Thursday, October 19, 2017

Case of the Day: Frontpoint Asian Event Driven Fund, L.P. v. Citibank, N.A., 2017 U.S. Dist. LEXIS 132759 (S.D.N.Y. Aug. 18, 2017)


The case involves a class action complaint alleging the defendant financial institutions (which included banks in the U.S., Europe and Asia) manipulated the Singapore Interbank Offered Rate (SIBOR) and Singapore Swap Offer Rate (SOR).

The non-U.S. banks moved to dismiss based on lack of personal jurisdiction. The court granted the motion, as the foreign banks were not subject to general jurisdiction. The court found that registration and the accompanying appointment of an in-state agent does not give rise to general jurisdiction. The court also found that the foreign banks' settlement with the U.S. Commodity Futures Trading Commission was not sufficient to give rise to specific jurisdiction, unless the plaintiffs can also identify the specific collusive trade that occurred in New York.

As to all defendants, the court dismissed most of the complaint except for the conspiracy to manipulate SIBOR and SOR in violation of the antitrust laws.


Here is the Asian parallel to the LIBOR manipulation scandal that rocked the financial world a few years back--yet much of the case turned not on the laws about the financial institutions, but on the laws about personal jurisdiction. This is a constant theme when dealing with Asia-themed litigation in the United States, where personal jurisdiction is at least half of the game in all cases.

Wednesday, October 18, 2017

Case of the Day: Sejin Precision Indus. Co. v. Citibank, N.A., 2017 U.S. Dist. LEXIS 132793 (S.D.N.Y. June 26, 2017)


Plaintiffs are six South Korean mid-sized manufacturers alleging fraud by the Korean affiliate of the defendant Citibank. The alleged misrepresentation involved a financial product called "KIKO," which stands for "knock-in, knock-out." KIKO is a type of hedge against the fluctuations in foreign exchange rate, to which the plaintiffs were exposed as exporters who receive payments in USD while spending money in KRW. In essence, the plaintiffs alleged that Citibank's Korea affiliate marketed KIKO in a way that misled them on KIKO's risks, eventually costing them over US $40 million when the USD-KRW exchange rate fluctuated in the direction adverse to the plaintiffs.

The court first found that all the claims were time-barred, as the six-year statute of limitations under the New York law has run. The court also found the defendant's assurance that KIKO was a "zero cost" instrument was a prediction of future events (that the USD would appreciate,) which cannot serve as a basis of a fraud claim. The court further found the plaintiffs' reliance on the defendant's representations was unreasonable, as the transactions were clearly structured for the plaintiffs and the bank to stand opposite of each other. The court also found there was no fiduciary relationship between the plaintiffs and the defendants.


This is a holdover from the 2008 financial crisis, when the USD appreciated sharply and caused massive losses to companies holding option products such as these. There was an earlier litigation in South Korea regarding this product (which went all the way up to Korea's Supreme Court,) and the plaintiffs lost there also. Although East Asia overall survived the 2008 crisis better than the U.S. and Europe, but certainly there were segments that suffered.

Tuesday, October 10, 2017

Case of the Day: Yang v. Asiana Airlines, Inc., 2017 U.S. Dist. LEXIS 129174 (N.D. Cal. Aug. 14, 2017)


The case concerns Asiana Flight 214, which departed from Seoul, South Korea and crash-landed at San Francisco International Airport on July 6, 2013. Asiana Airlines is based in South Korea. The two plaintiffs are Chinese nationals who began their trip from Shanghai, China and transferred onto Flight 214. The plaintiffs had "open jaw" round-trip tickets: the departing trip went from Shanghai to San Francisco via Seoul, and the return trip was scheduled to be from Los Angeles to Shanghai via Seoul.

The court granted the motion to dismiss for lack of subject matter jurisdiction. Article 33 of the Montreal Convention provides an action for damages must be sought in one of the five jurisdictions: (1) the carrier's domicile; (2) the carrier's principal place of business; (3) situs of the contract; (4) destination; (5) passenger's primary residence in which the carrier conducts business. The court found that even in case of an open jaw ticket, the complete round-trip meant that the passengers' final destination was Shanghai, China. The court also found the three-month stay in the United States to receive medical treatment did not establish primary residence.


