Hercules Ascendant? A New Fifth Circuit Personal Jurisdiction Decision, and a Gasp of Breath from a Seemingly Dead Letter

by Baker Donelson
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The Fifth Circuit’s recent decision in Sangha v. Navig8 Shipmanagement Private Limited,  No. 17-20093, — F.3d —-, 2018 WL 706518  (Feb 5, 2009) has continued the recent jurisprudential renaissance of personal jurisdiction decisions in a maritime ruling that has implications for jurisdictional disputes in all substantive areas. 

And perhaps equally importantly (certainly just as interesting, as previously tracked on this blog) the Sangha opinion may give fresh life to the much-debated, yet-to-be-resolved but by all recent appearances dead letter doctrine of removal of general maritime law (GML) claims under the revised provisions of 28 U.S.C. 1441 (as amended in 2014), notwithstanding the saving-to-suitors clause of 28 U.S.C. §1333, under the analysis originally set forth by the Southern District of Texas in the Hercules decision (and subsequently extended, rejected (frequently), and differentiated by various courts along the way).

Sangha involved claims by Captain Sangha against his former employer Navig8, who had fired him as master of an anchor handling vessel after he was involved in a collision on the vessel MISS CLAUDIA in the Gulf of Mexico.  Capt. Sangha then went to work for Marine Consulting on the M/V SONGA PEARL (an oil tanker), a vessel used to perform vessel-to-vessel bunker oil transfers.  At some point, the SONGA PEARL was scheduled to provide bunkers to the MISS CLAUDIA, and Navig8 emailed Marine Consulting to request that Capt. Sangha not be involved with the operation (due to ongoing insurance issues/investigation of his earlier collision).  Ultimately, after various ongoing email traffic between Marine Consulting and Navig8, Marine Consulting fired Capt. Sangha and removed him from the SONGA PEARL in the Port of Houston.  Capt. Sangha in turn sued Navig8 in Texas state court for various claims relating to tortious interference with his employment contract.

Navig8 removed the case to federal court under the concept of GML removal pursuant to amended §1441 and the Hercules analysis.  By way of brief background and context, since its inception in 2013 after the effective date of amended §1441,  the Hercules concept of GML removal has been extremely controversial, much debated, and deeply divisive among both courts and commentators:

This issue has sharply divided the district courts within the Fifth Circuit and courts outside of this Circuit. Courts in the Eastern and Western Districts of Louisiana and in the Southern and Eastern Districts of Texas have held that the 2011 amendments did not change the Fifth Circuit’s longstanding rule that maritime claims are not removable absent a basis of jurisdiction outside of admiralty.  However, [one court] in the Middle District of Louisiana and other courts in the same Texas district in which [Hercules] was decided have followed [Hercules], holding that the 2011 amendment makes these cases removable.

Collins v. Great Lakes Dredge & Dock Co. LLC, 2016 WL 8710030, at *2 (W.D. La. June 17, 2016) (citations omitted).  As a practical matter, the Hercules removal doctrine was effectively a dead letter in the Eastern and Western Districts of Louisiana, as well as in the Southern and Eastern Districts of Texas.  See, e.g., Darville v. Tidewater Marine Serv., Inc., 2016 WL 1402837, at *8 (E.D. La. Apr. 11, 2016) (“[T]he majority position held by every other section of this Court [is] that general maritime law claims are not removable.”).  That said, some courts even in those  districts were still allowing GML removal under Hercules as recently as the fall of 2017.  See Costanza v. Accutrans, Inc., 2017 WL 4785004, at *5 (E.D. La. Oct. 24, 2017) “Under 28 U.S.C. §1441, a defendant may remove a case based on general maritime law, even in the absence of an independent grant of jurisdiction.”).  Critically, however, the Fifth Circuit has yet to definitively address the propriety vel non of GML removals under amended §1441/Hercules, perhaps in part because it is an issue evading review (given that remand orders are non-appealable, and that denials of remand are interlocutory and thus cannot be appealed until a case is appealed after a final judgment).  The closest thing to any commentary by the Fifth Circuit on this issue actually came in a pre-Hercules decision (Barker v. Hercules Offshore, Inc., 713 F.3d 208 (5th Cir. 2013)), where the court stated in dicta that the amended version of §1441 was merely a “clarification” rather than an amendment.  This, however, obviously did not give pause to the Hercules court, nor to any of the subsequent courts that have allowed GML removals.

