R. Maganlal & Co. v. M.G. Chemical Co., Inc.

• Decision Date: 19 August 1991
• Docket Number: No. 1658,D,1658
• Citation: 942 F.2d 164
• Parties: R. MAGANLAL & COMPANY, Plaintiff-Appellant, v. M.G. CHEMICAL COMPANY, INC., Defendant-Appellee. ocket 91-7085.
• Court: U.S. Court of Appeals — Second Circuit

Page 164

942 F.2d 164

R. MAGANLAL & COMPANY, Plaintiff-Appellant, v. M.G. CHEMICAL COMPANY, INC., Defendant-Appellee.

No. 1658, Docket 91-7085.

United States Court of Appeals Second Circuit.

Argued June 5, 1991.

Decided August 19, 1991.

Sebastiano M. Bio, New York City (Picillo Bromberg Caruso, Fairfield, N.J.; Howard Hackman, Columbus, Ohio; Manlio DePreta, O'Donnell & Schwartz, New York City, of counsel), for plaintiff-appellant.

Spencer Webber Waller, Brooklyn, N.Y., for defendant-appellee.

Before OAKES, Chief Judge, and PRATT and ALTIMARI, Circuit Judges.

ALTIMARI, Circuit Judge:

Plaintiff-appellant R. Maganlal & Company ("Maganlal"), an Indian export trading company, appeals from a judgment of the United States District Court for the Southern District of New York (Mary Johnson Lowe, Judge ) dismissing on grounds of forum non conveniens Maganlal's breach of contract action against defendant-appellee M.G. Chemical Company, Inc. ("MG"). Maganlal brought the underlying action claiming that goods purchased from MG, a New York corporation, and delivered to Maganlal in India, were of inferior quality and did not conform to the contract's specifications. MG moved to dismiss the complaint, arguing that India was a more convenient forum. MG contended, and the district court agreed, that an issue of central importance in the case was whether Maganlal's import licenses, which were apparently issued by the Indian government and governed by Indian law, permitted the importation of the goods Maganlal had purchased from MG. Because resolution of this issue would require application of Indian law and access to witnesses in India, the district court granted MG's motion and dismissed the case.

Maganlal appeals from this judgment of dismissal. On appeal, Maganlal argues that the district court clearly erred in finding that issues of foreign law and access to foreign witnesses would so dominate the action as to make trial in the Southern District, Maganlal's chosen forum, inappropriate. According to Maganlal, the fundamental issue in the case, regarding both MG's liability and Maganlal's entitlement to damages, was whether the goods conformed to the contract, not whether the goods were covered by Maganlal's import documents. Maganlal contends that because the district court placed undue emphasis on the "import" issue, the court improperly weighed the private and public interest factors set forth in Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508-09, 67 S.Ct. 839, 843, 91 L.Ed. 1055 (1947), and therefore abused its discretion in dismissing the case on grounds of forum non conveniens.

For the reasons set forth below, we reverse the judgment of the district court and remand the case for further proceedings.

BACKGROUND

In September 1987, plaintiff-appellant Maganlal contracted with defendant-appellee MG to purchase approximately 200 metric tons of low density polyethelene ("LDPE"), an intermediate stage plastic used in the manufacture of plastic film. The LDPE, which apparently was to be manufactured by DuPont, a Delaware corporation, was to be delivered to Maganlal in India. The contract was negotiated and signed in New York on behalf of Maganlal The LDPE ultimately was shipped to India from Houston, Texas and, the district court found, MG was paid pursuant to the letter of credit. Upon the goods' arrival at the Indian port of Kandla in January 1988, Indian customs inspectors inspected the goods and found them to be wet, possibly contaminated with foreign matter and not in conformity with the description of the goods in the import documents. Maganlal contacted MG and rejected the goods, claiming that the goods did not conform to the contract. MG did not respond to the rejection letter. Shortly thereafter, Maganlal arranged for the goods to be examined by two private entities, including the Bombay agent of Lloyd's of London ("Lloyd's"). Lloyd's agent observed that between 90 and 95% of the goods were either wet, discolored or contained foreign material. Further, Lloyd's agent concluded that the "damage appears to have occured prior to shipping." In any event, based upon the customs authorities' examination of the LDPE, the goods were eventually confiscated in November 1988. According to the customs officials, the LDPE constituted "disposal goods" which could not be imported into India under Maganlal's import licenses. The record is not clear as to whether the basis of the authorities' action was that the LDPE was adulterated or that Maganlal's import documents simply did not permit the importation of "off-spec" goods.

                by Maganlal's agent, Kanu Patel.   After the contract was negotiated, Maganlal arranged for an irrevocable letter of credit in the amount of $171,383.69 to be established in favor of MG.   The letter of credit identified the product to be purchased as LDPE "natural virgin film."   Subsequently, the letter of credit was amended to indicate, in conformity with MG's invoice, that the LDPE was "off-spec," i.e., LDPE that did not meet industry standards as prime material
                

Because MG failed to return Maganlal's payment, Maganlal commenced the underlying diversity action against MG in the United States District Court for the Southern District of New York in July 1988. Maganlal alleged that MG had breached their contract by sending non-conforming, worthless goods and sought monetary damages. MG served its answer in August 1988, denying Maganlal's allegations.

