U.S. Court of Appeals for the Ninth Circuit, Milos Product Tanker Corp. v. Valero, Docket No. 23-55655

Transportation by Sea

 

Maritime Transportation Contract (or Charter Party)

 

Common Carrier v. Private-Carriage Case

 

Bill of Lading

 

Letter of Indemnity

 

Freight Costs

 

 

-       If a contract allocates freight liability to a nonparty

 

-       For common carriage contracts, the published rate forms an “offer,” which is “accepted” by receipt of the goods under a bill of lading, charter party, or default rules obligating a consignee (about default rules, see Interstate Commerce Act (“ICA”), 49 U.S.C. §§ 101 et seq.; see also 49 C.F.R. §1035.1)

 

 

 

 

Appeal from the United States District Court for the Central District of California.

 

 

Defendant–Appellant Valero Marketing and Supply company (“Valero”) appeals the district court’s grant of summary judgment for Plaintiff–Appellee Milos Product Tanker Corporation (“Milos”). In 2020, Milos transported by sea roughly 40,000 tons of jet fuel belonging to Valero. This transport cost a little over $1,000,000. But after Milos delivered, Valero refused to pay. Valero had already paid freight costs when it bought the fuel from a third company, Koch Refining International PTE Ltd., Co. (“Koch”), and had no intention of paying twice. Koch was also unwilling to pay Milos. Milos’s contract was with a fourth company, GP Global PTE Ltd. on behalf of Gulf Petrochem FCZ (“GP Global”), which arranged the voyage. But GP Global had “experienced financial difficulties” and could not pay. So Milos sued Valero for, relevant here, breach of contract.

 

 

Reviewing de novo, we agree with Valero. Valero was not party to the contract between Milos and GP Global. That contract specifically stated that GP Global would pay freight. Why Valero’s payment for freight to Koch never made it to Milos through GP Global is beyond the scope of this case. And States Marine (States Marine International, Inc. v. Seattle-First National Bank, 524 F.2d 245, 248 (9th Cir. 1975)) does not support an implied obligation for Valero to pay. States Marine modestly extended freight rules established in railroad cases to ocean carriers “operating under tariffs”—that is, from railroad common carriers to ocean common carriers. In both railroad and ocean contexts, common carriers must publish their rates and are subject to default terms of a universal bill of lading. These distinctions permit a presumption that whoever accepts delivery of a shipment from a common carrier understands what they are liable to pay. But in a private-carriage case like this one, notice of shipping costs and default terms cannot be presumed. It was therefore error to find that Valero had an implied obligation to pay under States Marine, and we must reverse.

 

 

(…) The Charter Party authorized the ship captain to sign bills of lading for the cargo. A bill of lading is a document “issued by the shipowner when goods are loaded on its ship, and may, depending on the circumstances, serve as a receipt, a document of title, a contract for the carriage of goods, or all of the above.” Asoma Corp. v. SK Shipping Co., 467 F.3d 817, 823 (2d Cir. 2006). Ordinarily, a carrier like Milos is responsible for releasing cargo only to the party who presents an original bill of lading. See C-ART, Ltd. v. Hong Kong Islands Line Am., S.A., 940 F.2d 530, 532 (9th Cir. 1991).

 

 

(…) On July 14, Valero agreed to purchase the jet fuel from Koch on “cost and freight” (“CFR”) terms. Under CFR terms, the seller arranges and pays for transportation to the port of delivery, while the buyer assumes title and risk of loss as soon as the cargo is loaded onto the carrier at the port of origin. See, e.g., BP Oil Int'l, Ltd. v. Empresa Estatal Petroleos de Ecuador, 332 F.3d 333, 338 (5th Cir. 2003).

 

 

(…) We begin with the law governing maritime freight liability. It is “well settled” that the party who sends the goods—the “shipper” or “consignor”—is “primarily liable to the carrier for freight charges.” States Marine, 524 F.2d at 247 (citing Louisville & Nashville R.R. Co. v. Cent. Iron & Coal Co., 265 U.S. 59, 67 (1924)). That is true even when a bill of lading purports to impose liability on the receiver of the goods (the “consignee”). Louisville & Nashville R.R. Co., 265 U.S. at 67. After all, “the shipper is presumably the consignor; the transportation ordered by him is presumably on his own behalf; and a promise by him to pay therefor is inferred.” Id. However, a contract or statute may form binding obligations that modify the general rule. See States Marine, 524 F.2d at 247–48. Of the two, a contract may be more significant because statutory default terms only come into play in the absence of a contract. See Louisville & Nashville R.R. Co., 265 U.S. at 65–67. That is natural because parties are generally free to negotiate and assign freight liability however they like. Id. (the shipper’s obligation to pay freight is not “absolute”—a “carrier and shipper are free to contract” as to “when or by whom the payment should be made”). If a contract allocates freight liability to a party, that ends the court’s inquiry. See Travelers Indem. Co. v. Bailey, 557 U.S. 137, 150–51 (2009) (citing 11 WILLISTON ON CONTRACTS § 30:4 (4th ed. 1999)); see also C.A.R. Transp. Brokerage Co. v. Darden Rests., Inc., 213 F.3d 474, 479 (9th Cir. 2000) (citing Fikse & Co. v. United States, 23 Cl. Ct. 200, 204 (1991)); In re Roll Form Prods., Inc., 662 F.2d 150, 154 (2d Cir.1981) (citing Consol. Freightways Corp. v. Admiral Corp., 442 F.2d 56, 62 (7^th Cir. 1971)).

