The plaintiffs below, Candlewood Timber Group LLC ("Candlewood") and Forestal Santa Barbara SRL ("FSB"),
Candlewood is a Delaware limited liability company that is engaged in a venture with its wholly-owned and controlled Argentine subsidiary, FSB, to sell wood products derived from South American forests that are managed consistently with international standards of sustainable forestry.
Pan American, a Delaware limited liability company that engages in oil and gas extraction, is the second largest hydrocarbon producer in Argentina. Pan American is the majority owner and the operator of a consortium of companies that were granted concessionary rights by the Argentine Republic (which owns all of the oil and gas rights in Argentina) to extract oil and gas in the Province of Salta. That concession covers the land owned by FSB in the Salta Province. The majority owner of Pan American is a subsidiary of BP p.l.c., and the minority owner is Bridas Corporation, an oil company controlled by one of Argentina's wealthiest families.
On January 28, 2003, Candlewood filed an action against Pan American in the Court of Chancery for monetary and injunctive relief. On March 4, 2003, Candlewood filed an amended complaint. The following day, Pan American filed an original action in the Supreme Court of Argentina against Candlewood and FSB. In its Argentine action, Pan American sought a declaration that the parties' dispute was subject to the original jurisdiction of the Argentine Supreme Court, the Argentine federal courts, or the Argentine provincial courts. In support of its application, Pan American alleged that the "mere existence of the Delaware action," and the threat of restraining orders had caused Pan American to suspend its drilling operations, and that orders of a Delaware court might interrupt its operations and force Pan American to breach its supply contracts. Pan American also sought to join the Nation of Argentina and the Province of Salta as third parties, so as to create original jurisdiction in the Argentine Supreme Court.
Pan American responded to Candlewood's Delaware Chancery complaint by filing a motion to dismiss or, alternatively, to stay the Delaware action in favor of its Argentine action. Thereafter, Candlewood filed a second amended complaint that dropped all its requests for injunctive relief, including relief that would require supervision of Pan American's conduct on FSB's land in Argentina. Candlewood and FSB did, however, continue to assert claim for specific performance of Pan American's contractual obligation to purchase liability insurance.
In their second amended complaint, which is the operative complaint for purposes of this appeal, Candlewood included claims for breach of contract, negligence, fraud, tortious infringement of property rights, and tortious interference with business relations. Candlewood's contract claim alleges that Pan American breached its obligation under the extraction permits and accompanying correspondence, and that "Candlewood and FSB are entitled to indemnification for their losses, and [to] specific performance to compel Pan American to purchase comprehensive liability insurance. . . ." Candlewood's request for specific performance is the only reference in its complaint to an equitable remedy.
On May 30, 2003, Candlewood filed a motion in the Court of Chancery to restrain Pan American from prosecuting its Argentine action. Candlewood also moved for a declaration that the Court of Chancery is the appropriate forum to adjudicate their claims. On June 26, 2003, after a hearing, the Court of Chancery entered an order restraining Pan American from interfering with the prosecution of Candlewood's motion for a declaration that the Court of Chancery was the proper forum to adjudicate their claims.
Meanwhile, on June 23, 2003, Pan American filed a second action in an Argentine
Facts Relating To Forum Non Conveniens Motion
The facts relating to Pan American's motion to dismiss Candlewood's Court of Chancery action are uncontroverted.
Pan American has tremendous resources at its disposal. Describing itself as a "leading regional player" in oil and gas production with operations throughout the Southern Cone of South America, Pan American is the principal vehicle for BP's oil and gas activity in Argentina, Bolivia, Brazil, Chile and Uruguay. Pan American's certified reserves approach 2 billion barrels of oil equivalent, and its exploration block portfolio approximates 5 million net acres.
Pan American conducts significant business in the United States. When asked in an interrogatory to identify which of its employees traveled to the United States on business, Pan American replied that many of its employees "travel abroad on a regular basis, including to the United States." Pan American also stated that it "does not contend that it would be an undue hardship for some of its employees to travel to the United States, but it would be unduly burdensome to seek to identify each person who has traveled to the United States and the dates of such travel."
