U.S.O. Corporation v. Mizuho Holding Co ( 2008 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 07-3588
U.S.O. C ORPORATION,
Plaintiff-Appellant,
v.
M IZUHO H OLDING C OMPANY, et al.,
Defendants-Appellees.
A ppeal from the U nited States District Court
for the Northern District of Illinois, Eastern Division.
N o. 06 C 459— Joan H um phrey Lefkow , Judge.
A RGUED S EPTEMBER 3, 2008—D ECIDED O CTOBER 28, 2008
Before P OSNER, R IPPLE, and E VANS, Circuit Judges.
P OSNER, Circuit Judge. This diversity suit, in federal
court under 28 U.S.C. § 1332(d)(2)(C), charges conversion
by affiliated Japanese entities that we’ll refer to
collectively as “the bank.” The district judge dismissed
the suit on the basis of the doctrine of forum non
conveniens. That venerable judge-made doctrine, securely
a part of federal common law, authorizes a court to
dismiss a suit if making the defendant defend in that
2 No. 07-3588
court rather than in an alternative forum would burden
the defendant unreasonably. Sinochem Int’l Co. v. Malaysia
Int’l Shipping Corp., 549 U.S. 422, 429 (2007); Gulf Oil
Corp. v. Gilbert, 330 U.S. 501, 507-09 (1947); Piper Aircraft
Co. v. Reyno, 454 U.S. 235, 248-51 (1981) (“dismissal will
ordinarily be appropriate where trial in the plaintiff’s
chosen forum imposes a heavy burden on the defendant
or the court, and where the plaintiff is unable to offer
any specific reasons of convenience supporting his
choice”); In re Factor VIII or IX Concentrate Blood Products
Litigation, 484 F.3d 951 (7th Cir. 2007); Hyatt Int’l Corp. v.
Coco, 302 F.3d 707, 717-19 (7th Cir. 2002); Howe v. Goldcorp
Investments, Ltd., 946 F.2d 944, 950 (1st Cir. 1991).
The plaintiff, although incorporated in Delaware, is the
wholly owned subsidiary of a Japanese company, and its
headquarters are in Japan. It invested in a limited partner-
ship also created under Delaware law; and as with the
plaintiff the partnership’s principal place of business
was in Japan, and all its partners had Japanese addresses.
The partnership invested in another limited partnership,
which bought a building in Chicago. The suit charges
the bank with having misappropriated $6.95 million
from the plaintiff’s bank account in Japan after the
building was sold, that being the plaintiff’s share of the
proceeds from the sale. The suit also charges the bank
with having skimmed an unspecified percentage of the
annual return to which the plaintiff’s investment entitled
it before the bank was sold, and by doing so of having
reduced that return to $500,000 in each of the ten years
of the plaintiff’s indirect investment in the building.
No. 07-3588 3
Most of the alleged bad acts were committed in Japan
by Japanese persons and almost all the witnesses and
documents are there; and eight months after this suit
was filed the bank brought a mirror-image declaratory
judgment suit in a Japanese court. That litigation is pro-
ceeding, the Japanese court having denied the plaintiff’s
motion to dismiss the suit because of the pendency of
the present suit.
There is no reason for identical suits to be proceeding
in different courts in different countries thousands of
miles apart. Such parallel proceedings incite a race to
judgment in the hope that the judgment in the home
forum will favor the home litigant and be usable to block
the other suit by interposing a defense of res judicata in
it. Oddly, none of the lawyers in this case seems to know
much about Japanese law; they have been unable to tell
us what if any weight the Japanese court would give a
final judgment in the present suit should it end first. But
Japan does have a doctrine of res judicata, and though
narrower than ours it would bar an identical suit
provided the judgment pleaded in bar was a judgment on
the merits. Yasuhiro Fujita, 5 Doing Business in Japan, Part
XIV, § 5.04 (2008); J. Mark Ramseyer & Minoru Nakazato,
Japanese Law: An Economic Approach 144-45 (1999); Kevin
M. Clermont, “A Global Law of Jurisdiction and Judg-
ments: Views from the United States and Japan,” 37 Cornell
Int’l L.J. 1, 11-12 (2004); Shiro Kawashima & Susumu
Sakurai, “Shareholder Derivative Litigation in Japan: Law,
Practice, and Suggested Reforms,” 33 Stanford J. Int’l L. 9,
52-54 (1997).