 

 

If a contract allocates freight liability to a nonparty, then the court must determine whether the nonparty consented to be bound under the contract. In re M/V Rickmers Genoa Litig., 622 F. Supp. 2d 56, 71–72 (S.D.N.Y. 2009), aff'd sub nom. Chem One, Ltd. v. M/V Rickmers Genoa, 502 Fed. App’x 66 (2d Cir. 2012). For example, a bill of lading might allocate freight liability to a consignee. But the consignee would not be obligated to pay freight without evidence the consignee consented to be bound under the bill of lading. That evidence can be supplied by context. See, e.g., Ingram Barge Co. v. Zen-Noh Grain Corp., 3 F.4th 275, 279 (6th Cir. 2021). Typically, consignees demonstrate consent to be bound by presenting the bill of lading and accepting the goods under it. See id. at 282 (White, J., dissenting) (citing Neilsen v. Jesup, 30 F. 138, 139 (S.D.N.Y. 1887); Pacific Coast Fruit Distribs. v. Pa. R.R. Co., 217 F.2d 273, 275 (9th Cir. 1954)). Similarly, consignees may show their consent to be bound under a bill of lading by suing on the bill of lading, or by silence in context of longstanding dealings, or by the consignee’s agent negotiating the bill of lading. See Ingram Barge, 3 F.4th at 279. Notice that all these contexts show the consignee is aware of the terms to which they are agreeing.

 

 

If no contract allocates freight liability, courts may still find an implied promise to pay in some circumstances. For example, common carriers must charge publicly posted rates and are subject to default terms of a uniform bill of lading. See Interstate Commerce Act (“ICA”), 49 U.S.C. §§ 101 et seq.; see also 49 C.F.R. §1035.1. In that context, “where the parties fail to agree or where discriminatory practices are present, . . . the ICA's default terms bind the parties.” C.A.R. Transp. Brokerage Co., 213 F.3d at 479 (citing In re Roll Form Prods., Inc., 662 F.2d at 154).

 

 

A narrow reading of States Marine is in harmony with basic principles of contract formation. “The law of private carriage, now primarily charter parties, . . .  is still governed by the principle of freedom of contract.” Common Carriage and Private Carriage, 1 ADMIRALTY & MAR. LAW § 10:3 (6th ed.). Parties to a freight contract, like any other contract, are free to assign liability as they wish, provided their allocation does not run afoul of the law. See Oak Harbor Freight Lines, Inc. v. Sears Roebuck, & Co., 513 F.3d 949, 956 (9th Cir. 2008) (citing Louisville & Nashville R.R. Co., 265 U.S. at 66–67); C.A.R. Transp. Brokerage Co, 213 F.3d at 479. Beyond that, an offer generally must precede acceptance. See 1 WILLISTON ON CONTRACTS § 4:16; RESTATEMENT (SECOND) OF CONTRACTS § 23 (AM. L. INST.1981); see also Schnabel v. Trilegiant Corp., 697 F.3d 110, 121 (2d Cir. 2012). For common carriage contracts, the published rate forms an “offer,” which is “accepted” by receipt of the goods under a bill of lading, charter party, or default rules obligating a consignee. Without a published rate, it would be quite possible for a private consignee’s “acceptance” to precede the “offer” of the private carrier’s rates. And the consignee’s “acceptance” could only demonstrate a meeting of the minds if consignee liability was one of the terms of the transaction.

 

 

Any implied obligation for private-carrier consignees to pay freight must fit with foundational contract principles. Unlike common-carrier consignees, private-carrier consignees are not presumed to know key terms simply because they receive and accept goods. And they are certainly not expected to know they are liable for freight when an express contract says they are not. Therefore, private-carrier consignees cannot be under the same presumptive obligation to pay freight upon acceptance. A narrow reading of States Marine makes that clear.

 

 

 

(U.S. Court of Appeals for the Ninth Circuit, Sept. 18, 2024, Milos Product Tanker Corp. v. Valero, Docket No. 23-55655, for Publication)

 

U.S. Court of Appeals for the Ninth Circuit, Infanzon v. Allstate Insurance Company, Docket No. 22-56070

Insurance Law

Insurance Agent’s Liability

Joinder

Diversity

California Law

 

 

Appeal from the United States District Court for the Central District of California.

