In re South African Apartheid Litigation

• Decision Date: 22 June 2009
• Docket Number: No. 02 MDL 1499 (SAS),,No. 03 Civ. 4524 (SAS).,02 MDL 1499 (SAS),,03 Civ. 4524 (SAS).
• Citation: 643 F.Supp.2d 423
• Parties: In re SOUTH AFRICAN APARTHEID LITIGATION. This Document Relates to: Sakewe Balintulo, et al., Plaintiffs, v. Daimler AG, et al., Defendants.
• Court: U.S. District Court — Southern District of New York

643 F.Supp.2d 423

In re SOUTH AFRICAN APARTHEID LITIGATION This Document Relates to: Sakewe Balintulo, et al., Plaintiffs, v. Daimler AG, et al., Defendants.

No. 02 MDL 1499 (SAS),

No. 03 Civ. 4524 (SAS).

United States District Court, S.D. New York.

June 22, 2009.

COPYRIGHT MATERIAL OMITTED

Michael D. Hausfeld, Esq., Hausfeld LLP, Washington, DC, Matt Schultz, Esq., Levin Papantonio Thomas Mitchell Echsner & Proctor, P.A., Pensacola, FL, Steig D. Olson, Esq., Hausfeld LLP, New York, NY, Robert G. Kerrigan, Esq., Kerrigan, Estess, Rankin & McLeod, LLP, Pensacola, FL, for Plaintiffs Balintulo et al.

Jerome S. Hirsch, Esq., Robert E. Zimet, Esq., Susan L. Saltzstein, Esq., Skadden, Arps, Slate, Meagher & Flom LLP, New York, NY, for Defendant Rheinmetall AG.

OPINION & ORDER

SHIRA A. SCHEINDLIN, District Judge:

I. INTRODUCTION

Two actions brought on behalf of massive classes of South Africans ("plaintiffs") assert that several multinational corporations ("defendants") aided and abetted torts in violation of customary international law. Plaintiffs claim jurisdiction in United States courts under the Alien Tort Claims Act ("ATCA").¹ These lawsuits address the obligations of corporations under the law of nations, the role of American courts in enforcing universal norms of international law, and the legacy of South African apartheid.

The long procedural history of these cases dates back to the filing of complaints in 2002. Since that time, defendant Rheinmetall AG has contested personal jurisdiction and the effectiveness of service under the Hague Convention on the Service Abroad of Judicial and Extra-Judicial Documents in Civil or Commercial Matters ("Hague Convention").² However, resolution of those issues had been stayed pending resolution of the consolidated motion to dismiss filed by the other defendants.³

On April 8, 2009, this Court granted in part and denied in part defendants' consolidated motion to dismiss these actions in their entirety.⁴ Rheinmetall now moves to dismiss the claims against it based on both lack of personal jurisdiction and improper service.⁵ Plaintiffs have counter-moved for authorization of an alternative form of service under Federal Rule of Civil Procedure 4(f)(3).⁶ For the reasons stated below, Rheinmetall's motion to dismiss is denied with leave to re-file after the conclusion of limited jurisdictional discovery. Plaintiffs' motion for authorization of alternative service is granted.

II. BACKGROUND

A. Rheinmetall AG's Presence in the United States

Rheinmetall AG is a German holding company, headquartered in Düsseldorf, Germany.⁷ As a holding company, Rheinmetall does not directly manufacture or sell any products; nor is it authorized or registered to do business in the United States.⁸ Although Rheinmetall executives participate in investor conferences in the United States, the company has engaged in almost no other direct action in the United States, including the commencement of lawsuits, the marketing of products, or the purposeful listing of stock.⁹

Rheinmetall owns numerous subsidiaries, including a separately incorporated armaments manufacturer known as Rheinmetall Defence ("DeTec").¹⁰ The companies presently "share the same headquarters, communications and press operations, and, since 2004, Chief Executive Officer ("CEO")."¹¹ Moreover Rheinmetall has bound DeTec—along with its other subsidiaries—to a global labor agreement concerning social responsibility and conformance with the standards of the International Labor Organization.¹² Rheinmetall also runs a central communications department for all subsidiaries, both presenting the image of a unified company and controlling the ability of subsidiaries to manage their own public relations.¹³ Finally, Rheinmetall's governance structure has consistently placed a member of Rheinmetall's four-member management board as CEO of DeTec, along with executive positions in numerous other subsidiaries of DeTec.¹⁴ Rheinmetall publicly describes DeTec as "the Defence arm of Germany's Rheinmetall Group" and "Rheinmetall AG's Defence unit."¹⁵

