Insurance Law
Arbitration Award
International Maritime Dangerous Goods Code
Confirmation of the Arbitration Award in the Federal District Court
Personal Jurisdiction
Specific Personal Jurisdiction
Purposeful Availment
Waiver of Personal Jurisdiction Defense Through Insurer’s Issuance of a Letter of Understanding (or Undertaking)?
Louisiana Law
Appeal from the United States District Court for the Eastern District of Louisiana USDC No. 2:22-CV-1114.
Conti chartered its cargo vessel, the M/V FLAMINIA, to the Mediterranean Shipping Company (“MSC”). During one voyage, the FLAMINIA received three chemical tanks from the Port of New Orleans. The tanks exploded during Atlantic transit, causing extensive damage and three deaths. After a London arbitration panel awarded Conti $200 million, Conti sued to confirm the award in the Eastern District of Louisiana. The district court, ruling it had personal jurisdiction over MSC because the tanks had been loaded in New Orleans, confirmed the award. MSC appealed, arguing the court lacked personal jurisdiction. While agreeing with much of the district court’s well-stated decision, we must reverse because we conclude the court lacked personal jurisdiction over MSC. We agree with the district court that, when assessing personal jurisdiction to confirm an award under the New York Convention, a court should consider contacts related to the underlying dispute—not only contacts related to the arbitration itself. That holding aligns us with every other circuit to have considered the issue. But we disagree with the district court that MSC waived its personal jurisdiction defense through its insurer’s issuance of a letter of understanding that was expressly conditioned on MSC’s reserving all litigation defenses. We also disagree that the sole forum contact, the loading of the tanks in New Orleans, conferred specific personal jurisdiction over MSC. That contact arose from the unilateral activities of other parties whose actions are not attributable to MSC.
Accordingly, we REVERSE and REMAND with instructions to dismiss the case for lack of personal jurisdiction.
Conti, a German corporation based in Hamburg, owns the FLAMINIA. In November 2000, Conti chartered the FLAMINIA to MSC, a Swiss corporation based in Geneva. The charterparty required all disputes arising out of the agreement to be arbitrated in London. For the next 12 years, the FLAMINIA carried thousands of cargo containers to and from ports around the world, including the Port of New Orleans.
Conti brought an arbitration proceeding against MSC in London as required by the charterparty. The arbitration panel ruled that MSC breached the charterparty by failing to comply with the International Maritime Dangerous Goods Code. It awarded Conti about $200 million in total damages. Conti then sued MSC in the Eastern District of Louisiana seeking to confirm the award pursuant to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”). See 9 U.S.C. §207. MSC moved to dismiss for lack of personal jurisdiction.
(…) While that motion was pending, MSC’s insurer issued a letter of undertaking (“LOU”) to Conti. The LOU promised to pay Conti up to $220 million on any final judgment entered by the Eastern District of Louisiana, provided that Conti did not interfere with MSC’s property or bring a separate action in another jurisdiction. The LOU was “given without prejudice to any and all rights or defenses MSC, its agents or affiliates have or may have” in the Eastern District of Louisiana proceedings. It also permitted Conti to return the LOU if Conti decided to discontinue those proceedings or if the court concluded Conti was not entitled to enforce the award in full.
(…) The court (…) granted Conti’s motion for judgment on the pleadings and confirmed the arbitral award. MSC now appeals, arguing the court lacked personal jurisdiction over it.
To confirm the arbitral award, the district court needed personal jurisdiction over MSC. See First Inv. Corp. of Marshall Islands v. Fujian Mawei Shipbuilding, Ltd., 703 F.3d 742, 748 (5th Cir. 2012) (due process requires personal jurisdiction to confirm award under the New York Convention). Only specific personal jurisdiction is at issue. See, e.g., Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915,919 (2011) (distinguishing “general or all-purpose jurisdiction, and specific or case-linked jurisdiction”. Conti, then, had to show that MSC “purposefully availed itself of the privilege of conducting activities within the forum State.” Ford Motor Co. v. Mont. Eighth Jud. Dist. Ct., 141 S. Ct. 1017, 1024 (2021) (quoting Hanson v. Denckla, 357 U.S. 235, 253 (1958)). MSC’s forum contacts must be its “own choice and not ‘random, isolated, or fortuitous.’” Id. at 1025 (quoting Keeton v. Hustler Mag., Inc., 465 U.S. 770, 774 (1984)). And, crucially, Conti’s claim against MSC “must arise out of or relate to” those contacts. Ibid. In other words, for specific personal jurisdiction to exist over MSC, “there must be ‘an affiliation between the forum and the underlying controversy.’” Ibid. (quoting Bristol-Myers Squibb Co. v. Superior Ct. of Cal., San Francisco Cnty., 582 U.S. 255, 262 (2017)).
