9th Circuit: Court Has Personal Jurisdiction Over Honduran Company
We’ve blogged before about the need for certified legal translation from Spanish to English in international commercial litigation cases. As discussed below, a recent 9th Circuit case, Glob. Commodities Trading Grp., v. Beneficio De Aroz, concerned a commercial contract dispute between a U.S. company and a Honduran company and involved legal documents that needed to be translated from Spanish to English. As is often the case in these types of commercial contract disputes, the parties disputed whether a U.S. Court had jurisdiction over a foreign company. While the district court initially held that it did not have jurisdiction, the 9th Circuit Court of Appeals reversed.
In this case, the plaintiff was a California company engaged in the sale of international agricultural commodities. The defendant corporation was a Honduran company organized under the laws of Honduras with its principal place of business located in Choloma, Cortes, Honduras. The defendant’s business consisted of importing and processing rice and corn from other countries.
The plaintiff and defendant had an ongoing contractual relationship whereby the plaintiff sold the defendant over fifty million dollars of agricultural commodities. The contracts were typically cost, insurance, freight (or “CIF”), contracts, whereby the contract was considered to be complete once the goods were loaded at the point of shipment. The contracts were negotiated primarily by email, although several of the defendant’s Honduran employees did make business trips to the plaintiff’s offices in California. The parties had been contracting with one another for four years when the defendant fell behind on its payments on two contracts. Thereafter, the plaintiff filed suit against the defendant company and two of its officers in federal district court for breach of contract.
The Disputed Commodities Contract.
In 2011, the parties entered into an agreement in which the defendant agreed to purchase 15,000 tons of rice and corn. Shortly thereafter, the defendants traveled to the United States and met with the plaintiff’s employees at the plaintiff’s California office in connection with the contracts. According to a declaration submitted by the plaintiff’s corporate president, the defendant’s employees informed him at this meeting that they had successfully extended the company’s Honduran import permits in order to allow them to receive the rice and corn per the contract. Following this meeting, the plaintiff shipped the rice and corn from the Port of Darrow, Louisiana to Puerto Cortes, Honduras. However, upon arrival in Honduras, local authorities refused to allow the goods to be loaded off the ship because the defendant’s permits were invalid.
The plaintiff incurred charges in the amount of $644,000 while the goods were detained in the Honduran port. The defendant failed to submit payment to the plaintiff in accordance with the agreement on the grounds that the defendant had been assessed an import duty of 45%. Thereafter, the parties negotiated a memorandum of understanding in which the defendant agreed that it owed the plaintiff for its shipment of rice and corn as well as the extra port charges. In addition, the defendant executed a promissory note for $11,000,000 and the individual defendant also signed a personal guarantee. One of the defendants, however, alleged that she did not sign the guaranty and had never seen it before. The other defendant alleged that the plaintiff’s company president told him that he only needed the memorandum, promissory note, and guaranty so he “could have something to show the banks,” and that the plaintiff had promised him that the agreements “were not legally binding”. The defendant company later defaulted on the payments under the revised loan agreement, and the individual defendants failed to abide by their alleged personal guarantees. Accordingly, the plaintiff filed suit for breach of contract in federal district court and the defendants moved to dismiss on jurisdictional grounds.
District Court Grants Defendant’s Motion to Dismiss for Lack of Jurisdiction.
The district court granted the defendants’ motion to dismiss for lack of personal jurisdiction. The court also denied the defendant’s accompanying motion to dismiss for forum non conveniens as moot. The court found that the parties’ negotiations conducted mainly by email were insufficient to confer jurisdiction since the defendants were not physically present in California. The court found that the visits the individual defendants made to the plaintiff’s offices in California did not trigger jurisdiction because the meetings concerned the original contracts and not the memorandum of understanding the parties executed after the product was shipped and held in the port in Honduras.
The plaintiff filed an appeal.
9th Circuit Court of Appeals Reverses District Court’s Decision.
On appeal, the 9th Circuit Court of appeals reversed and remanded the district court’s decision. The 9th Circuit held that the district court did, in fact, have personal jurisdiction over the defendants. The court concluded that the plaintiff had made a prima facie showing that the defendant had “reached out beyond Honduras to create continuing relationships and obligations with citizens of California.” The court cited the fact that the defendant had purchased millions of dollars of goods to be shipped from the United States to Honduras, goods which were “graded” per American standards. In addition, the necessary inspection certificates had been issued in California. The court further noted that although physical presence was not required per the court’s decision in Burger King Corp. v. Rudzewicz, 471U.S. 462, 476-78 (1985), the plaintiff had alleged that the defendant’s officers had traveled to California and had made promises central to the dispute.
The court further found that the district court had personal jurisdiction over the individual defendants who were officers of the defendant corporation. The court reasoned that the individual defendants negotiated the commodities contracts in person in California and had falsely assured the plaintiff that its import permits had been extended. The court also found that the individual defendants were “key players” in the long-standing business relationship that existed between the parties and that they had assumed personal liability.
9th Circuit Also Rules on Forum Non Conveniens Issue.
In addition to finding that the district court had personal jurisdiction over the defendants, the 9th Circuit also held that the balance of private and public interest factors did not favor the dismissal of the suit on forum non conveniens grounds. While the court acknowledged that both parties had identified witnesses who would benefit from appearing in their home country, the court cited evidence provided by the plaintiff identifying key safety concerns with its employees traveling to Honduras, particularly for those intending to collect a debt owed by a Honduran company. In addition, the court found that “most of the key documentary evidence, although originally in Spanish, ha[d] already been translated into English.” Moreover, the court found that “a plaintiff’s choice of forum-particularly a plaintiff’s ‘home forum’-is entitled to considerable deference.”
Based on the foregoing, the 9th Circuit reversed the district court’s order dismissing the action for lack of personal jurisdiction and remanded the case with instructions to deny the defendant’s forum non conveniens motion on the merits.
The case is Global Commodities Trading Grp, Inc. v. Beneficio De Arroz Choloma, S.A., Court No. 18-16026, decided on August 26, 2020 by the Ninth Circuit Court of Appeals.
Legal document translation service All Language Alliance, Inc. provide certified translations from Spanish to English and certified translation services from English to Spanish in international contract dispute cases. We also supply Spanish deposition interpreters for in-person deposition and for remote depositions via Zoom.
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