Supreme Court Requests Response to FNC Cert Petition

Jeonju, South Korea” by Emmanuel Dyan

The Supreme Court has called for a response in Wamai v. Industrial Bank of Korea, a terrorism-related lawsuit that was dismissed for forum non conveniens. The plaintiffs have asked the Court to consider how much deference federal courts should give U.S. plaintiffs’ choice of forum when they are joined by foreign co-plaintiffs. The Southern District of New York (Judge Denise Cote), using the Second Circuit’s sliding scale approach from Iragorri v. United Technologies Corp. (2001), concluded that the plaintiffs’ choice of forum was entitled to only minimal deference, and the Second Circuit affirmed in a summary order. Though the Supreme Court consistently rejects cert petitions challenging forum non conveniens dismissals, the Second Circuit’s sliding scale approach is ripe for reconsideration.

The Dispute

The plaintiff-petitioners are 323 current and former U.S. government employees or contractors injured or killed in the 1998 terrorist attacks on the U.S. embassies in Kenya and Tanzania and their family members. They sued Iran for providing material support to al Qaeda in the attacks and obtained default judgments amounting to $5.5 billion in compensatory and punitive damages. But they have been unable to collect on those judgments.

In January 2021, the plaintiffs sued the Industrial Bank of Korea (IBK) seeking turnover of Iranian assets that it allegedly funneled through U.S. accounts in violation of U.S. sanctions. Judge Cote dismissed the complaint for forum non conveniens, conditional on IBK waiving any jurisdictional or statute of limitations defense before Korean courts.

In particular, Judge Cote gave minimal deference to the plaintiffs’ choice of a New York forum. Applying the Second Circuit’s sliding scale approach to the question of deference, Judge Cote reasoned that “[t]he vast majority of the plaintiffs … are not resident in the United States, and of the handful of plaintiffs who are U.S. residents, only a small fraction live in New York.” She also factored into the deference determination that the location of evidence is in Korea and that IBK planned to raise defenses of personal jurisdiction and sovereign immunity (as a majority government-owned enterprise).

Judge Cote then found that South Korea was an adequate and available alternative forum, and she concluded that the balance of private and public interest factors weighed in favor of suing IBK there. The Second Circuit affirmed.

The Cert Petition

The plaintiffs have asked the Supreme Court to decide whether plaintiffs’ choice of forum is entitled to less deference when U.S.-resident plaintiffs are joined by foreign-resident co-plaintiffs. Under the Supreme Court’s decision in Piper Aircraft Co. v. Reyno (1981), a plaintiff’s choice of forum is supposed to receive substantial deference, but “a foreign plaintiff’s choice deserves less deference” than that of a U.S. plaintiff. Piper didn’t consider what the appropriate level of deference would be if there were both U.S. and foreign plaintiffs. The Wamai plaintiffs assert that the Second Circuit’s sliding scale approach to deference is inefficient and in conflict with the D.C., Ninth, and Eleventh Circuits, which maintain a “strong presumption” of deference to U.S.-resident plaintiffs’ choice of forum even when they bring their lawsuit with a greater number of non-resident co-plaintiffs.

The Problem with Iragorri’s Sliding Scale

The district court’s decision illustrates how Iragorri’s sliding scale approach creates more problems than it solves. Most obviously, Iragorri incorporates the private and public interest factors into the threshold question of deference—before weighing them again later in the forum non conveniens analysis. In Wamai, the district court put much weight on the location of evidence in determining that the plaintiffs’ choice of forum deserved minimal deference, and then relied solely on that factor again when evaluating the private interest factors.

The court also considered—again, at the initial threshold stage of determining the appropriate level of deference to plaintiff’s choice of forum—IBK’s plan to challenge personal and subject matter jurisdiction. If such considerations belong anywhere in a forum non conveniens analysis, they belong in the public interest factors. But they don’t really belong there, either: they are simply separate grounds for dismissal. Granted, the Supreme Court has held that federal courts can dismiss for forum non conveniens without resolving questions of personal and subject matter jurisdiction. But that does not mean the existence of such questions should be weighed as part of the forum non conveniens analysis. Such an approach allows the defendant to increase the odds of dismissal just by threatening to bring more motions.

