienvenido Cadalin, a claimant in POEA Case No. 84-06-555. On December 12, 1986, the NLRC dismissed the two appeals filed on February 27, 1985 and September 18, 1985 by AIBC and BRII. In narrating the proceedings of the labor cases before the POEA Administrator, it is not amiss to mention that two cases were filed in the Supreme Court by the claimants, namely G.R. No. 72132 on September 26, 1985 and Administrative Case No. 2858 on March 18, 1986. On May 13, 1987, the Supreme Court issued a resolution in Administrative Case No. 2858 directing the POEA Administrator to resolve the issues raised in the motions and oppositions filed in POEA Cases Nos. L-84-06-555 and L-86-05-460 and to decide the labor cases with deliberate dispatch. AIBC also filed a petition in the Supreme Court (G.R. No. 78489), questioning the Order dated September 4, 1985 of the POEA Administrator. Said order required BRII and AIBC to answer the amended complaint in POEA Case No. L-84-06-555. In a resolution dated November 9, 1987, we dismissed the petition by informing AIBC that all its technical objections may properly be resolved in the hearings before the POEA. Complaints were also filed before the Ombudsman. The first was filed on September 22, 1988 by claimant Hermie Arguelles and 18 co-claimants against the POEA Administrator and several NLRC Commissioners. The Ombudsman merely referred the complaint to the Secretary of Labor and Employment with a request for the early disposition of POEA Case No. L-84-06-555. The second was filed on April 28, 1989 by claimants Emigdio P. Bautista and Rolando R. Lobeta charging AIBC and BRII for violation of labor and social legislations. The third was filed by Jose R. Santos, Maximino N. Talibsao and Amado B. Bruce denouncing AIBC and BRII of violations of labor laws. On January 13, 1987, AIBC filed a motion for reconsideration of the NLRC Resolution dated December 12, 1986. On January 14, 1987, AIBC reiterated before the POEA Administrator its motion for suspension of the period for filing an answer or motion for extension of time to file the same until the resolution of its motion for reconsideration of the order of the NLRC dismissing the two appeals. On April 28, 1987, NLRC en banc denied the motion for reconsideration. At the hearing on June 19, 1987, AIBC submitted its answer to the complaint. At the same hearing, the parties were given a period of 15 days from said date within which to submit their respective position papers. On June 24, 1987 claimants filed their "Urgent Motion to Strike Out Answer," alleging that the answer was filed out of time. On June 29, 1987, claimants filed their "Supplement to Urgent Manifestational Motion" to comply with the POEA Order of June 19, 1987. On February 24, 1988, AIBC and BRII submitted their position paper. On March 4, 1988, claimants filed their "Ex-Parte Motion to Expunge from the Records" the position paper of AIBC and BRII, claiming that it was filed out of time.
212
On September 1, 1988, the claimants represented by Atty. De Castro filed their memorandum in POEA Case No. L-86-05-460. On September 6, 1988, AIBC and BRII submitted their Supplemental Memorandum. On September 12, 1988, BRII filed its "Reply to Complainant's Memorandum." On October 26, 1988, claimants submitted their "Ex-Parte Manifestational Motion and Counter-Supplemental Motion," together with 446 individual contracts of employments and service records. On October 27, 1988, AIBC and BRII filed a "Consolidated Reply." On January 30, 1989, the POEA Administrator rendered his decision in POEA Case No. L-84-06-555 and the other consolidated cases, which awarded the amount of $824,652.44 in favor of only 324 complainants. On February 10, 1989, claimants submitted their "Appeal Memorandum For Partial Appeal" from the decision of the POEA. On the same day, AIBC also filed its motion for reconsideration and/or appeal in addition to the "Notice of Appeal" filed earlier on February 6, 1989 by another counsel for AIBC. On February 17, 1989, claimants filed their "Answer to Appeal," praying for the dismissal of the appeal of AIBC and BRII. On March 15, 1989, claimants filed their "Supplement to Complainants' Appeal Memorandum," together with their "newly discovered evidence" consisting of payroll records. On April 5, 1989, AIBC and BRII submitted to NLRC their "Manifestation," stating among other matters that there were only 728 named claimants. On April 20, 1989, the claimants filed their "Counter-Manifestation," alleging that there were 1,767 of them. On July 27, 1989, claimants filed their "Urgent Motion for Execution" of the Decision dated January 30, 1989 on the grounds that BRII had failed to appeal on time and AIBC had not posted the supersedeas bond in the amount of $824,652.44. On December 23, 1989, claimants filed another motion to resolve the labor cases. On August 21, 1990, claimants filed their "Manifestational Motion," praying that all the 1,767 claimants be awarded their monetary claims for failure of private respondents to file their answers within the reglamentary period required by law. On September 2, 1991, NLRC promulgated its Resolution, disposing as follows: WHEREFORE, premises considered, the Decision of the POEA in these consolidated cases is modified to the extent and in accordance with the following dispositions: 1. The claims of the 94 complainants identified and listed in Annex "A" hereof are dismissed for having prescribed; 2. Respondents AIBC and Brown & Root are hereby ordered, jointly and severally, to pay the 149 complainants, identified and listed in Annex "B" hereof, the peso equivalent, at the time of payment, of the total amount in US dollars indicated opposite their respective names; 3. The awards given by the POEA to the 19 complainants classified and listed in Annex "C" hereof, who appear to have worked elsewhere than in Bahrain are hereby set aside. 4. All claims other than those indicated in Annex "B", including those for overtime work and favorably granted by the POEA, are hereby dismissed for lack of substantial evidence in support thereof or are beyond the competence of this Commission to pass upon. In addition, this Commission, in the exercise of its powers and authority under Article 218(c) of the Labor Code, as amended by R.A. 6715, hereby directs Labor Arbiter Fatima J. Franco of this Commission to summon parties, conduct hearings and receive evidence, as expeditiously as possible, and thereafter submit a written report to this Commission (First Division) of the proceedings taken, regarding the claims of the following: (a) complainants identified and listed in Annex "D" attached and made an integral part of this Resolution, whose claims were dismissed by the POEA for lack of proof of employment in Bahrain (these complainants numbering 683, are listed in pages 13 to 23 of the decision of POEA, subject of the appeals) and, (b) complainants identified and listed in Annex "E" attached and made an integral part of this Resolution, whose awards decreed by the POEA, to Our mind, are not supported by substantial evidence" (G.R. No. 104776; Rollo, pp. 113-115; G.R. Nos. 104911-14, pp. 85-87; G.R. Nos. 105029-31, pp. 120-122). On November 27, 1991, claimant Amado S. Tolentino and 12 co-claimants, who were former clients of Atty. Del Mundo, filed a petition for certiorari with the Supreme Court (G.R. Nos. 120741-44). The petition was dismissed in a resolution dated January 27, 1992. Three motions for reconsideration of the September 2, 1991 Resolution of the NLRC were filed. The first, by the claimants represented by Atty. Del Mundo; the second, by the claimants represented by Atty. De Castro; and the third, by AIBC and BRII. In its Resolution dated March 24, 1992, NLRC denied all the motions for reconsideration. Hence, these petitions filed by the claimants represented by Atty. Del Mundo (G.R. No. 104776), the claimants represented by Atty. De Castro (G.R. Nos. 104911-14) and by AIBC and BRII (G.R. Nos. 105029-32). II Compromise Agreements Before this Court, the claimants represented by Atty. De Castro and AIBC and BRII have submitted, from time to time, compromise agreements for our approval and jointly moved for the dismissal of their respective petitions insofar as the claimants-parties to the compromise agreements were concerned (See Annex A for list of claimants who signed quitclaims).
213
Thus the following manifestations that the parties had arrived at a compromise agreement and the corresponding motions for the approval of the agreements were filed by the parties and approved by the Court: 1) Joint Manifestation and Motion involving claimant Emigdio Abarquez and 47 coclaimants dated September 2, 1992 (G.R. Nos. 104911-14, Rollo, pp. 263-406; G.R. Nos. 105029-32, Rollo, pp. 470-615); 2) Joint Manifestation and Motion involving petitioner Bienvenido Cadalin and 82 copetitioners dated September 3, 1992 (G.R. No. 104776, Rollo, pp. 364-507); 3) Joint Manifestation and Motion involving claimant Jose M. Aban and 36 co-claimants dated September 17, 1992 (G.R. Nos. 105029-32, Rollo, pp. 613-722; G.R. No. 104776, Rollo, pp. 518-626; G.R. Nos. 104911-14, Rollo, pp. 407-516); 4) Joint Manifestation and Motion involving claimant Antonio T. Anglo and 17 coclaimants dated October 14, 1992 (G.R. Nos. 105029-32, Rollo, pp. 778-843; G.R. No. 104776, Rollo, pp. 650-713; G.R. Nos. 104911-14, Rollo, pp. 530-590); 5) Joint Manifestation and Motion involving claimant Dionisio Bobongo and 6 coclaimants dated January 15, 1993 (G.R. No. 104776, Rollo, pp. 813-836; G.R. Nos. 104911-14, Rollo, pp. 629-652); 6) Joint Manifestation and Motion involving claimant Valerio A. Evangelista and 4 coclaimants dated March 10, 1993 (G.R. Nos. 104911-14, Rollo, pp. 731-746; G.R. No. 104776, Rollo, pp. 1815-1829); 7) Joint Manifestation and Motion involving claimants Palconeri Banaag and 5 coclaimants dated March 17, 1993 (G.R. No. 104776, Rollo, pp. 1657-1703; G.R. Nos. 104911-14, Rollo, pp. 655-675); 8) Joint Manifestation and Motion involving claimant Benjamin Ambrosio and 15 other co-claimants dated May 4, 1993 (G.R. Nos. 105029-32, Rollo, pp. 906-956; G.R. Nos. 104911-14, Rollo, pp. 679-729; G.R. No. 104776, Rollo, pp. 1773-1814); 9) Joint Manifestation and Motion involving Valerio Evangelista and 3 co-claimants dated May 10, 1993 (G.R. No. 104776, Rollo, pp. 1815-1829); 10) Joint Manifestation and Motion involving petitioner Quiterio R. Agudo and 36 coclaimants dated June 14, 1993 (G.R. Nos. 105029-32, Rollo, pp. 974-1190; G.R. Nos. 104911-14, Rollo, pp. 748-864; G.R. No. 104776, Rollo, pp. 1066-1183); 11) Joint Manifestation and Motion involving claimant Arnaldo J. Alonzo and 19 coclaimants dated July 22, 1993 (G.R. No. 104776, Rollo, pp. 1173-1235; G.R. Nos. 105029-32, Rollo, pp. 1193-1256; G.R. Nos. 104911-14, Rollo, pp. 896-959); 12) Joint Manifestation and Motion involving claimant Ricardo C. Dayrit and 2 coclaimants dated September 7, 1993 (G.R. Nos. 105029-32, Rollo, pp. 1266-1278; G.R. No. 104776, Rollo, pp. 1243-1254; G.R. Nos. 104911-14,Rollo, pp. 972-984); 13) Joint Manifestation and Motion involving claimant Dante C. Aceres and 37 coclaimants dated September 8, 1993 (G.R. No. 104776, Rollo, pp. 1257-1375; G.R. Nos. 104911-14, Rollo, pp. 987-1105; G.R. Nos. 105029-32, Rollo, pp. 1280-1397); 14) Joint Manifestation and Motion involving Vivencio V. Abella and 27 co-claimants dated January 10, 1994 (G.R. Nos. 105029-32, Rollo, Vol. II); 15) Joint Manifestation and Motion involving Domingo B. Solano and six co-claimants dated August 25, 1994 (G.R. Nos. 105029-32; G.R. No. 104776; G.R. Nos. 10491114). III The facts as found by the NLRC are as follows: We have taken painstaking efforts to sift over the more than fifty volumes now comprising the records of these cases. From the records, it appears that the complainants-appellants allege that they were recruited by respondent-appellant AIBC for its accredited foreign principal, Brown & Root, on various dates from 1975 to 1983. They were all deployed at various projects undertaken by Brown & Root in several countries in the Middle East, such as Saudi Arabia, Libya, United Arab Emirates and Bahrain, as well as in Southeast Asia, in Indonesia and Malaysia. Having been officially processed as overseas contract workers by the Philippine Government, all the individual complainants signed standard overseas employment contracts (Records, Vols. 25-32. Hereafter, reference to the records would be sparingly made, considering their chaotic arrangement) with AIBC before their departure from the Philippines. These overseas employment contracts invariably contained the following relevant terms and conditions. PART B (1) Employment Position Classification : (Code) : (2) Company Employment Status : (3) Date of Employment to Commence on : (4) Basic Working Hours Per Week : (5) Basic Working Hours Per Month : (6) Basic Hourly Rate : (7) Overtime Rate Per Hour : (8) Projected Period of Service (Subject to C(1) of this [sic]) : Months and/or Job Completion
214
xxx xxx xxx 3. HOURS OF WORK AND COMPENSATION a) The Employee is employed at the hourly rate and overtime rate as set out in Part B of this Document. b) The hours of work shall be those set forth by the Employer, and Employer may, at his sole option, change or adjust such hours as maybe deemed necessary from time to time. 4. TERMINATION a) Notwithstanding any other terms and conditions of this agreement, the Employer may, at his sole discretion, terminate employee's service with cause, under this agreement at any time. If the Employer terminates the services of the Employee under this Agreement because of the completion or termination, or suspension of the work on which the Employee's services were being utilized, or because of a reduction in force due to a decrease in scope of such work, or by change in the type of construction of such work. The Employer will be responsible for his return transportation to his country of origin. Normally on the most expeditious air route, economy class accommodation. xxx xxx xxx 10. VACATION/SICK LEAVE BENEFITS a) After one (1) year of continuous service and/or satisfactory completion of contract, employee shall be entitled to 12-days vacation leave with pay. This shall be computed at the basic wage rate. Fractions of a year's service will be computed on a prorata basis. b) Sick leave of 15-days shall be granted to the employee for every year of service for non-work connected injuries or illness. If the employee failed to avail of such leave benefits, the same shall be forfeited at the end of the year in which said sick leave is granted. 11. BONUS A bonus of 20% (for offshore work) of gross income will be accrued and payable only upon satisfactory completion of this contract. 12. OFFDAY PAY The seventh day of the week shall be observed as a day of rest with 8 hours regular pay. If work is performed on this day, all hours work shall be paid at the premium rate. However, this offday pay provision is applicable only when the laws of the Host Country require payments for rest day. Art. 111: . . . the employer concerned shall pay to such worker, upon termination of employment, a leaving indemnity for the period of his employment calculated on the basis of fifteen days' wages for each year of the first three years of service and of one month's wages for each year of service thereafter. Such worker shall be entitled to payment of leaving indemnity upon a quantum meruit in proportion to the period of his service completed within a year. Art. 80: Friday shall be deemed to be a weekly day of rest on full pay. . . . an employer may require a worker, with his consent, to work on his weekly day of rest if circumstances so require and in respect of which an additional sum equivalent to 150% of his normal wage shall be paid to him. . . . Art. 81: . . . When conditions of work require the worker to work on any official holiday, he shall be paid an additional sum equivalent to 150% of his normal wage. Art. 84: Every worker who has completed one year's continuous service with his employer shall be entitled to leave on full pay for a period of not less than 21 days for each year increased to a period not less than 28 days after five continuous years of service. A worker shall be entitled to such leave upon a quantum meruit in respect of the proportion of his service in that year. Art. 107: A contract of employment made for a period of indefinite duration may be terminated by either party thereto after giving the other party thirty days' prior notice before such termination, in writing, in respect of monthly paid workers and fifteen days' notice in respect of other workers. The party terminating a contract without giving the required notice shall pay to the other party compensation equivalent to the amount of wages payable to the worker for the period of such notice or the unexpired portion thereof. In the State of Bahrain, where some of the individual complainants were deployed, His Majesty Isa Bin Salman Al Kaifa, Amir of Bahrain, issued his Amiri Decree No. 23 on June 16, 1976, otherwise known as the Labour Law for the Private Sector (Records, Vol. 18). This decree took effect on August 16, 1976. Some of the provisions of Amiri Decree No. 23 that are relevant to the claims of the complainants-appellants are as follows (italics supplied only for emphasis): Art. 79: . . . A worker shall receive payment for each extra hour equivalent to his wage entitlement increased by a minimum of twenty-five per centum thereof for hours worked during the day; and by a minimum of fifty per centum thereof for hours worked during the night which shall be deemed to being from seven o'clock in the evening until seven o'clock in the morning. . . .
215
All the individual complainants-appellants have already been repatriated to the Philippines at the time of the filing of these cases (R.R. No. 104776, Rollo, pp. 59-65). IV The issues raised before and resolved by the NLRC were: First: Whether or not complainants are entitled to the benefits provided by Amiri Decree No. 23 of Bahrain; (a) Whether or not the complainants who have worked in Bahrain are entitled to the above-mentioned benefits. (b) Whether or not Art. 44 of the same Decree (allegedly prescribing a more favorable treatment of alien employees) bars complainants from enjoying its benefits. Second: Assuming that Amiri Decree No. 23 of Bahrain is applicable in these cases, whether or not complainants' claim for the benefits provided therein have prescribed. Third: Whether or not the instant cases qualify as a class suit. Fourth: Whether or not the proceedings conducted by the POEA, as well as the decision that is the subject of these appeals, conformed with the requirements of due process; (a) Whether or not the respondent-appellant was denied its right to due process; (b) Whether or not the admission of evidence by the POEA after these cases were submitted for decision was valid; (c) Whether or not the POEA acquired jurisdiction over Brown & Root International, Inc.; (d) Whether or not the judgment awards are supported by substantial evidence; (e) Whether or not the awards based on the averages and formula presented by the complainants-appellants are supported by substantial evidence; (f) Whether or not the POEA awarded sums beyond what the complainants-appellants prayed for; and, if so, whether or not these awards are valid. (b) Whether or not the undisputed fact that AIBC was a licensed construction contractor precludes a finding that Brown & Root is liable for complainants claims. Sixth: Whether or not the POEA Administrator's failure to hold respondents in default constitutes a reversible error. Seventh: Whether or not the POEA Administrator erred in dismissing the following claims: a. Unexpired portion of contract; b. Interest earnings of Travel and Reserve Fund; c. Retirement and Savings Plan benefits; d. War Zone bonus or premium pay of at least 100% of basic pay; e. Area Differential Pay; f. Accrued interests on all the unpaid benefits; g. Salary differential pay; h. Wage differential pay; i. Refund of SSS premiums not remitted to SSS; j. Refund of withholding tax not remitted to BIR; k. Fringe benefits under B & R's "A Summary of Employee Benefits" (Annex "Q" of Amended Complaint); l. Moral and exemplary damages; m. Attorney's fees of at least ten percent of the judgment award; Fifth: Whether or not the POEA erred in holding respondents AIBC and Brown & Root jointly are severally liable for the judgment awards despite the alleged finding that the former was the employer of the complainants; (a) Whether or not the POEA has acquired jurisdiction over Brown & Root;
216
n. Other reliefs, like suspending and/or cancelling the license to recruit of AIBC and the accreditation of B & R issued by POEA; o. Penalty for violations of Article 34 (prohibited practices), not excluding reportorial requirements thereof. Eighth: Whether or not the POEA Administrator erred in not dismissing POEA Case No. (L) 86-65-460 on the ground of multiplicity of suits (G.R. Nos. 104911-14, Rollo, pp. 25-29, 51-55). Anent the first issue, NLRC set aside Section 1, Rule 129 of the 1989 Revised Rules on Evidence governing the pleading and proof of a foreign law and admitted in evidence a simple copy of the Bahrain's Amiri Decree No. 23 of 1976 (Labour Law for the Private Sector). NLRC invoked Article 221 of the Labor Code of the Philippines, vesting on the Commission ample discretion to use every and all reasonable means to ascertain the facts in each case without regard to the technicalities of law or procedure. NLRC agreed with the POEA Administrator that the Amiri Decree No. 23, being more favorable and beneficial to the workers, should form part of the overseas employment contract of the complainants. NLRC, however, held that the Amiri Decree No. 23 applied only to the claimants, who worked in Bahrain, and set aside awards of the POEA Administrator in favor of the claimants, who worked elsewhere. On the second issue, NLRC ruled that the prescriptive period for the filing of the claims of the complainants was three years, as provided in Article 291 of the Labor Code of the Philippines, and not ten years as provided in Article 1144 of the Civil Code of the Philippines nor one year as provided in the Amiri Decree No. 23 of 1976. On the third issue, NLRC agreed with the POEA Administrator that the labor cases cannot be treated as a class suit for the simple reason that not all the complainants worked in Bahrain and therefore, the subject matter of the action, the claims arising from the Bahrain law, is not of common or general interest to all the complainants. On the fourth issue, NLRC found at least three infractions of the cardinal rules of administrative due process: namely, (1) the failure of the POEA Administrator to consider the evidence presented by AIBC and BRII; (2) some findings of fact were not supported by substantial evidence; and (3) some of the evidence upon which the decision was based were not disclosed to AIBC and BRII during the hearing. On the fifth issue, NLRC sustained the ruling of the POEA Administrator that BRII and AIBC are solidarily liable for the claims of the complainants and held that BRII was the actual employer of the complainants, or at the very least, the indirect employer, with AIBC as the labor contractor. NLRC also held that jurisdiction over BRII was acquired by the POEA Administrator through the summons served on AIBC, its local agent. On the sixth issue, NLRC held that the POEA Administrator was correct in denying the Motion to Declare AIBC in default. On the seventh issue, which involved other money claims not based on the Amiri Decree No. 23, NLRC ruled: (4) that the prescriptive period for the filing of the claims is ten years; and (1) that the POEA Administrator has no jurisdiction over the claims for refund of the SSS premiums and refund of withholding taxes and the claimants should file their claims for said refund with the appropriate government agencies; (2) the claimants failed to establish that they are entitled to the claims which are not based on the overseas employment contracts nor the Amiri Decree No. 23 of 1976; (3) that the POEA Administrator has no jurisdiction over claims for moral and exemplary damages and nonetheless, the basis for granting said damages was not established; (4) that the claims for salaries corresponding to the unexpired portion of their contract may be allowed if filed within the three-year prescriptive period; (5) that the allegation that complainants were prematurely repatriated prior to the expiration of their overseas contract was not established; and (6) that the POEA Administrator has no jurisdiction over the complaint for the suspension or cancellation of the AIBC's recruitment license and the cancellation of the accreditation of BRII. NLRC passed sub silencio the last issue, the claim that POEA Case No. (L) 86-65-460 should have been dismissed on the ground that the claimants in said case were also claimants in POEA Case No. (L) 84-06-555. Instead of dismissing POEA Case No. (L) 86-65-460, the POEA just resolved the corresponding claims in POEA Case No. (L) 84-06-555. In other words, the POEA did not pass upon the same claims twice. V G.R. No. 104776 Claimants in G.R. No. 104776 based their petition for certiorari on the following grounds: (1) that they were deprived by NLRC and the POEA of their right to a speedy disposition of their cases as guaranteed by Section 16, Article III of the 1987 Constitution. The POEA Administrator allowed private respondents to file their answers in two years (on June 19, 1987) after the filing of the original complaint (on April 2, 1985) and NLRC, in total disregard of its own rules, affirmed the action of the POEA Administrator; (2) that NLRC and the POEA Administrator should have declared AIBC and BRII in default and should have rendered summary judgment on the basis of the pleadings and evidence submitted by claimants; (3) the NLRC and POEA Administrator erred in not holding that the labor cases filed by AIBC and BRII cannot be considered a class suit;
217
(5) that NLRC and the POEA Administrator should have dismissed POEA Case No. L86-05-460, the case filed by Atty. Florante de Castro (Rollo, pp. 31-40). AIBC and BRII, commenting on the petition in G.R. No. 104776, argued: (1) that they were not responsible for the delay in the disposition of the labor cases, considering the great difficulty of getting all the records of the more than 1,500 claimants, the piece-meal filing of the complaints and the addition of hundreds of new claimants by petitioners; (2) that considering the number of complaints and claimants, it was impossible to prepare the answers within the ten-day period provided in the NLRC Rules, that when the motion to declare AIBC in default was filed on July 19, 1987, said party had already filed its answer, and that considering the staggering amount of the claims (more than US$50,000,000.00) and the complicated issues raised by the parties, the ten-day rule to answer was not fair and reasonable; (3) that the claimants failed to refute NLRC's finding that there was no common or general interest in the subject matter of the controversy which was the applicability of the Amiri Decree No. 23. Likewise, the nature of the claims varied, some being based on salaries pertaining to the unexpired portion of the contracts while others being for pure money claims. Each claimant demanded separate claims peculiar only to himself and depending upon the particular circumstances obtaining in his case; (4) that the prescriptive period for filing the claims is that prescribed by Article 291 of the Labor Code of the Philippines (three years) and not the one prescribed by Article 1144 of the Civil Code of the Philippines (ten years); and (5) that they are not concerned with the issue of whether POEA Case No. L-86-05-460 should be dismissed, this being a private quarrel between the two labor lawyers (Rollo, pp. 292-305). Attorney's Lien On November 12, 1992, Atty. Gerardo A. del Mundo moved to strike out the joint manifestations and motions of AIBC and BRII dated September 2 and 11, 1992, claiming that all the claimants who entered into the compromise agreements subject of said manifestations and motions were his clients and that Atty. Florante M. de Castro had no right to represent them in said agreements. He also claimed that the claimants were paid less than the award given them by NLRC; that Atty. De Castro collected additional attorney's fees on top of the 25% which he was entitled to receive; and that the consent of the claimants to the compromise agreements and quitclaims were procured by fraud (G.R. No. 104776, Rollo, pp. 838-810). In the Resolution dated November 23, 1992, the Court denied the motion to strike out the Joint Manifestations and Motions dated September 2 and 11, 1992 (G.R. Nos. 104911-14, Rollo, pp. 608-609). On December 14, 1992, Atty. Del Mundo filed a "Notice and Claim to Enforce Attorney's Lien," alleging that the claimants who entered into compromise agreements with AIBC and BRII with the assistance of Atty. De Castro, had all signed a retainer agreement with his law firm (G.R. No. 104776, Rollo, pp. 623-624; 838-1535). Contempt of Court On February 18, 1993, an omnibus motion was filed by Atty. Del Mundo to cite Atty. De Castro and Atty. Katz Tierra for contempt of court and for violation of Canons 1, 15 and 16 of the Code of Professional Responsibility. The said lawyers allegedly misled this Court, by making it appear that the claimants who entered into the compromise agreements were represented by Atty. De Castro, when in fact they were represented by Atty. Del Mundo (G.R. No. 104776, Rollo, pp. 1560-1614). On September 23, 1994, Atty. Del Mundo reiterated his charges against Atty. De Castro for unethical practices and moved for the voiding of the quitclaims submitted by some of the claimants. G.R. Nos. 104911-14 The claimants in G.R. Nos. 104911-14 based their petition for certiorari on the grounds that NLRC gravely abused its discretion when it: (1) applied the three-year prescriptive period under the Labor Code of the Philippines; and (2) it denied the claimant's formula based on an average overtime pay of three hours a day (Rollo, pp. 18-22). The claimants argue that said method was proposed by BRII itself during the negotiation for an amicable settlement of their money claims in Bahrain as shown in the Memorandum dated April 16, 1983 of the Ministry of Labor of Bahrain (Rollo, pp. 21-22). BRII and AIBC, in their Comment, reiterated their contention in G.R. No. 104776 that the prescriptive period in the Labor Code of the Philippines, a special law, prevails over that provided in the Civil Code of the Philippines, a general law. As to the memorandum of the Ministry of Labor of Bahrain on the method of computing the overtime pay, BRII and AIBC claimed that they were not bound by what appeared therein, because such memorandum was proposed by a subordinate Bahrain official and there was no showing that it was approved by the Bahrain Minister of Labor. Likewise, they claimed that the averaging method was discussed in the course of the negotiation for the amicable settlement of the dispute and any offer made by a party therein could not be used as an admission by him (Rollo, pp. 228-236). G.R. Nos. 105029-32 In G.R. Nos. 105029-32, BRII and AIBC claim that NLRC gravely abused its discretion when it: (1) enforced the provisions of the Amiri Decree No. 23 of 1976 and not the terms of the employment contracts; (2) granted claims for holiday, overtime and leave indemnity pay and other benefits, on evidence admitted in contravention of petitioner's constitutional right to due process; and (3) ordered the POEA Administrator to hold new hearings for the 683 claimants whose claims had been dismissed for lack of proof by the POEA Administrator or NLRC itself. Lastly, they allege that assuming that the Amiri Decree No. 23 of 1976 was applicable, NLRC erred when it did not apply the one-year prescription provided in said law (Rollo, pp. 29-30). VI G.R. No. 104776; G.R. Nos. 104911-14; G.R. Nos. 105029-32 All the petitions raise the common issue of prescription although they disagreed as to the time that should be embraced within the prescriptive period.
218
To the POEA Administrator, the prescriptive period was ten years, applying Article 1144 of the Civil Code of the Philippines. NLRC believed otherwise, fixing the prescriptive period at three years as provided in Article 291 of the Labor Code of the Philippines. The claimants in G.R. No. 104776 and G.R. Nos. 104911-14, invoking different grounds, insisted that NLRC erred in ruling that the prescriptive period applicable to the claims was three years, instead of ten years, as found by the POEA Administrator. The Solicitor General expressed his personal view that the prescriptive period was one year as prescribed by the Amiri Decree No. 23 of 1976 but he deferred to the ruling of NLRC that Article 291 of the Labor Code of the Philippines was the operative law. The POEA Administrator held the view that: These money claims (under Article 291 of the Labor Code) refer to those arising from the employer's violation of the employee's right as provided by the Labor Code. In the instant case, what the respondents violated are not the rights of the workers as provided by the Labor Code, but the provisions of the Amiri Decree No. 23 issued in Bahrain, which ipso factoamended the worker's contracts of employment. Respondents consciously failed to conform to these provisions which specifically provide for the increase of the worker's rate. It was only after June 30, 1983, four months after the brown builders brought a suit against B & R in Bahrain for this same claim, when respondent AIBC's contracts have undergone amendments in Bahrain for the new hires/renewals (Respondent's Exhibit 7). Hence, premises considered, the applicable law of prescription to this instant case is Article 1144 of the Civil Code of the Philippines, which provides: Art. 1144. The following actions may be brought within ten years from the time the cause of action accrues: (1) Upon a written contract; (2) Upon an obligation created by law; Thus, herein money claims of the complainants against the respondents shall prescribe in ten years from August 16, 1976. Inasmuch as all claims were filed within the tenyear prescriptive period, no claim suffered the infirmity of being prescribed (G.R. No. 104776, Rollo, 89-90). In overruling the POEA Administrator, and holding that the prescriptive period is three years as provided in Article 291 of the Labor Code of the Philippines, the NLRC argued as follows: The Labor Code provides that "all money claims arising from employer-employee relations . . . shall be filed within three years from the time the cause of action accrued; otherwise they shall be forever barred" (Art. 291, Labor Code, as amended). This three-year prescriptive period shall be the one applied here and which should be reckoned from the date of repatriation of each individual complainant, considering the fact that the case is having (sic) filed in this country. We do not agree with the POEA Administrator that this three-year prescriptive period applies only to money claims specifically recoverable under the Philippine Labor Code. Article 291 gives no such indication. Likewise, We can not consider complainants' cause/s of action to have accrued from a violation of their employment contracts. There was no violation; the claims arise from the benefits of the law of the country where they worked. (G.R. No. 104776, Rollo, pp. 90-91). Anent the applicability of the one-year prescriptive period as provided by the Amiri Decree No. 23 of 1976, NLRC opined that the applicability of said law was one of characterization, i.e., whether to characterize the foreign law on prescription or statute of limitation as "substantive" or "procedural." NLRC cited the decision in Bournias v. Atlantic Maritime Company (220 F. 2d. 152, 2d Cir. [1955], where the issue was the applicability of the Panama Labor Code in a case filed in the State of New York for claims arising from said Code. In said case, the claims would have prescribed under the Panamanian Law but not under the Statute of Limitations of New York. The U.S. Circuit Court of Appeals held that the Panamanian Law was procedural as it was not "specifically intended to be substantive," hence, the prescriptive period provided in the law of the forum should apply. The Court observed: . . . And where, as here, we are dealing with a statute of limitations of a foreign country, and it is not clear on the face of the statute that its purpose was to limit the enforceability, outside as well as within the foreign country concerned, of the substantive rights to which the statute pertains, we think that as a yardstick for determining whether that was the purpose this test is the most satisfactory one. It does not lead American courts into the necessity of examining into the unfamiliar peculiarities and refinements of different foreign legal systems. . . The court further noted: xxx xxx xxx Applying that test here it appears to us that the libelant is entitled to succeed, for the respondents have failed to satisfy us that the Panamanian period of limitation in question was specifically aimed against the particular rights which the libelant seeks to enforce. The Panama Labor Code is a statute having broad objectives, viz: "The present Code regulates the relations between capital and labor, placing them on a basis of social justice, so that, without injuring any of the parties, there may be guaranteed for labor the necessary conditions for a normal life and to capital an equitable return to its investment." In pursuance of these objectives the Code gives laborers various rights against their employers. Article 623 establishes the period of limitation for all such rights, except certain ones which are enumerated in Article 621. And there is nothing in the record to indicate that the Panamanian legislature gave special consideration to the impact of Article 623 upon the particular rights sought to be enforced here, as distinguished from the other rights to which that Article is also applicable. Were we confronted with the question of whether the limitation period of Article 621 (which carves out particular rights to be governed by a shorter limitation period) is to be regarded as "substantive" or "procedural" under the rule of "specifity" we might have a different case; but here on the surface of things we appear to be dealing with a "broad," and not a "specific," statute of limitations (G.R. No. 104776, Rollo, pp. 92-94). Claimants in G.R. Nos. 104911-14 are of the view that Article 291 of the Labor Code of the Philippines, which was applied by NLRC, refers only to claims "arising from the employer's violation of the employee's right as provided by the Labor Code." They assert that their claims are based on the violation of their employment contracts, as amended by the Amiri Decree No. 23 of 1976 and therefore the claims may be brought within ten
219
years as provided by Article 1144 of the Civil Code of the Philippines (Rollo, G.R. Nos. 104911-14, pp. 18-21). To bolster their contention, they cite PALEA v. Philippine Airlines, Inc., 70 SCRA 244 (1976). AIBC and BRII, insisting that the actions on the claims have prescribed under the Amiri Decree No. 23 of 1976, argue that there is in force in the Philippines a "borrowing law," which is Section 48 of the Code of Civil Procedure and that where such kind of law exists, it takes precedence over the common-law conflicts rule (G.R. No. 104776,Rollo, pp. 45-46). First to be determined is whether it is the Bahrain law on prescription of action based on the Amiri Decree No. 23 of 1976 or a Philippine law on prescription that shall be the governing law. Article 156 of the Amiri Decree No. 23 of 1976 provides: In article XIII on Social Justice and Human Rights, the 1987 Constitution provides: A claim arising out of a contract of employment shall not be actionable after the lapse of one year from the date of the expiry of the contract. (G.R. Nos. 105029-31, Rollo, p. 226). As a general rule, a foreign procedural law will not be applied in the forum. Procedural matters, such as service of process, joinder of actions, period and requisites for appeal, and so forth, are governed by the laws of the forum. This is true even if the action is based upon a foreign substantive law (Restatement of the Conflict of Laws, Sec. 685; Salonga, Private International Law, 131 [1979]). A law on prescription of actions is sui generis in Conflict of Laws in the sense that it may be viewed either as procedural or substantive, depending on the characterization given such a law. Thus in Bournias v. Atlantic Maritime Company, supra, the American court applied the statute of limitations of New York, instead of the Panamanian law, after finding that there was no showing that the Panamanian law on prescription was intended to be substantive. Being considered merely a procedural law even in Panama, it has to give way to the law of the forum on prescription of actions. However, the characterization of a statute into a procedural or substantive law becomes irrelevant when the country of the forum has a "borrowing statute." Said statute has the practical effect of treating the foreign statute of limitation as one of substance (Goodrich, Conflict of Laws 152-153 [1938]). A "borrowing statute" directs the state of the forum to apply the foreign statute of limitations to the pending claims based on a foreign law (Siegel, Conflicts, 183 [1975]). While there are several kinds of "borrowing statutes," one form provides that an action barred by the laws of the place where it accrued, will not be enforced in the forum even though the local statute has not run against it (Goodrich and Scoles, Conflict of Laws, 152-153 [1938]). Section 48 of our Code of Civil Procedure is of this kind. Said Section provides: If by the laws of the state or country where the cause of action arose, the action is barred, it is also barred in the Philippines Islands. Section 48 has not been repealed or amended by the Civil Code of the Philippines. Article 2270 of said Code repealed only those provisions of the Code of Civil Procedures as to which were inconsistent with it. There is no provision in the Civil Code of the Philippines, which is inconsistent with or contradictory to Section 48 of the Code of Civil Procedure (Paras, Philippine Conflict of Laws 104 [7th ed.]). In the light of the 1987 Constitution, however, Section 48 cannot be enforced ex proprio vigore insofar as it ordains the application in this jurisdiction of Section 156 of the Amiri Decree No. 23 of 1976. Sec. 3. The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote full employment and equality of employment opportunities for all. Having determined that the applicable law on prescription is the Philippine law, the next question is whether the prescriptive period governing the filing of the claims is three years, as provided by the Labor Code or ten years, as provided by the Civil Code of the Philippines. The claimants are of the view that the applicable provision is Article 1144 of the Civil Code of the Philippines, which provides: The following actions must be brought within ten years from the time the right of action accrues: (1) Upon a written contract; (2) Upon an obligation created by law; (3) Upon a judgment. NLRC, on the other hand, believes that the applicable provision is Article 291 of the Labor Code of the Philippines, which in pertinent part provides: Money claims-all money claims arising from employer-employee relations accruing during the effectivity of this Code shall be filed within three (3) years from the time the cause of action accrued, otherwise they shall be forever barred. xxx xxx xxx The case of Philippine Air Lines Employees Association v. Philippine Air Lines, Inc., 70 SCRA 244 (1976) invoked by the claimants in G.R. Nos. 104911-14 is inapplicable to the cases at bench (Rollo, p. 21). The said case involved the correct computation of overtime pay as provided in the collective bargaining agreements and not the Eight-Hour Labor Law. The courts of the forum will not enforce any foreign claim obnoxious to the forum's public policy (Canadian Northern Railway Co. v. Eggen, 252 U.S. 553, 40 S. Ct. 402, 64 L. ed. 713 [1920]). To enforce the one-year prescriptive period of the Amiri Decree No. 23 of 1976 as regards the claims in question would contravene the public policy on the protection to labor. In the Declaration of Principles and State Policies, the 1987 Constitution emphasized that: The state shall promote social justice in all phases of national development. (Sec. 10). The state affirms labor as a primary social economic force. It shall protect the rights of workers and promote their welfare (Sec. 18).
220
As noted by the Court: "That is precisely why petitioners did not make any reference as to the computation for overtime work under the Eight-Hour Labor Law (Secs. 3 and 4, CA No. 494) and instead insisted that work computation provided in the collective bargaining agreements between the parties be observed. Since the claim for pay differentials is primarily anchored on the written contracts between the litigants, the ten-year prescriptive period provided by Art. 1144(1) of the New Civil Code should govern." Section 7-a of the Eight-Hour Labor Law (CA No. 444 as amended by R.A. No. 19933) provides: Any action to enforce any cause of action under this Act shall be commenced within three years after the cause of action accrued otherwise such action shall be forever barred, . . . . The court further explained: The three-year prescriptive period fixed in the Eight-Hour Labor Law (CA No. 444 as amended) will apply, if the claim for differentials for overtime work is solely based on said law, and not on a collective bargaining agreement or any other contract. In the instant case, the claim for overtime compensation is not so much because of Commonwealth Act No. 444, as amended but because the claim is demandable right of the employees, by reason of the above-mentioned collective bargaining agreement. Section 7-a of the Eight-Hour Labor Law provides the prescriptive period for filing "actions to enforce any cause of action under said law." On the other hand, Article 291 of the Labor Code of the Philippines provides the prescriptive period for filing "money claims arising from employer-employee relations." The claims in the cases at bench all arose from the employer-employee relations, which is broader in scope than claims arising from a specific law or from the collective bargaining agreement. The contention of the POEA Administrator, that the three-year prescriptive period under Article 291 of the Labor Code of the Philippines applies only to money claims specifically recoverable under said Code, does not find support in the plain language of the provision. Neither is the contention of the claimants in G.R. Nos. 104911-14 that said Article refers only to claims "arising from the employer's violation of the employee's right," as provided by the Labor Code supported by the facial reading of the provision. VII G.R. No. 104776 A. As to the first two grounds for the petition in G.R. No. 104776, claimants aver: (1) that while their complaints were filed on June 6, 1984 with POEA, the case was decided only on January 30, 1989, a clear denial of their right to a speedy disposition of the case; and (2) that NLRC and the POEA Administrator should have declared AIBC and BRII in default (Rollo, pp. 31-35). Claimants invoke a new provision incorporated in the 1987 Constitution, which provides: Sec. 16. All persons shall have the right to a speedy disposition of their cases before all judicial, quasi-judicial, or administrative bodies. It is true that the constitutional right to "a speedy disposition of cases" is not limited to the accused in criminal proceedings but extends to all parties in all cases, including civil and administrative cases, and in all proceedings, including judicial and quasi-judicial hearings. Hence, under the Constitution, any party to a case may demand expeditious action on all officials who are tasked with the administration of justice. However, as held in Caballero v. Alfonso, Jr., 153 SCRA 153 (1987), "speedy disposition of cases" is a relative term. Just like the constitutional guarantee of "speedy trial" accorded to the accused in all criminal proceedings, "speedy disposition of cases" is a flexible concept. It is consistent with delays and depends upon the circumstances of each case. What the Constitution prohibits are unreasonable, arbitrary and oppressive delays which render rights nugatory. Caballero laid down the factors that may be taken into consideration in determining whether or not the right to a "speedy disposition of cases" has been violated, thus: In the determination of whether or not the right to a "speedy trial" has been violated, certain factors may be considered and balanced against each other. These are length of delay, reason for the delay, assertion of the right or failure to assert it, and prejudice caused by the delay. The same factors may also be considered in answering judicial inquiry whether or not a person officially charged with the administration of justice has violated the speedy disposition of cases. Likewise, in Gonzales v. Sandiganbayan, 199 SCRA 298, (1991), we held: It must be here emphasized that the right to a speedy disposition of a case, like the right to speedy trial, is deemed violated only when the proceeding is attended by vexatious, capricious, and oppressive delays; or when unjustified postponements of the trial are asked for and secured, or when without cause or justified motive a long period of time is allowed to elapse without the party having his case tried. Since July 25, 1984 or a month after AIBC and BRII were served with a copy of the amended complaint, claimants had been asking that AIBC and BRII be declared in default for failure to file their answers within the ten-day period provided in Section 1, Rule III of Book VI of the Rules and Regulations of the POEA. At that time, there was a pending motion of AIBC and BRII to strike out of the records the amended complaint and the "Compliance" of claimants to the order of the POEA, requiring them to submit a bill of particulars. The cases at bench are not of the run-of-the-mill variety, such that their final disposition in the administrative level after seven years from their inception, cannot be said to be attended by unreasonable, arbitrary and oppressive delays as to violate the constitutional rights to a speedy disposition of the cases of complainants. The amended complaint filed on June 6, 1984 involved a total of 1,767 claimants. Said complaint had undergone several amendments, the first being on April 3, 1985. The claimants were hired on various dates from 1975 to 1983. They were deployed in different areas, one group in and the other groups outside of, Bahrain. The monetary claims totalling more than US$65 million according to Atty. Del Mundo, included: 1. Unexpired portion of contract; 2. Interest earnings of Travel and Fund;
221
3. Retirement and Savings Plan benefit; 4. War Zone bonus or premium pay of at least 100% of basic pay; 5. Area Differential pay; 6. Accrued Interest of all the unpaid benefits; 7. Salary differential pay; 8. Wage Differential pay; 9. Refund of SSS premiums not remitted to Social Security System; 10. Refund of Withholding Tax not remitted to Bureau of Internal Revenue (B.I.R.); 11. Fringe Benefits under Brown & Root's "A Summary of Employees Benefits consisting of 43 pages (Annex "Q" of Amended Complaint); 12. Moral and Exemplary Damages; 13. Attorney's fees of at least ten percent of amounts; 14. Other reliefs, like suspending and/or cancelling the license to recruit of AIBC and issued by the POEA; and 15. Penalty for violation of Article 34 (Prohibited practices) not excluding reportorial requirements thereof (NLRC Resolution, September 2, 1991, pp. 18-19; G.R. No. 104776, Rollo, pp. 73-74). Inasmuch as the complaint did not allege with sufficient definiteness and clarity of some facts, the claimants were ordered to comply with the motion of AIBC for a bill of particulars. When claimants filed their "Compliance and Manifestation," AIBC moved to strike out the complaint from the records for failure of claimants to submit a proper bill of particulars. While the POEA Administrator denied the motion to strike out the complaint, he ordered the claimants "to correct the deficiencies" pointed out by AIBC. Before an intelligent answer could be filed in response to the complaint, the records of employment of the more than 1,700 claimants had to be retrieved from various countries in the Middle East. Some of the records dated as far back as 1975. The hearings on the merits of the claims before the POEA Administrator were interrupted several times by the various appeals, first to NLRC and then to the Supreme Court. Aside from the inclusion of additional claimants, two new cases were filed against AIBC and BRII on October 10, 1985 (POEA Cases Nos. L-85-10-777 and L-85-10-779). Another complaint was filed on May 29, 1986 (POEA Case No. L-86-05-460). NLRC, in exasperation, noted that the exact number of claimants had never been completely established (Resolution, Sept. 2, 1991, G.R. No. 104776, Rollo, p. 57). All the three new cases were consolidated with POEA Case No. L-84-06-555. NLRC blamed the parties and their lawyers for the delay in terminating the proceedings, thus: These cases could have been spared the long and arduous route towards resolution had the parties and their counsel been more interested in pursuing the truth and the merits of the claims rather than exhibiting a fanatical reliance on technicalities. Parties and counsel have made these cases a litigation of emotion. The intransigence of parties and counsel is remarkable. As late as last month, this Commission made a last and final attempt to bring the counsel of all the parties (this Commission issued a special order directing respondent Brown & Root's resident agent/s to appear) to come to a more conciliatory stance. Even this failed (Rollo, p. 58). The squabble between the lawyers of claimants added to the delay in the disposition of the cases, to the lament of NLRC, which complained: It is very evident from the records that the protagonists in these consolidated cases appear to be not only the individual complainants, on the one hand, and AIBC and Brown & Root, on the other hand. The two lawyers for the complainants, Atty. Gerardo Del Mundo and Atty. Florante De Castro, have yet to settle the right of representation, each one persistently claiming to appear in behalf of most of the complainants. As a result, there are two appeals by the complainants. Attempts by this Commission to resolve counsels' conflicting claims of their respective authority to represent the complainants prove futile. The bickerings by these two counsels are reflected in their pleadings. In the charges and countercharges of falsification of documents and signatures, and in the disbarment proceedings by one against the other. All these have, to a large extent, abetted in confounding the issues raised in these cases, jumble the presentation of evidence, and even derailed the prospects of an amicable settlement. It would not be far-fetched to imagine that both counsel, unwittingly, perhaps, painted a rainbow for the complainants, with the proverbial pot of gold at its end containing more than US$100 million, the aggregate of the claims in these cases. It is, likewise, not improbable that their misplaced zeal and exuberance caused them to throw all caution to the wind in the matter of elementary rules of procedure and evidence (Rollo, pp. 58-59). Adding to the confusion in the proceedings before NLRC, is the listing of some of the complainants in both petitions filed by the two lawyers. As noted by NLRC, "the problem created by this situation is that if one of the two petitions is dismissed, then the parties and the public respondents would not know which claim of which petitioner was dismissed and which was not." B. Claimants insist that all their claims could properly be consolidated in a "class suit" because "all the named complainants have similar money claims and similar rights sought irrespective of whether they worked in Bahrain, United Arab Emirates or in Abu Dhabi, Libya or in any part of the Middle East" (Rollo, pp. 35-38). A class suit is proper where the subject matter of the controversy is one of common or general interest to many and the parties are so numerous that it is impracticable to bring them all before the court (Revised Rules of Court, Rule 3, Sec. 12).
222
While all the claims are for benefits granted under the Bahrain Law, many of the claimants worked outside Bahrain. Some of the claimants were deployed in Indonesia and Malaysia under different terms and conditions of employment. NLRC and the POEA Administrator are correct in their stance that inasmuch as the first requirement of a class suit is not present (common or general interest based on the Amiri Decree of the State of Bahrain), it is only logical that only those who worked in Bahrain shall be entitled to file their claims in a class suit. While there are common defendants (AIBC and BRII) and the nature of the claims is the same (for employee's benefits), there is no common question of law or fact. While some claims are based on the Amiri Law of Bahrain, many of the claimants never worked in that country, but were deployed elsewhere. Thus, each claimant is interested only in his own demand and not in the claims of the other employees of defendants. The named claimants have a special or particular interest in specific benefits completely different from the benefits in which the other named claimants and those included as members of a "class" are claiming (Berses v. Villanueva, 25 Phil. 473 [1913]). It appears that each claimant is only interested in collecting his own claims. A claimants has no concern in protecting the interests of the other claimants as shown by the fact, that hundreds of them have abandoned their co-claimants and have entered into separate compromise settlements of their respective claims. A principle basic to the concept of "class suit" is that plaintiffs brought on the record must fairly represent and protect the interests of the others (Dimayuga v. Court of Industrial Relations, 101 Phil. 590 [1957]). For this matter, the claimants who worked in Bahrain can not be allowed to sue in a class suit in a judicial proceeding. The most that can be accorded to them under the Rules of Court is to be allowed to join as plaintiffs in one complaint (Revised Rules of Court, Rule 3, Sec. 6). The Court is extra-cautious in allowing class suits because they are the exceptions to the condition sine qua non, requiring the joinder of all indispensable parties. In an improperly instituted class suit, there would be no problem if the decision secured is favorable to the plaintiffs. The problem arises when the decision is adverse to them, in which case the others who were impleaded by their self-appointed representatives, would surely claim denial of due process. C. The claimants in G.R. No. 104776 also urged that the POEA Administrator and NLRC should have declared Atty. Florante De Castro guilty of "forum shopping, ambulance chasing activities, falsification, duplicity and other unprofessional activities" and his appearances as counsel for some of the claimants as illegal (Rollo, pp. 38-40). The Anti-Forum Shopping Rule (Revised Circular No. 28-91) is intended to put a stop to the practice of some parties of filing multiple petitions and complaints involving the same issues, with the result that the courts or agencies have to resolve the same issues. Said Rule, however, applies only to petitions filed with the Supreme Court and the Court of Appeals. It is entitled "Additional Requirements For Petitions Filed with the Supreme Court and the Court of Appeals To Prevent Forum Shopping or Multiple Filing of Petitioners and Complainants." The first sentence of the circular expressly states that said circular applies to an governs the filing of petitions in the Supreme Court and the Court of Appeals. While Administrative Circular No. 04-94 extended the application of the anti-forum shopping rule to the lower courts and administrative agencies, said circular took effect only on April 1, 1994. POEA and NLRC could not have entertained the complaint for unethical conduct against Atty. De Castro because NLRC and POEA have no jurisdiction to investigate charges of unethical conduct of lawyers. Attorney's Lien The "Notice and Claim to Enforce Attorney's Lien" dated December 14, 1992 was filed by Atty. Gerardo A. Del Mundo to protect his claim for attorney's fees for legal services rendered in favor of the claimants (G.R. No. 104776, Rollo, pp. 841-844). A statement of a claim for a charging lien shall be filed with the court or administrative agency which renders and executes the money judgment secured by the lawyer for his clients. The lawyer shall cause written notice thereof to be delivered to his clients and to the adverse party (Revised Rules of Court, Rule 138, Sec. 37). The statement of the claim for the charging lien of Atty. Del Mundo should have been filed with the administrative agency that rendered and executed the judgment. Contempt of Court The complaint of Atty. Gerardo A. Del Mundo to cite Atty. Florante De Castro and Atty. Katz Tierra for violation of the Code of Professional Responsibility should be filed in a separate and appropriate proceeding. G.R. No. 104911-14 Claimants charge NLRC with grave abuse of discretion in not accepting their formula of "Three Hours Average Daily Overtime" in computing the overtime payments. They claim that it was BRII itself which proposed the formula during the negotiations for the settlement of their claims in Bahrain and therefore it is in estoppel to disclaim said offer (Rollo, pp. 21-22). Claimants presented a Memorandum of the Ministry of Labor of Bahrain dated April 16, 1983, which in pertinent part states: After the perusal of the memorandum of the Vice President and the Area Manager, Middle East, of Brown & Root Co. and the Summary of the compensation offered by the Company to the employees in respect of the difference of pay of the wages of the overtime and the difference of vacation leave and the perusal of the documents attached thereto i.e., minutes of the meetings between the Representative of the employees and the management of the Company, the complaint filed by the employees on 14/2/83 where they have claimed as hereinabove stated, sample of the Service Contract executed between one of the employees and the company through its agent in (sic)Philippines, Asia International Builders Corporation where it has been provided for 48 hours of work per week and an annual leave of 12 days and an overtime wage of 1 & 1/4 of the normal hourly wage. xxx xxx xxx The Company in its computation reached the following averages: A. 1. The average duration of the actual service of the employee is 35 months for the Philippino (sic) employees . . . . 2. The average wage per hour for the Philippino (sic) employee is US$2.69 . . . . 3. The average hours for the overtime is 3 hours plus in all public holidays and weekends.
223
4. Payment of US$8.72 per months (sic) of service as compensation for the difference of the wages of the overtime done for each Philippino (sic) employee . . . (Rollo, p.22). BRII and AIBC countered: (1) that the Memorandum was not prepared by them but by a subordinate official in the Bahrain Department of Labor; (2) that there was no showing that the Bahrain Minister of Labor had approved said memorandum; and (3) that the offer was made in the course of the negotiation for an amicable settlement of the claims and therefore it was not admissible in evidence to prove that anything is due to the claimants. While said document was presented to the POEA without observing the rule on presenting official documents of a foreign government as provided in Section 24, Rule 132 of the 1989 Revised Rules on Evidence, it can be admitted in evidence in proceedings before an administrative body. The opposing parties have a copy of the said memorandum, and they could easily verify its authenticity and accuracy. The admissibility of the offer of compromise made by BRII as contained in the memorandum is another matter. Under Section 27, Rule 130 of the 1989 Revised Rules on Evidence, an offer to settle a claim is not an admission that anything is due. Said Rule provides: Article 1377 of the Civil Code of the Philippines provides: Offer of compromise not admissible. In civil cases, an offer of compromise is not an admission of any liability, and is not admissible in evidence against the offeror. This Rule is not only a rule of procedure to avoid the cluttering of the record with unwanted evidence but a statement of public policy. There is great public interest in having the protagonists settle their differences amicable before these ripen into litigation. Every effort must be taken to encourage them to arrive at a settlement. The submission of offers and counter-offers in the negotiation table is a step in the right direction. But to bind a party to his offers, as what claimants would make this Court do, would defeat the salutary purpose of the Rule. G.R. Nos. 105029-32 A. NLRC applied the Amiri Decree No. 23 of 1976, which provides for greater benefits than those stipulated in the overseas-employment contracts of the claimants. It was of the belief that "where the laws of the host country are more favorable and beneficial to the workers, then the laws of the host country shall form part of the overseas employment contract." It quoted with approval the observation of the POEA Administrator that ". . . in labor proceedings, all doubts in the implementation of the provisions of the Labor Code and its implementing regulations shall be resolved in favor of labor" (Rollo, pp. 90-94). AIBC and BRII claim that NLRC acted capriciously and whimsically when it refused to enforce the overseasemployment contracts, which became the law of the parties. They contend that the principle that a law is deemed to be a part of a contract applies only to provisions of Philippine law in relation to contracts executed in the Philippines. The overseas-employment contracts, which were prepared by AIBC and BRII themselves, provided that the laws of the host country became applicable to said contracts if they offer terms and conditions more favorable that those stipulated therein. It was stipulated in said contracts that: The Employee agrees that while in the employ of the Employer, he will not engage in any other business or occupation, nor seek employment with anyone other than the Employer; that he shall devote his entire time and attention and his best energies, and The interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity. Said rule of interpretation is applicable to contracts of adhesion where there is already a prepared form containing the stipulations of the employment contract and the employees merely "take it or leave it." The presumption is that there was an imposition by one party against the other and that the employees signed the contracts out of necessity that reduced their bargaining power (Fieldmen's Insurance Co., Inc. v. Songco, 25 SCRA 70 [1968]). Applying the said legal precepts, we read the overseas-employment contracts in question as adopting the provisions of the Amiri Decree No. 23 of 1976 as part and parcel thereof. The parties to a contract may select the law by which it is to be governed (Cheshire, Private International Law, 187 [7th ed.]). In such a case, the foreign law is adopted as a "system" to regulate the relations of the parties, including questions of their capacity to enter into the contract, the formalities to be observed by them, matters of performance, and so forth (16 Am Jur 2d, 150-161). Instead of adopting the entire mass of the foreign law, the parties may just agree that specific provisions of a foreign statute shall be deemed incorporated into their contract "as a set of terms." By such reference to the provisions of the foreign law, the contract does not become a foreign contract to be governed by the foreign law. The said law does not operate as a statute but as a set of contractual terms deemed written in the contract (Anton, Private International Law, 197 [1967]; Dicey and Morris, The Conflict of Laws, 702-703, [8th ed.]). A basic policy of contract is to protect the expectation of the parties (Reese, Choice of Law in Torts and Contracts, 16 Columbia Journal of Transnational Law 1, 21 [1977]). Such party expectation is protected by giving effect to the parties' own choice of the applicable law (Fricke v. Isbrandtsen Co., Inc., 151 F. Supp. 465, 467 [1957]). The choice of law must, however, bear some relationship to the parties or their transaction (Scoles and Hayes, Conflict of Law 644-647 [1982]). There is no question that the contracts sought to be abilities to the performance of such duties as may be assigned to him by the Employer; that he shall at all times be subject to the direction and control of the Employer; and that the benefits provided to Employee hereunder are substituted for and in lieu of all other benefits provided by any applicable law, provided of course, that total remuneration and benefits do not fall below that of the host country regulation or custom, it being understood that should applicable laws establish that fringe benefits, or other such benefits additional to the compensation herein agreed cannot be waived, Employee agrees that such compensation will be adjusted downward so that the total compensation hereunder, plus the non-waivable benefits shall be equivalent to the compensation herein agreed (Rollo, pp. 352-353). The overseas-employment contracts could have been drafted more felicitously. While a part thereof provides that the compensation to the employee may be "adjusted downward so that the total computation (thereunder) plus the non-waivable benefits shall be equivalent to the compensation" therein agreed, another part of the same provision categorically states "that total remuneration and benefits do not fall below that of the host country regulation and custom." Any ambiguity in the overseas-employment contracts should be interpreted against AIBC and BRII, the parties that drafted it (Eastern Shipping Lines, Inc. v. Margarine-Verkaufs-Union, 93 SCRA 257 [1979]).
224