It is always fascinating to see how the case law builds incrementally. Essentially, the plaintiffs' entire case for U.S. jurisdiction hinged on the fact that their tickets were open jaw. And it genuinely was an open question, until the court addressed the point.

Tuesday, October 3, 2017

Case of the Day: Kia W. v. H.M., 2017 Ill. App. Unpub. LEXIS 1684 (Ill. App. Ct. Aug. 14, 2017)


Appellant K.W. is a resident of Chicago, Illinois and paternal grandmother of E.S., a female infant. E.S. was born in prison in Bali, Indonesia, as her parents (both of whom are U.S. citizens) were incarcerated in Indonesia for murdering E.S.'s maternal grandmother. Pursuant to Indonesian prison regulations, E.S. was allowed to live with her mother until the age of two, after which the child's custody must be turned over a guardian. As E.S. turned two years old in March 2017, K.W. filed a petition to be appointed as E.S.'s guardian with the Illinois Circuit Court. The lower court denied the petition, citing lack of personal jurisdiction as there was no service of process effectuated to the parents who were imprisoned in Indonesia.

The Appellate Court affirmed. The court found that the service of process was inadequate, as there is no indication that the parents received notice. The court further found that E.S. did not have an estate in Illinois as E.S. was born in Indonesia and was never present in Illinois.


Holy cow, what a case. On one hand, I can see where the court is coming from. The entire case is being proceeded ex parte, with a pretty thin set of papers--essentially, no more than a FedEx receipt to an Indonesian city in the incarcerated parents' general vicinity. On the other hand, it is pretty hard to read with a straight face a sentence like this: "petitioner's allegation about the parent's continued incarceration for several more years fails to rebut the presumption that they are willing and able to make and carry out decisions about E.S.'s daily care." Seriously? Does the court really think a mother who would be in prison for eight more years and a father who would be in prison for 16 more years are able to carry out decisions about the daughter's daily care?

With a caveat that I am not an expert in family law--though I am one in international litigation--I don't necessarily see anything the court did that was wrong in the law. But this decision nonetheless is shocking in its heartlessness. A two-year-old U.S. citizen was born in a foreign prison and is about to taken out of the prison and put into a society with which (it appears) she has connection--and the court had nothing to say about that. As a matter of law, petitioner probably should have begun an action in Indonesia. But that's easy for me to say, since my clients are usually multi-billion dollar corporations doing business all around the world. In a case like this, the court should have done more to assist the petitioner and ultimately E.S.

Thursday, September 28, 2017

Academic Corner: Wedding Cakes, and Pitfalls of "Common Sense"

A personal note first. While attending Columbia Law School, I learned Civil Procedure from Professor Michael Dorf, who now teaches at Cornell Law School. Professor Dorf runs a popular law blog Dorf on Law along with a number of esteemed law professors. 

One of the Dorf on Law bloggers, professor Eric Segall at Georgia State University College of Law, recently wrote a post on the upcoming Supreme Court case of Masterpiece Cakeshop Ltd. v. Colo. Civil Rights Comm'n, more commonly known as the "cake baker case for a gay wedding" case. Professor Segall believes that there is no First Amendment protection for the cake baker who, based on his religious conviction, refused to bake a wedding cake for a gay wedding. I disagree with Professor Segall's argument, and this post explains why. 

Fair warning: this post has nothing to do with Asia or transnational litigation / arbitration. If you are a regular reader for those topics, you can safely skip this post. I am writing this post simply because Professor Segall's post piqued my interest--in one part because I am a religious person, and in another part because Professor Segall's post displays a common error in conceptualizing religion that is worth addressing.

Onto the point then. Professor Segall's point can be summarized into the following syllogism: (a) First Amendment only protects the "exercise of religion"; (b) baking a cake is not an "exercise of religion," as selling a commercial product for a profit is not, and cannot be, an "exercise of religion"; (c) therefore, First Amendment is not implicated. One paragraph from Professor Segall's post crystallizes his point:
When a baker who bakes cakes for a living bakes a cake for a wedding, he is not exercising religion, he is baking a cake. We know this because it is obvious. When I go swimming, or appear at a law conference to talk about the separation of church and state, or make business decisions about my employees' health insurance, I am not exercising religion. This idea should not have to be explained.
Contrary to his confident declaration, however, I do think Professor Segall does have to explain. 

