The Court Procedures of Matimak Trading Co and D.A.Y. Kids Sportswear Inc - Case Study Example

(MATIMAK TRADING CO. v. ALBERT KHALILY, d/b/a Unitex Mills, Inc., and D.A.Y. KIDS SPORTSWEAR INC Citation (United s Court of Appeals for the Second Circuit 118 F.3d 76 (1997)) Facts: The Plaintiff, Matimak Trading Company, appealed the order of the United States District Court for the Southern District of New York, which dismissed the plaintiff's claims for lack of jurisdiction due to the plaintiff's being incorporated under the laws of Hong Kong. The United States Court of Appeals for the Second Circuit reconsidered the lower courts grant of dismissal, in light of whether Hong Kong may be regarded as a "foreign state" for the purpose of bringing suit in a U.S. court (alienage jurisdiction). The relevant laws in this case are U.S. Constitution, Article III, Section 2, Clause 1, and 28 United States Judicial Code 1332(a)(2). U.S. Const. art. III, 2, cl. 1. grants federal judicial power over all cases that are between a U.S. State or the citizen of a U.S. State and any "foreign States, Citizens or Subjects". 28 U.S.C. 1332(a)(2) provides for jurisdiction over a civil action that is between the citizen(s) of a U.S. State, and the "citizens or subjects of a foreign state". Procedure (Backround): The plaintiff attempted to sue Albert Khalily and D.A.Y. Kids Sportswear, Inc., in the Southern District of New York, on the basis of alleged breach of contract. Both defendants were incorporated in the State of New York. The plaintiff claimed the right to bring suit in a U.S. court under 28 U.S.C. 1332(a)(2), which grants jurisdiction to the court over civil disputes between U.S. citizens and "citizens or subjects of a foreign state". During the breach of contract case, in June 1996, the court, of its accord, brought up the issue of whether it had proper jurisdiction over the matter. After the parties involved had briefed the issue, in August 1996, the court dismisssed it on the basis of lack of jurisdiction, having determined that, for the purposes of diversity jurisdiction, Hong Kong is not a "foreign state", and, therefore, the plaintiff cannot be considered a "citizen or subject" of one. Issue(s): (a) Does "Hong Kong" merit the legal status of a "foreign state", thus allowing Matimak the status of a "citizen or subject of a foreign state" for the purposes of alienage jurisdiction; (b) Does Matimak have the status of a "citizen or subject" of the United Kingdom because of the Hong Kong's status as a "British Dependent Territory", when Matimak brought suit; (c)Does every non-U.S. citizen, in fact, have the right to claim alienage jurisdiction, when engaged in a civil dissent with a U.S. citizen Holding: (a) No. Hong Kong is not recognized a "foreign state" by the Executive Branch of the U.S. Government, therefore, Matimak is not a "citizen or subject of a foreign state" for the purposes of alienage jurisdiction. (b) No. Matmak is not a "citizen or subject" of the United Kingdom because the United Kingdom does not recognize corporations founded in Hong Kong as its "citizens or subjects". (c) No. Only the "citizens or subjects" of foreign states which are recognized as being sovereign states by the U.S. Government may claim alienage jurisdiction. Reasoning: (a) The definition of "foreign state" is not explicitly provided within the Constitution, nor in the relevent law. However, 13B C. Wright, A. Miller & E. Cooper, Federal Practice & Procedure 3604 (1984) holds that the generally recognized definition of a "foreign state", for purposes of U.S. legal status is a state that is recognized formally by the Executive Branch of the Federal Government. The Court used this definition to provide a ruling on the question of alienage jurisdiction in Iran Handicraft and Carpet Export Center v. Marjan International Corp., 655 F. Supp. 1275 (S.D.N.Y.), aff'd, 868 F.2d 1267 (2d Cir. 1988). At that time, the Court determined that because only the President has the power to receive Foreign Ministers, formal recognition of "foreign states" is solely the realm of the Executive Branch, and not a matter for the courts to decide. Other precedent, as well as International Law, upheld this determination, and so found that under these terms, Hong Kong could not be considered a "foreign state". Matimak argued that the U.S. gave Hong Kong such recognition de facto, without formal acknowledgement, by entering into economic agreements with Hong Kong as though it were a sovereign state. Other cases where such de facto status was granted by the court, such as Murarka