Commercial Division Blog

Posted: August 11, 2019 / Categories Commercial, Forum Non Conveniens

Court Need Not Determine Whether There is Personal Jurisdiction Before Dismissing on Forum Non Conveniens Grounds

On August 6, 2019, the First Department issued a decision in Kainer v. UBS AG, 2019 NY Slip Op. 06053, holding that a court need not determine whether it has personal jurisdiction over a defendant before dismissing an action on forum non conveniens grounds, explaining:

The motion court properly dismissed this action on forum non conveniens grounds without first determining whether it had personal jurisdiction over all the defendants. Sinochem Intl. Co. Ltd. v Malaysia Intl. Shipping Corp. (549 US 422 [2007]) is persuasive authority on this point. In that case, a unanimous United States Supreme Court held that a trial court

has discretion to respond at once to a defendant's forum non conveniens plea, and need not take up first any other threshold objection. In particular, a court need not resolve whether it has authority to adjudicate the cause (subject matter jurisidiction) or personal jurisdiction over the defendant if it determines that, in any event, a foreign tribunal is plainly the more suitable arbiter of the merits of the case

To be sure, as the Sinochem Court noted, if a court can readily determine that it lacks personal jurisdiction over a defendant, the proper course is to dismiss on that ground. However, where personal jurisdiction is difficult to determine, and forum non conveniens considerations clearly militate in favor of dismissal, a court may dismiss on the latter ground.

Plaintiffs concede that they currently do not have a basis for personal jurisdiction in New York over any defendant except Christie's. Plaintiffs' attempt to minimize the amount of discovery necessary to establish personal jurisdiction over the remaining defendants is unconvincing. This action concerns actions taken by various entities on two continents. The defendants' alleged actions that would expose them to personal jurisdiction in New York overlap extensively with the merits of plaintiff's claims that Christie's conspired with the remaining defendants to interfere with plaintiffs' rights to the painting. As it could not readily determine, without allowing significant discovery, that it had personal jurisdiction over all the defendants, the motion court properly considered the defendants' arguments that New York is an inconvenient forum.

The doctrine of forum non conveniens permits a court to dismiss an action that is otherwise jurisdictionally sound if it finds that in the interest of substantial justice the action should be heard in another forum. The relevant factors include: (1) the burden on the New York courts; (2) potential hardship to the defendant; (3) the unavailability of an alternative forum; (4) whether both parties are nonresidents; and (5) whether the transaction out of which the cause of action arose occurred primarily in a foreign jurisdiction. The court may also consider the location of potential witnesses and documents and potential applicability of foreign law.

These factors clearly demonstrate that New York is an inconvenient forum. Plaintiffs' rights as heirs to the painting arose in Germany and France, although the painting was allegedly wrongfully sold in New York. The burden on the New York court in applying Swiss and French estate law to determine the underlying issue of the lawful heirs to Kainer's estate is significant. As the motion court noted, the parties not only dispute the applicable foreign law, but discuss the substance of the law in a manner that is, at best, opaque. The applicability of foreign law is an important consideration in determining a forum non conveniens motion and weighs in favor of dismissal.

The potential hardships to the defendants of litigating in New York are clear. Kircher lives in Switzerland, the Foundation was created and is domiciled in Switzerland, UBS AG is incorporated and headquartered there, and UBS Global Asset Management has consented to jurisdiction there. Although UBS has a New York office and resources to litigate the case here, many relevant nonparty witnesses and documents are located in Switzerland and Germany, and UBS would be powerless to compel their attendance in New York.

Switzerland appears to be an available alternative forum. France and Germany also may be possible alternatives. Plaintiffs have asked the Swiss court to find that they are the sole heirs [*3]to the Kainer estate, declare the Swiss certificates of inheritance null and void, and order that all assets — not just the painting at issue herein - originating from Kainer's estate be returned to plaintiffs. Whether the Foundation and Christie's could enter into their agreement to sell the painting cannot be determined without reference to the underlying issue of ownership — the very issue that is already being litigated abroad. This factor thus favors dismissal, in part due to the risk of conflicting rulings. Plaintiffs note that the Foundation and the Swiss localities seek dismissal of the Swiss proceedings for lack of jurisdiction and on statute of limitations grounds. In any event, while the existence of a suitable alternative forum is an important factor, its absence does not require a New York court to retain jurisdiction.

Plaintiffs also argue that, even if the Swiss proceedings reach a determination on the merits, they will not determine plaintiffs' rights to the paintings because the Swiss courts cannot invalidate plaintiffs' French certificates of inheritance, but the same is true in New York. The certificates merely confer standing to sue, and do not conclusively resolve the question, in Switzerland or New York, of whether the Foundation has rights to the painting.

The foregoing factors favor dismissal against UBS, Kircher, and the Foundation, and a stay of the proceedings against Christie's pending a determination favorable to plaintiffs in the foreign courts.

(Internal quotations and citations omitted).

Disputes regarding commercial contracts involving international parties end up being heard in New York courts. Even if the court has the power to assert jurisdiction of the parties, it can, under the forum non conveniens doctrine discussed above, dismiss the dispute so it can be heard in a forum that is more convenient for the parties. Contact Schlam Stone & Dolan partner John Lundin at if you or a client face a situation where you are unsure whether New York is the appropriate forum in which a dispute should be heard.