Also instructive is the Second Circuit’s decision in SoléResort, which involved a petition asking a New York federal court to vacate a Florida arbitral award involving two foreign companies. 450 F.3d at 101–02. The defendant resisted personal jurisdiction on the ground that the plaintiff’s claim was only “about the actions of the arbitrators, not about the facts underlying the dispute that led to the arbitration.” Id. at 105. The Second Circuit disagreed. “Any arbitration proceeding,” the court reasoned, “is...an extension of the parties’ contract with one another,” and “without the contract, the arbitration, and its resultant judgment, a subsequent challenge to that judgment never could exist.” Id. at 104. Accordingly, the court found “a substantial relationship between a challenge to the arbitrators’ decision and the contract that provided for the arbitration.” Ibid. “While the arbitrators’ actions themselves took place outside New York,” the court concluded, “those actions necessarily bear a substantial relationship to the events underlying the contract that created the arbitration.” Id. at 105 (cf. Fn. 4 below).
4The SoléResort analysis has been adopted by the pertinent Restatement. The authors explain that “in determining whether the requirement of minimum contacts is met, account is not taken only of the arbitration but also of the underlying transaction.” Restatement (Third) of U.S. Law of Int’l Com. Arb. §4.25 note (a)(ii) (citing SoléResort, 450 F.3d 100). Accordingly, “actions to enforce international arbitral awards do not call for any special personal jurisdictional rules. The adequacy of any particular exercise of personal jurisdiction is determined according to the generally applicable statutory and constitutional standards for the exercise of personal jurisdiction.” Id. at § 5.19 cmt. (a) (fn. 4).
Six other circuits follow an approach similar to the Tenth and Second Circuits with respect to evaluating personal jurisdiction over actions to confirm arbitral awards. That is, they consider a defendant’s contacts related to the underlying dispute that led to the arbitral award, and not only contacts related to the arbitration proceeding itself (cf. Fn. 5 below).
See Telcordia Tech, 458 F.3d at 178 (analyzing contacts between defendant and forum relevant to underlying dispute before finding personal jurisdiction to confirm a foreign arbitral award); Base Metal Trading, Ltd. v. OJSC “Novokuznetsky Aluminum Factory”, 283 F.3d 208, 215–16 (4th Cir. 2002) (considering lack of regular shipments between the two companies and contact with the United States to deny personal jurisdiction to confirm foreign arbitral award); Reynolds v. Int’l Amateur Athletic Fed’n, 23 F.3d 1110, 1116–17 (6th Cir. 1994) (considering state law tort and contract claims when determining personal jurisdiction to confirm a domestic arbitral award); Glencore Grain, 284 F.3d at 1123–24 (analyzing the sale of rice to California distributors in evaluating personal jurisdiction to confirm a foreign arbitral award); Greenfield Advisors LLC v. Salas, 733 F. App’x 364, 366–67 (9th Cir. 2018) (considering personal contacts between the appellant and state of Washington to find personal jurisdiction to enforce a foreign arbitral award); S & Davis Int’l, Inc. v. Republic of Yemen, 218 F.3d 1292, 1304–05 (11th Cir. 2000) (considering contacts regarding contractual breach to find personal jurisdiction to enforce a foreign arbitral award); Creighton, Ltd. v. Gov’t of Qatar, 181 F.3d 118, 127–28 (D.C. Cir. 1999) (considering phone calls, ongoing business, and other communications between Qatar and Tennessee in the underlying dispute to find no personal jurisdiction to confirm foreign arbitral award); GSS Grp. Ltd. v. Nat’l Port Auth., 680 F.3d 805, 817 (D.C. Cir. 2012) (finding no contacts between defendant and forum as to underlying dispute and thus dismissing for lack of personal jurisdiction). (Fn. 5).
Badgerow involved domestic arbitration governed by FAA Chapter One, see 9 U.S.C. §§1–16, whereas this case involves foreign arbitration under the New York Convention, governed by FAA Chapter Two, see id. §§201–208. As the district court carefully explained, Chapter Two lacks any textual indication that forbids looking to the underlying dispute in assessing personal jurisdiction to confirm an award under the Convention.