v. Bachrack Brothers, Inc., 215 F.2d 547 (2d Cir. 1954), however, were shown to have still taken into account the above mentioned criterion. Therefore, without official recognition by the Executive Branch, Hong Kong could not be considered a "foreign state". (b) Based on common practice and precedent, both in U.S. and International Law, the court affirmed the right of sovereign states to set their own criteria for determining who is a citizen or subject of theirs. In United States v. Wong Kim Ark, 169 U.S. 649, 668 (1898), the Court said that sovereign nations have the right to determine by the own laws, rules, and contitutions, who is and who is not entitled to their citizenship. Although Matimak alleged entitlement to British citizenship under British Nationality Act 1981, it was determined by the Court that the Act applies only to natural citizens and not to corporations; however, the Court also dtermined that if it did apply to corporations, Matimak would still not be a citizen under its provisions because Matimak had not fulfilled the requirements for citizenship. The British case Windert Watch Co. v. Remex Elecs. Ltd., 468 F. Supp. 1242, 1246 (S.D.N.Y. 1979) (citing British Companies Act 1948 406) firmly set the precedent under British Law that Hong Kong corporations are not British citizens or subjects. (c)All non-U.S. citizens are not entitled to invoke alienage jurisdiction because, although this may have been what the Constitutional Framers originally intended, "statelessness", as it is known today did not exist at the time the Constitution was drafted. In Houghton Mifflin Co. v. Stackpole Sons, Inc., 104 F.2d 306, 309-10 (2d Cir. 1939), it was dtermined that "statelessness" was a recent phenonenon, which would likely cause legal confusion in the future. Because the status of being legally stateless is more common now, it has become well entrenced in International Law. Although stateless persons are thus not allowed to sue in Federal Court under alienage jurisdiction, it was determined in Romanella, 1997 WL 272247, at *1; Blair Holdings, 133 F. Supp. At 501 that they may seek relief in state venues. Concurring/dissenting opinions (Opinions): Altimari, Circuit Judge, dissents, arguing that every non-U.S. citizen does, in fact, have the right to claim alienage jurisdiction, when engaged in a civil dissent with a U.S. citizen. He bases this on the above-mentioned point that the Framers of the Constitution most likely had this in mind when drafting the alienage jurisdiction clause. In 1891, Chief Justice Story, wrote that any person who is not a citizen of the United States may generally be considered an alien who is entitled to sue in a U.S. court under alienage jurisdiction. 11 Am. U.J. Int'l L. & Pol'y 195, 211 (quoting Joseph Story, Commentaries on the Constitution of the United States at 499 (5th ed. 1891); The Federalist No. 80, at 58889 (Alexander Hamilton) (B. Wright ed., 1961)). He supports the claim that the U.S. has recognized Hong Kong de facto, by virtue of economic agreements and treaties, and concludes that it is a mistake to allow foreign laws to dictate the rulings of U.S. Courts. WEST SHELL, JR., et al., Plaintiffs v. R. W. STURGE LTD., et al., Defendants Case No. C-1-93-0802 United States District Court For The Southern District Of Ohio, Western Division 850 F. Supp. 620, 1993 U.S. Dist. Decision December 10, 1993, Decided summary: The plaintiffs wished to rescind their international contract with Loyds of London, which stated irrevocably the forum of any dispute would be British, claiming under the laws of their native state of Ohio, they were afforded greater protections. 1.Hauck, Middendorf, and Shell, members of Loyds of London and residents of Cincinnati, Ohio, filed a complaint in the Hamilton County Court of Common Pleas, Case No. A9308995 alleging that Sturge sold the plaintiffs securities which were not registered and not exempt from registration as required by O.R.C. 1701.01 et seq. (Ohio Blue Sky Laws); therefore, the securities and all related documents were illegal and void. Plaintiffs alleged that securities sold by Sturge, were sold through persons not licensed to sell securities in Ohio violating the Ohio Blue Sky Laws. Plaintiffs alleged that the Corporation, Society, and Council of Loyd's of London aided Sturge in the sale of the illegal securities; therefore, they were jointly and severally liable with Sturge. 