Case of the Day: Pearce v. Mizuho Bank, 2018 U.S. Dist. LEXIS 146005 (E.D. Pa. Aug. 27, 2018)

Summary:

Plaintiff was a bitcoin investor with Mt. Gox, previously one of the world's most prominent bitcoin exchanges. On behalf of those similarly situation, plaintiff sued Mt. Gox's president and Mizuho Bank, the exclusive processor of all bank deposits and withdrawals made by Mt. Gox during relevant time period. Plaintiff alleged that, in an attempt to pressure Mt. Gox into severing the banking relationship, Mizuho made it difficult for Mt. Gox's customers located abroad to withdraw funds from Mt. Gox accounts, which eventually led to Mt. Gox's bankruptcy.

The court granted Mizuho's motion to dismiss based on lack of personal jurisdiction. The court found there was no purposeful availment of the Pennsylvania forum, as refusing to do business with a customer in Pennsylvania is not an activity, but an absence of activity.

Takeaway:

This is the correct result: despite the valiant attempt to flip the negative to the affirmative, there is no specific jurisdiction when the defendant didn't do something in the forum. It is also ironic to see traders in bitcoin--something that was intended to transcend artifices like countries and borders--are being stymied by a classic application of the territoriality principle.

Case of the Day: Intercontinental Indus. Corp. v. Wuhan State Owned Indus. Holdings Co., 2018 U.S. App. LEXIS 15782 (9th Cir. June 12, 2018)

Summary:

Plaintiff is a U.S. corporation that purchased a tool-making factory in Wuhan, China, and expanded the factory by acquiring new land and built additional facilities. Plaintiff claimed the defendant demanded an additional investment of $10 million, withdrew $21 million from the factory's bank account before freezing the account, and expelled the American managers from the facilities. The district court found it lacked subject matter jurisdiction, because of foreign sovereign immunity.

The Ninth Circuit affirmed. The court found the defendant's actions were not "an act performed in the United States in connection with a commercial activity of the foreign state elsewhere[,]" as provided in the exceptions in the Foreign Sovereign Immunity Act. 

Takeaway:

Short opinion, and fairly indisputable in terms of legal doctrine. But the case is a sobering one, as this type of straightforward thuggery against foreign investors is not uncommon in China. With the U.S. courts unable to provide a remedy, what can a plaintiff in this situation do, other than to simply not do any business with Chinese state-owned entities (which are a major part of the Chinese economy)?

Case of the Day: Hardy Exploration & Prod. (India) v. Gov't of India, 2018 U.S. Dist. LEXIS 95965 (D.D.C. June 7, 2018)

Summary:

Petitioner is a hydrocarbon extraction company that had a contract with the government of India to explore and extract petroleum and natural gas off the southeastern coast of India. The contract provided the petitioner had two years to assess the commercial viability of a discovered deposit if the deposit was petroleum, and five years if the deposit was natural gas. The petitioner then discovered a deposit that it claimed to be natural gas; India claimed it to be petroleum. After the two year assessment period, India claimed the petitioner lost the right the deposit. The petitioner filed arbitration. The tribunal found in favor of the petitioner, ordering India to award back the right to the deposit. The petitioner then sought to confirm the award with the federal court in the District of Columbia.

The court denied the motion to confirm, noting that the tribunal order was a specific performance, and it is contrary to the public policy of the United States to compel specific performance from the foreign sovereign.

Takeaway:

A very rare case in which the court refuses to confirm an arbitral award! It is very important for litigators to remember that enforceability is everything. With the court refusing to recognize this award, it is not clear if the petitioner will be able to get any relief after all they have gone through.

Case of the Day: Rockefeller Tech. Invs. Asia VII v. Changzhou Sinotype Tech. Co., 2018 Cal. App. LEXIS 515 (Cal. App. Ct. June 1, 2018)

Summary:

Judgment creditor held a default judgment in excess of $414 million against a judgment debtor located in China. The judgment debtor moved to set aside the judgment based on inter alia improper service that did not follow the terms of the Hague Service Convention. The lower court found the service was proper, because although the service did not follow the terms of the Convention, the parties alternatively agreed to accept service by mail.

The appellate court reversed, finding that parties may not contract around the requirements of the Hague Service Convention.

Takeaway:

Simple lesson, but massively consequential point: you cannot contract around the Hague Service Convention!

Ongoing Case Update: Zhang v. Chinese Anti-Cult World Alliance, 2018 U.S. Dist. LEXIS 90107 (E.D.N.Y. May 30, 2018)

Summary:

This is a continuation of the case previously discussed in this post. Plaintiffs are New York residents who are practitioners of Falun Gong. Defendant organization is a New York non-profit whose mission is to expose Falun Gong as "an evil and dangerous threat to society." In addition to circulating pamphlets denouncing Falun Gong, members of the defendant organization allegedly engaged in harassment and altercation with the plaintiffs. Among other claims, plaintiffs claimed damages pursuant to Freedom of Access to Clinic Entrances Act (18 U.S.C. s. 248), which protects access to a place of religious worship. The defendants then challenged the constitutionality of FACEA, arguing the law exceeds the authority given to Congress under the Commerce Clause.

While the court noted that the constitutionality of FACEA was not obvious because it was enacted shortly before the U.S. Supreme Court significantly shifted its Commerce Clause analysis, the court nonetheless found FACEA constitutional as "[p]laces of religious worship can be areas of commerce." The court then certified this question for an interlocutory appeal.