 

The district court correctly found that Leticia Pomes, the Allstate Insurance Sales Agent who was named as a codefendant in Infanzon’s state court complaint, was fraudulently joined. See Morris v. Princess Cruises, Inc., 236 F.3d 1061, 1067 (9th Cir. 2001). “Joinder of a non-diverse defendant is deemed fraudulent, and the defendant’s presence in the lawsuit is ignored for purposes of determining diversity, ‘if the plaintiff fails to state a cause of action against a resident defendant, and the failure is obvious according to the settled rules of the state.’” Id. (quoting McCabe v. General Foods Corp., 811 F.2d 1336, 1339 (9th Cir. 1987)). Under California law, an insurance agent acting in the name of a disclosed principal is not personally liable for acts committed within the scope of his or her employment, Lippert v. Bailey, 241 Cal. App. 2d 376, 382 (1966), “unless an agent or employee acts as a dual agent.” Mercado v. Allstate Ins. Co., 340 F.3d 824, 826 (9th Cir. 2003). Here, there is no dispute that Pomes acted on behalf of Allstate, her disclosed principal; that she always held herself out as Allstate’s agent to Infanzon and to others; and that she acted within the scope of her employment. Therefore, because Pomes acted as Allstate’s exclusive agent, Infanzon has no cognizable claim against her under California law, and complete diversity exists.

 

 

(U.S. Court of Appeals for the Ninth Circuit, Aug. 2, 2024, Infanzon v. Allstate Insurance Company, Docket No. 22-56070, Not for Publication)

 

 

U.S. Court of Appeals for the Ninth Circuit, EB Holdings II, Inc. v. Illinois National Insurance Comp., Docket No. 23-15556

Insurance Law

 

Conflict-of-Laws

 

Affirmative Defense

 

Diversity Cases

 

Choice-of-Law Rules of the Forum State

 

Texas and Nevada Law

 

 

 

 

Appeal from the United States District Court for the District of Nevada

 

 

The Insureds are holding companies incorporated in Nevada and headquartered in Dallas, Texas. In 2015, the Insureds had dozens of subsidiaries, through which the Insureds operated battery recycling facilities and manufactured supplies for the oil exploration industry. EBH II’s principal asset was ownership of 86.9% of Eco-Bat Technologies, Ltd. (Eco-Bat), a supplier of recycled lead based in the United Kingdom. Howard Meyers was a Director and the President of both Insureds in 2015. Albert Lospinoso was the other Director of EBH II. In the summer of 2015, the Insureds sought to renew their Directors and Officers and Private Company Liability Insurance Policy with Illinois National Insurance Company (Illinois National), an American International Group, Inc. (AIG) subsidiary organized pursuant to Illinois law with a principal place of business in New York. The Insureds were seeking to renew coverage not only for themselves but also for dozens of their subsidiary companies, including Eco-Bat and Eco-Bat’s subsidiaries. To facilitate the renewal, the Insureds’ insurance broker sent numerous documents to AIG’s underwriters that summer relating to the finances of the Insureds and their subsidiaries. These documents included a consolidated balance sheet of Eco-Bat America, LLC (EBA), a wholly owned subsidiary of Eco-Bat. This document represented that the subsidiary, EBA, had $29.9 million in long-term debt.

 

 

The District Court erred in concluding that Nevada law, and not Texas law, governs the affirmative defense.

 

It is well-established in the federal courts that a conflict-of-laws analysis may result in the laws of different jurisdictions applying to different issues in the same case. Allstate Ins. Co. v. Hague, 449 U.S. 302, 307 (1981). “It is also well-established that in diversity cases, such as this one, ‘federal courts must apply the choice-of-law rules of the forum state.’” Rustico v. Intuitive Surgical, Inc., 993 F.3d 1085, 1091 (9th Cir. 2021) (quoting Ledesma v. Jack Stewart Produce, Inc., 816 F.2d 482, 484 (9th Cir. 1987)). Here, the forum state is Nevada. “Nevada tends to follow the Restatement . . . in determining choice-of-law questions involving contracts, generally, and insurance contracts, in particular.” Progressive Gulf Ins. Co. v. Faehnrich, 327 P.3d 1061, 1063 (Nev. 2014). That includes § 187 of the Restatement, which, according to the Nevada Supreme Court, permits the parties “within broad limits to choose the law that will determine the validity and effect of their contract.” Ferdie Sievers & Lake Tahoe Land Co. v. Diversified Mortg. Invs., 603 P.2d 270, 273 (Nev. 1979). Nevertheless, where an insurance policy does not evince a clear choice-of-law governing a particular issue, the Nevada Supreme Court has instructed its courts to apply § 188 of the Restatement, i.e., the “substantial relationship” test. See, e.g., Sotirakis v. United Serv. Auto. Ass’n, 787 P.2d 788, 789–90 (Nev. 1990). That test requires courts to consider: “(a) the place of contracting, (b) the place of negotiation of the contract, (c) the place of performance, (d) the location of the subject matter of the contract, and (e) the domicil, residence, nationality, place of incorporation and place of business of the parties.” Restatement § 188. Each factor of the test must be “evaluated according to its relative importance with respect to the particular issue” that gave rise to the choice-of-law dispute in the first place. Id.