enforced by claimants have a direct connection with the Bahrain law because the services were rendered in that country. In Norse Management Co. (PTE) v. National Seamen Board, 117 SCRA 486 (1982), the "Employment Agreement," between Norse Management Co. and the late husband of the private respondent, expressly provided that in the event of illness or injury to the employee arising out of and in the course of his employment and not due to his own misconduct, "compensation shall be paid to employee in accordance with and subject to the limitation of the Workmen's Compensation Act of the Republic of the Philippines or the Worker's Insurance Act of registry of the vessel, whichever is greater." Since the laws of Singapore, the place of registry of the vessel in which the late husband of private respondent served at the time of his death, granted a better compensation package, we applied said foreign law in preference to the terms of the contract. The case of Bagong Filipinas Overseas Corporation v. National Labor Relations Commission, 135 SCRA 278 (1985), relied upon by AIBC and BRII is inapposite to the facts of the cases at bench. The issue in that case was whether the amount of the death compensation of a Filipino seaman should be determined under the shipboard employment contract executed in the Philippines or the Hongkong law. Holding that the shipboard employment contract was controlling, the court differentiated said case from Norse Management Co. in that in the latter case there was an express stipulation in the employment contract that the foreign law would be applicable if it afforded greater compensation. B. AIBC and BRII claim that they were denied by NLRC of their right to due process when said administrative agency granted Friday-pay differential, holiday-pay differential, annual-leave differential and leave indemnity pay to the claimants listed in Annex B of the Resolution. At first, NLRC reversed the resolution of the POEA Administrator granting these benefits on a finding that the POEA Administrator failed to consider the evidence presented by AIBC and BRII, that some findings of fact of the POEA Administrator were not supported by the evidence, and that some of the evidence were not disclosed to AIBC and BRII (Rollo, pp. 35-36; 106-107). But instead of remanding the case to the POEA Administrator for a new hearing, which means further delay in the termination of the case, NLRC decided to pass upon the validity of the claims itself. It is this procedure that AIBC and BRII complain of as being irregular and a "reversible error." They pointed out that NLRC took into consideration evidence submitted on appeal, the same evidence which NLRC found to have been "unilaterally submitted by the claimants and not disclosed to the adverse parties" (Rollo, pp. 37-39). NLRC noted that so many pieces of evidentiary matters were submitted to the POEA administrator by the claimants after the cases were deemed submitted for resolution and which were taken cognizance of by the POEA Administrator in resolving the cases. While AIBC and BRII had no opportunity to refute said evidence of the claimants before the POEA Administrator, they had all the opportunity to rebut said evidence and to present their counter-evidence before NLRC. As a matter of fact, AIBC and BRII themselves were able to present before NLRC additional evidence which they failed to present before the POEA Administrator. Under Article 221 of the Labor Code of the Philippines, NLRC is enjoined to "use every and all reasonable means to ascertain the facts in each case speedily and objectively and without regard to technicalities of law or procedure, all in the interest of due process." In deciding to resolve the validity of certain claims on the basis of the evidence of both parties submitted before the POEA Administrator and NLRC, the latter considered that it was not expedient to remand the cases to the POEA Administrator for that would only prolong the already protracted legal controversies. Even the Supreme Court has decided appealed cases on the merits instead of remanding them to the trial court for the reception of evidence, where the same can be readily determined from the uncontroverted facts on record (Development Bank of the Philippines v. Intermediate Appellate Court, 190 SCRA 653 [1990]; Pagdonsalan v. National Labor Relations Commission, 127 SCRA 463 [1984]). C. AIBC and BRII charge NLRC with grave abuse of discretion when it ordered the POEA Administrator to hold new hearings for 683 claimants listed in Annex D of the Resolution dated September 2, 1991 whose claims had been denied by the POEA Administrator "for lack of proof" and for 69 claimants listed in Annex E of the same Resolution, whose claims had been found by NLRC itself as not "supported by evidence" (Rollo, pp. 41-45). NLRC based its ruling on Article 218(c) of the Labor Code of the Philippines, which empowers it "[to] conduct investigation for the determination of a question, matter or controversy, within its jurisdiction, . . . ." It is the posture of AIBC and BRII that NLRC has no authority under Article 218(c) to remand a case involving claims which had already been dismissed because such provision contemplates only situations where there is still a question or controversy to be resolved (Rollo, pp. 41-42). A principle well embedded in Administrative Law is that the technical rules of procedure and evidence do not apply to the proceedings conducted by administrative agencies (First Asian Transport & Shipping Agency, Inc. v. Ople, 142 SCRA 542 [1986]; Asiaworld Publishing House, Inc. v. Ople, 152 SCRA 219 [1987]). This principle is enshrined in Article 221 of the Labor Code of the Philippines and is now the bedrock of proceedings before NLRC. Notwithstanding the non-applicability of technical rules of procedure and evidence in administrative proceedings, there are cardinal rules which must be observed by the hearing officers in order to comply with the due process requirements of the Constitution. These cardinal rules are collated in Ang Tibay v. Court of Industrial Relations, 69 Phil. 635 (1940). VIII The three petitions were filed under Rule 65 of the Revised Rules of Court on the grounds that NLRC had committed grave abuse of discretion amounting to lack of jurisdiction in issuing the questioned orders. We find no such abuse of discretion. WHEREFORE, all the three petitions are DISMISSED. SO ORDERED. Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 61594 September 28, 1990 PAKISTAN INTERNATIONAL AIRLINES CORPORATION, petitioner, vs HON. BLAS F. OPLE, in his capacity as Minister of Labor; HON. VICENTE LEOGARDO, JR., in his
225
capacity as Deputy Minister; ETHELYNNE B. FARRALES and MARIA MOONYEEN MAMASIG, respondents. Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles for petitioner. Ledesma, Saludo & Associates for private respondents. services as flight stewardesses would be terminated "effective 1 September 1980, conformably to clause 6 (b) of the employment agreement [they had) executed with [PIA]." 2 On 9 September 1980, private respondents Farrales and Mamasig jointly instituted a complaint, docketed as NCR-STF-95151-80, for illegal dismissal and non-payment of company benefits and bonuses, against PIA with the then Ministry of Labor and Employment ("MOLE"). After several unfruitful attempts at conciliation, the MOLE hearing officer Atty. Jose M. Pascual ordered the parties to submit their position papers and evidence supporting their respective positions. The PIA submitted its position paper, 3 but no evidence, and there claimed that both private respondents were habitual absentees; that both were in the habit of bringing in from abroad sizeable quantities of "personal effects"; and that PIA personnel at the Manila International Airport had been discreetly warned by customs officials to advise private respondents to discontinue that practice. PIA further claimed that the services of both private respondents were terminated pursuant to the provisions of the employment contract. In his Order dated 22 January 1981, Regional Director Francisco L. Estrella ordered the reinstatement of private respondents with full backwages or, in the alternative, the payment to them of the amounts equivalent to their salaries for the remainder of the fixed three-year period of their employment contracts; the payment to private respondent Mamasig of an amount equivalent to the value of a round trip ticket Manila-USA Manila; and payment of a bonus to each of the private respondents equivalent to their one-month salary. 4 The Order stated that private respondents had attained the status of regular employees after they had rendered more than a year of continued service; that the stipulation limiting the period of the employment contract to three (3) years was null and void as violative of the provisions of the Labor Code and its implementing rules and regulations on regular and casual employment; and that the dismissal, having been carried out without the requisite clearance from the MOLE, was illegal and entitled private respondents to reinstatement with full backwages. On appeal, in an Order dated 12 August 1982, Hon. Vicente Leogardo, Jr., Deputy Minister, MOLE, adopted the findings of fact and conclusions of the Regional Director and affirmed the latter's award save for the portion thereof giving PIA the option, in lieu of reinstatement, "to pay each of the complainants [private respondents] their salaries corresponding to the unexpired portion of the contract[s] [of employment] . . .". 5 xxx xxx xxx Notwithstanding anything to contrary as herein provided, PIA reserves the right to terminate this agreement at any time by giving the EMPLOYEE notice in writing in advance one month before the intended termination or in lieu thereof, by paying the EMPLOYEE wages equivalent to one month's salary. xxx xxx xxx 10. APPLICABLE LAW: This agreement shall be construed and governed under and by the laws of Pakistan, and only the Courts of Karachi, Pakistan shall have the jurisdiction to consider any matter arising out of or under this agreement. Respondents then commenced training in Pakistan. After their training period, they began discharging their job functions as flight attendants, with base station in Manila and flying assignments to different parts of the Middle East and Europe. On 2 August 1980, roughly one (1) year and four (4) months prior to the expiration of the contracts of employment, PIA through Mr. Oscar Benares, counsel for and official of the local branch of PIA, sent separate letters both dated 1 August 1980 to private respondents Farrales and Mamasig advising both that their In the instant Petition for Certiorari, petitioner PIA assails the award of the Regional Director and the Order of the Deputy Minister as having been rendered without jurisdiction; for having been rendered without support in the evidence of record since, allegedly, no hearing was conducted by the hearing officer, Atty. Jose M. Pascual; and for having been issued in disregard and in violation of petitioner's rights under the employment contracts with private respondents. 1. Petitioner's first contention is that the Regional Director, MOLE, had no jurisdiction over the subject matter of the complaint initiated by private respondents for illegal dismissal, jurisdiction over the same being lodged in the Arbitration Branch of the National Labor Relations Commission ("NLRC") It appears to us beyond dispute, however, that both at the time the complaint was initiated in September 1980 and at the time the Orders assailed were rendered on January 1981 (by Regional Director Francisco L. Estrella) and August 1982 (by Deputy Minister Vicente Leogardo, Jr.), the Regional Director had jurisdiction over termination cases. Art. 278 of the Labor Code, as it then existed, forbade the termination of the services of employees with at least one (1) year of service without prior clearance from the Department of Labor and Employment: Art. 278. Miscellaneous Provisions . . . (b) With or without a collective agreement, no employer may shut down his establishment or dismiss or terminate the employment of employees with at least one year of service during the last two (2) years, whether such service is continuous or
FELICIANO, J.: On 2 December 1978, petitioner Pakistan International Airlines Corporation ("PIA"), a foreign corporation licensed to do business in the Philippines, executed in Manila two (2) separate contracts of employment, one with private respondent Ethelynne B. Farrales and the other with private respondent Ma. M.C. Mamasig. 1 The contracts, which became effective on 9 January 1979, provided in pertinent portion as follows: 5. DURATION OF EMPLOYMENT AND PENALTY This agreement is for a period of three (3) years, but can be extended by the mutual consent of the parties. xxx xxx xxx 6. TERMINATION
226
broken, without prior written authority issued in accordance with such rules and regulations as the Secretary may promulgate . . . (emphasis supplied) Rule XIV, Book No. 5 of the Rules and Regulations Implementing the Labor Code, made clear that in case of a termination without the necessary clearance, the Regional Director was authorized to order the reinstatement of the employee concerned and the payment of backwages; necessarily, therefore, the Regional Director must have been given jurisdiction over such termination cases: Sec. 2. Shutdown or dismissal without clearance. Any shutdown or dismissal without prior clearance shall be conclusively presumed to be termination of employment without a just cause. The Regional Director shall, in such case order the immediate reinstatement of the employee and the payment of his wages from the time of the shutdown or dismissal until the time of reinstatement. (emphasis supplied) Policy Instruction No. 14 issued by the Secretary of Labor, dated 23 April 1976, was similarly very explicit about the jurisdiction of the Regional Director over termination of employment cases: Under PD 850, termination cases with or without CBA are now placed under the original jurisdiction of the Regional Director. Preventive suspension cases, now made cognizable for the first time, are also placed under the Regional Director. Before PD 850, termination cases where there was a CBA were under the jurisdiction of the grievance machinery and voluntary arbitration, while termination cases where there was no CBA were under the jurisdiction of the Conciliation Section. In more details, the major innovations introduced by PD 850 and its implementing rules and regulations with respect to termination and preventive suspension cases are: 1. The Regional Director is now required to rule on every application for clearance, whether there is opposition or not, within ten days from receipt thereof. xxx xxx xxx (Emphasis supplied) 2. The second contention of petitioner PIA is that, even if the Regional Director had jurisdiction, still his order was null and void because it had been issued in violation of petitioner's right to procedural due process . 6 This claim, however, cannot be given serious consideration. Petitioner was ordered by the Regional Director to submit not only its position paper but also such evidence in its favor as it might have. Petitioner opted to rely solely upon its position paper; we must assume it had no evidence to sustain its assertions. Thus, even if no formal or oral hearing was conducted, petitioner had ample opportunity to explain its side. Moreover, petitioner PIA was able to appeal his case to the Ministry of Labor and Employment. 7 There is another reason why petitioner's claim of denial of due process must be rejected. At the time the complaint was filed by private respondents on 21 September 1980 and at the time the Regional Director issued his questioned order on 22 January 1981, applicable regulation, as noted above, specified that a "dismissal without prior clearance shall be conclusively presumed to be termination of employment without a cause", and the Regional Director was required in such case to" order the immediate reinstatement of the employee and the payment of his wages from the time of the shutdown or dismiss until . . . reinstatement." In other words, under the then applicable rule, the Regional Director did not even have to require submission of position papers by the parties in view of the conclusive (juris et de jure) character of the presumption created by such applicable law and regulation. In Cebu Institute of Technology v. Minister of Labor and Employment, 8 the Court pointed out that "under Rule 14, Section 2, of the Implementing Rules and Regulations, the termination of [an employee] which was without previous clearance from the Ministry of Labor is conclusively presumed to be without [just] cause . . . [a presumption which] cannot be overturned by any contrary proof however strong." 3. In its third contention, petitioner PIA invokes paragraphs 5 and 6 of its contract of employment with private respondents Farrales and Mamasig, arguing that its relationship with them was governed by the provisions of its contract rather than by the general provisions of the Labor Code. 9 Paragraph 5 of that contract set a term of three (3) years for that relationship, extendible by agreement between the parties; while paragraph 6 provided that, notwithstanding any other provision in the Contract, PIA had the right to terminate the employment agreement at any time by giving one-month's notice to the employee or, in lieu of such notice, one-months salary. A contract freely entered into should, of course, be respected, as PIA argues, since a contract is the law between the parties. 10 The principle of party autonomy in contracts is not, however, an absolute principle. The rule in Article 1306, of our Civil Code is that the contracting parties may establish such stipulations as they may deem convenient, "provided they are not contrary to law, morals, good customs, public order or public policy." Thus, counter-balancing the principle of autonomy of contracting parties is the equally general rule that provisions of applicable law, especially provisions relating to matters affected with public policy, are deemed written into the contract. 11 Put a little differently, the governing principle is that parties may not contract away applicable provisions of law especially peremptory provisions dealing with matters heavily impressed with public interest. The law relating to labor and employment is clearly such an area and parties are not at liberty to insulate themselves and their relationships from the impact of labor laws and regulations by simply contracting with each other. It is thus necessary to appraise the contractual provisions invoked by petitioner PIA in terms of their consistency with applicable Philippine law and regulations. As noted earlier, both the Labor Arbiter and the Deputy Minister, MOLE, in effect held that paragraph 5 of that employment contract was inconsistent with Articles 280 and 281 of the Labor Code as they existed at the time the contract of employment was entered into, and hence refused to give effect to said paragraph 5. These Articles read as follows: Art. 280. Security of Tenure. In cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or when authorized by this Title An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and to his backwages computed from the time his compensation was withheld from him up to the time his reinstatement. Art. 281. Regular and Casual Employment. The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreements of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season. An employment shall be deemed to be casual if it is not covered by the preceding paragraph: provided, that, any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered as regular employee with respect to the activity in which he is employed and his employment shall continue while such actually exists. (Emphasis supplied)
227
In Brent School, Inc., et al. v. Ronaldo Zamora, etc., et al., 12 the Court had occasion to examine in detail the question of whether employment for a fixed term has been outlawed under the above quoted provisions of the Labor Code. After an extensive examination of the history and development of Articles 280 and 281, the Court reached the conclusion that a contract providing for employment with a fixed period was not necessarily unlawful: There can of course be no quarrel with the proposition that where from the circumstances it is apparent that periods have been imposed to preclude acquisition of tenurial security by the employee, they should be struck down or disregarded as contrary to public policy, morals, etc. But where no such intent to circumvent the law is shown, or stated otherwise, where the reason for the law does not exist e.g. where it is indeed the employee himself who insists upon a period or where the nature of the engagement is such that, without being seasonal or for a specific project, a definite date of termination is a sine qua non would an agreement fixing a period be essentially evil or illicit, therefore anathema Would such an agreement come within the scope of Article 280 which admittedly was enacted "to prevent the circumvention of the right of the employee to be secured in . . . (his) employment?" As it is evident from even only the three examples already given that Article 280 of the Labor Code, under a narrow and literal interpretation, not only fails to exhaust the gamut of employment contracts to which the lack of a fixed period would be an anomaly, but would also appear to restrict, without reasonable distinctions, the right of an employee to freely stipulate with his employer the duration of his engagement, it logically follows that such a literal interpretation should be eschewed or avoided. The law must be given reasonable interpretation, to preclude absurdity in its application. Outlawing the whole concept of term employment and subverting to boot the principle of freedom of contract to remedy the evil of employers" using it as a means to prevent their employees from obtaining security of tenure is like cutting off the nose to spite the face or, more relevantly, curing a headache by lopping off the head. xxx xxx xxx Accordingly, and since the entire purpose behind the development of legislation culminating in the present Article 280 of the Labor Code clearly appears to have been, as already observed, to prevent circumvention of the employee's right to be secure in his tenure, the clause in said article indiscriminately and completely ruling out all written or oral agreements conflicting with the concept of regular employment as defined therein should be construed to refer to the substantive evil that the Code itself has singled out: agreements entered into precisely to circumvent security of tenure. It should have no application to instances where a fixed period of employment was agreed upon knowingly and voluntarily by the parties, without any force, duress or improper pressure being brought to bear upon the employee and absent any other circumstances vitiating his consent, or where it satisfactorily appears that the employer and employee dealt with each other on more or less equal terms with no moral dominance whatever being exercised by the former over the latter. Unless thus limited in its purview, the law would be made to apply to purposes other than those explicitly stated by its framers; it thus becomes pointless and arbitrary, unjust in its effects and apt to lead to absurd and unintended consequences. (emphasis supplied) It is apparent from Brent School that the critical consideration is the presence or absence of a substantial indication that the period specified in an employment agreement was designed to circumvent the security of tenure of regular employees which is provided for in Articles 280 and 281 of the Labor Code. This indication must ordinarily rest upon some aspect of the agreement other than the mere specification of a fixed term of the ernployment agreement, or upon evidence aliunde of the intent to evade. Examining the provisions of paragraphs 5 and 6 of the employment agreement between petitioner PIA and private respondents, we consider that those provisions must be read together and when so read, the fixed period of three (3) years specified in paragraph 5 will be seen to have been effectively neutralized by the provisions of paragraph 6 of that agreement. Paragraph 6 in effect took back from the employee the fixed three (3)-year period ostensibly granted by paragraph 5 by rendering such period in effect a facultative one at the option of the employer PIA. For petitioner PIA claims to be authorized to shorten that term, at any time and for any cause satisfactory to itself, to a one-month period, or even less by simply paying the employee a month's salary. Because the net effect of paragraphs 5 and 6 of the agreement here involved is to render the employment of private respondents Farrales and Mamasig basically employment at the pleasure of petitioner PIA, the Court considers that paragraphs 5 and 6 were intended to prevent any security of tenure from accruing in favor of private respondents even during the limited period of three (3) years, 13 and thus to escape completely the thrust of Articles 280 and 281 of the Labor Code. Petitioner PIA cannot take refuge in paragraph 10 of its employment agreement which specifies, firstly, the law of Pakistan as the applicable law of the agreement and, secondly, lays the venue for settlement of any dispute arising out of or in connection with the agreement "only [in] courts of Karachi Pakistan". The first clause of paragraph 10 cannot be invoked to prevent the application of Philippine labor laws and regulations to the subject matter of this case, i.e., the employer-employee relationship between petitioner PIA and private respondents. We have already pointed out that the relationship is much affected with public interest and that the otherwise applicable Philippine laws and regulations cannot be rendered illusory by the parties agreeing upon some other law to govern their relationship. Neither may petitioner invoke the second clause of paragraph 10, specifying the Karachi courts as the sole venue for the settlement of dispute; between the contracting parties. Even a cursory scrutiny of the relevant circumstances of this case will show the multiple and substantive contacts between Philippine law and Philippine courts, on the one hand, and the relationship between the parties, upon the other: the contract was not only executed in the Philippines, it was also performed here, at least partially; private respondents are Philippine citizens and respondents, while petitioner, although a foreign corporation, is licensed to do business (and actually doing business) and hence resident in the Philippines; lastly, private respondents were based in the Philippines in between their assigned flights to the Middle East and Europe. All the above contacts point to the Philippine courts and administrative agencies as a proper forum for the resolution of contractual disputes between the parties. Under these circumstances, paragraph 10 of the employment agreement cannot be given effect so as to oust Philippine agencies and courts of the jurisdiction vested upon them by Philippine law. Finally, and in any event, the petitioner PIA did not undertake to plead and prove the contents of Pakistan law on the matter; it must therefore be presumed that the applicable provisions of the law of Pakistan are the same as the applicable provisions of Philippine law. 14 We conclude that private respondents Farrales and Mamasig were illegally dismissed and that public respondent Deputy Minister, MOLE, had not committed any grave abuse of discretion nor any act without or in excess of jurisdiction in ordering their reinstatement with backwages. Private respondents are entitled to three (3) years backwages without qualification or deduction. Should their reinstatement to their former or other substantially equivalent positions not be feasible in view of the length of time which has gone by since their services were unlawfully terminated, petitioner should be required to pay separation pay to private respondents amounting to one (1) month's salary for every year of service rendered by them, including the three (3) years service putatively rendered. ACCORDINGLY, the Petition for certiorari is hereby DISMISSED for lack of merit, and the Order dated 12 August 1982 of public respondent is hereby AFFIRMED, except that (1) private respondents are entitled to three (3) years backwages, without deduction or qualification; and (2) should reinstatement of private respondents to their former positions or to substantially equivalent positions not be feasible, then petitioner shall, in lieu thereof, pay to private respondents separation pay amounting to one (1)-month's salary for every year of service actually rendered by them and for the three (3) years putative service by private respondents. The Temporary Restraining Order issued on 13 September 1982 is hereby LIFTED. Costs against petitioner. SO ORDERED.
228
Fernan (C.J., Chairman), Gutierrez, Jr., Bidin and Corts, JJ., concur. MARIA CRISTINA BELLIS and MIRIAM PALMA BELLIS, oppositors-appellants, vs. EDWARD A. BELLIS, ET AL., heirs-appellees. Vicente R. Macasaet and Jose D. Villena for oppositors appellants. Paredes, Poblador, Cruz and Nazareno for heirs-appellees E. A. Bellis, et al. Quijano and Arroyo for heirs-appellees W. S. Bellis, et al. J. R. Balonkita for appellee People's Bank & Trust Company. Ozaeta, Gibbs and Ozaeta for appellee A. B. Allsman. BENGZON, J.P., J.: This is a direct appeal to Us, upon a question purely of law, from an order of the Court of First Instance of Manila dated April 30, 1964, approving the project of partition filed by the executor in Civil Case No. 37089 therein.1wph1.t The facts of the case are as follows: Amos G. Bellis, born in Texas, was "a citizen of the State of Texas and of the United States." By his first wife, Mary E. Mallen, whom he divorced, he had five legitimate children: Edward A. Bellis, George Bellis (who predeceased him in infancy), Henry A. Bellis, Alexander Bellis and Anna Bellis Allsman; by his second wife, Violet Kennedy, who survived him, he had three legitimate children: Edwin G. Bellis, Walter S. Bellis and Dorothy Bellis; and finally, he had three illegitimate children: Amos Bellis, Jr., Maria Cristina Bellis and Miriam Palma Bellis. On August 5, 1952, Amos G. Bellis executed a will in the Philippines, in which he directed that after all taxes, obligations, and expenses of administration are paid for, his distributable estate should be divided, in trust, in the following order and manner: (a) $240,000.00 to his first wife, Mary E. Mallen; (b) P120,000.00 to his three illegitimate children, Amos Bellis, Jr., Maria Cristina Bellis, Miriam Palma Bellis, or P40,000.00 each and (c) after the foregoing two items have been satisfied, the remainder shall go to his seven surviving children by his first and second wives, namely: Edward A. Bellis, Henry A. Bellis, Alexander Bellis and Anna Bellis Allsman, Edwin G. Bellis, Walter S. Bellis, and Dorothy E. Bellis, in equal shares.1wph1.t Subsequently, or on July 8, 1958, Amos G. Bellis died a resident of San Antonio, Texas, U.S.A. His will was admitted to probate in the Court of First Instance of Manila on September 15, 1958. The People's Bank and Trust Company, as executor of the will, paid all the bequests therein including the amount of $240,000.00 in the form of shares of stock to Mary E. Mallen and to the three (3) illegitimate children, Amos Bellis, Jr., Maria Cristina Bellis and Miriam Palma Bellis, various amounts totalling P40,000.00 each in satisfaction of their respective legacies, or a total of P120,000.00, which it released from time to time according as the lower court approved and allowed the various motions or petitions filed by the latter three requesting partial advances on account of their respective legacies. On January 8, 1964, preparatory to closing its administration, the executor submitted and filed its "Executor's Final Account, Report of Administration and Project of Partition" wherein it reported, inter alia, the satisfaction of the legacy of Mary E. Mallen by the delivery to her of shares of stock amounting to $240,000.00, and the legacies of Amos Bellis, Jr., Maria Cristina Bellis and Miriam Palma Bellis in the amount of P40,000.00 each or a total of P120,000.00. In the project of partition, the executor pursuant to the "Twelfth" clause of the testator's Last Will and Testament divided the residuary estate into seven equal portions for the benefit of the testator's seven legitimate children by his first and second marriages.
Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-23678 June 6, 1967
TESTATE ESTATE OF AMOS G. BELLIS, deceased. PEOPLE'S BANK and TRUST COMPANY, executor.
229
On January 17, 1964, Maria Cristina Bellis and Miriam Palma Bellis filed their respective oppositions to the project of partition on the ground that they were deprived of their legitimes as illegitimate children and, therefore, compulsory heirs of the deceased. Amos Bellis, Jr. interposed no opposition despite notice to him, proof of service of which is evidenced by the registry receipt submitted on April 27, 1964 by the executor.1 After the parties filed their respective memoranda and other pertinent pleadings, the lower court, on April 30, 1964, issued an order overruling the oppositions and approving the executor's final account, report and administration and project of partition. Relying upon Art. 16 of the Civil Code, it applied the national law of the decedent, which in this case is Texas law, which did not provide for legitimes. Their respective motions for reconsideration having been denied by the lower court on June 11, 1964, oppositors-appellants appealed to this Court to raise the issue of which law must apply Texas law or Philippine law. In this regard, the parties do not submit the case on, nor even discuss, the doctrine of renvoi, applied by this Court in Aznar v. Christensen Garcia, L-16749, January 31, 1963. Said doctrine is usually pertinent where the decedent is a national of one country, and a domicile of another. In the present case, it is not disputed that the decedent was both a national of Texas and a domicile thereof at the time of his death.2 So that even assuming Texas has a conflict of law rule providing that the domiciliary system (law of the domicile) should govern, the same would not result in a reference back (renvoi) to Philippine law, but would still refer to Texas law. Nonetheless, if Texas has a conflicts rule adopting the situs theory (lex rei sitae) calling for the application of the law of the place where the properties are situated, renvoi would arise, since the properties here involved are found in the Philippines. In the absence, however, of proof as to the conflict of law rule of Texas, it should not be presumed different from ours.3Appellants' position is therefore not rested on the doctrine of renvoi. As stated, they never invoked nor even mentioned it in their arguments. Rather, they argue that their case falls under the circumstances mentioned in the third paragraph of Article 17 in relation to Article 16 of the Civil Code. Article 16, par. 2, and Art. 1039 of the Civil Code, render applicable the national law of the decedent, in intestate or testamentary successions, with regard to four items: (a) the order of succession; (b) the amount of successional rights; (e) the intrinsic validity of the provisions of the will; and (d) the capacity to succeed. They provide that ART. 16. Real property as well as personal property is subject to the law of the country where it is situated. However, intestate and testamentary successions, both with respect to the order of succession and to the amount of successional rights and to the intrinsic validity of testamentary provisions, shall be regulated by the national law of the person whose succession is under consideration, whatever may he the nature of the property and regardless of the country wherein said property may be found. ART. 1039. Capacity to succeed is governed by the law of the nation of the decedent. Appellants would however counter that Art. 17, paragraph three, of the Civil Code, stating that Prohibitive laws concerning persons, their acts or property, and those which have for their object public order, public policy and good customs shall not be rendered ineffective by laws or judgments promulgated, or by determinations or conventions agreed upon in a foreign country. prevails as the exception to Art. 16, par. 2 of the Civil Code afore-quoted. This is not correct. Precisely, Congressdeleted the phrase, "notwithstanding the provisions of this and the next preceding article" when they incorporated Art. 11 of the old Civil Code as Art. 17 of the new Civil Code, while reproducing without substantial change the second paragraph of Art. 10 of the old Civil Code as Art. 16 in the new. It must have been their purpose to make the second paragraph of Art. 16 a specific provision in itself which must be applied in testate and intestate succession. As further indication of this legislative intent, Congress added a new provision, under Art. 1039, which decrees that capacity to succeed is to be governed by the national law of the decedent. It is therefore evident that whatever public policy or good customs may be involved in our System of legitimes, Congress has not intended to extend the same to the succession of foreign nationals. For it has specifically chosen to leave, inter alia, the amount of successional rights, to the decedent's national law. Specific provisions must prevail over general ones. Appellants would also point out that the decedent executed two wills one to govern his Texas estate and the other his Philippine estate arguing from this that he intended Philippine law to govern his Philippine estate. Assuming that such was the decedent's intention in executing a separate Philippine will, it would not alter the law, for as this Court ruled in Miciano v. Brimo, 50 Phil. 867, 870, a provision in a foreigner's will to the effect that his properties shall be distributed in accordance with Philippine law and not with his national law, is illegal and void, for his national law cannot be ignored in regard to those matters that Article 10 now Article 16 of the Civil Code states said national law should govern. The parties admit that the decedent, Amos G. Bellis, was a citizen of the State of Texas, U.S.A., and that under the laws of Texas, there are no forced heirs or legitimes. Accordingly, since the intrinsic validity of the provision of the will and the amount of successional rights are to be determined under Texas law, the Philippine law on legitimes cannot be applied to the testacy of Amos G. Bellis. Wherefore, the order of the probate court is hereby affirmed in toto, with costs against appellants. So ordered. Concepcion, C.J., Reyes, J.B.L., Dizon, Regala, Makalintal, Zaldivar, Sanchez and Castro, JJ., concur.
230
Disgruntled over TransWorld Airlines, Inc.'s refusal to accommodate them in TWA Flight 007 departing from New York to Los Angeles on June 6, 1984 despite possession of confirmed tickets, petitioners filed an action for damages before the Regional Trial Court of Makati, Metro Manila, Branch 145. Advocating petitioner's position, the trial court categorically ruled that respondent TransWorld Airlines (TWA) breached its contract of carriage with petitioners and that said breach was "characterized by bad faith." On appeal, however, the appellate court found that while there was a breach of contract on respondent TWA's part, there was neither fraud nor bad faith because under the Code of Federal Regulations by the Civil Aeronautics Board of the United States of America it is allowed to overbook flights. The factual backdrop of the case is as follows: Petitioners-spouses Cesar C. Zalamea and Suthira Zalamea, and their daughter, Liana Zalamea, purchased three (3) airline tickets from the Manila agent of respondent TransWorld Airlines, Inc. for a flight to New York to Los Angeles on June 6, 1984. The tickets of petitioners-spouses were purchased at a discount of 75% while that of their daughter was a full fare ticket. All three tickets represented confirmed reservations. While in New York, on June 4, 1984, petitioners received notice of the reconfirmation of their reservations for said flight. On the appointed date, however, petitioners checked in at 10:00 a.m., an hour earlier than the scheduled flight at 11:00 a.m. but were placed on the wait-list because the number of passengers who had checked in before them had already taken all the seats available on the flight. Liana Zalamea appeared as the No. 13 on the wait-list while the two other Zalameas were listed as "No. 34, showing a party of two." Out of the 42 names on the wait list, the first 22 names were eventually allowed to board the flight to Los Angeles, including petitioner Cesar Zalamea. The two others, on the other hand, at No. 34, being ranked lower than 22, were not able to fly. As it were, those holding full-fare tickets were given first priority among the wait-listed passengers. Mr. Zalamea, who was holding the full-fare ticket of his daughter, was allowed to board the plane; while his wife and daughter, who presented the discounted tickets were denied boarding. According to Mr. Zalamea, it was only later when he discovered the he was holding his daughter's full-fare ticket. Republic of the Philippines SUPREME COURT Manila SECOND DIVISION Even in the next TWA flight to Los Angeles Mrs. Zalamea and her daughter, could not be accommodated because it was also fully booked. Thus, they were constrained to book in another flight and purchased two tickets from American Airlines at a cost of Nine Hundred Eighteen ($918.00) Dollars. Upon their arrival in the Philippines, petitioners filed an action for damages based on breach of contract of air carriage before the Regional Trial Court of Makati, Metro Manila, Branch 145. As aforesaid, the lower court ruled in favor of petitioners in its decision 1 dated January 9, 1989 the dispositive portion of which states as follows: WHEREFORE, judgment is hereby rendered ordering the defendant to pay plaintiffs the following amounts: (1) US $918.00, or its peso equivalent at the time of payment representing the price of the tickets bought by Suthira and Liana Zalamea from American Airlines, to enable them to fly to Los Angeles from New York City; (2) US $159.49, or its peso equivalent at the time of payment, representing the price of Suthira Zalamea's ticket for TWA Flight 007; (3) Eight Thousand Nine Hundred Thirty-Four Pesos and Fifty Centavos (P8,934.50, Philippine Currency, representing the price of Liana Zalamea's ticket for TWA Flight 007,
G.R. No. 104235 November 18, 1993 SPOUSES CESAR & SUTHIRA ZALAMEA and LIANA ZALAMEA, petitioners, vs. HONORABLE COURT OF APPEALS and TRANSWORLD AIRLINES, INC., respondents. Sycip, Salazar, Hernandez, Gatmaitan for petitioners. Quisumbing, Torres & Evangelista for private-respondent.
NOCON, J.:
231
(4) Two Hundred Fifty Thousand Pesos (P250,000.00), Philippine Currency, as moral damages for all the plaintiffs' (5) One Hundred Thousand Pesos (P100,000.00), Philippine Currency, as and for attorney's fees; and (6) The costs of suit. III. SO ORDERED. 2 On appeal, the respondent Court of Appeals held that moral damages are recoverable in a damage suit predicated upon a breach of contract of carriage only where there is fraud or bad faith. Since it is a matter of record that overbooking of flights is a common and accepted practice of airlines in the United States and is specifically allowed under the Code of Federal Regulations by the Civil Aeronautics Board, no fraud nor bad faith could be imputed on respondent TransWorld Airlines. Moreover, while respondent TWA was remiss in not informing petitioners that the flight was overbooked and that even a person with a confirmed reservation may be denied accommodation on an overbooked flight, nevertheless it ruled that such omission or negligence cannot under the circumstances be considered to be so gross as to amount to bad faith. Finally, it also held that there was no bad faith in placing petitioners in the wait-list along with forty-eight (48) other passengers where full-fare first class tickets were given priority over discounted tickets. The dispositive portion of the decision of respondent Court of Appeals 3 dated October 25, 1991 states as follows: WHEREFORE, in view of all the foregoing, the decision under review is hereby MODIFIED in that the award of moral and exemplary damages to the plaintiffs is eliminated, and the defendant-appellant is hereby ordered to pay the plaintiff the following amounts: (1) US$159.49, or its peso equivalent at the time of the payment, representing the price of Suthira Zalamea's ticket for TWA Flight 007; (2) US$159.49, or its peso equivalent at the time of the payment, representing the price of Cesar Zalamea's ticket for TWA Flight 007; (3) P50,000.00 as and for attorney's fees. (4) The costs of suit. SO ORDERED. 4 Not satisfied with the decision, petitioners raised the case on petition for review on certiorari and alleged the following errors committed by the respondent Court of Appeals, to wit: I. . . . IN NOT ORDERING THE REFUND OF LIANA ZALAMEA'S TWA TICKET AND PAYMENT FOR THE AMERICAN AIRLINES TICKETS. 5 That there was fraud or bad faith on the part of respondent airline when it did not allow petitioners to board their flight for Los Angeles in spite of confirmed tickets cannot be disputed. The U.S. law or regulation allegedly authorizing overbooking has never been proved. Foreign laws do not prove themselves nor can the courts take judicial notice of them. Like any other fact, they must be alleged and proved. 6 Written law may be evidenced by an official publication thereof or by a copy attested by the officer having the legal custody of the record, or by his deputy, and accompanied with a certificate that such officer has custody. The certificate may be made by a secretary of an embassy or legation, consul general, consul, vice-consul, or consular agent or by any officer in the foreign service of the Philippines stationed in the foreign country in which the record is kept, and authenticated by the seal of his office. 7 Respondent TWA relied solely on the statement of Ms. Gwendolyn Lather, its customer service agent, in her deposition dated January 27, 1986 that the Code of Federal Regulations of the Civil Aeronautics Board allows overbooking. Aside from said statement, no official publication of said code was presented as evidence. Thus, respondent court's finding that overbooking is specifically allowed by the US Code of Federal Regulations has no basis in fact. Even if the claimed U.S. Code of Federal Regulations does exist, the same is not applicable to the case at bar in accordance with the principle of lex loci contractus which require that the law of the place where the airline ticket was issued should be applied by the court where the passengers are residents and nationals of the forum and the ticket is issued in such State by the defendant airline. 8 Since the tickets were sold and issued in the Philippines, the applicable law in this case would be Philippine law. Existing jurisprudence explicitly states that overbooking amounts to bad faith, entitling the passengers concerned to an award of moral damages. In Alitalia Airways v. Court of Appeals, 9 where passengers with confirmed bookings were refused carriage on the last minute, this Court held that when an airline issues a ticket to a passenger confirmed on a particular flight, on a certain date, a contract of carriage arises, and the passenger has every right to expect that he would fly on that flight and on that date. If he does not, then the carrier opens itself to a suit for breach of contract of carriage. Where an airline had deliberately overbooked, it took the risk of having to deprive some passengers of their seats in case all of them would show up for the check in. For the indignity and inconvenience of being refused a confirmed seat on the last minute, said passenger is entitled to an award of moral damages. Similarly, in Korean Airlines Co., Ltd. v. Court of Appeals, 10 where private respondent was not allowed to board the plane because her seat had already been given to another passenger even before the allowable period for passengers to check in had lapsed despite the fact that she had a confirmed ticket and she had arrived on time, this Court held that petitioner airline acted in bad faith in violating private respondent's rights under their contract of carriage and is therefore liable for the injuries she has sustained as a result. . . . IN HOLDING THAT THERE WAS NO FRAUD OR BAD FAITH ON THE PART OF RESPONDENT TWA BECAUSE IT HAS A RIGHT TO OVERBOOK FLIGHTS. II. . . . IN ELIMINATING THE AWARD OF EXEMPLARY DAMAGES.
232
In fact, existing jurisprudence abounds with rulings where the breach of contract of carriage amounts to bad faith. In Pan American World Airways, Inc. v. Intermediate Appellate Court, 11 where a would-be passenger had the necessary ticket, baggage claim and clearance from immigration all clearly and unmistakably showing that she was, in fact, included in the passenger manifest of said flight, and yet was denied accommodation in said flight, this Court did not hesitate to affirm the lower court's finding awarding her damages. A contract to transport passengers is quite different in kind and degree from any other contractual relation. So ruled this Court in Zulueta v. Pan American World Airways, Inc. 12 This is so, for a contract of carriage generates a relation attended with public duty a duty to provide public service and convenience to its passengers which must be paramount to self-interest or enrichment. Thus, it was also held that the switch of planes from Lockheed 1011 to a smaller Boeing 707 because there were only 138 confirmed economy class passengers who could very well be accommodated in the smaller planes, thereby sacrificing the comfort of its first class passengers for the sake of economy, amounts to bad faith. Such inattention and lack of care for the interest of its passengers who are entitled to its utmost consideration entitles the passenger to an award of moral damages. 13 Even on the assumption that overbooking is allowed, respondent TWA is still guilty of bad faith in not informing its passengers beforehand that it could breach the contract of carriage even if they have confirmed tickets if there was overbooking. Respondent TWA should have incorporated stipulations on overbooking on the tickets issued or to properly inform its passengers about these policies so that the latter would be prepared for such eventuality or would have the choice to ride with another airline. Respondent TWA contends that Exhibit I, the detached flight coupon upon which were written the name of the passenger and the points of origin and destination, contained such a notice. An examination of Exhibit I does not bear this out. At any rate, said exhibit was not offered for the purpose of showing the existence of a notice of overbooking but to show that Exhibit I was used for flight 007 in first class of June 11, 1984 from New York to Los Angeles. Moreover, respondent TWA was also guilty of not informing its passengers of its alleged policy of giving less priority to discounted tickets. While the petitioners had checked in at the same time, and held confirmed tickets, yet, only one of them was allowed to board the plane ten minutes before departure time because the full-fare ticket he was holding was given priority over discounted tickets. The other two petitioners were left behind. It is respondent TWA's position that the practice of overbooking and the airline system of boarding priorities are reasonable policies, which when implemented do not amount to bad faith. But the issue raised in this case is not the reasonableness of said policies but whether or not said policies were incorporated or deemed written on petitioners' contracts of carriage. Respondent TWA failed to show that there are provisions to that effect. Neither did it present any argument of substance to show that petitioners were duly apprised of the overbooked condition of the flight or that there is a hierarchy of boarding priorities in booking passengers. It is evident that petitioners had the right to rely upon the assurance of respondent TWA, thru its agent in Manila, then in New York, that their tickets represented confirmed seats without any qualification. The failure of respondent TWA to so inform them when it could easily have done so thereby enabling respondent to hold on to them as passengers up to the last minute amounts to bad faith. Evidently, respondent TWA placed its selfinterest over the rights of petitioners under their contracts of carriage. Such conscious disregard of petitioners' rights makes respondent TWA liable for moral damages. To deter breach of contracts by respondent TWA in similar fashion in the future, we adjudge respondent TWA liable for exemplary damages, as well. Petitioners also assail the respondent court's decision not to require the refund of Liana Zalamea's ticket because the ticket was used by her father. On this score, we uphold the respondent court. Petitioners had not shown with certainty that the act of respondent TWA in allowing Mr. Zalamea to use the ticket of her daughter was due to inadvertence or deliberate act. Petitioners had also failed to establish that they did not accede to said agreement. The logical conclusion, therefore, is that both petitioners and respondent TWA agreed, albeit impliedly, to the course of action taken. The respondent court erred, however, in not ordering the refund of the American Airlines tickets purchased and used by petitioners Suthira and Liana. The evidence shows that petitioners Suthira and Liana were constrained to take the American Airlines flight to Los Angeles not because they "opted not to use their TWA tickets on another TWA flight" but because respondent TWA could not accommodate them either on the next TWA flight which was also fully booked. 14 The purchase of the American Airlines tickets by petitioners Suthira and Liana was the consequence of respondent TWA's unjustifiable breach of its contracts of carriage with petitioners. In accordance with Article 2201, New Civil Code, respondent TWA should, therefore, be responsible for all damages which may be reasonably attributed to the non-performance of its obligation. In the previously cited case of Alitalia Airways v. Court of Appeals, 15 this Court explicitly held that a passenger is entitled to be reimbursed for the cost of the tickets he had to buy for a flight to another airline. Thus, instead of simply being refunded for the cost of the unused TWA tickets, petitioners should be awarded the actual cost of their flight from New York to Los Angeles. On this score, we differ from the trial court's ruling which ordered not only the reimbursement of the American Airlines tickets but also the refund of the unused TWA tickets. To require both prestations would have enabled petitioners to fly from New York to Los Angeles without any fare being paid. The award to petitioners of attorney's fees is also justified under Article 2208(2) of the Civil Code which allows recovery when the defendant's act or omission has compelled plaintiff to litigate or to incur expenses to protect his interest. However, the award for moral damages and exemplary damages by the trial court is excessive in the light of the fact that only Suthira and Liana Zalamea were actually "bumped off." An award of P50,000.00 moral damages and another P50,000.00 exemplary damages would suffice under the circumstances obtaining in the instant case. WHEREFORE, the petition is hereby GRANTED and the decision of the respondent Court of Appeals is hereby MODIFIED to the extent of adjudging respondent TransWorld Airlines to pay damages to petitioners in the following amounts, to wit: (1) US$918.00 or its peso equivalent at the time of payment representing the price of the tickets bought by Suthira and Liana Zalamea from American Airlines, to enable them to fly to Los Angeles from New York City; (2) P50,000.00 as moral damages; (3) P50,000.00 as exemplary damages; (4) P50,000.00 as attorney's fees; and (5) Costs of suit. Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 138322 October 2, 2001
GRACE J. GARCIA, a.k.a. GRACE J. GARCIA-RECIO, petitioner, vs. REDERICK A. RECIO, respondents.
233
PANGANIBAN, J.: A divorce obtained abroad by an alien may be recognized in our jurisdiction, provided such decree is valid according to the national law of the foreigner. However, the divorce decree and the governing personal law of the alien spouse who obtained the divorce must be proven. Our courts do not take judicial notice of foreign laws and judgment; hence, like any other facts, both the divorce decree and the national law of the alien must be alleged and proven according to our law on evidence. The Case Before us is a Petition for Review under Rule 45 of the Rules of Court, seeking to nullify the January 7, 1999 Decision1 and the March 24, 1999 Order2 of the Regional Trial Court of Cabanatuan City, Branch 28, in Civil Case No. 3026-AF. The assailed Decision disposed as follows: "WHEREFORE, this Court declares the marriage between Grace J. Garcia and Rederick A. Recio solemnized on January 12, 1994 at Cabanatuan City as dissolved and both parties can now remarry under existing and applicable laws to any and/or both parties."3 The assailed Order denied reconsideration of the above-quoted Decision. Petitioner submits the following issues for our consideration: The Facts "I Rederick A. Recio, a Filipino, was married to Editha Samson, an Australian citizen, in Malabon, Rizal, on March 1, 1987.4 They lived together as husband and wife in Australia. On May 18, 1989,5 a decree of divorce, purportedly dissolving the marriage, was issued by an Australian family court. On June 26, 1992, respondent became an Australian citizen, as shown by a "Certificate of Australian Citizenship" issued by the Australian government.6 Petitioner a Filipina and respondent were married on January 12, 1994 in Our Lady of Perpetual Help Church in Cabanatuan City.7 In their application for a marriage license, respondent was declared as "single" and "Filipino."8 Starting October 22, 1995, petitioner and respondent lived separately without prior judicial dissolution of their marriage. While the two were still in Australia, their conjugal assets were divided on May 16, 1996, in accordance with their Statutory Declarations secured in Australia.9 On March 3, 1998, petitioner filed a Complaint for Declaration of Nullity of Marriage10 in the court a quo, on the ground of bigamy respondent allegedly had a prior subsisting marriage at the time he married her on January 12, 1994. She claimed that she learned of respondent's marriage to Editha Samson only in November, 1997. In his Answer, respondent averred that, as far back as 1993, he had revealed to petitioner his prior marriage andits subsequent dissolution.11 He contended that his first marriage to an Australian citizen had been validly dissolved by a divorce decree obtained in Australian in 1989;12 thus, he was legally capacitated to marry petitioner in 1994.1wphi1.nt On July 7, 1998 or about five years after the couple's wedding and while the suit for the declaration of nullity was pending respondent was able to secure a divorce decree from a family court in Sydney, Australia because the "marriage ha[d] irretrievably broken down."13 The trial court gravely erred in finding that the divorce decree obtained in Australia by the respondent ipso facto terminated his first marriage to Editha Samson thereby capacitating him to contract a second marriage with the petitioner. "2 The failure of the respondent, who is now a naturalized Australian, to present a certificate of legal capacity to marry constitutes absence of a substantial requisite voiding the petitioner' marriage to the respondent. "3 The trial court seriously erred in the application of Art. 26 of the Family Code in this case. "4 The trial court patently and grievously erred in disregarding Arts. 11, 13, 21, 35, 40, 52 and 53 of the Family Code as the applicable provisions in this case. "5 The trial court gravely erred in pronouncing that the divorce gravely erred in pronouncing that the divorce decree obtained by the respondent in Australia ipso facto capacitated the parties to The trial court declared the marriage dissolved on the ground that the divorce issued in Australia was valid and recognized in the Philippines. It deemed the marriage ended, but not on the basis of any defect in an essential element of the marriage; that is, respondent's alleged lack of legal capacity to remarry. Rather, it based its Decision on the divorce decree obtained by respondent. The Australian divorce had ended the marriage; thus, there was no more martial union to nullify or annual. Hence, this Petition.18 Issues Respondent prayed in his Answer that the Complained be dismissed on the ground that it stated no cause of action.14 The Office of the Solicitor General agreed with respondent.15 The court marked and admitted the documentary evidence of both parties.16 After they submitted their respective memoranda, the case was submitted for resolution.17 Thereafter, the trial court rendered the assailed Decision and Order. Ruling of the Trial Court
234
remarry, without first securing a recognition of the judgment granting the divorce decree before our courts."19 The Petition raises five issues, but for purposes of this Decision, we shall concentrate on two pivotal ones: (1) whether the divorce between respondent and Editha Samson was proven, and (2) whether respondent was proven to be legally capacitated to marry petitioner. Because of our ruling on these two, there is no more necessity to take up the rest. The Court's Ruling The Petition is partly meritorious. First Issue: Proving the Divorce Between Respondent and Editha Samson Petitioner assails the trial court's recognition of the divorce between respondent and Editha Samson. Citing Adong v. Cheong Seng Gee,20 petitioner argues that the divorce decree, like any other foreign judgment, may be given recognition in this jurisdiction only upon proof of the existence of (1) the foreign law allowing absolute divorce and (2) the alleged divorce decree itself. She adds that respondent miserably failed to establish these elements. Petitioner adds that, based on the first paragraph of Article 26 of the Family Code, marriages solemnized abroad are governed by the law of the place where they were celebrated (the lex loci celebrationist). In effect, the Code requires the presentation of the foreign law to show the conformity of the marriage in question to the legal requirements of the place where the marriage was performed. At the outset, we lay the following basic legal principles as the take-off points for our discussion. Philippine law does not provide for absolute divorce; hence, our courts cannot grant it.21 A marriage between two Filipinos cannot be dissolved even by a divorce obtained abroad, because of Articles 1522 and 1723 of the Civil Code.24 In mixed marriages involving a Filipino and a foreigner, Article 2625 of the Family Code allows the former to contract a subsequent marriage in case the divorce is "validly obtained abroad by the alien spouse capacitating him or her to remarry."26 A divorce obtained abroad by a couple, who are both aliens, may be recognized in the Philippines, provided it is consistent with their respective national laws.27 A comparison between marriage and divorce, as far as pleading and proof are concerned, can be made. Van Dorn v. Romillo Jr. decrees that "aliens may obtain divorces abroad, which may be recognized in the Philippines, provided they are valid according to their national law."28 Therefore, before a foreign divorce decree can be recognized by our courts, the party pleading it must prove the divorce as a fact and demonstrate its conformity to the foreign law allowing it.29 Presentation solely of the divorce decree is insufficient. Divorce as a Question of Fact Petitioner insists that before a divorce decree can be admitted in evidence, it must first comply with the registration requirements under Articles 11, 13 and 52 of the Family Code. These articles read as follows: "ART. 11. Where a marriage license is required, each of the contracting parties shall file separately a sworn application for such license with the proper local civil registrar which shall specify the following: Compliance with the quoted articles (11, 13 and 52) of the Family Code is not necessary; respondent was no longer bound by Philippine personal laws after he acquired Australian citizenship in 1992.39 Naturalization is the legal act of adopting an alien and clothing him with the political and civil rights belonging to a citizen.40 Naturalized citizens, freed from the protective cloak of their former states, don the attires of their adoptive countries. By becoming an Australian, respondent severed his allegiance to the Philippines and the vinculum juris that had tied him to Philippine personal laws. Burden of Proving Australian Law "ART. 52. The judgment of annulment or of absolute nullity of the marriage, the partition and distribution of the properties of the spouses, and the delivery of the children's presumptive legitimes shall be recorded in the appropriate civil registry and registries of property; otherwise, the same shall not affect their persons." Respondent, on the other hand, argues that the Australian divorce decree is a public document a written official act of an Australian family court. Therefore, it requires no further proof of its authenticity and due execution. Respondent is getting ahead of himself. Before a foreign judgment is given presumptive evidentiary value, the document must first be presented and admitted in evidence.30 A divorce obtained abroad is proven by the divorce decree itself. Indeed the best evidence of a judgment is the judgment itself.31 The decree purports to be a written act or record of an act of an officially body or tribunal of a foreign country.32 Under Sections 24 and 25 of Rule 132, on the other hand, a writing or document may be proven as a public or official record of a foreign country by either (1) an official publication or (2) a copy thereof attested33 by the officer having legal custody of the document. If the record is not kept in the Philippines, such copy must be (a) accompanied by a certificate issued by the proper diplomatic or consular officer in the Philippine foreign service stationed in the foreign country in which the record is kept and (b) authenticated by the seal of his office.34 The divorce decree between respondent and Editha Samson appears to be an authentic one issued by an Australian family court.35 However, appearance is not sufficient; compliance with the aforemetioned rules on evidence must be demonstrated. Fortunately for respondent's cause, when the divorce decree of May 18, 1989 was submitted in evidence, counsel for petitioner objected, not to its admissibility, but only to the fact that it had not been registered in the Local Civil Registry of Cabanatuan City.36 The trial court ruled that it was admissible, subject to petitioner's qualification.37Hence, it was admitted in evidence and accorded weight by the judge. Indeed, petitioner's failure to object properly rendered the divorce decree admissible as a written act of the Family Court of Sydney, Australia.38 xxx xxx xxx "(5) If previously married, how, when and where the previous marriage was dissolved or annulled; xxx xxx xxx
"ART. 13. In case either of the contracting parties has been previously married, the applicant shall be required to furnish, instead of the birth of baptismal certificate required in the last preceding article, the death certificate of the deceased spouse or the judicial decree of annulment or declaration of nullity of his or her previous marriage. x x x.
235
Respondent contends that the burden to prove Australian divorce law falls upon petitioner, because she is the party challenging the validity of a foreign judgment. He contends that petitioner was satisfied with the original of the divorce decree and was cognizant of the marital laws of Australia, because she had lived and worked in that country for quite a long time. Besides, the Australian divorce law is allegedly known by Philippine courts: thus, judges may take judicial notice of foreign laws in the exercise of sound discretion. We are not persuaded. The burden of proof lies with "the party who alleges the existence of a fact or thing necessary in the prosecution or defense of an action."41 In civil cases, plaintiffs have the burden of proving the material allegations of the complaint when those are denied by the answer; and defendants have the burden of proving the material allegations in their answer when they introduce new matters.42 Since the divorce was a defense raised by respondent, the burden of proving the pertinent Australian law validating it falls squarely upon him. It is well-settled in our jurisdiction that our courts cannot take judicial notice of foreign laws.43 Like any other facts, they must be alleged and proved. Australian marital laws are not among those matters that judges are supposed to know by reason of their judicial function.44 The power of judicial notice must be exercised with caution, and every reasonable doubt upon the subject should be resolved in the negative. Second Issue: Respondent's Legal Capacity to Remarry Petitioner contends that, in view of the insufficient proof of the divorce, respondent was legally incapacitated to marry her in 1994. Hence, she concludes that their marriage was void ab initio. Respondent replies that the Australian divorce decree, which was validly admitted in evidence, adequately established his legal capacity to marry under Australian law. Respondent's contention is untenable. In its strict legal sense, divorce means the legal dissolution of a lawful union for a cause arising after marriage. But divorces are of different types. The two basic ones are (1) absolute divorce or a vinculo matrimonii and (2) limited divorce or a mensa et thoro. The first kind terminates the marriage, while the second suspends it and leaves the bond in full force.45 There is no showing in the case at bar which type of divorce was procured by respondent. Respondent presented a decree nisi or an interlocutory decree a conditional or provisional judgment of divorce. It is in effect the same as a separation from bed and board, although an absolute divorce may follow after the lapse of the prescribed period during which no reconciliation is effected.46 Even after the divorce becomes absolute, the court may under some foreign statutes and practices, still restrict remarriage. Under some other jurisdictions, remarriage may be limited by statute; thus, the guilty party in a divorce which was granted on the ground of adultery may be prohibited from remarrying again. The court may allow a remarriage only after proof of good behavior.47 On its face, the herein Australian divorce decree contains a restriction that reads: "1. A party to a marriage who marries again before this decree becomes absolute (unless the other party has died) commits the offence of bigamy."48 As it is, however, there is absolutely no evidence that proves respondent's legal capacity to marry petitioner. A review of the records before this Court shows that only the following exhibits were presented before the lower court: (1) for petitioner: (a) Exhibit "A" Complaint;51 (b) Exhibit "B" Certificate of Marriage Between Rederick A. Recto (Filipino-Australian) and Grace J. Garcia (Filipino) on January 12, 1994 in Cabanatuan City, Nueva Ecija;52(c) Exhibit "C" Certificate of Marriage Between Rederick A. Recio (Filipino) and Editha D. Samson (Australian) on March 1, 1987 in Malabon, Metro Manila;53 (d) Exhibit "D" Office of the City Registrar of Cabanatuan City Certification that no information of annulment between Rederick A. Recto and Editha D. Samson was in its records;54 and (e) Exhibit "E" Certificate of Australian Citizenship of Rederick A. Recto;55 (2) for respondent: (Exhibit "1" Amended Answer;56 (b) Exhibit "S" Family Law Act 1975 Decree Nisi of Dissolution of Marriage in the Family Court of Australia;57 (c) Exhibit "3" Certificate of Australian Citizenship of Rederick A. Recto;58 (d) Exhibit "4" Decree Nisi of Dissolution of Marriage in the Family Court of Australia Certificate;59 and Exhibit "5" Statutory Declaration of the Legal Separation Between Rederick A. Recto and Grace J. Garcia Recio since October 22, 1995.60 Based on the above records, we cannot conclude that respondent, who was then a naturalized Australian citizen, was legally capacitated to marry petitioner on January 12, 1994. We agree with petitioner's contention that the court a quo erred in finding that the divorce decree ipso facto clothed respondent with the legal capacity to remarry without requiring him to adduce sufficient evidence to show the Australian personal law governing his status; or at the very least, to prove his legal capacity to contract the second marriage. Neither can we grant petitioner's prayer to declare her marriage to respondent null and void on the ground of bigamy. After all, it may turn out that under Australian law, he was really capacitated to marry petitioner as a direct result of the divorce decree. Hence, we believe that the most judicious course is to remand this case to the trial court to receive evidence, if any, which show petitioner's legal capacity to marry petitioner. Failing in that, then the court a quo may declare a nullity of the parties' marriage on the ground of bigamy, there being already in evidence two existing marriage certificates, which were both obtained in the Philippines, one in Malabon, Metro Manila dated March 1, 1987 and the other, in Cabanatuan City dated January 12, 1994. WHEREFORE, in the interest of orderly procedure and substantial justice, we REMAND the case to the court a quo for the purpose of receiving evidence which conclusively show respondent's legal capacity to marry petitioner; and failing in that, of declaring the parties' marriage void on the ground of bigamy, as above discussed. No costs. This quotation bolsters our contention that the divorce obtained by respondent may have been restricted. It did not absolutely establish his legal capacity to remarry according to his national law. Hence, we find no basis for the ruling of the trial court, which erroneously assumed that the Australian divorce ipso facto restored respondent's capacity to remarry despite the paucity of evidence on this matter. We also reject the claim of respondent that the divorce decree raises a disputable presumption or presumptive evidence as to his civil status based on Section 48, Rule 3949 of the Rules of Court, for the simple reason that no proof has been presented on the legal effects of the divorce decree obtained under Australian laws. Significance of the Certificate of Legal Capacity Petitioner argues that the certificate of legal capacity required by Article 21 of the Family Code was not submitted together with the application for a marriage license. According to her, its absence is proof that respondent did not have legal capacity to remarry. We clarify. To repeat, the legal capacity to contract marriage is determined by the national law of the party concerned. The certificate mentioned in Article 21 of the Family Code would have been sufficient to establish the legal capacity of respondent, had he duly presented it in court. A duly authenticated and admitted certificate is prima facie evidence of legal capacity to marry on the part of the alien applicant for a marriage license.50