Takeaway:

In the early 20th century, it was the Jehovah's Witnesses who led the fight for religious freedom in the United States. In the 21st century, it's Falun Gong and its right to criticize the Chinese government. This opinion is from late May, but there is even greater urgency to this question as we are learning that the Chinese government likely have put more than a million Muslims in concentration camps. What a time we live in.

Milestones: Haung Tang v. Aetna Life Ins. Co., 523 F.2d 811 (9th Cir. 1975)

Summary:

Plaintiff is a mother of a decedent who was killed by her husband. The husband killed the decedent in San Diego, California, and thereafter fled to Taiwan. There, the husband was tried, convicted and incarcerated for homicide. The decedent had a life insurance policy, for which the husband was the primary beneficiary and the plaintiff mother was the alternate beneficiary. The mother sued to collect the life insurance proceeds; the husband cross-claimed, averring that because he killed his wife while being temporarily insane, he was not precluded from collecting the insurance proceeds. The district court found that the husband was precluded from litigating the insanity argument, because the husband raised the argument in the Taiwanese court and lost.

The Ninth Circuit reversed. The court found that while there may be some occasions in which issue preclusion is permissible with a foreign judgment, plaintiff failed to meet the burden of pleading and proving the identity of issues, because plaintiff provided no foundation for a conclusion that the insanity defense in Taiwan is the same as legal insanity under California law.

Takeaway:

It's an old case, but always a good lesson to remember: because estoppel is such a powerful weapon, it always requires active pleading and establishment.

Media Appearance: "South Korea is Going Crazy over a Handful of Refugees" on Foreign Policy

A new column about Korea from me, this time about the liberal democracy in the south dealing with the 500-odd refugees from Yemen:

It is easy to be disappointed at this response coming from a liberal administration, one that was born out of the heroic months-long protests that resulted in the impeachment and removal of the deeply corrupt and authoritarian President Park Geun-hye. Yet polling reveals the dispiriting reason why the Moon administration is at least partially pandering to anti-refugee sentiments: The issue potentially poses the greatest threat to the administration’s stability yet, as it strikes at the foundation of its support, namely young voters, women, and the middle class.

In a recent survey, conducted by Hankook Research, 56 percent of those surveyed opposed admitting the Yemeni refugees, while only 24 percent supported letting them in. But women objected more strongly than men (61 percent to 51 percent), respondents in their 20s (70 percent) and 30s (66 percent) objected the most among all age groups, and middle-income households (62 percent) expressed the strongest objections against admitting the refugees.

South Korea is Going Crazy over a Handful of Refugees [Foreign Policy]

There have been persistent claims that South Korean democracy has been able to survive because of its ethnic homogeneity, closing off a potential major fault line. I used to give no credence to those claims, but the recent turn of events is a score one for those claims.

Case of the Day: China Agritech, Inc. v. Resh, 138 S. Ct. 1800 (2018)

Summary:

The case concerns a class action shareholder litigation against China Agritech, alleging securities fraud. Under the Securities Exchange Act of 1934, the statute of limitations for securities fraud is two years upon discovery of the fact constituting the violation. The statute of limitations began to run when the first class action against China Agritech was filed in 2011. In the following year, the district court denied class certification. Shortly thereafter, a new set of plaintiffs filed another round of class action suit, raising new evidence. The court denied the class certification once again. The plaintiffs in this case then filed a third round of class action in 2014, arguing the statute of limitation had been tolled while the court was considering the class certification. Noting the circuit split on this issue, the Supreme Court granted certiorari.

The Supreme Court unanimously ruled the successive class action suits do not receive the benefit of the tolling provided by Am. Pipe & Constr. Co. v. Utah, 414 U.S. 538 (1974). Justice Ruth Bader Ginsburg's opinion held that, given the "preference for preclusion of untimely successive class actions" appearing on the Federal Rules of Civil Procedure and the Private Securities Litigation Reform Act, the statute of limitations cannot be tolled practically forever as long as the plaintiffs try.

Takeaway:

Eminently sensible result that overruled the Ninth Circuit position, which was bonkers. The fact that the company at issue was a Chinese company can also serve as a broader commentary on where the U.S. economy is today.

Case of the Day: Benge v. Williams, 2018 Tex. LEXIS 441 (Tex. May 25, 2018)

Summary:

In a medical malpractice case involving a botched hysterectomy surgery, the plaintiff patient prevailed in the lower courts. In the appeal, the defendant-appellant argued that the plaintiff-appellee's expert witness was not qualified to give testimony because he was not "practicing medicine." The expert was a board certified obstetrician and gynecologist who later also attended and graduated from law school, and began a teaching career in Texas by teaching law at the University of Houston Law Center and medicine at Baylor College of Medicine. In 2011, the expert moved to South Korea to teach law and medicine at Yonsei University, while continuing to collaborate with a Baylor professor.

The court rejected the argument that the expert was not "practicing medicine" because he was not accredited to see patients in South Korea, and also rejected the argument that Yonsei University Medical School was not an accredited institution because the school was not accredited in accordance with U.S. standards.

Takeaway:

It is of course the litigant's prerogative to make this type of hyper technical argument, but the argument needs to pass the laugh test. It is an impossibly heavy lift to claim that a person with a credential like the expert described here, going from teaching at one elite hospital after another, was not "practicing medicine," even though the legal battle may be over a term of art.