Conti 11. Container Schiffarts-GMBH & Co. KG M.S. v. MSC Mediterranean Shipping Co. S.A., 91 F.4th 789 (5th Cir. 2024)[1]
Factual Background
In November 2000, Mediterranean Shipping Company (“MSC”), a Swiss corporation based in Geneva, chartered M/V FLAMINIA, a cargo vessel, from Conti, a German corporation. The charter agreement required all disputes arising thereunder to be arbitrated in London. From 2000 to 2012, MSC operated the FLAMINIA without issue.
In June 2012, a Houston-based employee of MSC (USA), a wholly-owned New York subsidiary of MSC, received a request from a chemical manufacturer to ship three containers of divinylbenzene (“DVB”) out of the port of New Orleans. Later that month the tanks were loaded onto the ship. Thirteen days later, the DVB tanks exploded. The explosion and resulting fire killed three crewmembers and caused over $100 million in damages.
Following the explosion, Conti brought an arbitration proceeding against MSC in London. The arbitration panel ruled that MSC breached the charter agreement and awarded Conti about $200 million in damages.
The Decision of the Eastern District of Louisiana
Conti then filed a lawsuit against MSC in the Eastern District of Louisiana to confirm the award under the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. MSC filed a motion to dismiss for lack of personal jurisdiction, arguing that the only forum contact alleged did not arise out of or relate to the confirmation claim. Conti ultimately conceded that the court lacked general personal jurisdiction as to MSC, meaning that the only inquiry was whether the court had specific personal jurisdiction.
While MSC’s motion to dismiss was pending, its insurer issued a letter of undertaking to Conti. The letter promised to pay Conti up to $220 million on any final judgment entered by the Eastern District of Louisiana, provided that Conti did not interfere with MSC’s property or bring a separate action in another jurisdiction. The letter, however, also expressly reserved “any and all rights or defenses” to which “MSC, its agents or affiliates” were entitled in the Eastern District of Louisiana proceedings.
The district court denied MSC’s motion to dismiss, rejecting the argument that the only relevant contacts were those relating to the London arbitration. Rather, the district court determined that MSC’s contacts relating to the underlying dispute were also relevant (citing cases from the Second, Third, and Tenth Circuits). Based on that, the district court determined it had specific personal jurisdiction over MSC. In the alternative, the district court concluded that MSC had waived its personal jurisdiction defense by entering the letter of understanding.
The Decision of the Fifth Circuit
On appeal, the first issue the Fifth Circuit considered was MSC’s argument that that the district court erred by basing its personal jurisdiction analysis on contacts related to the underlying dispute—i.e., the storage, loading, and shipping of the DVB at the Port of New Orleans. MSC contended that the court should have limited its analysis to contacts related only to MSC’s refusal to pay the arbitral award. The Fifth Circuit disagreed, explaining that the eight other Circuits to consider the issue all held that, in evaluating personal jurisdiction over actions to confirm arbitral awards, courts should consider a defendant’s contacts related to the underlying dispute that led to the arbitral award, and not only contacts related to the arbitration proceeding itself.
Here, however, even looking at the contacts relating to the underlying dispute, there was not a sufficient basis for specific jurisdiction. MSC’s “sole contact” with the forum—loading the DVB out of New Orleans—was insufficient because it arose from the unilateral actions of third parties. Specifically, MSC’s contact with New Orleans stemmed from the conduct of its subsidiary, MSC (USA), whose actions were not attributable to the Swiss corporation because they were distinct corporate entities. Thus, MSC had not purposefully availed itself of the privileges of conducting activities within the forum.
The Fifth Circuit also disagreed with the district court that the Swiss corporation waived its personal jurisdiction defense through its insurer’s issuance of a letter of understanding that was expressly conditioned on the German corporation reserving all litigation defenses. The issuance of the letter of understanding was expressly conditioned on the outcome of the personal jurisdiction litigation.
The Fifth Circuit therefore reversed and remanded with instructions to dismiss for lack of personal jurisdiction.
This Article was originally published in the North America Newsletter.