To conduct its international business, Pan American regularly agrees to litigate in the United States. Its gas export contracts and crude oil sales contracts provide exclusively for dispute resolution in the United States, and its financial agreements specify either English or United States fora. On three occasions in recent years
During the discovery proceedings that ultimately resulted in the decision on Pan American's motion to dismiss, Pan American submitted a single "Affidavit Re-Location and Access to Witnesses and Evidence." That affidavit identified no potential witnesses, documents, or evidence outside of Pan American's control, or any reason why Pan American would be unable to present factual evidence respecting damage to FSB's property through expert testimony, assisted by visual aids. The discovery also revealed that of the six Pan American employees who were identified as having the most knowledge about Pan American's activities on FSB's land, four had traveled internationally on business and three had traveled to the United States.
Summary of the Court Of Chancery Opinion
In an opinion handed down on October 22, 2003, the Court of Chancery granted Pan American's motion to dismiss on the grounds of lack of subject matter jurisdiction and, alternatively, forum non conveniens.
As for subject matter jurisdiction, the Court held that none of Candlewood's claims was equitable in character and that although on its face the complaint purported to seek an equitable remedy—specific performance of Pan American's contractual obligation to purchase a policy insuring against damage to FSB's land—in reality, Candlewood and FSB's claim was one at law for money damages. Because the harm to the land had already occurred, the remedy would have to take the form of a monetary award, whether or not Pan American had purchased an insurance policy. Therefore, because the complaint did not allege that the remedy at law was inadequate and specific performance was not necessary for the relief sought by Candlewood, the Court dismissed the complaint for lack of subject matter jurisdiction.
To summarize meaningfully the Court of Chancery's forum non conveniens rulings, it is helpful to discuss first the legal standard for dismissal under the forum non conveniens doctrine. Under Delaware law the moving party must demonstrate, with particularity, that being required to litigate in Delaware would subject it to overwhelming hardship. As this Court stated in Warburg, Pincus Ventures, L.P. v. Schrapper:
In assessing whether or not overwhelming hardship has been shown, Delaware courts employ an analysis predicated upon the six so-called Cryo-Maid" factors,
In its opinion, the Court of Chancery identified these legal standards accurately. The Court also appropriately framed the issue, as being "not whether Pan American has shown that Argentina is a better forum for the litigation, but whether Pan American has shown with particularity, through one or more of the Cryo-Maid factors, that litigating in Delaware constitutes an overwhelming hardship."
Taking these factors into consideration, the Court of Chancery concluded they showed, in the aggregate, that:
The Subject Matter Jurisdiction Issue
The first issue raised on this appeal is whether the Court of Chancery erred in dismissing the complaint for lack of subject matter jurisdiction. On questions of subject matter jurisdiction, the applicable standard of review by this Court is whether the trial court correctly formulated and applied legal principles.
As Delaware's Constitutional court of equity, the Court of Chancery can acquire subject matter jurisdiction over a cause in only three ways, namely, if: (1) one or more of the plaintiff's claims for relief is equitable in character,
Although specific performance is an equitable remedy upon which equity jurisdiction might be predicated, that is true only if the complaint, objectively viewed, discloses a genuine need for such equitable relief. The fact that a complaint contains a prayer for an equitable remedy, without more, does not conclude the jurisdictional analysis. In deciding whether or not equitable jurisdiction exists, the Court must look beyond the remedies nominally being sought, and focus upon the allegations of the complaint in light of what the plaintiff really seeks to gain by bringing his or her claim.
Applying those principles to Candlewood's complaint, the Court of Chancery concluded that it did not have equitable subject matter jurisdiction, because the plaintiffs failed to allege that they had no adequate remedy at law, and also (and more importantly) because:
We agree with that analysis. The Court of Chancery did not err in applying legal precepts or in concluding that it did not possess subject matter jurisdiction to adjudicate Candlewood's claim. Accordingly, if Delaware is a proper forum for this dispute, then the court that would have subject matter jurisdiction is the Superior Court.
That brings us to the second question, which is whether the Court of Chancery erred in determining, under forum non conveniens principles, that the only proper forum for this dispute is Argentina. We conclude, for the reasons next discussed, that the Court did so err.
The Forum Non Conveniens Issue
This Court has repeatedly reaffirmed that a defendant that seeks the dismissal of a first-filed Delaware action on the ground of forum non conveniens "must establish with particularity that [it] will be subjected to overwhelming hardship and inconvenience if required to litigate in Delaware."
