First Inv. Corp. of the Marshall Islands v. Fujian Mawei Shipbuilding, Ltd., 12-30377

• Decision Date: 21 December 2012
• Docket Number: No. 12-30377,12-30377
• Parties: FIRST INVESTMENT CORPORATION OF THE MARSHALL ISLANDS, Petitioner-Appellant v. FUJIAN MAWEI SHIPBUILDING, LIMITED, erroneously sued as Fujian Mawei Shipbuilding, Limited of the People's Republic of China; FUJIAN SHIPBUILDING INDUSTRY GROUP CORPORATION, erroneously sued as Fujian Shipbuilding Industry Group Corporation of the People's Republic of China; PEOPLE'S REPUBLIC OF CHINA Respondents-Appellees
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

FIRST INVESTMENT CORPORATION OF THE MARSHALL ISLANDS, Petitioner-Appellant

v.FUJIAN MAWEI SHIPBUILDING, LIMITED,

erroneously sued as Fujian Mawei Shipbuilding,

Limited of the People's Republic of China;

FUJIAN SHIPBUILDING INDUSTRY GROUP CORPORATION,

erroneously sued as Fujian Shipbuilding Industry Group Corporation

of the People's Republic of China;

PEOPLE'S REPUBLIC OF CHINA Respondents-Appellees

No. 12-30377

UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

Filed: December 21, 2012

REVISED JANUARY 17, 2013

Appeal from the United States District Court

for the Eastern District of Louisiana

Before STEWART, Chief Judge, and KING and OWEN, Circuit Judges.

KING, Circuit Judge:

First Investment Corporation of the Marshall Islands appeals a district court's decision to deny confirmation of a foreign arbitral award against Fujian Mawei Shipbuilding Ltd., Fujian Shipbuilding Industry Group Corp., and the People's Republic of China. This case requires us to address an issue of first impression in this circuit: whether a court may dismiss a petition to confirm a foreign arbitration award for lack of personal jurisdiction under the UnitedNations Convention on the Recognition and Enforcement of Foreign Arbitral Awards. For the reasons that follow we conclude that the district court's dismissal of the petition on personal jurisdiction grounds was appropriate. We similarly conclude that the district court properly dismissed the People's Republic of China for lack of subject matter jurisdiction. Accordingly, we affirm the district court's judgment.¹

I. FACTUAL AND PROCEDURAL BACKGROUND

On September 15, 2003, First Investment Corporation of the Marshall Islands ("First Investment") entered into a series of shipbuilding contracts with Fujian Shipbuilding Industry Group Corp. ("FSIGC") and Fujian Mawei Shipbuilding Ltd. ("Mawei"). FSIGC and Mawei (collectively, the "Fujian Entities") are Chinese companies. FSIGC is a Chinese state-owned entity, and Mawei is a private corporation of which FSIGC is a majority shareholder.

First Investment alleges that the Fujian Entities breached the contracts by refusing to honor an option agreement. Pursuant to a contractual arbitration clause, First Investment gave notice of arbitration to the Fujian Entities on May 3, 2004. An arbitration panel was duly constituted in London on June 18, 2004, under the rules of the London Maritime Arbitration Association. First Investment appointed Bruce Harris to the panel, and the Fujian Entities appointed Wang Sheng Chang. Harris and Wang then selected Professor J. Martin Hunter to complete the panel.

The arbitration concluded on September 17, 2005, at which time the arbitrators prepared a draft award in First Investment's favor. Professor Hunter expressed his belief that the panel would need to meet to deliberate before issuing a final award. After receiving a deliberations memorandum fromWang, Professor Hunter prepared a first draft of the award, and circulated it to Wang and Harris. In February 2006, Wang sent Hunter his comments on the draft award, as well as a dissenting opinion. Professor Hunter again expressed his belief that in-person discussions would be necessary. Wang replied that he would agree to a final award by email, but that he would also be available to meet in London in April 2006. A second draft was then sent by Professor Hunter on March 25, 2006, to the other arbitrators for signature. Wang did not receive the second draft and did not respond, having been detained by the People's Republic of China ("PRC") on charges of bribery and secret distribution of state-owned assets.² Hunter and Harris nevertheless proceeded to sign the award and attached Wang's dissent. The arbitration panel awarded First Investment approximately $26 million in damages.

