Opinion
Case No. 2:04-cv-0793.
July 16, 2007
ORDER
As this Court's order of May 25, 2007 reflects, after the defendants changed counsel, the Court held a status conference for the purpose of readjusting the case schedule in light of the appearance of new counsel and their need to become familiar with the issues in the case. At the status conference, however, counsel, citing the recent decision of the United States Supreme Court in Sinochem Intern. Co. Ltd. v. Malaysia Intern. Shipping Corp., 127 S.Ct. 1184 (2007), suggested that the Court should address a forum non conveniens issue prior to determining whether subject-matter jurisdiction exists. Counsel for the defendants also suggested that discovery be stayed pending a decision on that issue. The May 25, 2007 order established a briefing schedule with respect to defendants' requests. All parties have now submitted briefs addressing both of the issues identified in that order. Defendants' briefs also raise an additional issue regarding subject-matter jurisdiction. This order will dispose of all of the matters raised by the parties in the briefs.
I.
The Court notes, first, that the introductory brief filed by defendants expands the bases on which they request the Court to reconsider its earlier case management order. At the status conference, defendants raised only the issue concerning forum non conveniens. In their opening brief, however, they also contend that the Court should reformulate its approach to the subject-matter jurisdiction issue by considering the question of whether, even if the notes in question were validly issued by the Venezuelan government, they had a "direct effect" in the United States. They assert that this inquiry, which is a part of the jurisdictional section of the Foreign Sovereign Immunities Act upon which the plaintiff relies, can be determined as a matter of law and without the need for an evidentiary hearing or any discovery. Consequently, they are now requesting that the Court permit them to raise and brief both of these issues, and to suspend the discovery and evidentiary hearing contemplated by the Court's earlier orders, until the issues are decided.
Initially, in order to identify the appropriate legal standard under which to evaluate the defendants' requests, the Court must categorize them appropriately. Defendants have noted that because the prior rulings made by the Court are interlocutory, they are subject to reconsideration at any time. They have cited to case law suggesting that such reconsideration should occur only in order to prevent "manifest injustice." See Cale v. Johnson, 861 F.2d 943 (6th Cir. 1988); see also McWhorter v. Elsea, Inc., 2006 WL 3483964, *2 (S.D. Ohio November 30, 2006) (some measure of finality should be afforded to interlocutory orders in order to "discourage the filing of endless motions for reconsideration"). On the other hand, the case management orders issued by this Court were the product of a series of pretrial conferences which were conducted pursuant to Fed.R.Civ.P. 16(b). Rule 16(b) permits the Court to modify a pretrial order upon a showing of "good cause." The "good cause" standard appears to the Court to be more lenient than the "manifest injustice" standard more generally applicable to interlocutory orders. Consequently, the Court will examine defendants' requests under the more lenient standard, and will determine whether good cause exists to modify the Court's prior orders directing the nature and extent of the discovery to be conducted on the jurisdictional issue and directing the holding of an evidentiary hearing on that issue.
II.
Turning first to the forum non conveniens issue, defendants argue that the United States Supreme Court's recent decision inSinochem constitutes good cause for reconsideration of the prior case management order. As the Supreme Court explained, Sinochem was intended to resolve a conflict in the circuits which had arisen since the court decided Steel Co. v. Citizens for Better Environment, 523 U.S. 83 (1998). Steel Co. stands for the general proposition that a district court must decide if it has subject-matter jurisdiction before addressing the merits of a case. In other words, it is improper for a district court to assume the existence of jurisdiction and to proceed to the merits, an approach which some courts had adopted when the merits question was less complex than the jurisdictional inquiry. A year later, in Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574 (1999), the court explained that a district court could choose to decide issues of personal jurisdiction prior to reaching the issue of subject-matter jurisdiction without running afoul of the Steel Co. holding because personal jurisdiction, like subject-matter jurisdiction, is a threshold legal issue that goes to the Court's power to decide the case before it. Sinochem simply added forum non conveniens to the list of threshold issues which may be decided prior to a decision about subject-matter jurisdiction. Although several Courts of Appeals had concluded that it would not be proper to reach that issue prior to resolving subject-matter jurisdiction, the Court of Appeals for the Sixth Circuit had not decided the issue.
Sinochem does not represent a material change in the law. It does not overrule or modify the Supreme Court's prior holdings inSteel Co. and Ruhrgas in any way. Rather, it simply clarifies that, consistent with the decision in Ruhrgas that threshold issues such as subject-matter jurisdiction and personal jurisdiction may be decided in any order that the court deems appropriate, forum non conveniens is another such threshold issue. Since the latter doctrine is very similar to personal jurisdiction, the holding in Sinochem is entirely consistent with the holding in Ruhrgas. Consequently, the Court does not believe that there has been any intervening change in the law which would constitute good cause for a reversal of course with respect to the way in which the Court has previously managed this litigation, and defendants' argument based on the Sinochem decision is therefore rejected.
