The World in US Courts: Orrick's Quarterly Review of Decisions Applying US Law to Global Business and Cross-Border Activities

Orrick, Herrington & Sutcliffe LLP

Fall 2015

The Global law firm Orrick, Herrington & Sutcliffe LLP takes great pride in announcing the Fall 2015 edition of The World in US Courts: Orrick’s Quarterly Review of Decisions Applying US Law To Global Business and Cross-Border Activities. This issue contains our summaries of 25 new US federal court decisions, in areas of the law including the Foreign Sovereign Immunities Act, Arbitration, Securities Law, White Collar Criminal Law, and Personal Jurisdiction.

​​​Please take a moment to review the members of our Editorial Board, who are drawn from Orrick’s 23 offices in North America, Europe, and Asia.

Editorial Board

Decisions Discussed in This Issue: Fall 2015

Please click the links below to see an expanded summary of the decision described. Copies of any case discussed in this issue are available upon request.

Please note that Orrick may be representing parties in the cases discussed below.  Nothing in the informal summaries contained in this publication should be taken as commenting on the merits of cases, or as a binding construction of court opinions that are discussed.

Alien Tort Statute (ATS)/Foreign Sovereign Immunity Act (FSIA)

District Court Allows ATS Claim To Proceed Where ExxonMobil Alleged To Have "Aided and Abetted" Violations of International Law in Indonesia through Actions Taken in the US

Doe v. ExxonMobil Corp., US District Court for the District of Columbia, July 6, 2015

Plaintiffs alleged that Indonesian soldiers serving as security guards at an ExxonMobil natural gas facility in Indonesia violated their human rights in 2000 and 2001, and in 2001 sued ExxonMobil under the ATS. In a decision reported in the Fall 2014 issue of The World in US Courts, the US District Court in Washington, DC dismissed the claims because they were based on an impermissible extraterritorial application of the ATS. But, because that requirement was only set forth by the US Supreme Court after the complaint was filed, the Court allowed the plaintiffs to amend their complaint to try to meet the new requirements. The present decision considers the plaintiffs' request to amend their complaint, and ExxonMobil's corresponding motion to dismiss.

After first confirming that corporations may be liable under the ATS, the Court considered whether the complaint satisfied the requirement that "violations of customary international law" be alleged. The Court assumed that conduct must have been committed by representatives of a government in order to be violations of international law, and found the security guards' status as active members of the Indonesian military satisfied the requirement for pleading purposes. The Court then concluded that two of the alleged violations of law—"arbitrary detention" and "cruel, inhuman, and degrading treatment"—had been recognized by other courts as violations of customary international law, rejecting that status for a third alleged violation, "forced disappearance." The Court further concluded that allegations of "torture and extrajudicial killing" were cognizable under the ATS, finding that the later-enacted Torture Victims Protection Act had not become the exclusive vehicle for suits based on such claims, and that extrajudicial killings could be the subject of an ATS claim even absent an allegation of systematic mass killing. Finally, the Court concluded that a defendant could be found liable merely for "aiding and abetting" the conduct of a non-US sovereign.

The Court then addressed the extraterritorial scope of the ATS, noting the lack of standards for determining whether the allegations of a complaint "touch and concern" the US sufficiently to displace the presumption against extraterritoriality. The Court adopted a test under which an ATS violation requires "substantial and specific domestic conduct relevant to" the violation, subject to the consideration of other factors that might support the assertion of jurisdiction. The Court stated that the principal basis for ATS jurisdiction is conduct alleged to have occurred in the US that falls within the scope of the statute. Where a less direct connection is alleged, the Court noted that it would consider additional factors, including whether the defendant is a US citizen or corporation and whether US connections "implicate important national interests."

Because the plaintiffs alleged an "aiding and abetting" ATS violation, the Court first concluded that a plaintiff additionally had to allege two components, typically found in violations of criminal law, that go by the Latin terms "actus reus" ("practical assistance, encouragement, or moral support which has a substantial effect on the perpetration of the crime") and "mens rea" (knowledge that one's actions are connected to the commission of a crime).

As relevant here, the Court denied ExxonMobil's motion to dismiss. It found that the plaintiffs satisfied the mens rea requirement by alleging in their amended complaint that ExxonMobil officials had "received briefings" on (i) abuses committed by Exxon security personnel in Indonesia, (ii) prior instances in which Indonesian military personnel had allegedly committed human rights abuses, and (iii) the likelihood that providing resources to the personnel would increase the likelihood of such violations. The Court found that the actus reus requirement was satisfied by the allegations of ExxonMobil's decisions in the US to supply the security forces and put them in contact with the local population, including the plaintiffs. As the Court concluded, "The allegations set forth decisions to facilitate the underlying offenses and to provide the means by which those offenses were carried out."  For these reasons, the Court denied ExxonMobil's motion to dismiss to case.

District Court Finds Egyptian Holding Company of EgyptAir Airlines To Have Engaged in "Commercial Activity" in the US, But Dismisses Claim on FSIA Grounds Because the Claim Was Not "Based Upon" That Activity

Abdel-Karim v. EgyptAir Airlines, US District Court for the Southern District of New York, August 5, 2015

Plaintiff Abdel-Karim flew to Cairo on EgyptAir Airlines and, upon arrival, was arrested and detained for having "weapon-like items" in his checked luggage. He sued the airline and its holding company, EHC, both owned by the Arab Republic of Egypt, under numerous theories, claiming their errors were responsible for his arrest. EHC moved to dismiss the case on FSIA grounds.

EHC moved for summary judgment on grounds that the claims at issue were barred by the FSIA, and that personal jurisdiction could not otherwise be obtained over them.

The District Court in New York first considered whether the case could proceed under the "commercial activity" exception to the FSIA, which allows claims against sovereigns that are "based upon" acts undertaken in connection with "a regular course of commercial conduct or a particular commercial transaction or act." Because EgyptAir and EHC were independent entities, the applicability of the exception had to be considered with respect to the activities of EHC specifically. In doing so, the Court found "commercial activity," principally through EHC's (1) contracting with United Airlines for services, (2) ownership of its subsidiary, EgyptAir, which was licensed to fly in the US, and (3) secondment of employees to EgyptAir. But because the claims under review were not "based upon" the "commercial activity" of EHC specifically, the Court found the FSIA exception inapplicable. Without subject matter or personal jurisdiction over EHC, the Court granted summary judgment in favor of EHC.

District Court Rejects Argument that FSIA and Related Doctrines Preclude "Registration" of ICSID Arbitration Award against Romania by Federal Court

Micula v. Government of Romania, US District Court for the Southern District of New York, August 5, 2015

Plaintiffs obtained an ICSID arbitration award against the Government of Romania stemming from investments they made in Romania that declined in value after the Government eliminated certain financial subsidies. Romania opposed the awards, arguing that satisfying them through payments would constitute subsidies that are illegal under European law. The European Commission agreed, and precluded Romania from making the payment. Proceedings to vacate the award are pending. Separately, the plaintiffs sought to use a special ex parte procedure to enforce the award in the US District Court in New York, and to this end obtained a court order converting the arbitration award into a judgment. The present proceeding reflects Romania's attempt to declare the order as violative of the FSIA and various related doctrines, and therefore void.

Romania first argued that the judgment was void because the FSIA requires that actions to recognize ICSID awards be plenary proceedings in which the affected government is a participant. Citing strong, but not uniform, precedent, the Court concluded that the New York ex parte procedure was lawful. In so doing, it observed that the only issue presented was the prior court order "recognizing" the ICSID award, not whether that judgment should be enforced against Romania through an order requiring payment or the attachment of assets. Indeed, the Court recognized that Romania retained extensive rights under the FSIA for such time as enforcement may be sought. Additionally, the Court noted that Romania's principal objection was to the arbitration award itself, and Romania's appeal of that award through European channels remains ongoing.

The Court also rejected various arguments made by the European Commission, which intervened to support Romania. First, although it treated the EC as a "sovereign," the Court rejected the argument that "international comity" required that it defer to the EC's proceedings in Europe. In so doing, it found no significant potential for conflict by again contrasting the narrow nature of the US proceeding to "recognize" the award with the substantive review of the merits that is being undertaken in Europe. Second, the Court rejected applicability of the "act of state doctrine," under which US courts deem actions taken by sovereigns within their own borders to be valid. The Court found the argument had not properly been raised, and in any event was irrelevant because the question whether an ICSID awards should be recognized did not involve an act of state. Finally, the Court rejected applicability of the "foreign compulsion doctrine," a defense by a party arguing that liability was based on actions a sovereign required that it perform. Even assuming the availability of the defense, the Court concluded that Romania's "voluntary submission to the ICSID process" was a waiver of any rights it possessed.

[Editor's note: The Micula case is also discussed in the Arbitration section of this report.]

District Court Grants Common Law Immunity to Saudi Government Official Where FSIA Unavailable

In re Terrorist Attacks on September 11, 2001, US District Court for the Southern District of New York, August 14, 2015

Dr. Abdul Rahman Al-Swailem, a defendant in the vast multi-district litigation arising from the September 11 terrorist attacks, sought dismissal from the case on grounds that he enjoyed common-law sovereign immunity because the acts he is alleged to have committed were taken as president of two Saudi Arabian entities that are "instrumentalities" of the Saudi Arabian Government, and that are described by the Saudi government as "humanitarian relief organizations."

As a preliminary matter, the Court confirmed that the FSIA was not available because it does not apply to protect individuals. Passage of that statute, however, did not eliminate sovereign immunity that previously existed under common-law. As a procedural matter, the Court noted that Al-Swailem could have sought a determination of immunity by the US State Department and had not done so, but it ruled that option to be discretionary. Absent such a US Government determination, the Court stated it would decide for itself whether "the ground of immunity is one which it is the established policy of the [State department] to recognize." Here, the Court determined that the Government would grant "conduct-based immunity" for acts by officials of instrumentalities of non-US governments in their official capacities. It concluded that test would be satisfied because the Saudi ambassador to the US made a filing with the Court requesting that immunity be granted, and stating that Al-Swailem was a Saudi government official whose alleged conduct was undertaken "as an official of the Saudi government." Because the Saudi representations were sufficient under established State Department policy for granting common-law immunity, the Court dismissed Al-Swailem from the case. In so doing it observed that the US Court of Appeals for Second Circuit, in which the Court sits, previously rejected the argument advanced by the plaintiffs that common-law immunity is unavailable to individuals alleged to have violated fundamental international norms of conduct.

