Alienage Jurisdiction of US-Federal Courts

von: Jord Hollenberg

Outline

A. Introduction and Historical Background

B. International Forum Selection Agreements

I. Exclusive and Nonexclusive Forum Selection Agreements
II. Reasons for Choice of Forum Clauses
III. Relation between Choice of Forum and Choice of Law Clauses
IV. Development and Enforceability of Choice of Forum Clauses
V. Forum Non Conveniens

i. Historic Approach
ii. Modern Approach

a. Forum Non Conveniens and Forum Selection Clauses and their application in ‘The Bremen v. Zapata Off-Shore Co.’
b. Forum Selection Clause and its Enforcement in ‘Carnival Cruise Lines, Inc. v. Shute’; the aftermath of ‘The Bremen v. Zapata Off- Shore Co.’

C. Access to Federal Courts under 28 U.S.C. § 1332(a) for Foreign Corporations or ‘The Question of Stateless Corporations’

A. Introduction and Historical Background

The founders of the United States recognized the desirability of providing aliens access to the federal courts and they expressly granted aliens the right to have their cases heard in the federal courts when they drafted the Constitution. 1 As the Constitution in Art III, § 2 put it: "The judicial power shall extend . . . to Controversies . . . between a State, or the Cit izens thereof, and foreign States, Citizens or Subjects." In explaining why federal subject matter jurisdiction should extend to cases involving aliens, Alexander Hamilton reasoned “an unjust sentence against a foreigner … would … if unredressed, be an aggression upon his sovereign, as well as one which violated the stipulations in a treaty or the general laws of nations.”2 At the same time, disputes involving aliens were thought likely to involve legal and other issues of national importance, which federal courts were deemed best able to decide.”3

Although there are few records of the Constitutional Convention relating to the subject of the judiciary, it is generally accepted that the decision to establish a federal forum for cases involving aliens arose from two related concerns. The first concern was that state and local judges were likely to be swayed by local prejudices against foreigners and that aliens would therefore have difficulty obtaining a fair trial in state or local courts. The second, and perhaps more compelling, concern was that foreign nations might take offense if the affairs of their citizens in the United States were not treated at the national level. Allowing aliens access to the federal courts in which the judges were not accountable to the local citizenry appeared to be the best way of ove rcoming these problems.4

The First Congress passed the Judiciary Act of 1789 during its first session. Unfortunately, the history of that Act is shrouded in mystery because the debates of the Senate were then secret, and amendments made in the Senate and House of Representatives were not recorded in any detail. However, the constitutional provision5 is the foundatio n for diversity and alienage jurisdiction. Since 1789, Congress has conferred this jurisdiction on the federal courts and its modern implementation can be found in 28 U.S.C. § 1332, known as the “diversity statute”. B. International Forum Selection Agreements Many international disputes can arise under the laws of more than one country. Therefore it is very common in domestic as well as in international commercial matters that parties “stip ulate in advance to submit their controversies for resolution within a particular jurisdiction.”6 Such stipulations are known as ‘forum selection’, ‘jurisdiction’ or ‘choice of forum clauses’.

I. Exclusive and Nonexclusive Forum Selection Agreements

Exclusive and Nonexclusive Forum Selection Agreements have fundamental distinctions; where an exclusive or mandatory forum clause requires that any litigation take place in one single forum, and nowhere else,7 a nonexclusive forum selection agreement permits litigation of disputes in a particular forum that does not preclude the parties from going forward in other courts if they have also jurisdiction.8 A nonexclusive forum selection clause (“prorogation agreement” or “permissive” forum clause) is a mutual promise to submit to the jurisdiction of a specified court, and a promissory waiver to undertake litigation elsewhere. Often a nonexclusive forum clause explicitly submits the parties to the personal jurisdiction of the contractual forum, but if no expressed submission is agreed upon it has been dealt with as being implied.9

II. Reasons for Choice of Forum Clauses

Reasons for entering into a Forum Selection Agreement are obvious. Bargaining power10 or negotiating ability may allow a party to select the forum it finds most convenient or advantageous. In international agreements the parties seek to try their disputes in their home courts, just because they are more familiar with their courts and hope these are more trustworthy.11 It is un- deniable that home jurisdiction is more convenient and allows the perception of a “home-court” advantage over foreign litigants. On the other hand a forum selection agreement allows circumventing highly undesirable courts to one or both parties. It can therefore be a grant for certainty and predictability. As the Supreme Court put it, “[a] contractual provision specifying in advance the forum in which disputes shall be litigated and the law applied is … an almost indispensable precondition to achievement of the orderliness and predictability essential to any international business transaction.” 12 Forum Clauses are also able to minimize costs that may arise in disputes, by circumventing parallel litigation. Thus makes it more likely to resolve a dispute in one single forum and is a factor to speed up trials.

III. Relation between Choice of Forum and Choice of Law Clauses

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1 Rubenstein, Alienage Jurisdiction in the Federal Courts, 17 Int’l Law. 283, see n1.

2 A. Hamilton, J. Madison & J. Jay, The Federalist Papers, No. 80, at 476 (C. Rossiter ed. 1961).

3 A. Hamilton, J. Madison & J. Jay, The Federalist Papers, No. 80, at 476 (C. Rossiter ed. 1961) (“So great a proportion of the cases in which foreigners are parties involve national questions that is by far most safe and most expedient to refer all those in which they are concerned to the national tribunals.”).

4 Rubenstein, Alienage Jurisdiction in the Federal Courts, 17 Int’l Law. 283, see n2-4.

5 U.S. Constitution Art. III, §2 cl. 1.

6 Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 n. 14 (1985).

7 Heller Finacial, Inc. v. Midwhey Powder Co., 883 F.2d 1286 (7th Cir.).

8 Born, International Civil Litigation in United States Courts, pp. 371 -72 n.1.

9 Northwestern Nat’l Life Ins. Co. v. Donovan, 916 F.2d 372, 376-77 (7th Cir. 1990).

10 See Carnival Cruise Line v. Shute, 499 U.S. 585 (1991).

11 The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 11-12 (1972).

12 Scherk v. Alberto-Culver Co., 417 U.S. 506, 516 (1974).