U.S.O. Corp. v. Mizuho Holding Co.

Decision Date28 October 2008
Docket NumberNo. 07-3588.,07-3588.
Citation547 F.3d 749
PartiesU.S.O. CORPORATION, Plaintiff-Appellant, v. MIZUHO HOLDING COMPANY, et al., Defendants-Appellees.
CourtU.S. Court of Appeals — Seventh Circuit

Reid M. Figel (argued), Kellogg, Huber, Hansen, Todd, Evans & Figel, Washington, DC, for Plaintiff-Appellant.

Yasuhiro Saito (argued), Hughes, Hubbard & Reed, New York, NY, David M. Simon, Wildman, Harrold, Allen & Dixon, Lawrence Benjamin, Neal, Gerber & Eisenberg, Chicago, IL, for Defendants-Appellees.

Before POSNER, RIPPLE, and EVANS, Circuit Judges.

POSNER, Circuit Judge.

This diversity suit, in federal court under 28 U.S.C. § 1332(d)(2)(C), charges conversion by affiliated Japanese entities that we'll refer to collectively as "the bank." The district judge dismissed the suit on the basis of the doctrine of forum non conveniens. That venerable judge-made doctrine, securely a part of federal common law, authorizes a court to dismiss a suit if making the defendant defend in that court rather than in an alternative forum would burden the defendant unreasonably. Sinochem Int'l Co. v. Malaysia Int'l Shipping Corp., 549 U.S. 422, 429, 127 S.Ct. 1184, 167 L.Ed.2d 15 (2007); Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 507-09, 67 S.Ct. 839, 91 L.Ed. 1055 (1947); Piper Aircraft Co. v. Reyno, 454 U.S. 235, 248-51, 102 S.Ct. 252, 70 L.Ed.2d 419 (1981) ("dismissal will ordinarily be appropriate where trial in the plaintiff's chosen forum imposes a heavy burden on the defendant or the court, and where the plaintiff is unable to offer any specific reasons of convenience supporting his choice"); In re Factor VIII or IX Concentrate Blood Products Litigation, 484 F.3d 951 (7th Cir. 2007); Hyatt Int'l Corp. v. Coco, 302 F.3d 707, 717-19 (7th Cir.2002); Howe v. Goldcorp Investments, Ltd., 946 F.2d 944, 950 (1st Cir.1991).

The plaintiff, although incorporated in Delaware, is the wholly owned subsidiary of a Japanese company, and its headquarters are in Japan. It invested in a limited partnership also created under Delaware law; and as with the plaintiff the partnership's principal place of business was in Japan, and all its partners had Japanese addresses. The partnership invested in another limited partnership, which bought a building in Chicago. The suit charges the bank with having misappropriated $6.95 million from the plaintiff's bank account in Japan after the building was sold, that being the plaintiff's share of the proceeds from the sale. The suit also charges the bank with having skimmed an unspecified percentage of the annual return to which the plaintiff's investment entitled it before the bank was sold, and by doing so of having reduced that return to $500,000 in each of the ten years of the plaintiff's indirect investment in the building.

Most of the alleged bad acts were committed in Japan by Japanese persons and almost all the witnesses and documents are there; and eight months after this suit was filed the bank brought a mirror-image declaratory judgment suit in a Japanese court. That litigation is proceeding, the Japanese court having denied the plaintiff's motion to dismiss the suit because of the pendency of the present suit.

There is no reason for identical suits to be proceeding in different courts in different countries thousands of miles apart. Such parallel proceedings incite a race to judgment in the hope that the judgment in the home forum will favor the home litigant and be usable to block the other suit by interposing a defense of res judicata in it. Oddly, none of the lawyers in this case seems to know much about Japanese law; they have been unable to tell us what if any weight the Japanese court would give a final judgment in the present suit should it end first. But Japan does have a doctrine of res judicata, and though narrower than ours it would bar an identical suit provided the judgment pleaded in bar was a judgment on the merits. Yasuhiro Fujita, 5 Doing Business in Japan, Part XIV, § 5.04 (2008); J. Mark Ramseyer & Minoru Nakazato, Japanese Law: An Economic Approach 144-45 (1999); Kevin M. Clermont, "A Global Law of Jurisdiction and Judgments: Views from the United States and Japan," 37 Cornell Int'l L.J. 1, 11-12 (2004); Shiro Kawashima & Susumu Sakurai, "Shareholder Derivative Litigation in Japan: Law, Practice, and Suggested Reforms," 33 Stanford J. Int'l L. 9, 52-54 (1997).

