Jurisdiction, Venue and Service Issues Related to a Receiver’s Action Against a Foreign Third Party

6.01 In General

Often a receiver discovers that the receivership estate has a claim against a foreign entity that does not reside nor do business in the United States. In such a situation, issues arise regarding whether the court which presides over the receivership can assert personal jurisdiction the foreign defendant, what venue is proper, and how actual service of the summons and complaint can be achieved on the foreign defendant.

6.02 Jurisdictional Issues Relating To Foreign Defendants

A federal district court adopts the jurisdiction of the state in which they sit, and can only assert personal jurisdiction over nonresident parties when those parties could be subject to the personal jurisdiction of the state court. Michael J. Neuman & Assoc. v. Florabelle Flowers, Inc., 15 F.3d 721, 724 (7th Cir. 1994); Fisher v. Teva, PFC SRL, 212 F. App’x 72, 75 (3d Cir. 2006); Allred v. Moore & Peterson, 117 F.3d 278, 281 (5th Cir. 1997). As a result, in most circumstances, a receivership court can assert personal jurisdiction over a foreign defendant only if the state in which the receivership court sits could do likewise. States exercise jurisdiction over foreign, nonresident defendants pursuant to their respective long-arm statutes. While the various long-arm jurisdictions of the states each have specific nuances, most states’ long-arm jurisdiction statutes generally operate to give the state jurisdiction over a defendant based upon the defendant’s commission of a tortious act in that forum or due to their transaction of business in that forum.27 Additionally, many states also provide for the exercise of personal jurisdiction over foreign defendants who conspire with another to commit a tortious action upon the plaintiff as long as the conspiracy is such that it alone would be actionable.

Regardless of the requirements of the long-arm statute which is applied, a receiver must also demonstrate that the due process requirements of the United States Constitution have been met. In order for due process requirements to be met, the receiver must show that the foreign defendant had certain “minimum contacts” with the forum state so that requiring the foreign defendant to defend the suit would not violate “traditional notions of fair play and substantial justice.” International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). Such minimum contacts exist when the foreign defendant’s conduct in the forum state is such that he can reasonably foresee being haled into court there. Kulko v. California Superior Court, 436 U.S. 84, 97-98 (1978). However, if the plaintiff’s claim did not arise from the defendant’s activities in that state, due process is only satisfied if the defendant’s contacts in the forum state were of a “continuous and systematic nature.” See International Shoe, 326 U.S. 310.

Notwithstanding the foregoing, when a receiver pursues litigation under certain federal laws, state lines can simply be ignored. In enacting the Securities and Exchange Act (“S.E.A.”) and the Racketeer Influenced and Corrupt Organization (“RICO”) laws, Congress authorized nationwide service of process. Fizsimmons v. Barton, 589 F.2d 330, 332-334 (7th Cir. 1979) (securities laws); Lisak v. Mercantile Bancorp, Inc., 834 F.2d 668, 671-672 (7th Cir. 1987) (RICO). “And when a federal court is attempting to exercise personal jurisdiction over a defendant in a suit based upon a federal statute providing for nationwide service of process, the relevant inquiry is whether the defendant has had minimum contacts with the United States.” Busch v. Buchman, Buchman & O’Brien Law Firm, 11 F.3d 1255, 1257 (5th Cir. 1994). Therefore, the S.E.A. and RICO confer personal jurisdiction over a foreign defendant in any federal court as long as that defendant has sufficient minimum contacts with the United States as a whole (and not just the particular state in which the federal court is located). See Bd. of Trustees, Sheet Metal Workers’ Nat. Pension Fund v. Elite Erectors, Inc., 212 F.3d 1031 (7th Cir. 2000) (ruling that nationwide service of process is proper “as long as the defendants have adequate contacts with the United States as a whole”); United States v. De Ortiz, 910 F.2d 376, 382 (7th Cir. 1990) (“We have, in other federal question cases, determined that due process requires only that each party have sufficient contacts with the United States as a whole rather than any particular state or other geographic area.”); Herbstein v. Bruetman, 768 F. Supp. 79 (S.D.N.Y. 1991) (finding personal jurisdiction over Argentine corporation in RICO case based on contacts with the United States); In re Auto. Refinishing Paint Antitrust Litig., 358 F.3d 288, 299 (3d Cir. 2004) (finding that personal jurisdiction “is as broad as the limits of the Fifth Amendment” in an action brought under the Clayton Act).

