LANCE M. AFRICK, District Judge.
Before this Court is a motion
FIC filed this action to confirm a foreign arbitral award pursuant to the terms of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of June 10, 1958 ("the New York Convention").
The arbitration panel was duly constituted on June 18, 2004.
On September 22, 2005, Professor Hunter expressed his opinion that the panel would need to meet for their deliberations before issuing a final award.
On March 25, 2006, Professor Hunter circulated a second draft of the award to Dr. Wang and Mr. Harris that incorporated all of the amendments proposed by Dr. Wang and Mr. Harris, "together with some consequential drafting changes resulting both from the existence and content of Dr. Wang's draft dissenting opinion."
On May 3, 2006, Professor Hunter sent a letter to the parties informing them that he believed the final award could be issued without Dr. Wang's signature.
Professor Hunter and Mr. Harris addressed the problem of the panel's composition in Procedural Order No. 8, which was issued on the same day as the final award.
The arbitrators recognized that they had previously contemplated the need for an in-person meeting to complete their deliberations.
Accordingly, Professor Hunter and Mr. Harris concluded that the award could be made without the signature of Dr. Wang as he had participated fully in the deliberations of the matter.
On December 5, 2006, FIC commenced a confirmation action in Xiamen Maritime Court to enforce the award against the Fujian Group and Mawei.
On the basis of that interpretation of the relevant law, the Court held that Dr. Wang had not fully participated in the arbitration proceedings as he had been detained before the deliberations came to an end.
On May 27, 2009, FIC filed its petition in this Court to confirm the arbitral award.
On March 22, 2011, this Court entered a second judgment confirming the arbitral award.
On July 12, 2011, the Fujian respondents filed the present motion to dismiss the case or, in the alternative, to refuse to confirm the arbitral award.
In the context of a motion filed pursuant to Federal Rule of Civil Procedure 12(b)(2), a plaintiff must establish a court's personal jurisdiction over the defendant. Wilson v. Belin, 20 F.3d 644, 648 (5th Cir.1994). Where, as here, the Court rules without conducting an evidentiary hearing, the plaintiff bears the burden of establishing a prima facie case that the Court has jurisdiction over a defendant. Johnston v. Multidata Sys. Int'l Corp., 523 F.3d 602, 609 (5th Cir.2008).
A federal court may exercise personal jurisdiction over a nonresident defendant if (1) statutory authority exists for the exercise of such jurisdiction, and (2) the exercise of jurisdiction complies with federal constitutional standards of due process. See Moncrief Oil Int'l v. OAO Gazprom, 481 F.3d 309, 311 (5th Cir.2007). To the extent that this Court must look to the forum state's long-arm statute to find personal jurisdiction, the Court need only consider the second step of the inquiry as "the limits of the Louisiana long-arm statute are coextensive with constitutional due process limits" Walk Haydel, 517 F.3d at 242-43 (citing A & L Energy, Inc. v. Pegasus Group, 791 So.2d 1266, 1270 (La.2001)).
"As interpreted by the Supreme Court, the Fourteenth Amendment Due Process clause requires satisfaction of a two-prong test in order for a federal court to properly exercise jurisdiction: (1) the nonresident must have minimum contacts with the forum state, and (2) subjecting the nonresident to jurisdiction must be consistent with `traditional notions of fair play and substantial justice.'" Freudensprung v. Offshore Tech. Serv., Inc., 379 F.3d 327, 343 (5th Cir.2004) (citing Asarco, Inc. v. Glenara, Ltd., 912 F.2d 784 (5th Cir. 1990) and Int'l Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945)).
"The `minimum contacts' prong is further subdivided into contacts that give rise to specific jurisdiction and those that give rise to general jurisdiction." Freudensprung, 379 F.3d at 343.
The Fifth Circuit follows a three-step analysis for specific jurisdiction.