District Court Finds No Personal Jurisdiction over Romanian Gun Manufacturer Whose Activities in the US Did Not Target Forum State Arbitration

Williams v. Romarm S.A., United States District Court for the District of Maryland, July 20, 2015

Parents of individuals killed or injured by assault rifles sued the manufacturer of the weapons, Romarm, a company owned by the Government of Romania. Romarm moved to dismiss on a number of grounds, including that the FSIA barred the claims against it.

The plaintiffs conceded that Romarm was a "foreign state" under the FSIA because the statute extended to corporations wholly-owned by non-US governments. Ordinarily, personal jurisdiction over a non-US sovereign follows from a finding that a claim is not barred by the FSIA. An exception exists where the defendant is an instrumentality of a sovereign yet independent of it, in which case a plaintiff must separately establish the minimum contacts with the US forum to satisfy the requirements of the Due Process Clause of the US Constitution. Based on prior litigation between the parties, the US District Court for the District of Maryland concluded that such independence between Romarm and Romania existed and thus the exception applied.

The Court only addressed whether Romarm had sufficient contacts with Maryland to support specific personal jurisdiction. It observed that such a showing required that Romarm have "purposefully availed" itself of the privilege of conducting activities within Maryland, and that its "conduct and connection with the forum State" must make a suit arising out of those contacts "reasonably foreseeable." In the context of a case involving injury form a product sold by the defendant, the Court noted that jurisdiction cannot merely be based on the fact that the manufacturer anticipated that its product would be sold in the forum, but observed that the US Supreme Court had yet to decide definitively what more must be shown. The Court adopted the rule specified by the US Court of Appeals with jurisdiction over the Maryland federal court, requiring that the defendant have "created a substantial connection to the forum state by action purposefully directed toward the forum state." Asserting jurisdiction must not, additionally, offend "traditional notions of fair play and substantial justice."

In the case at bar, the Court noted that the plaintiffs did not allege that Romarm targeted sales to Maryland, or even that Romarm's US distributor had done so. Indeed, there was not even evidence that the assault weapon used in the attacks had even been bought or sold in Maryland, merely that it had been transported from Maryland to the District of Columbia, where the injuries had occurred. Finding no "regular course of sales" into the State, and no conduct targeting the State, the Court concluded that the Due Process Clause precluded the assertion of jurisdiction over Romarm.


District Court Rejects Argument that FSIA and Related Doctrines Preclude "Registration" of ICSID Arbitration Award against Romania by Federal Court Securities Law

Micula v. Government of Romania, US District Court for the Southern District of New York, August 5, 2015

Plaintiffs obtained an ICSID arbitration award against the Government of Romania stemming from investments they made in Romania that declined in value after the Government eliminated certain financial subsidies. Romania opposed the awards, arguing that satisfying them through payments would constitute subsidies that are illegal under European law. The European Commission agreed, and precluded Romania from making the payment. Proceedings to vacate the award are pending. Separately, the plaintiffs sought to use a special ex parte procedure to enforce the award in the US District Court in New York, and to this end obtained a court order converting the arbitration award into a judgment. The present proceeding reflects Romania's attempt to declare the order as violative of the FSIA and various related doctrines, and therefore void.

Romania first argued that the judgment was void because the FSIA requires that actions to recognize ICSID awards be plenary proceedings in which the affected government is a participant. Citing strong, but not uniform, precedent, the Court concluded that the New York ex parte procedure was lawful. In so doing, it observed that the only issue presented was the prior court order "recognizing" the ICSID award, not whether that judgment should be enforced against Romania through an order requiring payment or the attachment of assets. Indeed, the Court recognized that Romania retained extensive rights under the FSIA for such time as enforcement may be sought. Additionally, the Court noted that Romania's principal objection was to the arbitration award itself, and Romania's appeal of that award through European channels remains ongoing.

The Court also rejected various arguments made by the European Commission, which intervened to support Romania. First, although it treated the EC as a "sovereign," the Court rejected the argument that "international comity" required that it defer to the EC's proceedings in Europe. In so doing, it found no significant potential for conflict by again contrasting the narrow nature of the US proceeding to "recognize" the award with the substantive review of the merits that is being undertaken in Europe. Second, the Court rejected applicability of the "act of state doctrine," under which US courts deem actions taken by sovereigns within their own borders to be valid. The Court found the argument had not properly been raised, and in any event was irrelevant because the question whether an ICSID awards should be recognized did not involve an act of state. Finally, the Court rejected applicability of the "foreign compulsion doctrine," a defense by a party arguing that liability was based on actions a sovereign required that it perform. Even assuming the availability of the defense, the Court concluded that Romania's "voluntary submission to the ICSID process" was a waiver of any rights it possessed.

[Editor's note: The Micula case is also discussed in the Alien Tort Statute/Foreign Sovereign Immunity Act section of this report.]

Securities Law

Court of Appeals Refuses To Apply Geographic Limitations of General Securities Fraud Statute to Investment Advisors Act White Collar Criminal Law

Lay v. United States, US Court of Appeals for the Sixth Circuit, August 17, 2015

Mark Lay was convicted in 2008 of securities fraud for violating the Investment Advisors Act of 1940, among other laws, in connection with investments in a Bermuda hedge fund on behalf of an agency of the State of Ohio. Two years, later, in the Morrison case, the US Supreme Court set out a new and more limited rule for determining whether US federal statutes should be given extraterritorial effect, imposing a presumption against extraterritorial application where a statute does not clearly provide for such a scope of operation. Morrison dealt with Section 10(b) of the Securities Exchange Act of 1934—the general antifraud provision for transactions in securities. In that context, the Supreme Court held that Section 10(b) could only support claims by non-US plaintiffs where the security was listed on an American stock exchange or the purchase or sale took place in the United States. Here, Lay sought to have that rule applied to the Investment Advisors Act, with the result that his service to a Bermudan investment fund would be outside the reach of the law.

The Court of Appeals disagreed. It first concluded that Morrison's focus on US transactions should not be applied to the Investment Advisors Act because the focus of the latter statute is the advisor's conduct, not on subsequent transactions. Focusing on that relationship, it then found sufficient US connections so as to avoid any problems of extraterritorial application of the law. Specifically, the Court of Appeals noted that Lay owed a fiduciary duty to the plaintiff agency of the state of Ohio, that Lay's adviser agreement related to a US-based fund, and that all of the activities that were the subject of the prosecution were undertaken pursuant to a single investment relationship between Law and the agency both the domestic fund and the Bermuda fund.

White Collar Criminal Law

District Court Applies "Fugitive Disentitlement Doctrine" To Bar Constitutional Due Process Challenge Brought by Non-US Criminal Defendant Who Had Never Been Served Personal Jurisdiction/Forum Non Conveniens

US v. Darin, United States District Court for the Southern District of New York, August 3, 2015

Defendant Darin was charged with Wire Fraud for his alleged role in rigging the LIBOR benchmark. He moved to dismiss the indictment against him on grounds that he had insufficient contacts with the US to sustain a criminal charge consistent with the Due Process protections of the Fifth Amendment to the US Constitution, and that the prosecution in any event constituted an impermissibly extraterritorial application of the Wire Fraud statute.

The District Court in New York agreed with the parties that Due Process protection would apply as a general matter, but the Court considered whether the "fugitive disentitlement doctrine" would preclude Darin from taking advantage of it. The doctrine is equitable in nature and discretionary, and when applied serves to prevent defendants who "evade the authority of the justice system at any stage" from exercising rights they would otherwise possess as criminal defendants.

The Court first determined that Darin was a "fugitive," even though he never fled the US, or indeed was ever in the US. Rather, the Court concluded that a defendant can be a "constructive fugitive" merely by refusing to turn himself in to US authorities after learning that charges against him have been filed.

Next, the Court considered the four factors that determine whether to apply the "fugitive disentitlement doctrine": "(1) whether a decision on the merits would be enforceable; (2) whether the defendant is flouting the judicial process; (3) whether a decision on the merits would encourage similar flights from justice; and (4) whether the defendant's evasion prejudices the Government." The Court found all four factors pointed to application of the doctrine. In Darin's absence, no prosecution could be enforced against him, also demonstrating prejudice to the Government; he is "flouting" the judicial process by asking for relief even though he remains "at a safe distance" at no risk; and allowing his effort to succeed would encourage other individuals located outside the US not to come to the US to submit to the jurisdiction of the criminal justice system.

Although not necessary for decision, the Court observed that the alleged crime of wire fraud focuses on the location of the "wires," not the location of the alleged scheme. Because Darin was charged with using US means of telecommunication, the Court concluded that only a domestic violation had been charged.

Personal Jurisdiction/Forum Non Conveniens

District Court Finds Personal Jurisdiction over Indian Citizen Who Registered 580 Domain Names in India, Directing His Business Toward University of Phoenix Students in the United States

Apollo Educ. Grp., Inc. v. Somani, US District Court for the Northern District of California, August 13, 2015

Plaintiffs Apollo Education Group and the University of Phoenix ("UOP") brought trademark infringement, cybersquatting, and unlawful competition claims against Indian Defendant Vivek Somani. UOP claimed Somani improperly used their marks on his websites to sell University of Phoenix course materials to students in the United States. Somani filed a motion to dismiss for lack of personal jurisdiction based on the fact that he resides in India and has never traveled to the United States. The Court rejected his argument and denied his motion to dismiss, reasoning that Somani's sole assertion that he is beyond the jurisdiction of US courts simply because he lives in India is "plainly insufficient to defeat specific jurisdiction in this forum under Federal Rule of Civil Procedure 4(k)(2)."

That federal rule is designed to permit the assertion of jurisdiction where a defendant's contacts with the US as a whole are substantial enough to satisfy the Due Process Clause of the US Constitution, even though its contacts with any one State are not. The Court required UOP to prove three factors: that the claims against Somani arose under federal law; that there was no state court that had general jurisdiction over Somani; and that any personal jurisdiction exercised in a federal court would comport with the Due Process Clause. The Court easily determined the first prong was satisfied—UOP's claims arose under the federal "Lanham" and "Anticybersquatting Consumer Protection" Acts. The second prong was satisfied based on Somani's own undisputed assertion that he was "not subject to general personal jurisdiction in any state of the United States."  Thus, the bulk of the discussion centered on the third prong, related to the constitutional requirement.

