In action to enforce foreign
arbitral award, Ninth Circuit affirms dismissal of action by Dutch
rice-purchasing company for lack of personal jurisdiction over Indian seller
Glencore Grain Rotterdam B.V.
(Glencore), a Dutch company located in Rotterdam, concluded 11 contracts to buy
300,000 tons of rice from Shivnath Rai Harnarain Co. (Shivnath), a rice
exporter doing business in New Delhi, India. Under the contracts, Shivnath was
to have the rice delivered at the Port of Kandla, India. The arbitration
clauses provided that a panel of arbitrators of the London Rice Brokers’
Association (LRBA) would decide all contract disputes. As for choice of law,
the contracts provided that they “shall be deemed to have been made in England
and ... shall be governed in all respects by English Law.”
A dispute sprang up between the
parties about the delivery of the rice. In 1997, an LRBA panel awarded Glencore
more than $7 million in damages and interest. The award became final in England
and remains enforceable there. Shivnath neither paid, nor challenged, the
award. In 1998, Glencore sought enforcement of the award in India, in an action
currently pending in the High Court of Delhi. In 2000, Glencore sought
enforcement of the award in district court in California under the Convention
on the Recognition and Enforcement of Foreign Arbitral Awards [June 10, 1958,
T.I.A.S. 6997, 330 U.N.T.S. 38, 21 U.S.T. 2517, reprinted following 9 U.S.C.A.
Section 201 (West 1999)]. Both the U.S. and the United Kingdom are parties to
the Convention. In support of its claim, Glencore submitted evidence that
Shivnath had a sales agent in California, and had made several shipments to
California destinations. Shivnath filed a motion to dismiss based, inter alia,
on the lack of personal jurisdiction over it.
The district court did in fact
dismiss for lack of personal jurisdiction. First, it could not find that
Shivnath carried on any direct business activity in the U.S. Secondly, the
activities performed through a Shivnath sales agent failed to make out enough
contacts for general jurisdiction. The district court refused to exercise
specific jurisdiction because Glencore’s cause of action did not arise out of,
or relate to, Shivnath’s activities within the forum. Glencore appealed. The
U.S. Court of Appeals for the Ninth Circuit affirms.
Congress implemented the
Convention by passing Chapter II of the Federal Arbitration Act (FAA) [9 U.S.C.
Sections 201-208]. Section 203 provides that “an action or proceeding falling
under the Convention shall be deemed to arise under the laws and treaties of
the United States. The district courts of the United States ... shall have
original jurisdiction over such an action or proceeding, regardless of the
amount in controversy.”
Glencore argued (1) that neither
the Convention nor the FAA expressly requires personal jurisdiction over the
party against whom confirmation of an arbitral award is sought, and (2) that
lack of personal jurisdiction is not among the Convention’s seven defenses to
recognition and enforcement of a foreign arbitral award (see Article V, 21
U.S.T. 2517).
The Court notes that the
Convention did not eliminate the due process requirement that a federal court
have jurisdiction over the defendant’s person or property in an action to
confirm a previously issued arbitration award. See Restatement (Third) of
Foreign Relations Law Section Sec. 487, cmt. c (1987) (an arbitral award is
ordinarily enforced by confirmation in a judgment; an action to enforce a
foreign arbitral award requires jurisdiction over the award debtor or his
property).
Here, the district court lacked
jurisdiction over Shivnath. “When, as here, subject matter jurisdiction is
premised on a federal question, the exercise of personal jurisdiction over a
non-resident defendant must be authorized by a rule or statute and consonant
with the constitutional principles of due process. (Cite) Because there is no
applicable federal statute governing personal jurisdiction, our starting point
is California’s long-arm statute. See Fed.R.Civ.P. 4(k)(1)(A). (Cite)
California’s long arm [sic] allows its courts to exercise jurisdiction over
defendants to the limits of due process. See Cal.Civ. Proc. Code Section
410.10. (Cit.) Thus, our analysis of personal jurisdiction under California’s
long-arm and the Constitution collapse into one, and we consider only whether
the exercise of jurisdiction over Shivnath Rai comports with due process.”
