General Electric International, Inc. v. Thorco Shipping America, Inc.

Background

General Electric International, Inc. and General Electric International, Inc. Taiwan Branch (USA) brought a maritime case against Thorco Shipping America, Inc. and Thorco Projects A/S. The plaintiffs alleged that the defendants negligently handled and transported cargo, breaching statutory, common-law, and contractual duties. The complaint alleged that cargo received for shipment in July 2020 arrived damaged, causing estimated damages of $68,602.

The plaintiffs and Thorco Shipping entered an Ocean Transportation Contract. That contract selected New York federal or state courts as the forum for litigation arising from the contract and stated that the parties submitted to personal jurisdiction there. Thorco Projects was not a signatory to that contract. The booking note and bill of lading identified Thorco Projects as the carrier and contained terms calling for English law and arbitration in London. The booking note also referred to the Ocean Transportation Contract.

Thorco Projects moved to dismiss under Federal Rule of Civil Procedure 12(b)(2) for lack of personal jurisdiction, under Rule 12(b)(3) for improper forum, or under the doctrine of forum non conveniens, which allows a court to decline a case when another forum is substantially more appropriate. Thorco Projects also moved to stay, or pause, discovery while the dismissal motion was pending. The plaintiffs opposed the stay and requested limited discovery about whether Thorco Projects consented to jurisdiction in New York.

Motion to Stay Discovery

The court denied Thorco Projects’s motion to stay discovery. It reasoned that substantially similar discovery would likely be needed in this case or in the London arbitration, so responding to discovery in this litigation was unlikely to impose a significant additional burden on Thorco Projects. The court also found that a stay could prejudice the plaintiffs, particularly because discovery against Thorco Shipping was continuing.

The court further noted that the London arbitration had not progressed: no arbitration tribunal had been constituted, and there were no scheduled proceedings or hearings. Because the court found that some discovery was necessary to resolve the personal-jurisdiction motion, pausing discovery would hinder the plaintiffs’ efforts in both proceedings.

Personal Jurisdiction

Personal jurisdiction is the court’s authority over a defendant. On a motion challenging personal jurisdiction before discovery, a plaintiff generally must make a preliminary showing that jurisdiction exists. But jurisdictional discovery may be allowed when the plaintiff identifies a genuine factual question about jurisdiction that discovery could resolve.

Thorco Projects argued that it was a foreign business entity operating under the laws of Denmark, had no New York office or place of business, and was not bound by the Ocean Transportation Contract because it did not sign that contract. It contended that the booking note and bill of lading governed the dispute and required London arbitration.

The plaintiffs argued that the bill of lading incorporated the booking note, which in turn incorporated the Ocean Transportation Contract and its New York forum-selection clause. They also argued that Thorco Projects was closely related to Thorco Shipping, a contract signatory, and therefore could be bound by the forum-selection clause. The plaintiffs asserted that Thorco Projects owned 75% of Thorco Shipping and that the entities appeared to operate through one another, among other points described in the opinion.

Under the “closely related” test discussed by the court, a non-signatory may be bound by a forum-selection clause when its relationship with a signatory makes enforcement of the clause foreseeable. The court found that the plaintiffs had made substantial progress toward showing that Thorco Projects and Thorco Shipping might be closely related, but that additional facts were needed.

Ruling

The court granted the plaintiffs’ request for limited jurisdictional discovery. The discovery may address whether Thorco Projects participated in negotiating, drafting, or carrying out the Ocean Transportation Contract; the nature of its relationship with Thorco Shipping; whether it was an intended beneficiary of the contract; and whether its interests were directly related to Thorco Shipping’s interests or conduct.

The court denied Thorco Projects’s motion to dismiss the complaint without prejudice to Thorco Projects filing a renewed motion after jurisdictional discovery. The court did not reach Thorco Projects’s arguments concerning improper forum or forum non conveniens at that time. Regular discovery otherwise was to continue, and the parties were ordered to propose a schedule for the jurisdictional discovery.