What is the error that piqued my interest? The error is that, in Professor Segall's view, "exercise of religion" amounts to no more than "performing a religious act, ritual or ceremony." (Professor Segall might agree, that "exercise of religion" may include certain actions that can be constructively interpreted as a performance of a religious act, ritual or ceremony, such as a pacifist refusal to serve in the military, but let's set that aside for now.)

I find this error interesting because it is so common. My sense is that the current-day United States is so irreligious (which is not the same thing as atheistic) that most Americans have lost sight of what having a religion means. Instead, they focus on the outward signifiers of religion--church attendance, certain garments, or certain dietary codes--and believe religion to be the sum of those signifiers, and nothing more. Note that this is true even with most Americans who consider themselves religious; rather than conceptualizing religion as a comprehensive worldview that guides one's every thought and action, they compartmentalize their lives such that their so-called religion is reduced to a checklist of behaviors that conveniently fits around their pre-existing vice and prejudice. (Rod Dreher recently wrote a good op-ed on the New York Times explaining this type of error committed by conservative Christians.)

But neither the writers of the Constitution nor the Supreme Court jurisprudence on religious freedom ever endorsed this type of irreligious conception of religion. Rather, the Supreme Court has repeatedly established that religion is a fundamental component of one's conscience, and the "exercise of religion" is not reducible only to "religious action, movement or exertion," to use Professor Segall's words. In other words, the First Amendment guarantee for exercise of religion is not merely a guarantee over one's right to attend the church on Sundays, or to refuse to eat pork. Instead, it is part and parcel of the broader guarantee of individual conscience, the most foundational freedom of a liberal political system.

One of the most celebrated Supreme Court cases, W. Va. State Bd. of Educ. v. Barnette, 319 U.S. 624 (1943), is the clearest example of this line of jurisprudence. Barnette, famously, involved the refusal of Jehovah's Witnesses to salute the American flag. In what is touted as the finest sentence written in the history of Supreme Court opinion, Justice Robert Jackson wrote: "If there is any fixed star in our constitutional constellation, it is that no official, high or petty, can prescribe what shall be orthodox in politics, nationalism, religion, or other matters of opinion or force citizens to confess by word or act their faith therein." Following Barnette, the Supreme Court held in Wooley v. Maynard, 430 U.S. 705 (1977) that the State of New Hampshire must provide an alternate license plate for Jehovah's Witnesses who did not subscribe to the state's motto, "Live Free or Die." In neither Barnette nor Wooley, the "action, movement or exertion" involved (saluting the American flag, driving a car with the state license plate) was a commonly recognized religious signifier. No matter, said the Supreme Court--the First Amendment protects those who refuse to salute, and those who refuse to drive a license plate with a state motto that violated their religious conscience.

To be clear, in Employment Div. v. Smith, 494 U.S. 872 (1990), Justice Antonin Scalia wrote the majority opinion that held generally applicable laws that burden religion do not implicate the Free Exercise Clause. Professor Segall notes that for the cake baker to prevail, the Supreme Court must overturn Smith. I would agree, if we were referring to the most aggressive interpretation of Smith possible. Smith was a clear deviation from the then-existing the Free Exercise Clause jurisprudence, likely occasioned by the Court's willingness to bend to the War on Drugs being waged at the time. (As an aside, Smith is the reason why I am skeptical of the claims about Justice Scalia's learned religiosity.) Based on the standard articulated in Barnette, the most aggressive interpretation of Smith--that a religious exercise is to be compartmentalized into a portion that steers clear of the "generally applicable laws"--cannot stand. At any rate, we have seen the Supreme Court gradually stepping away from the most aggressive interpretation of Smith. In Church of Lukumi Babalu Aye v. City of Hialeah, 508 U.S. 520 (1993), the Supreme Court found that the local ordinance prohibiting animal cruelty infringed upon Santeria church's ritual of animal sacrifice, although prohibition of animal cruelty could arguably considered a generally applicable law. Similarly in Hosanna-Tabor Evangelical Lutheran Church & Sch. v. E.E.O.C., 565 U.S. 171 (2012), the court unanimously held that a school run by a church was not subject to a suit by a former teacher based on Americans with Disabilities Act--a generally applicable law if there ever was one. It wouldn't be surprising for the court in Masterpiece Cakeshop to take another step away from Smith.

