458 F.3d 172 (3rd Cir. 2006), 05-1653, Telcordia Tech Inc. v. Telkom SA Ltd

Docket Nº:05-1653.
Citation:458 F.3d 172
Party Name:TELCORDIA TECH INC, in the matter of the arbitration of certain controversies between, Appellant v. TELKOM SA LTD.
Case Date:August 14, 2006
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit

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458 F.3d 172 (3rd Cir. 2006)

TELCORDIA TECH INC, in the matter of the arbitration of certain controversies between, Appellant



No. 05-1653.

United States Court of Appeals, Third Circuit.

August 14, 2006

Argued Jan. 13, 2006.

On Appeal from the United States District Court for the District of New Jersey D.C. No. 04-cv-02463, District Judge: Hon. John C. Lifland.

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[Copyrighted Material Omitted]

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Allen B. Green, Esquire (Argued) McKenna, Long & Aldridge, Charles M. Lizza, Esquire, Jay G. Safer, Esquire, LeBoeuf, Lamb, Greene & MacRae, Jay G. Safer, Esquire LeBoeuf, Lamb, Greene & MacRae, Counsel for Appellants.

Eugene D. Gulland, Esquire (Argued) Covington & Burling, Counsel for Appellees.

Before: SCIRICA[*], FUENTES and ROTH[**], Circuit Judges.


ROTH, Circuit Judge

We review here two orders by the District Court of New Jersey. In the first, the District Court granted Telkom SA Ltd.'s motion to dismiss Telcordia Technologies Inc.'s petition to confirm a partial arbitral award. Specifically, the District Court dismissed Telcordia's petition with prejudice because of issue preclusion or estoppel resulting from a previous decision by the D.C. Circuit Court of Appeals dismissing a similar petition by Telcordia without prejudice. In the alternative, but still in the first order, the District Court dismissed the petition without prejudice because the court chose to exercise "its discretion not to enforce the award at this time."

In the second order, the District Court dismissed the petition for lack of personal jurisdiction over Telkom and denied Telcordia's request for jurisdictional discovery. For the reasons that follow, we find that the District Court does have personal jurisdiction over Telkom. Furthermore, we find that considerations of comity and the proper interpretation of the New York

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Convention dictate that the petition be dismissed without prejudice.

I. Background

Telcordia, with a principal place of business in Piscataway, New Jersey, entered into a multimillion dollar contract with Telkom, a South African telecommunications company that was formerly the state-owned telephone monopoly.1 Pursuant to the agreement, Telkom was to pay Telcordia more than $249 million for customized telecommunications software. Unfortunately, the performance of the contract was racked with disputes, mainly with respect to whether the software complied with certain contractual specifications.2

Pursuant to the parties' contract, the two companies entered into binding arbitration in South Africa according to the rules of the International Chamber of Commerce (ICC). The arbitrator was Anthony Boswood, QC, of Fountain Court Temple, London, England. During the proceedings, Telkom sought intervention from the South African High Court to correct alleged errors in the arbitration.3 Specifically, Telkom concluded that the arbitrator was viewing issues from the perspective of English law, instead of South African law, as required by the parties' agreement. Before the High Court could act, on September 27, 2002, the arbitrator held that Telkom was liable to Telcordia for breach of contract. On September 30, 2002, the ICC's International Court of Arbitration formally issued its final award in favor of Telcordia and directed the parties to give it effect.

Shortly thereafter, Telcordia petitioned the United States District Court for the District of Columbia to confirm the arbitral award pursuant to the New York Convention.4] Contemporaneously, Telkom had filed a separate action in the South African High Court to have the award set aside or annulled pursuant to Section 33 of the South African Arbitration Act. Article III of the New York Convention provides that each state party "shall recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon." The setting aside or annulment of

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the arbitral award by the South African Court would be grounds for other courts to refuse recognition and enforcement of the arbitral award pursuant to Article V of the New York Convention. Specifically, Article V(1)(e) provides that:

1. Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that:

(e) The award has not yet become binding on the parties, or has been set aside

or suspended by a competent authority of the country in which, or under the law of which, that award was made.

