Tag Archives: Anti-suit Injunction

Case of the Day: Stichting Shell Pensionenfonds v. Krys

The case of the day is Stichting Shell Pensionenfonds v. Krys [2014] UKPC 41. Shell, a Dutch pension fund, had invested in shares of Fairfield Sentry Ltd., a BVI mutual fund and the largest “feeder fund” for Bernard L. Madoff Investment Securities LLC, which needs no introduction. After Madoff’s arrest, Shell immediately sought to redeem its shares in Fairfield, but of course it received nothing. So Shell applied to a court in Amsterdam, its home jurisdiction, for an order attaching bank accounts of Fairfield held by Citco Bank Nederland BV, Fairfield’s asset custodian, in its Dublin branch. The Dutch court approved the attachment; everyone agreed that the Dutch court had jurisdiction over Citco. The High Court of the BVI ordered Fairfield to be wound up and appointed Krys and Lau as liquidators. Shell submitted a claim in the BVI insolvency claim but its claim was rejected. So the situation was that if Shell was allowed to litigate the merits of its claim in the Netherlands and succeeded there, then it would receive the full amount of its claim on account of the attachment, and in effect to have priority over other creditors, who could not hope for such a recovery in the BVI insolvency proceedings. Indeed, as Shell admitted, that was the point of the attachment. Krys and Lau moved in the BVI court for an anti-suit injunction enjoining Shell from prosecuting its claim in the Netherlands and requiring Shell to procure a release of the attachment. The BVI Court of Appeal held in favor of the liquidators, and Shell appealed to the Privy Council.
Continue reading Case of the Day: Stichting Shell Pensionenfonds v. Krys

Case of the Day: Maroc Fruit Board v. M/V Almeda Star

The case of the day is Maroc Fruit Board, S.A. v. M/V Alemda Star (D. Mass. 2013). Like Maroc Fruit Bd. v. M/V Vinson, 2012 A.M.C. 2278 (D. Mass. 2012), which I covered last year, the case involved a claim of a shipment of fruit that went bad, but it seems that there were two separate incidents. In other words, today’s case doesn’t seem to have anything to do with the prior case.

Maroc sued Star Reefers Shipowning, Inc. and its ship, the Almeda Star. The claim was that Maroc had delivered thousands of boxes of fruit to the defendant at the port of Agidar, Morocco, for shipment to New Bedford, where the fruit was to be delivered to the order of Maroc’s consignees, Fresh Taste, a Toronto firm, and Barimex, a Quebec firm, in accordance with the bills of lading. At New Bedford, Maroc learned that some of the fruit had been contaminated by an oil leak. It sued for $930,000 for oil contamination and $4,000 for short delivery of cargo. In its answer to an amended complaint, Reefers Shipping raised arbitration as an affirmative defense, after the parties had engaged in extensive discovery and motion practice in the US action. Reefers Shipping sent an arbitration demand to Maroc and the consignees at about the time it answered the amended complaint. Maroc, asserting it was concerned about the possibility that Star Reefers might ask an English court for an anti-suit injunction, preemptively asked the US court for an anti-suit injunction for the purpose of preventing Star Reefers from seeking its own anti-suit injunction.

The judge refused to issue the injunction on the grounds that the equities did not favor Maroc. Star Reefers had not yet sought an injunction in England or done anything that could oust the US court of its jurisdiction. “This court has no wish to engage in an ‘arms race’ with the English courts.” But he also gave a stern warning to Star Reefers, which had told the judge that it planned to move (in the US court) to stay the US action:

Star Reefers has indicated its intention to file a motion to stay proceedings pending the London arbitration. The court expresses no opinion on the merits of that issue. But such a motion, or similar motion, brought in open court with an opportunity for opposition, is the appropriate vehicle for addressing a disagreement over the proper forum for resolution of Plaintiffs’ claims. The court expects Star Reefers to comport itself, both before this court and in matters affecting this court’s jurisdiction over this litigation, in a manner consistent with the values of openness and procedural fairness inherent in the American court system. Failure by any party to do so may result in sanctions.

Question: If Star Reefers gets an English anti-suit injunction despite the US court’s warning, who will be in a position to make a motion for sanctions in the US court?