That is my rejoinder to Professor Segall. As an aside--to me, the most salient legal issue in Masterpiece Cakeshop is not whether cake-baking is a religious exercise. If the prior Supreme Court cases are any indication, it is, depending on the message that a specific cake may impart. (Just as much as a flag salute or driving a car with a certain license plate can be a religious exercise.) What distinguishes Masterpiece Cakeshop from Barnette or Wooley (or even Smith) is not the "exercise" involved, but the means through which such an exercise is regulated. All of Barnette, Wooley and Smith involved a regulation applied directly by the state or state instruments:  public school board, department of motor vehicles, or the state government. In contrast, the regulation in Masterpiece Cakeshop comes from a private person who makes use of a state non-discrimination law. In this sense, Masterpiece Cakeshop is more akin to Hosanna-Tabor, which also involved a private person suing the church based on Americans with Disabilities Act.

Wednesday, September 27, 2017

Case of the Day: Gov't of the U.S. Virgin Islands v. Takata Corp., 2017 V.I. LEXIS 125 (V.I. Super. Ct. June 19, 2017)


The defendants are Japanese air bag manufacturers that supply air bags for Honda cars. Government of U.S. Virgin Islands sought injunction and damages for the defendants' role in equipping cars with defective air bags. Defendants moved to dismiss based on lack of personal jurisdiction and failure to state a claim.

The court found it had personal jurisdiction, as the defendants targeted USVI as "one of the four 'priority regions' that experience 'higher levels of heat and absolute humidity'" and derived substantial revenue from the territory. The court also found the plaintiff established a prima facie case for a violation of CICO, USVI's equivalent of RICO, as well as USVI's Consumer Fraud and Deceptive Business Practices Act and common law claims of public nuisance. The court further held the claims were not preempted by the federal Motor Vehicle Safety Act.


A case from U.S. Virgin Islands! According to the court's website, the Superior Court is the general jurisdiction trial court, whose decisions may be appealed to the USVI Supreme Court made up of three justices. As international litigators, you never know what jurisdiction your next litigation may take you.

The case itself is also interesting. The analysis is fulsome and sophisticated, but also slightly off-kilter with the prevailing trend in federal litigation of declining jurisdiction for foreign defendants. Perhaps it helped that the plaintiff was the government.  Also interesting is that the Honda Motor Company joined the government as one of the plaintiffs--a sound strategy to piggyback off the deference that the court may show to the government as the plaintiff.

Friday, September 22, 2017

Case of the Day: Dick's Sporting Goods v. PICC Prop. & Cas. Co., 2017 U.S. Dist. LEXIS 119983 (W.D. Penn. July 28, 2017)


A customer bought a fitness ball manufactured by a Chinese company from Dick's Sporting Goods, was injured from it, and sued the company in the Pennsylvania state court. The Chinese company had an insurance policy from PICC Property and Casualty Company Ltd., a Chinese insurance company. The insurance policy also covered DSG as a third party beneficiary. The insurance company, however, refused to cover the underlying state court litigation. DSG then sued the defendant insurance company. The defendant claimed the forum selection clause in the contract required the dispute come before a Chinese court.

The court found that the forum selection clause is binding even on the third party beneficiary, and the plaintiff did not make an adequate showing for forum non conveniens.


The first line of the magistrate judge's opinion reads: "International commerce creates international consequences. One such consequence is litigating a garden-variety-insurance dispute on the other side of the world." Isn't that the truth! It's not quite Robert Jackson's quote in Board of Education v. Barnette ("If there is any fixed star in our constitutional constellation, it is that no official . . . can prescribe what shall be orthodox in politics . . ."), but for international litigators, it is such an important point. Something as mundane as an insurance dispute can suddenly go up several factors in difficulty when it crosses borders.

Another interesting point is how the corporations' preference for a forum selection clause is starting to backfire. Until around 15 to 20 years ago, U.S. corporations loved the U.S. court's strict enforcement of the forum selection clause, because it was usually the corporations that were choosing the forum. But as U.S. companies come to rely ever more on trades with China, increasingly it is the Chinese companies dictating the forum selection clause upon a U.S. company, as is the case here.