The Sangha Court’s Commentary on GML Removal

With this background in mind, Capt. Sangha – likely expecting that the majority rule rejecting Hercules-based removals would prevail – moved to remand under the saving-to-suitors clause and the majority jurisprudence.  In turn, Navig8 (in addition to re-urging the propriety of its removal) took a different and independent tack by filing a motion to dismiss for lack of general or specific personal jurisdiction of the Texas courts.  The district court gave a wide berth to the fraught issue of whether GML claims are removable – and thus whether it even had subject matter jurisdiction in the first place; and instead dismissed the claims against Navig8 on the non-merits basis of lack of personal jurisdiction in Texas.

On Capt. Sangha’s appeal, the Fifth Circuit first tackled the question of whether the district court should have first determined its own subject matter jurisdiction – i.e. whether Navig8’s GML removal was proper – before addressing the non-merits lack-of-personal-jurisdiction basis for dismissal:

[A]lthough federal courts normally must resolve questions of subject-matter jurisdiction before reaching other threshold issues, this rule is subject to the qualification that courts facing multiple grounds for dismissal should consider the complexity of subject-matter jurisdiction issues raised by the case, as well as concerns of federalism, and of judicial economy and restraint in determining whether to dismiss claims due to a lack of personal jurisdiction before considering challenges to its subject-matter jurisdiction.

2018 WL706518 at *2.

And as a result, the court was faced (at least preliminarily) with addressing the “thorny question” of GML removal under Hercules.  Somewhat surprisingly, despite the groundswell of opinions rejecting removal under Hercules, the Fifth Circuit in Sangha seems to have breathed life back into the doctrine:

The district court did not state that Cpt. Sangha’s motion to remand presented particularly thorny questions. However, despite Cpt. Sangha’s claims to the contrary, the question of subject-matter jurisdiction presented in this case—whether the saving-to-suitors clause of the federal maritime statute prohibits removal of general maritime claims absent an independent basis for federal jurisdiction in light of Congress’s December 2011 amendment to the federal removal statute—is not clear. The vast majority of district courts considering this question have maintained that such lawsuits are not removable. However, because there is no binding precedent from this circuit, see Riverside Constr. Co., Inc. v. Entergy Miss., Inc., 626 F. App’x 443, 447 (5th Cir. 2015) (noting that “[t]he Fifth Circuit has not yet spoken directly on this issue”), there remains a consequential number of district courts that have held to the contrary. This disagreement, lopsided as it might be, highlights the conceptual difficulty of and uncertainty surrounding the issue. Accordingly, we hold that the district court did not abuse its discretion in resolving the issue of personal jurisdiction before establishing whether subject-matter jurisdiction existed.

Id.  Thus, the Sangha panel did not deal the deathblow to the Hercules removal doctrine, although it could have effectively done so, even in its dicta regarding the district court’s discretionary non-merits dismissal in lieu of a subject matter jurisdictional analysis.

