Non Convenient Forum. The New York Court of Appeals holds that a court does not need to resolve questions of personal jurisdiction before dismissing an action on the basis of forum non conveniens.

Succession of Margaret Kainer against UBS AGNew York Bulletin 2021. Op. 07056 (16 Dec. 2021) [click for opinion]

In the 1930s, the Nazi regime stole a painting by Edgar Degas titled dancers by Margaret Kainer, a resident of Germany. After being dispossessed of this and other works of art, Kainer lived as a refugee in Switzerland, then moved to France where she died in 1968. The claimants are Kainer’s estate and 11 putative heirs who allege that Kainer’s estate passed to them under French ab intestate law.

Defendant Norbert Stiftung, formerly known as Norbert Levy Stiftung (the “Foundation”) is a foundation allegedly provided for in Kainer’s father’s 1927 will, to be established in the event that she died without children or grandchildren . The plaintiffs claim that after Kainer’s death, the defendants’ predecessor UBS AG and UBS Global Asset Management (Americas) established the Foundation as a Swiss public entity under the direction and control of UBS, and obtained improperly all of Kainer’s assets.

In 2000, the Foundation, allegedly acting in its capacity as heir, registered dancers as stolen from lost and looted art databases. In 2009, defendant Christie’s Inc. approached the Foundation, seeking to facilitate a private sale of the painting by a Japanese gallery. The Foundation entered into a restitution settlement agreement with the gallery in which it relinquished its rights to the painting in exchange for 30% of the proceeds from the private sale, receiving approximately $1.8 million. A few days later, Christie’s offered the painting at public auction in New York where it sold for $10.7 million.

Plaintiffs sued Defendants in the New York Supreme Court, alleging conversion, unjust enrichment and conspiracy, based on the sale of dancers. Motions to dismiss were presented for lack of personal jurisdiction and forum not conveniens. The plaintiffs argued that the court could not forum not conveniens part of the motion until he first establishes jurisdiction. The trial court referred to two longstanding conflicting lines of authority in New York on this preliminary issue. According to the first, the court must decide the question of jurisdiction before deciding whether the dismissal is justified in view of the doctrine of forum non conveniens because, if a court does not have jurisdiction over a defendant, it does not have the power to issue a binding order forum not conveniens rule on this defendant. The second argues that a court “assuming, without deciding jurisdiction”, may decide whether the action should be dismissed on the basis of forum not conveniens ground.

According to the trial court, the weight of authority in New York favored the first opinion. However, the court found the second line of cases to be more compelling. In doing so, he relied on the well-known decision of the United States Supreme Court in Sinochem Malaysia Intl. shipping company, which held that, in federal court, district courts may decide unfounded issues before determining whether they have jurisdiction.

On appeal, the Appeal Division upheld. She agreed with the trial court’s analysis that the sinochem reasoning must prevail and that “where personal jurisdiction is difficult to determine and considerations of forum non conveniens clearly militate in favor of dismissal, a court may dismiss on the latter ground”. He also agreed with the trial court that, since he could not readily determine, without permitting significant discovery, that he had personal jurisdiction over all of the defendants, he properly considered the defendants’ arguments that New York was an awkward forum.

On a further appeal to the Court of Appeal, the appellants relied on a single argument—the decision of the Court of Appeal in Ehrlich-Bober & Co. c. Univ. from Houston— where, according to the appellants, the Court of Appeal held that the doctrine of forum not conveniens “applicable only if the tribunal has obtained jurisdiction in personam from the parties.” The Court of Appeal dismissed this argument, stating in a single sentence that the quoted statement of Ehrlich-Bober has been affirmation. The Court of Appeal then said: “We did not accept Ehrlich-Bober that a court must invariably resolve any outstanding questions of personal jurisdiction before ruling on forum non conveniens, decline to adopt such a rule in this case, and find that the court in this case did not abuse its its discretion in this regard” (while referring to the Supreme Court’s decision in sinochem).

On the forum not conveniens issue, the Court of Appeal held that the courts below had carefully considered all of the forum not conveniens factors, including the public policies involved—for example., New York’s compelling interest in protecting the art market and preventing the illicit trafficking of stolen art into the state, and the public policy of the United States to seek justice and restitution for victims of hijacking by the Nazis. The court also held that, although the availability of another suitable forum is an important factor, it is not a prerequisite for the application of the forum not conveniens doctrine under New York State law. New York’s highest court upheld the forum not conveniens dismissal.

Dukki Moon from the Washington DC office contributed to this summary.

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Melvin B. Baillie