In Kingstown Capital Mgmt. v. Vitek, 0:20-cv-03406 (2d Cir. Sep. 1, 2022), the Second Circuit affirmed the dismissal of a RICO suit filed in the Southern District of New York by a Delaware investment firm against foreign defendants for conduct that occurred outside the United States and was already the subject of a foreign proceeding under foreign law.
Kingstown Capital Management, a Delaware entity with offices in New York, was an investor in a Luxembourg-based real estate company. Id. at *4. Kingstown sued that company and its directors in Luxembourg for alleged violations of Luxembourg’s corporate governance rules. Id. While that action was pending, Kingstown filed a second suit against the same defendants in the Southern District of New York. Id. This suit alleged substantially the same underlying conduct but asserted claims under U.S. common law and the civil provisions of the Racketeer Influenced and Corrupt Organizations (“RICO”) Act. Id. The district court dismissed the action for forum non conveniens and international comity. Id. Kingstown appealed.
The Second Circuit affirmed, finding that the district court’s forum-non-conveniens dismissal was not a clear abuse of discretion. That analysis turned on three elements: (1) the deference entitled to plaintiff’s choice of forum, (2) the adequacy of the alternative forum, and (3) the balancing of a private and public factors.
First, even though Kingstown had offices in New York and therefore was “in some sense” at home in the jurisdiction, its choice of forum was entitled only to “diminished deference” because virtually all other considerations pointed strongly in favor of a forum in Luxembourg. Id. at 9-10.
[T]he district court also rightly noted that nearly all of the significant events in this case took place in Europe; that virtually all of the evidence and witnesses are overseas; that the parties dispute whether the district court even has personal jurisdiction over all defendants; and that the salient difference between the proceeding in the United States and the proceeding in Luxembourg is the potential for treble damages under the RICO statute.
Second, the court confirmed that Luxembourg was an adequate alternative forum. Plaintiff did not dispute that the defendants were subject to jurisdiction in Luxembourg, and the district court was not required to condition its dismissal on the defendants’ consent to jurisdiction in Luxembourg. Id. Further, Luxembourg was an adequate forum even though it did not offer analogous statutory causes of action or treble damages. Id. at 11-12. It was enough that Luxembourg permitted litigation on the subject matter in dispute and offered remedies that were not “so clearly inadequate or unsatisfactory [as to be] no remedy at all.” Id. at 12. Similarly, Kingstown’s inability to pursue a criminal action in Luxembourg did not render its civil remedies inadequate. Id. at 12-13.
Third, the Second Circuit rejected Kingstown’s argument that the district court had erred in balancing the private and public factors relevant to the forum-non-conveniens analysis, concluding instead that Kingstown “merely disagree[s] with the outcome.” Id. at 13. Finding that the analysis tipped “decidedly in favor of dismissal,” the district court’s consideration of private factors emphasized that the case involved many foreign defendants beyond the subpoena power of the court, “massive foreign discovery,” and allegations of a scheme based entirely in Europe that inflicted injury on the defendant in Europe. 19-cv-3170, 2020 WL 5350492, at *10 (S.D.N.Y. Sep. 4, 2020). The public factors, too, weighed in favor of dismissal, since Luxembourg had the predominant interest in the outcome of the case and there was little reason to burden New York courts with deciding a foreign dispute under foreign law. Id.
A brief comparison to the decision in Metito (Overseas) Ltd. v. General Elec. Co., 05 Civ. 9478, 2006 WL 3230301 (S.D.N.Y. Nov. 7, 2006), illustrates just how much of the forum-non-conveniens analysis turns on the balancing of these case-specific factors. In Metito, the court rejected a forum-non-conveniens motion, finding that the balance of private and public factors did not warrant dismissal. Metito (Overseas) Ltd., 2006 WL 3230301 at *2, *5. As in Kingstown Capital Mgmt., Metito alleged wrongful conduct directed abroad. Most of the witnesses and evidence were outside the United States, making litigation in the United States the more costly proposition. Id. at *5. Also, because the plaintiff was a nonresident, its choice of forum was entitled to reduced deference. Id. Nevertheless, the court held that the alternative forum, even if it was sufficient as a matter of law, was not “significantly preferable to New York.” Id. Nor was New York “genuinely inconvenient.” Id. Unlike in Kingstown Capital Mgmt., there was no evidence that the foreign witnesses were unwilling or unable to appear in New York. Id. at *6. Both defendants were sophisticated, multinational corporations accustomed to international business practices and capable of using technological tools to minimize the cost of the case. Id. Further, the individual witnesses were distributed throughout multiple countries, including the United States, making no single forum significantly more convenient than the rest. Id. at *5. As for public considerations, the defendant’s domicile in New York gave New York courts an interest in the litigation that merited the burden of hearing the case and deciding matters of foreign law. Id. at *6-7.
When bringing a case, plaintiffs are wise to consider what jurisdiction might offer the most favorable conditions for the case. But even where jurisdiction exists in plaintiff’s chosen forum, courts will not defer to a plaintiff’s choice when a different forum is clearly more appropriate.
If you have questions about the proper forum for a legal action, contact Michael Rakower or Travis Mock.Kingstown Capital Management