6.03 Forum Non Conveniens

When a receiver files suit against a foreign defendant, the defendant may argue that the federal lawsuit should be dismissed under the doctrine of forum non conveniens because the matter would more appropriately be heard by the foreign defendant’s native court. “The purpose of the doctrine of forum non conveniens as stated is to avoid litigation in a seriously inconvenient forum, rather than to ensure litigation in the most convenient forum.” Casad & Richman, Jurisdiction in Civil Actions, p. 34 (1998 ed.) In the leading case of Gulf Oil Corp. v. Gilbert, 330 U.S. 501 (1947), the United States Supreme Court stated:

The principal of forum non conveniens is simply that a court may resist imposition upon its jurisdiction even when jurisdiction is authorized by the letter of a general venue statute. These statutes are drawn with a necessary generality and usually give a plaintiff a choice of courts, so that he may be quite sure of some place in which to pursue his remedy. But the open door may admit those who seek not simply justice but perhaps justice blended with some harassment. A plaintiff sometimes is under temptation to resort to a strategy of forcing the trial at a most inconvenient place for an adversary, even at some inconvenience to himself . . . . If the combination and weight of factors requisite to given results are difficult to forecast or state, those to be considered are not difficult to name. An interest to be considered, and the one likely to be most pressed, is the private interest of the litigant. Important considerations are the relative ease of access to sources of proof; availability of compulsory process for attendance of unwilling, and the cost of obtaining attendance of willing witnesses; possibility of view of premises, if view would be appropriate to the action; and all other practical problems that make trial of a case easy, expeditious and inexpensive. There may also be questions as the enforceability of a judgment if one is obtained. The court will weigh relative advantages and obstacles to fair trial. It is often said that the plaintiff may not, by choice of an inconvenient forum, “vex,” “harass,” or “oppress” the defendant by inflicting upon him expense or trouble not necessary to his own right to pursue his remedy. But unless the balance is strongly in favor of the defendant, the plaintiff’s choice of forum should rarely be disturbed. Gulf Oil, 330 U.S. at 507-508 (emphasis added).

In any analysis of a forum non conveniens motion, “the ultimate inquiry is where trial will best serve the convenience of the parties and the ends of justice. Koster v. (Am.) Lumberman’s Mut. Cas. Co., 330 U.S. 518, 527 (1947). In most receiverships, the primary witnesses against any foreign defendant and the interested parties in the litigation are in the receivership jurisdiction or, at least, within the territory of the federal government who appointed the receiver. These facts strongly favor the receiver’s choice of forum especially as there is a “strong presumption in favor of the plaintiff’s choice of forum, which may be overcome only when the private and public interest factors clearly point towards trial in the alternative forum.” Wilson v. Humphrey (Cayman) Ltd., 916 F.2d 1239, 1246 (7th Cir. 1990).

Some circuits have held that the strong presumption in favor of the plaintiff’s choice of forum “is particularly true where a domestic plaintiff has filed suit in his own home forum” against a foreign defendant. AAR Intern., Inc. v. Nimelias Enterprises S.A., 250 F.3d 510 (7th Cir. 2001). See also In Casad & Richman, Jurisdiction in Civil Actions(1998), p. 614 (“In applying the principles of forum non conveniens, federal courts sometimes give relatively heavy weight to the plaintiff’s claim to an American forum when the plaintiff is American and the defendant foreign.”) (citing Humphrey (Cayman) Ltd., 916 F.2d 1239). Additionally, for purposes of the analysis under forum non conveniens, the “home forum” or the court-appointed receiver should be considered the United States (and not any particular federal district) and the alternative forum as that of the foreign country. Reid-Walen v. Hansen, 933 F.2d 1390, 1394 (8th Cir. 1991).

6.04 Service Under The Hague Convention

Often, a receiver can serve the summons and complaint against a foreign defendant under the provisions of the Hague Convention pursuant to Fed.R.Civ.P. 4. The forms which allow a plaintiff to file according to the Hague Convention are entitled “Request for Service Abroad of Judicial or Extrajudicial Documents,” and are available, with instructions, from the United States Marshall’s Office. In most situations, this form is completed by the plaintiff and sent to the clerk’s office of the district court in which the action has been filed for execution by the court clerk. Once the form has been executed, it should be sent with two copies of the summons and complaint to the foreign court presiding over the foreign defendant’s “home jurisdiction.” The foreign court will serve the documents on the foreign defendant and return an affidavit of service to the plaintiff. More information on this process is available at www.travel.state.gov.


 

27 The “doing business” doctrine is actually a variety of general jurisdiction that exists separately from long-arm jurisdiction and which will apply to bestow personal jurisdiction even when the action does not arise out of the jurisdictional contacts.
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