The Court stated that, in the context of the present case, Due Process requires that personal jurisdiction may only be asserted against a defendant who has purposefully directed his activities to the forum state by committing an intentional act aimed at the state that causes harm "the defendant knows is likely to be suffered in that forum state." UOP's claims against Somani alleged he intentionally created websites with the purpose of selling various materials to University of Phoenix students in the United States and thus could reasonably assume harm could occur within the United States. Additionally, his activities were related to and directly led to UOP's claims. For these reasons, the Court concluded that UOP had successfully made a prima facie case that the Court had specific personal jurisdiction over Somani, despite the fact that he was not physically present in the United States.

Because a prima facie case for jurisdiction had been established, the burden then shifted to Somani to convince the Court that exercising jurisdiction over him would be unreasonable and thus would violate the Due Process Clause. But Somani failed to file a reply brief to UOP's opposition to his motion to dismiss—presenting the Court with no evidence that it would be unreasonable for him to defend himself in an American court. The Court took that failure as a concession that no legitimate Due Process problem existed.

District Court Dismisses Employment Discrimination Claim Against Foreign Company Owned by US Corporation For Lack of Personal Jurisdiction

Carroll v. Vinnell Arabia, LLC, US District Court for the Eastern District of Virginia, September 22, 2015

Daniel B. Carroll sued Vinnell Arabia, LLC for employment discrimination. Carroll claimed he was interviewed by Vinnell employees in Saudi Arabia for an accounting job there, but was denied the job because of his race and religion. Vinnell moved to dismiss the case for lack of personal jurisdiction.

The District Court began by examining whether Vinnell was subject to general personal jurisdiction. The Court noted that foreign defendants must exhibit "continuous and systematic" contact with the forum in order for general personal jurisdiction to be proper, significant enough that they would be considered to be "at home" in the forum. Here, Vinnell was domiciled in Saudi Arabia, its principal place of business was in Riyadh, and it was not registered to do business in Virginia. Plaintiff argued that jurisdiction was appropriate because Vinnell was 51%-owned by Northrop Gunman, a US company. The Court disagreed, citing precedent to the effect that the existence of a US parent was not alone sufficient to support a finding of general personal jurisdiction.

The Court next considered specific personal jurisdiction, examining whether (1) Vinnell purposefully availed itself of the privilege of doing business in Virginia, (2) Carroll's claims arose out Vinnell's actions directed toward Virginia, and (3) exercising personal jurisdiction would be reasonable so as to satisfy the requirements of the Due Process Clause of the US Constitution. As to the first step of the analysis, the Court concluded that Vinnell did not purposefully avail itself of the privilege of doing business in Virginia. The Court noted that Vinnell's only contact with Virginia was its initiation of business and a long-term contract with Northrop Gunman. By contrast, all of Carroll's interactions with Vinnell occurred in Saudi Arabia and concerned services to be rendered in Saudi Arabia. Thus, the Court concluded that Carroll could not satisfy the first step of the analysis and, as a consequence, it could not exercise specific personal jurisdiction over Vinnell.

The Court additionally explained that Carroll's claims did not arise out of Vinell's conduct directed toward Virginia—they arose out of actions that occurred in Saudi Arabia—and that exercising personal jurisdiction would not be constitutionally reasonable.

District Court Finds No Personal Jurisdiction over Airline that Sold Tickets in New York Without Further Contact with the Forum

Cordice v. LIAT Airlines, United States District Court for the Eastern District of New York, September 22, 2015

Dorothy Cordice sued LIAT Airlines after an employee spilled hot water on her lap during a flight from Trinidad and Tobago to St. Vincent. LIAT moved for summary judgment, arguing that the New York District Court lacked personal jurisdiction over it.

The Court began by examining whether general personal jurisdiction could be exercised over LIAT. Because LIAT was incorporated under the laws of Antigua and Barbuda and had its principal place of business in Antigua, general personal jurisdiction over LIAT would  be available only under extraordinary circumstances—if the airline's contacts with New York were otherwise "so continuous and systematic . . . that it [was] essentially at home" in the State. As to that question, Cordice alleged only that she bought her ticket in New York, and the Court held that fact alone was not enough to render LIAT "at home" in New York. The Court therefore concluded it lacked general personal jurisdiction over LIAT.

The Court next analyzed potential grounds for exercising specific personal jurisdiction over LIAT. First, it noted that New York law would support the exercise of specific jurisdiction where a cause of action arises out of the transaction of any business within the State. This requires an "articulable nexus or substantial relationship" between the business transacted and the cause of action. While Plaintiff alleged she purchased her ticket in New York, the Court cited precedent holding that the mere purchase of a ticket does not create a substantial enough connection to alleged violations of law occurring later, on the trip for which the ticket was bought. The Court thus held there was no nexus or substantial connection between the transaction and cause of action.

Next, the Court observed that New York law also supports the exercise of specific personal jurisdiction where a defendant's actions outside New York cause an injury within the State. Although Cordice alleged that her symptoms persisted after she returned to New York, she alleged that she was injured elsewhere, and so this basis for jurisdiction was also unavailable. 

Finally, the Court considered whether personal jurisdiction over LIAT was permitted under federal law. Under this standard, personal jurisdiction may exist over a non-US defendant for claims under federal law if the defendant has sufficient contact with the US as a whole to satisfy the requirements of the Due Process Clause of the US Constitution, even if it lacks sufficient contact with any individual forum State for jurisdiction otherwise to be appropriate. The Court noted that LIAT did have contacts with the US, including bank accounts and flights servicing Puerto Rico and the US Virgin Islands. It concluded, however, that those contacts were insufficient to render LIAT "essentially at home" in the US (which would support general personal jurisdiction) and were not connected in any way with Cordice's claims (which would support specific personal jurisdiction). 

District Court Finds No Personal Jurisdiction over Canadian Company in Nebraska Resident's Suit for Disappointing St. Martin Vacation Rental

Davis v. Villa Services d/b/a Rental Butler, US District Court for the District of Nebraska, July 17, 2015

Nebraska resident Henry Davis filed suit in Nebraska for breach of contract and fraudulent or negligent misrepresentation stemming from an allegedly deficient vacation rental in St. Martin. Davis named three defendants: the web-based vacation rental company, Rental Butler, the property management company in St. Martin, and the individual owner of the vacation rental. Nebraska's long-arm statute extends to the limits of the Due Process Clause of the US Constitution, and the Court dismissed the case upon finding that jurisdiction over each of the three defendants would violate due process.

Rental Butler is a Canadian company that contracted with Davis for the rental in St. Martin. In the rental process, Davis and Rental Butler exchanged 55 e-mails and spoke on the phone five times. But the Court noted that Rental Butler only knew Davis was a Nebraska resident because of the signature line on his e-mail. There was no evidence that Rental Butler conducted any marketing in Nebraska. In determining whether specific personal jurisdiction existed over a website, the Court applied the widely-accepted "Zippo" test that establishes a "sliding scale" for the assertion of jurisdiction, asking whether a website is interactive, and if so the extent of the interactions relating to the dispute that is the subject of the suit. Here, the Court noted that Rental Butler's website did not allow visitors to make any reservations or otherwise make a transaction; in order to book the property, Davis had to reach out to Rental Butler in Canada and wire his payments there. The Court also emphasized that the alleged breach of the contract, and any harmful effects suffered therefrom, took place in St. Martin, where the vacation property allegedly did not meet the specifications of the contract between Rental Butler and Davis.

Neither the property manager (a French company located in St. Martin) nor the property owner (an Illinois resident) had any contacts with Nebraska. Davis argued that personal jurisdiction could be found over these two defendants based on an agency theory but the Court, having found that Rental Butler was not subject to personal jurisdiction, concluded that no personal jurisdiction could be imputed to the other defendants. 

District Court Dismisses Shareholder Derivative Suit Brought Under Foreign Law under Doctrine of Forum Non Conveniens

Holzman v. Xin, US District Court for the Southern District of New York, September 18, 2015

Plaintiff, a stockholder in SinoTech Energy Limited—a non-US company incorporated in the Cayman Islands—brought a derivative suit against SinoTech's directors and officers. He claimed that various members of SinoTech's executive committee and board breached their fiduciary duties by failing to report that the majority shareholder was enriching himself with corporate assets. Defendants moved to dismiss on forum non conveniens grounds.

The District Court applied a three part test for forum non conveniens, determining (1) the degree of deference owed to the plaintiff's choice of forum, (2) the extent to which an adequate alternative forum existed, and (3) the public and private interests at stake in choosing the Plaintiff's forum over the Cayman Islands, proposed by the Defendants as the more appropriate location for litigation.

The Court began by determining that the Plaintiff's choice of forum was entitled to "relatively little deference." While generally a plaintiff's choice to litigate in his home forum is entitled to great deference, Plaintiff here was a resident of Ohio suing in New York Federal court. The Court further reduced the deference owed to the Plaintiff's choice because he was suing on behalf of a large number of individuals from various jurisdictions.

The Court next decided that the Cayman Islands was an adequate alternate forum, basing its analysis on a two-factor test: whether (1) the defendants are amenable to service there and (2) the alternate forum permits litigation of the subject matter of the dispute. The plaintiff argued that the first factor could not be satisfied because difficulties in service outside the US required as a practical matter that each defendant consent to service there, which would not occur. The Court rejected this argument, noting that while service may be difficult the question is whether it was possible. As to the second factor, the plaintiff did not dispute that the Cayman Islands permits shareholder litigation against corporate officers.

The Court then considered the private and public interest factors used in the third step of the forum non conveniens analysis. The Court used the following five factors to determine the private interests involved: (1) ease of access to evidence, (2) availability of compulsory process, (3) cost for cooperative witnesses to attend trial, (4) enforceability of a judgment, and (5) all other practical matters that might shorten a trial or make it less expensive. Because nearly all the witnesses in the case were located in China, the Court concluded that the private interest was neutral between New York and the Cayman Islands. Plaintiff argued that because the Cayman Islands does not allow lawyers to use contingency fees, he would be burdened by being required to litigate there, but the Court disagreed. Because contingency fees are rare in non-US forums, the Court reasoned that making their availability a deciding factor would foreclose nearly all forum non conveniens dismissals.