During a status conference in July 1989, MG's counsel moved to withdraw from the case. After some delay, new counsel was substituted in October 1989. Apparently, the issue of forum non conveniens was first discussed at the July status conference. After receiving an extension of time, MG's new counsel filed a motion to dismiss the action on the ground of forum non conveniens, contending that India was a more convenient forum for the litigation. MG's main argument, and its principal theory of defense, was that under Indian customs law, Maganlal's import documents did not permit the importation of the "off-spec" LDPE Maganlal had ordered, regardless of the condition of the goods. According to MG, it was the requirements of Indian law, and not the quality of the "off-spec" LDPE, that caused Maganlal's loss. To prevail on its defense, MG claimed that it needed access to witnesses in India. MG also contended that resolution of the "import" issue required an understanding and application of the Indian customs laws. Moreover, the allegedly adulterated LDPE was in storage in India, making testing difficult and expensive.

In response to MG's claims, Maganlal argued that whether the "off-spec" LDPE was covered by its import licenses was irrelevant to whether the LDPE conformed to the contract, and hence to whether MG was in breach. Moreover, Maganlal pointed out that the LDPE was manufactured in and shipped from the United States. As a result, Maganlal represented that all of its witnesses and documentary proof concerning the composition of the LDPE and its condition prior to shipment was in this country. The condition of the goods when shipped was relevant in light of Lloyd's agent's observation that the LDPE appeared to have been damaged prior to shipping. Maganlal further indicated that it could provide MG with samples of the LDPE for testing in the United States.

The district court granted MG's motion to dismiss. The court determined that there were two factual issues in the case: (1) whether the LDPE conformed to the contract specifications, and (2) whether Maganlal's import documents covered the importation of "off-spec" goods. In its analysis, the court discussed the relevant private and public interest factors set out in Gilbert, 330 U.S. at 508-09, 67 S.Ct. at 843, which must be weighed to determine whether dismissal on forum non conveniens grounds is proper. Regarding the issue of conformity, the court indicated that proof as to the conforming nature of the goods was not uniquely available in the United States. The court also noted that testing would require access to the goods in India. More importantly, the court reasoned that resolving the issue of whether Maganlal's import licenses covered the "off-spec" LDPE--an issue the court found to be of central importance to the case--required access to witnesses in India as well as the application of Indian law. Accordingly, the court determined that the balance of convenience weighed against trial in Maganlal's chosen forum and in favor of trial in India. See Piper Aircraft Co. v. Reyno, 454 U.S. 235, 255-56, 102 S.Ct. 252, 265-66, 70 L.Ed.2d 419 (1981). The court therefore dismissed the case contingent upon MG submitting to the jurisdiction of the Indian courts and waiving any defenses under the statute of limitations. This appeal followed.

DISCUSSION

A district court has broad discretion in deciding whether to dismiss an action on grounds of forum non conveniens. See Piper Aircraft, 454 U.S. at 257, 102 S.Ct. at 266-67; see also Borden, Inc. v. Meiji Milk Products Co., 919 F.2d 822, 827 (2d Cir.1990), cert. denied, --- U.S. ----, 111 S.Ct. 2259, 114 L.Ed.2d 712 (1991); Irish Nat'l Ins. Co. v. Aer Lingus Teoranta, 739 F.2d 90, 92 (2d Cir.1984). However, a court's discretion in this area is not so broad as to preclude meaningful appellate review of its decisions. See Irish Nat'l, 739 F.2d at 92; Overseas Programming Companies, Ltd. v. Cinematographische Commerz-Anstalt, 684 F.2d 232 (2d Cir.1982); see also Overseas Nat'l Airways Inc. v. Cargolux Airlines Int'l, S.A., 712 F.2d 11, 15 (2d Cir.1983) (Oakes, J., concurring). "A meaningful power of review is the right to determine whether the district court reached an erroneous conclusion on either the facts or the law." Irish Nat'l, 739 F.2d at 92; see also Reid-Walen v. Hansen, 933 F.2d 1390, 1394, n. 4 (8th Cir.1991).

The central purpose of a forum non conveniens inquiry is to...