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First Department Affirms Dismissal of Action Involving a Wire Transfer Between Non-U.S. Parties on Forum Non Conveniens Grounds

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  • Posted on: Feb 26 2020

Forum non conveniens is a common law doctrine in which a court may dismiss an action because adjudication of the matter is more appropriate in another forum.

In New York, the doctrine can be found in CPLR § 327(a). Under this section, a court may stay or dismiss an action if it finds “that in the interest of substantial justice the action should be heard in another forum.” CPLR § 327(a). The party seeking dismissal bears the burden of establishing that New York is not the proper forum for the action.

In considering a forum non conveniens motion, New York courts consider a number of factors, including the burden on New York courts, the potential hardship to the defendant, the unavailability of an alternative forum, whether both parties are nonresidents, whether the transaction out of which the cause of action arose occurred primarily in a foreign jurisdiction, the location of potential witnesses and documents, and the potential applicability of foreign law. No one factor is controlling.

In New York, the seminal case discussing the doctrine is Islamic Republic of Iran v. Pahlavi, 62 N.Y.2d 474 (1984), cert. denied, 469 U.S. 1108 (1985). In Pahlavi, the plaintiffs alleged that the Shah of Iran and his wife misappropriated, embezzled or converted $35 billion dollars in Iranian funds. Id. at 477. The plaintiff alleged that New York was the proper forum for the action because the funds were deposited into New York banks and there was no alternate forum to litigate the claims. The defendants moved to dismiss the complaint alleging that it raised nonjusticiable political questions, that the court lacked personal jurisdiction due to defective service of process on them and that the complaint should be dismissed on forum non conveniens grounds. Special Term granted defendants’ motion based on forum non conveniens, concluding that the parties had no connection with New York other than a claim that the Shah had deposited funds in New York banks, a claim which it found insufficient under the circumstances to justify the court in retaining jurisdiction. A divided Appellate Division, First Department, affirmed. In dissent, Justice Fein argued that jurisdiction should be assumed because no other forum was available to plaintiff. The Court of Appeals affirmed the dismissal, holding that the plaintiff failed to establish “a substantial nexus between this State and plaintiff’s cause of the action.” Id. at 483.

In so holding, the Court set forth a non-exhaustive list of factors (discussed above) that the lower courts could consider when confronted with a motion to dismiss on forum non conveniens grounds. Id. at 479. In applying the factors, the Court said that the ruling should rest on justice, fairness, and convenience. Id. Notably, however, the availability of an alternative forum, though a pertinent factor, is not a precondition to dismissal. Id. at 481.

The foregoing principles were at issue in Al Rushaid Parker Drilling Ltd. v. Byrne Modular Buildings L.L.C., 2020 N.Y. Slip Op. 01277 (1st Dept. Feb. 25, 2020) (here), decided by the Appellate Division, First Department on February 25, 2020. 

Rushaid involved an alleged bribe in connection with a construction project. Al Rushaid Parker Drilling Ltd. (“ARPD”) entered into a contract with the Saudi national oil company to carry out a construction project in Saudi Arabia. One of ARPD’s vendors for the project was the predecessor in interest of defendant Byrne Modular Buildings L.L.C. (“Byrne”), a United Arab Emirates (“UAE”) company.

Plaintiffs alleged that Byrne bribed certain of ARPD’s employees to act against ARPD’s interests in connection with the project. Plaintiffs further alleged that Byrne’s bribery of the faithless employees was facilitated by defendant Pictet & Cie (“Pictet”), a Swiss private bank. Pictet allegedly opened an account for a British Virgin Islands (“BVI”) entity created by the faithless employees, and Byrne wired funds from its UAE bank account to the BVI entity’s account with Pictet in Switzerland. These funds were transmitted through a correspondent bank in New York.

The appeal concerned two actions commenced by ARPD against Byrne (the “Byrne Action”) and against Pictet and nine individuals affiliated with it (the “Pictet Action”). In an earlier appeal in the Pictet Action, the New York Court of Appeals determined that the transfer of the funds constituting the bribes at issue through a New York correspondent bank subjected Pictet and its affiliated individual co-defendants to personal jurisdiction in New York for purposes of that action See Rushaid v. Pictet & Cie, 28 N.Y.3d 316 (2016). In doing so, the Court of Appeals declined to address Pictet’s alternative argument that the action should be dismissed pursuant to the forum non conveniens doctrine even if personal jurisdiction existed. The Court observed that, upon remittitur, “Supreme Court should address the matter [of forum non conveniens] in the first instance.” Id. at 332.

In each of the subject actions, the motion court granted the motions to dismiss on forum non conveniens grounds (CPLR § 327(a)) on the condition that the defendant or defendants stipulate to accept service of process and waive any statute of limitations defense if sued in the alternative forum (i.e., Switzerland in the Pictet Action, and the UAE in the Byrne Action). 

The First Department held that the motion court properly found: (1) none of the parties to either action is a New York citizen or resident or (if an entity) is formed under New York law or has its principal place of business in New York; (2) the alleged conduct at issue primarily occurred in the UAE, Saudi Arabia, and Switzerland, with the only New York connection being the presence of the bribery funds at a nonparty New York correspondent bank while en route from the UAE to Switzerland; (3) the bulk of the relevant documentary evidence is located in the UAE, Saudi Arabia, Switzerland and BVI, and most witnesses are located outside New York and beyond New York’s subpoena power; (4) there is a likelihood that foreign substantive law will govern; (5) there are alternative fora available (Switzerland and the UAE) with greater connection to the subject matter; and (6) in the Pictet Action, Switzerland has an interest in regulating the conduct of a bank operating within its borders. Slip Op. at *2. “In view of these considerations,” concluded the Court, “it cannot be said that Supreme Court improvidently exercised its broad discretion in granting the motions for forum non conveniens dismissal, still less that its discretion was abused.” Id.

According, the Court refused “to disturb the motion court’s discretionary determination that New York is not a convenient forum in cases where the sole connection to New York was the passage of wired funds through a correspondent bank in the state.” Id. (citations omitted).

Takeaway

The forum non conveniens doctrine permits a court to dismiss an action when “in the interest of substantial justice the action should be heard in another forum.” CPLR § 327(a). It is based upon “justice, fairness and convenience” (Pahlavi, 62 N.Y.2d at 479), in which the party challenging the forum bears the burden of demonstrating that the action would be better adjudicated elsewhere. It is a flexible doctrine that is based upon the facts and circumstances of each case. Only “when it plainly appears that New York is an inconvenient forum and that another is available which will best serve the ends of justice and the convenience of the parties” should a case be dismissed on forum non conveniens grounds. Silver v. Great Am. Ins. Co., 29 N.Y.2d 356, 361 (1972). As shown in Rushaid, the defendants were able to satisfy the burden reflected in the principles discussed above.

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