Turning to the public interest, the Court considered court congestion, the interests of forums in deciding local disputes, and the interest in issues of foreign law being decided by foreign tribunals. While court congestion was in neither forum's favor, the Court concluded that the last two factors heavily favored the Cayman Islands. The Court noted that the suit was not local to New York because it did not arise out of the Defendant's contacts with New York. Additionally, Plaintiff's claims were brought solely under Cayman Islands law. As a result, the Court observed it had virtually no legal interest in deciding the suit. On the other hand, the Cayman Islands had a significant interest in applying its own law to the SinoTech, which was incorporated in that country.

Finding all three factors in favor of applying forum non conveniens, the Court dismissed the case.

District Court Authorizes Jurisdictional Discovery to Clarify Foreign Corporation's Connection to US

Hume v. Farr's Coach Lines, Ltd., US District Court for the Western District of New York, September 30, 2015

Plaintiff Stephanie Hume sued Daimler Buses of North America, Ltd. ("DBNA, Ltd.") for negligence, breach of warranty, and other causes of action. DBNA Ltd., which is incorporated in Canada and has its principal place of business there, moved to dismiss for lack of personal jurisdiction.

The District Court in New York began by noting that personal jurisdiction is either general or specific. General personal jurisdiction exists when a defendant's affiliations with the forum are so continuous and systematic as to render it essentially "at home" in the state. Specific personal jurisdiction, on the other hand, depends on a connection between the state and an action or occurrence that takes place in the state. Plaintiff alleged both general and specific jurisdiction over DBNA, Ltd.

Analyzing general personal jurisdiction, the Court first considered when a non-US corporation has sufficiently systematic contact with a state as to render it "at home" in the state.  The Court observed that the US Supreme Court's 2014 decision in the Daimler case (unrelated to the present dispute) established that general personal jurisdiction could exist over a corporation that was neither organized under the laws of nor having a principal place of business in a state only in "exceptional cases." Despite this, the Court explained that DBNA Ltd. could still be "at home" in New York under the "alter ego" theory of personal jurisdiction. Under this theory, if a subsidiary of a company is not acting like an independent entity but rather as a "mere department" or "alter ego" of the parent company, and if personal jurisdiction over the parent exists, then personal jurisdiction will be found to exist over the subsidiary as well. The Court reasoned that the alter ego theory could apply in this case, as Plaintiff plausibly alleged facts suggesting that DBNA, Ltd. was a mere department of Daimler Buses North America, Inc. ("DBNA, Inc."), incorporated in New York. Because there were still outstanding questions regarding the connection of DBNA, Ltd. to DBNA, Inc., the Court granted Plaintiff's request for jurisdictional discovery.

The Court also concluded jurisdictional discovery was appropriate to determine if specific personal jurisdiction over DBNA, Ltd. existed. Specific personal jurisdiction may exist over a foreign corporation that transacts business with the forum or commits tortious acts outside the forum causing injury inside the forum, and where the plaintiff's claim arises from that contact. DBNA, Ltd. argued it was a foreign distributor which sold only to Canadian companies, without knowledge that its buses would end up in New York. Plaintiff responded by alleging DBNA, Ltd., part of an American company (DBNA, Inc.) and should have known, based on the identify of its customers, that its buses would be used in New York. The Court concluded that specific personal jurisdiction might exist, based on an agency theory and facts showing that DBNA, Ltd. had reason to believe any tortious activity in Canada would have a direct effect in New York. The Court therefore authorized jurisdictional discovery into DBNA Ltd.'s corporate connections and its transactions with Canadian companies.

District Court Finds No Personal Jurisdiction Over British Manufacturer Having Exclusive Sales Contract With Florida Corporation, But Orders Discovery On Jurisdictional Issue

Ikeda v. Organix Salon Systems, US District Court for the Southern District of New York, July 6, 2015

Ikeda brought a personal injury action against her salon and hairstylist after a hair treatment caused damage to her hair and scalp. The defendants in turn filed a product liability suit against HERB UK, the British manufacturer, of the hair product used on Plaintiff, as well as a Florida corporation called International Hair, with which HERB UK had an exclusive sales contract. HERB UK moved to dismiss the product liability claim for lack of personal jurisdiction.

The District Court first held that HERB UK fell within the scope of the New York statute authorizing jurisdiction over non-NY entities, which applies to parties that "should reasonably expect" their actions to have consequences in the State and that derive "substantial revenue" from trade with New York. The Court concluded that HERB UK's exclusive sales agreement with a single US distributor, though not expressly targeting the New York market, was nevertheless sufficient to show an attempt to serve the New York market, and a reasonable expectation by HERB UK that its acts would have consequences in New York.

The assertion of personal jurisdiction must also comport with the Due Process Clause of the US Constitution, however, and the Court held that HERB UK's dealings with New York did not satisfy the constitutional "minimum contacts" standard. The Court began by noting that HERB UK was organized under the laws of the United Kingdom; was not licensed to do business in New York; has no directors, officers, or employees acting on its behalf within the state; maintained no offices, bank accounts, or property in New York; has no designated agent for service in New York; and has never sold its products nor entered into a contract to perform services in New York. The Court also concluded that a defendant must be seen at least to have "targeted" New York with its products, not merely that it "might have predicted that its goods will reach" the State, to satisfy the Due Process Clause. The Court concluded no such allegations had been made, commenting that the complaint had not even identified the amount of HERB UK products being sold in the State.

Though holding that the parties pursuing the product liability complaint had failed to carry their burden of making a prima facie showing of minimum contacts, the Court denied HERB UK's motion to dismiss, and instead ordered limited jurisdictional discovery to allow more facts to be developed.

District Court Finds No Personal Jurisdiction over Foreign Nationals, Companies, and Trusts Connected to Failed Investment Arrangement Between NY Investment Broker and Deceased French Investor

Jonas v. Estate of Leven, US District Court for the Southern District of New York, July 27, 2015

A New York investment broker, Stanley Jonas, brought suit in federal court in New York against eleven foreign individuals and entities for breach of an alleged oral investment agreement. The case arose out of investing activity by Gustave Leven, an individual associated with Perrier mineral water. Jonas alleges that Leven failed to invest the full USD550 million he had promised Jonas in a 2006 oral agreement. Leven has since died.

Jonas filed suit in 2013, asserting that the foreign individuals and entities are responsible for Leven's breach of contract under alter ego or "hidden principal" theories. Six of the eleven defendants in the action moved to dismiss on the basis that the Court lacked personal jurisdiction over them.

Reviewing the New York specific personal jurisdiction statute, the Court first found that none of the moving defendants transacted business in New York. The meetings to negotiate the investment took place in France and Switzerland, following Jonas's marketing of his investment strategy to Leven in Paris; the defendants who attended the meetings are citizens of France and Switzerland; the money for the investment was located in Switzerland and never flowed to New York. The Court concluded "[t]his factual recitation reveals the astonishing lack of allegations linking plaintiffs' [breach of contract claim] to New York." Instead, the only connection to New York was that it is plaintiff's place of business and the Court found that the occurrence of some communications from Europe to Jonas in New York was an inadequate basis for jurisdiction.

Second, the Court addressed the impact of a lawsuit filed in New York in 2008 related to the failed investment. The suit was filed by Barneli & Cie SA, a Panamanian corporation of which Leven was the disclosed principal, allegedly at Leven's behest. If the defendants in the present case were deemed to have been responsible for the 2008 suit, and if that suit was deemed sufficiently related to the present dispute, the Court suggested that the defendants might be seen to have waived and defense based on personal jurisdiction. But the Court concluded that the acts of Barneli were not attributable to the moving defendants because Barneli did not act as their agent or alter ego in the lawsuit. Critically, the Court noted that none of the four moving individual defendants benefitted from the lawsuit in New York. Although each was an officer or director of Barneli, none is alleged to have been a shareholder or owner. Similarly, the Court found no facts supporting Jonas's contention that the two other moving defendants, an Israeli charitable organization and a Swiss trustee of a trust established by Leven, had any ownership interest in Barneli. Finally, under the applicable Panamanian law, the Court concluded it should not pierce Barneli's corporate veil and find it was the alter ego of the moving defendants. Jonas had not made any factual showing that the moving defendants disregarded corporate formalities or otherwise abused the corporate form to perpetuate a fraud.

Third, the Court rejected Jonas's argument that the moving defendants were subject to personal jurisdiction based on alleged tortious acts causing injury inside the state of New York. Jonas's claims sound in breach of contract, and did not allege facts sufficient to plead the tort of fraud.

Fourth, the Court found that ownership of real property—a residential condominium—by two of the individual defendants did not create personal jurisdiction because Jonas's claims were not linked factually to the property.

Finally, the Court found no basis for jurisdiction as a consequence of Barneli's designation of an attorney for service of process in the 2008 New York action. Most critically, the Court held that the New York law authorizing service of process on such an attorney would have only applied during the 2008 New York action, which had concluded before this case was filed in 2013.

District Court Dismisses RICO Action Involving Non-US Participants and a French Dispute on Forum Non Conveniens Grounds

Lfoundry Rousset SAS v. Atmel Corp, US District Court for the Southern District of New York, July 21, 2015

Plaintiffs are a bankrupt French corporation and one of its former employees, a French national, that formerly operated a French semiconductor business owned by a US corporation and its French parent, both of which are defendants. The complaint alleged violations of the US RICO statute through a scheme by which the defendants sought to close the semiconductor business in a way that improperly avoided expenses associated with French labor law and a collective bargaining agreement. The complaint was purportedly brought as a class action on behalf of displaced French employees. The defendants moved to dismiss on multiple grounds, including that a New York forum was so inconvenient and inappropriate so as to trigger the doctrine of forum non conveniens.

The District Court observed that it had discretion to dismiss a case on forum non conveniens grounds after undertaking a three-part analysis:  (1) the amount of discretion to be accorded the plaintiffs' choice of forum, (2) whether the alternative forum proposed by the defendants is adequate to adjudicate the parties' dispute, and (3) whether a balancing of the private and public interests counsels dismissal.

As to the first factor, the Court concluded that the strong presumption in favor of a plaintiff's choice of forum was weakened principally by the facts that (i) the plaintiffs here (and almost all of the plaintiffs they seek to represent) are not American, (ii) the "core operative facts" occurred in France, and (iii) that a US forum was largely chosen as a product of "forum shopping"—here, a desire to take advantage of the US RICO statute.  

