Penwest Development Corp. Ltd. v. Dow Chemical Co.

• Decision Date: 19 May 1987
• Docket Number: No. 86-CV-10317-BC.,86-CV-10317-BC.
• Citation: 667 F. Supp. 436
• Parties: PENWEST DEVELOPMENT CORPORATION LIMITED, Plaintiff, v. The DOW CHEMICAL COMPANY, Defendant.
• Court: U.S. District Court — Western District of Michigan

667 F. Supp. 436

PENWEST DEVELOPMENT CORPORATION LIMITED, Plaintiff, v. The DOW CHEMICAL COMPANY, Defendant.

No. 86-CV-10317-BC.

United States District Court, E.D. Michigan, N.D.

May 19, 1987.

Mark E. Staib, Hahn, Loeser & Parks, Cleveland, Ohio, Jay E. Brant, Honigman, Miller, Schwartz & Cohn, Detroit, Mich., for plaintiff.

Michael H. Whiting, Stark & Reagan, Troy, Mich., Leonard L. Rivkin, Rivkin, Radler, Dunne & Bayh, Uniondale, N.Y., for defendant.

MEMORANDUM OPINION

CHURCHILL, District Judge.

This is a products liability and civil RICO action brought by Penwest Development Corporation, a Canadian corporation with its principal place of business in Toronto, against Dow Chemical Company, a Delaware corporation with its principal place of business in Midland, Michigan. There is diversity as well as federal question jurisdiction under 28 U.S.C. §§ 1331 and 1332. The dispute arose out of a Dow product called Sarabond, which was used in constructing Bond Place, a hotel in Toronto. Penwest was the general contractor for the construction of Bond Place. The Sarabond product is a saran latex mortar additive used in brick masonry as a strengthening agent. Dow developed and tested Sarabond in Midland, Michigan in the early 1960's. In the early 1970's, Dow conducted testing in Midland to determine whether Sarabond contributed to corrosion of steel or the cracking of brick facades in response to complaints about the product. Penwest claims that a defect in Sarabond, of which Dow was aware, caused the alleged cracking and displacement of bricks in Bond Place.

Dow moves to dismiss this action based on the common law doctrine of forum non conveniens, arguing that this action is more appropriately tried in Canada. Magistrate Charles Binder, in a Report and Recommendation filed pursuant to 28 U.S.C. § 636(b)(1)(B), recommended a denial of defendant's motion for two alternative reasons: 1) forum non conveniens does not apply to RICO actions because of the special venue provision; or 2) defendant failed to establish that Canada is a more appropriate and convenient forum. Defendant filed timely objections to the Magistrate's Report and Recommendation, and the Court considers the entire matter de novo.

A. Forum Non Conveniens and Special Venue Provisions

The Magistrate agreed with Penwest's argument that the common law doctrine of forum non conveniens is inapplicable to actions under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961-68, because it would contravene congressional intent to give RICO plaintiffs broad venue choices. 18 U.S.C. § 1965(a) provides:

Any civil action or proceeding under this chapter against any person may be instituted in the district court of the United States for any district in which such person resides, is found, has an agent, or transacts his affairs.

This section was modeled after the venue provisions in the antitrust laws.

In United States v. National City Lines, 334 U.S. 573, 68 S.Ct. 1169, 92 L.Ed. 1584 (1948) ("National I"), the Supreme Court held that the doctrine of forum non conveniens does not apply to suits brought under the United States antitrust laws because to do so would thwart Congress' intent to facilitate enforcement of these laws by giving plaintiffs a wide range of possible venues. The Court stated:

In the face of this history we cannot say that room was left for judicial discretion to apply the doctrine of forum non conveniens so as to deprive the plaintiff of the choice given by the special venue provision.

334 U.S. at 588, 68 S.Ct. 1169, 92 L.Ed. at 1593. In National I, the suit was brought in California, and Illinois was asserted to be the more convenient forum.

After National I was decided, Congress enacted 28 U.S.C. § 1404(a) which provides:

For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district where it might have been brought.

In United States v. National City Lines, 337 U.S. 78, 69 S.Ct. 955, 93 L.Ed. 1226 (1949) ("National II"), the Supreme Court, relying on the companion case of Ex parte Collett, 337 U.S. 55, 69 S.Ct. 944, 93 L.Ed. 1207 (1949), held that section 1404 permits the transfer of an antitrust action to a more appropriate forum, notwithstanding the Clayton Act's special venue provision. In Collett, the Court was unwilling to find that section 1404 repealed such a provision, stating that a special venue provision "defines the proper forum" whereas section 1404(a) "deals with the right to transfer an action properly brought." 337 U.S. at 60, 69 S.Ct. 944, 93 L.Ed. at 1211. Even though section 1404 and the common law doctrine of forum non conveniens are facially similar, section 1404 is not a mere codification of the common law. Its purpose "`was to grant broadly the power of transfer for the convenience of parties and witnesses, in the interest of justice, whether dismissal under the doctrine of forum non conveniens would have been appropriate or not.'" Norwood v. Kirkpatrick, 349 U.S. 29, 32, 75 S.Ct. 544, 99 L.Ed. 789, 793 (1954). Although the considerations in determining whether to transfer a case under 1404 may be the same as those in deciding whether to dismiss a case under the common law doctrine, the district court has broader discretion under 1404. Id. Thus the common law doctrine is not identical to section 1404, and survives the enactment of that law. Liamuiga Tours v. Travel Impressions, Ltd., 617 F.Supp. 920, 929 (E.D.N.Y.1985). However, the common law doctrine has been largely superseded by section 1404 and now only applies where the alternative forum is a state court or the court of a foreign country. C. Wright, The Law of Federal Courts 259-60 (4th ed. 1983).