4 No. 07-3588
One device for avoiding duplicate lawsuits is the doc-
trine of abstention articulated in Colorado River Water
Conservation District v. United States, 424 U.S. 800, 818
(1976). It has sometimes been applied when identical
concurrent litigation is, as in this case, pending abroad.
See, e.g., Finova Capital Corp. v. Ryan Helicopters U.S.A., Inc.,
180 F.3d 896, 898-901 (7th Cir. 1999); Ingersoll Milling
Machine Co. v. Granger, 833 F.2d 680, 685-86 (7th Cir. 1987);
Royal & Sun Alliance Ins. Co. v. Century Int’l Arms, Inc., 466
F.3d 88, 93-94 (2d Cir. 2006); Louise Ellen Teitz, “Both
Sides of the Coin: A Decade of Parallel Proceedings and
Enforcement of Foreign Judgments in Transnational
Litigation,” 10 Roger Williams U. L. Rev. 1, 18-21 (2004). But
as far as we know abstention has not been urged in
either suit by any party to the present suit.
The bank has made a compelling case for the dismissal
of this suit on the ground of forum non conveniens.
Dragging all those witnesses and documents from Japan
to Chicago, supplying interpreters for the witnesses and
translators for the documents, and conducting a trial
largely on the basis of testimony given through inter-
preters and of documents translated from their original
language, would impose unreasonable burdens not only
on the defendants but also on the district court. Moreover,
the law applicable to the issues in the case is almost
certainly Japanese law, with which American judges
have little familiarity. In fact, as we said, even the lawyers
in this case, though their clients are Japanese firms, have
little familiarity with Japanese law. And besides, the
litigation in Japan is well advanced and the Japanese
court has declined to abate it in favor of the U.S. litigation.
No. 07-3588 5
The plaintiff argues that there is a strong presumption
in favor of a plaintiff’s choice of forum, especially if the
plaintiff is an American and the forum is an American
court. In a veritable paroxysm of formalism the plaintiff’s
lawyers refuse to acknowledge that their client is “Ameri-
can” in only the most artificial sense, since it has no
American presence except a Delaware certificate of incor-
poration. It had an indirect investment in an American
building, but foreigners own a large chunk of the
American economy without being thought Americans; by
the end of 2006 foreign direct investment in the United
States had reached $1.8 trillion. James K. Jackson, “CRS
Report for Congress: Foreign Investment and National
Security: Economic Considerations,” June 27, 2008, p. 1,
www.fas.org/sgp/crs/natsec/RL34561.pdf (visited Oct. 3,
2008); see also U.S. Dept. of State, “Foreign Direct Invest-
ment,” www.state.gov/r/pa/prs/ps/2006/63553.htm, Mar.
22, 2006 (visited Oct. 3, 2008).
The plaintiff says that to look through the corporate form
to the nationality of the plaintiff’s managers and share-
holders is to pierce the corporate veil without an
adequate showing of undercapitalization, misrepresenta-
tion, neglect of corporate formalities, etc. That is nonsense.
The purpose of the veil is to shield shareholders from
personal liability for the corporation’s debts in order to
encourage investment; no one is trying to reach the per-
sonal assets of the plaintiff’s shareholders.
Insisting (and with a straight face) on the American-
ness of their foreign client, the plaintiff’s lawyers argue
that the presumption in favor of the plaintiff’s choice of
6 No. 07-3588
forum is nationalistic; it is about the right not of plaintiffs
in general but of American plaintiffs to sue foreigners in
American courts. Putting to one side for the moment that
the plaintiff is not really “American,” one can find lan-
guage supportive of the nationalistic interpretation in
some court of appeals decisions. In SME Racks, Inc. v.
Sistemas Mecanicos Para Electronica, S.A., 382 F.3d 1097, 1101
(11th Cir. 2004), for example, we read that courts “should
require positive evidence of unusually extreme circum-
stances, and should be thoroughly convinced that
material injustice is manifest before exercising any such
discretion to deny a citizen access to the courts of this
country.” (To the same effect, see, e.g., Adelson v. Hananel,
510 F.3d 43, 53 (1st Cir. 2007); Reid-Walen v. Hansen, 933
F.2d 1390, 1395 n. 7 (8th Cir. 1991).) But SME Racks was
merely repeating language found in a 1955 case called
Burt v. Isthmus Development Co., 218 F.2d 353, 357 (5th Cir.
