The Perils of Rule 44.1

By Henrik – Own workBoat and plow from File:Flag of Pennsylvania.svg, Public Domain,

Late last month, Judge Malachy E. Mannion of the Middle District of Pennsylvania ruled on a motion for summary judgment in Epsilon-NDT Endustriyel Kontrol Sistemleri Sanayi VE Ticaret, A.S. (“Epsilon”) v. Powerrail Distribution, Inc. (“PowerRail”). From one perspective, this case is an unremarkable business dispute arising out of an international contract. But from another perspective, this case is an object lesson in the perils of proceeding under foreign law without checking the Federal Rules first.

The Dispute, Briefly

The details of the dispute are not central to this post, so only a brief summary is needed. Plaintiff Epsilon is an industrial equipment provider based in Istanbul, Turkey. In 2015, Epsilon agreed to purchase train parts from Rail and Traction Canada (“RTC”) for resale to Egyptian National Railways (“ENR”). RTC ultimately did not deliver the train parts, causing Epsilon to breach its agreement with ENR.

Epsilon then sued not RTC but PowerRail, a Pennsylvania company that Epsilon alleges was responsible for the breach. Epsilon’s theories were that PowerRail was the alter ego of RTC, it was the principal on behalf of which RTC acted, and/or it assumed the obligations of RTC by contract. Epsilon asserted claims for breach of contract, unjust enrichment, tortious interference, conversion, and fraudulent conveyance in the Middle District of Pennsylvania.

Fraudulent Conveyance and Foreign Law

PowerRail filed a motion for summary judgment. The court denied that motion as to breach of contract and unjust enrichment, and granted the motion as to tortious interference, conversion, and fraudulent conveyance. It is the reasoning of the fraudulent conveyance count that warrants special attention.

Plaintiff’s original claim for fraudulent conveyance relied on the Pennsylvania Uniform Voidable Transactions Act (PUVTA). Interestingly, the PUVTA includes a choice of law provision calling on the court to apply “the local law of the jurisdiction in which the debtor is located when the transfer is made, or the obligation is incurred.” In this case, there was no dispute that the debtor was RTC, an entity located in Ontario, Canada. Thus, the PUVTA would seem to contemplate the application of Ontario law.

However, more than a year after filing the complaint, and shortly before the close of discovery, plaintiff informed defendant that the case “may” be governed by Ontario law rather than the PUVTA. The parties then agreed by stipulation to remove all references to the PUVTA, but to leave the fraudulent conveyance claim otherwise intact. It thus seems as if plaintiff intended to sue directly under Ontario law, though it did not say so.

In its motion for summary judgment, defendant argued that the case could not proceed under the law of Ontario because plaintiff failed to give adequate notice of foreign law. Under Federal Rule of Civil Procedure 44.1, “[a] party who intends to raise an issue about a foreign country’s law must give notice by a pleading or other writing.” Defendant argued that plaintiff never gave such notice, only suggesting that Ontario law “may” apply, and even that was fairly late in the proceedings.

Although the court acknowledged that Rule 44.1 does not specify when notice should be given, and that the Advisory Committee observed that the rule “does not attempt to set any definite limit on the party’s time for giving the notice of an issue of foreign law,” the court concluded that plaintiff’s failure to give early written notice of the application of Ontario law should bar its use in this case. The court thought that there would be prejudice to the defendant (because the remedies under Ontario law differed from the PUVTA), and it observed that plaintiff offered no good reason for its delay.

Notably, the inability to bring this claim under Ontario law was functionally dispositive of the claim. While some courts will revert to domestic law when foreign law is not noticed, here the parties’ stipulation to remove the PUVTA from the complaint meant that domestic law was not available either. And even it if were, the PUVTA claim could not proceed because that statute would have pointed the court back to Ontario law, which was not properly noticed. As a result, the court dismissed the fraudulent conveyance claim in its entirety without even looking at the merits.


In sum, because counsel for Epsilon did not give early notice of the applicability of foreign law, it essentially forfeited its claim of fraudulent conveyance. Let this be a lesson to international lawyers—Rule 44.1 has bite, at least with Judge Mannion.