Case of the Day: Jiangsu Hongyuan Pharmaceutical Co. v. DI Global Logistics
Posted on February 18, 2016
The case of the day is Jiangsu Hongyuan Pharmaceutical Co. v. DI Global Logistics Inc. (S.D. Fla. 2016). Hongyuan was a Chinese firm; DI was a Florida corporation. The parties had a contract under which DI was Hongyuan’s exclusive distributor for chemical products in Colombia, Trinidad and Tobago, Brazil, Venezuela, and the United States. The parties had a dispute about an invoice Hongyuan sent DI for a shipment of titanium dioxide anatase. Hongyuan sued in the District Court, but DI moved to dismiss for forum non conveniens, pointing to the following article of the contract:
This agreement shall only be governed by Chinese law. In the event of any disputes between the parties the People’s Court of Jiangsu (China) shall be empowered to take cognizance of it, unless coercive law prescribes another court.
As an initial matter, it’s clear that whatever this clause was intended to do, it was not well-drafted, because it ignores the question of the exclusivity of the Chinese court’s jurisdiction.
The court found that the clause was a valid and enforceable choice of forum clause, because it satisfied the test of M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972): it was not induced by fraud or overreaching; it would not effectively deny the plaintiff its day in court because of the inconvenience or unfairness of the chosen forum (note that it was the American firm seeking to have the case heard in China); there was no fundamental unfairness in Chinese law that would deprive the plaintiff of a remedy; and there was no strong public policy reason not to enforce the agreement.
But was the clause exclusive? Or as the court put it, was it mandatory, or permissive? The court briefly reviewed the grammar of the clause (it uses the word “shall”), but the main point was that the clause was unnecessary if intended to be nonexclusive, because it was clear that the Chinese courts would have had jurisdiction without a clause, and because, in the court’s view, the phrase “unless coercive law prescribes another court” would be meaningless in a nonexclusive clause. I am not sure I find this reasoning persuasive, but one can hardly blame the court for trying to make sense of an imperfect clause.
Of course, under Atlantic Marine, a forum non conveniens dismissal does not always result from a finding that the parties agreed to an exclusive choice of forum clause. Rather, the court must undertake the usual analysis, with some modifications: (1) the plaintiff’s choice of forum receives no weight; (2) the parties’ private interests carry o weight; and (3) the forum’s (here, Florida’s) choice of law rules will not apply. The remaining factors look at the public interest, the adequacy of the foreign forum, and whether the suit can be reinstated abroad without undue inconvenience or prejudice. Here, the public interest factors favored China, because it would be simpler and more efficient for the Chinese court to apply Chinese law, as the contract required, and China has a strong interest in providing a forum for the suit. The Chinese court was an adequate forum in the absence of any evidence of partiality, corruption, or delay. On this point, Hongyuan cited a single law review article, but “generalized, anecdotal complaints of corruption are not enough for a federal court to declare that a nation’s legal system is so corrupt that it can’t serve as an adequate forum.” The other factors favored China, too.
Accordingly, the court granted the motion to dismiss in favor of litigation in China.