In July 2003, the D.C. District Court dismissed the case without prejudice on the grounds that it lacked personal jurisdiction over Telkom and, alternatively, that the case could not proceed under the doctrine of forum non conveniens. Telcordia appealed to the U.S. Court of Appeals for the D.C. Circuit. That court affirmed on the alternative ground that under Article VI of the New York Convention the District Court should have adjourned its proceeding and awaited the outcome of the pending action in South Africa.5 Article VI provides a mechanism by which courts asked to enforce an arbitral award can adjourn to await the type of proceeding in the situs jurisdiction referenced in Article (V)(1)(e). Accordingly, the D.C. Circuit dismissed the petition without prejudice.

On November 27, 2003, and while the case was on appeal in the D.C. Circuit, the South African High Court issued a decision setting aside the award and ordering a new arbitration. On November 29, 2004, the Supreme Court of Appeal of South Africa agreed to hear Telcordia's appeal from the trial court's annulment of the award. This appeal is currently pending.

Undeterred, Telcordia brought a petition to enforce the arbitral award in the District of New Jersey. The District Court dismissed the petition with prejudice based on estoppel vis-à-vis the D.C. Circuit decision and, alternatively and cryptically, dismissed without prejudice pursuant to the New York Convention. In a second order, the District Court dismissed for lack of personal jurisdiction over Telkom. Telcordia timely appealed both orders to this Court.

II. Subject Matter Jurisdiction and Standard of Review

The District Court had subject matter jurisdiction pursuant to 28 U.S.C. § 1331 because Telcordia sought confirmation of an arbitral award under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the "New York Convention"), 9 U.S.C. §§ 203, et seq. This Court has appellate jurisdiction over the two final orders under 28 U.S.C. § 1291.

We review a district court's decision that it possesses or lacks personal jurisdiction de novo. Pinker v. Roche Holdings Ltd., 292 F.3d 361, 368 (3d Cir. 2002). In reviewing a motion to dismiss for lack of personal jurisdiction, this Court "must accept all of the plaintiff's allegations as true and construe disputed facts in favor of the plaintiff." Id. (quoting Carteret Sav. Bank, FA v. Shushan, 954 F.2d 141, 142 n.1 (3d Cir. 1992)). Factual findings made by a district court in determining personal jurisdiction, however, are reviewed for clear error. Penzoil Prod. Co. v. Colelli & Assocs., Inc., 149 F.3d 197, 200 (3d Cir. 1998). Review of a district court's dismissal on grounds of issue preclusion is

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plenary. Del. River Port Auth. v. Fraternal Order of Police, 290 F.3d 567, 572 n.6 (3d Cir. 2002) (marshaling authority).

The standard of review of a district court's decision to defer to foreign annulment proceedings under Article VI of the New York Convention is one of first impression for this Circuit. We agree with the Second Circuit that "in light of the permissive language of Article VI of the Convention and a district court's general discretion in managing its own caseload and suspense docket, . . . the proper standard for reviewing a district court's decision whether to adjourn is for abuse of discretion." Europcar Italia S.P.A. v. Maiellano Tours, Inc., 156 F.3d 310, 316-17 (2d Cir. 1998) (internal citations omitted).

III. Discussion

A. Personal Jurisdiction

The District Court of New Jersey may assert personal jurisdiction over Telkom to the extent provided under New Jersey law. See Carteret, 954 F.2d at 144 (quoting Provident Nat'l Bank v. California Fed. Sav. & Loan Ass'n, 819 F.2d 434, 436 (3d Cir. 1987)). New Jersey's long-arm statute provides for jurisdiction up to the limits of the protection afforded to nonresidents by the Due Process Clause of the Fourteenth Amendment. Charles Gendler & Co., Inc. v. Telecom Equip. Corp., 102 N.J. 460, 508 A.2d 1127, 1131 (1986). Pursuant to the Due Process Clause of the Fourteenth Amendment, in personam jurisdiction may be asserted over a nonresident so long as 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." Int'l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945) (quotation omitted).

The concept of minimum contacts varies according to the nature of the interactions and type of jurisdiction asserted. Specific jurisdiction6 is established when a nonresident defendant has "purposefully directed" his activities at a resident of the forum and the injury arises from, or is related to, those activities. General Elec. Comp. v. Deutz A.G., 270 F.3d 144, 150 (3d Cir. 2001). In determining jurisdiction for a breach of contract, the district court must consider the totality of the circumstances. Remick v. Manfredy, 238 F.3d 248, 256 (3d Cir. 2001).

Traveling to the forum to consult with the other party can constitute purposeful availment, regardless of who solicited the contact. Carteret, 954 F.2d at 150. Moreover, physical presence in the forum is no longer determinative in light of modern commercial business...

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