The Sangha Court’s Personal Jurisdiction Ruling

With this initial issue resolved upholding the district court’s discretionary decision to avoid the “thorny” subject matter issue in favor of the more straightforward personal jurisdiction question, the court went on to affirm dismissal of the claims against Navig8 because there was no general or specific personal jurisdiction over the company in Texas.  Rather, the only jurisdictional contacts linking Navig8 to Texas were the very emails regarding Capt. Sangha that Navig8 exchanged with Marine Consulting, which the Fifth Circuit held was not enough:

It is clear that Navig8 is not subject to general jurisdiction in Texas. It is undisputed that Navig8 is not incorporated in Texas, has a foreign principal place of business, has no officers or shareholders in Texas, does not pay taxes in Texas, and does not have an agent for service of process in Texas . . . Cpt. Sangha’s allegations that Navig8 “conducted business routinely” and does “substantial business” in Texas [i.e. fulfills bunker orders for vessels originating out of/calling at Texas ports], without more, merely amount to “vague and overgeneralized assertions” of contacts “that give no indication as to the extent, duration or frequency” of Navig8’s contacts.

***

Nor does Cpt. Sangha allege sufficient contacts to show Navig8 is subject to specific jurisdiction in Texas. … The contacts Cpt. Sangha identifies to support specific jurisdiction—email communications from two Navig8 representatives located outside the country to Cpt. Sangha’s then-supervisor in Alabama, an employment contract between Cpt. Sangha and Marine Consultants allegedly confected in Houston, that the email communications were targeted at a contract formed in Texas, and that the emails concerned work that was to be performed in Texas—are legally insufficient to support a finding of specific jurisdiction. Navig8’s contacts with the state have to be purposeful “and not merely fortuitous.”  Even though Navig8’s email communications happened to affect Cpt. Sangha while he was at the Port of Houston, this single effect is not enough to confer specific jurisdiction over Navig8.

Id. at *4-5.  Moreover, the court rejected Capt. Sangha’s reliance on the so-called Calder effects-test (allowing for personal jurisdiction when out-of-state actions cause in-state effects) because those effects were a result of Capt. Sangha’s  own links to the Texas forum, not Navig8’s:

The Supreme Court recently clarified the form that forum contacts must take in intentional tort cases for the effects to be applicable, reiterating that mere injury to a forum resident is not a sufficient connection to the forum. Regardless of where a plaintiff lives or works, an injury is jurisdictionally relevant only insofar as it shows that the defendant has formed a contact with the forum State. The proper question is not whether Cpt. Sangha experienced an injury or effect in a particular location, but whether Navig8’s conduct connects it to the forum in a meaningful way. Cpt. Sangha’s presence in the Gulf of Mexico/Port of Houston is largely a consequence of his relationship with the forum, and not of any actions Navig8 took to establish contacts with the forum.

Id. at *5 (citing Walden v. Fiore, 134 S.Ct. 1115, 1122 (2014) previously blogged about here).  Even though Navig8’s business involved oil/fuel transfers in the Gulf of Mexico offshore from Houston, and even though the specific transfer leading to Capt. Sangha’s termination was offshore of Houston, the court nonetheless held that “the allegation that the ‘effects’ of Navig8’s emails were felt in Houston are nothing more than fortuitous.”  Id. at n. 3.

Emails not enough; Hercules Ascendant?

The actual holding in Sangha continues the trend (begun in the Supreme Court’s Daimler and Walden decisions) of requiring strict, specific evidence to support both general and personal jurisdiction against non-forum defendants.  And as an important practical practice guidepost, Sangha would seem to confirm that fortuitous email traffic ancillary to business operations outside of a forum and not originating from or directed to the forum will not be enough to support specific jurisdiction for torts arising out of those operations.

And perhaps equally important, the Sangha court’s commentary (although dicta) regarding “the conceptual difficulty of and uncertainty surrounding the issue” of GML removal under amended §1441 would seem to be a breath of life to what appeared to be the dead letter of Hercules-based removals.  If nothing else, the Sangha court’s comments (at least in the minds of this particular three-judge panel) do not signal an out-of-hand rejection of the Hercules doctrine, and thus indicate that room remains for good faith GML removals.  As such, the Sangha dicta may result in a second wave of removals under Hercules, at least until (if ever) the Fifth Circuit definitively faces the Lernian Hydra of GML removal under the amended text of §1441.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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