Second, the Court determined that a French court would provide an adequate remedy. In so ruling, it specifically rejected the plaintiffs' contention that French law provided an inadequate alternative because it supported neither class actions nor a RICO-style treble damages remedy.

Finally, the Court concluded that both private and public interests favored dismissal. As for the private interests, the Court noted the inconvenience of witness travel to the US and the fact that certain key parties could not be compelled to travel from Europe to testify. The most prominent public interests were the US interest in having local disputes settled locally and the greater interest that France would have in resolving this dispute. The Court also cited difficulties attendant to applying non-US law.

Finding little basis to keep the case and many reasons not to, the Court dismissed the case on forum non conveniens grounds.

District Court Finds No Personal Jurisdiction over a Saudi Arabian Titanium Dioxide Manufacturer That Has a Maryland-Based Subsidiary

Los Gatos Mercantile, Inc., US District Court for the Northern District of California, August 11, 2015

Cristal Arabia is a privately-held Saudi Arabian corporation with primary operations in Jeddah, Kingdom of Saudi Arabia. In 2007, Cristal acquired Millennium Inorganic Chemicals, Inc., a Maryland-based manufacturer of titanium dioxide. Plaintiffs brought an indirect purchaser class action against Millennium, its parent, and other domestic manufacturers of titanium dioxide, alleging they engaged in a conspiracy to fix the price of titanium dioxide sold in the United States.

The District Court in California explained that personal jurisdiction over Cristal Arabia could be asserted under theories of agency or alter ego only if "the parent and subsidiary are 'not really separate entities,' such that one entity's contacts with the forum state can be fairly attributed to the other" or if the subsidiary's presence "substitutes for the presence of the parent." The Court found that this standard was not satisfied. Plaintiffs relied upon allegations relating to (1) Cristal Arabia's direct and controlling ownership interest in Millennium; (2) Millennium's role as the primary importer and distributor of Cristal Arabia's products; (3) Cristal Arabia's control over Millennium's marketing, purchasing, pricing, management, and/or operating policies; (4) Cristal Arabia's role in approving Millennium's significant business decisions, and (5) the overlapping functions and operations of Cristal Arabia and Millennium. The Court found none of the arguments persuasive, finding the allegations either too vague or consistent with Millennium's retention of its corporate identity. The Court rejected Plaintiffs' argument that Cristal Arabia's control over Millennium's operations was evidenced by Cristal Arabia's meeting with customers and approving pricing decisions, noting that Cristal's president traveling to the United States twice a year and the CEO owning a house in Maine suggested only "the most sporadic participation in customer meetings" and did not evidence the type of control required for a finding of agency or alter ego. Further, the Court noted that Plaintiffs' personal jurisdiction assertion was undermined by the declaration of a Millennium VP, which stated that Millennium maintains its own corporate records and bank accounts, files its own taxes, has its own employees, and owns its own titanium dioxide plants.

The Court also considered whether jurisdiction could independently be based on Cristal Arabia's own contacts with the United States. The Court rejected the possibility of general personal jurisdiction, finding that the possible residence in the US of several Cristal Arabia representatives could not support a finding that Cristal Arabia was "at home" in the US—the standard articulated by the US Supreme Court in the Daimler case.  

Plaintiffs finally argued that Cristal Arabia was subject to the Court's specific personal jurisdiction, a finding that would require Cristal Arabia to have either purposefully directed its activities with the forum state or purposefully availed itself of the privilege of conducting activities in the forum. Plaintiffs alleged that this test was satisfied by Cristal Arabia's allegedly routine approvals of collusive prices set by Millennium. The Court disagreed, explaining that "purposeful direction" requires Cristal Arabia to have committed (1) an intentional act, (2) expressly aimed at the forum state, (3) causing harm that Cristal Arabia knew was likely to be suffered in the forum state. The Court found that Plaintiffs' failure to satisfy the requirement of pleading an intentional act was dispositive, noting that Cristal Arabia's alleged approval of Millenniums' pricing decision, without more, was not evidence of its participation in any price fixing conspiracy.

District Court Finds Personal Jurisdiction over Foreign Executive for Tort He Knew Would Have a Detrimental Effect in US

Marble Bridge Funding Group, Inc. v. Liquid Capital Exchange, Inc., US District Court for the Northern District of California, September 25, 2015

Marble Bridge Funding Group sued Liquid Capital Exchange and two of its executives—Sol Roter (a Canadian citizen) and Bruce Dawson (a US citizen)—claiming that they had misrepresented and fraudulently concealed facts regarding a transaction between Marble Bridge and Liquid Capital Exchange. Each Defendant moved to dismiss the case for lack of personal jurisdiction.

The District Court began by explaining its three-part test for exercising specific personal jurisdiction. First, the foreign defendant must "purposefully direct his activities or consummate some transaction with the forum" or a forum resident. Second, the Plaintiff's claim must "arise[] out of or relate to" the Defendant's activities in the forum. Third, exercising jurisdiction must be reasonable and comport with fair play and substantial justice.

The Court explained that, in tort cases, the first part of the test focuses on where the effects of the defendant's actions were felt in order to determine if the defendant "purposefully directed" its actions toward the forum. This inquiry, in turn, required a consideration of whether the defendant (i) committed an intentional act, (ii) expressly aimed at the forum state, (iii) causing harm that the defendant knew was likely to be suffered in the forum.

Beginning with Liquid Capital Exchange and Dawson, the Court concluded that, while Marble Bridge alleged intentional action by both defendants, it did not explain how the conduct was expressly aimed at anyone in California. The Court cited precedent holding that such claims of "untargeted negligence" cannot support the assertion of personal jurisdiction. Therefore, the Court concluded that it lacked personal jurisdiction over Liquid Capital Exchange and Dawson.

Turning to Roter, the Court found that Marble Bridge had sufficiently alleged that Roter purposefully directed his activities toward California. At the time of the transaction, Marble Bridge had identified itself to Roter by name and address, and Roter contacted Marble Bridge by phone and e-mail. The Court rejected Roter's contention that the contacts were minimal, noting that the quality—not quantity—of contact is the key inquiry. Furthermore, the fact that Roter's contacts were not themselves harmful was irrelevant. Thus, the Court found that Roter had purposefully directed his actions toward Plaintiff.

The Court held that Plaintiff easily satisfied the second step of the personal jurisdiction analysis. Roter knowingly contracted with a California corporation, and but for that agreement Plaintiff would not have suffered the injury alleged.

Finally, the Court determined that exercising personal jurisdiction over Roter would be reasonable and thus constitutional. It noted that the burden had shifted to Roter to make a "compelling case" that exercise of jurisdiction would be unconstitutional, and stated that its analysis would focus on the following factors: (1) the extent of the defendants' purposeful injection into the forum state's affairs; (2) the burden on the defendant of defending in the forum; (3) the extent of the conflict with the sovereignty of the defendant's state; (4) the forum state's interest in adjudicating the dispute; (5) the most efficient judicial resolution of the controversy; (6) the importance of the forum to the plaintiff's interest in convenient and effective relief; and (7) the existence of an alternative forum.

The first factor favored jurisdiction because Roter's actions in contracting with Plaintiff qualified as an injection into California affairs. Regarding the second factor, Roter argued that the inconvenience of traveling between Canada and the US, working in an unfamiliar legal system, weighed in his favor. But the Court found this unpersuasive, noting that technological advances have significantly reduced such inconvenience. Because Roter's alleged actions all occurred in Canada, the Court held that the third factor was in his favor; however, the fourth factor weighed against Roter, in light of California's strong interest in providing a forum to injured residents. The Court held that the fifth factor was neutral because relevant witnesses were evenly distributed between California and elsewhere. The Court afforded the sixth factor, the plaintiff's convenience, little weight even as it noted that Marble Bridge's interest in litigating in California was enhanced due to the presence of ongoing, related litigation in the forum. As to the seventh factor, Marble Bridge agreed alternate fora existed in which the dispute could be heard, but the Court considered this admission irrelevant because Roter had failed to establish that California was an unreasonable forum.

Considering all the factors together, the Court concluded that exercising jurisdiction in California was constitutionally reasonable. Therefore, the Court held that personal jurisdiction over Roter was appropriate, while it lacked personal jurisdiction over the remaining Defendants.

District Court Rejects Claims of Personal Jurisdiction over International Soccer Organization in Class Action in California

Mehr v. Federation Internationale De Football Association, et al., United States District Court for the Northern District of California, July 16, 2015

A group of seven soccer players brought a putative class action against five national and state-based soccer organizations, and the Federation Internationale de Football Association ("FIFA"), a Switzerland-based entity, for their alleged failure to provide adequate concussion management to youth soccer players. In moving to dismiss the complaint, FIFA contended that it was not subject to either general or specific jurisdiction in California.

Plaintiffs initially argued that the Court had general personal jurisdiction over FIFA because of its numerous contacts with California. The Court stated, however, that general jurisdiction could only be asserted if FIFA's contact with California were so substantial that the organization could be found to be "at home" in the State, and that the facts presented showed only commercial or quasi-commercial activities that were no more numerous in California than in any other US state or region in the world. Conversely, FIFA provided undisputed evidence that it had no facilities, offices, agents, employees, or subsidiaries in California, was not registered to do business in California, and had no financial assets or obligations in California. 

In determining whether it could exercise specific jurisdiction over FIFA, the Court considered whether (i) FIFA "purposefully directed" its activities or consummated a transaction with California or a California resident, or "purposefully availed" itself of the privileges of conducting activities in California; (ii) plaintiffs' claim arose out of or related to FIFA's activities in California; and (iii) the Court's exercise of jurisdiction over FIFA would be reasonable. With respect to the first prong, the Court observed that courts in the Ninth Circuit generally apply the "purposeful availment" standard in claims sounding in contract and apply the "purposeful direction" standard in claims sounding in tort.

FIFA contended that the Court should apply the "purposeful direction" standard, and conclude that plaintiffs could not show that the organization purposefully directed its activities to California or a California resident. Plaintiffs, however, claimed that the "purposeful availment" test should be applied, and that they sufficiently alleged that FIFA availed itself of the privilege of conducting activities in California. They specifically argued that FIFA exerted significant influence and regulation over the sport of soccer in the US and California, had various commercial activities in the US and California that reinforced its brand and influence, and received significant sums of money from the US and California.

