Seventh Circuit Court of Appeals Commentary : In Their Opinion : Lawyer & Attorney Michael E. Rigney : Kelley Drye & Warren Law Firm

KORAL v. BOEING COMPANY (January 4, 2011)

An Boeing airplane crashed in the Netherlands in 2009. One hundred seventeen plaintiffs have filed suit in Illinois state court in 29 separate actions. Boeing filed motions to dismiss the state court actions on the basis of forum non conveniens, citing the considerable inconvenience of transporting its witnesses from out-of-state in 29 different trials. In response, the plaintiffs pointed out that the standard practice in aviation crash cases is to establish liability by trying a small number of exemplar cases, thereby significantly reducing the inconvenience. Boeing used that response to remove all the state court cases to federal court, arguing that plaintiffs' comment was a proposal for a joint trial and thus qualified the case as a "mass action" under the Class Action Fairness Act. Judges Shadur, Guzman, Conlon, Coleman, and St. Eve (N.D. Ill.) each granted motions to remand. Boeing petitions for an appeal.

In their opinion, Seventh Circuit Judges Posner, Wood, and Tinder granted the petition and affirmed the remands. Under Rule 1332, a "mass action” is a civil action in which the claims of 100 or more people are "proposed to be tried jointly," except when the proposal is by a defendant. So Boeing’s “proposal cannot be a Rule 1332 proposal. Here, the only “proposal” is plaintiffs' predictions about what might happen as the case progresses. That falls short of a Rule 1332 proposal – Boeing’s removal was therefore premature. 

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STROITELSTVO BULGARIA LIMITED v. BULGARIAN-AMERICAN ENTERPRISE FUND (December 14, 2009)

Stroitelstvo Bulgaria Limited ("Limited") is a Bulgarian construction company. In 2005, it borrowed almost €2 million from the Bulgarian-American Credit Bank ("Bank") for a construction project. After a few months, the Bank claimed that Limited breached the loan agreement. It terminated its payments under the borrowing and asserted a right to recover almost €1 million, although less than €400,000 had been disbursed. According to Limited, the allegations of a breach were simply a pretext to put pressure on Limited to pay more for its borrowing. When the bank got a judgment in Bulgaria for almost €1 million and froze Limited’s assets, Limited agreed to compromise the claim for less than the judgment but more than they owed. They then sued Bank and its U.S. parent in U.S. court, alleging violations of RICO and the Bulgarian Obligations and Contracts Act as well as contract and tort claims. The court granted a motion to dismiss on forum non conveniens grounds. Limited appeals.

In their opinion, Judges Manion, Sykes and Tinder affirmed. In order to dismiss on forum non conveniens grounds, a court must find that there is an alternate forum that is both available and adequate. The principal issue on the appeal was whether the available Bulgarian forum was “adequate.” An adequate forum is one that provides some fair avenue for redress – not necessarily as complete or comprehensive as the U.S. forum. The Court noted that there was expert testimony regarding corruption in the Bulgarian court system. However, particularly given Bulgaria’s entry into the European Union with its requirement of a stable legal system, the Court concluded that the anecdotal evidence of corruption did not establish inadequacy. The Court also conceded that Limited would not have available the same claims in Bulgaria – particularly would have no RICO claim. It was undisputed that a breach of contract claim would lie against the Bank, and that was the heart of the complaint. The Court concluded that was enough potential for redress to meet the adequacy standard. Finally, the Court concluded that the higher filing fee in Bulgaria did not rule out the dismissal. Having concluded that the Bulgarian forum was available and adequate, the Court addressed the balancing factors. The Court found no abuse of discretion. In fact, it found the private and public interests strongly favored Bulgaria.

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IN RE LIMITNONE (December 19, 2008)

LimitNone, a software development company, was pitching an e-mail application to Google. Before a March 2007 meeting, the parties signed confidentiality agreements that included a forum-selection clause naming a California county as the exclusive venue for disputes. Both agreements limited modifications to writings signed by both parties. LimitNone claims that a Google employee later “accepted” an agreement that provided for exclusive jurisdiction in Illinois by clicking on the “Accept” button for the LimitNone License Agreement. After Google developed its own application, LimitNone brought an action in Illinois state court. It alleged violations of the Illinois Trade Secrets Act (“ITSA”) and the Illinois Consumer Fraud and Deceptive Practices Act. Google removed to federal court, asserting that the ITSA was preempted by the federal Copyright Act. LimitNone sought a remand. On Google’s motion, the district court transferred the case to the Northern District of California under § 1406(a), holding that the California forum-selection clause applied and venue was improper in Illinois. LimitNone petitions for a writ of mandamus.