236
SO ORDERED. Melo, Puno, Vitug, and Sandoval-Gutierrez, JJ., concur. G.R. No. 110263 July 20, 2001 SECOND DIVISION
ASIAVEST MERCHANT BANKERS (M) BERHAD, petitioner, vs. COURT OF APPEALS and PHILIPPINE NATIONAL CONSTRUCTION CORPORATION, respondents. DELEON, JR., J.: Before us is a petition for review on certiorari of the Decision1 of the Court of Appeals dated May 19,1993 in CA-G.R. CY No. 35871 affirming the Decision2 dated October 14,1991 of the Regional Trial Court of Pasig, Metro Manila, Branch 168 in Civil Case No. 56368 which dismissed the complaint of petitioner Asiavest Merchant Bankers (M) Berhad for the enforcement of the money of the judgment of the High Court of Malaysia in Kuala Lumpur against private respondent Philippine National Construction Corporation.1wphi1.nt The petitioner Asiavest Merchant Bankers (M) Berhad is a corporation organized under the laws of Malaysia while private respondent Philippine National Construction Corporation is a corporation duly incorporated and existing under Philippine laws. It appears that sometime in 1983, petitioner initiated a suit for collection against private respondent, then known as Construction and Development Corporation of the Philippines, before the High Court of Malaya in Kuala Lumpur entitled "Asiavest Merchant Bankers (M) Berhad v. Asiavest CDCP Sdn. Bhd. and Construction and Development Corporation of the Philippines."3 Petitioner sought to recover the indemnity of the performance bond it had put up in favor of private respondent to guarantee the completion of the Felda Project and the nonpayment of the loan it extended to AsiavestCDCP Sdn. Bhd. for the completion of Paloh Hanai and Kuantan By Pass; Project. On September 13, 1985, the High Court of Malaya (Commercial Division) rendered judgment in favor of the petitioner and against the private respondent which is also designated therein as the "2nd Defendant. " The judgment reads in full: SUIT NO. C638 of 1983 Between Asiavest Merchant Bankers (M) Berhad And 1. Asiavest -CDCP Sdn. Bhd. 2. Construction & Development Corporation of the Philippines JUDGMENT Republic of the Philippines SUPREME COURT Manila The 2nd Defendant having entered appearance herein and the Court having under Order 14, rule 3 ordered that judgment as hereinafter provided be entered for the Plaintiffs against the 2nd Defendant. Defendant Plaintiffs
237
IT IS THIS DAY ADJUDGED that the 2nd defendant do pay the Plaintiffs the sum of $5, 108,290.23 (Ringgit Five million one hundred and eight thousand two hundred and ninety and Sen twenty-three) together with interest at the rate of 12% per annum on (i) the sum of $2,586,866.91 from the 2nd day of March 1983 to the date of payment; and (ii) the sum of $2,521,423.32 from the 11th day of March 1983 to the date of payment; and $350.00 (Ringgit Three Hundred and Fifty) costs. Dated the 13th day of September, 1985. Senior Assistant Registrar, High Court, Kuala Lumpur This Judgment is filed by Messrs. Skrine & Co., 3 Floor, Straits Trading Building, No.4, Leboh Pasar, Besar, Kuala Lumpur, Solicitors for the Plaintiffs abovenamed. (VP/Ong/81194.7/83) 4 On the same day, September 13, 1985, the High Court of Malaya issued an Order directing the private respondent (also designated therein as the "2nd Defendant") to pay petitioner interest on the sums covered by the said Judgment, thus: SUIT NO. C638 of 1983 Between Asiavest Merchant Bankers (M) Berhad And 1. Asiavest -CDCP Sdn. Bhd. 2. Construction & Development Corporation of the Philippines BEFORE THE SENIOR ASSISTANT REGISTRAR CIK SUSILA S. PARAM THIS 13th DAY OF SEPTEMBER 1985 ORDER Upon the application of Asiavest Merchant Bankers (M) Berhad, the Plaintiffs in this action AND UPON READINGthe Summons in Chambers dated the 16th day of August, 1984 and the Affidavit of Lee Foong Mee affirmed on the 14th day of August 1984 both filed herein AND UPON HEARING Mr. T. Thomas of Counsel for the Plaintiffs and Mr. Khaw Chay Tee of Counsel for the 2nd Defendant abovenamed on the 26th day of December 1984 IT WAS ORDERED that the Plaintiffs be at liberty to sign final judgment against the 2nd Defendant for the sum of $5,108,290.23 AND IT WAS ORDERED that the 2nd Defendant do pay the Plaintiffs the costs of suit at $350.00AND IT WAS FURTHER ORDERED that the plaintiffs be at liberty to apply for payment of interest AND upon the application of the Plaintiffs for payment of interest coming on for hearing on the 1st day of August in the presence of Mr. Palpanaban Devarajoo of Counsel for the Plaintiffs and Mr. Khaw Chay Tee of Counsel for the 2nd Defendant above-named AND UPON HEARING Counsel as aforesaid BY CONSENT IT WAS ORDERED that the 2nd Defendant do pay the Plaintiffs interest at a rate to be assessed AND the same coming on for assessment this day in the presence of Mr. Palpanaban Devarajoo of Counsel for the Plaintiffs and Mr. Khaw Chay Tee of Counsel for the 2nd Defendant AND UPON HEARING Counsel as aforesaid BY CONSENT IT IS ORDERED that the 2nd Defendant do pay the Plaintiffs interest at the rate of 12% per annum on: IN CHAMBERS Hence, the instant Petition which is anchored on two (2) assigned errors,12 to wit: I THE COURT OF APPEALS ERRED IN HOLDING THAT THE MALAYSIAN COURT DID NOT ACQUIRE PERSONAL JURISDICTION OVER PNCC, NOTWITHSTANDING THAT (a) THE FOREIGN COURT HAD SERVED SUMMONS ON PNCC AT ITS MALAYSlA OFFICE, AND (b) PNCC ITSELF APPEARED BY COUNSEL IN THE CASE BEFORE THAT COURT. II THE COURT OF APPEALS ERRED IN DENYING RECOGNITION AND ENFORCEMENT TO (SIC) THE MALAYSIAN COURT JUDGMENT. Generally, in the absence of a special compact, no sovereign is bound to give effect within its dominion to a judgment rendered by a tribunal of another country;13 however, the rules of comity, utility and convenience of nations have established a usage among civilized states by which final judgments of foreign courts of competent jurisdiction are reciprocally respected and rendered efficacious under certain conditions that may vary in different countries.14 Defendants Plaintiffs In due time, the trial court rendered its Decision dated October 14, 1991 dismissing petitioner's complaint.Petitioner interposed an appeal with the Court of Appeals, but the appellate court dismissed the same and affirmed the decision of the trial court in a Decision dated May 19, 1993.
rd
(i) the sum of $2,586,866.91 from the 2nd day of March 1983 to the date of payment; and (ii) the sum Of $2,521,423.32 from the 11th day of March 1983 to the date of Payment. Dated the 13th day of September,1985. Senior Assistant Registrar, High Court, Kuala Lumpur.5 Following unsuccessful attempts6 to secure payment from private respondent under the judgment, petitioner initiated on September 5, 1988 the complaint before Regional Trial Court of Pasig, Metro Manila, to enforce the judgment of the High Court of Malaya.7 Private respondent sought the dismissal of the case via a Motion to Dismiss filed on October 5, 1988, contending that the alleged judgment of the High Court of Malaya should be denied recognition or enforcement since on in face, it is tainted with want of jurisdiction, want of notice to private respondent, collusion and/or fraud, and there is a clear mistake of law or fact.8 Dismissal was, however, denied by the trial court considering that the grounds relied upon are not the proper grounds in a motion to dismiss under Rule 16 of the Revised Rules of Court. 9 On May 22, 1989, private respondent filed its Answer with Compulsory Counter claim's10 and therein raised the grounds it brought up in its motion to dismiss. In its Reply filed11 on June 8, 1989, the petitioner contended that the High Court of Malaya acquired jurisdiction over the Person of private respondent by its voluntary submission the court's jurisdiction through its appointed counsel, Mr. Khay Chay Tee. Furthermore, private respondent's counsel waived any and all objections to the High Court's jurisdiction in a pleading filed before the court.
238
In this jurisdiction, a valid judgment rendered by a foreign tribunal may be recognized insofar as the immediate parties and the underlying cause of action are concerned so long as it is convincingly shown that there has been an opportunity for a full and fair hearing before a court of competent jurisdiction; that the trial upon regular proceedings has been conducted, following due citation or voluntary appearance of the defendant and under a system of jurisprudence likely to secure an impartial administration of justice; and that there is nothing to indicate either a prejudice in court and in the system of laws under which it is sitting or fraud in procuring the judgment.15 A foreign judgment is presumed to be valid and binding in the country from which it comes, until a contrary showing, on the basis of a presumption of regularity of proceedings and the giving of due notice in the foreign forum Under Section 50(b),16 Rule 39 of the Revised Rules of Court, which was the governing law at the time the instant case was decided by the trial court and respondent appellate court, a judgment, against a person, of a tribunal of a foreign country having jurisdiction to pronounce the same is presumptive evidence of a right as between the parties and their successors in interest by a subsequent title. The judgment may, however, be assailed by evidence of want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact. In addition, under Section 3(n), Rule 131 of the Revised Rules of Court, a court, whether in the Philippines or elsewhere, enjoys the presumption that it was acting in the lawful exercise of its jurisdiction. Hence, once the authenticity of the foreign judgment is proved, the party attacking a foreign judgment, is tasked with the burden of overcoming its presumptive validity. In the instant case, petitioner sufficiently established the existence of the money judgment of the High Court of Malaya by the evidence it offered. Vinayak Prabhakar Pradhan, presented as petitioner's sole witness, testified to the effect that he is in active practice of the law profession in Malaysia;17 that he was connected with Skrine and Company as Legal Assistant up to 1981;18 that private respondent, then known as Construction and Development Corporation of the Philippines, was sued by his client, Asiavest Merchant Bankers (M) Berhad, in Kuala Lumpur;19that the writ of summons were served on March 17, 1983 at the registered office of private respondent and on March 21, 1983 on Cora S. Deala, a financial planning officer of private respondent for Southeast Asia operations;20 that upon the filing of the case, Messrs. Allen and Gledhill, Advocates and Solicitors, with address at 24th Floor, UMBC Building, Jalan Sulaiman, Kuala Lumpur, entered their conditional appearance for private respondent questioning the regularity of the service of the writ of summons but subsequently withdrew the same when it realized that the writ was properly served;21 that because private respondent failed to file a statement of defense within two (2) weeks, petitioner filed an application for summary judgment and submitted affidavits and documentary evidence in support of its claim;22 that the matter was then heard before the High Court of Kuala Lumpur in a series of dates where private respondent was represented by counsel; 23 and that the end result of all these proceedings is the judgment sought to be enforced. In addition to the said testimonial evidence, petitioner offered the following documentary evidence: (a) A certified and authenticated copy of the Judgment promulgated by the Malaysian High Court dated September 13, 1985 directing private respondent to pay petitioner the sum of $5,108,290.23 Malaysian Ringgit plus interests from March 1983 until fully paid;24 (b) A certified and authenticated copy of the Order dated September 13,1985 issued by the Malaysian High Court in Civil Suit No. C638 of 1983;25 (c) Computation of principal and interest due as of January 31, 1990 on the amount adjudged payable to petitioner by private respondent;26 (d) Letter and Statement of Account of petitioner's counsel in Malaysia indicating the costs for prosecuting and implementing the Malaysian High Court's Judgment;27 (e) Letters between petitioner's Malaysian counsel, Skrine and Co., and its local counsel, Sycip Salazar Law Offices, relative to institution of the action in the Philippines;28 (f) Billing Memorandum of Sycip Salazar Law Offices dated January 2, 1990 showing attorney's fees paid by and due from petitioner; 29 (g) Statement of Claim, Writ of Summons and Affidavit of Service of such writ in petitioner's suit against private respondent before the Malaysian High Court;30 (h) Memorandum of Conditional Appearance dated March 28, 1983 filed by counsel for private respondent with the Malaysian High Court;31 (i) Summons in Chambers and Affidavit of Khaw Chay Tee, cotmsel for private respondent, submitted during the proceedings before the Malaysian High Court;32 (j) Record of the Court's Proceedings in Civil Case No. C638 of 1983.33 (k) Petitioner 's verified Application for Summary Judgment dated August 14, 1984;34 and (l) Letter dated November 6, 1985 from petitioner's Malaysian Counsel to private respondent's counsel in Malaysia.35 Having thus proven, through the foregoing evidence, the existence and authenticity of the foreign judgment, said foreign judgment enjoys presumptive validity and the burden then fell upon the party who disputes its validity, herein private respondent, to prove otherwise. Private respondent failed to sufficiently discharge the burden that fell upon it - to prove by clear and convincing evidence the grounds which it relied upon to prevent enforcement of the Malaysian High Court judgment, namely, (a) that jurisdiction was not acquired by the Malaysian Court over the person of private respondent due to alleged improper service of summons upon private respondent and the alleged lack of authority of its counsel to appear and represent private respondent in the suit; (b) the foreign judgment is allegedly tainted by evident collusion, fraud and clear mistake of fact or law; and (c) not only were the requisites for enforcement or recognition allegedly not complied with but also that the Malaysian judgment is allegedly contrary to the Constitutional prescription that the "every decision must state the facts and law on which it is based."36 Private respondent relied solely on the testimony of its two (2) witnesses, namely, Mr. Alfredo. Calupitan, an accountant of private respondent, and Virginia Abelardo, Executive Secretary and a member of the staff of the Corporate Secretariat Section of the Corporate Legal Division, of private respondent, both of whom failed to shed light and amplify its defense or claim for non-enforcement of the foreign judgment against it. Mr. Calupitan's testimony centered on the following: that from January to December 1982 he was assigned in Malaysia as Project Comptroller of the Pahang Project Package A and B for road construction under the joint venture of private respondent and Asiavest Holdings;37 that under the joint venture, Asiavest Holdings would handle the financial aspect of the project, which is fifty-one percent (51 %) while private respondent would handle the technical aspect of the project, or forty-nine percent (49%);38 and, that Cora Deala was not authorized to receive summons for and in behalf of the private respondent.39 Ms. Abelardo's testimony, on the other hand, focused on the following: that there was no board resolution authorizing Allen and Gledhill to admit all the claims of petitioner in the suit brought before the High Court of Malaya,40 though on cross-examination she admitted that Allen and Gledhill were the retained lawyers of private respondent in Malaysia. 41
239
The foregoing reasons or grounds relied upon by private respondent in preventing enforcement and recognition of the Malaysian judgment primarily refer to matters of remedy and procedure taken by the Malaysian High Court relative to the suit for collection initiated by petitioner. Needless to stress, the recognition to be accorded a foreign judgment is not necessarily affected by the fact that the procedure in the courts of the country in which such judgment was rendered differs from that of the courts of the country in which the judgment is relied on.42Ultimately, matters of remedy and procedure such as those relating to the service of summons or court process upon the defendant, the authority of counsel to appear and represent a defendant and the formal requirements in a decision are governed by the lex fori or the internal law of the forum,43 i.e., the law of Malaysia in this case. In this case, it is the procedural law of Malaysia where the judgment was rendered that determines the validity of the service of court process on private respondent as well as other matters raised by it. As to what the Malaysian procedural law is, remains a question of fact, not of law. It may not be taken judicial notice of and must be pleaded and proved like any other fact. Sections 24 and 25 of Rule 132 of the Revised Rules of Court provide that it may be evidenced by an official publication or by a duly attested or authenticated copy thereof. It was then incumbent upon private respondent to present evidence as to what that Malaysian procedural law is and to show that under it, the assailed service of summons upon a financial officer of a corporation, as alleged by it, is invalid. It did not. Accordingly, the presumption of validity and regularity of service of summons and the decision thereafter rendered by the High Court of Malaya must stand.44 On the matter of alleged lack of authority of the law firm of Allen and Gledhill to represent private respondent, not only did the private respondent's witnesses admit that the said law firm of Allen and Gledhill were its counsels in its transactions in Malaysia,45 but of greater significance is the fact that petitioner offered in evidence relevant Malaysian jurisprudence46 to the effect that (a) it is not necessary under Malaysian law for counsel appearing before the Malaysian High Court to submit a special power of attorney authorizing him to represent a client before said court, (b) that counsel appearing before the Malaysian High Court has full authority to compromise the suit, and (c) that counsel appearing before the Malaysian High Court need not comply with certain pre-requisites as required under Philippine law to appear and compromise judgments on behalf of their clients before said court.47 Furthermore, there is no basis for or truth to the appellate court's conclusion that the conditional appearance of private respondent's counsel who was allegedly not authorized to appear and represent, cannot be considered as voluntary submission to the jurisdiction of the High Court of Malaya, inasmuch as said conditional appearance was not premised on the alleged lack of authority of said counsel but the conditional appearance was entered to question the regularity of the service of the writ of summons. Such conditional appearance was in fact subsequently withdrawn when counsel realized that the writ was properly served.48 On the ground that collusion, fraud and, clear mistake of fact and law tainted the judgment of the High Court of Malaya, no clear evidence of the same was adduced or shown. The facts which the trial court found "intriguing" amounted to mere conjectures and specious observations. The trial court's finding on the absence of judgment against Asiavest-CDCP Sdn. Bhd. is contradicted by evidence on record that recovery was also sought against Asiavest-CDCP Sdn. Bhd. but the same was found insolvent.49 Furthermore, even when the foreign judgment is based on the drafts prepared by counsel for the successful party, such is not per se indicative of collusion or fraud. Fraud to hinder the enforcement within the jurisdiction of a foreign judgment must be extrinsic, i.e., fraud based on facts not controverted or resolved in the case where judgment is rendered,50 or that which would go to the jurisdiction of the court or would deprive the party against whom judgment is rendered a chance to defend the action to which he has a meritorious defense.51 Intrinsic fraud is one which goes to the very existence of the cause of action is deemed already adjudged, and it, therefore, cannot militate against the recognition or enforcement of the foreign judgment.52 Evidence is wanting on the alleged extrinsic fraud. Hence, such unsubstantiated allegation cannot give rise to liability therein. Lastly, there is no merit to the argument that the foreign judgment is not enforceable in view of the absence of any statement of facts and law upon which the award in favor of the petitioner was based. As aforestated, the lex fori or the internal law of the forum governs matters of remedy and procedure.53 Considering that under the procedural rules of the High Court of Malaya, a valid judgment may be rendered even without stating in the judgment every fact and law upon which the judgment is based, then the same must be accorded respect and the courts in the jurisdiction cannot invalidate the judgment of the foreign court simply because our rules provide otherwise. All in all, private respondent had the ultimate duty to demonstrate the alleged invalidity of such foreign judgment, being the party challenging the judgment rendered by the High Court of Malaya. But instead of doing so, private respondent merely argued, to which the trial court agreed, that the burden lay upon petitioner to prove the validity of the money judgment. Such is clearly erroneous and would render meaningless the presumption of validity accorded a foreign judgment were the party seeking to enforce it be required to first establish its validity.54 WHEREFORE, the instant petition is GRANTED. The Decision of the Court of Appeals dated May 19,1993 in CA-G.R CY No. 35871 sustaining the Decision dated October 14, 1991 in Civil Case No. 56368 of the Regional Trial Court of Pasig, Branch 168 denying the enforcement of the Judgment dated September 13, 1985 of the High Court of Malaya in Kuala Lumpur is REVERSED and SET ASIDE, and another in its stead is hereby renderedORDERING private respondent Philippine National Construction Corporation to pay petitioner Asiavest Merchant Bankers (M) Berhad the amounts adjudged in the said foreign Judgment, subject of the said case. Costs against the private respondent. SO ORDERED. Bellosillo, Mendoza, and Buena, JJ. , concur.
224 N.Y. 99, 120 N.E. 198
240
Court of Appeals of New York. LOUCKS et al. v. STANDARD OIL CO. OF NEW YORK. July 12, 1918. 1. The courts of no country execute the penal laws of another. The Antelope, 10 Wheat. [23 U.S.] 66, 123, 6 L. Ed. 268. The defendant invokes that principle as applicable here. Penal in one sense the statute indisputably is. The damages are not limited to compensation; they are proportioned to the offenders guilt. A minimum recovery of $500 is allowed in every case. But the question is not whether the statute is penal in some sense. The question is whether it is penal within the rules of private international law. A statute penal in that sense is one that awards a penalty to the state, or to a public officer in its behalf, or to a member of the public, suing in the interest of the whole community to redress a public wrong. Huntington v. Attrill, 146 U. S. 657, 668, 13 Sup. Ct. 224, 36 L. Ed. 1123; Huntington [*103] v. Attrill, [1903] A. C. 150, 156 [sic, should be [1893] A.C. 150]; Brady v. Daly, 175 U. S. 148, 154, 157, 20 Sup. Ct. 62, 44 L. Ed. 109; Raulin v. Fischer, [1911] 2 K. B. 93; Dicey, Conflict of Laws, p. 209. The purpose must be, not reparation to one aggrieved, but vindication of the public justice. Huntington v. Attrill, 146 U. S. 668, 13 Sup. Ct. 224, 36 L. Ed. 1123; Brady v. Daly, supra. The Massachusetts statute has been classified in some jurisdictions as penal, and in others as remedial. Connecticut, Rhode Island, and Vermont put it in the first category. [**199] Cristilly v. Warner, 87 Conn. 461, 88 Atl. 711, 51 L. R. A. (N. S.) 415; Gardner v. N. Y. & N. E. Ry. Co., 17 R. I. 790, 24 Atl. 831; O'Reilly v. N. Y. & N. E. Ry. Co., 16 R. I. 388, 17 Atl. 171, 906, 19 Atl. 244, 5 L. R. A. 364, 6 L. R. A. 719; Adams v. Fitchburg R. R. Co., 67 Vt. 76, 30 Atl. 687, 48 Am. St. Rep. 800. See also Raisor v. C. & A. Ry. Co., 215 Ill. 47, 74 N. E. 69, 106 Am. St. Rep. 153, 2 Ann. Cas. 802. New Hampshire and some of the federal courts put it in the second. Hill v. B. & M. R. R. Co., 77 N. H. 151, 89 Atl. 482, Cas. 1914C, 714, where the subject is fully considered; B. & M. R. R. Co. v. Hurd, 108 Fed. 116, 47 C. C. A. 615, 56 L. R. A. 193; Malloy v. Am. Hide & Leather Co. (C. C.) 148 Fed. 482. See also Whitlow v. Nashville R. R. Co., 114 Tenn. 344, 84 S. W. 618, 68 L. R. A. 503. The courts of Massachusetts have said that the question is still an open one. Boott Mills v. B. & M. R. R. Co., 218 Mass. 582, 592, 106 N. E. 680. No matter how they may have characterized the act as penal, they have not meant to hold that it is penal for every purpose. 218 Mass. 592, 106 N. E. 680. Even without that reservation by them, the essential purpose of the statute would be a question for our courts. Huntington v. Attrill, 146 U. S. 683, 13 Sup. Ct. 224, 36 L. Ed. 1123; [1903] A. C. 155; Hill v. B. & M. R. R. Co., supra. We think the better reason is with those cases which hold that the statute is not penal in the international sense. On that branch of the controversy, indeed, there is no division of opinion among us. It is true that the offender is punished, but the purpose of the punishment is reparation to those aggrieved by his offense. Com. v. B. & A. R. R. Co., 121 Mass. 36, 37; Com. v. Eastern R. R. Co., 5 Gray (Mass.) 473, 474. The common law did not give a cause of action to surviving relatives. [*104] Insurance Co. v. Brame, 95 U. S. 754, 757, 24 L. Ed. 580; Dennick v. R. R. Co., 103 U. S. 11, 26 L. Ed. 439; The Harrisburg, 119 U. S. 199, 7 Sup. Ct. 140, 30 L. Ed. 358; Admiralty Commissioners v. S. S. Amerika,[1917] A. C. 38. In the light of modern legislation, its rule is an anachronism. Nearly everywhere, the principle is now embodied in statute that the next of kin are wronged by the killing of their kinsman. The family becomes a legal unit, invested with rights of its own, invested with an interest in the continued life of its members, much as it was in primitive law. Maine, Ancient Law, pp. 121, 122, 178; 1 Pollock & Maitland, History of English Law, p. 24; Holmes, the Common Law, p. 342. The damages may be compensatory or punitive according to the statutory scheme. See 8 Ruling Case Law, title Death, 120, where statutes are collated. In either case the plaintiffs have a grievance above and beyond any that belongs to them as members of the body politic. They sue to redress an outrage peculiar to themselves. We cannot fail to see in the history of the Massachusetts statutes a developing expression of this policy and purpose. The statutes have their distant beginnings in the criminal law. To some extent the vestiges of criminal forms survive. But the old forms have been filled with a new content. The purpose which informs and vitalizes them is the protection of the survivors. They are moods and phases, the particular and varying expression, of a tendency in legislation as general as the common law. They are not to be viewed in isolation, apart from the stream of events. At first, the remedy was given only when the wrongdoer was a common carrier. St. 1840, c. 80. That statute goes back to 1840, antedating Lord Campbell's Act in England. St. 9 & 10 Vict. c. 93 (1846). The remedy was by indictment and fine, the fine being payable to the widow and next of kin. If there were no survivors of the prescribed class, there could be no indictment. [*105] Com. v. B. & A. R. R. Co., 121 Mass. 36. The reason was that even then the dominant purpose was reparation to the family. But later an alternative remedy by civil action at the suit of the executor or administrator became available even against carriers. Hudson v. L. & B. R. R., 185 Mass. 515, 516, 71 N. E. 66; Grella v. Lewis Wharf Co., 211 Mass. 54, 58, 97 N. E. 745, Ann. Cas. 1913A, 1136. Then other statutes gave a civil remedy against other wrongdoers, and a civil remedy exclusively. Some statutes were confined to cases where the defendant was the employer of the decedent. St. 1887, c. 270; R. L. c. 106, 73; Smith v. Thomson-Houston El. Co., 188 Mass. 371, 74 N. E.
PREVIOUS HISTORY: Loucks v. Standard Oil Co. of New York, 92 Misc. 475, 156 N.Y.S. 7 (N.Y.Sup. Dec 11, 1915) Reversed by: Loucks v. Standard Oil Co., 172 A.D. 227, 159 N.Y.S. 282 (N.Y.A.D. 4 Dept. Apr 19, 1916) Reversed by: Loucks v. Standard Oil Co. of New York, 224 N.Y. 99, 120 N.E. 198 (N.Y. Jul 12, 1918) SUBSEQUENT HISTORY: Distinguished by: In re Rubins Will, 280 A.D. 348, 280 A.D. 864, 113 N.Y.S.2d 70 (N.Y.A.D. 1 Dept. Jun 03, 1952) Appeal from Supreme Court, Appellate Division, Fourth Department. Action by Fannie F. Loucks and James M. Rutledge, as joint administrators of Everett A. Loucks, deceased, against the Standard Oil Company of New York. From a judgment of the Appellate Division (172 App. Div. 227, 159 N. Y. Supp. 282), reversing an order of the Special Term (92 Misc. Rep. 475, 156 N. Y. Supp. 7) and granting defendant's motion for judgment on the pleadings, plaintiffs appeal. Reversed, and order of the Special Term affirmed. A. Lee Olmsted, of Syracuse, for appellants. Lyman M. Bass, of Buffalo, for respondent. Collin, J., dissenting in part. [**198] [*101] CARDOZO, J. The action is brought to recover damages for injuries resulting in death. The plaintiffs are the administrators of the estate of Everett A. Loucks. Their intestate, while traveling on a highway in the state of [*102] Massachusetts, was run down and killed through the negligence of the defendant's servants then engaged in its business. He left a wife and two children, residents of New York. A statute of Massachusetts (R. L. c. 171, 2, as amended by L. 1907, c. 375) provides that: If a person or corporation by his or its negligence, or by the negligence of his or its agents or servants while engaged in his or its business, causes the death of a person who is in the exercise of due care, and not in his or its employment or service, he or it shall be liable in damages in the sum of not less than $500, nor more than $10,000, to be assessed with reference to the degree of his or its culpability, or * * * that of his or its * * * servants, to be recovered in an action of tort commenced within two years after the injury which caused the death, by the executor or administrator of the deceased, one-half thereof to the use of the widow and one-half to the use of the children of the deceased, or, if there are no children, the whole to the use of the widow, or, if there is no widow, the whole to the use of the next of kin. The question is whether a right of action under that statute may be enforced in our courts.
241
664. Finally there came one which gave a remedy against all persons who had not otherwise been made liable. T. L. c. 171, 2. That is the statute sued on. The remedy is civil; it is an action of tort. Through all this legislation there runs a common purpose. Boott Mills v. B. & M. R. R. Co., supra, 218 Mass. 586, 106 N. E. 680; Brown v. Thayer, 212 Mass. 392, 99 N. E. 237. It is penal in one element and one only; the damages are punitive. The courts of Massachusetts do not give punitive damages even for malicious torts except by force of statute. Bott Mills v. B. & M. R. R. Co., supra, 218 Mass. 588, 106 N. E. 680; Ellis v. Brockton Pub. Co., 198 Mass. 538, 84 N. E. 1018, 126 Am. St. Rep. 454, 15 Ann. Cas. 83. That may have led them to emphasize unduly the penal element in such recoveries. But the punishment of the wrongdoer is not designed as atonement for a crime; it is solace to the individual who has suffered a private wrong. This is seen in many tokens. The employer may be innocent himself. Smart money will still be due in proportion to his servant's negligence. That is a distribution of burdens more characteristic of torts than crimes. But even more significant is the distribution of benefits. All the statutes are in pari material. All or none are [**200] penal in the international sense. Boott Mills Co. v. B. & M. R. R. Co., supra. Under all, liability is conditioned upon the existence of a widow or of next of kin. Under some, [*106] there must be proof also that the next of kin were dependent on the decedent's wages for support. R. L. c. 106, 73. That restriction brings the dominant purpose into clear relief as reparation to those aggrieved. Other purposes may be served at the same time. It is easy to cite dicta that seem to give them prominence. McCarthy v. Ward Lumber Co., 219 Mass. 566, 107 N. E. 439; Hudson v. L. & B. R. R., 185 Mass. 510, 71 N. E. 66; Mulhall v. Fallon, 176 Mass. 266, 269, 57 N. E. 386, 54 L. R. A. 934, 79 Am. St. Rep. 309. They are dicta only. Nor are all the dicta on one side. Brown v. Thayer, 212 Mass. 392, 398, 99 N. E. 237; Upson v. B. & M. R. R. Co., 211 Mass. 446, 98 N. E. 32; Grella v. Lewis Wharf Co., 211 Mass. 54, 58, 97 N. E. 745, Ann. Cas. 1913A, 1136. There are cross-currents and eddies in the stream. We follow the main course. The executor or administrator who sues under this statute is not the champion of the peace and order and public justice of the commonwealth of Massachusetts. He is the representative of the outraged family. He vindicates a private right. 2. Another question remains. Even though the statute is not penal, it differs from our own. We must determine whether the difference is a sufficient reason for declining jurisdiction. A tort committed in one state creates a right of action that may be sued upon in another unless public policy forbids. That is the generally accepted rule in the United States. Huntington v. Attrill, 146 U. S. 657, 670, 13 Sup. Ct. 224, 36 L. Ed. 1123; Stewart v. B. & O. R. R. Co., 168 U. S. 445, 18 Sup. Ct. 105, 42 L. Ed. 537; N. Pac. R. R. Co. v. Babcock, 154 U. S. 190, 14 Sup. Ct. 978, 38 L. Ed. 958; A., T. & St. Fe Ry. Co. v. Sowers, 213 U. S. 55, 67, 68, 29 Sup. Ct. 397, 53 L. Ed. 695; Cuba R. R. Co. v. Crosby, 222 U. S. 473, 478, 479, 32 Sup. Ct. 132, 56 L. Ed. 274, 38 L. R. A. (N. S.) 40; Howarth v. Lombard, 175 Mass. 570, 56 N. E. 888, 49 L. R. A. 301; Walsh v. B. & M. R. R., 201 Mass. 527, 530, 88 N. E. 12. It is not the rule in every jurisdiction where the common law prevails. In England it has been held that the foreign tort must be also one by English law (The Halley, L. R. 2 P. C. 193, 204; Phillips v. Eyre, L. R. 6 Q. B. 1, 28; Carr v. Fracis Times & Co., [1902] A. C. 176, 182; [*107] Dicey, Conflict of Laws, p. 645; 6 Halsbury, Laws of England, p. 248), which then becomes the source and measure of the resulting cause of action (Machado v. Fontes, [1897] 2 Q. B. 231; Beale, Conflict of Laws, 163). That is certainly not the rule with us. But there are some decisions in death cases which suggest a compromise. They say that jurisdiction will be refused unless the statutes of the two states are substantially the same. That is an approach to the English rule. But then they say that, if substantial correspondence exists, it is the right of action under the foreign statute, and not the statute of the forum, which our courts will enforce. To that extent there is a departure from the English rule. There is little doubt about the wisdom of the departure. What is subject to criticism, is the approach. The question is whether the enforcement of a right of action for tort under the statutes of another state is to be conditioned upon the existence of a kindred statute here. Support for the restriction is supposed to be found in four cases in this court: McDonald v. Mallory, 77 N. Y. 546, 33 Am. Rep. 664; Leonard v. Columbia Steam Navigation Co., 84 N. Y. 48, 38 Am. Rep. 491; Wooden v. Western N. Y. & P. R. R. Co., 126 N. Y. 10, 26 N. E. 1050, 13 L. R. A. 458, 22 Am. St. Rep. 803; and Kiefer v. Grand Trunk R. Co., 12 App. Div. 28, 42 N. Y. Supp. 171, affirmed on opinion below 153 N. Y. 688, 48 N. E. 1105. McDonald v. Mallory is altogether irrelevant. In that case, death occurred upon the high seas. The ship hailed from this state, was registered in one of our ports, and was owned by one of our citizens. She was, therefore, constructively part of our territory. For that reason, our law governed, and the action was sustained. Rapallo, J., in the course of his opinion, said that the laws of New York have no operation in foreign jurisdictions, and that, where the wrong is suffered elsewhere, 'no action therefor can be maintained here, at least without proof of the existence of a similar statute in the place where the wrong was committed.' That statement was accurate as applied [*108] to the case that was then at hand. There must be a similar statute, i. e., a statute giving a cause of action for death, in the place where death is caused. Locus regit actum. It is quite another thing to say that, if there is a foreign statute, it must be duplicated here. In Leonard v. Columbia Steam Navigation Co., supra, the death occurred in Connecticut, where there was a statute similar to our own. The court held that the action would lie. It was unnecessary to determine whether there would have been another result if the statute had been different. Judge Rapallos statement of the rule in McDonald v. Mallory was quoted as if it sustained a requirement of correspondence. That was obviously a misapprehension of its meaning. There was a citation of some English cases. Madrazo v. Willes, 3 B. 3 Ald. 353; Melan v. Duke de Fitz-James, 1 B. & P. 138 [, 126 E.R. 822] [PDF, 492 kb]; Mostyn v. Fabrigas, 1 Cowp. 161 [, 98 E.R. 1021] [PDF, 1.2 mb]. They have little bearing on the subject. In Wooden v. Western N. Y. & P. R. R. Co., supra, the death occurred in Pennsylvania. The case was heard upon demurrer to the complaint. Counsel on each side assumed that the statutes must be substantially similar. [**201] The argument was confined to the question whether they were similar. Not unnaturally the court proceeded upon the same assumption. McDonald v. Mallory and Leonard v. Columbia Steam Navigation Co., supra, were the only cases cited. The court found substantial similarity between the statutes except in respect of the measure of recovery. The Pennsylvania statute did not limit the damages. Our statute then prescribed a maximum of $5,000. The difference was thought to affect the remedy rather than the right. We said that the right created by the foreign statute would be enforced, but subject to the restriction in amount which expressed the local policy. There was some suggestion that if the defendant were a nonresident, the restriction would not [*109] apply. The suggestion sounds like an echo of the theory of the statute personal, a body of national law which the citizen carries about with him. Beale, Conflict of Laws, 54, 55; Am. Banana Co. v. United Fruit Co., 213 U. S. 347, 356, 29 Sup. Ct. 511, 53 L. Ed. 826, 16 Ann. Cas. 1047. That is a theory which has yielded generally in this country to the principles of the territorial system and the doctrine of vested rights. Beale, supra, 70, 73. But we do not need to go into distinctions between residents and nonresidents. Even in its application to residents, the ruling in the Wooden Case expresses a conception of our public policy which is not to be extended. The Supreme Court of the United States has held under like conditions that the foreign law governs not only the definition of the tort, but also the assessment of the damages. Northern Pac. R. R. Co. v. Babcock,154 U. S. 190, 14 Sup. Ct. 978, 38 L. Ed. 958; Slater v. Mexican Nat. R. R. Co., 194 U. S. 120, 126, 24 Sup. Ct. 581, 48 L. Ed. 900. An amendment to the Constitution has abrogated the limitation upon the amount of the recovery, and established the public policy of the state on a new and broader basis. Const. art. 1, 18. In these circumstances, the authority of the Wooden Case does not extend beyond the specific point decided. In Kiefer v. Grand Trunk Ry. Co., supra, the death occurred in Canada. Canada has a statute similar to our own. The chief variance is in the award of interest. Limiting the ruling in the Wooden Case, we held that interest had relation to the substance of the right, and must be governed by the foreign statute. Those are the only decisions of this court which tend to support the rule of similarity. The rule itself has no more stable foundation than a misapprehended dictum in McDonald v. Mallory. This was pointed out by Bischoff, J., in Boyle v. Southern R. Co., 36 Misc. Rep. 289, 291, 73 N. Y. Supp. 465, and recently by Veeder, J., in Lauria v. Du Pont (D. C.) 241 Fed. 687. See, [*110] also, Nelson v. Chesapeake & D. R. R. Co., 88 Va. 971, 975, 976, 14 S. E. 838, 15 L. R. A. 583, reviewing many cases. No case has yet arisen in which the statutes were so dissimilar that acceptance or rejection of the rule was necessary to a decision. The time has come to re-examine its foundations. A foreign statute is not law in this state, but it gives rise to an obligation, which, if transitory, follows the person and may be enforced wherever the person may be found. Slater v. Mex. Nat. R. R. Co., supra; Lauria v. Du Pont, supra; Cuba R. R. Co. v. Crosby, 222 U. S. 473, 478, 32 Sup. Ct. 132, 56 L. Ed. 274, 38 L. R. A. (N. S.) 40. No law can exist as such except the law of the land; but * * * it is a principle of every civilized law that vested rights shall be protected. Beale, supra, 51. The plaintiff owns something, and we help him to get it. Howarth v. Lombard, 175 Mass. 570, 56 N. E. 888, 49 L. R. A. 301; Walsh v. B. & M. R. R., 201 Mass. 527, 88 N. E. 12; Walsh v. N. Y., etc., R. R. 160 Mass. 571, 36 N. E. 584, 39 Am. St. Rep. 514; Beale, Conflict of
242
Laws, 51, 73. We do this unless some sound reason of public policy makes it unwise for us to lend our aid. The law of the forum is material only as setting a limit of policy beyond which such obligations will not be enforced there. Cuba R. R. Co. v. Crosby, supra, 222 U. S. 478, 32 Sup. Ct. 132, 56 L. Ed. 274, 38 L. R. A. (N. S.) 40. Sometimes we refuse to act where all the parties are nonresidents. Burdick v. Freeman, 120 N. Y. 420, 24 N. E. 949; English v. N. Y., N. H. & H. R. R. Co., 161 App. Div. 831, 146 N. Y. Supp. 963. That restriction need not detain us; in this case all are residents. If did is to be withheld here, it must be because the cause of action in its nature offends our sense of justice or menaces the public welfare. A., T. & St. F. Ry. Co. v. Sowers, 213 U. S. 55, 67, 68, 29 Sup. Ct. 397, 53 L. Ed. 695; Stewart v. Balt. & O. R. R. Co., 168 U. S. 445, 18 Sup. Ct. 105, 42 L. Ed. 537; Zeikus v. Florida E. C. Ry. Co., 153 App. Div. 345, 350, 138 N. Y. Supp. 478. Our own scheme of legislation may be different. We may even have no legislation on the subject. That is not enough to show that public policy forbids us to enforce the foreign right. A right of action is property. If a foreign statute gives [*111] the right, the mere fact that we do not give a like right is no reason for refusing to help the plaintiff in getting what belongs to him. We are not so provincial as to say that every solution of a problem is wrong because we deal with it otherwise at home. Similarity of legislation has indeed this importance; its presence shows beyond question that the foreign statute does not offend the local policy. But its absence does not prove the contrary. It is not to be exalted into an indispensable condition. The misleading word comity has been responsible for much of the trouble. It [**202] has been fertile in suggesting a discretion unregulated by general principles. Beale, Conflict of Laws, 71. The sovereign in its discretion may refuse its aid to the foreign right. St. Louis, I. M. & So. Ry. Co. v. Taylor, 210 U. S. 281, 28 Sup. Ct. 616, 52 L. Ed. 1061; Dougherty v. Am. McKenna Process Co., 255 Ill. 369, 99 N. E. 619, L. R. A. 1915F, 955, Ann. Cas. 1913D, 568. From this it has been an easy step to the conclusion that a like freedom of choice has been confided to the courts. But that, of course, is a false view. Cuba R. R. Co. v. Crosby, supra, 222 U. S. 478, 32 Sup. Ct. 132, 56 L. Ed. 274, 38 L. R. A. (N. S.) 40. The courts are not free to refuse to enforce a foreign right at the pleasure of the judges, to suit the individual notion of expediency or fairness. They do not close their doors, unless help would violate some fundamental principle of justice, some prevalent conception of good morals, some deep-rooted tradition of the common weal. This test applied, there is nothing in the Massachusetts statute that outrages the public policy of New York. We have a statute which gives a civil remedy where death is caused in our own state. We have though it so important that we have now imbedded it in the Constitution. Const. art. 1, 18. The fundamental policy is that there shall be some atonement for the wrong. Through the defendant's negligence, a resident of New York has been killed in Massachusetts. He has left a widow and children, who are also residents. The [*112] law of Massachusetts gives them a recompense for his death. It cannot be that public policy forbids our courts to help in collecting what belongs to them. We cannot give them the same judgment that our law would give if the wrong had been done here. Very likely we cannot give them as much. But that is no reason for refusing to give them what we can. We shall not make things better by sending them to another state, where the defendant may not be found, and where suit may be impossible. Nor is there anything to shock our sense of justice in the possibility of a punitive recovery. The penalty is not extravagant. It conveys no hint of arbitrary confiscation. Standard Oil Co. of Ind. v. Missouri, 224 U. S. 270, 286, 32 Sup. Ct. 406, 56 L. Ed. 760, Ann. Cas. 1913D, 936. It varies between moderate limits according to the defendants guilt. We shall not feel the pricks of conscience, if the offender pays the survivors in proportion to the measure of his offense. We have no public policy that prohibits exemplary damages or civil penalties. We give them for many wrongs. To exclude all penal actions would be to wipe out the distinction between the penalties of public justice and the remedies of private law. Finally, there are no difficulties of procedure that stand in the way. We have a statute authroizing the triers of the facts, when statutory penalties are sued for, to fit the award to the offense. Code Civ. Proc. 1898. The case is not one where special remedies established by the foreign law are incapable of adequate enforcement except in the home tribunals. Marshall v. Sherman, 148 N. Y. 9, 42 N. E. 419, 34 L. R. A. 757, 51 Am. St. Rep. 654; Howarth v. Angle, 162 N. Y. 179, 181, 189, 56 N. E. 489, 47 L. R. A. 725; Slater v. Mex. Nat. R. R. Co., supra. We hold, then, that public policy does not prohibit the assumption of jurisdiction by our courts and that this being so, mere differences of remedy do not count. For many years the courts have been feeling their way in the enforcement of these statutes. A civil remedy for another's death was something strange and new, and [*113] it did not find at once the fitting niche, the proper category, in the legal scheme. We need not be surprised, therefore, if some of the things said, as distinguished from those decided, must be rejected to-day. But the truth, of course, is that there is nothing sui generis about these death statutes in their relation to the general body of private international law. We must apply the same rules that are applicable to other torts; and the tendency of those rules to-day is toward a larger comity, if we must cling to the traditional term. Walsh v. B. & M. R. R., 201 Mass. 527, 533, 88 N. E. 12. The fundamental public policy is perceived to be that rights lawfully vested shall be everywhere maintained. At least, that is so among the states of the Union. Walsh v. N. Y. & N. E. R. R. Co., 160 Mass. 571, 573, 36 N. E. 584, 39 Am. St. Rep. 514; Walsh v. B. & M. R. R., supra; Beach, Uniform Interstate Enforcement of Vested Rights, 27 Yale Law Journal, 656. There is a growing conviction that only exceptional circumstances should lead one of the states to refuse to enforce a right acquired in another. The evidences of this tendency are many. One typical instance will suffice. For many years Massachusetts closed her courts to actions of this order based on foreign statutes. Richardson v. N. Y. C. R. R., 98 Mass. 85. She has opened them now, and overruled her earlier decisions. Hanlon v. Leyland & Co., Ltd., 223 Mass. 438, 111 N. E. 907, L. R. A. 1917A, 34; Walsh v. B. & M. R. R., supra. The test of similarity has been abandoned there. If it has ever been accepted here, we think it should be abandoned now. The judgment of the Appellate Division should be reversed, and the order of the Special Term affirmed, with costs in the Appellate Division and in this court. HISCOCK, C. J., and CUDDEBACK, POUND, CRANE, and ANDREWS, JJ., concur. COLLIN, J., dissents from decision of second question in opinion of CARDOZO, J., but otherwise concurs. Judgment reversed, etc. should be reversed, and the order of the Special Term affirmed. with costs in the Appellate Division and in this court. HISCOCK, C. J., and CUDDEBACK, POUND, CRANE, and ANDREWS, JJ., concur. COLLIN, J., dissents from decision of second question in opinion of CARDOZO, J., but otherwise concurs. Judgment reversed, etc.
243
159 U.S. 113 16 S.Ct. 139 40 L.Ed. 95 HILTON et al. v. GUYOT et al. (two cases). Nos. 130 and 34. June 3, 1895. The first of these two cases was an action at law, brought December 18, 1885, in the circuit court of the United States for the Southern district of New York, by Gustave Bertin Guyot, as official liquidator of the firm of Charles Fortin & Co., and by the surviving members of that firm, all aliens and citizens of the republic of France, against Henry Hilton and William Libbey, citizens of the United States and of the state of New York, and trading as copartners, in the cities of New York and Paris, and elsewhere, under the firm name of A. T. Stewart & Co. The action was upon a judgment recovered in a French court at Paris, in the republic of France, by the firm of Charles Fortin & Co., all of whose members were French citizens, against Hilton & Libbey, trading as copartners, as aforesaid, and citizens of the United States and of the state of New York. The complaint alleged that in 1886, and since, during the time of all the transactions included in the judgment sued on, Hilton and Libbey, as successors to Alexander T. Stewart and Libbey, under the firm name of A. T. Stewart & Co., carried on a general business as merchants in the cities of New York and Paris, and elsewhere, and maintained a regular store and place of business at Paris; that during the same time Charles Fortin & Co. carried on the manufacture and sale of gloves at Paris, and the two firms had there large dealings in that business, and controversies arose in the adjustment of accounts between them. The complaint further alleged that between March 1, 1879, and December 1, 1882, five suits were brought by Fortin & Co. against Stewart & Co. for sums alleged to be due, and three suits by Stewart & Co. against Fortin & Co., in the tribunal of commerce of the department of the Seine, a judicial tribunal or court, organized and existing under the laws of France, sitting at Paris, and having jurisdiction of suits and controversies between merchants or traders growing out of commercial dealings between them; that Stewart & Co. appeared by their authorized attorneys in all those suits; and that, after full hearing before an arbitrator appointed by that court, and before the court itself, and after all the suits had been consolidated by the court, final judgment was rendered on January 20, 1883, that Fortin & Co. recover of Stewart & Co. various sums, arising out of the dealings between them, amounting to 660,847 francs, with interest, and dismissed part of Fortin & Co.'s claim. The answer further alleged that, in the original suits brought against the defendants by Fortin & Co., the citations were left at their storehouse in Paris; that they were then residents and citizens of the state of New The answer further alleged that the tribunal of commerce of the department of the Seine was a tribunal whose judges were merchants, ship captains, stockbrokers, and persons engaged in commercial pursuits, and of which Charles Fortin had been a member until shortly before the commencement of the litigation. The answer admitted the proceedings and judgments in the French courts, and that the defendants gave up their business in France before the judgment on appeal, and had no property within the jurisdiction of France out of which that judgment could be collected. The defendants, in their answer, set forth in detail the original contracts and transactions in France between the parties, and the subsequent dealings between them, modifying those contracts, and alleged that the plaintiffs had no just claim against the defendants, but that, no the contrary, the defendants, upon a just settlement of the accounts, were entitled to recover large sums from the plaintiffs. The complaint further alleged that the judgment of the court of appeals of Paris, and the judgment of the tribunal of commerce, as modified by the judgment of the appellate court, still remain in full force and effect; 'that the said courts respectively had jurisdiction of the subject-matter of the controversies so submitted to them, and of the parties, the said defendants having intervened, by their attorneys and counsel, and applied for affirmative relief in both courts; that the plaintiffs have hitherto been unable to collect the said judgments or any part thereof, by reason of the absence of the said defendants, they having given up their business in Paris prior to the recovery of the said judgment on appeal, and having left no property within the jurisdiction of the republic of France out of which the said judgments might be made;' and that there are still justly due and owing from the defendants to the plaintiffs upon those said judgments certain sums, specified in the complaint, and amounting in all to 1,008,783 francs in the currency of the republic of France, equivalent to $195,122.47. The complaint further alleged that appeals were taken by both parties from that judgment to the court of appeals of Paris, Third section, an appellate court of record, organized and existing under the laws of the republic of France, and having jurisdiction of appeals from the final judgments of the tribunal of commerce of the department of the Seine, where the amount in dispute exceeded the sum of 1,500 francs; and that the said court of appeal, by a final judgment, rendered March 19, 1884, and remaining of record in the office of its clerk at Paris, after hearing the several parties by their counsel, and upon full consideration of the merits, dismissed the appeal of the defendants, confirmed the judgment of the lower court in favor of the plaintiffs, and ordered, upon the plaintiffs' appeal, that they recover the additional sum of 152,528 francs, with 182,849 francs for interest on all the claims allowed, and 12,559 francs for costs and expenses. The complaint further alleged that Guyot had been duly appointed by the tribunal of commerce of the department of the Seine official liquidator of the firm of Forth & Co., with full powers, according to law and commercial usage, for the verification and realization of its property, both real and personal, and to collect and cause to be executed the judgments aforesaid.
244
York, and neither of them at that time, or within four years before, had been within, or resident or domiciled within, the jurisdiction of that tribunal, or owed any allegiance to France; but that they were the owners of property situated in that country, which would by the law of France have been liable to seizure if they did not appear in that tribunal; and that they unwillingly, and solely for the purpose of protecting that property, authorized and caused an agent to appear for them in those proceedings; and that the suits brought by them against Fortin & Co. were brought for the same purpose, and in order to make a proper defense, and to establish counterclaims arising out of the transactions between the parties, and to compel the production and inspection of Fortin & Co.'s books, and that they sought no other affirmative relief in that tribunal. 'And it is further provided by the laws of France, by article 546 of the Code de Procedure Civile, as follows: The answer further alleged that pending that litigation the defendants discovered gross frauds in the accounts of Fourtin & Co., that the arbitrator and the tribunal declined to compel Fortin & Co. to produce their books and papers for inspection, and that, if they had been produced, the judgment would not have been obtained against the defendants. The answer further alleged that, without any fault or negligence on the part of the defendants, there was not a full and fair trial of the controversies before the arbitrator, in that no witness was sworn or affirmed; in that Charles Fortin was permitted to make, and did make, statements not under oath, containing many falsehoods; in that the privilege of cross-examination of Fortin and other persons, who made statements before the arbitrator, was denied to the defendants; and in that extracts from printed newspapers, the knowledge of which was not brought home to the defendants, and letters and other communications in writing between Fortin & Co. and third persons, to which the defendants were neither privy nor party, were received by the arbitrator; that without such improper evidence the judgment would not have been obtained; and that the arbitrator was deceived and misled by the false and fraudulent accounts introduced by Fortin & Co., and by the hearsay testimony given, without the solemnity of an oath, and without cross-examination, and by the fraudulent suppression of the books and papers. The answer further alleged that Fortin & Co. made up their statements and accounts falsely and fraudulently, and with intent to deceive the defendants and the arbitrator and the said courts of France, and those courts were deceived and misled thereby; that, owing to the fraudulent suppression of the books and papers of Fortin & Co. upon the trial, and the false statements of Fortin regarding matters involved in the controversy, the arbitrator and the courts of France 'were deceived and misled in regard to the merits of the controversies pending before them, and wrongfully decided against said Stewart & Co., as hereinbefore stated; that said judgment, hereinbefore mentioned, is fraudulent, and based upon false and fraudulent accounts and statements, and is errorneous in fact and in law, and is void; that the trial hereinbefore mentioned was not conducted according to the usages and practice of the common law, and the allegations and proofs given by said Fortin & Co., upon which said judgment is founded, would not be competent or admissible in any court or tribunal of the United States, in any suit between the same parties, involving the same subject-matter, and it is contrary to natural justice and public policy that the said judgment should be enforced against a citizen of the United States; and that, if there had been a full and fair trial upon the merits of the controversies so pending before said tribunals, no judgment would have been obtained against said Stewart & Co. The plaintiffs filed a replication to so much of the answer as made counterclaims, denying its allegations, and setting up in bar thereof the judgment sued on. The answer concluded by demanding that the plaintiffs' complaint be dismissed, and that the defendants have judgment against them upon the counterclaims, amounting to $102,942.91. The answer further set up, by way of counterclaim, and in detail, various matters arising out of the dealings between the parties, and alleged that none of the plaintiffs had since 1881 been residents of the state of New York, or within the jurisdiction of that state, but the defendants were, and always had been, residents of that state. 'That the construction given to said statutes by the judicial tribunals of France is such that no comity is displayed towards the judgments of tribunals of foreign countries against the citizens of France, when sued upon in said courts of France, and the merits of the controversies upon which the said judgments are based are examined anew, unless a treaty to the contrary effect exists between the said republic of France and the country in which such judgment is obtained. That no treaty exists between the said republic of France and the United States, by the terms or effect of which the judgments of either country are prevented from being examined anew upon the merits, when sued upon in the courts of the country other than that in which it is obtained. That the tribunals of the republic of France give no force and effect, within the jurisdiction of the said country, to the duly rendered judgments of courts of competent jurisdiction of the United States against citizens of France, after proper personal service of the process of said courts is made thereon in this country.' 'And it is further provided by the laws of France, by article 2128 [2123] of the Code de Procedure Civile [Civil Code]: 'A lien cannot, in like manner, arise from judgments rendered in any foreign country, save only as they have been declared in force by a French tribunal, without prejudice, however, to provisions to the contrary, contained in public laws and treaties.' [And by article 2128 of that Code: 'Contracts entered into in a foreign country cannot give a lien upon property in France, if there are no provisions contrary to this principle in public laws or in treaties.'] 'Judgments rendered by foreign tribunals shall be capable of execution in France, only in the manner and in the cases set forth by articles 2123 and 2128 of the Civil Code.' 'Defendants, further answering, allege that it is contrary to natural justice that the judgment hereinbefore mentioned should be enforced without an examination of the merits thereof; that by the laws of the republic of France, to wit, article 181 [121] of the royal ordinance of June 15, 1629, it is provided namely: 'Judgments rendered, contracts or obligations recognized, in foreign kingdoms and sovereignties, for any cause whatever, shall give rise to no lien or execution in our kingdom. Thus the contracts shall stand for simple promises, and, notwithstanding such judgments, our subjects against whom they have been rendered may contest their rights anew before our own judges.'
245
The defendants, on June 22, 1888, filed a bill in equity against the plaintiffs, setting forth the same matters as in their answer to the action at law, and praying for a discovery, and for an injunction against the prosecution of the action. To that bill a plea was filed, setting up the French judgments, and upon a hearing the bill was dismissed. 42 Fed. 249. From the decree dismissing the bill an appeal was taken, which is the second case now before this court. The action at law afterwards came on for trial by a jury, and the plaintiffs put in the records of the proceedings and judgments in the French courts, and evidence that the jurisdiction of those courts was as alleged in the complaint, and that the practice followed, and the method of examining the witnesses, were according to the French law; and also proved the title of Guyot as liquidator. It was admitted by both parties that for several years prior to 1876 the firm of Alexander T. Stewart & Co., composed of Stewart and Libbey, conducted their business as merchants in the city of New York, with branches in other cities of America and Europe; that both partners were citizens and residents of the city and state of New York during the entire period mentioned in the complaint; and that in April, 1876, Stewart died, and Hilton and Libbey formed a partnership to continue the business under the same firm name, and became the owners of all the property and rights of the old firm. The defendants made numerous offers of evidence in support of all the specific allegations of fact in their answer, including the allegations as to the law and comity of France. The plaintiffs, in their brief filed in this court, admitted that most of these offers 'where offers to prove matters in support of the defenses and counterclaims set up by the defendants in the cases tried before the French courts, and which, or most of which, would have been relevant and competent if the plaintiffs in error are not concluded by the result of those litigations, and have now the right to try those issues, either on the ground that the French judgments are only prima facie evidence of the correctness of those judgments, or on the ground that the case is within the exception of a judgment obtained by fraud.' The court declined to admit any of the evidence so offered by the defendants, and directed a verdict for the The defendants, in order to show that they should not be concluded by having appeared and litigated in the suits brought against them by the plaintiffs in the French courts, offered to prove that they were residents and citizens of the state of New York, and neither of them had been, within four years prior to the commencement of those suits, domiciled or resident within the jurisdiction of those courts; that they had a purchasing agent and a storehouse in Paris, but only as a means or facility to aid in the transaction of their principal business, which was in New York, and they were never otherwise engaged in business in France; that neither of them owed allegiance to France, but they were the owners of property there, which would, according to the laws of France, have been liable to seizure if they had not appeared to answer in those suits; that they unwillingly, and solely for the purpose of protecting their property within the jurisdiction of the French tribunal, authorized an agent to appear, and he did appear in the proceedings before it; and that their motion to compel an inspection of the plaintiffs' books, as well as the suits brought by the defendants in France, were necessary by way of defense or counterclaim to the suits there brought by the plaintiffs against them. 3 Wm. G. Choate, for defendants. 1 Elihu Root and James C. Carter, for plaintiffs. [Argument of Counsel from pages 123-140 intentionally omitted] Mr. Chief Justice Fuller, Mr. Justice Harlan, Mr. Justice Brewer, and Mr. Justice Jackson dissenting. TThe writ of error in the action at law and the appeal in the suit in equity were argued together in this court in January, 1894, and, by direction of the court, were reargued in April, 1894. plaintiffs in the sum of $277,775.44, being the amount of the French judgment and interest. The defendants, having duly excepted to the rulings and direction of the court, sued out a writ of error. The plaintiffs objected to all the evidence offered by the defendants, on the grounds that the matters offered to be proved were irrelevant, immaterial, and incompetent; that in respect to them the defendants were concluded by the judgment sued on and given in evidence; and that none of those matters, if proved, would be a defense to this action upon that judgment. Among the matters which the defendants alleged and offered to prove in order to show that the French judgments were procured by fraud were that Fortin & Co., with intent to deceive and defraud the defendants, and the arbitrator and the courts of France, entered in their books, and presented to the defendants, and to the French courts, accounts bearing upon the transactions in controversy which were false and fraudulent, and contained excessive and fraudulent charges against the defendants in various particulars, specified; that the defendants made due application to the tribunal of commerce to compel Fortin & Co. to allow their account books and letter books to be inspected by the defendants, and the application was opposed by Fortin & Co., and denied by the tribunal; that the discovery and inspection of those books were necessary to determine the truth of the controversies between the parties; that before the tribunal of commerce Charles Fortin was permitted to and did give in evidence statements not under oath, relating to the merits of the controversies there pending, and falsely represented that a certain written contract, made in 1873, between Stewart & Co. and Fortin & Co., concerning their dealings, was not intended by the parties to be operative according to its terms; and in support of that false representation made statements as to admissions by Stewart in a private conversation with him; and that the defendants could not deny those statements, because Stewart was dead, and they were not protected from the effect of Fortin's statements by the privilege of cross-examining him under oath; and that the French judgments were based upon false and fraudulent accounts presented and statements made by Fortin & Co. before the tribunal of commerce during the trial before it. The records of the judgments of the French courts, put in evidence by the plaintiffs, showed that all the matters now relied on to show fraud were contested in and considered by those courts.