Even more telling is Chapter Two’s venue provision. An action to confirm a Convention-related award may be brought in any district court in which save for the arbitration agreement an action or proceeding with respect to the controversy between the parties could be brought, or in such court for the district and division which embraces the place designated in the agreement as the place of arbitration if such place is within the United States. Id. §204. This provision contains the same “save for” language as the analogous domestic provision addressed in Vaden (§4), which the Supreme Court held requires looking to the underlying dispute. See Vaden, 556 U.S. at 62–63. True, §204 addresses venue, not personal jurisdiction. But, as the district court pointed out, “it would only make sense for the personal jurisdiction analysis under the Convention to follow that of venue because otherwise it would lead to irrational results”—namely, being able to consider the underlying dispute for venue purposes but not for personal jurisdiction. This is another strong clue that Chapter Two, unlike the Chapter One provisions in Badgerow, does not forbid considering the parties’ dispute for purposes of assessing jurisdiction.
Next, we turn to the district court’s ruling that MSC waived any challenge to personal jurisdiction when its insurer issued the LOU. Recall that the LOU promised to pay Conti up to $220 million on any final judgment and was “given without prejudice to any and all rights or defenses MSC, its agents or affiliates have or may have.” MSC argues the district court erred because the LOU plainly reserved its defenses to Conti’s suit, including lack of personal jurisdiction. We agree.
“Louisiana law recognizes broad freedom to contract” and “contractual intent is determined by the words of the contract.” Luv N’ Care, Ltd. v. Groupo Rimar, 844 F.3d 442, 447 (5th Cir. 2016); see also La. Civ. Code art. 1971 (“Parties are free to contract for any object that is lawful, possible, and determined or determinable.”). Contractual provisions like the ones here may be “relevant” to a personal jurisdiction analysis, “but they are not dispositive.” See Haliburton Energy Servs., Inc. v. Ironshore Specialty Ins. Co., 921 F.3d 522, 542 (5th Cir. 2019) (considering relevance of “choice-of-law provisions and forum-selection clauses” to personal jurisdiction analysis). When a party contractually submits to the court’s power for a “limited purpose,” it does “not waive its personal jurisdiction defense” for issues falling outside that purpose. Id. at 541.
Finally, MSC argues that, even if it is proper to consider contacts related to the underlying dispute, the district court erred in finding personal jurisdiction based only on the fact that the DVB shipped from the Port of New Orleans. We agree with MSC because that contact with New Orleans resulted not from MSC’s activity but rather that of its subsidiary, MSC (USA), and third parties. “Generally, a foreign parent corporation is not subject to the jurisdiction of a forum state merely because its subsidiary is present or doing business there.” Hargrave v. Fibreboard Corp., 710 F.2d 1154, 1159 (5th Cir. 1983) (citing 2 J. Moore & J. Lucas, Moore’s Federal Practice ¶4.25[6], at 4–272 (2d ed. 1982)). “This presumption of institutional independence...may be rebutted, however, by clear evidence” that the two corporations are “fused...for jurisdictional purposes.” Diece-Lisa, 943 F.3d at 251 (quoting Freudensprung, 379 F.3d at 346).
(…) Furthermore, the record suggests MSC and MSC (USA) are in fact distinct entities. While MSC (USA) is wholly owned by MSC, the two corporations have different headquarters—MSC (USA) in New York and MSC in Geneva. They have different officers and directors. And the record does not show that MSC and MSC (USA) failed to observe corporate formalities. To the contrary, the only evidence on that score is the arbitration panel’s finding that MSC (USA) followed corporate formalities with its own subsidiary, the New Orleans Terminal LLC. Nor does any evidence show MSC’s exercising complete authority over MSC (USA)’s operations. This evidence cannot overcome the presumption of separateness between MSC (USA) and MSC for personal jurisdiction purposes.
(…) See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985) (explaining the “‘purposeful availment’ requirement ensures that a defendant will not be haled into a jurisdiction solely as a result...of the ‘unilateral activity of another party or a third person’” (quoting Hanson, 357 U.S. at 253; Helicopteros Nacionales de Columbia, S.A. v. Hall, 466 U.S. 408, 417 (1984))). The district court thus lacked personal jurisdiction to confirm the London award.
(U.S. Court of Appeals for the Fifth Circuit, Jan. 29, 2024, Conti 11. Container Schiffarts-GMBH & Co. KG M.S., MSC Flaminia v. MSC Mediterranean Shipping Company S.A., Docket No. 22-30808)
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