Our recent blog post examined the a District Court’s treatment of a motion to dismiss international litigation for lack of personal jurisdiction and forum non conveniens in the context of contracts with a choice of forum clause. Here we examine the District Court’s treatment of a motion to dismiss for lack of personal and subject matter jurisdiction in the absence of a choice of forum clause.
Glencore AG (Glencore) v. Bharat Aluminum Co. Ltd., et al (Balco), 10 Civ. 5251 (S.D.N.Y. 1 Nov. 2010)(SAS), involved an attempt by the Plaintiff to confirm a non-U.S. arbitral award and to enter judgment on the confirmed award. Glencore’s application sought to apply the arbitral award not merely against Balco but against two alleged alter egos. The District Court rejected the attempt and dismissed the case. Specifically, the District Court held that:
- Unless the Defendant controverts the Plaintiff’s allegations of jurisdiction, the facts alleged by the Plaintiff are credited, with doubts resolved in favor of Plaintiff.
- In the absence of a forum selection clause, application of the “doing business” standard (necessary to lay personal jurisdiction) is a “stringent one” and must be met before a Defendant can be hailed into court on causes of action for acts not done in New York.
- To find alter ego jurisdiction, the subsidiary must be acting as an agent or as a “mere department” and that establishing personal jurisdiction over an alleged alter ego “requires application of a less stringent standard than that necessary to pierce the corporate veil for purposes of liability”.
- The alleged alter ego’s special appointment of CT Corp. as agent for the receipt of service of process for claims relating to its listed securities; entering into an independent with a New York choice of law clause; employing a New York-based law firm in another matter; commencing a lawsuit in New York; and purchasing securities on the New York Stock Exchange were not sufficient, individually or collectively, to confer personal jurisdiction over the alleged alter ego in New York. That is, even though the District Court determined that a prima facie case of alter ego had been alleged, there was no jurisdiction over the alter ego for want of a forum clause or other minimum contacts.
- Finally, and importantly: “An action to confirm a foreign arbitral award is not the proper occasion to assert an alter ego theory for liability” (quoting Orion Shipping & Trading Co. v. Eastern States Pet. Corp of Panama, 312 F.3d 299, 301 (2d Cir. 1963)). The District Court explained that an action to confirm an arbitral award was a focused proceeding that should not be expanded to include the factual development and proof necessary to litigate and decide an alter ego case. The District Court did not address the Ninth Circuit’s decision in Ahcom, Ltd v. Hendrik Smeding, et al., No. 09-16020 (9th Cir. 21 Oct. 2010), discussed in our earlier post on the subject confirming arbitral awards, where that Court of Appeals appeared to permit what the District Court here, following Second Circuit precedent from 1963, held could not be done. Nor did the Court address Aurum Asset Managers, LLC v. Banco Do Estado Do Rio Grande Do Sul (Banrisul), 08-102 (E.D. Pa. 13 Oct. 2010), discussed in our posting on post-arbitral proceedings against nonsignatories, where another District Court appeared to examine the issues of nonsignatory liability on a motion to confirm. Nor did the District Court examine the implications of its holding to the underlying international arbitration process, since an arbitral claimant will have to think seriously about joining the alter ego in the arbitral proceeding initially (for a related example of where the claimant commenced the arbitration against nonsignatories to a contract containing an arbitration clause, see our post discussing the effect on international litigation of a mid-litigation arbitral ruling over a nonsignatory’s potential liability).