Second, the Court considers "whether the plaintiff's cause of action arises out of or results from the defendant's forum-related contacts." Nuovo Pignone, 310 F.3d at 378. The proper focus of the personal jurisdiction analysis is on the "relationship among the defendant, the forum, and the litigation." Stroman Realty, Inc. v. Wercinski, 513 F.3d 476, 487 (5th Cir.2008).
Last, "[i]f the plaintiff successfully satisfies the first two prongs, the burden shifts to the defendant to defeat jurisdiction by showing that its exercise of jurisdiction would be unfair or unreasonable." Seiferth, 472 F.3d at 271 (citing Burger King, 471 U.S. at 482, 105 S.Ct. 2174). In this inquiry the Court analyzes five factors: "(1) the burden on the nonresident defendant, (2) the forum state's interests, (3) the plaintiff's interest in securing relief, (4) the interest of the interstate judicial system in the efficient administration of justice, and (5) the shared interest of the several states in furthering fundamental social policies." Luv N' care, 438 F.3d at 473. "It is rare to say the assertion of jurisdiction is unfair after minimum contacts have been shown." Johnston, 523 F.3d at 615 (citing Wien Air Alaska, Inc. v. Brandt, 195 F.3d 208, 215 (5th Cir.1999)). "The relationship between the defendant and the forum must be such that it is reasonable to require the defendant to defend the particular suit which is brought there." Id. (quoting Guidry v. U.S. Tobacco Co., 188 F.3d 619, 630 (5th Cir.1999)).
Where specific jurisdiction is lacking, a court may nevertheless exercise "general jurisdiction" based on a defendant's contacts with the forum unrelated to the controversy. Helicopteros Nacionales, 104 S.Ct. at 1872. "To exercise general jurisdiction, the court must determine whether the contacts are sufficiently systematic and continuous to support a reasonable exercise of jurisdiction." Holt Oil & Gas Corp. v. Harvey, 801 F.2d 773, 777
Federal courts are courts of limited jurisdiction and possess power over only those cases authorized by the United States Constitution and federal statutes. Coury v. Prot, 85 F.3d 244, 248 (5th Cir. 1996). A lack of subject matter jurisdiction may be raised at any time during the pendency of the case by any party or by the court. See Kontrick v. Ryan, 540 U.S. 443, 456, 124 S.Ct. 906, 157 L.Ed.2d 867 (2004) ("A litigant generally may raise a court's lack of subject-matter jurisdiction at any time in the same civil action, even initially at the highest appellate instance."); McDonal v. Abbott Labs., 408 F.3d 177, 182 n. 5 (5th Cir.2005) ("[A]ny federal court may raise subject matter jurisdiction sua sponte.").
A motion to dismiss for lack of subject matter jurisdiction should be granted "only if it appears certain that the plaintiff cannot prove any set of facts in support of his claim that would entitle plaintiff to relief." Ramming v. United States, 281 F.3d 158, 161 (5th Cir.2001). To assess whether subject matter jurisdiction exists, this Court may look to the complaint and the undisputed facts in the record. See id. When analyzing the complaint, this Court will take the allegations in the complaint as true. Saraw P'ship v. United States, 67 F.3d 567, 569 (5th Cir. 1995). Because the burden of proof on a motion to dismiss for lack of subject matter jurisdiction is on the party asserting jurisdiction, plaintiff "constantly bears the burden of proof that jurisdiction does in fact exist." Ramming, 281 F.3d at 161 (citing Menchaca v. Chrysler Credit Corp., 613 F.2d 507, 511 (5th Cir.1980)).
