436 F.3d 349 (3rd Cir. 2006), 04-1815, Malaysia Intern. Shipping Corp. v. Sinochem Intern. Co. Ltd.

Docket Nº:04-1815.
Citation:436 F.3d 349
Case Date:February 07, 2006
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit

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436 F.3d 349 (3rd Cir. 2006)




No. 04-1815.

United States Court of Appeals, Third Circuit.

Feb. 7, 2006

Argued June 7, 2005.

As Amended Feb. 8, 2006.

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Ann-Michele G. Higgins, (Argued), Diane B. Carvell, Rawle & Henderson LLP, Philadelphia, PA, for Appellant.

Stephen M. Hudspeth, (Argued), Susan L. Stevens, Coudert Brothers LLP, New York, NY, for Appellee.

Before AMBRO, STAPLETON and ALARCÓN, [*] Circuit Judges.

AMBRO, Circuit Judge.

Appellant Malaysia International Shipping Corporation ("MISC") appeals the District Court's dismissal, on forum non conveniens grounds, of its fraudulent misrepresentation action against Appellee Sinochem International Company Limited ("Sinochem"). We agree with the District Court that admiralty jurisdiction exists over this case. But because we believe the District Court should have determined whether it had personal jurisdiction before ruling on Sinochem's forum non conveniens motion, we vacate and remand.


In 2003, Sinochem, a Chinese company, contracted with Triorient Trading Inc. ("Triorient"), an American company that is not a party to this action, for the purchase of a large quantity of steel coils. The coils were required to be loaded for shipment to China by April 30, 2003. Pursuant to the contract, Sinochem opened a letter of credit with its bank in China to provide security to Triorient for the purchase price of the coils. To trigger payment under the letter of credit, Triorient was required to submit a valid bill of lading stating that the coils had been loaded on or before April 30, 2003. Sinochem's contract with Triorient specified that any dispute arising under it would be arbitrated under Chinese law.

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Triorient sub-chartered a vessel (the M/V HANDY ROSELAND; hereafter the "Vessel") owned by MISC, a Malaysian company, to transport the steel coils to China. 1 Triorient then hired Novolog Bucks County, Inc. ("Novolog"), an American company also not a party to this action, to load the coils onto the Vessel at the Port of Philadelphia. A bill of lading dated April 30, 2003, was issued, acknowledging that the steel coils had been loaded, and the Vessel sailed for China. 2

The bill of lading listed Triorient as the shipper, Sinochem as the receiver, and Pan Ocean as the carrier. On the back of the bill of lading were "Conditions of Carriage" specifying that the Hague Rules applied to it. This document also incorporated by reference a charter party--a contract between MISC and Pan Ocean regarding the Vessel. 3 The charter party here is not part of the record because Pan Ocean would not disclose its terms. A letter from Pan Ocean's counsel indicated that the charter party chose "New York law with U.S. arbitration" to apply to disputes under it. An opinion of the Chinese court in the related proceeding, 4 however, stated that English law governed disputes under the charter party.

On May 15, 2003, Sinochem filed an action in the Eastern District of Pennsylvania, in which it sought discovery, pursuant to 28 U.S.C. § 1782, 5 regarding various aspects of the Vessel's loading, the charter party, and the bill of lading for use in an "imminent foreign proceeding." The District Court granted this limited discovery.

On June 8, 2003, Sinochem petitioned the Guangzhou Admiralty Court in China (the "Chinese Admiralty Court") for preservation of a maritime claim against MISC and for the arrest of the Vessel when it arrived in China, claiming that MISC had fraudulently backdated the bill of lading to April 30, 2003. The Chinese Admiralty Court ordered the ship arrested that same day. The arrest of the Vessel was then carried out at the Huangpu Port in China. MISC posted security ($9,000,000), and the Vessel was released.

MISC filed the suit before us in the Eastern District of Pennsylvania on June 23, 2003, alleging that, when Sinochem petitioned the Chinese Admiralty Court for the Vessel's arrest, it negligently misrepresented "the [V]essel's fitness and suitability to load its cargo." MISC further alleged that: (1) "[w]ith a minimal amount of investigation, Sinochem knew or otherwise

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should have known whether its cargo of steel had been loaded aboard the [V]essel on or by April 30, 2003"; (2) "Sinochem knew or should have known that other cargo interests and charterers would reasonably and justifiably rely on Sinochem's representation(s) that the vessel had not loaded the cargo as required"; and (3) MISC had sustained damages "[d]ue to the fraudulent representations made by Sinochem and the resulting delay to the [Vessel] in the People's Republic of China caused by said representations...."