 

 

Section 187 of the Restatement permits the parties “within broad limits to choose the law that will determine the validity and effect of their contract.” Ferdie, 603 P.2d at 273. Parties typically effectuate that choice through an express choice-of-law provision in their contract. See Restatement § 187 cmt. a (“When the parties have made such a choice, they will usually refer expressly to the state of the chosen law in their contract, and this is the best way of insuring that their desires will be given effect.”). It is undisputed that the insurance policy in this case lacks such a provision. Nevertheless, commentary to the Restatement makes clear that an express choice-of-law provision is not required for § 187 to apply to a particular issue. See Restatement § 187 cmt. a.1 “The fact that a contract contains legal expressions, or makes reference to legal doctrines, that are peculiar to the local law of a particular state may provide persuasive evidence that the parties wished to have the law of that particular state applied.” Id.

 

 

(…) Because we conclude that Texas law applies to the defense of material misrepresentation, there is no reason to entertain the Insureds’ broader argument that Texas law applies to the entire policy. Cf. George K. Baum & Co. v. Twin City Fire Ins. Co., 760 F.3d 795, 799–800 (8th Cir. 2014) (applying comment (a) to § 187 of the Restatement to hold that New York law governed an entire insurance policy that lacked an express choice-of-law clause because it “contained numerous New York-specific provisions”). (Fn. 2).

 

 

 

 

 

 

(U.S. Court of Appeals for the Ninth Circuit, July 29, 2024, EB Holdings II, Inc. v. Illinois National Insurance Comp., Docket No. 23-15556, for Publication)

U.S. Court of Appeals for the Ninth Circuit, EB Holdings II, Inc. v. Illinois National Insurance Comp., Docket No. 23-15556

Conflict-of-Laws

 

Affirmative Defense

 

Diversity Cases

 

Choice-of-Law Rules of the Forum State

 

 

 

 

 

The District Court erred in concluding that Nevada law, and not Texas law, governs the affirmative defense.

 

It is well-established in the federal courts that a conflict-of-laws analysis may result in the laws of different jurisdictions applying to different issues in the same case. Allstate Ins. Co. v. Hague, 449 U.S. 302, 307 (1981). “It is also well-established that in diversity cases, such as this one, ‘federal courts must apply the choice-of-law rules of the forum state.’” Rustico v. Intuitive Surgical, Inc., 993 F.3d 1085, 1091 (9th Cir. 2021) (quoting Ledesma v. Jack Stewart Produce, Inc., 816 F.2d 482, 484 (9th Cir. 1987)). Here, the forum state is Nevada. “Nevada tends to follow the Restatement . . . in determining choice-of-law questions involving contracts, generally, and insurance contracts, in particular.” Progressive Gulf Ins. Co. v. Faehnrich, 327 P.3d 1061, 1063 (Nev. 2014). That includes § 187 of the Restatement, which, according to the Nevada Supreme Court, permits the parties “within broad limits to choose the law that will determine the validity and effect of their contract.” Ferdie Sievers & Lake Tahoe Land Co. v. Diversified Mortg. Invs., 603 P.2d 270, 273 (Nev. 1979). Nevertheless, where an insurance policy does not evince a clear choice-of-law governing a particular issue, the Nevada Supreme Court has instructed its courts to apply § 188 of the Restatement, i.e., the “substantial relationship” test. See, e.g., Sotirakis v. United Serv. Auto. Ass’n, 787 P.2d 788, 789–90 (Nev. 1990). That test requires courts to consider: “(a) the place of contracting, (b) the place of negotiation of the contract, (c) the place of performance, (d) the location of the subject matter of the contract, and (e) the domicil, residence, nationality, place of incorporation and place of business of the parties.” Restatement § 188. Each factor of the test must be “evaluated according to its relative importance with respect to the particular issue” that gave rise to the choice-of-law dispute in the first place. Id.

 

 

Section 187 of the Restatement permits the parties “within broad limits to choose the law that will determine the validity and effect of their contract.” Ferdie, 603 P.2d at 273. Parties typically effectuate that choice through an express choice-of-law provision in their contract. See Restatement § 187 cmt. a (“When the parties have made such a choice, they will usually refer expressly to the state of the chosen law in their contract, and this is the best way of insuring that their desires will be given effect.”). It is undisputed that the insurance policy in this case lacks such a provision. Nevertheless, commentary to the Restatement makes clear that an express choice-of-law provision is not required for § 187 to apply to a particular issue. See Restatement § 187 cmt. a.1 “The fact that a contract contains legal expressions, or makes reference to legal doctrines, that are peculiar to the local law of a particular state may provide persuasive evidence that the parties wished to have the law of that particular state applied.” Id.

 

 

(…) Because we conclude that Texas law applies to the defense of material misrepresentation, there is no reason to entertain the Insureds’ broader argument that Texas law applies to the entire policy. Cf. George K. Baum & Co. v. Twin City Fire Ins. Co., 760 F.3d 795, 799–800 (8th Cir. 2014) (applying comment (a) to § 187 of the Restatement to hold that New York law governed an entire insurance policy that lacked an express choice-of-law clause because it “contained numerous New York- specific provisions”). (Fn. 2).

