Judge Kimba Wood Dismisses Defendant from Alien Tort Statute Class Action for Lack of Personal Jurisdiction
Today's featured opinion has a somewhat tortured procedural history, but its ultimate holding -- that U.S. courts lacked personal jurisdiction over a foreign Alien Tort Statute defendant -- provides some encouragement for defendants who become mired in ATS litigation in the U.S. See Kiobel v. Royal Dutch Petroleum Co., 02 Civ. 7618 (KMW) (HBP), Slip op. (S.D.N.Y. June 21, 2010) (Law360 subscription required).
The dispute in Kiobel and some related litigation centered around allegations that certain oil companies cooperated with agents of the Nigerian government to use violence to suppress protests of oil exploration and development. The district court previously had granted a motion to dismiss brought by a Nigeria company, finding that America lacked personal jurisdiction over the company. Plaintiffs in a related suit appealed an identical decision, and the Second Circuit reversed, ordering the district court to allow discovery into the facts surrounding the jurisdictional issues. After having done so in this case, the court once again considered the defendant's motion to dismiss. Judge Wood held that plaintiffs failed to assert jurisdictional facts sufficient to establish "continuous and systematic general business contacts" with the United States, which is required for the assertion of general jurisdiction. See Slip op. at 2.
The Shell Petroleum Development Company of Nigeria ("SPDC") is a Nigerian corporation with its headquarters in Nigeria. It has no office, place of business, address or phone in the U.S., and it is not licensed to business here. Plaintiffs offered three reasons why SPDC should be subject to U.S. jurisdiction.
First, they claimed that SPDC's oil was shipped to the United States. Judge Wood, applying Federal Rule of Civil Procedure 4(k) and the requirements of due process, held that this factor did not weigh in favor of jurisdiction. To establish sufficient minimum contacts, plaintiffs must plead "continuous and systematic general business contacts" with the U.S. Plaintiffs did not. SPDC sold its oil FOB Nigeria to another company. The ownership and risk of loss thus passed in Nigeria. SPDC did not control who receives the oil, although the parties assumed for pricing purposes that roughly 60% went to U.S. companies. Still, without more, "[s]ales of a foreign manufacturer's product in the United States by third parties are generally insufficient to establish jurisdiction over the foreign manufacturer." Slip op. at 17 (citing cases). The court concluded:
It is clear that customers located in the United States buy a substantial amount of the oil produced by SPDC and that SPDC made business decisions with respect to their contractual arrangements and operations in Nigeria based, in part, on its expectations concerning market conditions in the United States. However, these facts do not suffice to confer general jurisdiction over SPDC, and plaintiffs cite no law to suggest otherwise.
Slip op. at 19.
Second, plaintiffs claimed that jurisdiction over SPDC was proper because the company would "cross-post" employees with other Shell companies in the United States to receive training. Judge Wood distinguished this sort of educational travel -- which was designed to improve the employees' performance in Nigeria -- with travel designed to generate business in the United States. SPDC's employees ceased to be SPDC employees during their posting, and they were not in the U.S. to generate business for SPDC. Thus, the court concluded that these contacts were not the sort of continuous and systematic business contacts that give rise to general jurisdiction. Slip op. at 21.
Third, plaintiffs claimed that because SPDC used a Shell employee recruiting and placement subsidiary to recruit new employees from the United States for SPDC in Nigeria, jurisdiction should lie. The court rejected this argument, noting that the U.S. sub was not SPDC's agent: it could not bind SPDC, it performed work for all Shell companies worldwide, and there was at least a three-year stretch where SPDC recruited no employees from the United States whatsoever. These were not the type of continuous and systematic contacts that could support personal jurisdiction.
Accordingly, the court held that the exercise of general jurisdiction over SPDC would not be consistent with due process, and thus it granted SPDC's motion to dismiss. Although the court's ultimate conclusion is encouraging, it is troubling that it came in a case that has been going on for 8 years, with multiple rounds of discovery. Sometimes justice can be very expensive indeed.