The Court of Chancery articulated the proper standard for a forum non conveniens dismissal, but it applied that standard incorrectly to the facts of the case, for three reasons. First, the Court imported into its analysis a consideration that is legally irrelevant and untethered to any hardship to Pan American. Second, the Court made Cryo-Maid-related factual findings that were not adequately supported by the record. Third, the record discloses no other basis to support a finding that Pan American would suffer overwhelming hardship if required to litigate in Delaware. To the contrary, the undisputed facts of record only further confirm that Pan American would not suffer any significant hardship.
1. The Relative Interests of Argentina And Delaware in This Controversy
The factor found to weigh most heavily in favor of the Court of Chancery's determination that litigating in Delaware would constitute an overwhelming hardship to Pan American, was that Argentina has a far greater interest in the controversy than does Delaware. The predominate
The problem with this analysis is that factors that bear on choice of law or upon the relative interests of Delaware and Argentina in adjudicating this dispute have no logical relevance to the critical issue, which is whether Pan American will suffer overwhelming hardship if required to litigate in Delaware. Because the defendant has the burden to demonstrate "overwhelming hardship" from litigating a first-filed case in Delaware, this Court has previously held that "whether an alternative forum would be more convenient for the litigation, or perhaps a better location, is irrelevant[;]"
Even if Argentine law is found to be applicable, "the application of foreign law is not sufficient reason to warrant dismissal under the doctrine of forum non conveniens."
By injecting an irrelevant factor into the forum non conveniens analysis, the Court
The governmental interests of Argentina would be a relevant factor had Pan American moved to dismiss under Chancery Court Rule 19, on the basis that the Argentine governmental entities are indispensable parties, such that Pan American would be prejudiced if this case proceeded in Delaware without the presence of those Argentine governmental entities. Pan American did advance the argument that the Argentine courts have exclusive jurisdiction, and both sides briefed that issue; but rather than decide that jurisdictional issue directly, the Court of Chancery folded that question into the "Delaware interest in the litigation" factor of its forum non conveniens analysis.
It is within that framework that the Court of Chancery concluded that for it to entertain this breach of contract and tort action against a private party, "will likely implicate Argentina's right to regulate access to surface property . . . [and] . . . will implicate Argentina's economic interests," and also that "[b]ecause of the significant interests of Argentine governmental entities, the Argentine courts
2. Erroneous Cryo-Maid Factual Findings
In its opinion the Court of Chancery considered and assessed the six factors prescribed by Cryo-Maid and its progeny, that are legally relevant to a forum non conveniens analysis. Regrettably, the Court's conclusions relating to several of those factors were based upon conclusory affidavits that Pan American had submitted. The Court's conclusions failed to take into account controverting evidence submitted by Candlewood as well as critical admissions by Pan American. This Court will not upset a trial court's factual findings if they are supported by the record
• Access To Proof
Relying solely on two paragraphs in an affidavit describing the location of certain Pan American employees and documents, the Court of Chancery found that Pan American's expected defense would depend on "witnesses, physical evidence and documents. . . located in a remote area of Argentina;" that travel for these witnesses to Delaware for trial would be "extremely inconvenient" and cause Pan American to "suffer significant disruption;" and that producing English translations of relevant documents in Delaware "will entail substantial burdens to Pan American" and may cause Pan American to "suffer the deprivation of live testimony" and to "have difficulty presenting rebuttal testimony."
These findings lack proper record support, and they ignore admissions by Pan American that significantly, if not fatally, undercut Pan American's assertions. Pan American's affidavit amounts essentially to bare conclusions that do not constitute a "particularized showing that witnesses, documents, or other evidence necessary to defend the allegations contained in [Candlewood's] complaint cannot be brought to or otherwise produced in Delaware."
The Court of Chancery's findings also do not take into account admissions by Pan American that significantly undercut its assertions of hardship. In its response to interrogatories, Pan American admitted that "it does not contend that it would be an undue hardship for some of its employees to travel to the United States."