On July 2, 2003, Sinochem filed a complaint with the Chinese Admiralty Court alleging that it had suffered damage due to MISC's alleged backdating of the bill of lading (which had triggered payment by Sinochem to Triorient under the letter of credit's terms). Specifically, Sinochem alleged that May 1, 2003, should have been the loading date on the bill of lading. It asserted that the April 30, 2003 loading date allowed Triorient to negotiate successfully its payment and made it "de facto impossible for [it] to stop payment and refuse acceptance of the goods."

MISC moved to dismiss the Chinese Admiralty Court action on jurisdictional grounds. That Court denied MISC's motion, and the Guangdong Higher People's Court (the "Chinese High Court") affirmed, 6 concluding that the Chinese Admiralty Court had jurisdiction.

The Chinese High Court rejected MISC's argument that the choice-of-law provisions of the bill of lading and the charter party controlled the case and that jurisdiction therefore properly rested with the London Maritime Arbitration Commission. 7 In rejecting MISC's contention that the Chinese Admiralty Court should not have exercised jurisdiction because MISC filed its U.S. action before Sinochem filed its Chinese action, the Chinese High Court determined as follows: "Given that the People's Republic of China and the U.S. are different sovereignties with different jurisdictions, whether [MISC] has taken actions at any U.S. court in respect of this case will have no effect on the exercise by a Chinese court of its competent jurisdiction over said case."

While these events were occurring in the Chinese courts, proceedings continued in MISC's action in the Eastern District of Pennsylvania. Sinochem filed a motion to dismiss MISC's complaint for lack of subject matter and personal jurisdiction, for forum non conveniens, and "for failure to observe the rules of [international] comity." The District Court granted Sinochem's motion to dismiss and later denied MISC's motion for reconsideration.

The District Court determined that it had subject matter jurisdiction over MISC's action pursuant to 28 U.S.C. § 1333 (admiralty and maritime jurisdiction) because the alleged tort--which the District Court identified as the seizure of the Vessel at a port in China--occurred on navigable waters and because the incident had a sufficient connection to maritime activity.

As to personal jurisdiction, the Court concluded that it did not have specific personal jurisdiction over Sinochem under the Pennsylvania long-arm statute. But it did state that, "provided limited discovery, [MISC] might be able to identify sufficient national contacts to establish personal jurisdiction over [Sinochem] through the federal long-arm statute." The Court declined

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to order such discovery or rule on this issue because it concluded that dismissal was appropriate on the basis of forum non conveniens. 8

In dismissing on forum non conveniens grounds, the District Court noted, in the absence of any argument to the contrary by MISC, that an adequate alternative forum for deciding MISC's negligent misrepresentation claim existed in the Chinese Admiralty Court. The District Court then reasoned that the "private interest" factors relevant to its forum non conveniens determination (which include, inter alia, ease of access to sources of proof and availability of compulsory process to obtain the attendance of unwilling witnesses) weighed in favor of dismissal because the main witnesses were located in China, and the American witnesses would have to travel to China for Sinochem's action regardless whether MISC's action continued in the United States. It reasoned further that the relevant "public interest" factor--the avoidance of unnecessary conflict-of-laws problems--also weighed in favor of dismissal because Chinese law would apply to MISC's negligent misrepresentation claim. 9 In this context and because no American interests were implicated, the Court held that dismissal for forum non conveniens was appropriate despite the deference that must be paid to the plaintiff's (in this case MISC's) choice of forum.

The District Court also issued an opinion denying MISC's motion for reconsideration of the dismissal for forum non conveniens. In doing so, the Court declined to consider MISC's assertion that there were additional important witnesses--the people who were retained as surveyors to observe the loading of the Vessel--located in the United States because MISC had failed to establish the connection of those witnesses to this country in responding to the motion to dismiss even though the information was available to MISC at that time. Even if these witnesses were in the United States, the Court pointed out that China had "adequate means" of compelling their testimony. The Court also noted that the Chinese High Court's decision (which was issued after the decision dismissing

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MISC's action had been filed) affirming Chinese jurisdiction over...

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