 

 

 

 

 

 

(U.S. Court of Appeals for the Ninth Circuit, July 29, 2024, EB Holdings II, Inc. v. Illinois National Insurance Comp., Docket No. 23-15556, for Publication)

 

U.S. Court of Appeals for the Ninth Circuit, EB Holdings II, Inc. v. Illinois National Insurance Comp., Docket No. 23-15556

Remand (Federal)

 

Prudential Reasons

 

Alternative Grounds for Affirmance

 

 

 

 

(…) Illinois National, Continental, and Federal devote much of their appellate briefing to arguing why the panel should affirm the district court’s grant of summary judgment on alternative grounds. This includes Illinois National’s argument that Endorsement #23 of the policy precludes coverage for the Insureds’ claims. We decline to reach these arguments in the first instance. See generally Detrich v. Ryan, 740 F.3d 1237, 1248–49 (9th Cir. 2013) (en banc) (observing that it is “standard practice . . . to remand to the district court for a decision in the first instance without requiring any special justification for so doing”), overruled on other grounds by Shinn v. Ramirez, 596 U.S. 366 (2022); Ecological Rts. Found. v. Pac. Lumber Co., 230 F.3d 1141, 1154 (9th Cir. 2000) (discussing prudential reasons why an appellate court typically does not address alternative grounds for affirmance).

 

 

 

 

(U.S. Court of Appeals for the Ninth Circuit, July 29, 2024, EB Holdings II, Inc. v. Illinois National Insurance Comp., Docket No. 23-15556, for Publication)

 

U.S. Court of Appeals for the Ninth Circuit, Radu v. Johnson Shon, Docket No. 22-16316

International Child Abduction

 

New Evidentiary Hearing

 

Ameliorative Measures

 

Pending Criminal Charges

 

Hague Convention on the Civil Aspects of International Child Abduction (Convention), Oct. 25, 1980, T.I.A.S. No. 11670

 

 

 

 

Domestically, the International Child Abduction Remedies Act (ICARA) implements the Convention’s rules, creates the United States Central Authority, and gives our courts jurisdiction to adjudicate disputes under the Convention. 22 U.S.C. § 9001 et seq.

 

 

Gaudin v. Remis made the consideration of ameliorative measures mandatory. See 415 F.3d 1028, 1035 (9th Cir. 2005) (“Courts applying ICARA have consistently held that, before denying the return of a child because of a grave risk of harm, a court must consider alternative remedies that would allow both the return of the children to their home country and their protection from harm.” (internal quotation marks and citation omitted)).

 

 

(…) The district court then contacted the State Department, Office of Children’s Issues’ country officer for Germany, who contacted the German Central Authority for the court.

 

 

(…) Shon again appealed. We stayed the appeal pending the Supreme Court’s resolution of Golan and eventually remanded for reconsideration in light of Golan’s clarification that consideration of ameliorative measures is discretionary rather than mandatory. See 142 S. Ct. at 1892–93.

 

 

The present appeal arises from the third return order. Given the parties’ uncertainty about aspects of the ordered remedy, and unresolved logistical issues, we ordered a limited remand while retaining jurisdiction to avoid further delay. See Friery v. L.A. Unified Sch. Dist., 448 F.3d 1146, 1150 (9th Cir. 2006) (ordering “a limited remand to the district court”). We directed the district court to clarify (1) its current Article 13(b) grave-risk finding and ameliorative measure(s) ordered, (2) whether Radu must pay for airfare, (3) whether Radu must pay for separate living arrangements, (4) the custody arrangements (sole or joint) while Shon was temporarily residing in Germany, (5) the custody arrangements if Shon is no longer able to legally reside in Germany before a German court decides custody, (6) the need to notify German child protective services upon the children’s arrival, and (7) whether, if necessary, German child protective services have jurisdiction to oversee the children’s wellbeing.

 

 

(…) Any categorical rule requiring new hearings would contravene the Convention’s directive for expeditious resolution.

 

 

(…) Our sister circuits agree. In March v. Levine, the question presented was whether the district court improperly granted summary judgment to a father petitioning for his children’s return without allowing discovery or a hearing on the merits. See 249 F.3d 462, 468 (6th Cir. 2001). The Sixth Circuit affirmed. Recognizing that Convention cases are unique, the court explained that “neither [the Convention nor ICARA] expressly requires a hearing or discovery”; instead they require “expeditious action.” Id. at 474. The court also found persuasive that “courts in other Contracting States to the treaty have also upheld summary proceedings on review.” Id. at 475 (discussing Australian court proceedings). The Tenth Circuit reached the same conclusion in West v. Dobrev, reasoning that Article 18’s permission to order return at any time provides trial courts “a substantial degree of discretion in determining the procedures necessary to resolve a petition filed pursuant to the Convention and ICARA.” 735 F.3d 921, 929 (10th Cir. 2013).