• Availability of Compulsory Process
Regarding this factor, the Court found that "[a]s a result of Argentina's reservation to the Hague Convention, Pan American may have no pre-trial discovery." Aside from the fact that Pan American never made that argument in the Court of Chancery (and its brief on appeal cites no record evidence to support this claim), Pan American never identified any potential witnesses or documents that are not under its control, or any third party witness in Argentina or elsewhere from whom it would wish to obtain discovery. Nor did Pan American suggest that there exists potential evidence in Argentina or elsewhere that Pan American might want
• View of the Premises
Although Candlewood attached to its complaint its expert's reports that contain various charts and drawings, Pan American asserted in the Court of Chancery, and urges on this appeal, that this action "unquestionably requires that the finder of fact undertake an up close and detailed view of the premises at issue."
Despite the lack of a particularized record on these issues, the Court of Chancery appears to have accepted uncritically Pan American's assertion that "this factual dispute cannot come to resolution without a view of the premises and, therefore, it will suffer overwhelming hardship if forced to litigate here."
• Whether The Controversy is Dependent Upon The Application of Delaware Law
The fourth Cryo-Maid factor is "whether the controversy is dependent upon the application of Delaware law which the courts of this State more properly should decide than those of another jurisdiction."
Pan American has failed to articulate any hardship that would result from a Delaware court applying Argentine law. The expense and inconvenience of translating pertinent legal precedent, of retaining foreign lawyers, and of producing foreign law experts to testify at trial, has not been shown to be of material weight in an overwhelming hardship analysis in this particular
• Lack of A Prior Pending Action
Although the Court of Chancery found that "an action similar to this litigation . . . [is] . . . pending before the Argentine courts,"
Pan American's second Argentine lawsuit does not implicate Candlewood's Delaware claims either, because (i) that action does not seek a declaration of non-liability for damage to land resulting from expropriation, (ii) that action seeks only a partial court-ordered expropriation of FSB's land, and (iii) even if expropriation relief were granted, that would not affect Candlewood's claims, all of which would have arisen pre-expropriation. Thus, the Court's finding of an action "similar to this litigation" pending in Argentina lacks support in the record.
• Other Practical Problems
The "practical problem" identified by the Court of Chancery is that it will be difficult to distinguish between the extraction-related property damage claimed by plaintiffs in this action and the property damage resulting from Pan American's seismic activities for which FSB has already been compensated and given a release. That factor favored the Argentine forum, the Court of Chancery found, because Argentine courts would not face that definitional problem, whereas a Delaware court would.
That conclusion is erroneous, because whichever court hears and decides Candlewood's claims, whether in Delaware or Argentina, will be required to engage in the task of delineating between the two different sources of damage. This practical problem, to the extent it exists, does not depend on the locus of the litigation. That is, if this constitutes a hardship to Pan American (or to anyone else), it is not a hardship that results from litigating in Delaware. Accordingly, the finding that this factor favored Argentina rests on an incorrect premise.
For these reasons, the Court of Chancery's assessment of the Cryo-Maid factors, and its conclusion that those factors establish overwhelming hardship, are not adequately supported by the record.
3. The Absence Of A Showing Of Overwhelming Hardship
Although the foregoing analysis would be a sufficient basis, in and of itself, to conclude that Pan American failed to meet its forum non conveniens burden, we have searched the record for other significant evidence of hardship, but have found none. Indeed, all the relevant evidence points to the conclusion that Pan American is in no position to argue that being required to litigate in Delaware would inflict a hardship upon it.
As earlier noted, it is our view that the real "driver" of the result reached by the Court of Chancery is the possibility that the Argentine courts have exclusive jurisdiction over the subject matter of the Delaware action. The parties argued both sides of that issue before the Court of Chancery and this Court. Had the Court of Chancery addressed this issue directly, as distinguished from treating it as a Cryo-Maid factor within the framework of a forum non conveniens analysis, a decision on that question, if favorable to Pan American's position, would have constituted an independent basis for dismissing the action.
Normally, we would remand the case to the trial court to decide that question in the first instance. But because all parties ask this Court to decide whether subject matter jurisdiction is concurrent or is vested exclusively in the Argentine courts, and because that issue is one of law and if resolved in favor of Pan American would result in an affirmance, we decide that question in the interests of judicial economy.
The Exclusive Jurisdiction Issue
In limited circumstances as discussed below, Delaware courts will not exercise subject matter jurisdiction over a dispute that is predicated on foreign law where the foreign state has vested jurisdiction exclusively in its own courts.