First Investment then sought to confirm the award in Xiamen Maritime Court, in Fujian province, China pursuant to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. 38 (entered into force with respect to the United States Dec. 29, 1970) ("New York Convention"), implemented in 9 U.S.C. §§ 201, et seq. First Investment alleges that it encountered numerous difficulties in attempting to confirm its award. Chinese embassies in London and Athens refused to authenticate documents necessary for commencement of a confirmation proceeding in China. On October 23, 2006, First Investment learned that the PRC had instructed its embassy in Athens not to authenticate the documents. Although the embassy ultimately did authenticate the documents, this occurred only after the Greek government interceded and filed a formal protest. First Investment's difficulties continued after it commenced a confirmation and enforcement proceeding in Xiamen on August 1, 2006. FirstInvestment contends that it was not permitted the assistance of its Chinese counsel at a hearing on July 13, 2007. In addition, First Investment was denied the aid of a competent translator, and was instead assigned an interpreter with no legal experience and a limited legal vocabulary.

On May 11, 2008, the Chinese court issued an order denying enforcement. The Chinese court determined that the arbitral tribunal was not in accordance with the agreement signed by the parties, which allegedly required that each member of the tribunal fully participate in the arbitration proceeding. Accordingly, the Chinese court held that, because Wang never reviewed the final draft of the decision, the award could not be confirmed pursuant to Article V of the New York Convention.

First Investment commenced a second confirmation proceeding on May 27, 2009, this time in the United States District Court for the Eastern District of Louisiana, against the Fujian Entities, as well as the PRC. The district court entered a default judgment against the Fujian Entities and the PRC on January 26, 2010, which was vacated on motion for improper service on August 9, 2010. The district court entered a second default judgment against the Fujian Entities and the PRC on March 22, 2011. The Fujian Entities filed a motion for reconsideration on April 15, 2011, and a motion to dismiss or, in the alternative, to refuse to confirm the arbitral award, on July 12, 2011. The district court granted Fujian's motion for reconsideration and vacated the default judgment against the Fujian Entities on June 28, 2011. The district court also granted the motion to dismiss for lack of personal jurisdiction on March 12, 2012. In the same order, the district court dismissed First Investment's petition against the PRC for lack of subject matter jurisdiction.

First Investment filed a timely notice of appeal on April 11, 2012.

II. DISCUSSION

A. Personal Jurisdiction

The district court dismissed First Investment's petition against the Fujian Entities for lack of personal jurisdiction. We review de novo a district court's determination that it lacks personal jurisdiction. Pervasive Software, Inc. v. Lexware GmbH & Co. KG, 688 F.3d 214, 219 (5th Cir. 2012). The burden of establishing jurisdiction rests with the party seeking to invoke the court's power, but it need only present prima facie evidence. Seiferth v. Helicopteros Atuneros, Inc., 472 F.3d 266, 270 (5th Cir. 2006). "In determining whether a prima facie case exists, this Court must accept as true [the Plaintiff's] uncontroverted allegations, and resolve in [its] favor all conflicts between the [jurisdictional] facts contained in the parties' affidavits and other documentation." Freudensprung v. Offshore Technical Servs., Inc., 379 F.3d 327, 343 (5th Cir. 2004) (alterations in original) (quoting Nuovo Pignone, SpA v. STORMAN ASIA M/V, 310 F.3d 374, 378 (5th Cir. 2002)) (internal quotation marks omitted).

On appeal, First Investment does not contend that, under a traditional due process analysis, the district court had personal jurisdiction over the Fujian Entities. Instead, First Investment argues that the Fujian Entities, as foreign entities with no contacts in the United States, were not entitled to the protections of the Fifth Amendment's Due Process Clause. First Investment further asserts that personal jurisdiction is not a valid defense under the New York Convention. Finally, First Investment argues that because the Fujian Entities were alter egos of the PRC, a foreign state over which personal jurisdiction was not required, the district court was wrong to dismiss the Fujian Entities.

We consider each of First Investment's arguments in turn.

1. Foreign Entities

First Investment argues that foreign entities that are neither present nor have property in the United States are not entitled to due process protections. We find no support for this proposition in current caselaw. The decisions First Investment relies on are clarified by later circuit decisions or are superseded by the Supreme Court's recent decision in Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S. Ct. 2846 (2011).

The first case First Investment relies on is People's Mojahedin Organization of Iran v. U.S. Department of State, in which the court held that "[a] foreign entity without property or presence in [the United States] has no constitutional rights, under the [D]ue [P]rocess [C]lause or otherwise." 182 F.3d 17, 22 (D.C. Cir. 1999). But that holding was recently clarified by the D.C. Circuit in GSS Group Ltd. v. National Port Authority, where the court reasoned that "[w]hen a foreign corporation is summoned into court, it is being forced to defend itself" and "[i]n opposing personal jurisdiction on due process grounds the corporation, through its attorney, makes itself present." 680 F.3d 805, 816 (D.C. Cir. 2012) (citing Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). Thus, having "been forced to appear in the United States . . . [the foreign corporation] is entitled to the protection of the Due Process Clause." Id. (citing Zadvydas v. Davis, 533 U.S. 678, 693 (2001)).³ The GSS Group court...