Case of the Day: Fellowes v. Changzhou Xinrui Fellowes Office Equipment Co.

The case of the day is Fellowes v. Changzhou Xinrui Fellowes Office Equipment Co. (N.D. Ill. 2012). Fellowes, an Illinois company, purchased paper shredders and other office products from Changzhou Xinrui Fellowes, a Chinese joint venture between Fellowes Hong Kong Ltd., apparently an affiliate of Fellowes, and Jiangsu Shinri Machinery Co. When Fellowes Hong Kong and Jiangsu got into a dispute, Jiangsu caused the joint venture to stop its shipments to Fellowes. Fellowes had to cancel thousands of orders from its customers and to find replacement manufacturers. Fellowes refused to pay some of the outstanding invoices on the grounds that it was entitled to a set-off on account of the damages it suffered because of Changzhou Xinrui’s failure to ship the goods it had purchased.

Changzhou Xinrui sued Fellowes in China for payment on the invoices, and Fellowes sued Changzhou Xinrui in Illinois seeking damages and an antisuit injunction. Fellowes sought a temporary restraining order and then a preliminary injunction to enjoin Changzhou Xinrui from prosecuting its lawsuit in China.The basis for Fellowes’s argument was that its purchase orders had incorporated its standard terms and conditions, which in turn contained a forum selection clause requiring disputes to be heard in the state or federal courts in Chicago.

The magistrate judge had recommended that the judge grant the motion for a preliminary injunction, and Changzhou Xinrui objected on the grounds that it had not received the requisite notice. FRCP 65(a)(1) permits a court to grant a preliminary injunction “only on notice to the adverse party.” Changzhou Xinrui asserted that the notice had not been transmitted by one of the methods permitted by the Hague Service Convention. (Instead, Fellowes sent the complaint, the TRO, and the notice of the hearing on a motion for a preliminary injunction, to Changzhou Xinrui via email).

The judge dismissed this argument without much analysis: “Rule 65 expressly requires only notice, not service of process. SEC v. Kimmes, 753 F. Supp. 695, 700-01 (N.D. Ill. 1990).”

I think the issue is worth more attention. I addressed the issue in a preliminary way in a post on Oct. 6, 2011. I’d like to expand on the point as follows:

  1. The transmission of the summons, complaint, TRO, and notice of the hearing probably violated the Hague Service Convention. The Convention applies whenever there is occasion to transmit judicial documents for service abroad. There can be no question that the documents here were judicial documents. The issue is whether they were transmitted “for service.” There is one view that says that the words “for service” limit the Convention’s scope to service of process in the strict sense, and that transmission of other judicial documents is not within the scope of the Convention. (See, for example, the proposal by Christopher Voltz I discussed on Nov. 7, 2011). But I don’t like this proposal for the reasons given in my post of April 26, 2012: if it’s right, then how do we account for the Convention’s application to transmission of extrajudicial documents? And why would the Convention refer specifically to “writs of summons” in some places (e.g., in Article 15) and not in Article 1 if the scope of the Convention was intended to be so limited? This point seems particularly clear from an American perspective, since we use the word “service” to refer both to service of process and to service of all other documents in the case, as FRCP 5 makes clear.
  2. That being said, does a violation of the Convention invalidate the notice, as a violation of the Convention would invalidate service of a summons? There’s no question that the notice and the motion for an injunction had to be served, see FRCP 5(a)(1)(D) & (E), and I assume that the service was improper because it didn’t comply with the Convention, for the reasons given above. But since the purpose of the notice is not jurisdictional in the way that the purpose of service of a summons is jurisdictional, why should a technical flaw in the service matter? (Let’s assume that there is no question about whether the Chinese defendant had actual notice of the motion for the injunction).
  3. I’m not suggesting that plaintiffs ought to serve notices in preliminary injunction cases in ways not permitted by the Convention. It’s difficult to know what the right thing to do is. On the one hand, the Convention is exclusive, and as a matter of US law, if my view about the scope of the Convention is right, the law requires the notices to be served under the Convention. On the other hand, the plaintiff faces no adverse consequences for violating the Convention (does the plaintiff’s lawyer face adverse consequences?), and the exigencies of the situation may require notice that is quicker than what the Convention allows in practice.