Intec Usa, LLC v. Engle

• Decision Date: 02 November 2006
• Docket Number: No. 06-1117.,06-1117.
• Citation: 467 F.3d 1038
• Parties: INTEC USA, LLC, Plaintiff-Appellant, v. Jonathan ENGLE, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

467 F.3d 1038

INTEC USA, LLC, Plaintiff-Appellant, v. Jonathan ENGLE, et al., Defendants-Appellees.

No. 06-1117.

United States Court of Appeals, Seventh Circuit.

Argued September 12, 2006.

Decided November 2, 2006.

Norman J. Lerum, Chicago, IL, William J. Wolf (argued), Bugg & Wolf, Durham, NV, for Plaintiff-Appellant.

Addie K.S. Ries, Kirk Alan Parry (argued), Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, Raleigh, NC, for Defendants-Appellees.

Before POSNER, EASTERBROOK, and SYKES, Circuit Judges.

EASTERBROOK, Circuit Judge.

An arbitration between Intec USA and a group of corporations controlled by Raph Engle was settled in 2003. Engle had founded Intec in 1990 and sold a majority interest in 1997. Intec's new investors maintained in the arbitration that Engle's other ventures (IBEX Industries Ltd. and related firms) were violating covenants not to compete that Engle had given in order to induce them to buy out his interest in Intec. The 2003 pact appeared to resolve that dispute. After concluding that Engle and his firms were not paying any more attention to the 2003 agreement than to the 1997 covenants, Intec filed suit in North Carolina, its home state. The 2003 settlement specifies that North Carolina's law will govern but does not include a provision consenting to litigate there. Engle is a citizen of New Zealand, as are three of the seven corporate defendants. Of the remaining corporations, two are citizens of Australia and one each of Brazil and the United Kingdom. They do not do business in North Carolina and denied that its courts have personal jurisdiction over them.

Before the court acted on the defendants' motion in North Carolina, Intec filed a new suit in Chicago, where it served Jonathan Engle (Raph's son) and the family corporations with process during a trade show for the food-processing industry, in which both Intec and the Engle businesses compete. The district court dismissed this suit on the ground of forum non conveniens. 2005 WL 3455863, 2005 U.S. Dist. LEXIS 33365 (N.D.Ill.Dec. 13, 2005). See Piper Aircraft Co. v. Reyno, 454 U.S. 235, 102 S.Ct. 252, 70 L.Ed.2d 419 (1981); In re Bridgestone/Firestone, Inc., 420 F.3d 702 (7th Cir.2005). North Carolina might be a convenient forum (if the problems with personal jurisdiction could be solved), and New Zealand might be a convenient forum, but Chicago had nothing to do with the parties or their dispute, the court concluded. As between Chicago and New Zealand, the district court thought, New Zealand is the more appropriate forum: only two of Intec's potential 18 witnesses, and none of the defendants', lives within the range of compulsory process under Fed. R.Civ.P. 45(b)(2), (c)(3). Many more potential witnesses can be compelled to appear in New Zealand than in Chicago. All of the defendants have consented to be sued in New Zealand, the base of the supposedly forbidden activities. Most if not all of the physical evidence is there. The district judge stressed that, as Intec wants an injunction, it is appropriate for the court that issues an injunction to have the on-the-spot ability to supervise compliance and provide supplemental relief.

Intec's appeal principally rests on the proposition that the plaintiff's choice of forum should be respected in all but extraordinary cases. See Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508-09, 67 S.Ct. 839, 91 L.Ed. 1055 (1947). We doubt that this proposition has controlling force in litigation among firms all of which trade worldwide. See Kamel v. Hill-Rom Co., 108 F.3d 799, 804 (7th Cir.1997). Intec has an affiliate (Intec Pacific) in Oceania, and the materials-handling business is international; it is not as if a person with no dealings outside the Great Plains were being dragged halfway around the world to litigate. Intec says that, because its claims rest on U.S. law, this nation should do the enforcement to protect domestic firms. Why courts should favor their citizens in court—and why the first litigant to reach a courthouse should receive this benefit (if it is one)—are mysteries. International business transactions depend on evenhanded application of legal rules; home-town favoritism is the enemy of commerce.