1955), and such language does not sort well with the
Supreme Court’s statement (made long after Burt) in
that “citizens or residents deserve somewhat more defer-
ence than foreign plaintiffs, but dismissal should not
be automatically barred when a plaintiff has filed suit in
his home forum. As always, if the balance of conveniences
suggests that trial in the chosen forum would be unneces-
sarily burdensome for the defendant or the court, dis-
missal is proper.” Piper Aircraft Co. v. Reyno, supra, 454
U.S. at 255 n. 23.
A foreign company that chooses to sue in the United
States rather than in its own country is unlikely to experi-
ence inconvenience if the court invokes forum non
conveniens against it. Realistically a Japanese company, our
No. 07-3588 7
plaintiff should not be disconcerted to have to litigate
against its Japanese adversaries in a Japanese court. “[I]f
the plaintiff is suing far from home, it is less reasonable
to assume that the forum is a convenient one . . . . [T]he
risk that the chosen forum really has little connection to
the litigation is greater.” In re Factor VIII or IX Concentrate
Blood Products Litigation, supra, 484 F.3d at 956. The plain-
tiff’s home is Tokyo, which is quite a distance from Chi-
cago.
Explaining why “citizens or residents deserve some-
what more deference than foreign plaintiffs” the Court in
Piper pointed out that “when the home forum has been
chosen, it is reasonable to assume that this choice is
convenient.” 454 U.S. at 235 n. 23. Convenience—the
“central purpose” of forum non conveniens, id. at 256—is not
a euphemism for nationalism or protectionism. The
demands of a global economy require that American
courts be amenable to permitting litigation that can be
handled much more efficiently in foreign forums to be
sent to those forums. “International business transactions
depend on evenhanded application of legal rules; home-
town favoritism is the enemy of commerce.” Intec USA,
LLC v. Engle, 467 F.3d 1038, 1040 (7th Cir. 2006); see also
Pacific Employers Ins. Co. v. M/V Captain W.D. Cargill,
751 F.2d 801, 805 (5th Cir. 1985). And so American plain-
tiffs may find themselves told to litigate in a foreign
forum under an even-handed and pragmatic application
of forum non conveniens.
Courts need to look behind an assertion that the plain-
tiff is “American,” moreover, to determine whether the
8 No. 07-3588
party has the sort of ties with the United States that make
the American judicial forum convenient. The plaintiff’s
lawyers contend that the Japanese character of the nomi-
nally American plaintiff cannot be a consideration in
deciding whether the presumption has been overcome;
only the respective litigation burdens of the parties in
one forum versus the other may be considered. This
contradicts the plaintiff’s “Americanism” argument, and
is anyway wrong. The more tenuous a party’s relation to
the forum, the weaker its case for litigating there. The
fact that a Japanese company has a Delaware corporate
certificate but no offices or personnel in Chicago or for
that matter anywhere else in the United States should not
make it feel more at home litigating in Chicago than in
Tokyo. The plaintiff keeps calling itself an “Illinois com-
pany,” but it is not. It is an out-of-state corporation that
had an indirect investment in a building located in
Illinois. The Supreme Court has said that the presump-
tion in favor of the plaintiff’s choice of forum is
diminished when it is not its home forum. Sinochem Int’l
Co. v. Malaysia Int’l Shipping Corp., supra, 549 U.S. at 430.
We do not question the presumption in favor of a plain-
tiff’s choice of forum. Rules governing subject-matter
jurisdiction, personal jurisdiction, venue, and removal
(the defendants removed the plaintiff’s suit, originally
filed in an Illinois state court, to the federal district court
in Chicago) limit a plaintiff’s choice of forum, as do
provisions for change of venue and for consolidating
multidistrict litigation for pretrial proceedings. 28 U.S.C.
§§ 1404, 1407. And the rules for allocating burdens of proof
usually make the plaintiff’s case harder to prove than
No. 07-3588 9
the defendant’s. The limits on personal jurisdiction are
particularly important, as they often force a plaintiff to
litigate on the defendant’s home turf. And dismissal may
have more serious consequences for a plaintiff, even if
he can refile his suit elsewhere, than merely being trans-
ferred to another district court within the federal sys-
tem—for the elsewhere is almost always a court in a
foreign country. Sinochem Int’l Co. v. Malaysia Int’l Shipping
Corp., supra, 549 U.S. at 430. That is why the showing
required to prove that the forum is indeed non conveniens
is greater than that required for obtaining a change of
venue from one district court to another. Norwood v.