246
4 [Argument of Counsel from pages 141-162 intentionally omitted] 5 Mr. Justice GRAY, after stating the case, delivered the opinion of the court. 6 These two casesthe one at law and the other in equityof Hilton v. Guyot, and the case of Ritchie v. McMullen, 16 Sup. Ct. 171, which has been under advisement at the same time, present important questions relating to the force and effect of foreign judgments, not hitherto adjudicated by this court, which have been argued with great learning and ability, and which require for their satisfactory determination a full consideration of the authorities. To avoid confusion in indicating the parties, it will be convenient first to take the case at law of Hilton v. Guyot. 7 International law, in its widest and most comprehensive sense,including not only questions of right between nations, governed by what has been appropriately called the 'law of nations,' but also questions arising under what is usually called 'private international law,' or the 'conflict of laws,' and concerning the rights of persons within the territory and dominion of one nation, by reason of acts, private or public, done within the dominions of another nation,is part of our law, and must be ascertained and administered by the courts of justice as often as such questions are presented in litigation between man and man, duly submitted to their determination. 8 The most certain guide, no doubt, for the decision of such questions is a treaty or a statute of this country. But when, as is the case here, there is no written law upon the subject, the duty still rests upon the judicial tribunals of ascertaining and declaring what the law is, whenever it becomes necessary to do so, in order to determine the rights of parties to suits regularly broght before them. In doing this, the courts must obtain such aid as they can from judicial decisions, from the works of jurists and commentators, and from the acts and usages of civilized nations. Fremont v. U. S., 17 How. 542, 557; The Scotia, 14 Wall. 170, 188; Respublica v. De Longchamps, 1 Dall. 111, 116; Moultrie v. Hunt, 23 N. Y. 394, 396. 13 9 No law has any effect, of its own force, beyond the limits of the sovereignty from which its authority is derived. The extent to which the law of one nation, as put in force within its territory, whether by executive order, by legislative act, or by judicial decree, shall be allowed to operate within the dominion of another nation, depends upon what our greatest jurists have been content to call 'the comity of nations.' Although the phrase has been often criticised, no satisfactory substitute has been suggested. 10 Again, Mr. Justice Story says: 'It has been thought by some jurists that the term 'comity' is not sufficiently expressive of the obligation of nations to give effect to foreign laws when they are not prejudicial to their own rights and interests. And it has been suggested that the doctrine rests on a deeper foundation; that it is not so much a matter of comity or courtesy, as a matter of paramount moral duty. Now, assuming that such a moral duty does exist, it is clearly one of imperfect obligation, like that of beneficence, humanity, and charity. Every nation must be the final judge for itself, not only of the nature and extent of the duty, but of the occasions on which its exercise may be justly demanded.' And, after further discussion of the matter, be concludes: 'There is, then, not only no impropriety in the use of the phrase 'comity of nations,' but it is 12 Afterwards, speaking of the difficulty of applying the positive rules laid down by the Continental jurists, he says that 'there is, indeed, great truth' in these remarks of Mr. Justice Porter, speaking for the supreme court of Louisiana: 'They have attempted to go too far, to define and fix that which cannot, in the nature of things, be defined and fixed. They seem to have forgotten that they wrote on a question which touched the comity of nations, and that that comity is, and ever must be, uncertain; that it must necessarily depend on a variety of circumstances which cannot be reduced to any certain rule; that no nation will suffer the laws of another to interfere with her own to the injury of her citizens; that whether they do or not must depend on the condition of the country in which the foreign law is sought to be enforced, the particular nature of her legislation, her policy, and the character of her institutions; that in the conflict of laws it must often be a matter of doubt which should prevail; and that, whenever a doubt does exist, the court which decides will prefer the laws of its own country to that of the stranger.' Story, Confl. Laws, 28; Saul v. His Creditors (1827) 5 Mart. (N. S.) 569, 596. 11 Mr. Justice Story, in his Commentaries on the Conflict of Laws, treating of the question in what department of the government of any state, in the absence of any clear declaration of the sovereign will, resides the authority to determine how far the laws of a foreign state shall have effect, and observing that this differs in different states, according to the organization of the departments of the government of each, says: 'In England and America the courts of justice have hitherto exercised the same authority in the most ample manner, and the legislatures have in no instance (it is believed) in either country interfered to provide any positive regulations. The common law of both countries has been expanded to meet the exigencies of the times as they have arisen, and, so far as the practice, of nations, or the 'jus gentium privatum,' has been supposed to furnish any general principle, it has been followed out.' Story, Confl. Laws, 23, 24. 'Comity,' in the legal sense, is neither a matter of absolute obligation, on the one hand, nor of mere courtesy and good will, upon the other. But it is the recognition which one nation allows within its territory to the legislative, executive, or judicial acts of another nation, having due regard both to international duty and convenience, and to the rights of its own citizens, or of other persons was are under the protection of its laws.
247
the most appropriate phrase to express the true foundation and extent of the obligation of the laws of one nation within the territories of another.' Story, Confl. Laws, 33-38. 14 Chief Justice Taney, likewise, speaking for this court, while Mr. Justice Story was a member of it, and largely adopting his words, said: 'It is needless to enumerate here the instances in which, by the general practice of civilized countries, the laws of the one will, by the comity of nations, be recognized and executed in another, where the rights of individuals are concerned.' 'The comity thus extended to other nations is no impeachment of sovereignty. It is the voluntary act of the nation by which it is offered, and is inadmissible when contrary to its policy, or prejudicial to its interests. But it contributes so largely to promote justice between individuals, and to produce a friendly intercourse between the sovereignties to which they belong, that courts of justice have continually acted upon it as a part of the voluntary law of nations.' 'It is not the comity of the courts, but the comity of the nation, which is administered and ascertained in the same way, and guided by the same reasoning, by which all other principles of municipal law are ascertained and guided.' Bank v. Earle (1839) 13 Pet. 519, 589; Story, Confl. Laws, 38. 15 Mr. Wheaton says: 'All the effect which foreign laws can have in the territory of a state depends absolutely on the express or tacit consent of that state.' 'The express consent of a state to the application of foreign laws within its territory is given by acts passed by its legislative authority, or by treaties concluded with other states. Its tacit consent is manifested by the decisions of its judicial and administrative authorities, as well as by the writings of its publicists. There is no obligation recognized by legislators, public authorities, and publicists to regard foreign laws; but their application is admitted only from considerations of utility and the mutual convenience of states, 'ex comitate, ob reciprocam utilitatem." Wheat. Int. Law (8th Ed.) 78, 79. 'No sovereign is bound, unless by special compact, to execute within his dominions a judgment rendered by the tribunals of another state; and, if execution be sought by suit upon the judgment or otherwise, the tribunal in which the suit is brought, or from which execution is sought, is, on principle, at liberty to examine into the merits of such judgment, and to give effect to it or not, as may be found just and equitable. The general comity, utility, and convenience of nations have, however, established a usage among most civilized states, by which the final judgments of foreign courts of competent jurisdiction are reciprocally carried into execution, under certain regulations and restrictions, which differ in different countries.' Id. 147. 16 Chancellor Kent says: 'The effect to be given to foreign judgments is altogether a matter of comity in cases where it is not regulated by treaty.' 2 Kent, Comm. (6th Ed.) 120. 17 In order to appreciate the weight of the various authorities cited at the bar, it is important to distinguish different kinds of judgments. Every foreign judgment, of whatever nature, in order to be entitled to any effect, must have been rendered by a court having jurisdiction of the cause, and upon regular proceedings, 20 Other judgments, not strictly in rem, under which a person has been compelled to pay money, are so far conclusive that the justice of the payment cannot be impeached in another country, so as to compel him to pay it again. For instance, a judgment in foreign attachment is conclusive, as between the parties, of the right to the property or money attached. Story, Confl. Laws (2d Ed.) 592a. And if, on the dissolution of a partnership, one partner promises to indemnify the other against the debts of the partnership, a judgment for such a debt, under which the latter has been compelled to pay it, is conclusive evidence of the debt in a suit by him to recover the amount upon the promise of indemnity. It was of such a judgment, and in such a suit, that Lord Nottingham said: 'Let the plaintiff receive back so much of the money brought into court as may be adequate to the sum paid on the sentence for custom, the justice whereof is not examinable here.' Gold v. Canham (1679) 2 Swanst. 325, 1 Ch. Cas. 311. See, also, Tarleton v. Tarleton, 4 Maule & S. 20; Konitzky v. Meyer, 49 N. Y. 571. 19 A judgment affecting the status of persons, such as a decree confirming or dissolving a marriage, is recognized as valid in every country, unless contrary to the policy of its own law. Cottington's Case, 2 Swanst. 326, note; Roach v. Garvan, 1 Ves. Sr. 157; Harvey v. Farnie, 8 App. Cas. 43; Cheely v. Clayton, 110 U. S. 701, 4 Sup. Ct. 328. It was of a foreign sentence of divorce that Lord Chancellor Nottingham, in the house of lords, in 1678, in Cottington's Case, above cited, said: 'It is against the law of nations not to give credit to the judgments and sentences of foreign countries till they be reversed by the law, and according to the form, of those countries wherein they were given; for what right hath one kingdom to reverse the judgment of another? And how can we refuse to let a sentence take place till it be reversed? And what confusion would follow in Christendom, if they should serve us so abroad, and give no credit to our sentences!' 18 A judgment in rem, adjudicating the title to a ship or other movable property within the custody of the court, is treated as valid everywhere. As said by Chief Justice Marshall: 'The sentence of a competent court, proceeding in rem, is conclusive with respect to the thing itself, and operates as an absolute change of the property. By such sentence the right of the former owner is lost, and a complete title given to the person who claims under the decree. No court of co-ordinate jurisdiction can examine the sentence. The question, therefore, respecting its conformity to general or municipal law can never arise, for no co-ordinate tribunal is capable of making the inquiry.' Williams v. Armroyd, 7 Cranch, 423, 432. The most common illustrations of this are decrees of courts of admiralty and prize, which proceed upon principles of international law. Croudson v. Leonard, 4 Cranch, 434; Williams v. Armroyd, above cited; Ludlow v. Dale, 1 Johns. Cas. 16. But the same rule applies to judgments in rem under municipal law. Hudson v. Guestier, 4 Cranch, 293; Ennis v. Smith, 14 How. 400, 430; Wisconsin v. Pelican Ins. Co., 127 U. S. 265, 291, 8 Sup. Ct. 1370; Scott v. McNeal, 154 U. S. 34, 46, 14 Sup. Ct. 1108; Castrique v. Imrie, L. R. 4 H. L. 414; Monroe v. Douglas, 4 Sandf. Ch. 126. and due notice. In alluding to different kinds of judgments, therefore, such jurisdiction, proceedings, and notice will be assumed. It will also be assumed that they are untainted by fraud, the effect of which will be considered later.
248
21 Other foreign judgments which have been held conclusive of the matter adjudged were judgments discharging obligations contracted in the foreign country between citizens or residents thereof. Story, Confl. Laws, 330-341; May v. Breed, 7 Cush. 15. Such was the case cited at the bar of Burroughs (or Burrows) v. Jamineau (or Jemino), Moseley, 1, 2 Strange, 733, 2 Eq. Cas. Abr. p. 525, pl. 7, 12 Vin. Abr. p. 87, pl. 9 Sel. Cas. Ch. 69, and 1 Dickens, 48. 22 In that case bills of exchange drawn in London were negotiated, indorsed, and accepted at Leghorn, in Italy, by the law of which an acceptance became void if the drawer failed without leaving effects in the acceptor's hands. The acceptor, accordingly, having received advices that the drawer had failed before the acceptances, brought a suit at Leghorn against the last indorsees, to be discharged of his acceptances, paid the money into court, and obtained a sentence there, by which the acceptances were vacated as against those indorsees, and all the indorsers and negotiators of the bills, and the money deposited was returned to him. Being afterwards sued at law in England by subsequent holders of the bills, he applied to the court of chancery, and obtained a perpetual injunction. Lord Chancellor King, as reported by Strange, 'was clearly of opinion that this cause was to be determined according to the local laws of the place where the bill was negotiated, and, the plaintiff's acceptance of the bill having been vacated and declared void by a court of competent jurisdiction, he thought that sentence was conclusive, and bound the court of chancery here'; as reported in Viner, that 'the court at Leghorn had jurisdiction of the thing and of the persons'; and, as reported by Mosely, that, though 'the last indorsees had the sole property of the bills, and were therefore made the only parties to the suit at Leghorn, yet the sentence made the acceptance void against the now defendants and all others.' It is doubtful, at the least, whether such a sentence was entitled to the effect given to it by Lord Chancellor King. See Novelli v. Rossi, 2 Barn. & Adol. 757; Castrique v. Imrie, L. R. 4 H. L. 414, 435; 2 Smith, Lead. Cas. (2d Ed.) 450. 23 The remark of Lord Hardwicke, arguendo, as chief justice, in Boucher v. Lawson (1734) that 'the reason gone upon by Lord Chancellor King, in the case of Burroughs v. Jamineau, was certainly right, that where any court, whether foreign or domestic, that has the proper jurisdiction of the cases, makes a determination, it is conclusive to all other courts,' evidently had reference, as the context shows, to judgments of a court having jurisdiction of the thing, and did not touch the effect of an executory judgment for a debt. Cas. t. Hardw. 85, 89, Cunn. 144, 148. 24 In former times, foreign decrees in admiralty in personam were executed, even by imprisonment of the defendant, by the court of admiralty in England, upon letters rogatory from the foreign sovereign, without a new suit. Its right to do so was recognized by the court of king's bench in 1607 in a case of habeas corpus, cited by the plaintiffs, and reported as follows: 'If a man of Frizeland sues an Englishman in Frizeland before the governor there, and there recovers against him a certain sum, upon which the Englishman, not having sufficient to satisfy it, comes into England, upon which the governor sends his letters missive into 29 28 This clearly appears in Dupleix v. De Roven (1705), where one of two merchants in France recovered a judgment there against the other for a sum of money, which, not being paid, he brought a suit in chancery in England for a discovery of assets and satisfaction of the debt, and the defendant pleaded the statute of limitations of six years, and prevailed; Lord Keeper Cowper saying: 'Although the plaintiff obtained a judgment or sentence in France, yet here the debt must be considered as a debt by simple contract. The plaintiff can maintain no action here but an indebitatus assumpsit or an insimul computassent, so that the statute of limitations is pleadable in this case.' 2 Vern. 540. 27 Early in the last century it was settled in England that a foreign judgment on a debt was considered, not like a judgment of a domestic court of record, as a record or a specialty, a lawful consideration for which was conclusively presumed, but as a simple contract only. 26 The effect to which a judgment, purely executory, rendered in favor of a citizen or resident of the country, in a suit there brought by him against a foreigner, may be entitled in an action thereon against the latter in his own country, as is the case now before us, presents a more difficult question, upon which there has been some diversity of opinion. 25 The extraterritorial effect of judgments in personam, at law, or in equity may differ, according to the parties to the cause. A judgment of that kind between two citizens or residents of the country, and thereby subject to the jurisdiction in which it is rendered, may be held conclusive as between them everywhere. So, if a foreigner invokes the jurisdiction by bringing an action against a citizen, both may be held bound by a judgment in favor of either; and if a citizen sues a foreigner, and judgment is rendered in favor of the latter, both may be held equally bound. Ricardo v. Garcias, 12 Clark & F. 368; The Griefswald, Swab. 430, 435; Barber v. Lamb, 8 C. B. (N. S.) 95; Lea v. Deakin, 11 Biss. 23, Fed. Cas. No. 8,154. England, omnes magistratus infra regnum Angliae rogans, to make execution of the said judgment, the judge of the admiralty may execute this judgment by imprisonment of the party, and he shall not be delivered by the common law; for this is by the law of nations that the justice of one nation should be aiding to the justice of another nation, and for one to execute the judgment of the other, and the law of England takes notice of this law, and the judge of the admiralty is the proper magistrate for this purpose, for he only hath the execution of the civil law within the realm. Weir's Case (Pasch. Term) 5 Jac. B. R. (resolved upon a habeas corpus, and remanded).' 1 Rolle, Abr. p. 530, pl. 12; 6 Vin. Abr. p. 512, pl. 12. But the only question there raised or decided was of the power of the English court of admiralty, and not of the conclusiveness of the foreign sentence, and in later times the mode of enforcing a foreign decree in admiralty is by a new libel. See The City of Mecca, 5 Prob. Div. 28, 6 Prob. Div. 106.
249
Several opinions of Lord Hardwicke define and illustrate the effect of foreign judgments, when sued on or pleaded in England. 30 In Otway v. Ramsay (1736), in the king's bench, Lord Hardwicke treated it as worthy of consideration 'what credit is to be given by one court to the courts of another nation, proceeding both by the same rules of law,' and said: 'It is very desirable, in such case, that the judgment given in one kingdom should be considered as res judicata in another.' But it was held that debt would not lie in Ireland upon an English judgment, because 'Ireland must be considered as a provincial kingdom, part of the dominions of the crown of England, but no part of the realm,' and an action of debt on a judgment was local. 4 Barn. & C. 414-416, note, 14 Vin. Abr. p. 569, pl. 5, 2 Strange, 1090. 31 A decision of Lord Hardwicke as chancellor was mentioned in Walker v. Witter (1778) 1 Doug. 1, 6, by Lord Mansfield, who said: 'He recollected a case of a decree on the chancery side in one of the courts of great sessions in Wales, from which there was an appeal to the house of lords, and the decree affirmed there. Afterwards, a bill was filed in the court of chancery, on the foundation of the decree so affirmed, and Lord Hardwicke thought himself entitled to examine into the justice of the decision of the house of lords, because the original decree was in the court of Wales, whose decisions were clearly liable to be examined.' And in Galbraith v. Neville (1789) 1 Doug. 6, note, Mr. Justice Buller said: 'I have often heard Lord Mansfield repeat what was said by Lord Hardwicke in the case alluded to from Wales, and the ground of his lordship's opinion was this: When you call for my assistance to carry into effect the decision of some other tribunal, you shall not have it, if it appears that you are in the wrong; and it was on that account that he said he would examine into the propriety of the decree.' The case before Lord Hardwicke mentioned by Lord Mansfield would appear (notwithstanding the doubt of its authenticity expressed by Lord Kenyon in Galbraith v. Neville) to have been a suit to recover a legacy, briefly reported, with references to Lord Hardwicke's note book, and to the original record, as Morgan v. Morgan (1737-38) West. Ch. 181, 597, 1 Atk. 53, 408. 34 32 In Gage v. Bulkeley (1744), briefly reported in 3 Atk. 215, cited by the plaintiffs, a plea of a foreign sentence in a commissary court in France was overruled by Lord Hardwicke, saying: 'It is the most proper case to stand for an answer, with liberty to except, that I ever met with.' His reasons are fully stated in two other reports of the case. According to one of them, at the opening of the argument he said: 'Can a sentence or judgment pronounced by a foreign jurisdiction be pleaded in this kingdom to a demand for the same thing in any court of justice here? I always thought it could not, because every sentence, having its authority from the sovereign in whose dominions it is given, cannot bind the jurisdiction of foreign courts, who own not the same authority, and have a different sovereign, and are only bound by judicial sentence given under the same soverign power by which they themselves act.' 'But though a foreign sentence cannot be used by way of plea in the courts here, yet it may be taken advantage of in the way of evidence.' 'You cannot in this kingdom maintain debt upon judgment obtained for money in a foreign jurisdiction, but 35 In Sinclair v. Fraser (1771) the appellant, having as attorney in Jamaica made large advances for his constituent in Scotland, and having been superseded in office, brought an action before the supreme court of Jamaica, and, after appearance, obtained judgment against him, and afterwards brought an action against him in Scotland upon that judgment. The court of sessions betermined that the plaintiff was bound to prove before it the ground, nature, and extent of the demand on which the judgment in Jamaica was obtained, and therefore gave judgment against him. But the house of lords (in which, as remarked by one These decisions of Lord Hardwicke demonstrate that in his opinion, whenever the question was of giving effect to a foreign judgment for money, in a suit in England between the parties, it did not have the weight of a domestic judgment, and could not be considered as a bar, or as conclusive, but only as evidence of the same weight as a simple contract, and the propriety and justice of the judgment might be examined. 33 In Roach v. Garvan (1748), where an infant ward of the court of chancery had been married in France, by her guardian, to his son, before a French court, and the son 'petitioned for a decree for cohabitation with his wife, and to have some money out of the bank,' Lord Hardwicke said, as to the validity of the marriage: 'It has been argued to be valid, from being established by the sentence of a court in France having proper jurisdiction; and it is true that, if so, it is conclusive, whether in a foreign court or not, from the law of nations in such cases; otherwise, the rights of mankind would be very precarious and uncertain. But the question is whether this is a proper sentence, in a proper cause, and between proper parties, of which it is impossible to judge without looking further into the proceedings; this being rather the execution of the sentence than the sentence itself.' And, after observing upon the competency of the French tribunal, and pointing out that restitution of conjugal rights was within the jurisdiction of the ecclesiastical court, and not of the court of chancery, he added: 'Much less will I order any money out of the bank to be given him.' 1 Ves. Sr. 157, 159. He thus clearly recognized the difference between admitting the effect of a foreign judgment as adjudicating the status of persons, and executing a foreign judgment by enforcing a claim for money. you may on assumpsit in nature of debt, upon a simple contract, and give the judgment in evidence, and have a verdict; so that the distinction seems to be, where such foreign sentence is used as a plea to bind the courts here as a judgment, and when it is made use of in evidence as binding the justice of the case only.' And afterwards, in giving his decision, he said: 'The first question is whether the subject-matter of the plea is good. The second is whether it is well pleaded. The first question depends upon this: Whether the sentence or judgment of a foreign court can be used by way of plea in a court of justice in England; and no authority, either at law or in equity, has been produced to show that it may be pleaded, and therefore I shall be very cautious how I establish such a precedent.' 'It is true such sentence is an evidence which may affect the right of this demand, when the cause comes to be heard; but, if it is no plea in a court of law to bind their jurisdiction, I do not see why it should be so here.' Ridg. t. Hardw. 263, 264, 270, 273. A similar report of his judgment is in 2 Ves. Sr. (Belt's Supp.) 409, 410.
250
reporter, Lord Mansfield was then the presiding spirit, acting in concert with or for the lord chancellor in disposing of the Scotch appeals) 'ordered and declared that the judgment of the supreme court of Jamaica ought to be received as evidence prima facie of the debt, and that it lies upon the defendant to impeach the justice thereof, or to show the same to have been irregularly obtained'; and therefore reversed the judgment of the court of sessions. 2 Paton, 253, 6 Mor. Dict. 4542, and 1 Doug. 5, note. 36 Accordingly, in Crawford v. Witten (1773) a declaration in assumpsit, in an action in England upon a judgment recovered in the mayor's court of Calcutta, in Bengal, without showing the cause of action there, was held good on demurrer. Lord Mansfield considered the case perfectly clear. Mr. Justice Aston, according to one report, said: 'The declaration is sufficient. We are not to suppose it an unlawful debt;' and, according to another report: 'They admitted the assumpsit by their demurrer. When an action comes properly before any court, it must be determined by the laws which govern the country in which the action accrued.' And Mr. Justice Ashurst said: 'I have often known assumpsit brought on judgments in foreign courts. The judgment is a sufficient consideration to support the implied promise.' Loft, 154; s. c., nom. Crawford v. Whittal, 1 Doug. 4, note. 37 In Walker v. Witter (1778) an action of debt was brought in England upon a judgment recovered in Jamacia. The defendant pleaded nil debet and nul tiel record. Judgment was given for the plaintiff, Lord Mansfield saying: 'The plea of nul tiel record was improper. Though the plaintiffs had called the judgment a record, yet, by the additional words in the declaration, it was clear they did not mean that sort of record to which implicit faith is given by the courts of Westminster hall. They had not misled the court nor the defendant, for they spoke of it as a court of record in Jamaica. The question was brought to a narrow point, for it was admitted on the part of the defendant that indebitatus assumpsit would have lain, and on the part of the plaintiff that the judgment was only prima facie evidence of the debt. That being so, the judgment was not a specialty, but the debt only a simple contract debt, for assumpsit will not lie on a specialty. The difficulty in the case had arisen from not fixing accurately what a court of record is in the eye of the law. That description is confined properly to certain courts in England, and their judgments cannot be controverted. Foreign courts, and courts in England not of record, have not that privilege, nor the courts in Wales, etc. But the doctrine in the case of Sinclair v. Fraser was unquestionable. Foreign judgments are a ground of action everywhere, but they are examinable.' Justices Willes, Ashurst, and Buller concurred; the two latter saying that wherever indebitatus assumpsit will lie, debt will also lie. 1 Doug. 1, 5, 6. 38 In Herbert v. Cook (1782), again, in an action of debt upon a judgment of an inferior English court, not a court of record, Lord Mansfield said that it was 'like a foreign judgment, and not conclusive evidence of the debt.' Willes, 36, note. 39 42 In Phillips v. Hunter (1795) the house of lords, in accordance with the opinion of the majority of the judges consulted, and against that of Chief Justice Eyre, decided that a creditor of an English bankrupt, who had obtained payment of his debt by foreign attachment in Pennsylvania, was liable to an action for the money by the assignees in bankruptcy in England. But it was agreed, on all hands, that the judgment in 41 In Bayley v. Edwards (1792) the judicial committee of the privy council, upon appeal from Jamaica, held that a suit in equity pending in England was not a good plea in bar to a subsequent bill in Jamaica for the same matter; and Lord Camden said: 'In Gage v. Bulkeley [evidently referring to the full report in Ridgeway, above quoted, which had been cited by counsel] Lord Hardwicke's reasons go a great way to show the true effect of foreign sentences in this country, and all the cases show that foreign sentences are not conclusive bars here, but only evidence of the demand.' 3 Swanst. 703, 708, 710. 40 In Messin v. Massareene (1791) the plaintiff, having obtained a judgment against the defendants in a French court, brought an action of assumpsit upon it in England, and, the defendants having suffered a default, moved for a reference to a master, and for a final judgment on his report, without executing a writ of inquiry. The motion was denied, Lord Kenyon saying: 'This is an attempt to carry the rule further than has yet been done, and, as there is no instance of the kind, I am not disposed to make a precedent for it;' and Mr. Justice Buller saying: 'Though debt will lie here on a foreign judgment, the defendant may go into the consideration of it.' 4 Term R. 493. In Galbraith v. Neville (1789), upon a motion for a new trial after verdict for the plaintiff, in an action of debt on a judgment of the supreme court of Jamaica, Lord Kenyon expressed 'very serious doubts concerning the doctrine laid down in Walker v. Witter, that foreign judgments are not binding on the parties here.' But Mr. Justice Buller said: 'The doctrine which was laid down in Sinclair v. Fraser has always been considered as the true line ever since; namely, that the foreign judgment shall be prima facie evidence of the debt, and conclusive till it be impeached by the other party.' 'As to actions of this sort, see how far the court could go, if what was said in Walker v. Witter were departed from. It was there held that the foreign judgment was only to be taken to be right prima facie; that is, we will allow the same force to a foreign judgment that we do to those of our own courts not of record. But if the matter were carried further, we should give them more credit; we should give them equal force with those of courts of record here. Now a foreign judgment has never been considered as a record. It cannot be declared on as such and a plea of nul tiel record, in such a case, is a mere nullity. How, then, can it have the same obligatory force? In short, the result is this: that it is prima facie evidence of the justice of the demand in an action of assumpsit, having no more credit than is given to every species of written agreement, viz. that it shall be considered as good till it is impeached.' 1 Doug. 6, note. And the court afterwards unanimously refused the new trial, because, 'without entering into the question how far a foreign judgment was impeachable, it was at all events clear that it was prima facie evidence of the debt; and they were of opinion that no evidence had been adduced to impeach this.' 5 East, 475, note.
251
Pennsylvania and payment under it were conclusive as between the garnishee and the plaintiff in that suit, and the distinction between the effect of a foreign judgment which vests title, and of one which only declares that a certain sum of money is due, was clearly stated by Chief Justice Eyre, as follows: 'This judgment against the garnishee in the court of Pennsylvania was recovered properly or improperly. If, notwithstanding the bankruptcy, the debt remained liable to an attachment according to the laws of that country, the judgment was proper; if, according to the laws of that country, the property in the debt was divested out of the bankrupt debtor, and vested in his assignees, the judgment was improper. But this was a question to be decided, in the cause instituted in Pennsylvania, by the courts of that country, and not by us. We cannot examine their judgment, and, if we could, we have not the means of doing it in this case. It is not stated upon this record, nor can we take notice, what the law of Pennsylvania is upon this subject. If we had the means, we could not examine a judgment of a court in a foreign state, brought before us in this manner. 43 'It is in one way only that the sentence or judgment of a court of a foreign state is examinable in our courts, and that is when the party who claims the benefit of it applies to our courts to enforce it. When it is thus voluntarily submitted to our jurisdiction, we treat it, not as obligatory to the extent to which it would be obligatory, perhaps, in the country in which it was pronounced, nor as obligatory to the extent to which, by our law, sentences and judgments are obligatory, not as conclusive, but as matter in pais, as consideration prima facie sufficient to raise a promise. We examine it as we do all other considerations or promises, and for that purpose we receive evidence of what the law of the foreign state is, and whether the judgment is warranted by that law.' 2 H. Bl. 402, 409, 410. 44 In Wright v. Simpson (1802) Lord Chancellor Eldon said: 'Natural law requires the courts of this country to give credit to those of another for the inclination and power to do justice, but not if that presumption is proved to be ill founded in that transaction which is the subject of it; and if it appears in evidence that persons suing under similar circumstances neither had met, nor could meet, with justice, that fact cannot be immaterial as an answer to the presumption.' 6 Ves. 714, 730. 45 Under Lord Ellenborough, the distinction between a suit on a foreign judgment in favor of the plaintiff against the defendant, and a suit to recover money which the plaintiff had been compelled to pay under a judgment abroad, was clearly maintained. 46 In Buchanan v. Rucker (1808), in assumpsit upon a judgment rendered in the Island of Tobago, the defendant pleaded non assumpsit, and prevailed, because it appeared that he was not a resident of the island, and was neither personally served with process nor came in to defend, and the only notice was, according to the practice of the court, by nailing up a copy of the declaration at the courthouse door. It was argued that 'the presumption was in favor of a foreign judgment, as well as of a judgment obtained in one 50 The English cases above referred to have been stated with the more particularity and detail, because they directly bear upon the question, what was the English law, being then our own law, before the Declaration of Independence? They demonstrate that by that law, as generally understood, and as declared by Hardwicke, Mansfield, Buller, Camden, Eyre, and Ellenborough, and doubted by Kenyon only, a judgment recovered in a foreign country for a sum of money, when sued upon in England, was only prima facie evidence of the demand, and subject to be examined and impeached. The law of England since it has become to us a foreign country will be considered afterwards. 49 In Harris v. Saunders (1825), Chief Justice Abbott (afterwards Lord Tenterden) and his associates, upon the authority of Otway v. Ramsay, above cited, held that, even since the Act of Union of 39 & 40 Geo. III. c. 67, assumpsit would lie in England upon a judgment recovered in Ireland, because such a judgment could not be considered a specialty debt in England. 4 Barn. & C. 411, 6 Dowl. & R. 471. 48 In Tarleton v. Tarleton (1815), on the other hand, the action was brought upon a covenant of indemnity in an agreement for dissolution of a partnership to recover a sum which the plaintiff had been compelled to pay under a decision in a suit between the parties in the Island of Grenada. Such was the case of which Lord Ellenborough, affirming his own ruling at the trial, said: 'I thought that I did not sit at nisi prius to try a writ of error in this case upon the proceedings in the court abroad. The defendant had notice of the proceedings, and should have appeared, and made his defense. The plaintiff, by this neglect, has been obliged to pay the money in order to avoid a sequestration.' The distinction was clearly brought out by Mr. Justice Bayley, who said: 'As between the parties to the suit, the justice of it might be again litigated; but as against a stranger it cannot.' 4 Maule & S. 20, 22, 23. 47 In Hall v. Odber (1809), in assumpsit upon a judgment obtained in Canada, with other counts on the original debt, Lord Ellenborough and Justices Grose, Le Blanc, and Bayley agreed that a foreign judgment was not to be considered as having the same force as a domestic judgment, but only that of a simple contract between the parties, and did not merge the original cause of action, but was only evidence of the debt; and therefore assumpsit would lie, either upon the judgment or upon the original cause of action. 11 East, 118. of the courts of this country'; to which Lord Ellenborough answered: 'That may be so, if the judgment appears, on the face of it, consistent with reason and justice; but it is contrary to the first principles of reason and justice that, either in civil or criminal proceedings, a man should be condemned before he is heard.' 'There might be such glaring injustice on the face of a foreign judgment, or it might have a vice rendering it so ludicrous, that it could not raise an assumpsit, and, if submitted to the jurisdiction of the courts of this country, could not be enforced.' 1 Camp. 63, 66, 67. A motion for a new trial was denied. 9 East, 192. And see Sadler v. Robins (1808) 1 Camp. 253, 256.
252
51 The law upon this subject as understood in the United States at the time of their separation from the mother country was clearly set forth by Chief Justice Parsons, speaking for the supreme judicial court of Massachusetts, in 1813, and by Mr. Justice Story in his Commentaries on the Constitution of the United States, published in 1833. Both those eminent jurists declared that by the law of England the general rule was that foreign judgments were only prima facie evidence of the matter which they purported to decide; and that by the common law, before the American Revolution, all the courts of the several colonies and states were deemed foreign to each other, and consequently judgments rendered by any one of them were considered as foreign judgments, and their merits re-examinable in another colony, not only as to the jurisdiction of the court which pronounced them, but also as to the merits of the controversy, to the extent to which they were understood to be re-examinable in England. And they noted that, in order to remove that inconvenience, statutes had been passed in Massachusetts, and in some of the other colonies, by which judgments rendered by a court of competent jurisdiction in a neighboring colony could not be impeached. Bissell v. Briggs, 9 Mass. 462, 464, 465; St. Mass. 1773-74, c. 16; 5 Prov. Laws, 323, 369; Story, Const. (1st Ed.) 1301, 1302; Id. (4th Ed.) 1306, 1307. 52 It was because of that condition of the law, as between the American colonies and states, that the United States, at the very beginning of their existence as a nation, ordained that full faith and credit should be given to the judgments of one of the states of the Union in the courts of another of those states. 53 By the articles of confederation of 1777 (article 4, 3), 'full faith and credit shall be given, in each of these states, to the records, acts and judicial proceedings of the courts and magistrates of every other state.' 1 Stat. 4. By the constitution of the United States (article 4, 1), 'full faith and credit shall be given in each state to the public acts, records and judicial proceedings of every other state; and the congress may by general laws prescribe the manner in which such acts, records and proceedings shall be proved, and the effect thereof.' And the first congress of the United States under the constitution, after prescribing the manner in which the records and judicial proceedings of the courts of any state should be authenticated and proved, enacted that 'the said records and judicial proceedings authenticated as aforesaid, shall have such faith and credit given to them in every court within the United States, as they have by law or usage in the courts of the state from whence the said records are or shall be taken.' Act May 26, 1790, c. 11 (1 Stat. 122); Rev. St. 905. 54 The effect of these provisions of the constitution and laws of the United States was at first a subject of diverse opinions, not only in the courts of the several states, but also in the circuit courts of the United States; Mr. Justice Cushing, Mr. Justice Wilson, and Mr. Justice Washington holding that judgments of the courts of a state had the same effect throughout the Union as within that state; but Chief Justice Marshall (if accurately reported) being of opinion that they were not entitled to conclusive effect, and that their consideration might be impeached. Armstrong v. Carson (1794) 2 Dall. 302, Fed. Cas. No. 543; Green v. 60 59 The obiter dictum of Mr. Justice Livingston in Hopkins v. Lee (1821) 6 Wheat. 109, 114, repeated by Mr. Justice Daniel in Pennington v. Gibson (1853) 16 How. 65, 78, as to the general effect of foreign judgments, has no important bearing upon the case before us. 58 In Hampton v. McConnell (1818) the point decided in Mills v. Duryee was again adjudged, without further discussion, in an opinion delivered by Chief Justice Marshall. 3 Wheat. 234. 57 In Mills v. Duryee (1813), in which it was established that by virtue of the constitution and laws of the United States the judgment of a court of one of the states was conclusive evidence, in every court within the United States, of the matter adjudged, and therefore nul tiel record, and not nil debet, was a proper plea to an action brought in a court of the United States in the District of Columbia upon a judgment recovered in a court of the state of New York, this court, speaking by Mr. Justice Story, said: 'The pleadings in an action are governed by the dignity of the instrument on which it is founded. If it be a record conclusive, between the parties, it cannot be denied but by the plea of nul tiel record; and when congress gave the effect of a record to the judgment it gave all the collateral consequences.' 'Were the construction contended for by the plaintiff in error to prevail, that judgments of the state courts ought to be considered prima facie evidence only, this clause in the constitution would be utterly unimportant and illusory. The common law would give such judgments precisely the same effect.' 7 Cranch, 481, 484, 485. 56 In Croudson v. Leonard (1808), in which this court held that the sentence of a foreign court of admiralty in rem, condemning a vessel for breach of blockade, was conclusive evidence of that fact in an action on a policy of insurance, Mr. Justice Washington, after speaking of the conclusiveness of domestic judgments generally, said: 'The judgment of a foreign court is equally conclusive, except in the single instance where the party claiming the benefit of it applies to the courts in England to enforce it, in which case only the judgment is prima facie evidence. But it is to be remarked that in such a case the judgment is no more conclusive as to the right it establishes than as to the fact it decides.' 4 Cranch, 434, 442. 55 The decisions of this court have clearly recognized that judgments of a foreign state are prima facie evidence only, and that, but for these constitutional and legislative provisions, judgments of a state of the Union, when sued upon in another state, would have no greater effect. Sarmiento (1811) 3 Wash. C. C. 17, 21, Pet. C. C. 74, 78, and Fed. Cas. No. 5,760; Peck v. Williamson (reported as in November, 1813, apparently a mistake for 1812), 1 Car. Law Repos. 53.
253
In McElmoyle v. Cohen (1839), Mr. Justice Wayne, discussing the effect of the act of congress of 1790, said that 'the adjudications of the English courts have now established the rule to be that foreign judgments are prima facie evidence of the right and matter they purport to decide.' 13 Pet. 312, 325. 61 In D'Arcy v. Ketchum (1850), in which this court held that the provisions of the constitution and laws of the United States gave no effect in one state to judgments rendered in another state by a court having no jurisdiction of the cause or of the parties, Mr. Justice Catron said: 'In construing the act of 1790, the law as it stood when the act was passed must enter into that construction; so that the existing defect in the old law may be seen, and its remedy by the act of congress comprehended. Now, it was most reasonable, on general principles of comity and justice, that among states and their citizens, united as ours are, judgments rendered in one should bind citizens of other states, where defendants had been served with process, or voluntarily made defense. As these judgments, however, were only prima facie evidence, and subject to be inquired into by plea, when sued on in another state, congress saw proper to remedy the evil, and to provide that such inquiry and double defense should not be allowed. To this extent, it is declared in the case of Mills v. Duryee, congress has gone in altering the old rule.' 11 How. 165, 175, 176. 62 In Christmas v. Russell (1866), in which this court decided that, because of the constitution and laws, of the United States, a judgment of a court of one state of the Union, when sued upon in a court of another, could not be shown to have been procured by fraud, Mr. Justice Clifford, in delivering the opinion, after stating that under the rules of the common law a domestic judgment, rendered in a court of competent jurisdiction, could not be collaterally impeached or called in question, said: 'Common-law rules placed foreign judgments upon a different footing, and those rules remain, as a general remark, unchanged to the present time. Under these rules, a foreign judgment was prima facie evidence of the debt, and it was open to examination, not only to show that the court in which it was rendered had no jurisdiction of the subjectmatter, but also to show that the judgment was fraudulently obtained.' 5 Wall. 290, 304. 63 In Bischoff v. Wethered (1869), in an action on an English judgment, rendered without notice to the defendant, other than by service on him in this country, this court, speaking by Mr. Justice Bradley, held that the proceeding in England 'was wholly without jurisdiction of the person, and whatever validity it may have in England, by virtue of statute law, against property of the defendant there situate, it can have no validity here, even of a prima facie character.' 9 Wall. 812, 814. 64 In Hanley v. Donoghue (1885) 116 U. S. 1, 4, 6 Sup. Ct. 242, and in Wisconsin v. Pelican Ins. Co. (1888) 127 U. S. 265, 292, 8 Sup. Ct. 1370, it was said that judgments recovered in one state of the Union, when proved in the courts of another, differed from judgments recovered in a foreign country in no other respect than in not being re-examinable on their merits, nor impeachable for fraud in obtaining them, if rendered by a court having jurisdiction of the cause and of the parties. 70 'The same comity is not extended to judgments or decrees which may be founded on the municipal laws of the state in which they are pronounced. Independent states do not choose to adopt such decisions without examination. These laws and regulations may be unjust, partial to citizens, and against foreigners. They may operate injustice to our citizens, whom we are bound to protect. They may be, and the decisions of courts founded on them, just cause of complaint against the supreme power of the state where rendered. To adopt them is not merely saying that the courts have decided correctly on the law, but it is approbating the law itself. Wherever, then, the court may have proceeded on municipal law, the rule is that the 69 'The respect which is due to judgments, sentences, and decrees of courts in a foreign state, by the law of nations, seems to be the same which is due to those of our own courts. Hence the decree of an admiralty court abroad is equally conclusive with decrees of our admiralty courts. Indeed, both courts proceed by the same rule, are governed by the same law,the maritime law of nations (Coll. Jurid. 100), which is the universal law of nations, except where treaties alter it. 68 In a less known case, decided in 1815, but not published until 1879, the reasons for this view were forcibly stated by Chief Justice Jeremiah Smith, speaking for the supreme court of New Hampshire, as follows: 67 In the leading case of Bissell v. Briggs, above cited, Chief Justice Parsons said: 'A foreign judgment may be produced here by a party to it, either to justify himself by the execution of that judgment in the country in which it was rendered, or to obtain the execution of it from our courts.' 'If the foreign court rendering the judgment had jurisdiction of the cause, yet the courts here will not execute the judgment, without first allowing an inquiry into its merits. The judgment of a foreign court, therefore, is by our laws considered only as presumptive evidence of a debt, or as prima facie evidence of a sufficient consideration of a promise, where such court had jurisdiction of the cause; and, if an action of debt be sued on any such judgment, nil debts is the general issue; or, if it be made the consideration of a promise, the general issue is non assumpsit. On these issues the defendant may impeach the justice of the judgment, by evidence relative to that point. On these issues the defendant may also, by proper evidence, prove that the judgment was rendered by a foreign court, which had no jurisdiction; and, if his evidence be sufficient for this purpose, he has no occasion to impeach the justice of the judgment.' 9 Mass. 463, 464. 66 In the courts of the several states it was long recognized and assumed as undoubted and indisputable that by our law, as by the law of England, foreign judgments for debts were not conclusive, but only prima facie evidence of the matter adjudged. Some of the cases are collected in the margin.1 65 But neither in those cases nor in any other has this court hitherto been called upon to determine how far foreign judgments may be re-examined upon their merits, or be impeached for fraud in obtaining them.
254
judgments are not conclusive evidence of debt, but prima facie evidence only. The proceedings have not the conclusive quality which is annexed to the records or proceedings of our own courts, where we approve both of the rule and of the judges who interpret and apply it. A foreign judgment may be impeached. Defendant may show that it is unjust, or that it was irregularly or unduly obtained. Doug. 5, note.' Bryant v. Ela, Smith (N. H.) 396, 404. 71 From this review of the authorities, it clearly appears that, at the time of the separation of this country from England, the general rule was fully established that foreign judgments in personam were prima facie evidence only, and not conclusive of the merits of the controversy between the parties. But the extent and limits of the application of that rule do not appear to have been much discussed, or defined with any approach to exactness, in England or America, until the matter was taken up by Chancellor Kent and by Mr. Justice Story. 74 72 In Taylor v. Bryden (1811), an action of assumpsit, brought in the supreme court of the state of New York, on a judgment obtained in the state of Maryland against the defendant, as indorser of a bill of exchange, and which was treated as a foreign judgment, so far as concerned its effect in New York (the decision of this court to the contrary in Mills v. Duryee, 7 Cranch, 481, not having yet been made), Chief Justice Kent said: 'The judgment in Maryland is presumptive evidence of a just demand; and it was incumbent upon the defendant, if he would obstruct the execution of the judgment here, to show, by positive proof, that it was irregularly or unduly obtained.' 'To try over again, as of course, every matter of fact which had been duly decided by a competent tribunal, would be disregarding the comity which we justly owe to the courts of other states, and would be carrying the doctrine of re-examination to an oppressive extent. It would be the same as granting a new trial in every case, and upon every question of fact. Suppose a recovery in another state, or in any foreign court, in an action for a tort, as for an assault and battery, false imprisonment, slander, etc., and the defendant was duly summoned and appeared, and made his defense, and the trial was conducted orderly and properly, according to the rules of a civilized jurisprudence, is every such case to be tried again here on the merits? I much doubt whether the rule can ever go to this length. The general language of the books is that the defendant must impeach the judgment by showing affirmatively that it was unjust by being irregularly or unfairly procured.' But the case was decided upon the ground that the defendant had done no more than raise a doubt of the correctness of the judgment sued on. 8 Johns. 173, 177, 178. 73 Chancellor Kent, afterwards, treating of the same subject in the first edition of his Commentaries (1827), put the right to impeach a foreign judgment somewhat more broadly, saying: 'No sovereign is obliged to execute, within his dominion, a sentence rendered out of it; and, if execution be sought by a suit upon the judgment or otherwise, he is at liberty, in his courts of justice, to examine into the merits of such judgment [for the effect to be given to foreign judgments is altogether a matter of comity, in cases where it is not regulated by treaty]. In the former case [of a suit to enforce a foreign judgment] the rule is that the foreign 75 He then proceeded to state his own view of the subject, on principle, saying: 'It is, indeed, very difficult to perceive what could be done if a different doctrine were maintainable to the full extent of opening all the evidence and merits of the cause anew on a suit upon the foreign judgment. Some of the witnesses may be since dead; some of the vouchers may be lost or destroyed. The merits of the cause, as formerly before the court upon the whole evidence, may have been decidedly in favor of the judgment; upon a partial possession of the original evidence, they may now appear otherwise. Suppose a case purely sounding in damages, such as an action for an assault, for slander, for conversion of property, for a malicious prosecution, or for a criminal conversation; is the defendant to be at liberty to retry the whole merits, and to make out, if he can, a new case upon new evidence? Or is the court to review the former decision, like a court of appeal, upon the old evidence? In a case of covenant, or of debt, or of a breach of contract, are all the circumstances to be re-examined anew? If they are, by what laws and rules of evidence and principles of justice is the validity of the original judgment to be tried? Is the court to open the judgment, and to proceed ex aequo et bono? Or is it to administer strict law, and stand to the doctrines of the local administration of justice? Is it to act upon the rules of evidence acknowledged in its own jurisprudence, or upon those of the foreign jurisprudence? These and many more questions might be put to show the intrinsic difficulties of the subject. Indeed, the rule that the judgment is to be prima facie evidence for the plaintiff would be a mere delusion if the defendant might still question it by opening all or any of the original merits on his side; for, under such circumstances, it would be equivalent to granting a new trial. It is easy to understand that the defendant may be at liberty to impeach the original justice of the judgment by showing that the court had no jurisdiction, or that he never had any notice of the suit, or that it was Mr. Justice Story, in his Commentaries on the Conflict of Laws, first published in 1834, after reviewing many English authorities, said: 'The present inclination of the English courts seems to be to sustain the conclusiveness of foreign judgments,' to which, in the second edition, in 1841, he added: 'Although, certainly, there yet remains no inconsiderable diversity of opinion among the learned judges of the different tribunals.' Section 606. judgment is to be received, in the first instance, as prima facie evidence of the debt; and it lies on the defendant to impeach the justice of it, or to show that it was irregularly and unduly obtained. This was the principle declared and settled by the house of lords in 1771, in the case of Sinclair v. Fraser, upon an appeal from the court of session in Scotland.' In the second edition (1832) he inserted the passages above printed in brackets; and in a note to the fourth edition (1840), after citing recent conflicting opinions in Great Britain, and referring to Mr. Justice Story's reasoning in his Commentaries on the Conflict of Laws (section 607) in favor of the conclusiveness of foreign judgments, he added: 'And that is certainly the more convenient and the safest rule, and the most consistent with sound principle, except in cases in which the court which pronounced the judgment has not due jurisdiction of the case, or of the defendant, or the proceeding was in fraud, or founded in palpable mistake or irregularity, or bad by the law of the rei judicatae; and in all such cases the justice of the judgment ought to be impeached.' 2 Kent, Comm. (1st Ed.) 102; Id. (later Eds.) 120.
255
procured by fraud, or that upon its face it is founded in mistake, or that it is irregular and bad by the local law, fori rei judicatae. To such an extent the doctrine is intelligible and practicable. Beyond this, the right to impugn the judgment is in legal effect the right to retry the merits of the original cause at large, and to put the defendant upon proving those merits.' Section 607. 76 He then observed: 'The general doctrine maintained in the American courts in relation to foreign judgments certainly is that they are prima facie evidence, but that they are impeachable. But how far and to what extent this doctrine is to be carried does not seem to be definitely settled. It has been declared that the jurisdiction of the court, and its power over the parties and the things in controversy, may be inquired into; and that the judgment may be impeached for fraud. Beyond this no definite lines have as yet been drawn.' Section 608. 77 After stating the effect of the constitution of the United States, and referring to the opinions of some foreign jurists, and to the law of France, which allows the merits of foreign judgments to be examined, Mr. Justice Story concluded his treatment of the subject as follows: 'It is difficult to ascertain what the prevailing rule is in regard to foreign judgments in some of the other nations of continental Europe,whether they are deemed conclusive evidence, or only prima facie evidence. Holland seems at all times, upon the general principle of reciprocity, to have given great weight to foreign judgments and in many cases, if not in all cases, to have given to them a weight equal to that given to domestic judgments, wherever the like rule of reciprocity with regard to Dutch judgments has been adopted by the foreign country whose judgment is brought under review. This is certainly a very reasonable rule, and may perhaps hereafter work itself firmly into the structure of international jurisprudence.' Section 618. 78 In Bradstreet v. Insurance Co. (1839), in the circuit court of the United States for the district of Massachusetts, Mr. Justice Story said: 'If a civilized nation seeks to have the sentences of its own courts held of any validity elsewhere, they ought to have a just regard to the rights and usages of other civilized nations, and the principles of public and national law in the administration of justice.' 3 Sumn. 600, 608, 609, Fed. Cas. No. 1,793. 79 In Burnham v. Webster (1845), in an action of assumpsit upon a promissory note, brought in the circuit court of the United States for the district of Maine, the defendant pleaded a former judgment in the province of New Brunswick in his favor in an action there brought by the plaintiff. The plaintiff replied that the note was withdrawn from that suit, by consent of parties and leave of the court, before verdict and judgment; and the defendant demurred to the replication. Judge Ware, in overruling the demurrer, said: 'Whatever difference of opinion there may be as to the binding force of foreign judgments, all agree that they are not entitled to the same authority as the judgments of domestic courts of general jurisdiction. They are but evidence of what they purport to decide, and liable to be controlled by counter evidence, and do 84 83 'Nor would I permit the prima facie force of the foreign judgment to go far if the court was one of a barbarous or semibarbarous government, and acting on no established principles of civilized jurisprudence, and not resorted to willingly by both parties, or both not inhabitants and citizens of the country. Nor can much comity be asked for the judgments of another nation, which, like France, pays no respect to those of other countries, except, as before remarked, on the principle of the parties belonging there or assenting to a trial there.' 1 Woodb. & M. 179, Fed. Cas. No. 2,179. 82 'By returning to that rule, we are enabled to give parties, at times, most needed and most substantial relief, such as in judgments abroad against them without notice, or without a hearing on the merits, or by accident or mistake of facts, as here, or on rules of evidence and rules of law they never assented to, being foreigners and their contracts made elsewhere, but happening to be traveling through a foreign jurisdiction, and being compelled in invitum to litigate there.' 1 Woodb. & M. 177, Fed. Cas. No. 2,179. 81 'They do, like domestic ones, operate conclusively, ex proprio vigore, within the governments in which they are rendered, but not elsewhere. When offered and considered elsewhere, they are, ex comitate, treated with respect, according to the nature of the judgment, and the character of the tribunal which rendered it, and the reciprocal mode, if any, in which that government treats our judgments, and according to the party offering it, whether having sought or assented to it voluntarily or not, so as to give it in some degree the force of a contract, and hence to be respected elsewhere by analogy according to the lex loci contractus. With these views I would go to the whole extent of the cases decided by Lords Mansfield and Buller; and where the foreign judgment is not in rem, as it is in admiralty, having the subject-matter before the court, and acting on that rather than the parties, I would consider it only prima facie evidence as between the parties to it.' 1 Woodb. & M. 175, Fed. Cas. No. 2,179. 80 At a subsequent trial of that case before a jury (1846; 1 Woodb. & M. 172, Fed. Cas. No. 2,179), the defendant proved the judgment in New Brunswick. The plaintiff then offered to prove the facts stated in his replication, and that any entry on the record of the judgment in New Brunswick concerning this note was therefore by mistake or inadventure. This evidence was excluded, and a verdict taken for the plaintiff, subject to the opinion of the court. Mr. Justice Woodbury, in granting a new trial, delivered a thoughtful and discriminating opinion upon the effect of foreign judgments, from which the following passages are taken: not, like domestic judgments, import absolute verity, and remain incontrovertible and conclusive until reversed.' And he added that, if the question stood entirely clear from authority, he should be of opinion that the plaintiff could not be allowed to deny the validity of the proceedings of a court whose authority he had invoked. 2 Ware, 236, 239, 241, Fed. Cas. No. 2,178.
256
'On the other hand, by considering a judgment abroad as only prima facie valid, I would not allow the plaintiff abroad, who had sought it there, to avoid it, unless for accident or mistake, as here, because, in other respects, having been sought there by him voluntarily, it does not lie in his mouth to complain of it. Nor would I in any case permit the whole merits of the judgment recovered abroad to be put in evidence as a matter of course; but, being prima facie correct, the party impugning it, and desiring a hearing of its merits, must show first, specifically, some objection to the judgment's reaching the merits, and tending to prove they had not been acted on; or [as?] by showing there was no jurisdiction in the court, or no notice, or some accident or mistake, or fraud, which prevented a full defense, and has entered into the judgment; or that the court either did not decide at all on the merits, or was a tribunal not acting in conformity to any set of legal principles, and was not willingly recognized by the party as suitable for adjudicating on the merits. After matters like these are proved, I can see no danger, but rather great safety, in the administration of justice, in permitting, to every party before us, at least one fair opportunity to have the merits of his case fully considered, and one fair adjudication upon them, before he is estopped forever.' 1 Woodb. & M. 180, Fed. Cas. No. 2,179. 85 In De Brimont v. Penniman (1873), in the circuit court of the United States for the Southern district of New York, Judge Woodruff said: 'The principle on which foreign judgments receive any recognition from our courts is one of comity. It does not require, but rather forbids, it where such a recognition works a direct violation of the policy of our laws, and does violence to what we deem the rights of our citizens.' And he declined to maintain an action against a citizen of the United States, whose daughter had been married in France to a French citizen, upon a decree of a French court requiring the defendant, then resident in France, and duly served with process there, to pay an annuity to his son-in-law. 10 Blatchf. 436, 441, Fed. Cas. No. 3,715. 86 Mr. Justice Story and Chancellor Kent, as appears by the passages above quoted from their Commentaries, concurred in the opinion that, in a suit upon a foreign judgment, the whole merits of the case could not, as matter of course, be re-examined anew, but that the defendant was at liberty to impeach the judgment, not only by showing that the court had no jurisdiction of the case or of the defendant, but also by showing that it was procured by fraud, or was founded on clear mistake or irregularity, or was bad by the law of the place where it was rendered. Story, Confl. Laws, 607; 2 Kent, Comm. (6th Ed.) 120. 87 The word 'mistake' was evidently used by Story and Kent, in this connection, not in its wider meaning of error in judgment, whether upon the law or upon the facts, but in the stricter sense of misapprehension or oversight, and as equivalent to what, in Burnham v. Webster, before cited, Mr. Justice Woodbury spoke of as 'some objection to the judgment's reaching the merits, and tending to prove that they had not been acted on,' 'some accident or mistake,' or 'that the court did not decide at all on the merits.' 1 Woodb. & M. 180, Fed. Cas. No. 2,179. 92 Lord Brougham, in the house of lords, as well as Chief Justice Tindal and Chief Justice Wilde (afterwards Lord Chancellor Truro) and their associates, in the common bench, considered it to be well settled that an 91 At one time it was held that, in an action brought in England upon a judgment obtained by the plaintiff in a foreign country, the judgment must be assumed to be according to the law of that country, unless the contrary was clearly proved; manifestly implying that proof on that point was competent. Becquet v. MacCarthy (1831) 2 Barn. & Adol. 951, 957; Alivon v. Furnival (1834) 1 Cromp., M. & R. 277, 293, 4 Tyrw. 751, 768. 90 The result of the modern decisions in England, after much diversity, not to say vacillation, of opinion, does not greatly differ (so far as concerns the aspects in which the English courts have been called upon to consider the subject) from the conclusions of Chancellor Kent and of Justices Story and Woodbury. 89 In recent times, foreign judgments rendered within the dominions of the English crown, and under the law of England, after a trial on the merits, and no want of jurisdiction and no fraud or mistake being shown or offered to be shown, have been treated as conclusive by the highest courts of New York, Maine, and Illinois. Lazier v. Westcott (1862) 26 N. Y. 146, 150; Dunstan v. Higgins (1893) 138 N. Y. 70, 74, 33 N. E. 729; Rankin v. Goddard (1866) 54 Me. 28; Id. (1868) 55 Me. 389; Baker v. Palmer (1876) 83 Ill. 568. In two early cases in Ohio it was said that foreign judgments were conclusive, unless shown to have been obtained by fraud. Bank v. Harding (1832) 5 Ohio, 545, 547; Anderson v. Anderson (1837) 8 Ohio, 108, 110. But in a later case in that state it was said that they were only prima facie evidence of indebtedness. Pelton v. Platner (1844) 13 Ohio, 209, 217. In Jones v. Jamison (1860) 15 La. Ann. 35, the decision was only that, by virtue of the statutes of Louisiana, a foreign judgment merged the original cause of action as against the plaintiff. 88 The suggestion that a foreign judgment might be impeached for error in law of the country in which it was rendered is hardly consistent with the statement of Chief Justice Marshall, when, speaking of the disposition of this court to adopt the construction given to the laws of a state by its own courts, he said: 'This course is founded on the principle, supposed to be universally recognized, that the judicial department of every government, where such department exists, is the appropriate organ for construing the legislative acts of that government. Thus, no court in the universe which professed to be governed by principle would, we presume, undertake to say that the courts of Great Britain or of France or of any other nation had misunderstood their own statutes, and therefore erect itself into a tribunal which should correct such misunderstanding. We receive the construction given by the courts of the nation as the true sense of the law, and feel ourselves no more at liberty to depart from that construction than to depart from the words of the statute.' Elmendorf v. Taylor (1825) 10 Wheat. 152, 159, 160.