2. Issues: 2.1.Does the issue of greater protection have weight over the forum of international law. Plaintiffs became members (Names) with Lloyd's in 1984, 1978, and 1985 respectively, specifically agreeing that their liability would extend to their entire net worth, even though they had no control over potential loss inherent to the insurance business. Under the terms of their contract, disputes were to be heard and arbitrated by British Law. They conceded no misconduct by defendants in connection with their original investment sales. Initially, they received profits. Recently, they suffered losses. The future outcome of their investments with Lloyd's is undetermined, however; they have a reasonable belief their losses will far exceed their profits. They purchased securities through the defendant, a broker in the state of Ohio, who under the terms of contract with Loyds, was their Member Agent. Plaintiffs sought severance with Lloyd's and to be returned to their original positions, as though investments had never occurred. Plaintiffs were willing to return any profits received by virtue of their investments with Lloyd's. Plaintiffs turned to the protections allegedly afforded them under the Ohio Blue Sky Laws, in order to obtain rescission. While the broker's credentials were of question, the motions before the court did not address this issue. The plaintiffs sought a temporary injunction of funds on grounds that dispersal of funds would cause undue economic injury. The court initially granted an ex parte restraining order, agreeing the issue of venue would be decided first. A motion for temporary injunction on the part of the plaintiff was filed. The defendant filed a concurrent motion for dismissal on the basis of improper venue, claiming that their agreement was governed by international law, specifically the contract between both parties, which placed the forum in British Court. the court ruled that contractual aspects of international business had equal weight with Ohio's laws governing securities, specifically regarding legal forums chosen by the parties of international contracts. The motion for the defense was granted. The court dismissed this civil suit on the basis that it had been filed in an improper venue. 2.2 Does diversity of protection have weight over the forum of international law. The plaintiffs claimed that the original contract was inadequate to redress their injuries and the laws governing securities transactions in Ohio were superior for their purpose, to their terms of contract under British law. The court determined that under British law, the plaintiffs had adequate recourse. The court construed this to be artful pleading. On appeal, Pursuant to Sixth Circuit Rule 24 ELECTRONIC CITATION: 1995 FED App. 0176P (6th Cir.) File Name: 95a0176p.06 No. 94-3119 UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT I. The Bremen v. Zapata Off-Shore Co. , 407 U.S. 1 (1972). states "The correct approach [is] to enforce the forum clause specifically unless" plaintiffs "[can] clearly show..." 1. that enforcement would be unreasonable and unjust 2. that the clause was invalid for such reasons as fraud or overreaching. Bremen , 407 U.S. at 15. 3. that "trial in the contractual forum will be so gravely difficult and inconvenient that [they] will for all practical purposes be deprived of [their] day in court," id. at 18, 4. "enforcement would contravene a strong public policy" of the forum state. Id. at 15. An affidavit prepared by Barrister John Lewis Powell stated one remedy "under English law for misrepresentation (whether innocent, negligent or fraudulent) is rescission", that plaintiffs may be entitled to indemnity against specific liability, and could make claims against defendants based on tort law; including deceit, breach of contract, negligence, and breach of fiduciary duty. " Citing this as well as three additional cases, the court agreed that plaintiffs have remedies which they can pursue in England. In summary, both courts stated that nationals seeking remedy in American courts for matters of international contracts simply because the law reflected more favorably upon them here, had a parochial approach. In such cases, where agreement of forum and country of law were already established, seeking remedy under American law would reflect poorly in international trade relations. Works Referenced Ray, August. Matimak Trading Co. v. Khalily and D.A.Y. Kids Sportswear Inc., In International Business Law, Text , Cases and Readings (Ed.4), (pp. 12-16). Ray, August. Shell v. R.W Sturg, In International Business Law, Text , Cases and Readings (Ed.4), (pp. 152-155). How to Write A Brief, accessed on 1 Sept. 2006, at URL: http://www.4lawschool.com/howto.htm Read More