Kirkpatrick, 349 U.S. 29, 32 (1955); Piper Aircraft Co. v. Reyno,
supra, 454 U.S. at 253-54; In re Joint Eastern & Southern
Districts Asbestos Litigation, 22 F.3d 755, 762 (7th Cir.
1994); Coffey v. Van Dorn Iron Works, 796 F.2d 217, 219-20
(7th Cir. 1986); 17 Moore’s Federal Practice § 111.74[3][a],
p. 111-227 (3d ed. 2008). Finally, it would complicate
and prolong litigation if the plaintiff’s choice of forum
were just the starting point for the selection of the forum
in which the case would actually be litigated. So the
presumption is fine, but it is not to be treated, as the
plaintiff would have us do, as a nigh-insurmountable
obstacle to dismissal.
The plaintiff argues that its principal evidence, at least
of its profit-skimming claim, is in the United States,
consisting on the documentary side of the partnership
agreements and on the witness side of accountants who
will try to reconstruct the profits from the investment
in the building. But the plaintiff is trying to make the
tail wag the dog. The amount of money at stake in the
10 No. 07-3588
profit-skimming claim appears to be tiny. Suppose the
bank had skimmed 5 percent of the proceeds of the build-
ing investment. Then the total loss to the plaintiff would
be only $263,157.90 ([$500,000 ÷ .95 × 10] × .05), for remem-
ber that the plaintiff received $500,000 a year for 10 years).
That is equal to only 3.8 percent of the amount of money
allegedly converted from the plaintiff’s bank account. The
amount skimmed could exceed $263,157.90, but the plain-
tiff’s inability after years of litigation to offer even a
ballpark estimate of its profit-skimming loss is
suspicious, as is its failure to have sought an accounting
of the building’s finances. If the plaintiff really has no
idea what its loss was, we cannot understand why it
expects to be presenting at considerable expense a
parade of witnesses and slew of documents in the
district court should the case be tried here and why that
uncertain expectation should be a reason for con-
ducting the entire litigation in Chicago.
An argument made by the plaintiff that is related to the
preceding one is that the limited scope of discovery
allowed by Japanese courts will make it impossible to
obtain justice in the Japanese litigation. The relation lies
in the plaintiff’s contention that the limitations of discov-
ery will be felt most acutely with respect to the profit-
skimming claim.
The argument reflects a misunderstanding of the differ-
ence between a common law system, such as that of the
United States, and a civil law system, such as that of Japan.
In the former, the burden of investigation falls on the
parties’ lawyers, and discovery procedures are designed
No. 07-3588 11
to facilitate party investigation. In the latter, the burden
of investigation falls on the judges, and the role of the
lawyers is correspondingly diminished. United States v.
Filani, 74 F.3d 378, 383 (2d Cir. 1996); Federal Judicial
Center, A Primer on the Civil-Law System 37 (1995); Carl F.
Goodman, “The Evolving Law of Document Production
in Japanese Civil Procedure: Context, Culture, and Com-
munity,” 33 Brooklyn J. Int’l L. 125, 128 (2007); Koichi
Miki, “Roles of Judges and Attorneys Under the Non-
Sanction Scheme in Japanese Civil Procedure,” 27 Hastings
Int’l & Comparative L. Rev. 31, 41-42 (2003); Geoffrey C.
Hazard, Jr., “Discovery and the Role of the Judge in Civil
Law Jurisdictions,” 73 Notre Dame L. Rev. 1017, 1019-22
(1998); John H. Langbein, “The German Advantage in
Civil Procedure,” 52 U. Chi. L. Rev. 823 (1985).
As far as we are able to determine, it is six of one, half-
dozen of the other; for the investigatory powers of judges
in a civil law system are great. Mary Ann Glendon, Paolo
G. Carozza & Colin B. Picker, Comparative Legal Tradi-
tions: Text, Materials and Cases on Western Law 185 (3d ed.
2007); Howard M. Erichson, “Mass Tort Litigation and
Inquisitorial Justice,” 87 Georgetown L.J. 1983, 2006-07
(1999); Robert G. Bone, “Statistical Adjudication: Rights,
Justice, and Utility in a World of Process Scarcity,” 46 Vand.