Rheinmetall's subsidiaries have engaged in extensive defense contracting with the United States military. From fiscal year 2003 to the present, Rheinmetall subsidiaries have won contracts valued at over $120 million.¹⁶ The Rheinmetall family of companies includes at least one subsidiary specifically for the manufacture and sale of arms to the United States military— American Rheinmetall Munitions, Inc. ("ARM").¹⁷ Rheinmetall subsidiaries have also established a number of weapons development projects alongside American defense contractors, including the naval Millennium Gun and the Skyshield 35 air defense system with Lockheed Martin¹⁸ and the Prospector and Thunder unmanned aerial vehicles with Teledyne Brown.¹⁹

B. Service of Process

Plaintiffs commenced this action on November 11, 2002. Soon thereafter, plaintiffs retained Legal Language Services ("LLS") to provide international litigation support.²⁰ On March 20, 2003, LLS transmitted a Hague Convention service request to the Central Authority for Northrhine-Westphalia including treaty paperwork and a copy of the Complaint translated into German.²¹ Rheinmetall challenged the propriety of service through Hague Convention processes before German courts, and the issue remains unresolved despite over six years of litigation.²²

The injunction against service of plaintiffs' Complaint is part of a larger pattern of stays issued by German courts against Hague Convention service of process stemming from American class-action lawsuits.²³ After a class of American intellectual-property owners sued German media company Bertelsmann AG in March 2003, Bertelsmann argued that service of process should be rejected on the basis that American class-action and punitive damages laws infringed on German sovereignty and security.²⁴ The dispute reached the Bundesverfassungsgericht—the Federal Constitutional Court—which temporarily enjoined service of process on July 25, 2003.²⁵ The Bundesverfassungsgericht granted four six-month extensions to the original temporary injunction, and it still had not ruled on the merits of the dispute when Bertelsmann settled the case and withdrew its appeal in November 2005.²⁶ Since the Bertelsmann episode, at least one other German company has successfully prevented service by claiming that American class-action procedures and damages provisions infringe on German sovereignty and security.²⁷

III. APPLICABLE LAW

A. Personal Jurisdiction

1. Rule 12(b)(2)

"In opposing a motion to dismiss for lack of personal jurisdiction, `the plaintiff bears the burden of establishing that the court has jurisdiction over the defendant.'"<sup>28</sup> "Where, as here, a district court relies on the pleadings and affidavits, and chooses not to conduct a `full-blown evidentiary hearing,' plaintiffs need only make a prima facie showing of personal jurisdiction over the defendant."²⁹ A court must "construe the pleadings and affidavits in the light most favorable to plaintiffs, resolving all doubts in their favor."³⁰

2. Rule 4(k)(2)

Under Federal Rule of Civil Procedure 4(k)(2),

For a claim that arises under federal law, serving a summons or filing a waiver of service establishes personal jurisdiction over a defendant if the defendant is not subject to jurisdiction in any state's courts of general jurisdiction and exercising jurisdiction is consistent with the United States Constitution and laws.³¹

"`A case arises under federal law . . . if a well-pleaded complaint establishes either that federal law creates the cause of action or that the plaintiffs right to relief necessarily depends on resolution of a substantial question of federal law.'"³²

In order to establish that a defendant is not subject to jurisdiction in any state's courts of general jurisdiction, a plaintiff who seeks to invoke Rule 4(k)(2)

must certify that, based on the information that is readily available to the plaintiff and his [or her] counsel, the defendant is not subject to suit in the courts of general jurisdiction of any state. If the plaintiff makes out his [or her] prima facie case, the burden shifts to the defendant to produce evidence which, if credited, would show either that one or more specific states exist in which it would be subject to suit or that its contacts with the United States are constitutionally insufficient.³³

This burden-shifting framework prevents the "Catch-22" in which a defendant would be forced "to choose between conceding its potential amenability to suit in federal court (by denying that any state court has jurisdiction over it) or conceding its potential amenability to suit in some identified state court."³⁴

3. Due Process Requirements

Under the Fifth Amendment to the U.S. Constitution, "Due process permits a court to exercise personal jurisdiction over a non-resident where the maintenance of the suit would not `offend traditional notions of fair play and substantial justice.'"<sup>35</sup> Second Circuit law requires a two step analysis. First, a court must determine "whether the defendant has sufficient minimum contacts with the forum to justify the court's exercise of personal jurisdiction."<sup>36</sup> Second, a court must "consider whether the assertion of personal jurisdiction `is reasonable under the circumstances of the particular case.'"³⁷

"A court's general jurisdiction over a non-resident . . . is based on a defendant's general business contacts with the forum, and `permits a court to exercise its power in a case where the subject matter of the suit is unrelated to those contacts.'"<sup>38</sup> The court "must evaluate the `quality and nature,' of the defendant's contacts with the forum state under a totality of the circumstances test."³⁹ "The crucial question is whether the defendant has `purposefully avail[ed] itself of the privilege of conducting activities within the forum . . ., thus invoking the benefits and protections of its laws such that [the defendant]...