 

 

We now hold that, in cases governed by the Convention, the district court has discretion as to whether to conduct an evidentiary hearing following remand and must exercise that discretion consistent with the Convention. The district court did not abuse its discretion in declining to hold a third evidentiary hearing when the factual record was fully developed.

 

 

(…) “While a district court has no obligation under the Convention to consider ameliorative measures that have not been raised by the parties, it ordinarily should address ameliorative measures raised by the parties or obviously suggested by the circumstances of the case . . . .” Golan, 142 S. Ct. at 1893.

 

 

(…) The record supports the district court’s determination that the time frame in which a German court would determine custody would be a few months rather than years. The district court found that a merits decision would be made within months. Radu, 2023 WL 142908, at *2. Shon’s German law expert’s testimony supports this finding. He testified that a German court would likely require the children to live in Germany for up to six months before determining custody but that the court would also have discretion to make an earlier decision. And the district court cited a German statute providing that the determination of custody issues “shall have priority” and “shall be handled in an expedited manner.” That the waiting period is likely to be months instead of years is supported by the record.

 

 

(…) Third, based on the lack of any evidence or testimony about pending criminal charges in Germany, the court drew the supported inference that none existed.

 

 

 

 

 

(U.S. Court of Appeals for the Ninth Circuit, March 13, 2023, Radu v. Johnson Shon, Docket No. 22-16316, for Publication)

U.S. Court of Appeals for the Ninth Circuit, Brown v. Commissioner of Internal Revenue, Docket No. 22-70001

 

Tax Law

 

Notices of Federal Tax Lien

 

Collection Due Process (“CDP”) Hearing  

 

Offer in Compromise (“OIC”)

 

The Tax Increase Prevention and Reconciliation Act of 2005 (“TIPRA”), Pub. L. 109–222, Requires a Taxpayer Who Makes an OIC to Submit a Payment of Twenty Percent of the Value of the OIC

 

TIPRA Payments Are Not Refundable Deposits

 

Notice of Determination (“NOD”) Which Allows to Appeal to the Tax Court to Contest the Liens and the Return of an OIC

 

Tax Court Jurisdiction

 

Equity

 

 

 

 

Appeal from a Decision of the United States Tax Court

 

 

Michael D. Brown owes approximately $50,000,000 in unpaid federal taxes for various years between 2001 and 2011. In 2016, after the Internal Revenue Service (“IRS”) placed two tax liens on his property, Brown submitted an offer in compromise (“OIC”) to the Commissioner of Internal Revenue. An OIC allows a taxpayer to settle his outstanding tax liabilities for less than their total value if the IRS determines there are doubts as to collectability or that full payment would be inequitable or cause unusual economic hardship. IRM 33.3.2 (Aug. 6, 2019) (Offers in Compromise); IRS Form 656 (Offer in Compromise) at 3. Brown’s OIC offered to settle his $50,000,000 outstanding tax liability for a payment of $400,000, claiming that there were doubts as to collectability. The Tax Increase Prevention and Reconciliation Act of 2005 (“TIPRA”), Pub. L. 109–222, requires a taxpayer who makes an OIC to submit a payment of twenty percent of the value of the OIC, in Brown’s case $80,000. See 26 U.S.C. § 7122(c)(1)(A)(i). As part of the OIC process, the taxpayer must acknowledge that he understands that the TIPRA payment will not be refunded if the OIC is not accepted. Brown acknowledged the following on his signed OIC submission form: “I voluntarily submit the payments made on this offer and understand that they will not be returned even if I withdraw the offer or the IRS rejects or returns the Offer.” IRS Form 656 (Offer in Compromise) at 5. The Commissioner returned Brown’s OIC after concluding that it was inappropriate to compromise his tax liability at that time because the existence of ongoing audits of Brown’s businesses made the overall amount of his tax liability uncertain. The IRS, in accordance with the terms of the OIC, did not return Brown’s $80,000 TIPRA payment. This litigation is Brown’s attempt to retrieve that money. In a previous appeal, we held that the IRS’s decision to return Brown’s OIC was proper but remanded to allow the Tax Court to determine if it had jurisdiction to refund Brown’s $80,000 TIPRA payment. Brown v. Comm’r, 826 F. App’x 673, 674 (9th Cir. 2020). On remand, the Tax Court held that it did not have jurisdiction to refund the payment because the power to do so had not been specifically granted to it by any statute. Brown v. Comm’r, 122 T.C.M. (CCH) 199, at *7 (2021). We agree and therefore we affirm.