While the Court agreed with plaintiffs that the "purposeful availment" test was the proper standard (as their claims sounded in tort), it found that plaintiffs made a "weak" showing. It noted that FIFA's regulation of its US and California members and its ability to influence individuals in the US and California did not establish that it had purposefully availed itself of the benefits of conducting activities in California to such an extent that it should have reasonably anticipated being sued into California courts—an alternative test that the US Supreme Court has endorsed. The Court held that FIFA's commercial activities "arguably" supported a finding of purposeful availment, but observed that the plaintiffs' claims neither arose out of nor were related to such commercial arrangements. The Court, therefore, held that it could not exercise specific jurisdiction over FIFA.

District Court Dismisses Defamation Suit Because Subsidiary Not Shown To Be "Alter Ego" of Parent

Payoda, Inc. v. Photon Infotech, Inc. et. al., US District Court for the Northern District of California, July 30, 2015

Payoda, an IT service provider based in India, asserted claims against Photon US in connection with three allegedly false and defamatory letters sent to some of Payoda's customers by a lawyer for both Photon US and its parent, Photon India. Photon US moved to dismiss on the ground that Payoda failed to adequately allege that Photon US was an "alter ego" of Photon India, which if true would mean that the US sub could be sued for actions taken by its parent. The District Court for the Northern District of California dismissed the case, concluding that Payoda's pleadings were insufficient.

The Court explained that the law of the forum state, not federal law, applies in determining whether alter ego liability applies. Under California law, two conditions must be met for the doctrine to apply: there must be (1) a unity of interest and ownership between the corporation and its equitable owner, and (2) an inequitable result if the acts in question are treated as those of the corporation alone. Among the most important factors generally used to assess these requirements are commingling of assets or use of the same offices and employees.

The Court explained that the "unity of interest" prong requires a showing that the parent controls the subsidiary to such a degree as to render it the mere instrumentality of the parent, and that facts had not been alleged showing this to be the case. At least as late as March 2012, Photon US was considered a subsidiary of Photon India, but the parent-subsidiary relationship did not itself suggest that the subsidiary was not independent. Nor was Payoda's allegation that Photon US and Photon India share common leadership and office space, as well as elements of their finances, contact information, employees, and customers, sufficient to establish that there was a unity of interest between them. The Court also explained that having a common website presence does not carry any weight in establishing a unity of interest.

Additionally, Payoda alleged that defendants intentionally sought to confuse and mislead members of the public as to the appropriate entity against which to seek legal or equitable relief.  It argued that this was sufficient under federal law to establish "alter ego" liability on the premise that the two companies had purposefully sought to evade criminal and civil liability. However, the Court stated that the law of the forum state, not federal law, applies. Applying California law, the Court found that the alter ego doctrine does not afford protection when creditors merely have difficulty in enforcing a judgment or collecting a debt. Rather, it applies where some conduct amounting to bad faith makes it inequitable for the corporate owner to hide behind the corporate form. The Court found that standard not to have been satisfied.

District Court Rejects Personal Jurisdiction Over French Company In Connection With Disputed Settlement Agreement

Paysys International, Inc. v. Atos SE, Wordline SA, Atos IT Services, and Sema SA, US District Court for the Southern District of New York, July 24, 2015

In 1988, Paysys, a software company, licensed one of its products to a company called Sema through a license agreement which, according to Paysys, strictly limited Sema's ability to assign its rights. In 2001, Paysys and Sema entered into a settlement agreement that included a clause designating the Southern District of New York as the proper venue, and New York law as the governing law, for adjudicating future disputes. Subsequently (and simplifying the parties involved), Sema's rights were ultimately transferred to Atos, a French company, through a series of transactions.

Paysys brought suit in in the Southern District of New York claiming that the licensing agreement precluded the assignments that were later made, and that Atos was liable for breach of contract, copyright infringement, misappropriation of trade secrets, conversion, and unfair competition. Atos moved to dismiss for lack of personal jurisdiction and for failure to state a claim. It argued (1) that the Court had no general jurisdiction over the non-US corporation, and (2) that Paysys was precluded from asserting the forum selection clause in the settlement agreement as a basis for specific personal jurisdiction.

With regard to specific jurisdiction—which focuses on a defendant's contacts with a forum—Paysys argued that the French defendant was bound by the forum designation clause of the settlement agreement Paysys had signed with Sema. Paysys simultaneously argued in the alternative, however, that Atos defendant never became a party to the license agreement since Sema was prohibited from assigning its rights.

The Court refused to apply the forum selection clause, holding that the assignment of rights from Sema to Atos was invalid. It thus found no basis to assert specific personal jurisdiction over Atos.

Paysys also argued that general personal jurisdiction could be asserted over Atos under an "alter ego" theory, which would result in a finding that Atos and Sema should be deemed for jurisdictional purposes to be the same entity. The alter ego test focuses on four factors: (1) common ownership, (2) financial dependency of the subsidiary on the parent corporation, (3) the degree to which the parent corporation interferes in the selection and assignment of the subsidiary's executive personnel and fails to observe corporate formalities, and (4) the degree of control over the marketing and operational policies exercised by the parent. The Court concluded that the complaint made allegations of fact capable of satisfying all of these factors. However, it also authorized jurisdictional discovery to provide more facts in support of a final decision.

In the course of its discussion, the Court rejected the argument that the "alter ego" test had been superseded by the US Supreme Court's decision in the Daimler case, which stated that general jurisdiction over a corporation ordinarily was limited to states where the corporation was organized or had its principal place of business. The Court found that Daimler cast doubt only on the usefulness of agency analysis focusing on an affiliate's importance to the defendant, not on whether the affiliate is so dominated by the defendant as to be its alter ego, which was the argument made in the present case.

District Court Stays Motion to Dismiss on Personal Jurisdiction Grounds and Orders Jurisdictional Discovery, Noting that Additional Facts About the Foreign Parent's Relationship with Its Domestic Subsidiary Could Establish Specific Jurisdiction over the Parent

Seedman v. Cochlear Americas, US District Court for the Central District of California, August 10, 2015

Seedman sued CLTD and CAM for strict liability and other claims, after a cochlear implant medical device implanted in his left ear failed. CLTD is an Australian manufacturer of implantable medical hearing devices with its principal place of business in New South Wales, Australia. CAM, a wholly-owned subsidiary of CLTD, is a Delaware corporation with its principal place of business in Colorado. CAM is registered to do business in California. CAM exclusively sells and distributes CLTD's products in the United States.    

Seedman argued that CLTD was subject to the Court's general personal jurisdiction by virtue of the conduct of its US subsidiary based on an "alter ego" theory. The Court agreed that the alter ego theory may be used to extend personal jurisdiction to a foreign parent or subsidiary provided that (1) there is such unity of interest and ownership that the separate personalities of the two entities no longer exist and (2) failure to disregard their separate identities would result in fraud or injustice. However, the Court found that Seedman could not satisfy the "unity of interest and ownership" prong since the evidence showed that each entity "observes all of the corporate formalities necessary to maintain corporate separateness." The Court relied on the facts that CLTD does not have any offices, plants, bank accounts, employees, or corporate agents in California, does not pay California income tax, does not manufacturer, distribute, or sell any products in California, and CLTD and CAM file separate tax returns, prepare separate financial statements, and maintain separate corporate books and records as well as separate legal and administrative departments. The Court noted that corporate separateness would exist even if Seedman could show that CLTD was involved in decision-making about CAM.

Seedman argued in the alternative that CLTD was subject to the Court's specific jurisdiction because it used CAM as a distributor for its products in California and that it maintains a website that allows consumers to find California clinics that implant its devices. The Court found that the website could not serve as "minimum contacts" with California, since CLTD does not sell any products on its website and the "Find your nearest clinic" feature does not require a user to give CLTD any commercially valuable information. Regarding the distribution of CLTD products in California, the Court found that "the placement of a product into the stream of commerce, without more, is not an act purposefully directed toward a forum state." Given that CLTD does not manufacturer, market or sell products in California, and CAM markets and sells the products entirely on its own, the Court found that there was insufficient evidence to establish personal jurisdiction. However, the Court found that limited jurisdictional discovery could "yield additional facts about the relationship between CLTD and CAM, which could establish specific jurisdiction over CLTD in this case."

District Court Dismisses Personal Injury Case on Forum Non Conveniens Grounds Where New Jersey Plaintiff Was Injured at a Hotel in St. Kitts and Nevis Where She Was Living To Attend Medical School

Suhail v. Trans-Americainvest (St. Kitts), Ltd., US District Court for the District of New Jersey, July 29, 2015

Plaintiff, a New Jersey resident, was injured when a walkway collapsed at a hotel in the federation of St. Kitts where she was staying while attending medical school. She filed suit in federal court in New Jersey against the hotel, and various entities associated with the medical school, one of which was a corporation based in Florida. The defendants moved to dismiss the complaint on forum non conveniens and other grounds.

The District Court in New Jersey stated that governing law in the Third Circuit requires that three factors be considered in determining whether a forum non conveniens dismissal should occur: (i) whether an "adequate alternative forum" exists, (ii) the amount of deference owed to the plaintiff's choice of forum, and (iii) whether the balance of public and private interest factors "indicates that trial in the chosen forum would result in oppression or vexation to the defendant out of all proportion to the plaintiff's convenience."

The Court found that the first factor would support dismissal. The defendants either were St. Kitts entities or agreed to be sued there, and there was no dispute that local courts could provide an adequate remedy for the claim alleged.

The Court found, however, that "great deference" should be paid to the plaintiff's choice of New Jersey for the case, because she was a New Jersey resident.

The third factor pointed strongly towards dismissal. The Court first considered the private interests of the litigants, including the relative ease of access to sources of proof, the availability of compulsory process for attendance of witnesses, "all other practical problems" attendant to trial in a particular location, and the enforceability of a judgment if one is obtained. The Court found that all of these factors favored litigation of the dispute in St. Kitts, focusing mainly on the presence in St. Kitts of evidence and witnesses relating to the construction and maintenance of the walkway and to the plaintiff's medical treatment.