The Fujian respondents argue that the claims against the Fujian Group and Mawei should be dismissed for lack of personal jurisdiction. Although the New York Convention provides that federal district courts have original jurisdiction over actions to compel or confirm arbitration awards, "it does not confer personal jurisdiction when it would not otherwise exist." Base Metal Trading Ltd. v. OJSC "Novokuznetsky Aluminum Factory", 283 F.3d 208, 212-13 (4th Cir.2002). See also Glencore Grain Rotterdam B.V. v. Shivnath Rai Harnarain Co., 284 F.3d 1114, 1120-23 (9th Cir.2002); Frontera Res. Azer. Corp. v. State Oil Co. of Azer. Republic, 582 F.3d 393, 397-98 (2d Cir.2009). As previously explained, personal jurisdiction may only be exercised over the Fujian respondents if: (1) statutory authority exists for the exercise of such jurisdiction, and (2) the exercise of jurisdiction complies with federal constitutional standards of due process. See Johnston v. Multidata Systems Intern. Corp., 523 F.3d 602, 609 (5th Cir.2008); see also GSS Group
The parties do not contest the fact that statutory authority exists for exercising jurisdiction over the Fujian Group. Federal Rule of Civil Procedure 4(k) provides:
Personal jurisdiction over the Fujian Group is authorized in this case by a federal statute: the Foreign Sovereign Immunities Act ("FSIA"). The FSIA authorizes the exercise of personal jurisdiction over a "foreign state," as to "any claim for relief in personam with respect to which the foreign state is not entitled to immunity...." 28 U.S.C. § 1330. The term "foreign state" is defined as follows:
28 U.S.C. § 1603.
The Fujian Group falls within the definition of a "foreign state" as an "agency or instrumentality of a foreign state." See 28 U.S.C. § 1603(b). First, it is a separate legal person, corporate or otherwise. See 28 U.S.C. § 1603(b)(1). Second, as a state-owned entity, all of its shares or other ownership interest are owned directly by the People's Republic of China. See 28 U.S.C. § 1603(b)(2). Third, the Fujian Group is neither a citizen of a State of the United States, nor created under the laws of any third country. See 28 U.S.C. § 1603(b)(3). As the FSIA waives immunity with respect to actions brought to confirm arbitral awards, 28 U.S.C. § 1605(a)(6), and the parties do not dispute that the Fujian Group was properly served with process, statutory authority for exercising personal jurisdiction over that entity has been established pursuant to the FSIA. 28 U.S.C. § 1330(b); Tex. Trading & Milling Corp. v. Fed. Republic of Nigeria, 647 F.2d 300, 308 (2d Cir.1981) (explaining that under the FSIA, "subject matter jurisdiction plus service of process equals personal jurisdiction") overruled on other grounds by Frontera, 582 F.3d at 398-400.
However, the FSIA does not provide a statutory basis for exercising personal jurisdiction over Mawei because that entity does not fall within the definition of an "agency or instrumentality of a foreign state." Although China owns the Fujian Group, which in turn owns a majority interest Mawei, "only direct ownership of a majority of shares by the foreign state satisfies the statutory requirement." Dole Food Co. v. Patrickson, 538 U.S. 468, 474,
The Fujian respondents assert that this Court cannot exercise jurisdiction over the Fujian Group and Mawei consistent with the constitutional requirements of due process. Guan Junbin, the vice general manager of Mawei, and Chen XiuXiang, the vice director of the Fujian Group's legal department, attest that neither entity has purchased or supplied products in the United States, possessed any property or bank accounts in the United States, maintained a phone number or mailing address in the United States, participated in legal proceedings in the United States, or conducted any transaction in the United States forming the basis for the underlying contract dispute.
FIC argues that this Court may nonetheless exercise jurisdiction over the Fujian respondents because they are not "persons" entitled to constitutional due process. The Due Process Clause of the Fifth Amendment provides that "[n]o person shall be ... deprived of life, liberty, or property, without due process of law." U.S. Const. Amend. V (emphasis added). Given that a "State of the Union" is not a "person" as that term is used in the Due Process Clause, See South Carolina v. Katzenbach, 383 U.S. 301, 323-24, 86 S.Ct. 803, 15 L.Ed.2d 769 (1966), the D.C. Circuit Court of Appeals in Price v. Socialist People's Libyan Arab Jamahiriya, 294 F.3d 82, 96 (D.C.Cir.2002) held that "it would make no sense to view foreign states as `persons' under the Due Process Clause."