As a nation whose policy favors free international trade, the United States must be prepared to trust the judiciary of our partners, unless there are grounds to doubt the competence or honesty of the foreign judicial system. See The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972) (enforcing agreement to litigate in London); cf. Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985) (enforcing agreement to arbitrate in Japan). Intec does not offer any reason to think that New Zealand would be a biased forum for this litigation. North Carolina law is "foreign" even to a federal court in Chicago (or for that matter North Carolina). Under Erie R.R. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), the federal court's task is not to made an independent decision but to predict how the Supreme Court of North Carolina would understand and apply its own law. New Zealand would try to do the same. Just as federal courts routinely enforce the laws and judicial decisions of other jurisdictions, so do the courts of other nations. See Omron Healthcare, Inc. v. Maclaren Exports Ltd., 28 F.3d 600 (7th Cir.1994). Intec has not cited any decision implying that New Zealand is unwilling to enforce choice-of-law clauses that specify other jurisdictions' norms or that it is hostile to any of the substantive rules of North Carolina's law. (Indeed, counsel for Intec revealed at oral argument that he has done no research and hasn't a clue how New Zealand handles disputes that arise out of international trade.)

Before we decide just how much weight to give to the plaintiff's choice of forum, however, we must attend to subject-matter jurisdiction, for if there is none then the suit must be dismissed without regard to whether Chicago would be the most convenient forum. It is an open question whether a district court may dismiss on forum non conveniens grounds without deciding whether it has subject-matter jurisdiction. See Malaysia International Shipping Corp. v. Sinochem International Co., 436 F.3d 349 (3d Cir.2006), cert. granted, ___ U.S. ___, 127 S.Ct. 36, ___ L.Ed.2d ___ (2006). The majority in Sinochem concluded that jurisdictional issues always must be resolved ahead of all others. It relied principally on Steel Co. v. Citizens for A Better Environment, 523 U.S. 83, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998), and Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 119 S.Ct. 1563, 143 L.Ed.2d 760 (1999), for the proposition that "jurisdictional" decisions must precede all others. Judge Stapleton replied in dissent that there are many reasons for not adjudicating—lack of subject-matter jurisdiction, lack of personal jurisdiction, lack of ripeness, abstention, and forum non conveniens, among others. He maintained that jurisdiction is vital only if the court proposes to issue a judgment on the merits. Ruhrgas says as much, 526 U.S. at 584-85, 119 S.Ct. 1563, though in dictum. (Its holding is that there is no priority between subject-matter jurisdiction and personal jurisdiction.)

Judge Stapleton's view is the norm among federal appellate courts. See, e.g., Monegasque De Reassurances S.A.M. v. Nak Naftogaz of Ukraine, 311 F.3d 488 (2d Cir.2002); In re Papandreou, 139 F.3d 247 (D.C.Cir.1998). It seems to us the right approach; we expect Sinochem to turn Ruhrgas's dictum into a holding. Unlike the majority in Sinochem, we do not read Kamel as committing this court to a rule that subject-matter jurisdiction always must be resolved ahead of forum non conveniens. But to avoid the need for further proceedings should the Supreme Court affirm in Sinochem, we turn to subject-matter jurisdiction. This is prudent in any event, because Intec may be tempted to try still a third federal forum (perhaps at the next trade show in Las Vegas), and if subject-matter jurisdiction is absent that maneuver must fail.

Intec is a limited liability company, which has the citizenship of each of its members. See Cosgrove v. Bartolotta, 150 F.3d 729 (7th Cir.1998); cf. Carden v. Arkoma Associates, 494 U.S. 185, 110 S.Ct. 1015, 108 L.Ed.2d 157 (1990) (all associations other than corporations have the citizenship of each partner or member). Intec has five members, all natural persons, and it alleged that all five are citizens of North Carolina. Yet one of them, John Smith, is a citizen of New Zealand. It is common ground among the parties (at least, it became common ground once we directed them to file supplemental memoranda after oral argument) that, if Smith is treated as a citizen of New Zealand, then Intec is a citizen of both North Carolina and New Zealand. Subject-matter jurisdiction then would be lacking, first because citizens of New Zealand would be on both sides (so complete diversity, see Strawbridge v. Curtiss, 3 Cranch 267, 2 L.Ed. 435 (1806), would be missing), and second because 28 U.S.C. § 1332(a)(2) does not in any event extend to litigation in which all of the litigants are aliens. See Hodgson v. Bowerbank, 5 Cranch 303, 3 L.Ed. 108 (1809); Mossman v. Higginson, 4 Dall. 12, 1 L.Ed. 720 (1800). (For this purpose Intec would be "an alien" in the same sense that a firm incorporated in Delaware, with its principal place of business in North Carolina, is a citizen of both states.)

Intec rests its position on the trailing, unnumbered sentence in § 1332(a): "For the purposes of this section, section 1335, and section 1441, an alien admitted to the United States for permanent residence shall be deemed a citizen of the State in which such alien is domiciled." Smith's immigration status is that of an alien "admitted to the United States for permanent residence", so this clause applies to him. But what does it mean? It could mean...