The question then is what is left of National I after the passage of 1404 and after National II and Collett? The Magistrate and Penwest believe that the reasoning of National I as it relates to the common law doctrine of forum non conveniens is still good law. The Sixth Circuit has not addressed this question, and the Fifth and Second Circuit Courts of Appeals are split on the issue. In Industrial Investment Development Corp. v. Mitsui, 671 F.2d 876 (5th Cir.1982), vacated and remanded on other grounds, 460 U.S. 1007, 103 S.Ct. 1244, 75 L.Ed. 475 (1983), the Fifth Circuit held that the "common law doctrine of forum non conveniens is inapplicable to suits brought under the United States antitrust laws", relying on National I. 671 F.2d at 890. In contrast, the Second Circuit recently held that forum non conveniens applies to RICO cases, notwithstanding RICO's special venue provision and notwithstanding National I. Transunion Corp. v. Pepsico, 811 F.2d 127 (2nd Cir.1987).

It is the opinion of the Court that the reasoning of National I was superseded by 28 U.S.C. § 1404(a). As the court in Pepsico points out, National I was based on an interpretation of the Clayton Act's legislative history which disclosed "`no other thought than that the choice of forums was given as a matter of right, not as one limited by judicial discretion.'" 811 F.2d at 130 (quoting National I, 334 U.S. at 586- 87, 68 S.Ct. at 1176). Congress subsequently negated this assertion by expressly allowing the deprivation of this "right" through the exercise of broader discretion than that allowed under the common law. Accordingly, the Court will apply the common law doctrine of forum non conveniens in determining whether this suit should be dismissed.

B. Forum Non Conveniens

A prerequisite to the application of forum non conveniens¹ is the existence of an adequate alternative forum. Gulf Oil Co. v. Gilbert, 330 U.S. 501, 506-07, 67 S.Ct. 839, 842, 91 L.Ed. 1055, 1061 (1947). An adequate alternative forum "presupposes at least two forums in which the defendant is amenable to process." Id. In this case, Dow has stipulated that it will accept Canadian jurisdiction and service of process. Courts have recognized a defendant's right to accept a foreign country's jurisdiction for purposes of forum non conveniens. See Watson v. Merrell Dow Pharmaceuticals, Inc., 769 F.2d 354, 356 (6th Cir.1985). The standard for determining the adequacy of the alternative forum is whether it is so clearly inadequate that it would provide "no remedy at all." Piper Aircraft Co. v. Reyno, 454 U.S. 235, 254, 102 S.Ct. 252, 265, 70 L.Ed.2d 419, 435 (1981).

Several courts have found Canada to be an adequate alternative forum, and rightly so. Ledingham v. Parke-Davis Div. of Warner-Lambert Co., 628 F.Supp. 1447, 1450 (E.D.N.Y.1986); see Miskow v. Boeing Co., 664 F.2d 205 (9th Cir.1981). While plaintiff will not be able to recover treble damages in Canada as it might under RICO, the mere fact that certain theories of recovery are not recognized is not equivalent to "no remedy at all." Dowling v. Richardson-Merrell, Inc., 727 F.2d 608, 615 (6th Cir.1984). It is true that a dismissal on forum non conveniens grounds is the "functional equivalent" of finding that defendant's alleged acts are beyond the reach of RICO, Mitsui, 671 F.2d at 891, but that is what forum non conveniens is all about. Federal common law has long authorized dismissal based on forum non conveniens, notwithstanding that there is subject matter jurisdiction over the claim. Gilbert, 330 U.S. at 507, 67 S.Ct. at 842. Moreover, courts applied the doctrine in federal admiralty cases long before it was extended to diversity cases in Gilbert. Piper, 454 U.S. at 248 n. 13, 102 S.Ct. at 262 n. 13; Tramp Oil and Marine Ltd. v. M/V Mermaid I, 743 F.2d 48, 50 (1st Cir.1984). The fact that plaintiff has included a RICO claim in its complaint has no bearing on the Court's forum non conveniens determination. As the Supreme Court stated in Piper, it is improper for the Court to give substantial weight to the possibility that a change in law will either be unfavorable to the plaintiff or favorable to the defendant. 454 U.S. at 252 n. 19, 102 S.Ct. at 264 n. 19. What is...