FIC relies on this line of cases for its argument that the Fujian Group and Mawei are not entitled to due process because they are "controlled" by China. Assuming that foreign states are not "persons" entitled to due process under the constitution as FIC proposes, see Republic of Argentina v. Weltover, Inc., 504 U.S. 607, 619, 112 S.Ct. 2160, 119 L.Ed.2d 394 (1992) (assuming without deciding that a foreign state is a person for purposes of the Due Process Clause but citing its decision in Katzenbach), this Court agrees with the reasoning of the D.C. Circuit and the Second Circuit that disregarding the separate juridical status of the Fujian Group and Mawei for the purposes of the Fifth Amendment would necessarily require a careful application of the Supreme Court's teachings in First National City Bank v. Banco Para El Comercio Exterior de Cuba, 462 U.S. 611, 103 S.Ct. 2591, 77 L.Ed.2d 46 (1983) ("Bancec"). See TMR Energy, 411 F.3d at 301; Frontera, 582 F.3d at 400 ("Although Banco asked when a state instrumentality can be treated like its state for `the attribution of liability,' we think, as the D.C. Circuit did in TMR Energy, that Bancec's analytic framework is also applicable when the question is whether the instrumentality should have due process rights to which the state is not entitled.") (citation omitted); Walter Fuller, 965 F.2d at 1382 ("The broader principles upon which Bancec was based ... are undoubtedly relevant whenever a plaintiff seeks to disregard a foreign government instrumentality.").
In Bancec, the Supreme Court established the principle that instrumentalities of foreign governments are presumed to retain their separate juridical status. Bancec, 462 U.S. at 623-34, 103 S.Ct. 2591. That presumption may be overcome when "a corporate entity is so extensively controlled by its owner that a relationship of principal and agent is created" or "when to do so would work fraud or injustice." Id. at 629, 103 S.Ct. 2591.
The Court in Bancec was careful to recognize the importance of respecting the separate status of government instrumentalities. The Court noted the features of a "typical government instrumentality" as one that is
The Court warned that "freely ignoring the separate status" of such instrumentalities,
In this case, the Chinese government's level of control over the Fujian respondents will determine FIC's ability to distinguish the Fujian Group and Mawei from the typical government instrumentality described in Bancec. If the presumption cannot be overcome that the Fujian Group and Mawei are juridical entities separate and distinct from the PRC, "the notion that the minimum contacts test must be satisfied before a court can exercise personal jurisdiction over a foreign nonresident defendant ... is enshrined in law." GSS Group Ltd. v. Nat'l Port Auth., 774 F.Supp.2d 134, 139 (D.D.C.2011).
FIC submitted the declarations of Wang Darong
Mr. Lin agrees with Mr. Wang that the Fujian Group is a state-owned entity that operates and manages government assets.
Based on the fact that the Fujian Group owns a majority interest in Mawei, Mr. Wang and Mr. Lin conclude that Mawei is also effectively controlled by the Chinese government.
Accepting these facts as true, and construing all disputed facts in FIC's favor, this Court disagrees with FIC that the allegations in its petition along with the declarations of Mr. Wang and Mr. Lin establish a prima facie case that this Court has jurisdiction over the Fujian respondents. The declarations of Mr. Wang and Mr. Lin establish only that the Fujian Group is 100% owned by the PRC and that the SASAC appoints the board of directors and senior management personnel, and otherwise exercises the rights of a shareholder. Although this certainly gives the Chinese government a significant amount of supervisory control over the entities, majority shareholding and the ability to appoint the board of directors cannot, without more, overcome the presumption of separateness. Hester, 879 F.2d at 181; see also NML Capital, Ltd. v. The Republic of Argentina, No. 09-7013, 2011 WL 524433 (S.D.N.Y. Feb. 15, 2011). The fact that some directors or officers may have also served as government officials does not show that those officials were acting to serve the interests of the sovereign in controlling the day-to-day operations of the entities. Foremost-McKesson, Inc. v. Islamic Republic of Iran, 905 F.2d 438, 448 (D.C.Cir.1990). The declarations of Mr. Wang and Mr. Lin provide even less assistance in the highly fact-intensive control analysis as to Mawei, which they conclude is controlled by the government merely by virtue of the Fujian Group's ownership interest and its role in the restructuring of Mawei.