III.
Defendants may be arguing, as a more fundamental matter, however, that the Court's prior decision (although it was made with the full input of prior counsel for the defendants) was simply wrong. In other words, the Court should have placed the forum non conveniens issue to the forefront because, as argued by defendants in their more recent briefing, it would save a considerable amount of time and judicial resources if the Court were to consider the issue first and, as defendants strongly suggest, dismiss the case on forum non conveniens grounds. In fact, that is the argument which defendants appear to advance with respect to their second point, which is that the Court should also parse the jurisdictional inquiry into a separate examination of whether there has been a "direct effect" of any alleged commercial activity within the United States. This issue, which goes to the Court's subject-matter jurisdiction, is not a new issue, nor has there been any recent development in the case law changing the way in which the Court should analyze such an issue. However, defendants assert that it would make the jurisdictional inquiry less time-consuming if the Court were to consider only that question first because, according to defendants, the question can be resolved without reference to any evidentiary materials and is, in essence, a pure legal question.
The problem with both of these arguments is that they are not being presented on a clean slate. At the outset of the case, had the defendants presented, as alternatives to the course ultimately chosen, initial consideration of either the "direct effect" prong of the jurisdictional test or the issue of forum non conveniens, the Court might well have been persuaded that these were viable alternatives which, as a matter of discretion, might be preferred to directing the parties to engage in discovery on the question of whether Venezuela had engaged in commercial activity, which is another prong of the jurisdictional test under the FSIA. Defendants do not explain why they did not identify these alternatives at any time prior to May 24, 2007, by which date this case had been pending for well over two years. As a direct result of the defendants prior approach to the case, the Court had identified what both parties believed to be the key jurisdictional issue and had set up a discovery schedule with respect to that issue. The parties had then embarked on a course of discovery which was on the brink of having depositions conducted. Given this posture of the case, although these alternatives might have been attractive to the Court at the outset, they are much less so now.
At this juncture, the Court has exercised its discretion appropriately in light of the parties' prior arguments. The defendants have essentially advanced no valid reasons why that was an inappropriate exercise of discretion then or why, given the extent to which that approach has now been implemented, reversing course would now be the more appropriate exercise of discretion. In short, the Court finds no good cause for modifying its prior order simply because there are other threshold issues, none of which is more fundamental than the question of whether Venezuela engaged in commercial activity, which could also be litigated.
This is not to say that the Court will refuse to consider these issues. In particular, there is no reason why the issue of whether the non-payment of the notes had a "direct effect" in the United States cannot be made a part of the threshold jurisdictional inquiry. The Court is not persuaded that the question can be decided in the absence of an evidentiary record. On the other hand, there is no reason why the parties' initial discovery cannot encompass that issue or that the issue cannot be fully delved into at the evidentiary hearing. Consequently, the Court will modify its prior order to the extent that it will permit the parties to argue that point as part of the current jurisdictional inquiry. It will not, however, address the question of forum non conveniens at this time. If the Court concludes, after an evidentiary hearing, that it has subject-matter jurisdiction, it will then consider whether that issue should be the next issue for the Court to consider.
IV.
Based upon the foregoing, the defendants' requests to raise and brief the issue of forum non conveniens at this stage of the case and to stay further discovery or the contemplated evidentiary hearing pending a ruling on that issue, and their request for the Court to suspend all discovery and the evidentiary hearing pending a determination as to whether the non-payment of the notes had a "direct effect" in the United States, are both denied. The parties shall, as directed by the Court at the status conference, immediately commence discovery on the subject-matter jurisdiction issues which exist under the FSIA and submit to the Court a proposed end date for that discovery so that the evidentiary hearing may be scheduled. This order disposes of defendants' motion for a protective order (#107) and the Clerk is directed to remove that motion from the Court's pending motions list.
Any party may, within ten (10) days after this Order is filed, file and serve on the opposing party a motion for reconsideration by a District Judge. 28 U.S.C. § 636(b)(1)(A), Rule 72(a), Fed.R.Civ.P.; Eastern Division Order No. 91-3, pt. I., F., 5. The motion must specifically designate the order or part in question and the basis for any objection. Responses to objections are due ten days after objections are filed and replies by the objecting party are due seven days thereafter. The District Judge, upon consideration of the motion, shall set aside any part of this Order found to be clearly erroneous or contrary to law.
This order is in full force and effect, notwithstanding the filing of any objections, unless stayed by the Magistrate Judge or District Judge. S.D. Ohio L.R. 72.4.