The Court also concluded that public interests favored dismissal, considering potential court congestion, the local interest in "having localized controversies decided at home," the relevant law to be applied, and "the unfairness of burdening citizens in an unrelated forum with jury duty." These factors were found to favor dismissal, principally because the of St. Kitts' presumed interest in ensuring the safety of allegedly defective local hotel facilities. The Court did not consider New Jersey's interest in compensating one of its residents injured abroad while living there to attend school to be substantial. The Court also noted that if the litigation were to occur in New Jersey, it would be "burdened with examining and applying the laws of St. Kitts."

The Court thus found that the factors suggesting the case should be heard in St. Kitts outweighed the discretion owed the plaintiff's choice of a New Jersey forum, and dismissed the case.

District Court Finds Personal Jurisdiction Over Chinese Company with Washington Subsidiary in Trade Secrets Action

T-Mobile USA, Inc. v. Huawei Device USA, Inc. et al., United States District Court for the Western District of Washington, July 14, 2015

T-Mobile, a national US mobile phone network provider, sued Huawei Device USA ("Huawei USA") and its Chinese parent company Huawei Technologies Co., Ltd. ("Huawei China"), alleging, among other things, that the defendants violated Washington State laws relating to trade secrets and consumer protection through their alleged misappropriation of T-Mobile's trade secrets relating to the testing of cell phone handsets by robot. Among other issues, the Court considered whether it could exercise specific personal jurisdiction over Huawei China.

In determining whether it could exercise specific jurisdiction over Huawei China, the Court considered whether: (i) T-Mobile could show (in a tort case) that Huawei China "purposefully directed" its activities toward or consummated a transaction with Washington or a Washington resident, or (in a contract case) "purposefully availed" itself of the privileges of conducting business in Washington; (ii) T-Mobile's claim arose out of or was related to Huawei China's activities in Washington; and (iii) the Court's exercise of jurisdiction over Huawei China would be reasonable. In considering whether the case was based on allegations that Huawei China "purposefully directed" conduct at Washington, the Court applied the "effects" test, which required T-Mobile to sufficiently allege that Huawei China committed an intentional act expressly aimed at Washington that caused a harm that it knew would be likely to be suffered in Washington.

Huawei China sought dismissal based on an affidavit stating that the company neither had a physical presence nor transacted business in Washington. The Court concluded, however, that such facts, even if true, would not be dispositive because the present case most resembled one alleging a tort, and so the relevant test was whether Huawei China "purposefully directed" conduct alleged in the complaint toward Washington. In this regard the Court noted that Huawei China's exercise of control over its USA employees was a reasonable inference based on the company's admission that it took disciplinary actions against the Huawei USA employees that allegedly misappropriated T-Mobile's confidential information, and their US-based supervisors. Further, the Court noted that Huawei China failed to refute T-Mobile's claim that the Chinese company directed its US-based employees to steal information from T-Mobile's facilities in Washington. Finally, the Court held that Huawei China did not demonstrate that the Court's exercise of personal jurisdiction over it would be unreasonable, and thus precluded by the Due process Clause of the US Constitution.

District Court in California Finds No Personal Jurisdiction Over German Patent Holder In Patent Non-Infringement Action Brought By Delaware Corporations

Xilinx, Inc. v. Papst Licensing GMBH & Co.KG, U.S. District Court for the Northern District of California, July 9, 2015

Plaintiff corporations, designers and manufacturers of a type of semiconductor, sought declaratory judgments from the US District Court for the Northern District of California that their products did not infringe certain patents held by the Defendant, a German corporation specializing solely in the monetization and licensing of intellectual property rights. The Defendant moved to dismiss the Plaintiffs' suit for lack of personal jurisdiction.

The Court observed that personal jurisdiction over Papst was to be determined first with regard to the scope of jurisdiction under California law, and then was to be measured against the Due Process Clause US Constitution. The Court noted, however, that California asserted jurisdiction to the full extent of the Due Process clause, and so only a single inquiry need be made.

The Court quickly disposed of the plaintiffs' claim of general personal jurisdiction over Papst, finding that the requirement of the US Supreme Court's Daimler decision that general jurisdiction could ordinarily be asserted against a non-US corporation only where the corporation could be considered "at home" could not be satisfied. While a closer question, the Court also found insufficient contacts to support specific personal jurisdiction. Applying Federal Circuit law because this is a patent case, the Court first noted that in declaratory judgment actions for non-infringement, such as the one presented here, only activities related to the "enforcement" of the patent or the "defense of the validity" of the patents-in-suit are relevant to the jurisdictional determination. In other words, evidence of activities such as a defendant's "manufacturing, use, offer for sale, or sale of goods" in the State would not bear on the specific jurisdiction analysis. By contrast, actions such as "initiating judicial or extra-judicial patent enforcement within the forum, or entering into an exclusive license agreement or other undertaking which imposes enforcement obligations with a party residing or regularly doing business in the forum," would be relevant.

The Court considered a large number of potential factual bases for specific jurisdiction, but rejected them all. Thus, Papst's cease-and-desist letters to Plaintiffs were found insufficient to create personal jurisdiction. So, too, were Papst's meetings with Plaintiffs in California (which were merely part of an attempt to license the patents), its maintenance of a "license targets" list; its retention of California patent counsel, who only made three maintenance fee payments over a twenty year term; and its hiring of a Texas attorney to undertake extrajudicial patent enforcement activities. The Court also rejected as unsubstantiated Plaintiff's claims that Defendant had threatened their customers.

Finding no basis for the assertion of general or specific jurisdiction over Papst, the Court dismissed the case.

Laws Discussed

We provide below alphabetically very brief summaries of key US laws addressed by cases summarized in this edition. Please note that these summaries provide a very simplified overview of the statutes and are not intended to describe fully what they may prohibit and require. They are only provided as a guide for the convenience of the reader.

Antiterrorism Act, 18 U.S.C. § 2331 et seq

The Antiterrorism Act creates criminal penalties and civil liability for various forms of terrorist activities committed against US nationals or on US soil. The statute is notable for its civil remedy allowing for the recovery of three-times damages plus attorneys’ fees, as well as an extended statute of limitations.

Alien Tort Statute (“ATS”), 28 U.S.C. § 1350 (also called the Alien Tort Claims Act)

The ATS is a jurisdictional statute that allows US courts to decide cases brought by a foreign citizen for torts committed in violation of international law or a US treaty. Much litigation under the statute involves the nature of the claims that can be brought; although treaties have specified terms, "international law" is a more general term. To support ATS jurisdiction, violations of international law "must be of a norm that is specific, universal, and obligatory."

Commodities Exchange Act (“CEA”) §§ 4o, 9(a), 22(a), 7 U.S.C. §§ 6o, 13(a), 25(a)

The CEA applies to the sale of commodities and imposes restrictions similar to those imposed on stock exchanges. Section 4o of the CEA generally makes unlawful the use of any means of fraud or deceit in connection with the sale of commodities or futures contracts involving commodities. Section 22(a) authorizes private individuals to sue for violations of Section 4o in certain limited circumstances. Finally, Section 9(a) prohibits manipulating the price of commodities or their futures contracts.

Copyright Act

US copyright law applies to any original work of authorship that is in tangible form; it protects the expression of ideas, but not the ideas itself. Copyright protection creates a right to prevent unauthorized use by others, including duplication, distribution, and performance. Copyrights are freely transferrable.

Dodd-Frank Wall Street Reform and Consumer Protection Act-Anti-Retaliation Provision, 15 U.S.C. § 78u-6(h)(1)(A)

The 2010 Dodd-Frank Act was reform legislation passed in the wake of the financial crisis. As relevant here, one provision expanded incentives for and protection of “whistleblowers” in specific circumstances. Most notably, the provision protects certain individuals from retaliation for making disclosures that are “required or protected” under previously-enacted securities laws or SEC rules. Other important limitations apply.

Foreign Corrupt Practices Act (FCPA”), 15 U.S.C. §§ 78dd-1, et seq.

The US anti-corruption statute, passed in 1977, generally makes unlawful:

  • Paying, offering to pay, promising to pay, or authorizing to pay,
  • Anything of value,
  • Corruptly,
  • To any third party (including local consultants & joint venture partners),
  • Knowing that some of it will be given to a “foreign official,”
  • To influence the official to confer a commercial benefit of any kind upon the payor.

Foreign Sovereign Immunities Act of 1976(FSIA), 28 U.S.C. Sec. l330, l332(a), l39l(f) and l60l-l6ll

The FSIA codifies the longstanding US rule that non-US Governments generally are immune from suit in US courts. The statute establishes a presumption against suit, and sets out a number of specific exceptions. These include:

  • Explicit or implicit waiver of immunity by the foreign state;
  • Commercial activity carried on in the United States or an act performed in the United States in connection with a commercial activity elsewhere, or an act in connection with a commercial activity of a foreign state elsewhere that causes a direct effect in the United States;
  • Property taken in violation of international law is at issue;
  • Rights in property in the United States acquired by succession or gift or rights in immovable property situated in the United States are at issue;
  • Money damages are sought against a foreign state for personal injury or death, or damage to or loss of property, occurring in the United States and caused by the tortious act or omission of that foreign state;
  • Action brought to enforce an agreement made by the foreign state with or for the benefit of a private party to submit to arbitration;
  • Money damages are sought against a foreign state for personal injury or death that was caused by an act of torture, extrajudicial killing, aircraft sabotage, hostage taking, or the provision of material support or resources for such an act, if the foreign state is designated as a state sponsor of terrorism under section 6(j) of the Export Administration Act of 1979 (50 U.S.C. App 2405(j) or Section 620A of the Foreign Assistance Act of 1961 (22 U.S.C. 2371).
  • A suit in admiralty is brought to enforce a maritime lien against a vessel or cargo of the foreign state which maritime lien is based upon a commercial activity of the foreign state. 

Foreign Trade Antitrust Improvements Act (“FTAIA”), 15 U.S.C. § 6a

The FTAIA is the principal US statute governing the applicability of US antitrust (competition) laws to foreign conduct. The statute is both complicated and unclear, and has been the subject of extensive litigation. Basically, the FTAIA provides that foreign conduct cannot be the basis of a violation of the US antitrust laws unless certain exceptions apply. These exceptions include, most significantly, foreign conduct that has a “direct, substantial, and reasonably foreseeable effect” on competition or prices in a US market, so long as the conduct also independently violates the substance of a US antitrust law. The FTAIA also permits antitrust claims to be brought where US export commerce is affected by anticompetitive acts outside the US. One important qualification is that the FATIA does not apply to claims that there has been an injury to the import trade into the US. Those claims must satisfy a different test under a different statutory regime.