This conflation of public and private interest factors with the threshold question of deference, however, is not solely the district court’s fault; those considerations are built into Iragorri’s sliding scale. As the Second Circuit described its approach in Iragorri, “[f]actors weighing in favor of deference include the convenience of the plaintiff’s residence in relation to the chosen forum, the availability of witnesses or evidence [in] the forum district, the defendant’s amenability to suit in the forum district, the availability of appropriate legal assistance, and other reasons relating to convenience or expense.” Taking these considerations into account in determining the appropriate level of deference to plaintiff’s choice of forum is repetitive with the private interest factors. The Supreme Court is not a big fan of sliding scales; Iragorri would be a good sliding scale for the Court to retire.

But even if the Supreme Court were to reject Iragorri’s approach, that wouldn’t answer the plaintiffs’ underlying question: how should Piper’s bifurcated approach to deference treat mixed sets of foreign- and U.S.-resident plaintiffs? A Supreme Court that is generally hostile to litigation brought by foreign plaintiffs is unlikely to adopt an absolute rule that any token U.S.-resident plaintiff can transform a suit brought by hundreds of foreign-resident plaintiffs into one that presumptively belongs in U.S. court. But do all the plaintiffs have to be U.S. residents in order to merit deference? If some in-between amount is needed, would it necessarily be an arbitrary limit (like 50%)? And how much should it matter if some of the foreign-resident plaintiffs are in fact U.S. citizens? It was precisely these sorts of factual distinctions that the Second Circuit sought to avoid with its sliding scale approach (as imperfect as it has been in practice).

The best answer is to jettison Piper’s bifurcated approach to deference. Piper’s concerns about forum shopping would be better addressed by incorporating the plaintiffs’ interests—both valid and questionable—in the weighing of private interests. Justice Marshall’s reasoning in Piper about plaintiff convenience and ulterior motives was always really about the private interest factors (as Iragorri‘s sliding scale effectively acknowledges). Relocating those concerns to the private interest analysis would allow a more transparent comparison of the plaintiff’s and defendant’s interests. And it would leave the simple (and traditional) default rule at the outset of the forum non conveniens analysis: the plaintiff’s choice of forum should always receive substantial deference.

Some Additional Concerns

I harbor no allusions, however, that the current Supreme Court will significantly curtail the excesses of forum non conveniens. But the reasoning of the lower courts in Wamai illustrates how the current framework can engender a myopic perspective of U.S. interests.

The plaintiffs are current or former U.S. government employees or contractors and their families. They were injured, or their loved ones were killed, because of an attack against the United States. They have a sizeable default judgment from a U.S. court thanks to congressional statutes encouraging civil recoveries for acts of terrorism. Nonetheless, the district court reasoned that their effort to recover on that judgment has no connection to New York because “[t]he underlying facts giving rise to the plaintiffs’ litigation against Iran stem from overseas terrorists attacks, and their U.S. judgments were entered in the District of Columbia.” The court also discounted “the coincidental involvement of bank accounts in New York,” even though IBK’s sanction-evading conduct—which underlies the plaintiffs’ request for rescission and disgorgement—involved laundering nearly $1 billion through U.S. accounts (though not necessarily IBK’s New York branch). This is not a case in which money moving through a U.S. account is a coincidental jurisdictional hook for a case otherwise about foreign transactions; the allegation of sanctions-evading conduct is about the use of U.S. bank accounts.

The district court also discounted the plaintiffs’ concerns that South Korea might not be willing to recognize the punitive damages portion of their U.S. judgment. Quoting Second Circuit precedent and echoing Piper, Judge Cote reasoned that “the fact that a plaintiff might recover less in an alternate forum does not render that forum inadequate.” But such language is usually reserved for plaintiffs seeking a remedy in the first instance. Here the court was shrugging its shoulders that a U.S. judgment might not be fully enforceable, anywhere—because even though the district court emphasized that only three of the 53 U.S.-resident plaintiffs reside in New York, no other U.S. court would have a better shot at hearing this case given that IBK’s only U.S. branch is in New York City.

Perhaps Congress would not want this state-owned bank to have to defend litigation in U.S. courts because it is entitled to immunity. There’s a statute that can answer that question. Perhaps IBK’s connections to Manhattan are just too attenuated from this dispute over sanctions-evading behavior. There’s a constitutional doctrine to answer that question. But the U.S.-resident plaintiffs in this suit were more than mere tokens, and the suit’s connection to the United States was more significant than the lower courts’ credited. Iragorri’s sliding scale may well have led those lower courts astray.