257
Irish or colonial judgment or a foreign judgment was not, like a judgment of a domestic court of record, conclusive evidence, but only, like a simple contract, prima facie evidence of a debt. Houlditch v. Donegal (1834) 8 Bligh, N. R. 301, 342, 346, 2 Clark & F. 470, 476-479; Don v. Lippmann (1837) 5 Clark & F. 1, 2022; Smith v. Nicolls (1839) 7 Scott, 147, 166-170, 5 Bing. N. C. 208, 220-224, 7 Dowl. 282; Bank v. Harding (1850) 9 C. B. 661, 686, 687. 98 93 On the other hand, Vice Chancellor Shadwell, upon an imperfect review of the early cases, expressed the opinion that a foreign judgment was conclusive. Martin v. Nicolls (1830) 3 Sim. 458. 94 Like opinions were expressed by Lord Denman, speaking for the court of queen's bench, and by Vice Chancellor Wigram, in cases of Irish or colonial judgments, which were subject to direct appellate review in England. Ferguson v. Mahon (1839) 11 Adol. & E. 179, 183, 3 Perry & D. 143, 146; Henderson v. Henderson (1844) 6 Q. B. 288, 298, 299; Henderson v. Henderson (1843) 3 Hare, 100, 118. 95 In Bank v. Nias (1851), in an action upon an Australian judgment, pleas that the original promises were not made, and that those promises, if made, were obtained by fraud, were held bad on demurrer. Lord Campbell, in delivering judgment, referred to Story on the Conflict of Laws, and adopted substantially his course of reasoning in section 607, above quoted, with regard to foreign judgments. But he distinctly put the decision upon the ground that the defendant might have appealed to the judicial committee of the privy council, and thus have procured a review of the colonial judgment; and he took the precaution to say: 'How far it would be permitted to a defendant to impeach the competency or the integrity of a foreign court from which there was no appeal, it is unnecessary here to inquire.' 16 Q. B. 717, 734-737. 96 The English courts, however, have since treated that decision as establishing that a judgment of any competent foreign court could not, in an action upon it, be questioned, either because that court had mistaken its own law, or because it had come to an erroneous conclusion upon the facts. De Cosse Brissac v. Rathbone (1861) 6 Hurl. & N. 301; Scott v. Pilkington(1862) 2 Best & S. 11, 41, 42; Vanquelin v. Bouard (1863) 15 C. B. (N. S.) 341, 368; Castrique v. Imrie (1870) L. R. 4 H. L. 414, 429, 430; Godard v. Gray (1870) L. R. 6 Q. B. 139, 150; Ochsenbein v. Papelier (1873) 8 Ch. App. 695, 701. In Meyer v. Ralli (1876) a judgment in rem, rendered by a French court of competent jurisdiction, was held to be reexaminable upon the merits, solely because it was admitted by the parties, in the special case upon which the cause was submitted to the English court, to be manifestly erroneous in regard to the law of France. 1 C. P. Div. 358. 97 In view of the recent decisions in England, it is somewhat remarkable that, by the Indian Code of Civil Procedure of 1877, 'no foreign judgment [which is defined as a judgment of 'a civil tribunal beyond the 100 In Scott v. Pilkington (1862) Chief Justice Cockburn treated it as an open question whether a judgment recovered in New York for a debt could be impeached on the ground that the record showed that the foreign court ought to have decided the case according to English law, and had either disregarded the comity of nations by refusing to apply the English law, or erred in its view of English law. 2 Best & S. 11, 42. In Castrique v. Imrie (1870) the French judgment which was adjudged not to be impeachable for error in law, French or English, was, as the house of lords construed it, a judgment in rem, under which the ship to which the plaintiff in England claimed title had been sold. L. R. 4 H. L. 414. In Godard v. Gray (1870) shortly afterwards, in which the court of queen's bench held that a judgment in personam of a French court could not be impeached because it had put a construction erroneous, according to English law, upon an 99 In Simpson v. Fogo (1860) 1 Johns. & H. 18, and Id. (1862) 1 Hem. & M. 195, Vice Chancellor Wood (afterwards Lord Hatherley) refused to give effect to a judgment in personam of a court in Louisiana, which had declined to recognize the title of a mortgagee of an English ship under the English law. In delivering judgment upon demurrer, he said: 'The state of Louisiana may deal as it pleases with foreign law; but, if it asks courts of this country to respect its law, it must be on a footing of paying a like respect to ours. Any comity between the courts of two nations holding such opposite doctrines as to the authority of the lex loci is impossible. While the courts of Louisiana refuse to recognize a title acquired here, which is valid according to our law, and hand over to their own citizens property so acquired, they cannot at the same time expect us to defer to a rule of their law which we are no more bound to respect than a law that any title of foreigners should be disregarded in favor of citizens of Louisiana. The answer to such a demand must be that a country which pays so little regard to our laws as to set aside a paramount title acquired here must not expect at our hands any greater regard for the title so acquired by the citizens of that country.' 1 Johns. & H. 28, 29. And, upon motion for a decree, he elaborated the same view, beginning by saying: 'Whether this judgment does so err or not against the recognized principles of what has been commonly called the comity of nations, by refusing to regard the law of the country where the title to the ship was acquired, is one of the points which I have to consider;' and concluding that it was 'so contrary to law, and to what is required by the comity of nations,' that he must disregard it. 1 Hem. & M. 222-247. See, also, Credit Co. v. Hunter (1867) L. R. 4 Eq. 62, 68; Id. (1868) 3 Ch. App. 479, 484. It was formerly understood in England that a foreign judgment was not conclusive if it appeared upon its face to be founded on a mistake or disregard of English law. Arnott v. Redfern (1825-26) 2 Car. & P. 88, 3 Bing. 353, and 11 Moore, C. P. 209; Novelli v. Rossi (1831) 2 Barn. & Adol. 757; 3 Burge, Col. Laws, 1065; 2 Smith's Lead. Cas. (2d Ed.) 448; Reimers v. Druce (1856) 23 Beav. 145. limits of British India, and not having authority in British India, nor established by the governor general in council'] shall operate as a bar to a suit in British India,' 'if it appears on the face of the proceeding to be founded on an incorrect view of international law,' or 'if it is, in the opinion of the court before which it is produced, contrary to natural justice.' Pig. Judgm. (2d Ed.) 380, 381.
258
English contract, the decision was put by Justices Blackburn and Mellor upon the ground that it did not appear that the foreign court had 'knowingly and perversely disregarded the rights given by the English law,' and by Justice Hannen solely upon the ground that the defendant did not appear to have brought the English law to the knowledge of the foreign court. L. R. 6 Q. B. 139, 149, 154. In Messina v. Petrococchino (1872), Sir Robert Phillimore, delivering judgment in the privy council, said: 'A foreign judgment of a competent court may, indeed, be impeached if it carries on the face of it a manifest error.' L. R. 4 P. C. 144, 157. 101 The result of the English decisions, therefore, would seem to be that a foreign judgment in personam may be impeached for a manifest and willful disregard of the law of England. 102 Lord Abinger, Baron Parke, and Baron Alderson were wont to say that the judgment of a foreign court of competent jurisdiction for a sum certain created a duty or legal obligation to pay that sum; or, in Baron Parke's words, that the principle on which the judgments of foreign and colonial courts are supported and enforced was 'that, where a court of competent jurisdiction has adjudicated a certain sum to be due from one person to another, a legal obligation arises to pay that sum, on which an action of debt to enforce the judgment may be maintained.' Russell v. Smyth (1842) 9 Mees. & W. 810, 818, 819; Williams v. Jones (1845) 13 Mees. & W. 628, 633, 634. 103 But this was said in explaining why, by the technical rules of pleading, an action of assumpsit or of debt would lie upon a foreign judgment, and had no reference to the question how far such a judgment was conclusive of the matter adjudged. At common law, an action of debt would lie on a debt appearing by a record or by any other specialty, such as a contract under seal, and would also lie for a definite sum of money due by simple contract. Assumpsit would not lie upon a record or other specialty; but would lie upon any other contract, whether expressed by the party or implied by law. In an action upon a record, or upon a contract under seal, a lawful consideration was conclusively presumed to exist, and could not be denied; but in an action, whether in debt or in assumpsit, upon a simple contract, express or implied, the consideration was open to inquiry. A foreign judgment was not considered, like a judgment of a domestic court of record, as a record or specialty. The form of action, therefore, upon a foreign judgment, was not in debt, grounded upon a record or a specialty, but was either in debt, as for a definite sum of money due by simple contract, or in assumpsit upon such a contract. A foreign judgment, being a security of no higher nature than the original cause of action, did not merge that cause of action. The plaintiff might sue, either on the judgment or on the original cause of action; and in either form of suit the foreign judgment was only evidence of a liability equivalent to a simple contract, and was therefore liable to be controlled by such competent evidence as the nature of the case admitted. See cases already cited, especially Walker v. Witter, 1 Doug. 1; Phillips v. Hunter, 2 H. Bl. 402, 410; Bissell v. Briggs, 9 Mass. 463, 464; Mills v. Duryee, 7 Cranch, 481, 485; D'Arcy v. Ketchum, 11 How. 165, 176; Hall v. Odber, 11 East, 118; Smith v. Nicolls, 7 107 In Abouloff v. Oppenheimer (1882) Lord Coleridge and Lord Justice Brett carefully avoided adopting the theory of a legal obligation to pay a foreign judgment as the test in determining how far such a judgment might be impeached. 10 Q. B. Div. 295, 300, 305. In Hawksford v. Giffard (1886), in the privy council, on appeal from the royal court of Jersey, Lord Herschell said: 'This action is brought upon an English judgment, which, until a judgment was obtained in Jersey, was in that country no more than evidence of a 105 But the theory that a foreign judgment imposes or creates a duty or obligation is a remnant of the ancient fiction, assumed by Blackstone, saying that 'upon showing the judgment once obtained still in full force, and yet unsatisfied, the law immediately implies that by the original contract of society the defendant hath contracted a debt, and is bound to pay it.' 3 Bl. Comm. 160. That fiction which embraced judgments upon default or for torts cannot convert a transaction wanting the assent of parties into one which necessarily implies it. Louisiana v. Mayor, etc., of City of New Orleans, 109 U. S. 285, 288, 3 Sup. Ct. 211. While the theory in question may help to explain rules of pleading which originated while the fiction was believed in, it is hardly a sufficient guide at the present day in dealing with questions of international law, public or private, and of the comity of our own country, and of foreign nations. It might be safer to adopt the maxim applied to foreign judgments by Chief Justice Weston, speaking for the supreme judicial court of Maine, 'Judicium redditur in invitum,' or, as given by Lord Coke, 'In praesumptione legis judicium redditur in invitum.' Jordan v. Robinson (1838) 15 Me. 167, 168; Co. Litt. 248b. 106 In Russell v. Smyth, above cited, Baron Parke took the precaution of adding: 'Nor need we say how far the judgment of a court of competent jurisdiction, in the absence of fraud, is conclusive upon the parties.' 9 Mees. & W. 819. He could hardly have contemplated erecting a rule of local procedure into a canon of private international law, and a substitute for 'the comity of nations,' on which, in an earlier case, he had himself relied as the ground for enforcing in England a right created by a law of a foreign country. Alivon v. Furnival, 1 Cromp., M. & R. 277, 296, 4 Tyrw. 751, 771. 104 Mr. Justice Blackburn, indeed, in determining how far a foreign judgment could be impeached, either for error in law, or for want of jurisdiction, expressed the opinion that the effect of such a judgment did not depend upon what he termed 'that which is loosely called 'comity," but upon the saying of Baron Parke, above quoted; and consequently 'that anything which negatives the existence of that legal obligation, or excuses the defendant from the performance of it, must form a good defense to the action.' Godard v. Gray (1870) L. R. 6 Q. B. 139, 148, 149; Schibsby v. Westenholz, Id. 155, 159. And his example has been followed by some other English judges: Fry, J., in Rousillon v. Rousillon (1880) 14 Ch. Div. 351, 370; North, J., in Nouvion v. Freeman (1887) 35 Ch. Div. 704, 714, 715; Cotton and Lindley, L. JJ., in Nouvion v. Freeman (1887) 37 Ch. Div. 244, 250, 256. Scott, 147, 5 Bing. N. C. 208. See, also, Grant v. Easton, 13 Q. B. Div. 302, 303; Lyman v. Brown, 2 Curt. 559, Fed. Cas. No. 8,627.
259
debt.' 12 App. Cas. 122, 126. In Nouvion v. Freeman (1889), in the house of lords, Lord Herschell, while he referred to the reliance placed by counsel on the saying of Baron Parke, did not treat a foreign judgment as creating or imposing a new obligation, but only as declaring and establishing that a debt or obligation existed. His words were: 'The principle upon which I think our enforcement of foreign judgments must proceed is this: that in a court of competent jurisdiction, where according to its established procedure, the whole merits of the case were open, at all events, to the parties, however much they may have failed to take advantage of them, or may have waived any of their rights, a final adjudication has been given that a debt or obligation exists which cannot thereafter in that court be disputed, and can only be questioned in an appeal to a higher tribunal. In such a case, it may well be said that, giving credit to the courts of another country, we are prepared to take the fact that such adjudication has been made as establishing the existence of the debt or obligation.' And Lord Bramwell said: 'How can it be said that there is a legal obligation on the part of a man to pay a debt who has a right to say, 'I owe none, and no judgment has established against me that I do?' I cannot see.' The foreign judgment in that case was allowed no force, for want of finally establishing the existence of a debt. 15 App. Cas. 1, 9, 10, 14. 108 In view of all the authorities upon the subject, and of the trend of judicial opinion in this country and in England, following the lead of Kent and Story, we are satisfied that where there has been opportunity for a full and fair trial abroad before a court of competent jurisdiction, conducting the trial upon regular proceedings, after due citation or voluntary appearance of the defendant, and under a system of jurisprudence likely to secure an impartial administration of justice between the citizens of its own country and those of other countries, and there is nothing to show either prejudice in the court, or in the system of laws under which it was sitting, or fraud in procuring the judgment, or any other special reason why the comity of this nation should not allow it full effect, the merits of the case should not, in an action brought in this country upon the judgment, be tried afresh, as on a new trial or an appeal, upon the mere assertion of the party that the judgment was erroneous in law or in fact. The defendants, therefore, cannot be permitted, upon that general ground, to contest the validity or the effect of the judgment sued on. 109 But they have sought to impeach that judgment upon several other grounds, which require separate consideration. 110 It is objected that the appearance and litigation of the defendants in the French tribunals were not voluntary, but by legal compulsion, and, therefore, that the French courts never acquired such jurisdiction over the defendants that they should be held bound by the judgment. 111 Upon the question what should be considered such a voluntary appearance, as to amount to a submission to the jurisdiction of a foreign court, there has been some difference of opinion in England. 115 It is next objected that in those courts one of the plaintiffs was permitted to testify not under oath, and was not subjected to cross-examination by the opposite party, and that the defendants were therefore deprived of safeguards which are by our law considered essential to secure honesty and to detect fraud in a witness; and also that documents and papers were admitted in evidence, with which the defendants had no connection, and which would not be admissible under our own system of jurisprudence. But it having 114 The present case is not one of a person traveling through or casually found in a foreign country. The defendants, although they were not citizens or residents of France, but were citizens and residents of the state of New York, and their principal place of business was in the city of New York, yet had a storehouse and an agent in Paris, and were accustomed to purchase large quantities of goods there, although they did not make sales in France. Under such circumstances, evidence that their sole object in appearing and carrying on the litigation in the French courts was to prevent property in their storehouse at Paris, belonging to them, and within the jurisdiction, but not in the custody, of those courts, from being taken in satisfaction of any judgment that might be recovered against them, would not, according to our law, show that those courts did not acquire jurisdiction of the persons of the defendants. 113 But it is now settled in England that while an appearance by the defendant in a court of a foreign country, for the purpose of protecting his property already in the possession of that court, may not be deemed a voluntary appearance, yet an appearance solely for the purpose of protecting other property in that country from seizure is considered as a voluntary appearance. De Cosse Brissac v. Rathbone (1861) 6 Hurl. & N. 301, 30 Law J. Exch. 238; Schibsby v. Westenholz (1870) L. R. 6 Q. B. 155, 162; Voinet v. Barrett (1885) Cab. & El. 554, 54 Law J. Q. B. 521, and 55 Law J. Q. B. 39. 112 In Navigation Co. v. Guillou (1843), in an action at law to recover damages to the plaintiffs' ship by a collision with the defendant's ship through the negligence of the master and crew of the latter, the defendant pleaded a judgment by which a French court, in a suit brought by him, and after the plaintiffs had been cited, had appeared, and had asserted fault on this defendant's part, had adjudged that it was the ship of these plaintiffs, and not that of this defendant, which was in fault. It was not shown or suggested that the ship of these plaintiffs was in the custody or possession of the French court. Yet Baron Parke, delivering a considered judgment of the court of exchequer (Lord Abinger and Barons Alderson and Rolfe concurring), expressed a decided opinion that the pleas were bad in substance, for these reasons: 'They do not state that the plaintiffs were French subjects, or resident or even present in France, when the suit began, so as to be bound, by reason of allegiance or domicile or temporary presence, by a decision of a French court, and they did not select the tribunal and sue as plaintiffs, in any of which cases the determination might have possibly bound them. They were mere strangers, who put forward the negligence of the defendant as an answer, in an adverse suit in a foreign country, whose laws they were under no obligation to obey.' 11 Mees. & W. 877, 894, 13 Law J. Exch. 168, 176.
260
been shown by the plaintiffs, and hardly denied by the defendants, that the practice followed and the method of examining witnesses were according to the laws of France, we are not prepared to hold that the fact that the procedure in these respects differed from that of our own courts is, of itself, a sufficient ground for impeaching the foreign judgment. 116 It is also contended that a part of the plaintiffs' claim is affected by one of the contracts between the parties having been made in violation of the revenue laws of the United States, requiring goods to be invoiced at their actual market value. Rev. St. 2854. It may be assumed that, as the courts of a country will not enforce contracts made abroad in evasion or fraud of its own laws, so they will not enforce a foreign judgment upon such a contract. Armstrong v. Toler, 11 Wheat. 258; De Brimont v. Penniman, 10 Blatchf. 436, Fed. Cas. No. 3,715; Lang v. Holbrook, Crabbe, 179, Fed. Cas. No. 8,057; Story, Confl. Laws, 244, 246; Whart. Confl. Laws, 656. But as this point does not affect the whole claim in this case, it is sufficient, for present purposes, to say that there does not appear to have been any distinct offer to prove that the invoice value of any of the goods sold by the plaintiffs to the defendants was agreed between them to be, or was, in fact, lower than the actual market value of the goods. 117 It must, however, always be kept in mind that it is the paramount duty of the court before which any suit is brought to see to it that the parties have had a fair and impartial trial, before a final decision is rendered against either party. 122 118 When an action is brought in a court of this country, by a citizen of a foreign country against one of our own citizens, to recover a sum of money adjudged by a court of that country to be due from the defendant to the plaintiff, and the foreign judgment appears to have been rendered by a competent court, having jurisdiction of the cause and of the parties, and upon due allegations and proofs, and opportunity to defend against them, and its proceedings are according to the course of a civilized jurisprudence, and are stated in a clear and formal record, the judgment is prima facie evidence, at least, of the truth of the matter adjudged; and it should be held conclusive upon the merits tried in the foreign court, unless some special ground is shown for impeaching the judgment, as by showing that it was affected by fraud or prejudice, or that by the principles of international law, and by the comity of our own country, it should not be given full credit and effect. 119 There is no doubt that both in this country, as appears by the authorities already cited, and in England, a foreign judgment may be impeached for fraud. 120 Shortly before the Declaration of Independence, the house of lords, upon the trial of the Duchess of Kingston for bigamy, put to the judges the question whetherassuming a sentence of the ecclesiastical 123 It has often, indeed, been declared by this court that the fraud which entitles a party to impeach the judgment of one of our own tribunals must be fraud extrinsic to the matter tried in the cause, and not merely consist in false and fraudulent documents or testimony submitted to that tribunal, and the truth of which was contested before it and passed upon by it. U. S. v. Throckmorton, 98 U. S. 61, 65, 66; Vance v. Burbank, 101 U. S. 514, 519; Steel v. Refining Co., 106 U. S. 447, 453, 1 Sup. Ct. 389; Moffat v. U. S., 115 U. S. 24, 32, 5 Sup. Ct. 10; U. S. v. Minor, 114 U. S. 233, 242, 5 Sup. Ct. 836. And in one English case, where a ship had been sold under a foreign judgment, the like restiction upon impeaching that judgment for fraud was suggested; but the decision was finally put upon the ground that the judicial sale passed the title to the ship. Cammell v. Sewell (1858-60) 3 Hurl. & N. 617, 646, 5 Hurl. & N. 728, 729, 742. 124 But it is now established in England, by well-considered and strongly-reasoned decisions of the court of appeal, that foreign judgments may be impeached, if procured by false and fraudulent representations and testimony of the plaintiff, even if the same question of fraud was presented to and decided by the foreign court. Under what circumstances this may be done does not appear to have ever been the subject of judicial investigation in this country. 121 All the subsequent English authorities concur in holding that any foreign judgment, whether in rem or in personam may be impeached upon the ground that it was fraudulently obtained. White v. Hall (1806) 12 Ves. 321, 324; Bowles v. Orr(1835) 1 Younge & O. Exch. 464, 473; Price v. Dewhurst (1837) 8 Sim. 279, 302-305; Don v. Lippmann (1837) 5 Clark & F. 1, 20; Bank v. Nias (1851) 16 Q. B. 717, 735; Reimers v. Druce (1856) 23 Beav. 145, 150; Castrique v. Imrie (1870) L. R. 4 H. L. 414, 445, 446; Godard v. Gray (1870) L. R. 6. Q. B. 139, 149; Messina v. Petrococchino (1872) L. R. 4 P. C. 144, 157; Ochsenbein v. Papelier (1873) 8 Ch. App. 695. court against a marriage, in a suit for jactitation of marriage, to be conclusive evidence so as to prevent the counsel for the crown from proving the marriage upon an indictment for polygame'the counsel for the crown may be admitted to avoid the effect of such sentence by proving the same to have been obtained by fraud or collusion.' Chief Justice De Grey, delivering the opinion of the judges, which was adopted by the house of lords, answering this question in the affirmative, said: 'But if it was a direct and decisive sentence upon the point, and, as it stands, to be admitted as conclusive evidence upon the court, and not to be impeached from within, yet, like all other acts of the highest judicial authority, it is impeachable from without. Although it is not permitted to show that the court was mistaken, it may be shown that they were misled. Fraud is an intrinsic collateral act, which vitiates the most solemn proceedings of courts of justice. Lord Coke says it avoids all judicial acts, ecclesiastical or temporal.' 20 How. State Tr. 537, 543, note, 2 Smith, Lead. Cas. 573.
261
125 In Abouloff v. Oppenheimer (1882) the plaintiff had recovered a judgment at Tiflis, in Russia, ordering the defendants to return certain goods, or to pay their value. The defendants appealed to a higher Russian court, which confirmed the judgment, and ordered the defendants to pay, besides the sum awarded below, an additional sum for costs and expenses. In an action in the English high court of justice upon those judgments, the defendants pleaded that they were obtained by the gross fraud of the plaintiff, in fraudulently representing to the Russian courts that the goods in question were not in her possession when the suit was commenced, and when the judgment was given, and during the whole time the suit was pending; and by fraudulently concealing from those courts the fact that those goods, as the fact was, and as she well knew, were in her actual possession. A demurrer to this plea was overruled, and judgment entered for the defendants. And that judgment was affirmed in the court of appeal by Lord Chief Justice Coleridge, Lord Justice Baggallay, and Lord Justice Brett, all of whom delivered concurring opinions, the grounds of which sufficiently appear in the opinion delivered by Lord Justice Brett (since Lord Esher, M. R.), who said: 'With regard to an action brought upon a foreign judgment, the whole doctrine as to fraud is English, and is to be applied in an action purely English. I am prepared to hold, according to the judgment of the house of lords adopting the proposition laid down by De Grey, C. J., that if the judgment upon which the action is brought was procured from the foreign court by the successful fraud of the party who is seeking to enforce it, the action in the English court will not lie. This proposition is absolute, and without any limitation, and, as the lord chief justice has pointed out, is founded on the doctrine that no party in an English court shall be able to take advantage of his own wrongful act, or, as it may be stated in other language, that no obligation can be enforced in an English court of justice which has been procured by the fraud of the person relying upon it as an obligation.' 'I will assume that in the suit in the Russian courts the plaintiff's fraud was alleged by the defendants, and that they gave evidence in support of the charge. I will assume, even, that the defendants gave the very same evidence which they propose to adduce in this action. Nevertheless, the defendants will not be debarred at the trial of this action from making the same charge of fraud and from adducing the same evidence in support of it; and if the high court of justice is satisfied that the allegations of the defendants are true, and that the fraud was committed, the defendants will be entitled to succeed in the present action. It has been contended that the same issue ought not to be tried in an English court which was tried in the Russian courts, but I agree that the question whether the Russian courts were deceived never could be an issue in the action tried before them.' 'In the present case, we have had to consider the question fully; and, according to the best opinion which I can form, fraud committed by a party to a suit, for the purpose of deceiving a foreign court, is a defense to an action in this country, founded upon the judgment of that foreign court. It seems to me that, if we were to accede to the argument for the plaintiff, the result would be that a plausible deceiver would succeed, whereas a deceiver who is not plausible would fail. I cannot think that plausible fraud ought to be upheld in any court of justice in England. I accept the whole doctrine, without any limitation, that whenever a foreign judgment has been obtained by the fraud of the party relying upon it, it cannot be maintained in the courts of this country; and, further, that nothing ought to persuade an English court to enforce a judgment against one party, which has been obtained by the fraud of the other party to the suit in the foreign court.' 10 Q. B. Div. 295, 305-308. 131 130 By the French Code of Civil Procedure (article 546), 'judgments rendered by foreign tribunals, and acts acknowledged before foreign officers, shall not be capable of execution in France, except in the manner and in the cases provided by articles 2123 and 2128 of the Civil Code,' which are as follows: By article 2123, 'a lien cannot arise from judgments rendered in a foreign country, except so far as they have been declared executory by a French tribunal; without prejudice to provisions to the contrary which may exist in public laws and treaties.' By article 2128, 'contracts entered into in a foreign country cannot give a lien upon property in France, if there are no provisions contrary to this principle in public laws or in treaties.' Touillier, ubi supra, No. 84. 129 In France, the royal ordinance of June 15, 1629 (article 121), provided as follows: 'Judgments rendered, contracts or obligations recognized, in foreign kingdoms and sovereignties, for any cause whatever, shall have no lien or execution in our kingdom. Thus the contracts shall stand for simple promises; and, notwithstanding the judgments, our subjects against whom they have been rendered may contest their rights anew before our judges.' Touillier, Droit Civil, lib. 3, tit. 3, c. 6, 3, No. 77. 128 But whether those decisions can be followed in regard to foreign judgments, consistently with our own decisions as to impeaching domestic judgments for fraud, it is unnecessary in this case to determine, because there is a distinct and independent ground upon which we are satisfied that the comity of our nation does not require us to give conclusive effect to the judgments of the courts of France; and that ground is the want of reciprocity, on the part of France, as to the effect to be given to the judgments of this and other foreign countries. 127 In the case at bar the defendants offered to prove, in much detail, that the plaintiffs presented to the French court of first instance and to the arbitrator appointed by that court, and upon whose report its judgment was largely based, false and fraudulent statements and accounts against the defendants, by which the arbitrator and the French courts were deceived and misled, and their judgments were based upon such false and fraudulent statements and accounts. This offer, if satisfactorily proved, would, according to the decisions of the English court of appeal in Abouloff v. Oppenheimer, Vadala v. Lawes, and Crozat v. Brogden, above cited, be a sufficient ground for impeaching the foreign judgment, and examining into the merits of the original claim. 126 The same view was affirmed and acted on in the same court by Lords Justices Lindley and Bowen in Vadala v. Lawes (1890) 25 Q. B. Div. 310, 317-320, and by Lord Esher and Lord Justice Lopes in Crozat v. Brogden [1894] 2 Q. B. 30, 34, 35.
262
The defendants, in their answer, cited the above provisions of the statutes of France, and alleged, and at the trial offered to prove, that by the construction given to these statutes by the judicial tribunals of France, when the judgments of tribunals of foreign countries against the citizens of France are sued upon in the courts of France, the merits of the controversies upon which those judgments are based are examined anew, unless a treaty to the contrary effect exists between the republic of France and the country in which such judgment is obtained (which is not the case between the republic of France and the United States), and that the tribunals of the republic of France give no force and effect, within the jurisdiction of that country, to the judgments duly rendered by courts of competent jurisdiction of the United States against citizens of France after proper personal service of the process of those courts has been made thereon in this country. We are of opinion that this evidence should have been admitted. 132 In Odwin v. Forbes (1817) President Henry, in the court of Demerara, which was governed by the Dutch law, and was, as he remarked, 'a tribunal foreign to and independent of that of England,' sustained a plea of an English certificate in bankruptcy, upon these grounds: 'It is a principle of their law, and laid down particularly in the ordinances of Amsterdam,' 'that the same law shall be exercised towards foreigners in Amsterdam as is exercised with respect to citizens of that state in other countries; and upon this principle of reciprocity, which is not confined to the city of Amsterdam, but pervades the Dutch laws, they have always given effect to the laws of that country which has exercised the same comity and indulgence in admitting theirs;' 'that the Dutch bankrupt laws proceed on the same principles as those of the English; that the English tribunals give effect to the Dutch bankrupt laws; and that, on the principle of reciprocity and mutual comity, the Dutch tribunals, according to their own ordinances, are bound to give effect to the English bankrupt laws when duly proved, unless there is any express law or ordinance prohibiting their admission.' And his judgment was affirmed in the privy council on appeal. Case of Odwin v. Forbes, pp. 89, 159-161, 173-176; Id. (1817) Buck, 57, 64. 133 President Henry, at page 76 of his Treatise on Foreign Law, published as a preface to his report of that case, said: 'This comity, in giving effect to the judgments of other tribunals, is generally exercised by states under the same sovereign, on the ground that he is the fountain of justice in each, though of independent jurisdiction; and it has also been exercised in different states of Europe with respect to foreign judgments, particularly in the Dutch states, who are accustomed by the principle of reciprocity to give effect in their territories to the judgments of foreign states, which show the same comity to theirs; but the tribunals of France and England have never exercised this comity to the degree that those of Holland have, but always required a fresh action to be brought, in which the foreign judgment may be given in evidence. As this is a matter of positive law and internal policy in each state, no opinion need be given. Besides, it is a mere question of comity, and perhaps it might be neither politic nor prudent, in two such great states, to give indiscriminate effect to the judgment of each other's tribunals, however the practice might be proper or convenient in federal states, or those under the same sovereign.' 134 139 Cheif Justice Smith, of New Hampshire, in giving reasons why foreign judgments or decrees, founded on the municipal laws of the state in which they are pronounced, are not conclusive evidence of debt, but prima facie evidence only, said: 'These laws and regulations may be unjust, partial to citizens, and against foreigners; they may operate injustice to our citizens, whom we are bound to protect; they may be, and the decisions of courts founded on them, just cause of complaint against the supreme power of the state where rendered. To adopt them is not merely saying that the courts have decided correctly on the law, but it is approbating the law itself.' Bryant v. Ela, Smith (N. H.) 396, 404. 138 Lord Brougham, presiding as lord chancellor in the house of lords, said: 'The law, in the course of procedure abroad, sometimes differs so mainly from ours in the principles upon which it is bottomed that it would seem a strong thing to hold that our courts were bound conclusively to give execution to the sentence of foreign courts, when, for aught we know, there is not any one of those things which are reckoned the elements or the corner stones of the due administration of justice present to the procedure in these foreign courts.' Houlditch v. Donegal, 8 Bligh, N. R. 301, 338. 137 Lord Eldon, after saying that 'natural law' (evidently intending the law of nations) 'requires the courts of this country to give credit to those of another for the inclination and power to do justice,' added that, 'if it appears in evidence that persons suing under similar circumstances neither had met nor could meet with justice, that fact cannot be immaterial as an answer to the presumption.' Wright v. Simpson, 6 Ves. 714, 730. 136 Lord Hardwicke threw out a suggestion that the credit to be given by one court to the judgment of a foreign court might well be affected by 'their proceeding both by the same rules of law.' Otway v. Ramsay, 4 Barn. & C. 414-416, note. 135 This rule, though never either affirmed or denied by express adjudication in England or America, has been indicated, more or less distinctly, in several of the authorities already cited. It was that statement which appears to have called forth the observations of Mr. Justice Story, already cited: 'Holland seems at all times, upon the general principle of reciprocity, to have given great weight to foreign judgments; and in many cases, if not in all cases, to have given to them a weight equal to that given to domestic judgments, wherever the like rule of reciprocity with regard to Dutch judgments has been adopted by the foreign country whose judgment is brought under review. This is certainly a very reasonable rule, and may, perhaps, hereafter work itself firmly into the structure of international jurisprudence.' Story, Confl. Laws, 618.
263
140 Mr. Justice Story said: 'If a civilized nation seeks to have the sentences of its own courts of any validity elsewhere, they ought to have a just regard to the rights and usages of other civilized nations, and the principles of public and national law in the administration of justice.' Bradstreet v. Insurance Co., 3 Sumn. 600, 608, Fed. Cas. No. 1,793. 141 Mr. Justice Woodbury said that judgments in personam, rendered under a foreign government, 'are, ex comitate, treated with respect, according to the nature of the judgment and the character of the tribunal which rendered it, and the reciprocal mode, if any, in which that government treats our judgments'; and added, 'nor can much comity be asked for the judgments of another nation which, like France, pays no respect to those of other countries.' Burnham v. Webster, 1 Woodb. & M. 172, 175, 179, Fed. Cas. No. 2,179. 142 Mr. Justice Cooley said: 'True comity is equality. We should demand nothing more and concede nothing less.' McEwan v. Zimmer, 38 Mich. 765, 769. 143 Mr. Wheaton said: 'There is no obligation, recognized by legislators, public authorities, and publicists, to regard foreign laws; but their application is admitted only from considerations of utility and the mutual convenience of states (ex comitate, ob reciprocam utilitatem).' 'The general comity, utility, and convenience of nations have, however, established a usage among most civilized states, by which the final judgments of foreign courts of competent jurisdiction are reciprocally carried into execution.' Wheat. Int. Law (8th Ed.) 79, 147. 144 Since Story, Kent, and Wheaton wrote their commentaries, many books and essays have been published upon the subject of the effect to be allowed by the courts of one country to the judgments of another, with references to the statutes and decisions in various countries. Among the principal ones are Foelix, Droit International Pirv e (4th Ed., by Demangeat, 1866) lib. 2, tits. 7, 8; Moreau, Effets Internationaux des Jugements (1884); Pig. Judgm. (2d Ed., 1884); Constant, De I'Execution des Jugements Etrangers (2d Ed., 1890), giving the text of the articles of most of the modern codes upon the subject, and of French treaties with Italian, German, and Swiss states; and numerous papers in Clunet's Journal de Droit International Prive, established in 1874, and continued to the present time. For the reasons stated at the outset of this opinion, we have not thought it important to state the conflicting theories of continental commentators and essayists as to what each may think the law ought to be, but have referred to their works only for evidence of authoritative declarations, legislative or judicial, of what the law is. 145 By the law of France, settled by a series of uniform decisions of the court of cassation, the highest judicial tribunal, for more than half a century, no foreign judgment can be rendered executory in France without a review of the judgment au fond (to the bottom), including the whole merits of the cause of action on which the judgment rests. Pard. Droit Commer. 1488; Bard, Pr ecis de Droit International (1883) Nos. 234-239; Story, Confl. Laws, 615-617; Pig. Judgm. 452; Westl. Priv. Int. Law (3d Ed., 1890) 350. 146 A leading case was decided by the court of cassation on April 19, 1819, and was as follows: A contract of partnership was made between Holker, a French merchant, and Parker, a citizen of the United States. Afterwards, and before the partnership accounts were settled, Parker came to France, and Holker sued him in the tribunal of commerce of Paris. Parker excepted on the ground that he was a foreigner, not domiciled in France, and obtained a judgment, affirmed on appeal, remitting the matter to the American courts (obtint son renvoi devant les tribunaux Americains). Holker then sued Parker in the circuit court of the United States for the district of Massachusetts, and in 1814 obtained a judgment there ordering Parker to pay him $529,949. One branch of the controversy had been brought before this court in 1813. Holker v. Parker, 7 Cranch, 436. Holker, not being able to obtain execution of that judgment in America, because Parker had no property there and continued to reside in Paris, obtained from a French judge an order declaring the judgment executory. Upon Parker's application to nullify the proceeding, the royal court of Paris, reversing the judgment of a lower court, set aside that order, assigning these reasons: 'Considering that judgments rendered by foreign courts have neither effect nor authority in France; that this rule is doubtless more particularly applicable in favor of Frenchmen, to whom the king and his officers owe a special protection, but that the principle is absolute, and may be invoked by all persons, without distinction, being founded on the independence of states; that the ordinance of 1629, in the beginning of its article 121, lays down the principle in its generality when it says that judgments rendered in foreign kingdoms and sovereignties, for any cause whatever, shall have no execution in the kingdom of France, and that the Civil Code, art. 2123, gives to this principle the same latitude when it declares that a lien cannot result from judgments rendered in a foreign country, except so far as they have been declared executory by a French tribunal, (which is not a matter of mere form, like the granting in past times of a pareatis from one department to another for judgments rendered within the kingdom, but which assumes, on the part of the French tribunals, a cognizance of the cause, and a full examination of the justice of the judgment presented for execution, as reason demands, and that this has always been practiced in France, according to the testimony of our ancient authorities); that there may result from this an inconvenience, where the debtor, as is asserted to have happened in the present case, removes his property and his person to France, while keeping his domicile in his native country; that it is for the creditor to be watchful, but that no consideration can impair a principle on which rests the sovereignty of governments, and which, whatever be the case, must preserve its whole force.' The court therefore adjudged that, before the tribunal of first instance, Holker should state the grounds of his action, to be contested by Parker, and to be determined by the court upon cognizance of the whole cause. That judgment was confirmed, upon deliberate consideration, by the court of cassation, for the reasons that the ordinance of 1629 enacted, in absolute terms and without exception, that foreign judgments should not have execution in France; that it was only by the Civil Code and the Code of Civil Procedure that the French tribunals had been authorized to declare
264
them executory; that, therefore, the ordinance of 1629 had no application; that the articles of the Codes referred to did not authorize the courts to declare judgments rendered in a foreign country executory in France without examination; that such an authorization would be as contrary to the institution of the courts as would be the award or the refusal of execution arbitrarily and at will, would impeach the right of sovereignty of the French government, and was not in the intention of the legislature; and that the Codes made no distinction between different judgments rendered in a foreign country, and permitted the judges to declare them all executory, and therefore those judgments, whether against a Frenchman or against a foreigner, were subject to examination on the merits. Holker v. Parker, Merlin, Questions do Droit, Jugement, 14, No. 2. 147 The court of cassation has ever since constantly affirmed the same view. Moreau, No. 106, note, citing many decisions; Clunet, 1882, p. 166. In Clunet, 1894, p. 913, note, it is said to be 'settled by judicial decisions (il est de jurisprudence) that the French courts are bound, in the absence of special diplomatic treaties, to proceed to the revision on the whole merits (au fond) of foreign judgments, execution of which is demanded of them'; citing, among other cases, a decision of the court of cassation on February 2, 1892, by which it was expressly held to result from the articles of the Codes above cited 'that judgments rendered in favor of a foreigner against a Frenchman, by a foreign court, are subject, when execution of them is demanded in France, to the revision of the French tribunals which have the right and the duty to examine them, both as to the form and as to the merits.' Sirey, 1892, 1, 201. 148 In Belgium the Code of Civil Procedure of 1876 provides that, if a treaty on the basis of reciprocity be in existence between Belgium and the country in which the foreign judgment has been given, the examination of the judgment in the Belgian courts shall bear only upon the questions whether it 'contains nothing contrary to public order, to the principles of the Belgian public order'; whether, by the law of the country in which it was rendered, it has the force of res judicata; whether the copy is duly authenticated; whether the defendant's rights have been duly respected; and whether the foreign court is not the only competent court, by reason of the nationality of the plaintiff. Where, as is the case between Belgium and France, there is no such treaty, the Belgian court of cassation holds that the foreign judgment may be reexamined upon the merits. Constant, 111, 116; Moreau, No. 189; Clunet, 1887, p. 217; Id. 1888, p. 837; Pig. Judgm. 439. And in a very recent case the civil tribunal of Brussels held that, 'considering that the right of revision is an emanation of the right of sovereignty; that it proceeds from the imperium, and that as such it is within the domain of public law; that from that principle it manifestly follows that, if the legislature does not recognize executory force in foreign judgments where there exists no treaty upon the basis of reciprocity, it cannot belong to the parties to substitute their will for that of the legislature, by arrogating to themselves the power of delegating to the foreign judge a portion of sovereignty.' Clunet, 1894, pp. 164, 165. 149 152 In Switzerland, by the federal constitution, civil judgments in one canton are ekecutory throughout the republic. As to foreign judgments, there is no federal law, each canton having its own law upon the subject. But civil judgments in one canton are executory other cantons, foreign judgments are executed according to the rule of reciprocity only. Constant, 193-204; Pig. Judgm. 505-516; Clunet, 1887, p. 762; Westl. Priv. Int. ubi supra. The law upon this subject has been clearly stated by Brocher, president of the court of cassation of Geneva, and professor of law in the university there. In his Nouveau Trait e de Droit 151 In the empire of Germany, as formerly in the states which now form part of that empire, the judgments of those states are mutually executed, and the principle of reciprocity prevails as to the judgments of other countries. Foelix, Nos. 328, 331, 333-341; Moreau, Nos. 178, 179; Vierhaus, in Pig. Judgm. 460-474; Westl. Priv. Int. ubi supra. By the German Code of 1877, 'compulsory execution of the judgment of a foreign court cannot take place, unless its admissibility has been declared by a judgment of exequatur'; 'the judgment of exequatur is to be rendered without examining whether the decision is conformable to law'; but it is not to be granted 'if reciprocity is not guaranteed.' Constant, 79-81; Pig. Judgm. 466. The reichsgericht, or imperial court, in a case reported in full in Pig. Judgm., has held that an English judgment cannot be executed in Germany, because, the court said, the German courts, by the Code, when they execute foreign judgments at all, are 'bound to the unqualified recognition of the legal validity of the judgments of foreign courts,' and 'it is therefore an essential requirement of reciprocity that the law of the foreign state should recognize in an equal degree the legal validity of the judgments of German courts, which are to be enforced by its courts, and that an examination of their legality, both as regards the material justice of the decision as to matters of fact or law, and with respect to matters of procedure, should neither be required as a condition of their execution, by the court ex officio, nor be allowed by the admission of pleas which might lead to it.' Pig. Judgm. 470, 471. See, also, Clunet, 1882, p. 35; Id. 1883, p. 246; Id. 1884, p. 600. 150 In Denmark the courts appear to require reciprocity to be shown before they will execute a foreign judgment. Foelix, Nos. 328, 345; Clunet, 1891, p. 987; Westl. Priv. Int. ubi supra. In Norway the courts reexamine the merits of all foreign judgments, even of those of Sweden. Foelix, No. 401; Pig. Judgm. 504, 505; Clunet, 1892, p. 296. In Sweden the principle of reciprocity has prevailed from very ancient times. The courts give no effect to foreign judgments, unless upon that principle; and it is doubtful whether they will even then, unless reciprocity is secured by treaty with the country in which the judgment was rendered. Foelix, No. 400; Olivecrona, in Clunet, 1880, p. 83; Constant, 191; Moreau, No. 222; Pig. Judgm. 503; Westl. Priv. Int. ubi supra. In Holland the effect given to foreign judgments has always depended upon reciprocity, but whether by reason of Dutch ordinances only, or of general principles of jurisprudence, does not clearly appear. Odwin v. Forbes, and Hen. For. Law, above cited; Story, Confl. Laws, 618; Foelix, No. 397, note; Clunet, 1879, p. 369; 1 Ferg. Int. Law, 85; Constant, 171; Moreau, No. 213.
265
International Priv e (1876) 174, treating of the question whether 'it might not be convenient that states should execute, without reviewing their merits, judgments rendered on the territory of each of them respectively,' he says: 'It would certainly be advantageous for the parties interested to avoid the delays, the conflicts, the differences of opinion, and the expenses resulting from the necessity of obtaining a new judgment in each locality where they should seek execution. There might thence arise, for each sovereignty, a juridical or moral obligation to lend a strong hand to foreign judgments. But would not such an advantage be counterbalanced, and often surpassed, by the dangers that might arise from that mode of proceeding? There is here, we believe, a question of reciprocal appreciation and confidence. One must, at the outset, inquire whether the administration of the foreign judiciary, whose judgments it is sought to execute without verifying their merits, presents sufficient guaranties. If the propriety of such an execution be admitted, there is ground for making it the object of diplomatic treaties. That form alone can guaranty the realization of a proper reciprocity. It furnishes, moreover, to each state, the means of acting upon the judicial organization and procedure of other states.' In an article in the Journal, after a review of the Swiss decisions, he recognizes and asserts that 'it comes within the competency of each canton to do what seems to it proper in such matters.' Clunet, 1879, pp. 88, 94. And in a later treatise he says: 'We cannot admit that the recognition of a state as sovereign ought necessarily to have as a consequence the obligation of respecting and executing the judicial decisions rendered by its tribunals. In strict right, the authority of such acts does not extend beyond the frontier. Each sovereignty possesses in particular, and more or less in private, the territory subject to its power. No other can exercise there an act of its authority. This territorial independence finds itself, in principle, directly included in the very act by which one nation recognizes a foreign state as a sovereign; but there cannot result therefrom a promise to adopt, and to cause to be executed upon the national territory, judgments rendered by the officials of the foreign state, whoever they may be. That would be an abdication of its own sovereignty; and would bind it in such sort as to make it an accomplice in acts often injurious, and in some cases even criminal. Such obligations suppose a reciprocal confidence. They are not undertaken, moreover, except upon certain conditions, and by means of a system of regulations intended to prevent or to lessen the dangers which might result from them.' 3 Cours de Droit International Priv e (1885) 126, 127. 153 In Russia, by the Code of 1864, 'the judgments of foreign tribunals shall be rendered executory according to the rules established by reciprocal treaties and conventions,' and, where no rules have been established by such treaties, are to be 'put in execution in the empire only after authorization granted by the courts of the empire'; and 'in deciding upon demands of this kind the courts do not examine into the foundation of the dispute adjudged by the foreign tribunals, but decide only whether the judgment does not contain dispositions which are contrary to the public order, or which are not permitted by the laws of the empire.' Constant, 183-185. Yet a chamber of the senate of St. Petersburg, sitting as a court of cassation, and the highest judicial tribunal of the empire in civil matters, has declined to execute a French judgment upon the grounds that, by the settled law of Russia, 'it is a principle in the Russian empire that only the decisions of the authorities to whom jurisdiction has been delegated by the sovereign power have legal value by themselves and of full right,' and that, 'in all questions of international law, reciprocity must be observed and maintained as a fundamental principle.' Adam v. Schipoff, Clunet, 1884, pp. 45, 46, 134. And Prof. 157 156 In Bulgaria, by a resolution of the supreme court in 1881, 'the Bulgarian judges should, as a general rule, abstain from entering upon the merits of the foreign judgment. They ought only to inquire whether the judgment submitted to then does not contain dispositions contrary to the public order and to the Bulgarian laws.' Constant, 129, 130; Clunet, 1886, p. 570. This resolution closely follows the terms of the Russian Code, which, as has been seen, has not precluded applying the principle of reciprocity. 155 In Roumania it is provided by Code that 'judicial decisions rendered in foreign countries cannot be executed in Roumania, except in the same manner in which Roumanian judgments are executed in the country in question, and provided they are declared executory by competent Roumanian judges'; and this article seems to be held to require legislative reciprocity. Moreau, No. 219; Clunet, 1879, p. 351; Id. 1885, p. 537; Id. 1891, p. 452; Pig. Judgm. 495. 154 In Poland the provisions of the Russian Code are in force; and the court of appeal of Warsaw has decided that where there is no treaty the judgments of a foreign country cannot be executed, because, 'in admitting a contrary conclusion, there would be impugned one of the cardinal principles of international relations, namely, the principle of reciprocity, according to which each state recognizes juridical rights and relations, originating or established in another country, only in the measure in which the latter, in its turn, does not disregard the rights and relations existing in the former.' Clunet, 1884, pp. 494, 495. Englemann, of the Russian University of Dorpat, in an able essay, explaining that and other Russian decisions, takes the following view of them: 'The execution of a treaty is not the only proof of reciprocity.' 'It is necessary to commit the ascertainment of the existence of reciprocity to the judicial tribunals, for the same reasons for which there is conferred upon them the right to settle all questions incident to the cause to be adjudged. The existence of reciprocity between two states ought to be proved in the same manner as all the positive facts of the case.' 'It is true that the principle of reciprocity is a principle not of right, but of policy, yet the basis of the principle of all regular and real policy is also the fundamental principle of right, and the point of departure of all legal order,the suum cuique. This last principle comprehends right, reciprocity, utility, and reciprocity is the application of right to policy.' 'Let this principle be applied wherever there is the least guaranty or even a probability of reciprocity, and the cognizance of this question be committed to the judicial tribunals, and one will arrive at important results, which, on their side, will touch the desired end,international accord. But for this it is indispensable that the application of this principle should be intrusted to judicial tribunals, accustomed to decide affairs according to right, and not to administrative authorities, which look above all to utility, and are accustomed to be moved by political reasons, intentions, and even passions.' Clunet, 1884, pp. 120-122. But it would seem that no foreign judgment will be executed in Russia unless reciprocity is secured by treaty. Clunet, 1884, pp. 46, 113, 139, 140, 602.
266
In Austria the rule of reciprocity does not rest upon any treaty or legislative enactment, but has been long established, by imperial decrees and judicial decisions, upon general principles of jurisprudence. Foelix, No. 331; Constant, 100-108; Moreau, No. 185; Weiss, Trait e de Droit International (1886) 950; Clunet, 1891, p. 1003; Id. 1894, p. (1886) 980; Clunet, 1891, p. 1003; Id. 1894, p. same principles were always followed as in Austria; and reciprocity has been made a condition by a law of 1880. Constant, 109; Moreau, No. 186, and note; Pig. Judgm. 436; Weiss, ubi supra. 158 In Italy, before it was united into one kingdom, each state had its own rules. In tuscany and in Modena, in the absence of treaty, the whole merits were reviewed. In Parma, as by the French ordinance of 1629, the foreign judgment was subject to fundamental revision, if against a subject of Parma. In Naples the Code and the decisions followed those of France. In Sardinia the written laws required above all the condition of reciprocity, and if that condition was not fulfilled the foreign judgment was re-examinable in all respects. Fiore, Effetti Internazionali delle Sentenze (1875) 40-44; Moreau, No. 204. In the papal states, by a decree of the pope in 1820, 'the exequatur shall not be granted, except so far as the judgments rendered in the states of his holiness shall enjoy the same favor in the foreign countries; this reciprocity is presumed, if there is no particular reason to doubt it.' Toullier, Droit Civil, lib. 3, tit. 3, c. 6, 3, No. 93. And see Foelix, No. 343; Westl. Priv. Int. ubi supra. In the kingdom of Italy, by the Code of Procedure of 1865, 'executory force is given to the judgments of foreign judicial authorities by the court of appeal in whose jurisdiction they are to be executed, by obtaining a judgment on an exequatur in which the court examines (a) if the judgment has been pronounced by a competent judicial authority; (b) if it has been pronounced, the parties being regularly cited; (c) if the parties have been legally represented or legally defaulted; (d) if the judgment contains dispositions contrary to public order or to the internal public law of the realm.' Constant, 157. In 1874 the court of cassation of Turin, 'considering that in international relations is admitted the principle of reciprocity, as that which has its foundation in the natural reason of equality of treatment, and in default thereof opens the way to the exercise of the right of retaliation,' and that the French courts examine the merits of Italian judgments before allowing their execution in France, decided that the Italian courts of appeal, when asked to execute a French judgment, ought not only to inquire into the competency of the foreign court, but also to review the merits and the justice of the controversy. Levi v. Pitre, in Rossi, Esecuzione delle Sentenze Straniere (1st Ed. 1875) 70,284; and in Clunet, 1879, p. 295. Some commentators, however, while admitting that decision to be most authoritative, have insisted that it is unsound, and opposed to other Italian decisions, to which we have not access. Rossi, ubi supra (2d Ed. 1890) 92; Fiore, 142, 143; Clunet, 1878, p. 237; Clunet, 1879, pp. 296, 305; Pig. Judgm. 483; Constant, 161. 159 In the principality of Monaco, foreign judgments are not executory, except by virtue of a special ordinance of the prince, upon a report of the advocate general. Constant, 169; Pig. Judgm. 488. 160 161 In Portugal, foreign judgments, whether against a Portuguese or against a foreigner, are held to be reviewable upon the merits before granting execution thereof. Foelix, No. 399; Clunet, 1875, pp. 54, 448; Moreau, No. 217; Constant, 176-180; Westl. Priv. Int. ubi supra. 162 In Greece, by the provisions of the Code of 1834, foreign judgments, both parties to which are foreigners, are enforced without examination of their merits; but if one of the parties is a Greek they are not enforced, if found contradictory to the facts proved, or if they are contrary to the prohibitive laws of Greece. Foelix, No. 396; Constant, 151, 152; Moreau, No. 202; Saripolos, in Clunet, 1880, p. 173; Pig. Judgm. 475. In Spain, formerly, foreign judgments do not appear to have been executed at all. Foelix, No. 398; Moreau, No. 197; Silvela, in Clunet, 1881, p. 20. But by the Code of 1855, revised in 1881, without change in this respect, 'judgments pronounced in foreign countries shall have in Spain the force that the respective treaties given them; if there are no special treaties with the nation in which they have been rendered, they shall have the same force that is given by the laws of that nation to Spanish executory judgments; if the judgment to be executed proceeds from a nation by whose jurisprudence effect is not given to the judgments pronounced by Spanish tribunals, it shall have no force in Spain'; and 'application for the execution of judgments pronounced in foreign countries shall be made to the supreme tribunal of justice, which, after examining an authorized translation of the foreign judgment, and after hearing the party against whom it is directed and the public minister, shall decide whether it ought or ought not to be executed.' Constant, 141, 142; Pig. Judgm. 499, 500. A case in which the supreme court of Spain in 1880 ordered execution of a French judgment, after reviewing its merits, is reported in Clunet, 1881, p. 365. In another case, in 1888, the same court, after hearing the parties and the public minister, ordered execution of a Mexican judgment. The public minister, in his demand for its execution, said: 'Our law of civil procedure, inspired, to a certain point, by the modern theories of international law, which, recognizing among civilized nations a true community of right, and considering mankind as a whole, in which nations occupy a position identical with that of individuals towards society, gives authority in Spain to executory judgments rendered by foreign tribunals, even in the absence of special treaty, provided that those countries do not proscribe the execution there of our judgments, and under certain conditions, which, if they limit the principle, are inspired by the wish of protecting our sovereignty and by the supreme exigencies of justice. When nothing appears, either for or against, as to the authority of the judgments of our courts in the foreign country, one should not put an obstacle to the fulfillment, in our country, of judgments emanating from other nations, especially when the question is of a country which, by its historic origin, its language, its literature, and by almost the identity of its customs, its usages, and its social institutions, has so great a connection with our own,which obliges us to maintain with it the most intimate relations of friendship and courtesy.' And he pointed out that Mexico, by its Code, had adopted reciprocity as a fundamental principle. Among the reasons assigned by the court for ordering the Mexican judgment to be executed was that 'there exists in Mexico no precedent of jurisprudence which refuses execution to judgments rendered by the Spanish tribunals.' Clunet, 1891, pp. 288-292.
267
163 In Egypt, under the influence of European jurisprudence, the Code of Civil Procedure has made reciprocity a condition upon which foreign judgments are executed. Constant, 136; Clunet, 1887, pp. 98, 228; Id. 1889, p. 322. 169 164 In Cuba and in Porto Rico, the Codes of Civil Procedure are based upon the Spanish Code of 1855. Pig. Judgm. 435, 503. In Hayti the Code re-enacts the provisions of the French Code. Constant, 153; Moreau, No. 203; Pig. Judgm. 460. 165 In Mexico the system of reciprocity has been adopted by the Code of 1884 as the governing principle. Constant, 168; Clunet, 1891, p. 290. 166 The rule of reciprocity likewise appears to have generally prevailed in South America. In Peru foreign judgments do not appear to be executed without examining the merits, unless when reciprocity is secured by treaty. Clunet, 1879, pp. 266, 267; Pig. Judgm. 548. In Chili there appears to have been no legislation upon the subject; but, according to a decision of the supreme court of Santiago in 1886, 'the Chilian tribunals should not award an exequatur, except upon decisions in correct form, and also reserving the general principle of reciprocity.' Clunet, 1889, p. 135; Constant, 131, 132. In Brazil foreign judgments are not executed, unless because of the country in which they were rendered admitting the principle of reciprocity, or because of a placet of the government of Brazil, which may be awarded according to the circumstances of the case. Constant, 124, and note; Moreau, No. 192; Pig. Judgm. 543-546; Westlake, ubi supra. In the Argentine Republic the principle of reciprocity was maintained by the courts, and was affirmed by the Code of 1878, as a condition sine qua non of the execution of foreign judgments, but has perhaps been modified by later legislation. Moreau, No. 218; Palomeque, in Clunet, 1887, pp. 539-558. 172 167 It appears, therefore, that there is hardly a civilized nation on either continent which, by its general law, allows conclusive effect to an executory foreign judgment for the recovery of money. In France and in a few smaller statesNorway, Portugal, Greece, Monaco, and Haytithe merits of the controversy are reviewed, as of course, allowing to the foreign judgment, at the most, no more effect than of being prima facie evidence of the justice of the claim. In the great majority of the countries on the continent of Europe, in Belgium, Holland, Denmark, Sweden, Germany, in many cantons of Switzerland, in Russia and Poland, in Roumania, in Austria and Hungary (perhaps in Italy), and in Spain, as well as in Egypt, in Mexico, and in a great part of South America, the judgment rendered in a foreign country is allowed the same effect only as the courts of that country allow to the judgments of the country in which the judgment in question is sought to be executed. 173 168 For these reasons, in the action at law, the If we should hold this judgment to be conclusive, we should allow it an effect to which, supposing the defendants' offers to be sustained by actual proof, it would, in the absence of a special treaty, be entitled in hardly any other country in Christendom, except the country in which it was rendered. If the judgment had been rendered in this country, or in any other outside of the jurisdiction of France, the French courts would not have executed or enforced it, except after examining into its merits. The very judgment now sued on would be held inconclusive in almost any other country than France. In England, and in the colonies subject to the law of England, the fraud alleged in its procurement would be a sufficient ground for disregarding it. In the courts of nearly every other nation, it would be subject to re-examination, either merely because it was a foreign judgment, or because judgments of that nation would be reexaminable in the courts of France. 171 By our law, at the time of the adoption of the constitution, a foreign judgment was considered as prima facie evidence, and not conclusive. There is no statute of the United States, and no treaty of the United States with France, or with any other nation, which has changed that law, or has made any provision upon the subject. It is not to be supposed that, if any statute or treaty had been or should be made, it would recognize as conclusive the judgments of any country, which did not give like effect to our own judgments. In the absence of statute or treaty, it appears to us equally unwarrantable to assume that the comity of the United States requires anything more. The reasonable, if not the necessary, conclusion appears to us to be that judgments rendered in France, or in any other foreign country, by the laws of which our own judgments are reviewable upon the merits, are not entitled to full credit and conclusive effect when sued upon in this country, but are prima facie evidence only of the justice of the plaintiffs' claim. 170 In holding such a judgment, for want of reciprocity, not to be conclusive evidence of the merits of the claim, we do not proceed upon any theory of retaliation upon one person by reason of injustice done to another, but upon the broad ground that international law is founded upon mutuality and reciprocity, and that by the principles of international law recognized in most civilized nations, and by the comity of our own country, which it is our judicial duty to known and to declare, the judgment is not entitled to be considered conclusive. The prediction of Mr. Justice Story in section 618 of his Commentaries on the Conflict of Laws, already cited, has thus been fulfilled, and the rule of reciprocity has worked itself firmly into the structure of international jurisprudence.