On the question of whether exclusive jurisdiction has been vested in the Argentine courts, Pan American, as the proponent of that contention, has the burden of persuasion. We conclude that none of Pan American's arguments has merit and that Pan American has not met its burden. We further conclude that the claims for relief being asserted by Candlewood in Delaware are transitory claims that have not been localized under Argentine
1. The Demerit of Pan American's Exclusive Jurisdiction Arguments
Pan American first argues that Article 117 of the Argentine Constitution confers ab initio jurisdiction to hear and decide all disputes involving the Argentine national government or a Province thereof. Even if correct, that proposition has no relevance to this Delaware action, because no claims are being asserted in Delaware against the Argentine national government or the Province of Salta. Nor does Pan American claim that those Argentine governmental entities are indispensable to a just adjudication of Candlewood's claims, within the meaning of Court of Chancery Rule 19.
Similarly irrelevant is Pan American's second argument, which is that Argentine law vests exclusive jurisdiction in its courts over disputes concerning real property and disputes involving issues of environmental protection. That argument is not analytically helpful, because this dispute is about compensation for harm to privately-owned land, not about ownership rights to real property or issues involving protection of the environment. As set forth in Section 87 of the Restatement (Second) Conflict of Laws (1971), "[a] state may entertain an action that seeks to recover compensation for a trespass upon or harm done to land in another state." Comment a to that Section explains that "[s]uch an action does not seek to affect title to foreign land, as would a bill to quiet title[.]"
Finally, Pan American relies upon a theory of its foreign law expert, Dr. Horacio A. Grigera Naón, that there are issues of public policy implicated in this dispute that require exclusive jurisdiction in Argentina. Dr. Naón's opinion, however, is disputed by an equally plausible opinion articulating the contrary view. According to Professor Litvinoff, there are no principles of public policy that affect the parties' legal rights, but even in cases that do involve the Argentine public interest, "this does not mean that the jurisdiction of Argentine courts is exclusive; thus, the fact that rules of public policy must be applied in the resolution of a particular case does not negate the existence of concurrent jurisdiction in other courts[.]"
2. Delaware's Concurrent Jurisdiction Over The Plaintiffs' Transitory Causes of Action
Our conclusion does not rest solely upon Pan American's failure to carry its burden, however. The facts of record in this case, and the rules of law applicable thereto, affirmatively establish that Candlewood's claims against Pan American are transitory. By definition a transitory claim is one that can be brought in the jurisdiction where a defendant resides, in this case, Delaware.
As stated in Professor Moore's treatise, "[an] action is transitory, even though it may affect land, if the type of relief requested is personal in nature so that the court acts on the defendant's person or personal property, which is within its control, and not directly on the lands involved. . . . [M]ost types of actions are considered transitory even though the outcome of the litigation may affect property."
Pan American does not straightforwardly confront this issue or address that analysis. Instead, it contends that this dispute is akin to that involved in Taylor v. LSI Logic Corp., where this Court held that a Canadian statute (Section 241 of the Canada Business Corporations Act) which provided an "oppression remedy" for minority stockholders and authorized suit only in specified Canadian courts, deprived the Delaware courts of subject matter jurisdiction to grant the requested equitable relief that the plaintiff was seeking under that statute.
Taylor is properly analyzed within the framework of the general rule that was first articulated in 1914 in Tennessee Coal, Iron & R.R. Co. v. George.
In Taylor this Court found that the general rule of Tennessee Coal did not apply, because "the oppression remedy in Section 241 [was] purely a legislatively created statutory remedy,"
This case requires the application of the general rule of Tennessee Coal rather than the analysis applied in Taylor. Here, unlike Taylor (or, for that matter, unlike Tennessee Coal), the plaintiffs here are asserting claims arising under common law, not under an Argentine statute that purports to localize those claims exclusively within the Argentine court system. Moreover, here the plaintiffs' causes of action are not (as was found to be the case in Taylor) so inseparably intertwined with a statutorily-created remedy that the right can be enforced only in the statutorily-mandated tribunal.
This case is more akin to Randall v. Arabian American Oil Co.,
For the foregoing reasons, the judgment of the Court of Chancery is affirmed in part, reversed in part, and remanded with instructions that the case be transferred to the Superior Court under 10 Del. C. § 1902.