In their opinion, Judges Bauer, Coffey and Sykes denied the petition. The Court first addressed whether mandamus was the proper vehicle for relief. The Court noted that the Supreme Court has approved mandamus for challenging transfers under § 1404 but has suggested that it is inappropriate for transfers under § 1406. But the Court concluded that the district court erroneously applied § 1406. Section 1406 applies only when venue is improper. Here, notwithstanding the forum-selection clause, venue was proper in the district court. The Court treated the transfer as based on § 1404 and found mandamus to be the proper vehicle for review.

On the merits, however, the Court rejected LimitNone’s arguments that the lower court erred in a) transferring the case before ruling on subject matter jurisdiction, and b) making factual determinations regarding the transfer argument before ruling on subject matter jurisdiction. The Court conceded that the Supreme Court requires a determination of subject-matter jurisdiction before a ruling on the merits. The Supreme Court does not, however, mandate a particular sequence in determining jurisdictional issues. The transfer was not a decision on the merits. The district court was within its discretion in ruling on the venue issue before the subject-matter jurisdiction issue. Furthermore, the court was well within its power to resolve factual disputes that were necessary to the adjudication of the venue issue. The Court noted that district courts are frequently required to resolve disputed factual issues before ruling on preliminary issues such as personal jurisdiction, diversity of citizenship or amount in controversy, for example. The fact that LimitNone may be barred from relitigating that issue does not change the result.

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U.S.O. CORP. v. MIZUHO HOLDING CO. (October 28, 2008)

U.S.O. Corp. (“USO”) is incorporated in Delaware but is the wholly-owned subsidiary of a Japanese company. Its headquarters are in Japan. USO invested in a limited partnership. Like USO, the partnership was incorporated in Delaware. It also had its principal place of business in Japan and the partners all had addresses in Japan. The partnership invested in another partnership, which acquired a building in Chicago, Illinois. The partnership held the building investment for ten years. USO sued Mizuho Holding Co. (“Mizuho”) and alleged that Mizuho failed to pay the amounts due to USO during its investment and misappropriated USO’s portion of the proceeds of the sale of the building, almost $7 million. The acts complained of occurred mostly in Japan. Most of the witnesses and record evidence exists in Japan. Mizuho brought a declaratory judgment suit in Japan raising the same issues, albeit eight months after USO sued in the United States. The district court dismissed the suit based on forum non conveniens. USO appeals.

In their opinion, Judges Posner, Ripple, and Evans affirmed. The Court thought that Mizuno’s case that it would be unreasonably burdened to have to defend in the United States was “compelling.” USO argued that its choice of forum, particularly as an American company, should not be rejected lightly. The Court did not question the existence of a presumption in favor of plaintiff’s choice of forum. But it also noted the many legal principles that limit a plaintiff’s choice – jurisdiction, venue, and removal, to name a few. The Court looked to the Supreme Court’s decision in Piper Aircraft Co. v. Reyno for guidance. There, the Supreme Court held that dismissal is proper, even for an American company, if the balance of conveniences demonstrates that the defendant would be burdened by being forced to litigate in the plaintiff’s chosen forum. The deference to Americans is not based on nationalism but on the assumption that a home forum is more convenient to an American than it likely would be to a foreign company. The Court noted that USO was not really “American” except through incorporation. The assumption of convenience did not apply in its case. Here, the Court listed a host of reasons to dismiss: a) the presence of witnesses and documents in Japan, b) the need for interpreters and translators if litigated in the U.S., c) the probable application of Japanese law, d) the pending, “well-advanced” case in Japan, and e) the refusal of the Japanese court to abate its case in favor of a U.S. case. Piper also directed the Court to look at how the public’s interest is affected. The public interest considerations include burdening an American jury with a wholly foreign dispute and forcing a court to struggle with Japanese law. The balance of conveniences and the public interest in this case clearly favor a dismissal.

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