One device for avoiding duplicate lawsuits is the doctrine of abstention articulated in Colorado River Water Conservation District v. United States, 424 U.S. 800, 818, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976). It has sometimes been applied when identical concurrent litigation is, as in this case, pending abroad. See, e.g., Finova Capital Corp. v. Ryan Helicopters U.S.A., Inc., 180 F.3d 896, 898-901 (7th Cir.1999); Ingersoll Milling Machine Co. v. Granger, 833 F.2d 680, 685-86 (7th Cir.1987); Royal & Sun Alliance Ins. Co. v. Century Int'l Arms, Inc., 466 F.3d 88, 93-94 (2d Cir.2006); Louise Ellen Teitz, "Both Sides of the Coin: A Decade of Parallel Proceedings and Enforcement of Foreign Judgments in Transnational Litigation," 10 Roger Williams U.L.Rev. 1, 18-21 (2004). But as far as we know abstention has not been urged in either suit by any party to the present suit.

The bank has made a compelling case for the dismissal of this suit on the ground of forum non conveniens. Dragging all those witnesses and documents from Japan to Chicago, supplying interpreters for the witnesses and translators for the documents, and conducting a trial largely on the basis of testimony given through interpreters and of documents translated from their original language, would impose unreasonable burdens not only on the defendants but also on the district court. Moreover, the law applicable to the issues in the case is almost certainly Japanese law, with which American judges have little familiarity. In fact, as we said, even the lawyers in this case, though their clients are Japanese firms, have little familiarity with Japanese law. And besides, the litigation in Japan is well advanced and the Japanese court has declined to abate it in favor of the U.S. litigation.

The plaintiff argues that there is a strong presumption in favor of a plaintiff's choice of forum, especially if the plaintiff is an American and the forum is an American court. In a veritable paroxysm of formalism the plaintiff's lawyers refuse to acknowledge that their client is "American" in only the most artificial sense, since it has no American presence except a Delaware certificate of incorporation. It had an indirect investment in an American building, but foreigners own a large chunk of the American economy without being thought Americans; by the end of 2006 foreign direct investment in the United States had reached $1.8 trillion. James K. Jackson, "CRS Report for Congress: Foreign Investment and National Security: Economic Considerations," June 27, 2008, p. 1, www.fas.org/sgp/crs/natsec/RL34561. pdf (visited Oct. 3, 2008); see also U.S. Dept. of State, "Foreign Direct Investment," www.state.gov/r/pa/prs/ps/2006/63553.htm, Mar. 22, 2006 (visited Oct. 3, 2008).

The plaintiff says that to look through the corporate form to the nationality of the plaintiff's managers and shareholders is to pierce the corporate veil without an adequate showing of undercapitalization, misrepresentation, neglect of corporate formalities, etc. That is nonsense. The purpose of the veil is to shield shareholders from personal liability for the corporation's debts in order to encourage investment; no one is trying to reach the personal assets of the plaintiff's shareholders.

Insisting (and with a straight face) on the Americanness of their foreign client, the plaintiff's lawyers argue that the presumption in favor of the plaintiff's choice of forum is nationalistic; it is about the right not of plaintiffs in general but of American plaintiffs to sue foreigners in American courts. Putting to one side for the moment that the plaintiff is not really "American," one can find language supportive of the nationalistic interpretation in some court of appeals decisions. In SME Racks, Inc. v. Sistemas Mecanicos Para Electronica, S.A., 382 F.3d 1097, 1101 (11th Cir.2004), for example, we read that courts "should require positive evidence of unusually extreme circumstances, and should be thoroughly convinced that material injustice is manifest before exercising any such discretion to deny a citizen access to the courts of this country." (To the same effect, see, e.g., Adelson v. Hananel, 510 F.3d 43, 53 (1st Cir.2007); Reid-Walen v. Hansen, 933 F.2d 1390, 1395 n. 7 (8th Cir.1991).) But SME Racks was merely repeating language found in a 1955 case called Burt v. Isthmus Development Co., 218 F.2d 353, 357 (5th Cir.1955), and such language does not sort well with the Supreme Court's statement (made long after Burt) that "citizens or residents deserve somewhat more deference than foreign plaintiffs, but dismissal should not be automatically barred when a plaintiff has filed suit in his home forum. As always, if the balance of conveniences suggests that trial in the chosen forum would be unnecessarily burdensome for the defendant or the court, dismissal is proper." Piper Aircraft Co. v. Reyno, supra, 454 U.S. at 255 n. 23.

A foreign company that chooses to sue in the United States rather than in its own country is unlikely to experience inconvenience if the court invokes forum non conveniens against it. Realistically a Japanese company, our plaintiff should not be disconcerted to have to litigate against its Japanese adversaries in a Japanese court. "[I]f the plaintiff is suing far from home, it is less reasonable to assume that the forum is a convenient one. . . . [T]he risk that the chosen forum really has little connection to the litigation is greater." In re Factor VIII or IX Concentrate Blood Products Litigation, supra, 484 F.3d at 956. The plaintiff's home is Tokyo,...

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