Dale Metals Corp. v. Kiwa Chemical Industry Co., Ltd.
| Decision Date | 27 December 1977 |
| Docket Number | No. 77 Civ. 3506.,77 Civ. 3506. |
| Parties | DALE METALS CORP. and Overseas Development Corporation, Plaintiffs, v. KIWA CHEMICAL INDUSTRY CO., LTD., Toyo Menka Kaisha, Ltd., Sakai Trading New York, Inc., and Sakai Trading Co., Ltd., Defendants. |
| Court | U.S. District Court — Southern District of New York |
Siegel, Matson & Lasky, New York City, for plaintiffs.
Guggenheimer & Untermyer, New York City, for defendant Toyo Menka Kaisha, Ltd.
Yamada & Condemi, New York City, for defendants Kiwa Chemical Industry Co., Ltd., Sakai Trading New York, Inc. and Sakai Trading Co., Ltd.
Toyo Menka Kaisha, Ltd. ("TMK") moves to dismiss the action against all defendants on the grounds of forum non conveniens. In the alternative, TMK seeks a stay of this action, pending completion of the arbitration proceeding that has been commenced in Japan, in which TMK is suing Overseas Development Corporation ("ODC") for moneys due under the sales agreement that underlies this case (see Exhibit N, TMK Moving Affidavit). The plaintiffs countermove to remand this case, which is here on removal, to the state court. Their motion is denied (see, infra, at 81, n.1). TMK's motion is granted in part and denied in part.
Dale Metals Corp. ("Dale") and its principal shareholder and affiliate, ODC, claim to have been fraudulently induced to distribute products manufactured by Kiwa Chemical Industry Co., Ltd. ("Kiwa") (¶¶ 9-12, Complaint, annexed as Exhibit C to TMK Moving Affidavit). They further claim that after they embarked on the distribution plan, TMK, Kiwa and the two Sakai companies (Sakai Trading Co., Inc. and Sakai Trading New York, Inc.) conspired to wrest the United States toehold created by plaintiffs and to appropriate the established paths of distribution so that the two Sakai companies, rather than plaintiffs, could act as the American distributors of Kiwa products (¶¶ 19-22, Complaint).
The underlying business relationship started in July, 1975 when Hiroyuki Masuda, an employee of TMK — Kiwa's sales agent — wrote to Mort Levin, Dale's President (Exhibit C, Plaintiffs' Opposing Affidavit). Masuda expressed Kiwa's interest in creating a United States market for Kiwalite, a reflective sheeting material used for the construction of highway signs. Levin was sufficiently interested in the Kiwa proposal to visit Japan in October, 1975 (¶¶ 6, 8, Masuda Affidavit; ¶ 12, Levin Affidavit). There, he toured Kiwa's facilities and negotiated an agreement with Kiwa and TMK. Levin claims that in the course of the negotiations, it was (¶ 12, Levin Affidavit).
Plaintiffs subsequently set up marketing facilities for the American distribution of Kiwalite (¶ 13, Levin Affidavit), and, between January, 1976 and November, 1976, received 640,000 feet of material, under confirmations of sale that were signed by TMK and ODC (Exhibit E, TMK Moving Affidavit; ¶ 11, Plaintiffs' Moving Affidavit). It later came to Levin's attention that Sakai New York was (allegedly) attempting to market Kiwalite and was approaching prospective purchasers who had originally been contacted by Dale and ODC (Exhibit F, Plaintiffs' Opposing Affidavit). Negotiations followed, concerning what plaintiffs believed to be a breach of the distribution agreement. When these proved unfruitful, plaintiffs filed this suit in the Supreme Court of the State of New York, New York County (February 14, 1977). Three months later, on May 19, 1977, TMK commenced an arbitration proceeding in Japan against ODC (Exhibit N, TMK Moving Affidavit). The proceeding was authorized by the arbitration clause that appeared on the confirmation of sale documents, under which the goods had been shipped to the United States (Exhibit E, TMK Moving Affidavit). On May 19, 1977, plaintiffs obtained an order from the state court, staying the arbitration proceeding. One day later, the defendants petitioned for removal (Exhibit S, TMK Moving Affidavit) and the case was taken up by this court.
In denying TMK's motion to dismiss, we note that this case is not one with a merely tenuous connection to New York, Fitzgerald v. Westland Marine Corporation, 369 F.2d 499 (2d Cir. 1966), nor is it one that will require, in largest part, the testimony of foreign witnesses, Fitzgerald v. Texaco, Inc., 521 F.2d 448 (2d Cir. 1975), cert. denied, 423 U.S. 1052, 96 S.Ct. 781, 46 L.Ed.2d 641 (1976). Although, as TMK contends and plaintiffs concede, the alleged fraud and later conspiracy are claimed to have been initiated in Japan, "the illegal scheme and activities of defendants were carried out within the United States, primarily through the actions of defendant Sakai New York, but with the active participation in this country of employees and agents of defendants Kiwa and Toyo Menka" (¶ 6, Plaintiffs' Opposing Affidavit; see, in reference to alleged conspiratorial acts in New York, ¶ 5, Levin Affidavit and Exhibit F, Plaintiffs' Opposing Affidavit). In addition to the connection that this case has with New York, four of plaintiffs' five witnesses are New Yorkers (December 19, 1977 Letter of Robert Matson, Counsel for Plaintiffs) and much of the documentary evidence relevant to plaintiffs' case is located in the offices of ODC and Dale, that is, in New York. Perhaps understandably, defendants are not sure of the number or identities of the witnesses they will call. Judging from the affidavits of defense counsel, the number of witnesses they expect — all of them Japanese — range from zero to approximately eight. However that may be, the fact that defendants may ultimately be required to call more witnesses than plaintiffs is not dispositive of a motion to dismiss for forum non conveniens. In light of the substantial number of New York witnesses that plaintiffs intend to call, the presence of relevant documents here, and the alleged occurrence of "furthering" acts in this state, defendants have not met, and cannot meet, the burden of showing that "the balance of convenience is strongly in favor of the defendant." Gulf Oil v. Gilbert, 330 U.S. 501, 508, 67 S.Ct. 839, 843, 91 L.Ed....
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