 

 

This litigation began in 2015 when the IRS filed the first of two notices of federal tax lien (“NFTLs”) against Brown’s property as a consequence of Brown’s unpaid taxes. In response to the NFTLs, Brown requested a Collection Due Process (“CDP”) hearing and indicated that he intended to make an OIC. At that time, there were multiple ongoing audits of Brown’s businesses. In November 2016, Brown submitted his OIC. As noted, his OIC offered to settle his $50,000,000 tax liability for $400,000 and included the required twenty percent ($80,000) TIPRA payment. The law is clear that TIPRA payments are not refundable deposits but rather are non-refundable payments of tax. See Isley v. Comm’r, 141 T.C. 349, 372 (2013) (“The TIPRA payment constitutes a nonrefundable, partial payment of the taxpayer’s liability . . .”) (citing H.R. Conf. Rept. No. 109–455, at 234 (2006)); see also 26 U.S.C. § 7122(c)(2)(A)–(C) (establishing that any TIPRA payment goes to the taxpayer’s liabilities). The IRS accepted Brown’s OIC for processing but decided that it should be returned because of the ongoing audits. After the OIC was returned, Brown received a Notice of Determination (“NOD”) which permitted him to appeal to the Tax Court to contest the liens and the return of his OIC. See 26 U.S.C. § 6330(d)(1).

 

 

(…)

 

 

As the Tax Court correctly noted, it is a court of limited jurisdiction and possesses no general equitable powers. See Comm’r v. McCoy, 484 U.S. 3, 7 (1987). In other words, it has only the jurisdiction specifically granted by statute and lacks the authority to expand upon that statutory grant. Id.; see 26 U.S.C. § 7442. We have been clear that “the Tax Court’s jurisdiction is defined and limited by Title 26 and it may not use general equitable powers to expand its jurisdictional grant beyond this limited Congressional authorization. It may exercise its authority only within its statutorily defined sphere.” Est. of Branson v. Comm’r, 264 F.3d 904, 908 (9th Cir. 2001).

 

 

Brown argues that 26 U.S.C. §§ 6320 and 6330 give the Tax Court jurisdiction to refund his TIPRA payment. This is not so. Section 6320 merely requires that taxpayers be given notice and an opportunity for a hearing when a tax lien is filed. And section 6330 deals with procedures governing levies on property and administrative reviews of both liens and levies. See 26 U.S.C. § 6320(c) (explaining that provisions of § 6330 shall apply to the review of tax-lien hearings). Nothing in either section grants the Tax Court the power to refund TIPRA payments.1

 

 

1Cf. 26 U.S.C. § 6512(b)(1) (giving the Tax Court, in its deficiency jurisdiction, the power to determine an overpayment and refund such overpayment to the taxpayer).

 

 

Thus, the Tax Court lacks jurisdiction to refund TIPRA payments because there is no specific statutory grant conferring jurisdiction to do so. We have considered Brown’s remaining arguments and find them to be without merit.

 

 

 

 

(U.S. Court of Appeals for the Ninth Circuit, Brown v. Commissioner of Internal Revenue, Jan. 24, 2023, Docket No. 22-70001, for Publication)

 

U.S. Court of Appeals for the Ninth Circuit, Lang Van, Inc. v. VNG Corp., Docket No. 19-56452

Foreign Defendants

 

Personal Jurisdiction

 

Long-Arm Jurisdiction Under Rule 4(k)(2) of the Federal Rules of Civil Procedure

 

Purposeful Availment

 

Google Play Store and Microsoft App Store

 

Geoblocking

 

Forum Non Conveniens

 

 

 

In assessing whether Lang Van established a prima facie case of jurisdiction, the panel analyzed jurisdiction under Federal Rule of Civil Procedure 4(k)(2), which provides for jurisdiction over foreign defendants that have ample contacts with the United States as a whole, but whose contacts are so scattered among states that none of them would have jurisdiction. Under Rule 4(k)(2), the plaintiff must prove: (1) the claim at issue arises from federal law; (2) the defendant is not subject to any state’s courts of general jurisdiction; and (3) invoking jurisdiction upholds due process. The plaintiff has the burden to show the first two prongs, and the burden then shifts to the defendant to show that application of jurisdiction would be unreasonable.

 

 

In 2014, Lang Van, Inc. (“Lang Van”) filed a copyright infringement suit against VNG Corporation (“VNG”). VNG, prior to discovery or answer, moved to dismiss for lack of personal jurisdiction.

 

 

Lang Van contends that personal jurisdiction exists over VNG, either under minimum contacts specifically directed at the State of California and/or under long-arm jurisdiction pursuant to Fed. R. Civ. P. 4(k)(2).

 

 

VNG contends that it is not subject to personal jurisdiction in any state’s courts of general jurisdiction. Accordingly, when assessing whether Lang Van has established a prima facie case of jurisdiction, the Court will analyze jurisdiction under Fed. R. Civ. P. 4(k)(2). See Holland Am. Line, Inc., 485 F.3d at 461 (“If  . . . the defendant contends that he cannot be sued in the forum state and refuses to identify any other where suit is possible, then the federal court is entitled to use Rule 4(k)(2).” (quoting ISI Int’l, Inc. v. Borden Ladner Gervais LLP, 256 F.3d 548, 551 (7th Cir.), as amended (July 2, 2001))).