268
174 Judgment is reversed, and the cause remanded to the circuit court, with directions to set aside the verdict and to order a new trial. 182 175 For the same reasons, in the suit in equity between these parties, the foreign judgment is not a bar, and therefore the 176 Decree dismissing the bill is reversed, the plea adjudged bad, and the cause remanded to the circuit court for further proceedings not inconsistent with this opinion. 177 Mr. Chief Justice FULLER, dissenting. 178 Plaintiffs brought their action on a judgment recovered by them against the defendants in the courts of France, which courts had jurisdiction over person and subject-matter, and in respect of which judgment no fraud was alleged, except in particulars contested in and considered by the French courts. The question is whether under these circumstances, and in the absence of a treaty or act of congress, the judgment is reexaminable upon the merits. This question I regard as one to be determined by the ordinary and settled rule in respect of allowing a party who has had an opportunity to prove his case in a competent court to retry it on the merits; and it seems to me that the doctrine of res judicata applicable to domestic judgments should be applied to foreign judgments as well, and rests on the same general ground of public policy, that there should be an end of litigation. 179 This application of the doctrine is in accordance with our own jurisprudence, and it is not necessary that we should hold it to be required by some rule of international law. The fundamental principle concerning judgments is that disputes are finally determined by them, and I am unable to perceive why a judgment in personam, which is not open to question on the ground of want of jurisdiction, either intrinsically or over the parties, or of fraud, or on any other recognized ground of impeachment, should not be held, inter partes, though recovered abroad, conclusive on the merits. 180 Judgments are executory while unpaid, but in this country execution is not given upon a foreign judgment as such, it being enforced through a new judgment obtained in an action brought for that purpose. 181 The principle that requires litigation to be treated as terminated by final judgment, properly rendered, is as applicable to a judgment proceeded on in such an action as to any other, and forbids the allowance to the 183 The following view of the rule in England was expressed by Lord Herschell in Nouvion v. Freeman, 15 App. Cas. 1, 9, quoted in the principal opinion: 'The principle upon which I think our enforcement of foreign judgments must proceed is this: That in a court of competent jurisdiction, where, according to its established procedure, the whole merits of the case were open, at all events, to the parties, however much they may have failed to take advantage of them or may have waived any of their rights, a final adjudication has been given that a debt or obligation exists, which cannot thereafter in that court be disputed, and can only be questioned in an appeal to a higher tribunal. In such a case it may well be said that, giving credit to the court of another country, we are prepared to take the fact that such adjudication has been made as establishing the existence of the debt or obligation.' But in that connection the observations made by Mr. Justice Blackburn in Godard v. Gray, L. R. 6 Q. B. 139, 148, and often referred to with approval, may usefully again be quoted: That any other conclusion is inadmissible is forcibly illustrated by the case in hand. Plaintiffs in error were trading copartners in Paris as well as in New York, and had a place of business in Paris at the time of these transactions and of the commencement of the suit against them in France. The subjects of the suit were commercial transactions, having their origin, and partly performed, in France, under a contract there made, and alleged to be modified by the dealings of the parties there, and one of thej claims against them was for goods sold to them there. They appeared generally in the case, without protest, and by counterclaims relating to the same general course of business, a part of them only connected with the claims against them, became actors in the suit, and submitted to the courts their own claims for affirmative relief, as well as the claims against them. The courts were competent, and they took the chances of a decision in their favor. As traders in France they were under the protection of its laws, and were bound by its laws, its commercial usages, and its rules of procedure. The fact that they were Americans and the opposite parties were citizens of France is immaterial, and there is no suggestion on the record that those courts proceeded on any other ground than that all litigants, whatever their nationality, were entitled to equal justice therein. If plaintiffs in error had succeeded in their cross suit and recovered judgment against defendants in error, and had sued them here on that judgment, defendants in error would not have been permitted to say that the judgment in France was not conclusive against them. As it was, defendants in error recovered, and I think plaintiffs in error are not entitled to try their fortune anew before the courts of this country on the same matters voluntarily submitted by them to the decision of the foreign tribunal. We are dealing with the judgment of a court of a civilized country, whose laws and system of justice recognize the general rules in respect to property and rights between man and man prevailing among all civilized peoples. Obviously, the last persons who should be heard to complain are those who identified themselves with the business of that country, knowing that all their transactions there would be subject to the local laws and modes of doing business. The French courts appear to have acted 'judicially, honestly, and with the intention to arrive at the right conclusion,' and a result thus reached ought not to be disturbed. judgment debtor of a retrial of the original cause of action, as of right, in disregard of the obligation to pay arising on the judgment, and of the rights acquired by the judgment creditor thereby.
269
184 'It is not an admitted principle of the law of nations that a state is bound to enforce within its territories the judgments of a foreign tribunal. Several of the continental nations (including France) do not enforce the judgments of other countries, unless where there are reciprocal treaties to that effect. But in England, and in those states which are governed by the common law, such judgments are enforced, not by virtue of any treaty nor by virtue of any statute, but upon a principle very well stated by Parke, B., in Williams v. Jones, 13 Mees. & W. 633: 'Where a court of competent jurisdiction had adjudicated a certain sum to be due from one person to another, a legal obligation arises to pay that sum, on which an action of debt to enforce the judgment may be maintained. It is in this way that the judgments of foreign and colonial courts are supported and enforced.' And taking this as the principle, it seems to follow that anything which negatives the existence of that legal obligation, or excuses the defendant from the performance of it, must form a good defense to the action. It must be open, therefore, to the defendant to show that the court which pronounced the judgment had not jurisdiction to pronounce it, either because they exceeded the jurisdiction given to them by the foreign law, or because he, the defendant, was not subject to that jurisdiction; and so far the foreign judgment must be examinable. Probably the defendant may show that the judgment was obtained by the fraud of the plaintiff, for that would show that the defendant was excused from the performance of an obligation thus obtained; and it may be that where the foreign court has knowingly and perversely disregarded the rights given to an English subject by English law, that forms a valid excuse for disregarding the obligation thus imposed on him; but we prefer to imitate the caution of the present lord chancellor in Castrique v. Imrie, L. R. 4 H. L. 445, and to leave those questions to be decided when they arise, only observing in the present case, as in that: 'The whole of the facts appear to have been inquired into by the French courts judicially, honestly, and with the intention to arrive at the right conclusion; and, having heard the facts as stated before them, they came to a conclusion which justified them in France in deciding as they did decide.' * * * Indeed, it is difficult to understand how the common course of pleading is consistent with any notion that the judgment was only evidence. If that were so, every count on a foreign judgment must be demurrable on that ground. The mode of pleading shows that the judgment was considered, not as merely prima facie evidence of that cause of action for which the judgment was given, but as in itself giving rise, at least prima facie, to a legal obligation to obey that judgment, and pay the sum adjudged. This may seem a technical mode of dealing with the question; but in truth it goes to the root of the matter; for, if the judgment were merely considered as evidence of the original cause of action, it must be open to meet it by any counter evidence negativing the existence of that original cause of action. If, on the other hand, there is a prima facie obligation to obey the judgment of a tribunal having jurisdiction over the party and the cause, and to pay the sum decreed, the question would be whether it was open to the unsuccessful party to try the cause over again in a court not sitting as a court of appeal from that which gave the judgment. It is quite clear that this could not be done where the action is brought on the judgment of an English tribunal; and, on principle, it seems the same rule should apply where it is brought on that of a foreign tribunal.' 185 In any aspect, it is difficult to see why rights acquired under foreign judgments do not belong to the category of private rights acquired under foreign laws. Now, the rule is universal in this country that private 188 I cannot yield my assent to the proposition that, because by legislation and judicial decision in France that effect is not there given to judgments recovered in this country which, according to our jurisprudence, we whink should be given to judgments wherever recovered (subject, of course, to the recognized exceptions), therefore we should pursue the same line of conduct as respects the judgments of French tribunals. The application of the doctrine of res judicata does not rest in discretion; and it is for the government, and not for its courts, to adopt the principle of retorsion, if deemed under any circumstances desirable or necessary. 189 As the court expressly abstains from deciding whether the judgment is impeachable on the ground of fraud, I refrain from any observations on that branch of the case. 187 It is held by the majority of the court that defendants cannot be permitted to contest the validity and effect of this judgment on the general ground that it was erroneous in law or in fact, and the special grounds relied on are seriatim rejected. In respect of the last of thesethat of fraudit is said that it is unnecessary in this case to decide whether certain decisions cited in regard to impeaching foreign judgments for fraud could be followed consistently with our own decisions as to impeaching domestic judgments for that reason, 'because there is a distinct and independent ground upon which we are satisfied that the comity of our nation does not require us to give conclusive effect to the judgments of the courts of France, and that ground is the want of reciprocity on the part of France as to the effect to be given to the judgments of this and other foreign countries.' And the conclusion is announced to be 'that judgments rendered in France, or in any other foreign country, by the laws of which our own judgments are reviewable upon the merits, are not entitled to full credit and conclusive effect when sued upon in this country, but are prima facie evidence only of the justice of the plaintiff's claim.' In other words, that, although no special ground exists for impeaching the original justice of a judgment, such as want of jurisdiction or fraud, the right to retry the merits of the original cause at large, defendant being put upon proving those merits, should be accorded in every suit on judgments recovered in countries where our own judgments are not given full effect, on that ground merely. 186 And, without going into the refinements of the publicists on the subject, it appears to me that that law finds authoritative expression in the judgments of courts of competent jurisdiction over parties and subjectmatter. rights acquired under the laws of foreign states will be respected and enforced in our courts unless contrary to the policy or prejudicial to the interests of the state where this is sought to be done; and, although the source of this rule may have been the comity characterizing the intercourse between nations, it prevails to-day by its own strength, and the right to the application of the law to which the particular transaction is subject is a juridical right.
270
190 Mr. Justice HARLAN, Mr. Justice BREWER, and Mr. Justice JACKSON concur in this dissent.
THIRD DIVISION
[G.R. No. 137378. October 12, 2000]
PHILIPPINE ALUMINUM WHEELS, INC., petitioner, vs. FASGI ENTERPRISES, INC., respondent.
271
DECISION VITUG, J.: On 01 June 1978, FASGI Enterprises Incorporated ("FASGI"), a corporation organized and existing under and by virtue of the laws of the State of California, United States of America, entered into a distributorship arrangement with Philippine Aluminum Wheels, Incorporated ("PAWI"), a Philippine corporation, and Fratelli Pedrini Sarezzo S.P.A. ("FPS"), an Italian corporation.The agreement provided for the purchase, importation and distributorship in the United States of aluminum wheels manufactured by PAWI. Pursuant to the contract, PAWI shipped to FASGI a total of eight thousand five hundred ninety four (8,594) wheels, with an FOB value of US$216,444.30 at the time of shipment, the first batch arriving in two containers and the second in three containers. Thereabouts, FASGI paid PAWI the FOB value of the wheels. Unfortunately, FASGI later found the shipment to be defective and in non-compliance with stated requirements, viz; "A. contrary to the terms of the Distributorship Agreement and in violation of U.S. law, the country of origin (the Philippines) was not stamped on the wheels; "B. the wheels did not have weight load limits stamped on them as required to avoid mounting on excessively heavy vehicles, resulting in risk of damage or bodily injury to consumers arising from possible shattering of the wheels; "C. many of the wheels did not have an indication as to which models of automobile they would fit; "D. many of the wheels did not fit the model automobiles for which they were purportedly designed; "E. some of the wheels did not fit any model automobile in use in the United States; "F. most of the boxes in which the wheels were packed indicated that the wheels were approved by the Specialty Equipment Manufacturer's Association (hereafter, `SEMA'); in fact no SEMA approval has been obtained and this indication was therefore false and could result in fraud upon retail customers purchasing the wheels."[1] On 21 September 1979, FASGI instituted an action against PAWI and FPS for breach of contract and recovery of damages in the amount of US$2,316,591.00 before the United States District Court for the Central District of California. In January 1980, during the pendency of the case, the parties entered into a settlement, entitled "Transaction" with the corresponding Italian translation "Convenzione Transsativa," where it was stipulated that FPS and PAWI would accept the return of not less than 8,100 wheels after restoring to FASGI the purchase price of US$268,750.00 viafour (4) irrevocable letters of credit ("LC"). The rescission of the contract of distributorship was to be effected within the period starting January up until April 1980.[2] In a telex message, dated 02 March 1980, PAWI president Romeo Rojas expressed the company's inability to comply with the foregoing agreement and proposed a revised schedule of payment. The message, in part, read: "We are most anxious in fulfilling all our obligations under compromise agreement executed by our Mr. Giancarlo Dallera and your Van Curen. We have tried our best to comply with our commitments, however, because of the situation as mentioned in the foregoing and currency regulations and restrictions imposed by our government on the outflow, of foreign currency from our country, we are constrained to request for a revised schedule of shipment and opening of L/Cs. "After consulting with our bank and government monetary agencies and on the assumption that we submit the required pro-forma invoices we can open the letters of credit in your favor under the following schedule: "A) First L/C - it will be issued in April 1980 payable 90 days thereafter "B) Second L/C - it will be issued in June 1980 payable 90 days thereafter "C) Third L/C - it will be issued in August 1980 payable 90 days thereafter "D) Fourth L/C - it will be issued in November 1980 payable 90 days thereafter "We understand your situation regarding the lease of your warehouse. For this reason, we are willing to defray the extra storage charges resulting from this new schedule. If you cannot renew the lease [of] your present warehouse, perhaps you can arrange to transfer to another warehouse and storage charges transfer thereon will be for our account. We hope you understand our position. The delay and the revised schedules were caused by circumstances totally beyond our control."[3] On 21 April 1980, again through a telex message, PAWI informed FASGI that it was impossible to open a letter of credit on or before April 1980 but assured that it would do its best to comply with the suggested schedule of payments.[4] In its telex reply of 29 April 1980, FASGI insisted that PAWI should meet the terms of the proposed schedule of payments, specifically its undertaking to open the first LC within April of 1980, and that "If the letter of credit is not opened by April 30, 1980, then x x x [it would] immediately take all necessary legal action to protect [its] position."[5] Despite its assurances, and FASGI's insistence, PAWI failed to open the first LC in April 1980 allegedly due to Central Bank "inquiries and restrictions," prompting FASGI to pursue its complaint for damages against PAWI before the California district court. Pre-trial conference was held on 24 November 1980. In the interim, the parties, realizing the protracted process of litigation, resolved to enter into another arrangement, this time entitled "Supplemental Settlement Agreement," on 26 November 1980. In substance, the covenant provided that FASGI would deliver to PAWI a container of wheels for every LC opened and paid by PAWI: "3. Agreement "3.1 Sellers agree to pay FASGI Two Hundred Sixty-Eight Thousand, Seven Hundred Fifty and 00/100 Dollars ($268,750.00), plus interest and storage costs as described below. Sellers shall pay such amount by delivering to FASGI the following four (4) irrevocable letters of credit, confirmed by Crocker Bank, Main Branch, Fresno, California, as set forth below: "(i) on or before June 30, 1980, a documentary letter of credit in the amount of (a) Sixty-Five Thousand, Three Hundred Sixty-nine and 00/100 Dollars ($65,369.00), (b) plus interest on that amount at the annual rate of 16.25% from January 1, 1980 until July 31, 1980, (c) plus Two Thousand Nine Hundred Forty Dollars and 00/100 ($2,940.00) and (d) with interest on that sum at the annual rate of 16.25% from May 1, 1980 to July 31, 1980, payable on or after August 31, 1980; "(ii) on or before September 1, 1980, a documentary letter of credit in the amount of (a) Sixty-Seven Thousand, Seven Hundred Ninety-Three Dollars and Sixty-Seven Cents ($67,793.67) plus (b) Two Thousand, Nine Hundred Forty and 00/100 Dollars ($2,940.00), plus (c) interest at an annual rate equal to the prime rate of Crocker Bank, San Francisco, in effect from time to time, plus two percent on the amount in (a) from January 1, 1980 until December 21, 1980, and on the amount set forth in (b) from May 1, 1980 until December 21, 1980, payable ninety days after the date of the bill of lading under the letter of credit; "(iii) on or before November 1, 1980, a documentary letter of credit in the amount of (a) Sixty-Seven Thousand, Seven Hundred Ninety-Three Dollars and Sixty-Seven Cents ($67,793.67) plus (b) Two Thousand, Nine Hundred Forty and 00/100 Dollars ($2,490.00), plus (c) interest at an annual rate equal to the prime rate of Crocker Bank, San Francisco, in effect from time to time, plus two percent on the amount in (a) from
272
January 1, 1980 until February 21, 1981, and on the amount set forth in (b) from May 1, 1980 until February 21, 1981, payable ninety days after the date of the bill of lading under the latter of credit; "(iv) on or before January 1, 1981, a documentary letter of credit in the amount of (a) Sixty-Seven Thousand, Seven Hundred Ninety-Three Dollars and Sixty-Seven Cents ($67,793.67) plus (b) Five Thousand, Eight Hundred Eighty and 00/100 Dollars ($5,880.00), plus (c) interest at an annual rate equal to the prime rate of Crocker Bank, San Francisco, in effect from time to time, plus two percent on the amount in (a) from January 1, 1980 until April 21, 1981, and on the amount set forth in (b) from May 1, 1980 until April 21, 1981, payable ninety days after the date of the bill of lading under the latter of credit."[6] Anent the wheels still in the custody of FASGI, the supplemental settlement agreement provided that "3.4 (a) Upon execution of this Supplemental Settlement Agreement, the obligations of FASGI to store or maintain the Containers and Wheels shall be limited to (i) storing the Wheels and Containers in their present warehouse location and (ii) maintaining in effect FASGI's current insurance in favor of FASGI, insuring against usual commercial risks for such storage in the principal amount of the Letters of Credit described in Paragraph 3.1. FASGI shall bear no liability, responsibility or risk for uninsurable risks or casualties to the Containers or Wheels. "x x x x x x x x x "(e) From and after February 28, 1981, unless delivery of the Letters of Credit are delayed past such date pursuant to the penultimate Paragraph 3.1, in which case from and after such later date, FASGI shall have no obligation to maintain, store or deliver any of the Containers or Wheels."[7] The deal allowed FASGI to enter before the California court the foregoing stipulations in the event of the failure of PAWI to make good the scheduled payments; thus "3.5 Concurrently with execution and delivery hereof, the parties have executed and delivered a Mutual Release (the `Mutual Release'), and a Stipulation for Judgment (the `Stipulation for Judgment') with respect to the Action. In the event of breach of this Supplemental Settlement Agreement by Sellers, FASGI shall have the right to apply immediately to the Court for entry of Judgment pursuant to the Stipulation for Judgment in the full amount thereof, less credit for any payments made by Sellers pursuant to this Supplemental Settlement Agreement. FASGI shall have the right thereafter to enforce the Judgment against PAWI and FPS in the United States and in any other country where assets of FPS or PAWI may be located, and FPS and PAWI hereby waive all defenses in any such country to execution or enforcement of the Judgment by FASGI. Specifically, FPS and PAWI each consent to the jurisdiction of the Italian and Philippine courts in any action brought by FASGI to seek a judgment in those countries based upon a judgment against FPS or PAWI in the Action."[8] In accordance with the aforementioned paragraph 3.5 of the agreement, the parties made the following stipulation before the California court: "The undersigned parties hereto, having entered into a Supplemental Settlement Agreement in this action, "IT IS HEREBY STIPULATED by and between plaintiff FASGI Enterprises, Inc. (`FASGI') and defendants Philippine Aluminum Wheels, Inc., (`PAWI'), and each of them, that judgment may be entered in favor of plaintiff FASGI and against PAWI, in the amount of Two Hundred Eighty Three Thousand Four Hundred Eighty And 01/100ths Dollars ($283,480.01). "Plaintiff FASGI shall also be entitled to its costs of suit, and to reasonable attorneys' fees as determined by the Court added to the above judgment amount."[9] The foregoing supplemental settlement agreement, as well as the motion for the entry of judgment, was executed by FASGI president Elena Buholzer and PAWI counsel Mr. Thomas Ready. PAWI, again, proved to be remiss in its obligation under the supplemental settlement agreement. While it opened the first LC on 19 June 1980, it, however, only paid on it nine (9) months after, or on 20 March 1981, when the letters of credit by then were supposed to have all been already posted. This lapse, notwithstanding, FASGI promptly shipped to PAWI the first container of wheels. Again, despite the delay incurred by PAWI on the second LC, FASGI readily delivered the second container. Later, PAWI totally defaulted in opening and paying the third and the fourth LCs, scheduled to be opened on or before, respectively, 01 September 1980 and 01 November 1980, and each to be paid ninety (90) days after the date of the bill of lading under the LC. As so expressed in their affidavits, FASGI counsel Frank Ker and FASGI president Elena Buholzer were more inclined to believe that PAWI's failure to pay was due not to any restriction by the Central Bank or any other cause than its inability to pay. These doubts were based on the telex message of PAWI president Romeo Rojas who attached a copy of a communication from the Central Bank notifying PAWI of the bank's approval of PAWI's request to open LCs to cover payment for the reimportation of the wheels. The communication having been sent to FASGI before the supplemental settlement agreement was executed, FASGI speculated that at the time PAWI subsequently entered into the supplemental settlement agreement, its request to open LCs had already been approved by the Central Bank. Irked by PAWI's persistent default, FASGI filed with the US District Court of the Central District of California the following stipulation for judgment against PAWI. "PLEASE TAKE NOTICE that on May 17, 1982 at 10:00 A.M. in the Courtroom of the Honorable Laughlin E. Waters of the above Court, plaintiff FASGI ENTERPRISES, INC. (hereinafter `FASGI') will move the Court for entry of Judgment against defendant PHILIPPINE ALUMINUM WHEELS, INC. (hereinafter `PAWI'), pursuant to the Stipulation for Judgment filed concurrently herewith, executed on behalf of FASGI and PAWI by their respective attorneys, acting as their authorized agents. "Judgment will be sought in the total amount of P252,850.60, including principal and interest accrued through May 17, 1982, plus the sum of $17,500.00 as reasonable attorneys' fees for plaintiff in prosecuting this action. "The Motion will be made under Rule 54 of the Federal Rules of Civil Procedure, pursuant to and based upon the Stipulation for Judgment, the Supplemental Settlement Agreement filed herein on or about November 21, 1980, the Memorandum of Points and Authorities and Affidavits of Elena Buholzer, Franck G. Ker and Stan Cornwell all filed herewith, and upon all the records, files and pleadings in this action. "The Motion is made on the grounds that defendant PAWI has breached its obligations as set forth in the Supplemental Settlement Agreement, and that the Supplemental Settlement Agreement expressly permits FASGI to enter the Stipulation for Judgment in the event that PAWI has not performed under the Supplemental Settlement Agreement."[10] On 24 August 1982, FASGI filed a notice of entry of judgment. A certificate of finality of judgment was issued, on 07 September 1982, by the US District Judge of the District Court for the Central District of California. PAWI, by this time, was approximately twenty (20) months in arrears in its obligation under the supplemental settlement agreement. Unable to obtain satisfaction of the final judgment within the United States, FASGI filed a complaint for "enforcement of foreign judgment" in February 1983, before the Regional Trial Court, Branch 61, of Makati, Philippines. The Makati court, however, in an order of 11 September 1990, dismissed the case, thereby denying the enforcement of the foreign judgment within Philippine jurisdiction, on the ground that the decree was tainted with collusion, fraud, and clear mistake of law and fact. [11] The lower court ruled that the foreign judgment ignored the reciprocal obligations of the parties. While the assailed foreign judgment ordered the return by PAWI of the purchase amount, no similar order was made requiring FASGI to return to PAWI the
273
third and fourth containers of wheels.[12] This situation, the trial court maintained, amounted to an unjust enrichment on the part of FASGI. Furthermore, the trial court said, the supplemental settlement agreement and the subsequent motion for entry of judgment upon which the California court had based its judgment were a nullity for having been entered into by Mr. Thomas Ready, counsel for PAWI, without the latter's authorization. FASGI appealed the decision of the trial court to the Court of Appeals. In a decision,[13] dated 30 July 1997, the appellate court reversed the decision of the trial court and ordered the full enforcement of the California judgment. Hence this appeal. Generally, in the absence of a special compact, no sovereign is bound to give effect within its dominion to a judgment rendered by a tribunal of another country;[14] however, the rules of comity, utility and convenience of nations have established a usage among civilized states by which final judgments of foreign courts of competent jurisdiction are reciprocally respected and rendered efficacious under certain conditions that may vary in different countries.[15] In this jurisdiction, a valid judgment rendered by a foreign tribunal may be recognized insofar as the immediate parties and the underlying cause of action are concerned so long as it is convincingly shown that there has been an opportunity for a full and fair hearing before a court of competent jurisdiction; that trial upon regular proceedings has been conducted, following due citation or voluntary appearance of the defendant and under a system of jurisprudence likely to secure an impartial administration of justice; and that there is nothing to indicate either a prejudice in court and in the system of laws under which it is sitting or fraud in procuring the judgment.[16] A foreign judgment is presumed to be valid and binding in the country from which it comes, until a contrary showing, on the basis of a presumption of regularity of proceedings and the giving of due notice in the foreign forum. Rule 39, section 48 of the Rules of Court of the Philippines provides: Sec. 48. Effect of foreign judgments or final orders - The effect of a judgment or final order of a tribunal of a foreign country, having jurisdiction to render the judgment or final order is as follows: xxxx (b) In case of a judgment or final order against a person, the judgment or final order is presumptive evidence of a right as between the parties and their successors-in-interest by a subsequent title. In either case, the judgment or final order may be repelled by evidence a want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact. In Soorajmull Nagarmull vs. Binalbagan-Isabela Sugar Co. Inc.,[17] one of the early Philippine cases on the enforcement of foreign judgments, this Court has ruled that a judgment for a sum of money rendered in a foreign court is presumptive evidence of a right between the parties and their successors-in-interest by subsequent title, but when suit for its enforcement is brought in a Philippine court, such judgment may be repelled by evidence of want of jurisdiction, want of notice to the party, collusion, fraud or clear mistake of law or fact. In Northwest Orient Airlines, Inc., vs. Court of Appeals,[18] the Court has said that a party attacking a foreign judgment is tasked with the burden of overcoming its presumptive validity. PAWI claims that its counsel, Mr. Ready, has acted without its authority. Verily, in this jurisdiction, it is clear that an attorney cannot, without a client's authorization, settle the action or subject matter of the litigation even when he honestly believes that such a settlement will best serve his client's interest.[19] In the instant case, the supplemental settlement agreement was signed by the parties, including Mr. Thomas Ready, on 06 October 1980. The agreement was lodged in the California case on26 November 1980 or two (2) days after the pre-trial conference held on 24 November 1980. If Mr. Ready was indeed not authorized by PAWI to enter into the supplemental settlement agreement, PAWI could have forthwith signified to FASGI a disclaimer of the settlement. Instead, more than a year after the execution of the supplemental settlement agreement, particularly on 09 October 1981, PAWI President Romeo S. Rojas sent a communication to Elena Buholzer of FASGI that failed to mention Mr. Ready's supposed lack of authority. On the contrary, the letter confirmed the terms of the agreement when Mr. Rojas sought forbearance for the impending delay in the opening of the first letter of credit under the schedule stipulated in the agreement. It is an accepted rule that when a client, upon becoming aware of the compromise and the judgment thereon, fails to promptly repudiate the action of his attorney, he will not afterwards be heard to complain about it.[20] Nor could PAWI claim any prejudice by the settlement. PAWI was spared from possibly paying FASGI substantial amounts of damages and incurring heavy litigation expenses normally generated in a full-blown trial. PAWI, under the agreement was afforded time to reimburse FASGI the price it had paid for the defective wheels. PAWI, should not, after its opportunity to enjoy the benefits of the agreement, be allowed to later disown the arrangement when the terms thereof ultimately would prove to operate against its hopeful expectations. PAWI assailed not only Mr. Ready's authority to sign on its behalf the Supplemental Settlement Agreement but denounced likewise his authority to enter into a stipulation for judgment before the California court on 06 August 1982 on the ground that it had by then already terminated the former's services. For his part, Mr. Ready admitted that while he did receive a request from Manuel Singson of PAWI to withdraw from the motion of judgment, the request unfortunately came too late. In an explanatory telex, Mr. Ready told Mr. Singson that under American Judicial Procedures when a motion for judgment had already been filed a counsel would not be permitted to withdraw unilaterally without a court order. From the time the stipulation for judgment was entered into on 26 April 1982 until the certificate of finality of judgment was issued by the California court on 07 September 1982, no notification was issued by PAWI to FASGI regarding its termination of Mr. Ready's services. If PAWI were indeed hoodwinked by Mr. Ready who purportedly acted in collusion with FASGI, it should have aptly raised the issue before the forum which issued the judgment in line with the principle of international comity that a court of another jurisdiction should refrain, as a matter of propriety and fairness, from so assuming the power of passing judgment on the correctness of the application of law and the evaluation of the facts of the judgment issued by another tribunal.[21] Fraud, to hinder the enforcement within this jurisdiction of a foreign judgment, must be extrinsic, i.e., fraud based on facts not controverted or resolved in the case where judgment is rendered, [22] or that which would go to the jurisdiction of the court or would deprive the party against whom judgment is rendered a chance to defend the action to which he has a meritorious case or defense. In fine, intrinsic fraud, that is, fraud which goes to the very existence of the cause of action - such as fraud in obtaining the consent to a contract is deemed already adjudged, and it, therefore, cannot militate against the recognition or enforcement of the foreign judgment.[23] Even while the US judgment was against both FPS and PAWI, FASGI had every right to seek enforcement of the judgment solely against PAWI or, for that matter, only against FPS. FASGI, in its complaint, explained: "17. There exists, and at all times relevant herein there existed, a unity of interest and ownership between defendant PAWI and defendant FPS, in that they are owned and controlled by the same shareholders and managers, such that any individuality and separateness between these defendants has ceased, if it ever existed, and defendant FPS is the alter ego of defendant PAWI. The two entities are used interchangeably by their shareholders and managers, and plaintiff has found it impossible to ascertain with which entity it is dealing at any one time. Adherence to the fiction of separate existence of these defendant corporations would permit an abuse of the corporate privilege and would promote injustice against this plaintiff because assets can easily be shifted between the two companies thereby frustrating plaintiff's attempts to collect on any judgment rendered by this Court."[24] Paragraph 14 of the Supplemental Settlement Agreement fixed the liability of PAWI and FPS to be "joint and several" or solidary. The enforcement of the judgment against PAWI alone would not, of course, preclude it from pursuing and recovering whatever contributory liability FPS might have pursuant to their own agreement.
274
PAWI would argue that it was incumbent upon FASGI to first return the second and the third containers of defective wheels before it could be required to return to FASGI the purchase price therefor, [25] relying on their original agreement (the "Transaction").[26] Unfortunately, PAWI defaulted on its covenants thereunder that thereby occasioned the subsequent execution of the supplemental settlement agreement. This time the parties agreed, under paragraph 3.4(e)[27] thereof, that any further default by PAWI would release FASGI from any obligation to maintain, store or deliver the rejected wheels. The supplemental settlement agreement evidently superseded, at the very least on this point, the previous arrangements made by the parties. PAWI cannot, by this petition for review, seek refuge over a business dealing and decision gone awry. Neither do the courts function to relieve a party from the effects of an unwise or unfavorable contract freely entered into. As has so aptly been explained by the appellate court, the over-all picture might, indeed, appear to be onerous to PAWI but it should bear emphasis that the settlement which has become the basis for the foreign judgment has not been the start of a business venture but the end of a failed one, and each party, naturally, has had to negotiate from either position of strength or weakness depending on its own perception of who might have to bear the blame for the failure and the consequence of loss.[28] Altogether, the Court finds no reversible error on the part of the appellate court in its appealed judgment. WHEREFORE, the decision of the Court of Appeals is AFFIRMED. No costs. SO ORDERED. Melo, (Chairman), Panganiban, Purisima, and Gonzaga-Reyes, JJ., concur. On January 15, 1983, private respondent Ventura O. Ducat obtained separate loans from petitioners Ayala International Finance Limited (hereafter called AYALA) 1 and Philsec Investment Corporation (hereafter called PHILSEC) in the sum of US$2,500,000.00, secured by shares of stock owned by Ducat with a market value of P14,088,995.00. In order to facilitate the payment of the loans, private respondent 1488, Inc., through its president, private respondent Drago Daic, assumed Ducat's obligation under an Agreement, dated January 27, 1983, whereby 1488, Inc. executed a Warranty Deed with Vendor's Lien by which it sold to petitioner Athona Holdings, N.V. (hereafter called ATHONA) a parcel of land in Harris County, Texas, U.S.A., for US$2,807,209.02, while PHILSEC and AYALA extended a loan to ATHONA in the amount of US$2,500,000.00 as initial payment of the purchase price. The balance of US$307,209.02 was to be paid by means of a promissory note executed by ATHONA in favor of 1488, Inc. Subsequently, upon their receipt of the US$2,500,000.00 from 1488, Inc., PHILSEC and AYALA released Ducat from his indebtedness and delivered to 1488, Inc. all the shares of stock in their possession belonging to Ducat. As ATHONA failed to pay the interest on the balance of US$307,209.02, the entire amount covered by the note became due and demandable. Accordingly, on October 17, 1985, private respondent 1488, Inc. sued petitioners PHILSEC, AYALA, and ATHONA in the United States for payment of the balance of US$307,209.02 and for damages for breach of contract and for fraud allegedly perpetrated by petitioners in misrepresenting the marketability of the shares of stock delivered to 1488, Inc. under the Agreement. Originally instituted in the United States District Court of Texas, 165th Judicial District, where it was docketed as Case No. 85-57746, the venue of the action was later transferred to the United States District Court for the Southern District of Texas, where 1488, Inc. filed an amended complaint, reiterating its allegations in the original complaint. ATHONA filed an answer with counterclaim, impleading private respondents herein as counterdefendants, for allegedly conspiring in selling the property at a price over its market value. Private respondent Perlas, who had allegedly appraised the property, was later dropped as counterdefendant. ATHONA sought the recovery of damages and excess payment allegedly made to 1488, Inc. and, in the alternative, the rescission of sale of the property. For their part, PHILSEC and AYALA filed a motion to dismiss on the ground of lack of jurisdiction over their person, but, as their motion was denied, they later filed a joint answer with counterclaim against private respondents and Edgardo V. Guevarra, PHILSEC's own former president, for the rescission of the sale on the ground that the property had been overvalued. On March 13, 1990, the United States District Court for the Southern District of Texas dismissed the counterclaim against Edgardo V. Guevarra on the ground that it was "frivolous and [was] brought against him simply to humiliate and embarrass him." For this reason, the U.S. court imposed so-called Rule 11 sanctions on PHILSEC and AYALA and ordered them to pay damages to Guevarra. On April 10, 1987, while Civil Case No. H-86-440 was pending in the United States, petitioners filed a complaint "For Sum of Money with Damages and Writ of Preliminary Attachment" against private respondents in the Regional Trial Court of Makati, where it was docketed as Civil Case No. 16563. The complaint reiterated the allegation of petitioners in their respective counterclaims in Civil Action No. H-86-440 of the United States vs. THE HONORABLE COURT OF APPEALS, 1488, INC., DRAGO DAIC, VENTURA O. DUCAT, PRECIOSO R. PERLAS, and WILLIAM H. CRAIG, respondents.
MENDOZA, J.: This case presents for determination the conclusiveness of a foreign judgment upon the rights of the parties under the same cause of action asserted in a case in our local court. Petitioners brought this case in the Regional Trial Court of Makati, Branch 56, which, in view of the pendency at the time of the foreign action, dismissed Civil Case No. 16563 on the ground of litis pendentia, in addition to forum non conveniens. On appeal, the Court of Appeals affirmed. Hence this petition for review on certiorari. The facts are as follows:
Republic of the Philippines SUPREME COURT Manila SECOND DIVISION
G.R. No. 103493 June 19, 1997 PHILSEC INVESTMENT CORPORATION, BPI-INTERNATIONAL FINANCE LIMITED, and ATHONA HOLDINGS, N.V., petitioners,
275
District Court of Southern Texas that private respondents committed fraud by selling the property at a price 400 percent more than its true value of US$800,000.00. Petitioners claimed that, as a result of private respondents' fraudulent misrepresentations, ATHONA, PHILSEC, and AYALA were induced to enter into the Agreement and to purchase the Houston property. Petitioners prayed that private respondents be ordered to return to ATHONA the excess payment of US$1,700,000.00 and to pay damages. On April 20, 1987, the trial court issued a writ of preliminary attachment against the real and personal properties of private respondents. 2 Private respondent Ducat moved to dismiss Civil Case No. 16563 on the grounds of (1) litis pendentia, vis-avisCivil Action No. H-86-440 filed by 1488, Inc. and Daic in the U.S., (2) forum non conveniens, and (3) failure of petitioners PHILSEC and BPI-IFL to state a cause of action. Ducat contended that the alleged overpricing of the property prejudiced only petitioner ATHONA, as buyer, but not PHILSEC and BPI-IFL which were not parties to the sale and whose only participation was to extend financial accommodation to ATHONA under a separate loan agreement. On the other hand, private respondents 1488, Inc. and its president Daic filed a joint "Special Appearance and Qualified Motion to Dismiss," contending that the action being in personam, extraterritorial service of summons by publication was ineffectual and did not vest the court with jurisdiction over 1488, Inc., which is a non-resident foreign corporation, and Daic, who is a non-resident alien. On January 26, 1988, the trial court granted Ducat's motion to dismiss, stating that "the evidentiary requirements of the controversy may be more suitably tried before the forum of the litis pendentia in the U.S., under the principle in private international law of forum non conveniens," even as it noted that Ducat was not a party in the U.S. case. A separate hearing was held with regard to 1488, Inc. and Daic's motion to dismiss. On March 9, 1988, the trial court 3 granted the motion to dismiss filed by 1488, Inc. and Daic on the ground of litis pendentia considering that the "main factual element" of the cause of action in this case which is the validity of the sale of real property in the United States between defendant 1488 and plaintiff ATHONA is the subject matter of the pending case in the United States District Court which, under the doctrine of forum non conveniens, is the better (if not exclusive) forum to litigate matters needed to determine the assessment and/or fluctuations of the fair market value of real estate situated in Houston, Texas, U.S.A. from the date of the transaction in 1983 up to the present and verily, . . . (emphasis by trial court) The trial court also held itself without jurisdiction over 1488, Inc. and Daic because they were nonresidents and the action was not an action in rem or quasi in rem, so that extraterritorial service of summons was ineffective. The trial court subsequently lifted the writ of attachment it had earlier issued against the shares of stocks of 1488, Inc. and Daic. Petitioners appealed to the Court of Appeals, arguing that the trial court erred in applying the principle of litis pendentia and forum non conveniens and in ruling that it had no jurisdiction over the defendants, despite the previous attachment of shares of stocks belonging to 1488, Inc. and Daic. On January 6, 1992, the Court of Appeals 4 affirmed the dismissal of Civil Case No. 16563 against Ducat, 1488, Inc., and Daic on the ground of litis pendentia, thus: The plaintiffs in the U.S. court are 1488 Inc. and/or Drago Daic, while the defendants are Philsec, the Ayala International Finance Ltd. (BPI-IFL's former name) and the Athona Holdings, NV. The case at bar involves the same parties. The transaction sued upon by the parties, in both cases is the Warranty Deed executed by and between Athona Holdings and 1488 Inc. In the U.S. case, breach of contract and the promissory note are sued upon by 1488 Inc., which likewise alleges fraud employed by herein appellants, on the marketability of Ducat's securities given in exchange for the Texas property. The recovery of a sum of money and damages, for fraud purportedly committed by appellees, in overpricing the Texas land, constitute the action before the Philippine court, which likewise stems from the same Warranty Deed. The Court of Appeals also held that Civil Case No. 16563 was an action in personam for the recovery of a sum of money for alleged tortious acts, so that service of summons by publication did not vest the trial court with jurisdiction over 1488, Inc. and Drago Daic. The dismissal of Civil Case No. 16563 on the ground offorum non conveniens was likewise affirmed by the Court of Appeals on the ground that the case can be better tried and decided by the U.S. court: The U.S. case and the case at bar arose from only one main transaction, and involve foreign elements, to wit: 1) the property subject matter of the sale is situated in Texas, U.S.A.; 2) the seller, 1488 Inc. is a non-resident foreign corporation; 3) although the buyer, Athona Holdings, a foreign corporation which does not claim to be doing business in the Philippines, is wholly owned by Philsec, a domestic corporation, Athona Holdings is also owned by BPI-IFL, also a foreign corporation; 4) the Warranty Deed was executed in Texas, U.S.A. In their present appeal, petitioners contend that: 1. THE DOCTRINE OF PENDENCY OF ANOTHER ACTION BETWEEN THE SAME PARTIES FOR THE SAME CAUSE (LITIS PENDENTIA) RELIED UPON BY THE COURT OF APPEALS IN AFFIRMING THE TRIAL COURT'S DISMISSAL OF THE CIVIL ACTION IS NOT APPLICABLE. 2. THE PRINCIPLE OF FORUM NON CONVENIENS ALSO RELIED UPON BY THE COURT OF APPEALS IN AFFIRMING THE DISMISSAL BY THE TRIAL COURT OF THE CIVIL ACTION IS LIKEWISE NOT APPLICABLE. 3. AS A COROLLARY TO THE FIRST TWO GROUNDS, THE COURT OF APPEALS ERRED IN NOT HOLDING THAT PHILIPPINE PUBLIC POLICY REQUIRED THE ASSUMPTION, NOT THE RELINQUISHMENT, BY THE TRIAL COURT OF ITS RIGHTFUL JURISDICTION IN THE CIVIL ACTION FOR THERE IS EVERY REASON TO PROTECT AND VINDICATE PETITIONERS' RIGHTS FOR TORTIOUS OR WRONGFUL ACTS OR CONDUCT PRIVATE RESPONDENTS (WHO ARE MOSTLY NON-RESIDENT ALIENS) INFLICTED UPON THEM HERE IN THE PHILIPPINES. We will deal with these contentions in the order in which they are made. First. It is important to note in connection with the first point that while the present case was pending in the Court of Appeals, the United States District Court for the Southern District of Texas rendered judgment 5 in the case before it. The judgment, which was in favor of private respondents, was affirmed on appeal by the Circuit Court of Appeals. 6 Thus, the principal issue to be resolved in this case is whether Civil Case No. 16536 is barred by the judgment of the U.S. court. Private respondents contend that for a foreign judgment to be pleaded as res judicata, a judgment admitting the foreign decision is not necessary. On the other hand, petitioners argue that the foreign judgment cannot be given the effect of res judicata without giving them an opportunity to impeach it on grounds stated in Rule 39, 50 of the Rules of Court, to wit: "want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact."
276
Petitioners' contention is meritorious. While this Court has given the effect of res judicata to foreign judgments in several cases, 7 it was after the parties opposed to the judgment had been given ample opportunity to repel them on grounds allowed under the law. 8 It is not necessary for this purpose to initiate a separate action or proceeding for enforcement of the foreign judgment. What is essential is that there is opportunity to challenge the foreign judgment, in order for the court to properly determine its efficacy. This is because in this jurisdiction, with respect to actions in personam, as distinguished from actions in rem, a foreign judgment merely constitutes prima facieevidence of the justness of the claim of a party and, as such, is subject to proof to the contrary. 9 Rule 39, 50 provides: Sec. 50. Effect of foreign judgments. The effect of a judgment of a tribunal of a foreign country, having jurisdiction to pronounce the judgment is as follows: (a) In case of a judgment upon a specific thing, the judgment is conclusive upon the title to the thing; (b) In case of a judgment against a person, the judgment is presumptive evidence of a right as between the parties and their successors in interest by a subsequent title; but the judgment may be repelled by evidence of a want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact. Thus, in the case of General Corporation of the Philippines v. Union Insurance Society of Canton, Ltd., 10 which private respondents invoke for claiming conclusive effect for the foreign judgment in their favor, the foreign judgment was considered res judicata because this Court found "from the evidence as well as from appellant's own pleadings" 11 that the foreign court did not make a "clear mistake of law or fact" or that its judgment was void for want of jurisdiction or because of fraud or collusion by the defendants. Trial had been previously held in the lower court and only afterward was a decision rendered, declaring the judgment of the Supreme Court of the State of Washington to have the effect of res judicata in the case before the lower court. In the same vein, in Philippines International Shipping Corp. v. Court of Appeals, 12 this Court held that the foreign judgment was valid and enforceable in the Philippines there being no showing that it was vitiated by want of notice to the party, collusion, fraud or clear mistake of law or fact. The prima facie presumption under the Rule had not been rebutted. In the case at bar, it cannot be said that petitioners were given the opportunity to challenge the judgment of the U.S. court as basis for declaring it res judicata or conclusive of the rights of private respondents. The proceedings in the trial court were summary. Neither the trial court nor the appellate court was even furnished copies of the pleadings in the U.S. court or apprised of the evidence presented thereat, to assure a proper determination of whether the issues then being litigated in the U.S. court were exactly the issues raised in this case such that the judgment that might be rendered would constitute res judicata. As the trial court stated in its disputed order dated March 9, 1988. On the plaintiff's claim in its Opposition that the causes of action of this case and the pending case in the United States are not identical, precisely the Order of January 26, 1988 never found that the causes of action of this case and the case pending before the USA Court, were identical. (emphasis added) It was error therefore for the Court of Appeals to summarily rule that petitioners' action is barred by the principle of res judicata. Petitioners in fact questioned the jurisdiction of the U.S. court over their persons, but their claim was brushed aside by both the trial court and the Court of Appeals. 13 Moreover, the Court notes that on April 22, 1992, 1488, Inc. and Daic filed a petition for the enforcement of judgment in the Regional Trial Court of Makati, where it was docketed as Civil Case No. 92-1070 and assigned to Branch 134, although the proceedings were suspended because of the pendency of this case. To sustain the appellate court's ruling that the foreign judgment constitutes res judicata and is a bar to the claim of petitioners would effectively preclude petitioners from repelling the judgment in the case for enforcement. An absurdity could then arise: a foreign judgment is not subject to challenge by the plaintiff against whom it is invoked, if it is pleaded to resist a claim as in this case, but it may be opposed by the defendant if the foreign judgment is sought to be enforced against him in a separate proceeding. This is plainly untenable. It has been held therefore that: [A] foreign judgment may not be enforced if it is not recognized in the jurisdiction where affirmative relief is being sought. Hence, in the interest of justice, the complaint should be considered as a petition for the recognition of the Hongkong judgment under Section 50 (b), Rule 39 of the Rules of Court in order that the defendant, private respondent herein, may present evidence of lack of jurisdiction, notice, collusion, fraud or clear mistake of fact and law, if applicable. 14 Accordingly, to insure the orderly administration of justice, this case and Civil Case No. 92-1070 should be consolidated. 15 After all, the two have been filed in the Regional Trial Court of Makati, albeit in different salas, this case being assigned to Branch 56 (Judge Fernando V. Gorospe), while Civil Case No. 92-1070 is pending in Branch 134 of Judge Ignacio Capulong. In such proceedings, petitioners should have the burden of impeaching the foreign judgment and only in the event they succeed in doing so may they proceed with their action against private respondents. Second. Nor is the trial court's refusal to take cognizance of the case justifiable under the principle of forum non conveniens. First, a motion to dismiss is limited to the grounds under Rule 16, 1, which does not include forum non conveniens. 16 The propriety of dismissing a case based on this principle requires a factual determination, hence, it is more properly considered a matter of defense. Second, while it is within the discretion of the trial court to abstain from assuming jurisdiction on this ground, it should do so only after "vital facts are established, to determine whether special circumstances" require the court's desistance. 17 In this case, the trial court abstained from taking jurisdiction solely on the basis of the pleadings filed by private respondents in connection with the motion to dismiss. It failed to consider that one of the plaintiffs (PHILSEC) is a domestic corporation and one of the defendants (Ventura Ducat) is a Filipino, and that it was the extinguishment of the latter's debt which was the object of the transaction under litigation. The trial court arbitrarily dismissed the case even after finding that Ducat was not a party in the U.S. case. Third. It was error we think for the Court of Appeals and the trial court to hold that jurisdiction over 1488, Inc. and Daic could not be obtained because this is an action in personam and summons were served by extraterritorial service. Rule 14, 17 on extraterritorial service provides that service of summons on a nonresident defendant may be effected out of the Philippines by leave of Court where, among others, "the property of the defendant has been attached within the Philippines." 18 It is not disputed that the properties, real and personal, of the private respondents had been attached prior to service of summons under the Order of the trial court dated April 20, 1987. 19 Fourth. As for the temporary restraining order issued by the Court on June 29, 1994, to suspend the proceedings in Civil Case No. 92-1445 filed by Edgardo V. Guevarra to enforce so-called Rule 11 sanctions imposed on the petitioners by the U.S. court, the Court finds that the judgment sought to be enforced is severable from the main judgment under consideration in Civil Case No. 16563. The separability of Guevara's claim is not only admitted by petitioners, 20 it appears from the pleadings that petitioners only belatedly impleaded Guevarra as defendant in Civil Case No. 16563. 21 Hence, the TRO should be lifted and Civil Case No. 92-1445 allowed to proceed. WHEREFORE, the decision of the Court of Appeals is REVERSED and Civil Case No. 16563 is REMANDED to the Regional Trial Court of Makati for consolidation with Civil Case No. 92-1070 and for further proceedings in accordance with this decision. The temporary restraining order issued on June 29, 1994 is hereby LIFTED.
277
SO ORDERED. Regalado, Romero, Puno and Torres, Jr., JJ., concur.
313 U.S. 487 61 S.Ct. 1020 85 L.Ed. 1477
278
KLAXON CO. v. STENTOR ELECTRIC MFG. CO., Inc. No. 741. 3 Argued May 1, 2, 1941. Decided June 2, 1941. Messrs. John Thomas Smith, of New York City, and James D. Carpenter, Jr., of Jersey City, N.J., for petitioner. [Argument of Counsel from pages 488-489 intentionally omitted] Mr. Murray C. Bernays, of New York City, for respondent. [Argument of Counsel from Pages 490-493 intentionally omitted] Mr. Justice REED delivered the opinion of the Court. 1 The principal question in this case is whether in diversity cases the federal courts must follow conflict of laws rules prevailing in the states in which they sit. We left this open in Ruhlin v. New York Life Insurance Company, 304 U.S. 202, 208, note 2, 58 S.Ct. 860, 862, 82 L.Ed. 1290. The frequent recurrence of the problem, as well as the conflict of approach to the problem between the Third Circuit's opinion here and that of the First Circuit in Sampson v. Channell, 110 F.2d 754, 759762, 128 A.L.R. 394, led us to grant certiorari. 2 In 1918 respondent, a New York corporation, transferred its entire business to petitioner, a Delaware corporation. Petitioner contracted to use its best efforts to further the manufacture and sale of certain patented devices covered by the agreement, and respondent was to have a share of petitioner's profits. The agreement was executed in New York, the assets were transferred there, and petitioner began performance there although later it moved its operations to other states. Respondent was voluntarily dissolved under New York law in 1919. Ten years later it instituted this action in the United States District Court for the District of Delaware, alleging that petitioner had failed to perform its agreement to use its best efforts. Jurisdiction rested on diversity of citizenship. In 1939 respondent recovered a jury verdict of $100,000, upon which judgment was entered. Respondent then moved to correct the judgment by adding interest at the rate of six percent from June 1, 1929, the date the action had been brought. The basis of the motion was the provision in section 480 of the New York Civil Practice Act directing that in contract actions interest be added to the principal sum 'whether theretofore liquidated or unliquidated.'1 The District Court 5 Besides these general considerations, the traditional treatment of interest in diversity cases brought in the federal courts points to the same conclusion. Section 966 of the Revised Statutes, 28 U.S.C. 811, 28 U.S.C.A. 811, relating to interest on judgments, provides that it be calculated from the date of judgment 4 We are of opinion that the prohibition declared in Erie Railroad v. T mpkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, 114 A.L.R. 1487, against such independent determinations by the federal courts extends to the field of conflict of laws. The conflict of laws rules to be applied by the federal court in Delaware must conform to those prevailing in Delaware's state courts.2Otherwise the accident of diversity of citizenship would constantly disturb equal administration of justice in coordinate state and federal courts sitting side by side. See Erie Railroad v. Tompkins, supra, 304 U.S. at 7477, 58 S.Ct. at 820822, 82 L.Ed. 1188, 114 A.L.R. 1487. Any other ruling would do violence to the principle of uniformity within a state upon which the Tompkins decision is based. Whatever lack of uniformity this may produce between federal courts in different states is attributable to our federal system, which leaves to a state, within the limits permitted by the Constitution, the right to pursue local policies diverging from those of its neighbors. It is not for the federal courts to thwart such local policies by enforcing an independent 'general law' of conflict of laws. Subject only to review by this Court on any federal question that may arise, Delaware is free to determine whether a given matter is to be governed by the law of the forum or some other law. Cf. Milwaukee County v. White Co., 296 U.S. 268, 272, 56 S.Ct. 229, 231, 80 L.Ed. 220. This Court's views are not the decisive factor in determining the applicable conflicts rule. Cf. Funkhouser v. J. B. Preston Co., 290 U.S. 163, 54 S.Ct. 134, 78 L.Ed. 243. And the proper function of the Delaware federal court is to ascertain what the state law is, not what it ought to be. The Circuit Court of Appeals was of the view that under New York law the right to interest before verdict under section 480 went to the substance of the obligation, and that proper construction of the contract in suit fixed New York as the place of performance. It then concluded that section 480 was applicable to the case because 'it is clear by what we think is undoubtedly the better view of the law that the rules for ascertaining the measure of damages are not a matter of procedure at all, but are matters of substance which should be settled by reference to the law of the appropriate state according to the type of case being tried in the forum. The measure of damages for breach of a contract is determined by the law of the place of performance; Restatement, Conflict of Laws 413.' The court referred also to section 418 of the Restatement, which makes interest part of the damages to be determined by the law of the place of performance. Application of the New York statute apparently followed from the court's independent determination of the 'better view' without regard to Delaware law, for no Delaware decision or statute was cited or discussed. granted the motion, taking the view that the rights of the parties were governed by New York law and that under New York law the addition of such interest was mandatory. 30 F.Supp. 425, 431. The Circuit Court of Appeals affirmed, 3 Cir., 115 F.2d 268, 275, and we granted certiorari, limited to the question whether section 480 of the New York Civil Practice Act is applicable to an action in the federal court in Delaware. 312 U.S. 674, 61 S.Ct. 734, 85 L.Ed. -.
279
at such rate as is allowed by law on judgments recovered in the courts of the state in which the court is held. In Massachusetts Benefit Association v. Miles, 137 U.S. 689, page 691, 11 S.Ct. 234, page 235, 34 L.Ed. 834, this Court held that section 966 did not exclude the allowance of interest on verdicts as well as judgments, and the opinion observed that 'the courts of the state and the federal courts sitting within the state should be in harmony upon this point'. 6 Looking then to the Delaware cases, petitioner relies on one group to support his contention that the Delaware state courts would refuse to apply section 480 of the New York Civil Practice Act, and respondent on another to prove the contrary. We make no analysis of these Delaware decisions, but leave this for the Circuit Court of Appeals when the case is remanded. 7 Respondent makes the further argument that the judgment must be affirmed because, under the full faith and credit clause of the Constitution, Art. 4, 1, the state courts of Delaware would be obliged to give effect to the New York statute. The argument rests mainly on the decision of this Court in John Hancock Mutual Life Insurance Company v. Yates, 299 U.S. 178, 57 S.Ct. 129, 81 L.Ed. 106, where a New York statute was held such an integral part of a contract of insurance that Georgia was compelled to sustain the contract under the full faith and credit clause. Here, however, section 480 of the New York Civil Practice Act is in no way related to the validity of the contract in suit, but merely to an incidental item of damages, interest, with respect to which courts at the forum have commonly been free to apply their own or some other law as they see fit. Nothi g in the Constitution ensures unlimited extraterritorial recognition of all statutes or of any statute under all circumstances. Pacific Employers Insurance Co. v. Industrial Accident Comm., 306 U.S. 493, 59 S.Ct. 629, 83 L.Ed. 940; Kryger v. Wilson, 242 U.S. 171, 37 S.Ct. 34, 61 L.Ed. 229. The full faith and credit clause does not go so far as to compel Delaware to apply section 480 if such application would interfere with its local policy. 8 Accordingly, the judgment is reversed and the case remanded to the Circuit Court of Appeals for decision in conformity with the law of Delaware. 9 Reversed and remanded.
640 F.2d 77
280