Lin Yuanmin,
The uncontroverted facts in this case stand in contrast to those in cases where courts have disregarded a government instrumentality's separate juridical status. In TMR Energy, for example, the D.C. Circuit applied the reasoning in Bancec when finding that the State Property Fund of Ukraine (SPF) was not a "person" entitled to due process protection. 411 F.3d at 301-02. The Court explained that the first provision of the regulations creating the SPF, which were approved by the Supreme Rada (parliament), stated that "[t]he [SPF] is a body of the State which implements national policies in the area of privatization." Id. The second provision stated that "[i]n the course of its activities, the [SPF] shall be subordinated and accountable to the Supreme Rada.... The activities of the [SPF] shall be governed by the Constitution and legislative acts of Ukraine, the Cabinet of Ministers of Ukraine and these Regulations." Id. The Court further noted that the SPF's chairman was "appointed and discharged by the President of Ukraine subject to the consent of the Supreme Rada," and that the members of the board of directors had to be "approved by the Presidium of the Supreme Rada." Id. Finally, the SPF's expenses were paid from the budget of the State of Ukraine. Id. The Court concluded that the State of Ukraine exercised such control over the SPF that it was "barely distinguishable from an executive department of the government." Id. The uncontroverted facts in this case fail to show that China exercised such plenary control over the operations of the Fujian Group and Mawei or that those entities otherwise amount to anything more than the "typical government instrumentality" described in Bancec.
This Court similarly rejects FIC's argument that the equitable principles applied by the Supreme Court in Bancec require that this Court disregard the separate juridical status of the Fujian respondents in order to avoid fraud and injustice. The dispute in Bancec arose when the Banco Para El Comercio Exterior de Cuba ("Bancec"), a financial institution established by the Cuban government, sought to collect on a letter of credit extended to First National Bank ("Citibank"). 462 U.S. at 613, 103 S.Ct. 2591. The Cuban government seized and nationalized Citibank's assets just days after the Cuban bank gave notice of its intent to collect under the letter of credit. Id. at 614-15, 103 S.Ct. 2591. While it recognized that Bancec had been established as an autonomous institution with full juridical capacity of its own, the Supreme Court held that Citibank was entitled to set-off the value of the assets seized by the Cuban government from the amounts owed to Bancec under the letter of credit. Id. at 632-33, 103 S.Ct. 2591. The Court reasoned that giving separate effect to Bancec's separate juridical status under the circumstances
Finally, the Court notes that the principles set forth in Bancec strongly counsel against dispensing with the presumption of separateness in this case. Permitting FIC to avoid the minimum contacts test on this record would set a highly undesirable precedent for the exercise of personal jurisdiction over any Chinese state-owned entity regardless of its contacts with the United States. Without more evidence of government involvement in the day-to-day operation and management of such entities, "freely ignoring the separate status" of Chinese state-owned entities in this manner would unjustifiably frustrate a sovereign nation's attempt to structure its activities "in a manner deemed necessary to promote economic development and efficient administration." Bancec, 462 U.S. at 626, 103 S.Ct. 2591. Accordingly, the Court finds that FIC cannot avoid having to show that the Fujian respondents maintained sufficient contacts with the forum to justify the exercise of personal jurisdiction over the Fujian Group and Mawei.
The foregoing analysis leads to the conclusion that this Court also lacks subject matter jurisdiction to enforce the arbitral award against China under the FSIA.