“Constitutional due process is
satisfied when a non-resident 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.’‘ (Cite) Depending on the nature
of a foreign defendant’s contacts with the forum, a federal court may obtain
either specific or general jurisdiction over him. A court exercises specific
jurisdiction where the cause of action itself arises out of, or has a
substantial connection to, the defendant’s contacts with the forum. (Cite).
Alternatively, a defendant whose contacts are substantial, continuous, and
systematic is subject to a court’s general jurisdiction even if the suit
concerns matters not arising out of his contacts with the forum. (Cite) Whether
dealing with specific or general jurisdiction, the touchstone remains
‘purposeful availment.’” [Slip op. 16-18] In the Court’s view, Shivnath lacks
enough contacts with California to meet this test.
The Ninth Circuit applies a
three-part test to determine the propriety of specific jurisdiction: (1)
whether the defendant purposefully availed himself of the privileges of
conducting activities in the forum, (2) whether the claim arises out of or
results from the defendant’s forum-related activities, and (3) whether the
exercise of jurisdiction is reasonable. Here, Glencore’s action fails the
second requirement.
“We apply a ‘but for’ test to
assess whether Glencore Grain’s claims ‘arise out of Shivnath Rai’s forum
conduct: Glencore Grain must show that it would not have been injured ‘but for’
Shivnath Rai’s contacts with California. (Cite) The contracts giving rise to
this dispute were negotiated abroad, involved foreign companies, and required
performance (i.e., delivery of rice) in India. In short, Glencore Grain’s claim
does not arise out of conduct directed at or related to California. Thus, due
process forbids the exercise of specific jurisdiction.” [Slip. op. 19]
Neither is general jurisdiction
appropriate under the circumstances. Shivnath has had an independent sales
representative in California, and made a total of about 16 rice shipments to
California between March 1999 and March 2000. But Shivnath does not have any
property, bank accounts, or employees in California.
The Court points out that
engaging in commerce with residents of the forum state is not, in and of
itself, the kind of activity that approximates physical presence within the
state’s borders. Thus, Shivnath is at most a “visitor” to California, and its
contacts with California do not amount to the “physical presence” necessary to
assert general jurisdiction.
In concluding, the Court
declares: “We arrive at what we deem an unremarkable holding: the Convention
and the FAA authorize the exercise of subject matter jurisdiction but not
personal jurisdiction. Personal jurisdiction must be based on a defendant’s
person or property. Glencore Grain failed to identify any property of, or
conduct by, Shivnath Rai that might serve as the basis for the court’s
jurisdiction over it; even if Shivnath Rai’s conduct supported the exercise of
jurisdiction, that exercise would be unreasonable given the circumstances of
this case. Accordingly, the district court properly dismissed this action.”
[Slip op. 31-32]
Citation: Glencore Grain
Rotterdam B.V. v. Shivnath Rai Harnarain Co., 284 F.3d 1114 (9th Cir. 2002).
**** Mr. Richard Ehrlich is a specialist in Corporate, Estate and Personal Financial Planning in Florida. In the course of his career, he has prepared hundreds of estate plans and helped hundreds of small businesses navigate the various issues involving insurance, retirement and employee retention. He has helped numerous families deal with the difficulties of taking care of elderly relatives and assisted with all of their long-term planning and long-term care needs. Finally, he has helped investors with their losses in unsuitable investments. LinkedIn Profile: https://www.linkedin.com/in/richard-ehrlich-777b513/; Attorney Profile: http://www.eldercounsel.com/profile/richard-ehrlich-ehrlich-law-center-pa/; Attorney Profile: https://solomonlawguild.com/richard-ehrlich%2C-esq; Attorney News: https://attorneygazette.com/richard-ehrlich%2C-esq#c35a1098-f039-43ab-b0dc-06cff6dabf61