Hendrik KOSTER, a Citizen of the Netherlands, Plaintiff-Appellee, v. AUTOMARK INDUSTRIES, INCORPORATED, a Delaware Corporation, Defendant-Appellant. No. 80-1765. United States Court of Appeals, Seventh Circuit. Argued Dec. 11, 1980. Decided Feb. 3, 1981. John C. Loring, Chicago, Ill., for defendant-appellant. Thomas B. Cassidy, Martin, Craig, Chester & Sonnenschein, Chicago, Ill., for plaintiff-appellee. Before SPRECHER, BAUER and WOOD, Circuit Judges. HARLINGTON WOOD, Jr., Circuit Judge. 1 This diversity case involves the appeal of defendant Automark Industries, Inc. ("Automark"), a corporation doing business in Illinois, from the district court's determination on motion for summary judgment in favor of plaintiff Hendrik Koster, a citizen of the Netherlands. The district court's decision granted enforcement of a default judgment obtained in district court in Amsterdam by Koster against Automark in a case brought on a claimed breach of contract. Finding that Automark did not have sufficient contact with the Netherlands to vest that country's courts with personal jurisdiction over Automark so as to permit enforcement of the default judgment in United States courts, we reverse. 2 Whether a court may, under American law, assert jurisdiction over a foreign defendant-company depends upon whether the company "purposefully avails itself of the privilege of conducting activities within the forum State." Shaffer v. Heitner, 433 U.S. 186, 216, 97 S.Ct. 2569, 2586, 53 L.Ed.2d 683 (1977). This means that the company must pass a threshold of minimum contacts with the forum state so that it is fair to subject it to the jurisdiction of that state's courts. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292, 100 S.Ct. 559, 564, 62 L.Ed.2d 490 (1980); International Shoe v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945). 3 The parties agree that the document alleged to be Automark's contract to purchase up to 600,000 units of Koster's valve cap gauges was executed in Milan, Italy.1 The Milan meeting between Koster and Automark 6 The document at issue in the case before us was executed in Italy and involved the purchase of goods manufactured in Switzerland. While the document contains language that might be construed as an agreement to pay, which payment Koster claims was to take place in the Netherlands, such a promise even if so interpreted is not sufficient contact to confer personal jurisdiction. Kulko v. California Superior Court, 436 U.S. 84, 93 n.6, 98 S.Ct. 1690, 1697, n.6, 56 L.Ed.2d 132 (1978) (child-support payments 5 In Lakeside, the defendant construction company had ordered structural assemblies from plaintiff Lakeside, a Wisconsin company. Several letters and telephone calls had been exchanged between the two businesses, and a contract concluded by mail. The assemblies were delivered, and Lakeside sued when the defendant withheld part of the purchase price. The court assumed that the defendant believed that Lakeside would perform the contract in Wisconsin, the forum state. Focusing on the nature and quality of the contacts between the two companies, the court nevertheless concluded that Wisconsin could not assert jurisdiction over the West Virginia company because the defendant's Wisconsin contacts did not show that it "purposefully avail(ed) itself of the privilege of conducting activities within the forum state." 597 F.2d at 603. 4 The business contacts described above are insufficient to reach the minimum level needed to satisfy due process requirements prerequisite to enforcement of the Dutch default judgment. A recent opinion of this court, Lakeside Bridge & Steel Co. v. Mountain State Construction Co., 597 F.2d 596 (7th Cir. 1979), thoroughly analyzed the due process requirements of minimum contacts in concluding that a federal court sitting in a diversity case arising in Wisconsin did not have personal jurisdiction of a West Virginia defendant. Whether it be Wisconsin or the Netherlands, the standard of minimum contacts is the same. See generally Somportex Limited v. Philadelphia Chewing Gum Corp., 453 F.2d 435, 440 (3d Cir. 1971), cert. denied 405 U.S. 1017, 92 S.Ct. 1294, 31 L.Ed.2d 479 (1972). The facts in the Lakeside case were similar to those involved here, and if anything, presented a more compelling case for recognizing personal jurisdiction. followed preliminary inquiry and discussion between the two parties during a period of five months. The discussion was carried on via mail between Koster's Amsterdam office and Automark's Illinois address. Automark began the exchange of letters in June, 1970 with a one-sentence request for "descriptive material and prices" of Koster's product. Automark subsequently expressed interest in marketing the tire gauges, but stated that it needed to know the details of such important factors as Koster's relationship with the Swiss factory that produced the gauges, Koster's present patent rights, and his rights to worldwide distribution of the total output of the Swiss factory. Automark expressly disclaimed willingness to negotiate and conclude a contract through the mail.2 In early November, 1970, Automark's vice-president, J. L. Bohmrich, wrote that he would like to meet with Koster in Amsterdam or at the Swiss factory during a European trip Bohmrich planned to take later in the month. Koster replied that he would instead be willing to meet in Milan, and would telephone Bohmrich's Illinois office to make arrangements. As noted, the Milan meeting resulted in execution of the document involved in this case. So far as the record shows, Automark never ordered Koster's gauges, and Koster never shipped any gauges.
281
required under separation agreement to spouse living in California insufficient contact to confer jurisdiction on that state). 7 In comparison to the facts in the Lakeside case, Automark's only contacts with the Netherlands were eight letters, and possibly a telegram and a transatlantic telephone call all preliminary to the meeting in Italy. In Lakeside, 597 F.2d at 604, the court notes that such contacts cannot be held to satisfy jurisdictional requirements, otherwise "(u)se of the interstate telephone and mail service to communicate with (an out-ofstate) plaintiff, if constituting contacts supporting jurisdiction, would give jurisdiction to any state into which communications were directed." Such a result would make virtually every business subject to suit in any state with which it happened to communicate in some manner. That clearly would not satisfy the demands of due process. 8 Lakeside emphasizes that "the best interests of the international and state systems" of commerce should be considered when making determinations about minimum contacts in individual cases. 597 F.2d at 603, quoting Restatement (Second) of Conflict of Laws 37, Comment a (1971). This consideration weighs in favor of Automark, since it "is based on the proposition that '(a) state should not improperly impinge upon the interests of other states by trying in its courts a case with which it has no adequate relationship.' " 597 F.2d at 603, quoting Restatement, supra, 24, Comment b. The Netherlands lacks an adequate relationship to defendant's presence and conduct to justify trial of the case in that country. The interests of international business are better served by protecting potential international purchasers from being unreasonably called to defend suits commenced in foreign courts which lack jurisdiction according to our recognized standards of due process. See 597 F.2d at 603 n.12. 9 Moreover, the Lakeside opinion stresses that where the nature of a defendant's business contact in the forum state does not involve activities dangerous to persons and property, the propriety of vesting personal jurisdiction in that state must be considered in light of its relationship with the defendant other than that at issue in the lawsuit. 597 F.2d at 603. The purchase and shipment of valve gauges is not a dangerous activity. And here, there are no allegations that Automark had any relationship with the Netherlands beyond the letters, telegram and telephone call involved in its business contact with Koster. 10 On these facts, Automark did not have the minimum contacts necessary to show that it purposefully utilized the privilege to conduct business activities in the Netherlands sufficient to confer on that country's courts personal jurisdiction over Automark. The district court concluded that cases decided under the Illinois long-arm statute, Ill.Rev.Stat.Ch. 110, 17(a), supported his finding that Automark satisfied the requirement of minimum contacts to support the Dutch court's jurisdiction. We disagree. We note that the Illinois courts have held that the state long-arm statute is intended to assert jurisdiction over non-resident defendants only "to the extent permitted by the due process clause." Colony Press, Inc. v. Fleeman, 17 Ill.App.3d 14, 19, 308 N.E.2d 78 (1974). The Lakeside court's discussion of the application of Wisconsin's 13 Absent personal jurisdiction over Automark in the Dutch case that resulted in a default judgment, the courts of this country lack jurisdiction to enforce the foreign default judgment. The decision of the district court accordingly is reversed and the case is remanded with directions to dismiss the complaint.3 12 And the other case relied upon by the district judge, Cook Associates, Inc. v. Colonial Broach & Machine Co., 14 Ill.App.3d 965, 304 N.E.2d 27 (1973), dealt with a service contract involving an out-of-state company that had used the services of an Illinois employment agency via a single telephone call. This satisfied the requirements for minimum contacts under the circumstances of that case since "that call was all that was necessary for defendant to achieve its (business) purpose", i. e., obtaining the names of prospective employees. 14 Ill.App.3d at 970, 304 N.E.2d 27. The conclusion and performance of the contract were carried out in Illinois via that telephone call, unlike the situation before us where neither activity occurred in the Netherlands. 11 At any rate, the cases relied upon by the district court for its determination that the Dutch court was vested with personal jurisdiction do not detract from our holding here. Thus, in Colony Press, supra, the state court noted that the "essential points" for purposes of its determination that an Ohio corporation was subject to a suit brought in Illinois courts by an Illinois company were that the contract was accepted in Illinois and performance thereunder was expected to occur wholly within that state. 17 Ill.App.3d at 18, 308 N.E.2d 78. As our discussion indicates, the document involved in this case was executed in Italy, and the goods to which it related were to be produced in Switzerland: the Netherlands was not the situs of either activity. long-arm statute to a decision on the basis of federal due process rights is pertinent. The court noted that the Wisconsin law "was intended by the state legislature to reach only so far as permitted by the due process clause.... In these circumstances we are interpreting the statute, not ruling on its constitutionality, when we decide the due process question; yet we are of course not bound by the (state courts') determination of that federal question". 597 F.2d at 599. Likewise, in the case before us we are not bound by Illinois judicial determinations on the requirements of due process to support personal jurisdiction. This is especially true where we are considering the powers of a court in a jurisdiction other than Illinois.
282
Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 77085 April 26, 1989 PHILIPPINE INTERNATIONAL SHIPPING CORPORATION (PISC), GEORGE LIM, MARCOS BAUTISTA, CARLOS LAUDE, TAN SING LIM, ANTONIO LIU LAO, ONG TEH, PHILIPPINE CONSORTIUM CONSTRUCTION CORPORATION, PACIFIC MILLS, INC., and UNIVERSAL STEEL SMELTING CO., INC., petitioners, vs. THE HON. COURT OF APPEALS, HON. JOSE C. DE GUZMAN, as Judge presiding Branch 93 of the Regional Trial Court of Quezon City, INTERPOOL, LTD. and SHERIFF NORBERTO V. DOBLADA JR.,respondents. RESOLUTION The other defendants, namely: 1) George Lim; 2) Marcos Bautista; 3) Carlos Laude 4) Tan Sing Lim; 5) Antonio Liu Lao and 6) Ong Teh, unconditionally and irrevocably guaranteed to pay (sic) plaintiff all payments due to it under the Master Equipment Leasing Agreement (Exhibit C) and Membership Agreement and Hiring Conditions (Exhibit B) dated June 8, 1979, in the amounts at the time and in the manner set out in the said agreements and to indemnify plaintiff against all claims, liabilities, costs, damages and expenses (including legal fees) suffered or incurred by plaintiff, arising out of or in connection with any failure by defendant Philippine International Shipping Corporation to perform any of its obligations under the aforesaid Agreements (Exhibit D, E, F, G, H, and I). 4 In 1979 to 1981, defendant Philippine International Shipping Corporation incurred outstanding and unpaid obligations with the plaintiff, in the amount of $94,456.28, representing unpaid per diems, drop-off charges, interest and other agreed charges. The plaintiff sent letters to the defendants (Exhibit K, L, M, N 0, P, Q, R, S and T ), 5 demanding payment of their outstanding and unpaid obligations, but to no avail, so plaintiff was constrained to file a case against the principal defendant, (PISC) before the United States District Court, Southern District of New York, which was docketed as 83 Civil 290 (EW) Plaintiff obtained a Default Judgment on July 3, 1983 against (PISC) ordering it to pay the plaintiff the sum of $80,779.33, as liquidated damages, together with interest in the amount of $13,676.95 and costs in the amount of $80.00. or for a total judgment of $94,456.28 (Exhibit A). 6 Because of the unjustifiable failure and refusal of PISC and its guarantors to jointly and severally pay their obligations to the plaintiff, the latter filed on November 16, 1983 a complaint [docketed as Civil Case No. Q-39927, Branch 93, Regional Trial Court of Quezon City] (Annex A) 7 to enforce the default judgment of the U.S. District Court against the defendant PISC and also to enforce the individually executed Continuing Guaranties of the other defendants (Annexes D, E, F, G, H, I, and J of the Complaint). The defendants (herein petitioners) were duly summoned, but they failed to answer the complaint. On motion of the plaintiff, they were declared in default 8 and the plaintiff (herein private respondent) was allowed to present its evidence ex parte. On April 11, 1985 the court rendered judgment for the plaintiff, 9 the dispositive part reading as follows: WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendants, ordering: 1) The defendant, Philippine International Shipping Corporation, and the defendantsGuarantors, to jointly and severally pay plaintiff the liquidated amount of $80,779.33, together with interest in the amount of $13,676.95 and costs in the amount of $80.00 or a total of $94,456.28, pursuant to the Default Judgment rendered by the United States District Court, Southern District of New York, or in the Philippine currency equivalent of the aforesaid amount of $94,456.28, computed at the time of payment, with interest for late payment at the rate of 18% per annum from July 4, 1983, until fully paid; and/or agents of I.S.C. dry cargo containers and/or chassis, including but not limited, to per diem leasing charges, damages protection plan charges, damages charge and/or replacement costs of constructively and/or totally lost containers as well as handling and drop-off charges (Exhibit J). 3
FELICIANO, J.: The subject of the present Petition is the Decision of the Court of Appeals dated 12 December 1986, in CAG.R. SP No. 10614. The appellate court upheld the Order of Branch 93 of the Regional Trial Court of Quezon City granting the issuance of a writ of execution, in Civil Case No. Q-39927. The undisputed facts are stated in the appealed decision: Plaintiff [respondent Interpool, Ltd.] is a foreign corporation, duly organized and existing under the laws of Bahamas Islands with office and business address at 630, 3rd Avenue, New York, New York, and not licensed to do, and not doing business, in the Philippines. Defendants Philippine International Shipping Corporation, Philippine Construction Consortium Corporation, Pacific Mills Inc., and Universal Steel Smelting Company, Inc., are corporations duly organized and existing under and by virtue of the laws of the Philippines. The other defendants, George Lim Marcos Bautista, Carlos Laude, Tan Sing Lim, Antonio Liu Lao and Ong Teh are Philippine residents. In 1979 to 1981, the defendant, Philippine International Shipping Corporation (PISC) leased from the plaintiff and its wholly owned subsidiary, the Container Trading Corporation, several containers pursuant to the Membership Agreement and Hiring Conditions (Exhibit B) 1 and the Master Equipment Leasing Agreement (Exhibit C ), 2 both dated June 8, 1979. Defendants Philippine Construction Consortium Corporation, Pacific Mills Inc. and Universal Steel Smelting Company, guaranteed to pay (sic) all monies due, or to become due, to the plaintiff from (PISC) and any liability of the latter arising out of the leasing or purchasing of equipment from the plaintiff or any of its subsidiaries, affiliates
283
2) The defendant, Philippine International Shipping Corporation, and the defendantsGuarantors, to jointly and severally pay plaintiff the sum equivalent to twenty (20%) percent of the total amount due from the defendants by way of attorney's fees; and 3) To pay the costs. On May 17, 1985, the defendants appealed the decision to this Appellate Court (ACG.R. UDK No. 7383) which dismissed the appeal on November 13, 1985 for failure of the appellants to pay the docketing fee despite their receipt of the notice to do so on August 26, 1985. 10 Entry of that final resolution was made on December 6,1985. In view of the finality of the decision, the plaintiff filed on July 23, 1986 a motion for execution and for appointment of a special sheriff to enforce it. 11 Over the defendants' opposition, the trial court issued an order of execution on October 15, 1986 and appointed Norberto V. Doblado, Jr., of the office of the Makati Sheriff, as special sheriff for the purpose (Annex D). 12 On 20 November 1986, petitioners (defendants below) filed with the Court of Appeals a Petition to Annul Judgment (docketed as C.A.-GR SP No. 10614) 13 directed at the 15 October 1986 Order of the Regional Trial Court. On 12 December 1986, the appellate court rendered a Decision 14 denying that petition for lack of merit. A Motion for Reconsideration was likewise denied for lack of merit.15 In the instant Petition for Review, filed with this Court on 27 February 1987, petitioners allege that both the Default Judgment rendered by the U.S. District Court, Southern District of New York, in 83 Civil 290 (EW), and the Decision of the Regional Trial Court of Quezon City, in Civil Case No. Q-39927, are null and void essentially on jurisdictional grounds. In the first instance, petitioners contend that the U.S. District Court never acquired jurisdiction over their persons as they had not been served with summons and a copy of the Complaint in 83 Civil 290 (EW). In the second instance, petitioners contend that such jurisdictional ty effectively prevented the Regional Trial Court of Quezon City from taking cognizance of the Complaint in Civil Case No. Q-39927 and from enforcing the U.S. District Court's Default Judgment against them. Petitioners contend, finally, that assuming the validity of the disputed Default Judgment, the same may be enforced only against petitioner Philippine International Shipping Corporation (PISC) the other nine (9) petitioners not having been impleaded originally in the case filed in New York, U.S.A. The Petition must fail. 1. To begin with, the evidence of record clearly shows that the U.S. District Court had validly acquired jurisdiction over petitioner (PISC) under the procedural law applicable in that forum i.e., the U.S. Federal Rules on Civil Procedure. Copies of the Summons and Complaint 16 in 83 Civil 290 (EW) which were in fact attached to the Petition for Review filed with this Court, were stamped "Received, 18 Jan 1983, PISC Manila." indicating that service thereof had been made upon and acknowledged by the (PISC) office in Manila on, 18 January 1983, and that (PISC) had actual notice of such Complaint and Summons. Moreover, copies of said Summons and Complaint had likewise been served upon Prentice-Hall Corporation System, Inc. (New York), petitioner PISCs agent, expressly designated by it in the Master Equipment Leasing Agreement with respondent Interpool. "for the purpose of accepting service of any process within the State of New York, USA with respect to any claim or controversy arising out of or relating to directly or indirectly, this Lease." 17 The record also shows that petitioner PISC, without, however, assailing the jurisdiction of the U.S. District Court over the person of petitioner, had filed a Motion to Dismiss 18 the Complaint in 83 Civil 290 (EW) which Motion was denied. All of the foregoing matters, which were stated specifically in the U.S. District Court's disputed Default Judgement, 19 have not been disproven or otherwise overcome by petitioners, whose bare and unsubstantiated allegations cannot prevail over clear and convincing evidence of record to the contrary. That foreign judgment-which had become final and executory, no appeal having been taken therefrom and perfected by petitioner PISC-is thus "presumptive evidence of a right as between the parties [i.e., PISC and Interpool] and their successors in interest by a subsequent title." 20 We note, further that there has been in this case no showing by petitioners that the Default Judgment rendered by the U.S. District Court in 83 Civil 290 (EW) was vitiated by "want of notice to the party, collusion, fraud, or clear mistake of law or fact. " 21 In other words, the Default Judgment imposing upon petitioner PISC a liability of U.S.$94,456.28 in favor of respondent Interpool, is valid and may be enforced in this jurisdiction. 2. The existence of liability (i.e., in the amount of U.S.$94,456.28) on the part of petitioner PISC having been duly established in the U.S. case, it was not improper for respondent Interpool, in seeking enforcement in this jurisdiction of the foreign judgment imposing such liability, to have included the other nine (9) petitioners herein (i.e., George Lim, Marcos Bautista, Carlos Laude,Tan Sing Lim, Antonio Liu Lao, Ong Teh Philippine Consortium Construction Corporation, Pacific Mills, Inc. and Universal Steel Smelting Co., Inc.) as defendants in Civil Case No. Q- 39927, filed with Branch 93 of the Regional Trial Court of Quezon City. With respect to the latter, Section 6, Rule 3 of the Revised Rules of Court expressly provides: Sec. 6. Permissive joinder of parties. All persons in whom or against whom any right to relief in respect to or arising out of the same transaction or series of transactions is alleged to exist, whether jointly, severally, or in the alternative, may, except as otherwise provided in these rules, join as plaintiffs or be joined as defendants in one complaint, where any question of law or fact common to all such plaintiffs or to all such defendants may arise in the action; but the court may make such orders as may be just to prevent any plaintiff or defendant from being embarrassed or put to expense in connection with any proceedings in which he may have no interest. (Emphasis supplied) The record shows that said nine (9) petitioners had executed continuing guarantees" to secure performance by petitioner PISC of its contractual obligations, under the Membership Agreement and Hiring Conditions and Master Equipment Leasing Agreement with respondent Interpool. As guarantors, they had held themselves out as liable. "whether jointly, severally, or in the alternative," to respondent Interpool under their separate "continuing guarantees" executed in the Philippines, for any breach of those Agreements on the part of (PISC) The liability of the nine (9) other petitioners was, in other words, not based upon the Membership Agreement and the Master Equipment Leasing Agreement to which they were not parties. The New York award of U.S. $94,456.28 is precisely premised upon a breach by PISC of its own obligations under those Agreements. We, therefore, consider the nine (9) other petitioners as persons 44 against whom [a] right to relief in respect to or arising out of the same transaction or series of transactions [has been] alleged to exist." as contemplated in the Rule quoted above and, consequently, properly impleaded as defendants in Civil Case No. Q-39927. There was, in other words, no need at all, in order that Civil Case No. Q-39927 would prosper, for respondent Interpool to have first impleaded the nine (9) other petitioners in the New York case and there obtain judgment against all ten (10) petitioners. 3. Petitioners' argument of lack or absence of jurisdiction on the part of the Quezon City Regional Trial Court, on the alleged ground of non-service of notice or summons in Civil Case No. Q-39927, does not persuade. But we do not need to address this specific argument. For even assuming (though merely arguendo) that none of the ten (10) petitioner herein had been served with notice or summons below, the record shows, however, that they did in fact file with the Regional Trial Court a Motion for Extension of Time to file Answer 22 (dated 9 December 1983) as well as Motion for Bill of Particulars 23 (dated 15 December 1983), both addressing respondent Interpool's
284
.Complaint in Civil Case No. Q-39927. In those pleadings, petitioners not only manifested their intention to controvert the allegations in the Complaint, but they neither questioned nor assailed the jurisdiction of the trial court, either over the case filed against them or over their individual persons, as defendants therein. There was here, in effect, voluntary submission to the jurisdiction of the Quezon City trial court by petitioners, who are thereby estopped from asserting otherwise before this Court. 24 ACCORDINGLY, the Petition for Review is DENIED and the Decision dated 12 December 1986 of the Court of Appeals in C.A.-G.R. SP No. 10614, is hereby AFFIRMED. This Resolution is immediately executory. Costs against petitioners. SO ORDERED. Argued April 29, 1974. Decided June 17, 1974. Rehearing Denied, Oct. 15, 1974. See 419 U.S. 885, 95 S.Ct. 157. Syllabus Respondent, an American manufacturer based in Illinois, in order to expand its overseas operations, purchased from petitioner, a German citizen, three enterprises owned by him and organized under the laws of Germany and Liechtenstein, together with all trademark rights of these enterprises. The sales contract, which was negotiated in the United States, England, and Germany, signed in Austria, and closed in Switzerland, contained express warranties by petitioner that the trademarks were unencumbered and a clause providing that 'any controversy or claim (that) shall arise out of this agreement or the breach thereof' would be referred to arbitration before the International Chamber of Commerce in Paris, France, and that Illinois laws would govern the agreement and its interpretation and performance. Subsequently, after allegedly discovering that the trademarks were subject to substantial encumbrances, respondent offered to rescind the contract, but when petitioner refused, respondent brought suit in District Court or damages and other relief, contending that petitioner's fraudulent representations concerning the trademark rights violated 10(b) of the Securities Exchange Act of 1934 and Rule 10b5 promulgated thereunder. Petitioner moved to dismiss the action or alternatively to stay the action pending arbitration, but the District Court denied the motion to dismiss and, as sought by respondent, preliminarily enjoined petitioner from proceeding with arbitration, holding, in reliance on Wilko v. Swan, 346 U.S. 427, 74 S.Ct. 182, 98 L.Ed. 168, that the arbitration clause was unenforceable. The Court of Appeals affirmed. Held: The arbitration clause is to be respected and enforced by federal courts in accord with the explicit provisions of the United States Arbitration Act that an arbitration agreement, such as is here involved, 'shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.' 9 U.S.C. 1, 2. Wilko v. Swan, supra, distinguished. Pp. 510520. 417 U.S. 506 94 S.Ct. 2449. 41 L.Ed.2d 270 Fritz SCHERK, Petitioner, v. ALBERTO-CULVER COMPANY. No. 73781. (b) In the context of an international contract, the advantages that a security buyer might possess in having a wide choice of American courts and venue in which to litigate his claims of violations of the securities laws, (a) Since uncertainty will almost inevitably exist with respect to any contract, such as the one in question here, with substantial contacts in two or more countries, each with its own substantive laws and conflict-of-laws rules, a contractual provision specifying in advance the forum for litigating disputes and the law to be applied is an almost indispensable precondition to achieving the orderliness and predictability essential to any international business transaction. Such a provision obviates the danger that a contract dispute might be submitted to a forum hostile to the interests of one of the parties or unfamiliar with the problem area involved. Pp. 515517.
285
become chimerical, since an opposing party may by speedy resort to a foreign court block or hinder access to the American court of the buyer's choice. Pp. 517518. (c) An agreement to arbitrate before a specified tribunal is, in effect, a specialized kind of forum-selection clause that posits not only the situs of suit but also the procedure to be used in resolving the dispute, and the invalidation of the arbitration clause in this case would not only allow respondent to repudiate its solemn promise but would, as well, reflect a 'parochial concept that all disputes must be resolved under our laws and in our courts.' The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 9, 92 S.Ct. 1907, 1912, 32 L.Ed.2d 513. P. 519. 484 F.2d 611, reversed and remanded. Robert F. Hanley, Evanston, Ill., for petitioner. Gerald Aksen for the American Arbitration Association, as amicus curiae, by special leave of Court. Francis J. Higgins, Chicago, Ill., for respondent. Mr. Justice STEWART delivered the opinion of the Court. 1 Alberto-Culver Co., the respondent, is an American company incorporated in Delaware with its principal office in Illinois. It manufactures and distributes toiletries and hair products in this country and abroad. During the 1960's Alberto-Culver decided to expand its overseas operations, and as part of this program it approached the petitioner Fritz Scherk, a German citizen residing at the time of trial in Switzerland. Scherk was the owner of three interrelated business entities, organized under the laws of Germany and Liechtenstein, that were engaged in the manufacture of toiletries and the licensing of trademarks for such toiletries. An initial contact with Scherk was made by a representative of Alberto-Culver in Germany in June 1967, and negotiations followed at further meetings in both Europe and the United States during 1967 and 1968. In February 1969 a contract was signed in Vienna, Austria, which provided for the transfer of the ownership of Scherk's enterprises to Alberto-Culver, along with all rights held by these enterprises to trademarks in cosmetic goods. The contract contained a number of express warranties whereby Scherk guaranteed the sole and unencumbered ownership of these trademarks. In addition, the contract contained an arbitration clause providing that 'any controversy or claim (that) shall arise out of this agreement or the breach thereof' would be referred to arbitration before the International Chamber of Commerce in Paris, France, and that '(t)he laws of the State of Illinois, U.S.A. shall apply to and govern this agreement, its interpretation and performance.'1 2 The closing of the transaction took place in Geneva, Switzerland, in June 1969. Nearly one year later Alberto-Culver allegedly discovered that the trademark rights purchased under the contract were subject to substantial encumbrances that threatened to give others superior rights to the trademarks and to restrict or 5 In Wilko v. Swan, supra, this Court acknowledged that the Act reflects a legislative recognition of the 'desirability of arbitration as an alternative to the complications of litigation,' 346 U.S., at 431, 74 S.Ct., at 185, but nonetheless declined to apply the Act's provisions. That case involved an agreement between Anthony Wilko and Hayden, Stone & Co., a large brokerage firm, under which Wilko agreed to purchase on margin a number of shares of a corporation's common stock. Wilko alleged that his purchase of the stock was induced by false representations on the part of the defendant concerning the value of the shares, and he brought suit for damages under 12(2) of the Securities Act of 1933, 15 U.S.C. 77l. The 4 * The United States Arbitration Act, now 9 U.S.C. 1 et seq., reversing centuries of judicial hostility to arbitration agreements,4 was designed to allow parties to avoid 'the costliness and delays of litigation,' and to place arbitration agreements 'upon the same footing as other contracts . . ..' H.R.Rep.No.96, 68th Cong., 1st Sess., 1, 2 (1924); see also S.Rep.No.536, 68th Cong., 1st Sess. (1924). Accordingly the Act provides that an arbitration agreement such as is here involved 'shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.' 9 U.S.C. 2.5 The Act also provides in 3 for a stay of proceedings in a case where a court is satisfied that the issue before it is arbitrable under the agreement, and 4 of the Act directs a federal court to order parties to proceed to arbitration if there has been a 'failure, neglect, or refusal' of any party to honor an agreement to arbitrate. 3 In response, Scherk filed a motion to dismiss the action for want of personal and subject-matter jurisdiction as well as on the basis of forum non conveniens, or, alternatively, to stay the action pending arbitration in Paris pursuant to the agreement of the parties. AlbertoCulver, in turn, opposed this motion and sought a preliminary injunction restraining the prosecution of arbitration proceedings.2 On December 2, 1971, the District Court denied Scherk's motion to dismiss, and, on January 14, 1972, it granted a preliminary order enjoining Scherk from proceeding with arbitration. In taking these actions the court relied entirely on this Court's decision in Wilko v. Swan, 346 U.S. 427, 74 S.Ct. 182, 98 L.Ed. 168, which held that an agreement to arbitrate could not preclude a buyer of a security from seeking a judicial remedy under the Securities Act of 1933, in view of the language of 14 of that Act, barring '(a)ny condition, stipulation, or provision binding any person acquiring any security to waive compliance with any provision of this subchapter . . ..' 48 Stat. 84, 15 U.S.C. 77n.3 The Court of Appeals for the Seventh Circuit, with one judge dissenting, affirmed, upon what it considered the controlling authority of the Wilko decision. 484 F.2d 611. Because of the importance of the question presented we granted Scherk's petition for a writ of certiorari. 414 U.S. 1156, 94 S.Ct. 913, 39 L.Ed.2d 108. preclude Alberto-Culver's use of them. Alberto-Culver thereupon tendered back to Scherk the property that had been transferred to it and offered to rescind the contract. Upon Scherk's refusal, Alberto-Culver commenced this action for damages and other relief in a Federal District Court in Illinois, contending that Scherk's fraudulent representations concerning the status of the trademark rights constituted violations of 10(b) of the Securities Exchange Act of 1934, 48 Stat. 891, 15 U.S.C. 78j(b), and Rule 10b5 promulgated thereunder, 17 CFR 240.10b5.
286
defendant responded that Wilko had agreed to submit all controversies arising out of the purchase to arbitration, and that this agreement, contained in a written margin contract between the parties, should be given full effect under the Arbitration Act. 6 The Court found that '(t)wo policies, not easily reconcilable, are involved in this case.' 346 U.S., at 438, 74 S.Ct., at 188. On the one hand, the Arbitration Act stressed 'the need for avoiding the delay and expense of litigation,' id., at 431, 74 S.Ct., at 185, and directed that such agreements be 'valid, irrevocable, and enforceable' in federal courts. On the other hand, the Securities Act of 1933 was '(d)esigned to protect investors' and to require 'issuers, underwriters, and dealers to make full and fair disclosure of the character of securities sold in interstate and foreign commerce and to prevent fraud in their sale,' by creating 'a special right to recover for misrepresentation . . ..' 346 U.S., at 431, 74 S.Ct., at 184 (footnote omitted). In particular, the Court noted that 14 of the Securities Act, 15 U.S.C. 77n, provides: 7 'Any condition, stipulation, or provision binding any person acquiring any security to waive compliance with any provision of this subchapter or of the rules and regulations of the Commission shall be void.' 8 The Court ruled that an agreement to arbitrate 'is a 'stipulation,' and (that) the right to select the judicial forum is the kind of 'provision' that cannot be waived under 14 of the Securities Act.'6 346 U.S., at 434 435, 74 S.Ct., at 186. Thus, Wilko's advance agreement to arbitrate any disputes subsequently arising out of his contract to purchase the securities was unenforceable under the terms of 14 of the Securities Act of 1933. 9 Alberto-Culver, relying on this precedent, contends that the District Court and Court of Appeals were correct in holding that its agreement to arbitrate disputes arising under the contract with Scherk is similarly unenforceable in view of its contentions that Scherk's conduct constituted violations of the Securities Exchange Act of 1934 and rules promulgated thereunder. For the reasons that follow, we reject this contention and hold that the provisions of the Arbitration Act cannot be ignored in this case. 10 At the outset, a colorable argument could be made that even the semantic reasoning of the Wilko opinion does not control the case before us. Wilko concerned a suit brought under 12(2) of the Securities Act of 1933, which provides a defrauded purchaser with the 'special right' of a private remedy for civil liability, 346 U.S., at 431, 74 S.Ct., at 184. There is no statutory counterpart of 12(2) in the Securities Exchange Act of 1934, and neither 10(b) of that Act nor Rule 10b5 speaks of a private remedy to redress violations of the kind alleged here. While federal case law has established that 10(b) and Rule 10b5 create an implied private cause of action, see 6 L. Loss, Securities Regulation 38693873 (1969) and cases cited therein; cf. J.I. Case Co. v. Borak, 377 U.S. 426, 84 S.Ct. 1556, 12 L.Ed.2d 423, the Act itself does not establish the 'special right' that the Court in Wilko found significant. Furthermore, while both the Securities 14 13 Such uncertainty will almost inevitably exist with respect to any contract touching two or more countries, each with its own substantive laws and conflict-of-laws rules. A contractual provision specifying in advance the forum in which disputes shall be litigated and the law to be applied is, therefore, an almost indispensable precondition to achievement of the orderliness and predictability essential to any international business transaction. Furthermore, such a provision obviates the danger that a dispute under the agreement might be submitted to a forum hostile to the interests of one of the parties or unfamiliar with the problem area involved.10 12 Such a contract involves considerations and policies significantly different from those found controlling in Wilko. In Wilko, quite apart from the arbitration provision, there was no question but that the laws of the United States generally, and the federal securities laws in particular, would govern disputes arising out of the stock-purchase agreement. The parties, the negotiations, and the subject matter of the contract were all situated in this country, and no credible claim could have been entertained that any international conflict-of-laws problems would arise. In this case, by contrast, in the absence of the arbitration provision considerable uncertainty existed at the time of the agreement, and still exists, concerning the law applicable to the resolution of disputes arising out of the contract.9 11 Accepting the premise, however, that the operative portions of the language of the 1933 Act relied upon in Wilko are contained in the Securities Exchange Act of 1934, the respondent's reliance on Wilko in this case ignores the significant and, we find, crucial differences between the agreement involved in Wilko and the one signed by the parties here. Alberto-Culver's contract to purchase the business entities belonging to Scherk was a truly international agreement. Alberto-Culver is an American corporation with its principal place of business and the vast bulk of its activity in this country, while Scherk is a citizen of Germany whose companies were organized under the laws of Germany and Liechtenstein. The negotiations leading to the signing of the contract in Austria and to the closing in Switzerland took place in the United States, England, and Germany, and involved consultations with legal and trademark experts from each of those countries and from Liechtenstein. Finally, and most significantly, the subject matter of the contract concerned the sale of business enterprises organized under the laws of and primarily situated in European countries, whose activities were largely, if not entirely, directed to European markets. Act of 1933 and the Securities Exchange Act of 1934 contain sections barring waiver of compliance with any 'provision' of the respective Acts,7certain of the 'provisions' of the 1933 Act that the Court held could not be waived by Wilko's agreement to arbitrate find no counterpart in the 1934 Act. In particular, the Court in Wilko noted that the jurisdictional provision of the 1933 Act, 15 U.S.C. 77v, allowed a plaintiff to bring suit 'in any court of competent jurisdictionfederal or stateand removal from a state court is prohibited.' 346 U.S., at 431, 74 S.Ct., at 184. The analogous provision of the 1934 Act, by contrast, provides for suit only in the federal district courts that have 'exclusive jurisdiction,' 15 U.S.C. 78aa, thus significantly restricting the plaintiff's choice of forum.8
287
A parochial refusal by the courts of one country to enforce an international arbitration agreement would not only frustrate these purposes, but would invite unseemly and mutually destructive jockeying by the parties to secure tactical litigation advantages. In the present case, for example, it is not inconceivable that if Scherk had anticipated that Alberto-Culver would be able in this country to enjoin resort to arbitration he might have sought an order in France or some other country enjoining Alberto-Culver from proceeding with its litigation in the United States. Whatever recognition the courts of this country might ultimately have granted to the order of the foreign court, the dicey atmosphere of such a legal no-man's-land would surely damage the fabric of international commerce and trade, and imperil the willingness and ability of businessmen to enter into international commercial agreements.11 15 The exception to the clear provisions of the Arbitration Act carved out by Wilko is simply inapposite to a case such as the one before us. In Wilko the Court reasoned that '(w)hen the security buyer, prior to any violation of the Securities Act, waives his right to sue in courts, he gives up more than would a participant in other business transactions. The security buyer has a wider choice of courts and venue. He thus surrenders one of the advantages the Act gives him . . ..' 346 U.S., at 435, 74 S.Ct., at 187. In the context of an international contract, however, these advantages become chimerical since, as indicated above, an opposing party may by speedy resort to a foreign court block or hinder access to the American court of the purchaser's choice.12 16 Two Terms ago in The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513, we rejected the doctrine that a forum-selection clause of a contract, although voluntarily adopted by the parties, will not be respected in a suit brought in the United States "unless the selected state would provide a more convenient forum than the state in which suit is brought." Id., at 7, 92 S.Ct., at 1912. Rather, we concluded that a 'forum clause should control absent a strong showing that it should be set aside.' Id., at 15, 92 S.Ct., at 1916. We noted that 'much uncertainty and possibly great inconvenience to both parties could arise if a suit could be maintained in any jurisdiction in which an accident might occur or if jurisdiction were left to any place (where personal or in rem jurisdiction might be established). The elimination of all such uncertainties by agreeing in advance on a forum acceptable to both parties is an indispensable element in international trade, commerce, and contracting.' Id., at 1314, 92 S.Ct., at 1915. 17 An agreement to arbitrate before a specified tribunal is, in effect, a specialized kind of forum-selection clause that posits not only the situs of suit but also the procedure to be used in resolving the dispute.13 The invalidation of such an agreement in the case before us would not only allow the respondent to repudiate its solemn promise but would, as well, reflect a 'parochial concept that all disputes must be resolved under our laws and in our courts. . . . We cannot have trade and commerce in world markets and international waters exclusively on our terms, governed by our laws, and resolved in our courts.' Id., at 9, 92 S.Ct., at 1912.14 18 For all these reasons we hold that the agreement of the parties in this case to arbitrate any dispute arising out of their international commercial transaction is to be respected and enforced by the federal courts in accord with the explicit provisions of the Arbitration Act.15 27 We have here, however, questions under the Securities Exchange Act of 1934, which in 3(a)(10) defines 'security' as including any 'note, stock, treasury stock, bond, debenture, certificate of interest or 26 The basic dispute between the parties concerned allegations that the trademarks which were basic assets in the transaction were encumbered and that their purchase was induced through serious instances of fraudulent representations and omissions by Scherk and his agents within the jurisdiction of the United States. If a question of trademarks were the only one involved, the principle of The Bremen v. Zapata OffShore Co., 407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513, would be controlling. 25 The only defense material at this stage of the proceeding is a provision of the contract providing that if any controversy or claim arises under the agreement the parties agree it will be settled 'exclusively' by arbitration under the rules of the International Chamber of Commerce, Paris, France. 24 Alberto undertook to purchase from Scherk the entire establishmentthe trademarks and the stock of the two corporations; and later, alleging it had been defrauded, brought this suit in the United States District Court in Illinois to rescind the agreement and to obtain damages. 23 Respondent (Alberto-Culver) is a publicly held corporation whose stock is traded on the New York Stock Exchange and is a Delaware corporation, with its principal place of business in Illinois. Petitioner (Scherk) owned a business in Germany, Firma Ludwig Scherk, dealing with cosmetics and toiletries. Scherk owned various trademarks and all outstanding securities of a Liechtenstein corporation (SEV) and of a German corporation, Lodeva. Scherk also owned various trademarks which were licensed to manufacturers and distributors in Europe and in this country. SEV collected the royalties on those licenses. 22 Mr. Justice DOUGLAS, with whom Mr. Justice BRENNAN, Mr. Justice WHITE, and Mr. Justice MARSHALL concur, dissenting. 21 Reversed and remanded. 20 It is so ordered. 19 Accordingly, the judgment of the Court of Appeals is reversed and the case is remanded to that court with directions to remand to the District Court for further proceedings consistent with this opinion.
288
participation in any profit-sharing agreement . . ..' 15 U.S.C. 78c(a)(10). We held in Tcherepnin v. Knight, 389 U.S. 332, 88 S.Ct. 548, 19 L.Ed.2d 564, as respects 3(a)(10): 28 '(R)emedial legislation should be construed broadly to effectuate its purposes. The Securities Exchange Act quite clearly falls into the category of remedial legislation. One of its central purposes is to protect investors through the requirement of full disclosure by issuers of securities, and the definition of security in 3(a)(10) necessarily determines the classes of investments and investors which will receive the Act's protections. Finally, we are remainded that, in searching for the meaning and scope of the word 'security' in the Act, form should be disregarded for substance and the emphasis should be on economic reality.' Id., at 336, 88 S.Ct., at 553. (Footnote omitted.) 29 Section 10(b) of the 1934 Act makes it unlawful for any person by use of agencies of interstate commerce or the mails '(t)o use or employ, in connection with the purchase or sale of any security,' whether or not registered on a national securities exchange, 'any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe.' 15 U.S.C. 78j(b). 30 Alberto-Culver, as noted, is not a private person but a corporation with publicly held stock listed on the New York Stock Exchange. If it is to be believed, if in other words the allegations made are proved, the American company has been defrauded by the issuance of 'securities' (promissory notes) for assets which are worthless or of a much lower value than represented. Rule 10b518 of the Securities and Exchange Commission states: 31 'It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facilitity of any national securities exchange, 41 32 '(a) To employ any device, scheme, or artifice to defraud, 33 '(b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or 43 34 '(c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, 35 The Court does not consider the question whether a 'security' is involved in this case, saying it was not raised by petitioner. A respondent, however, has the right to urge any argument to support the judgment in his favor (save possibly questions of venue, see Peoria R. Co. v. United States, 263 U.S. 528, 536, 44 S.Ct. 194, 197, 68 L.Ed. 427. United States v. American Railway Express Co., 265 U.S. 425, 435436, and n. 11, 44 S.Ct. 560, 563 564, 68 L.Ed. 1087), even those not passed upon by the court below and also 42 Wilko was held by the Court of Appeals to control this case and properly so. 'As the protective provisions of the Securities Act require the exercise of judicial direction to fairly assure their effectiveness, it seems to us that Congress must have intended 14 . . . to apply to waiver of judicial trial and review.' 346 U.S., at 437, 74 S.Ct., at 188. 40 In Wilko v. Swan, 346 U.S. 427, 74 S.Ct. 182, 98 L.Ed. 168, a customer brought suit against a brokerage house alleging fraud in the sale of stock. A motion was made to stay the trial until arbitration occurred under the United States Arbitration Act, 9 U.S.C. 3, as provided in the customer's contract. The Court held that an agreement for arbitration was a 'stipulation' within the meaning of 14 which sought to 'waive' compliance with the Securities Act. We accordingly held that the courts, not the arbitration tribunals, had jurisdiction over suits under that Act. The arbitration agency, we held, was bound by other standards which were not necessarily consistent with the 1933 Act. We said: 39 'Any condition, stipulation, or provision binding any person acquiring any security to waive compliance with any provision of this subchapter or of the rules and regulations of the Commission shall be void.' 38 The Securities Act of 1933, 48 Stat. 84, 15 U.S.C. 77n, has a like provision in its 14: 37 And 29(b) adds that '(e)very contract' made in violation of the Act 'shall be void.'1 No exception is made for contracts which have an international character. 36 'Any condition, stipulation, or provision binding any person to waive compliance with any provision of this chapter or of any rule or regulation thereunder, or of any rule of an exchange required thereby shall be void.' 15 U.S.C. 78cc(a). Section 29(a) of the Act provides: 'in connection with the purchase or sale of any security.' 17 CFR 240.10b5.
289
contentions rejected below. Langnes v. Green, 282 U.S. 531, 535539, 51 S.Ct. 243, 244246, 75 L.Ed. 520; Walling v. General Industries Co., 330 U.S. 545, 547 n. 5, 67 S.Ct. 883, 884, 91 L.Ed. 1088. The Court of Appeals held that 'securities' within the meaning of the 1934 Act were involved here, 484 F.2d 611, 615. The brief of the respondent is based on the premise that 'securities' are involved here; and petitioner has not questioned that ruling of the Court of Appeals. 44 It could perhaps be argued that Wilko does not govern because it involved a little customer pitted against a big brokerage house, while we deal here with sophisticated buyers and sellers: Scherk, a powerful German operator, and Alberto-Culver, an American business surrounded and protected by lawyers and experts. But that would miss the point of the problem. The Act does not speak in terms of 'sophisticated' as opposed to 'unsophisticated' people dealing in securities. The rules when the giants play are the same as when the pygmies enter the market. 45 If there are victims here, they are not Alberto-Culver the corporation, but the thousands of investors who are the security holders in Alberto-Culver. If there is fraud and the promissory notes are excessive, the impact is on the equity in Alberto-Culver. 46 Moreover, the securities market these days is not made up of a host of small people scrambling to get in and out of stocks or other securities. The markets are overshadowed by huge institutional traders.2 The socalled 'off-shore funds,' of which Scherk is a member, present perplexing problems under both the 1933 and 1934 Acts.3 The tendency of American investors to invest indirectly as through mutual funds4 may change the character of the regulation but not its need. 47 There has been much support for arbitration of disputes; and it may be the superior way of settling some disagreements. If A and B were quarreling over a trade-mark and there was an arbitration clause in the contract, the policy of Congress in implementing the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, as it did in 9 U.S.C. 201 et seq., would prevail. But the Act does not substitute an arbiter for the settlement of disputes under the 1933 and 1934 Acts. Art. II(3) of the Convention says: 48 'The court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed.'5 (1970) 3 U.S.T. 2517, 2519, T.I.A.S. No. 6997. 49 But 29(a) of the 1934 Act makes agreements to arbitrate liabilities under 10 of the Act 'void' and 'inoperative.' Congress has specified a precise way whereby big and small investors will be protected and the rules under which the Alberto-Culvers of this Nation shall operate. They or their lawyers cannot waive 53 Section 29(a) of the 1934 Act provides that a stipulation binding one to waive compliance with 'any provision' of the Act shall be void, and the Act expressly provides that the federal district courts shall have 'exclusive jurisdiction' over suits brought under the Act. 15 U.S.C. s 78aa. The Court appears to attach some significance to the fact that the specific provisions of the 1933 Act involved in Wilko are not duplicated in the 1934 Act, which is involved in this case. While Alberto-Culver would not have the right to sue in either a state or federal forum as did the plaintiff in Wilko, 346 U.S., at 431, 74 S.Ct., at 184, the Court deprives it of its right to have its Rule 10b5 claim heard in a federal court. We spoke at length in Wilko of this problem, elucidating the undesirable effects of remitting a securities plaintiff to an arbitral, 52 It has been recognized that the 1934 Act, including the protections of Rule 10b-5, applies when foreign defendants have defrauded American investors, particularly when, as alleged here,8 they have profited by virtue of proscribed conduct within our boundaries. This is true even when the defendant is organized under the laws of a foreign country, is conducting much of its activity outside the United States, and is therefore governed largely by foreign law.9 The language of 29 of the 1934 Act does not immunize such international transactions, and the United Nations Convention provides that a forum court in which a suit is brought need not enforce an agreement to arbitrate which is 'void' and 'inoperative' as contrary to its public policy.10 When a foreign corporation undertakes fraudulent action which subjects it to the jurisdiction of our federal securities laws, nothing justifies the conclusion that only a diluted version of those laws protects American investors. 51 This invocation of the 'international contract' talisman might be applied to a situation where, for example, an interest in a foreign company or mutual fund was sold to an utterly unsophisticated American citizen, with material fraudulent misrepresentations made in this country. The arbitration clause could appear in the fine print of a form contract, and still be sufficient to preclude recourse to our courts, forcing the defrauded citizen to arbitration in Paris to vindicate his rights.7 50 The Court finds it unnecessary to consider Scherk's argument that this case is distinguishable from Wilko in that Wilko involved parties of unequal bargaining strength. Ante, at 512513, n. 6. Instead, the Court rests its conclusion on the fact that this was an 'international' agreement, with an American corporation investing in the stock and property of foreign businesses, and speaks favorably of the certainty which inheres when parties specify an arbitral forum for resolution of differences in 'any contract touching two or more countries.' those statutory conditions, for our corporate giants are not principalities of power but guardians of a host of wards unable to care for themselvs. It is these wards that the 1934 Act tries to protect.6 Not a word in the Convention governing awards adopts the standards which Congress has passed to protect the investors under the 1934 Act. It is peculiarly appropriate that we adhere to Wilkomore so even than when Wilko was decided. Huge foreign investments are being made in our companies. It is important that American standards of fairness in security dealings govern the destinies of American investors until Congress changes these standards.
290
rather than a judicial, forum. Here, as in Wilko, the allegations of fraudulent misrepresentation will involve 'subjective findings on the purpose and knowledge' of the defendant, questions ill-determined by arbitrators without judicial instruction on the law. See id., at 435, 74 S.Ct., at 187. An arbitral award can be made without explication of reasons and without development of a record, so that the arbitrator's conception of our statutory requirement may be absolutely incorrect yet functionally unreviewable, even when the arbitrator seeks to apply our law. We recognized in Wilko that there is no judicial review corresponding to review of court decisions. Id., at 436437, 74 S.Ct., at 187188. The extensive pretrial discovery provided by the Federal Rules of Civil Procedure for actions in district court would not be available. And the wide choice of venue provided by the 1934 Act, 15 U.S.C. 78aa, would be forfeited. See Wilko v. Swan, supra, at 431, 435, 74 S.Ct. at 186. The loss of the proper judicial forum carries with it the loss of substantial rights.11 54 When a defendant, as alleged here, has, through proscribed acts within our territory, brought itself within the ken of federal securities regulation, a fact not disputed here, those lawsincluding the controlling principles of Wilkoapply whether the defendant is foreign or American, and whether or not there are transnational elements in the dealings. Those laws are rendered a chimera when foreign corporations or fundsunlike domestic defendantscan nullify them by virtue of arbitration clauses which send defrauded American investors to the uncertainty of arbitration on foreign soil, or, if those investors cannot afford to arbitrate their claims in a far-off forum, to no remedy at all. 4 55 Moreover, the international aura which the Court gives this case is ominous. We now have many multinational corporations in vast operations around the worldEurope, Latin America, the Middle East, and Asia.12 The investments of many American investors turn on dealings by these companies. Up to this day, it has been assumed by reason of Wilko that they were all protected by our various federal securities Acts. If these guarantees are to be removed, it should take a legislative enactment. I would enforce our laws as they stand, unless Congress makes an exception. 56 The virtue of certainty in international agreements may be important, but Congress has dictated that when there are sufficient contacts for our securities laws to apply, the policies expressed in those laws take precedence. Section 29 of the 1934 Act, which renders arbitration clauses void and inoperative, recognizes no exception for fraudulent dealings which incidentally have some international factors. The Convention makes provision for such national public policy in Art. II(3). Federal jurisdiction under the 1934 Act will attach only to some international transactions, but when it does, the protections afforded investors such as Alberto-Culver can only be full-fledged. 1 The arbitration clause relating to the transfer of one of Scherk's business entities, similar to the clauses covering the other two, reads in its entirety as follows: 5 Section 2 of the Arbitration Act renders 'valid, irrevocable, and enforceable' written arbitration provisions 'in any maritime transaction or a contract evidencing a transaction involving commerce . . .,' as those terms are defined in 1. In Bernhardt v. Polygraphic Co., 350 U.S. 198, 76 S.Ct. 273, 100 L.Ed. 199, this Court held that the stay provisions of 3 apply only to the two kinds of contracts specified in 1 and 2. Since the transaction in this case constituted 'commerce . . . with foreign nations,' 9 U.S.C. 1, the Act clearly covers this agreement. 6 The arbitration agreement involved in Wilko was contained in a standard form margin contract. But see the dissenting opinion of Mr. Justice Frankfurter, 346 U.S. 427, 439, 440, 74 S.Ct. 182, 189, concluding that the record did not show that 'the plaintiff (Wilko) in opening an account had no choice but to accept the arbitration stipulation . . ..' The petitioner here would limit the decision in Wilko to situations where the parties exhibit a disparity of bargaining power, and contends that, since the negotiations leading to the present contract took place over a number of years and involved the participation on both sides of knowledgeable and sophisticated business and legal experts, the Wilko decision should not apply. See also the dissenting opinion of Judge English courts traditionally considered irrevocable arbitration agreements as 'ousting' the courts of jurisdiction, and refused to enforce such agreements for this reason. This view was adopted by American courts as part of the common law up to the time of the adoption of the Arbitration Act. See H.R.Rep.No. 96, 68th Cong., 1st Sess., 1, 2 (1924); Sturges & Murphy, Some Confusing Matters Relating to Arbitration under the United States Arbitration Act, 17 Law & Contemp.Prob. 580. 3 The memorandum opinion of the District Court is unreported. 2 Scherk had taken steps to initiate arbitration in Paris in early 1971. He did not, however, file a formal request for arbitration with the International Chamber of Commerce until November 9, 1971, almost five months after the filing of Alberto-Culver's complaint in the Illinois federal court. 'The parties agree that if any controversy or claim shall arise out of this agreement or the breach thereof and either party shall request that the matter shall be settled by arbitration, the matter shall be settled exclusively by arbitration in accordance with the rules then obtaining of the International Chamber of Commerce, Paris, France, by a single arbitrator, if the parties shall agree upon one, or by one arbitrator appointed by each party and a third arbitrator appointed by the other arbitrators. In case of any failure of a party to make an appointment referred to above within four weeks after notice of the controversy, such appointment shall be made by said Chamber. All arbitration proceedings shall be held in Paris, France, and each party agrees to comply in all respects with any award made in any such proceeding and to the entry of a judgment in any jurisdiction upon any award rendered in such proceeding. The laws of the State of Illinois, U.S.A. shall apply to and govern this agreement, its interpretation and performance.'
291
Stevens of the Court of Appeals in this case, 484 F.2d 611, 615. Because of our disposition of this case on other grounds, we need not consider this contention. 7 Section 14 of the Securities Act of 1933, 15 U.S.C. 77n, provides as follows: 'Any condition, stipulation, or provision binding any person acquiring any security to waive compliance with any provision of this subchapter or of the rules and regulations of the Commission shall be void.' Section 29(a) of the Securities Exchange Act of 1934, 15 U.S.C. 78cc(a), provides: 'Any condition, stipulation, or provision binding any person to waive compliance with any provision of this chapter or of any rule or regulation thereunder, or of any rule of an exchange required thereby shall be void.' While the two sections are not identical, the variations in their wording seem irrelevant to the issue presented in this case. 13 8 We do not reach, or imply any opinion as to, the question whether the acquisition of Scherk's businesses was a security transaction within the meaning of 10(b) of the Securities Exchange Act of 1934, and Rule 10b5. Although this important question was considered by the District Court and the Court of Appeals, and although the dissenting opinion, post, p. 521, seems to consider it controlling, the petitioner did not assign the adverse ruling on the question as error and it was not briefed or argued in this Court. 9 Together with his motion for a stay pending arbitration, Scherk moved that the complaint be dismissed because the federal securities laws do not apply to this international transaction, cf. Leasco Data Processing Equipment Corp. v. Maxwell, 468 F.2d 1326 (CA2 1972). Since only the order granting the injunction was appealed, this contention was not considered by the Court of Appeals and is not before this Court. 10 See Quigley, Accession by the United States to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 70 Yale L.J. 1049, 1051 (1961). For example, while the arbitration agreement involved here provided that the controversies arising out of the agreement be resolved under '(t)he laws of the State of Illinois,' supra, n. 1, a determination of the existence and extent of fraud concerning the trademarks would necessarily involve an understanding of foreign law on that subject. 11 The dissenting opinion argues that our conclusion that Wilko is inapplicable to the situation presented in this case will vitiate the force of that decision because parties to transactions with many more direct contacts with this country than in the present case will nonetheless be able to invoke the 'talisman' of having an 'international contract.' Post, at 529. Concededly, situations may arise where the contacts with foreign countries are so insignificant or attenuated that the holding in Wilko would meaningfully apply. Judicial response to such situations can and should await future litigation in concrete cases. This case, however, 15 Our conclusion today is confirmed by international developments and domestic legislation in the area of commercial arbitration subsequent to the Wilko decision. On June 10, 1958, a special conference of the United Nations Economic and Social Council adopted the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. In 1970 the United States acceded to the treaty, (1970) 3 U.S.T. 2517, T.I.A.S. No. 6997, and Congress passed Chapter 2 of the United States Arbitration Act, 9 U.S.C. 201 et seq., in order to implement the Convention. Section 1 of the new chapter, 9 U.S.C. 201, provides unequivocally that the Convention 'shall be enforced in United States courts in accordance with this chapter.' 14 In The Bremen we noted that forum-selection clauses 'should be given full effect' when 'a freely negotiated private international agreement (is) unaffected by fraud . . ..' 407 U.S., at 13, 12, 92 S.Ct., at 1915, 1914. This qualification does not mean that any time a dispute arising out of a transaction is based upon an allegation of fraud, as in this case, the clause is unenforceable. Rather, it means that an arbitration or forum-selection clause in a contract is not enforceable if the inclusion of that clause in the contract was the product of fraud or coercion. Cf. Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 87 S.Ct. 1801, 18 L.Ed.2d 1270. Although we do not decide the question, presumably the type of fraud alleged here could be raised, under Art. V of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, see n. 15, infra, in challenging the enforcement of whatever arbitral award is produced through arbitration. Article V(2)(b) of the Convention provides that a country may refuse recognition and enforcement of an award if 'recognition or enforcement of the award would be contrary to the public policy of that country.' Under some circumstances, the designation of arbitration in a certain place might also be viewed as implicitly selecting the law of that place to apply to that transaction. In this case, however, '(t)he laws of the State of Illinois' were explicitly made applicable by the arbitration agreement. See n. 1, supra. provides no basis for a judgment that only United States laws and United States courts should determine this controversy in the face of a solemn agreement between the parties that such controversies be resolved elsewhere. The only contact between the United States and the transaction involved here is the fact that Alberto-Culver is an American corporation and the occurrence of somebut by no means the greater partof the pre-contract negotiations in this country. To determine that 'American standards of fairness,' post, at 528, must nonetheless govern the controversy demeans the standards of justice elsewhere in the world, and unnecessarily exalts the primacy of United States law over the laws of other countries. 12 The dissenting opinion raises the specter that our holding today will leave American investors at the mercy of multinational corporations with 'vast operations around the world . . ..' Post, at 533. Our decision, of course, has no bearing on the scope of the substantive provisions of the federal securities laws for the simple reason that the question is not presented in this case. See n. 8, supra.
292
The goal of the Convention, and the principal purpose underlying American adoption and implementation of it, was to encourage the recognition and enforcement of commercial arbitration agreements in international contracts and to unify the standards by which agreements to arbitrate are observed and arbitral awards are enforced in the signatory countries. See Convention on the Recognition and Enforcement of Foreign Arbitral Awards, S. Exec. Doc. E, 90th Cong., 2d Sess. (1968): Quigley, Accession by the United States to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 70 Yale L.J. 1049 (1961). Article II(1) of the Convention provides: 'Each Contracting State shall recognize an agreement in writing under which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration.' In their discussion of this Article, the delegates to the Convention voiced frequent concern that courts of signatory countries in which an agreement to arbitrate is sought to be enforced should not be permitted to decline enforcement of such agreements on the basis of parochial views of their desirability or in a manner that would diminish the mutually binding nature of the agreements. See G. Haight, Convention on the Recognition and Enforcement of Foreign Arbitral Awards: Summary Analysis of Record of United Nations Conference, May/June 1958, pp. 2428 (1958). Without reaching the issue of whether the Convention, apart from the considerations expressed in this opinion, would require of its own force that the agreement to arbitrate be enforced in the present case, we think that this country's adoption and ratification of the Convention and the passage of Chapter 2 of the United States Arbitration Act provide strongly persuasive evidence of congressional policy consistent with the decision we reach today.
293
294
295