FIC's ability to enforce the arbitral award against China — which was not a party to the arbitration — depends upon its argument that this Court should disregard the separate juridical status of the Fujian Group and Mawei. "Although Bancec's description of the basis for disregarding the separate juridical status of foreign agencies occurred in a discussion of substantive liability, its principles have been applied to FSIA jurisdictional issues." Arriba Ltd., 962 F.2d at 533-34; Foremost-McKesson, Inc., 905 F.2d at 446; Walter Fuller Aircraft Sales, Inc. v. Republic of Phil., 965 F.2d 1375, 1381-83 (5th Cir.1992); Hester, 879 F.2d at 176. "[W]here, as here, jurisdiction depends on an allegation that the particular defendant was an agent of the sovereign, the plaintiff bears the burden of proving this relationship." Arriba Ltd., 962 F.2d at 533-34. This Court has already found that FIC failed to overcome the presumption established in Bancec that the Fujian respondents should retain their status as judicial entities separate and apart from the PRC. As China was not otherwise a party to the arbitration proceedings, the arbitration exception to foreign sovereign immunity does not apply. Accordingly, this Court lacks subject matter jurisdiction over the claims against China.
Despite FIC's argument that this Court should not dismiss its claims against China without allowing for jurisdictional discovery as to China's relationship with the Fujian respondents,
The cases recognized by the Fifth Circuit as warranting jurisdictional discovery involved "allegations of specific facts that, if proved, sustained a nexus between particularized [non-immune] activity and the claims asserted by the plaintiff." Id. (emphasis in original) (citing Gould, Inc. v. Pechiney Ugine Kuhlmann, 853 F.2d 445, 453 (6th Cir.1988) (authorizing discovery to verify whether or not a theft of trade secrets had been accomplished through negotiations in the United States with plaintiff's former employer); Gilson v. Republic of Ir., 682 F.2d 1022 (D.C.Cir.1982) (authorizing discovery to verify whether or not the Republic of Ireland and companies owned by the it had enticed the plaintiff to work in Ireland in order to steal his patent rights); Filus v. Lot Polish Airlines, 907 F.2d 1328, 1332-33 (2d Cir.1990) (authorizing discovery to determine whether or not a Soviet entity negligently overhauled a Polish aircraft); Foremost-McKesson, 905 F.2d at 446-49 (remanding for further fact-finding to verify the "complaint allegations which, although conclusory, would amount to the degree of control necessary to attribute the actions of the co-defendants to the Government of Iran.")). Jurisdictional discovery is not warranted where a plaintiff fails to allege facts which, if true, would show that a particular defendant was not entitled immunity. Kelly, 213 F.3d at 849-51; Arriba, 962 F.2d at 534 ("[B]ecause Arriba's allegations do not satisfy Bancec, permitting discovery will not cure the FSIA jurisdictional discovery.").
In this case, the generalized allegations that the Chinese government exercised control over the Fujian respondents do not provide facts which, if true, would satisfy Bancec. FIC has not alleged facts establishing a nexus between particularized government activities and the management of the Fujian respondents sufficient to establish the requisite level of control. While the evidence submitted in connection with this motion does elaborate on the general ownership and corporate structure of the entities, it fails to bridge the gap by showing that government officials were implementing government policy by managing the daily affairs of the Fujian respondents, much less in connection with any particular transactions or series of events. Accordingly, the Court does not find that permitting jurisdictional discovery under these circumstances would "cure the FSIA jurisdictional deficiency." See Arriba, 962 F.2d at 537.
For the foregoing reasons,
Id. at 67.
R. Doc. No. 34-20, pp. 13-14. Article 11 of the Articles of Association for the Fujian Group states that the SASAC "shall perform the duties of the capital subscriber and carry out supervision and management of the Company's assets." R. Doc. No. 34-7, p. 12. Article 12 specifically enumerates the supervisory duties of the capital subscriber. Id. at pp. 12-13.
R. Doc. No. 34-7, p. 11 (emphasis added).
Having dismissed the claims against the Fujian respondents, this Court's jurisdiction over the remaining claims rests solely on the presence of a foreign state. Accordingly, this Court must now independently determine whether it has subject matter jurisdiction to enforce the award against China. See Verlinden, 461 U.S. at 488-89, 103 S.Ct. 1962 ("[E]ven if the foreign state does not enter an appearance to assert an immunity defense, a District Court still must determine that immunity is unavailable under the [FSIA]").