 

 

A.   Jurisdiction under Rule 4(k)(2)

 

Rule 4(k)(2) was established in “response to the Supreme Court’s suggestion that the rules be extended to cover persons who do not reside in the United States, and have ample contacts with the nation as a whole, but whose contacts are so scattered among states that none of them would have jurisdiction.” ISI Int’l, Inc., 256 F.3d at 551 (citing Omni Cap. Int’l, Ltd. v. Rudolf Wolff & Co., 484 U.S. 97, 111 (1987)); see also Fed. R. Civ. P. 4(k)(2) advisory committee’s note to 1993 amendment.

 

 

Accordingly, Rule 4(k)(2) uses virtually the same analysis as the Calder effects test for traditional state court personal jurisdiction, see 465 U.S. at 788–90, but the Court looks at the nation as a whole when reviewing contacts. Under Rule 4(k)(2), the plaintiff must prove: (1) the claim at issue arises from federal law; (2) the defendants are not subject to any state’s courts of general jurisdiction; and (3) invoking jurisdiction upholds due process (namely, that jurisdiction is not unreasonable). Pebble Beach Co., 453 F.3d at 1159. The plaintiff has the burden to show the first two prongs; the burden then shifts to the defendant to show application of jurisdiction would be unreasonable.

 

 

Prong 3: 

 

Due process

 

“The due process analysis under Rule 4(k)(2) is nearly identical to the traditional personal jurisdiction analysis with one significant difference: rather than considering contacts between the . . . defendants and the forum state, we consider contacts with the nation as a whole.” Holland Am. Line Inc., 485 F.3d at 462 (citing Pebble Beach Co., 453 F.3d at 1159). First, there must be purposeful activities or transactions with the United States, with an act that shows defendant purposefully availing itself of the privileges of doing business in the United States, and thereby invoking the benefits and protections of its laws; second, the claim must arise out of activities that are related to the United States; and third, the exercise of jurisdiction must comport with notions of fair play and substantial justice. Washington Shoe Co., 704 F.3d at 672; Int’l Shoe Co. v. State of Wash., Off. of Unemployment Comp. & Placement, 326 U.S. 310, 316 (1945). There must also be “intentional conduct by the defendant that creates the necessary contacts with the forum.” Walden, 571 U.S. at 286. Walden requires the defendant to have ties to the forum “in a meaningful way,” apart from simply knowing the plaintiff has ties to the forum. Id. at 290.

 

 

(…) VNG chose not to geoblock access to Lang Van’s content on Zing MP3 which would have restricted the use of Zing MP3 in the United States or elsewhere outside of Vietnam. The First Circuit has stated that “if a defendant tries to limit U.S. users’ ability to access its website . . . that is surely relevant to its intent not to serve the United States” and that the “converse is also true,” such that the defendant’s “failure to implement such restrictions, coupled with its substantial U.S. business, provides an objective measure of its intent to serve customers in the U.S. market.” Plixer Int’l, Inc. v. Scrutinizer GmbH, 905 F.3d 1, 9 (1st Cir. 2018). VNG clearly did not attempt to limit U.S. users’ ability to access its website, even though deposition testimony indicates that it had the ability to geoblock users as of 2013, if not earlier.

 

 

Two courts have determined that a defendant “purposefully availed itself of the privilege of conducting business in the United States by distributing the Infringing content on platforms such as the Google Play store and Microsoft App store.” Blizzard Ent., Inc. v. Joyfun Inc Co., Ltd., No. SACV191582JVSDFMX, 2020 WL 1972284, at *6 (C.D. Cal. Feb. 7, 2020); Goes Int’l, AB v. Dodur Ltd., No. 3:14-CV-05666-LB, 2015 WL 5043296, at *9 (N.D. Cal. Aug. 26, 2015). VNG failed to geoblock users in the United States from the Zing MP3 app but did geoblock U.S. users’ access to certain U.S. studios, such as Universal Music. This selective geoblocking indicates purposeful conduct. Further, in 2012, VNG and Lang Van had been involved in negotiations and communications regarding the licensing of Lang Van’s content on Zing MP3.

 

 

B. Venue

 

The Court rejects defendant’s argument regarding forum non conveniens in Vietnam. VNG argues that the more appropriate venue is Vietnam and is an alternative to dismissal of this case. While the district court acknowledged this argument, it did not specifically address it on the merits. This Court has “discretion to reach forum non conveniens even if the district court declined to consider it.” Ranza v. Nike, Inc., 793 F.3d 1059, 1076 (9th Cir. 2015). VNG contends that the majority of witnesses and evidence are in Vietnam, and issues of Vietnamese contracts and copyright law would be better decided in Vietnam.

 

 

The Court finds that venue in this case is not proper in Vietnam. Copyright cases concerning alleged unlawful activities purposely directed toward the United States are more amenable to suit in the United States for the reasons set forth herein. We reverse and remand for further proceedings consistent with this opinion.

 

 

 

 

(U.S. Court of Appeals for the Ninth Circuit, July 21, 2022, Lang Van, Inc. v. VNG Corp., Docket No. 19-56452, for Publication)