Cases Conflicts

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Cases Conflicts

Uploaded by

Copyright:

Available Formats

Conflicts of Law Full Text of Cases Atty.

De Castro PLM College of Law

Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585 (1990)

Decided April 17, 1991

THE NINTH CIRCUIT

897 F.2d 377 (CA9 1990), reversed.

Page 499 U. S. 587

Page 499 U. S. 588

JUSTICE BLACKMUN delivered the opinion of the Court.

Page 499 U. S. 590

Page 499 U. S. 591

Page 499 U. S. 592

In this respect, the Court noted that there was

This Court vacated and remanded, stating that, in general,

The Bremen concerned a

Page 499 U. S. 596

Page 499 U. S. 595

Page 499 U. S. 597

The judgment of the Court of Appeals is reversed.

Page 499 U. S. 598

JUSTICE STEVENS, with whom JUSTICE MARSHALL joins, dissenting.

Page 499 U. S. 599

by them expounded are restated."

The Kensington, 183 U. S. 263, 183 U. S. 268 (1902).

Page 499 U. S. 601

Page 499 U. S. 600

Page 499 U. S. 602

46 U.S.C. App. 183c (emphasis added).

Page 499 U. S. 604

See 46 U.S.C. App. 183c:

See 46 U.S.C. App. 183b(a):

The Bremen v. Zapata Off-Shore Co., 407 U. S. 1, 407 U. S. 6 (1972).

The Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972)

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

428 F.2d at 907-908. (Footnotes omitted.)

Vacated and remanded.

The General Towage Conditions of the contract included the following:

immediately preceding the date and the parties' signatures. . . ."

428 F.2d 888, 907.

See 359 U.S. at 359 U. S. 182.

Chief Justice Taft concluded:

I would affirm the judgment below.

subjects them to the full equitable powers of the Limitation Court.

Decided May 20, 1985

APPEAL FROM THE UNITED STATES COURT OF APPEALS FOR THE

Page 471 U. S. 463

724 F.2d 1505, reversed and remanded.

Page 471 U. S. 465

JUSTICE BRENNAN delivered the opinion of the Court.

Page 471 U. S. 466

Page 471 U. S. 467

Page 471 U. S. 471

Page 471 U. S. 472

Page 471 U. S. 470

World-Wide Volkswagen Corp. v. Woodson, 444 U. S. 286, 444 U. S. 297 (1980).

Page 471 U. S. 474

Page 471 U. S. 473

(1984). [Footnote 15] Thus

Page 471 U. S. 475

Page 471 U. S. 477

Page 471 U. S. 476

Page 471 U. S. 479