L. Rev. 561, 629 n. 208 (1993). As Ramseyer and Nakazato,
supra, at 141-42, explain, “Although American critics
frequently point to the absence of discovery in Japan, the
point is a red herring. For its absence follows straight-
forwardly from the use of discontinuous trials. In the
United States, the need to try facts before a specially
impaneled jury forces lawyers to concentrate prepara-
12 No. 07-3588
tion into a discrete pretrial phase. Discovery is merely its
name. In Japan, the trial itself blends the American trial
equivalent with the American discovery equivalent.
Granted, even between court hearings Japanese lawyers
cannot conduct the indiscriminate and largely unsuper-
vised fishing expeditions that characterize some
American discovery. Instead, to obtain evidence they
generally must convince the judge to order others to
testify or to produce documents (though recent changes
in the Japanese Civil Procedure Code allow parties a bit
more independence than before) . . . . Critically Japanese
judges do have the power they need to make the dis-
closure process work. If a judge finds a request for infor-
mation valid, he can order the opposing party to com-
ply. Should the party refuse, depending on the issue he can
fine him, throw him in jail, or find the disputed fact in the
other party’s favor. Should a third party refuse to comply
with an order to testify or produce documents, he can,
again, fine him or throw him in jail.”
The plaintiff has given us no reason to suppose that
Japanese procedures are inadequate to enable it to prove
its profit-skimming claim. It tells us, moreover, that it
does not intend to file that claim as a counterclaim in
the Japanese litigation; this strengthens the inference
that the claim is a makeweight, injected into the present
suit for strategic reasons.
Thus far we have considered, with the partial exception
of choice of law, considerations relating to the balance of
convenience to the parties. The Supreme Court has told
us also to consider how the public interest might be
affected by the choice of forum:
No. 07-3588 13
Factors of public interest also have place in applying
the doctrine [of forum non conveniens]. Administrative
difficulties follow for courts when litigation is piled
up in congested centers instead of being handled at
its origin. Jury duty is a burden that ought not to be
imposed upon the people of a community which
has no relation to the litigation. In cases which touch
the affairs of many persons, there is reason for
holding the trial in their view and reach rather than
in remote parts of the country where they can learn of
it by report only. There is a local interest in having
localized controversies decided at home. There is an
appropriateness, too, in having the trial of a diversity
case in a forum that is at home with the state law that
must govern the case, rather than having a court in
some other forum untangle problems in conflict of
laws, and in law foreign to itself.
Gulf Oil Corp. v. Gilbert, supra, 330 U.S. at 508-09; see also
Clerides v. Boeing Co., 534 F.3d 623, 628 (7th Cir. 2008).
These considerations point as strongly to Japan as the
proper forum for resolving the parties’ dispute as the
private-interest considerations do, except that we have
no information about congestion in the Japanese court
in Tokyo where the mirror-image litigation is pending.
That uncertainty to one side, the local interest is that
of Japan; to burden Americans with jury duty to resolve
an intramural Japanese dispute would be gratuitous; and
a Japanese court is more at home with Japanese law and
Japanese firms than an American court would be. This
last point bears on the public interest as well as the
private interest in the choice of forum because “judges
14 No. 07-3588
have an interest independent of party preference for
not being asked to decide an issue that they cannot
resolve intelligently.” Tomic v. Catholic Diocese of Peoria,
442 F.3d 1036, 1042 (7th Cir. 2006).
The “public interest” is open-ended. There may be
cases in which it will weigh heavily in favor of conducting
international litigation in a U.S. rather than a foreign
court, for example cases involving concerns of national
security in either the strategic or the economic sense of
that term, Agudas Chasidei Chabad v. Russian Federation,
466 F. Supp. 2d 6, 29-30 (D.D.C. 2006), or in which compli-
ance with an important U.S. regulatory scheme could not
be assured in a foreign forum. See Doe v. Hyland Therapeu-
tics Division, 807 F. Supp. 1117, 1128-30 (S.D.N.Y. 1992);
Carlenstolpe v. Merck & Co., 638 F. Supp. 901, 908-09
(S.D.N.Y. 1986); Note, “Cross-Jurisdictional Forum
Non Conveniens Preclusion,” 121 Harv. L. Rev. 2178, 2198
(2008). This is not such a case.
A FFIRMED.
10-28-08