Gun Control Act, 18 U.S.C. ch. 44

The Gun Control Act of 1968 restricts the sales of firearms the numerous classes of persons, including fugitives from justice, drug addicts, persons unlawfully in the US, certain persons suffering from mental illness, and persons convicted of felony crimes.

Hobbs Act, 18 U.S.C. § 1951

The Hobbs Act is a criminal statute that prohibits actual or attempted robbery or extortion affecting interstate commerce between the US and other countries. It is often used in labor disputes and cases involving commercial disputes and public corruption.

Investment Advisers Act of 1940, 15 U.S.C. § 80b-1 through 80b-21

The Investment Advisors Act regulates persons and entities in the business of advising others on securities investments, and requires such persons or entities to register with the Securities and Exchange Commission as investment advisers. Section 206 of the Investment Advisers Act is the source of federal fiduciary standards governing the conduct of investment advisers. Registered investment advisers have fiduciary obligations of good faith, loyalty, and fair dealing to the clients who entrust their money to them.

Lanham Act, 15 U.S.C. § 1051, et seq.

The Lanham Act is the principal trademark infringement statute in the US, and also creates additional remedies related to false advertising and “cybersquatting.” The statute makes unlawful the use of both registered and unregistered marks that create a “likelihood of confusion” with a pre-existing trademark. More generally, it also prohibits the use of false or misleading statements made in advertising where the effect may be the likely injury to a business. Amendments to the Lanham Act in 1999 prohibited the use of confusingly similar domain names in internet web sites. Parties that violate the Lanham Act may be subject to damages as well as injunctions.

Magnuson-Moss Warranty Act, 15 U.S.C. 2301 et seq.

The Magnuson-Moss Act governs the terms of warranties on consumer products sold in interstate commerce. It does not require that any particular warranties be offered, but provides that the terms and conditions of warranties that are offered be disclosed fully, clearly, and conspicuously. The Act places specific limitations on warranties that are "full" or "limited." Violations may give rise to claims by the US Government as well as consumers.

Maritime Drug Law Enforcement Act (“MDLEA”), 46 U.S.C. § 70501, et seq.

The MDLEA makes unlawful drug trafficking on the high seas. It provides that an individual may not “knowingly or intentionally manufacture or distribute, or possess with intent to manufacture or distribute, a controlled substance on board (1) a vessel of the United States or a vessel subject to the jurisdiction of the United States; or (2) any vessel if the individual is a citizen of the United States or a resident alien of the United States.” The statute expressly provides for application to conduct occurring outside the territorial jurisdiction of the US.

Patent Act, 35 U.S.C. § 271 (Patent Infringement)

Under US law, patent infringement occurs generally where a person, “without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor.” Prior knowledge of the patent is irrelevant for purposes of patent infringement liability. A person who “actively induces” the infringement of a patent is also liable as an infringer. Parties that commit patent infringement face monetary penalties as well as an injunction.

Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1961, et seq.

RICO establishes civil and criminal liability for persons employed by or associated with an “enterprise” that has been engaging in a “pattern of racketeering.” The applicability of the statute turns on the meanings of these two terms. The term “enterprise” is broadly defined and can include formal legal entities such as corporations, as well as more informal associations-in-fact, which are “a group of persons associated together for a common purpose of engaging in a course of conduct.” A “pattern of racketeering” is defined in turn to be the commission of at least two “predicate acts” during a ten-year period, where those acts were sufficiently related to one another to be considered part of a “pattern.” The RICO statute lists 35 state and federal crimes that constitute “predicate acts,” including mail and wire fraud, bribery, obstruction of justice, embezzlement, money laundering, immigration fraud, and an assortment of crimes of violence.

Securities Act of 1933, 15 U.S.C. § 77a, et seq.

The Securities Act generally prohibits a security from being offered or sold to the public unless it is either registered with the Securities and Exchange Commission or an exemption from the registration requirement applies.

Securities Exchange Act of 1934 (“1934 Act”) §§ 10(b) & 15(a)(1), 15 U.S.C. §§ 78j(b) & 78o(a)(1) (also referred to as Exchange Act)

Section 10(b) of the 1934 Act is a broad provision prohibiting fraudulent activities with respect to securities listed on US exchanges, including American Depositary Receipts (“ADRs”). In addition, pursuant to Section 10(b), the Securities and Exchange Commission has promulgated Rule 10b-5, which extends Section 10(b)’s prohibition to fraudulent activity in connection with the purchase or sale of any security, registered or unregistered securities, publicly held or closely held companies, and any kind of entity that issues securities, including federal, state, and local government securities.

Section 15(a)(1) of the 1934 Act prohibits any person or company to from acting as a broker or dealer without first registering with the Securities and Exchange Commission.

Sherman Antitrust Act, 15 U.S.C. §§ 1 & 2

The Sherman Antitrust Act is the most generally applicable antitrust statute in US law. Section 1 of the Act makes unlawful any agreement “in restraint of trade.” For most agreements affecting commercial transactions, the statute only makes unlawful agreements that unreasonably restrain trade, meaning that they have an actual anticompetitive effect on a market for goods or services in the US that is not outweighed by precompetitive benefits. Certain narrow classes of agreements, including price-fixing, bid rigging, and agreements among competitors to divide customers or territories, are per se violations of law as to which the facts, if proved, allow for no defenses. Section 2 of the Sherman Act makes unlawful monopolization and attempted monopolization, which may be undertaken by a company acting unilaterally.

Title VI of the Civil Rights Act of 1964

This federal statute broadly prohibits discrimination by covered employers. It declares an “unlawful employment practice” for an employer to take various actions, including to discriminate against any individual with respect to compensation, terms, or conditions of employment because of such individual’s race, color, religion, sex, or national origin.

Torture Victims Protection Act of 1991 (“TVPA”), Pub. L. No. 102–256, 106 Stat. 73 (1992), codified at 28 U.S.C. § 1350

The TVPA was passed for the purpose of giving a US civil remedy to victims of torture and/or murder. The statute, however, only authorized lawsuits against individuals, not corporations or political groups. When filing suit, the plaintiff must show that he or she pursued all “adequate and available” local remedies. Plaintiffs need not be US citizens to sue.

Victims of Trafficking and Violence Protection Act, 18 U.S.C. § 1581 et seq.

The Victims of Trafficking and Violence Protection Act of 2000, Public Law 106-386, as amended, declares illegal the trafficking in persons, including forced labor, involuntary servitude, slavery and sex trafficking. 18 USC § 1595 creates a private right of action in US federal court for victims of such conduct, allowing them to collect actual damages, punitive damages, and attorneys’ fees. Section 1596 of Title 18 establishes that the remedy applies extraterritorially.

Wire Act, 18 U.S.C. § 1084

The Interstate Wire Act of 1961 prohibiting the operation of certain types of betting businesses in the United States. The statute has been construed to be limited to betting on sporting events, and not to apply to other forms of online gambling.

Wire Fraud Statute, 18 USC § 1343

Establishes as a federal crime the use of US means of interstate electronic communication in pursuit of a scheme to defraud.

42 U.S.C. § 1981 

This federal statute provides that “all persons within the jurisdiction of the United States shall have the same right in every State and Territory to make and enforce contracts, to sue, be parties, give evidence, and to the full and equal benefit of all laws and proceedings for the security of persons and property as is enjoyed by white citizens, and shall be subject to like punishment, pains, penalties, taxes, licenses, and exactions of every kind, and to no other.” The statute is intended to advance the goal that all persons within its scope or equal under the law. Courts have concluded in many cases that it may be enforced by lawsuits in federal court.

Written by:

Orrick, Herrington & Sutcliffe LLP

Orrick, Herrington & Sutcliffe LLP on:

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  • "Persistent cookies" - These cookies stay on your computer or device after your browser has been closed and last for a time specified in the cookie. We use persistent cookies when we need to know who you are for more than one browsing session. For example, we use them to remember your preferences for the next time you visit.
  • "Web Beacons/Pixels" - Some of our web pages and emails may also contain small electronic images known as web beacons, clear GIFs or single-pixel GIFs. These images are placed on a web page or email and typically work in conjunction with cookies to collect data. We use these images to identify our users and user behavior, such as counting the number of users who have visited a web page or acted upon one of our email digests.

JD Supra Cookies. We place our own cookies on your computer to track certain information about you while you are using our Website and Services. For example, we place a session cookie on your computer each time you visit our Website. We use these cookies to allow you to log-in to your subscriber account. In addition, through these cookies we are able to collect information about how you use the Website, including what browser you may be using, your IP address, and the URL address you came from upon visiting our Website and the URL you next visit (even if those URLs are not on our Website). We also utilize email web beacons to monitor whether our emails are being delivered and read. We also use these tools to help deliver reader analytics to our authors to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

Analytics/Performance Cookies. JD Supra also uses the following analytic tools to help us analyze the performance of our Website and Services as well as how visitors use our Website and Services:

  • HubSpot - For more information about HubSpot cookies, please visit
  • New Relic - For more information on New Relic cookies, please visit
  • Google Analytics - For more information on Google Analytics cookies, visit To opt-out of being tracked by Google Analytics across all websites visit This will allow you to download and install a Google Analytics cookie-free web browser.

Facebook, Twitter and other Social Network Cookies. Our content pages allow you to share content appearing on our Website and Services to your social media accounts through the "Like," "Tweet," or similar buttons displayed on such pages. To accomplish this Service, we embed code that such third party social networks provide and that we do not control. These buttons know that you are logged in to your social network account and therefore such social networks could also know that you are viewing the JD Supra Website.

Controlling and Deleting Cookies

If you would like to change how a browser uses cookies, including blocking or deleting cookies from the JD Supra Website and Services you can do so by changing the settings in your web browser. To control cookies, most browsers allow you to either accept or reject all cookies, only accept certain types of cookies, or prompt you every time a site wishes to save a cookie. It's also easy to delete cookies that are already saved on your device by a browser.

The processes for controlling and deleting cookies vary depending on which browser you use. To find out how to do so with a particular browser, you can use your browser's "Help" function or alternatively, you can visit which explains, step-by-step, how to control and delete cookies in most browsers.

Updates to This Policy

We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at:

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