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In Re South African Apartheid Litigation
Citation: 643 F. Supp. 2d 423Docket: 02 MDL 1499 (SAS), No. 03 Civ. 4524 (SAS)
Court: District Court, S.D. New York; June 22, 2009; Federal District Court
Two actions on behalf of South African plaintiffs allege that several multinational corporations aided and abetted torts violating customary international law, asserting jurisdiction under the Alien Tort Claims Act (ATCA). The lawsuits explore corporate obligations under international law, the role of U.S. courts in enforcing global legal norms, and the legacy of apartheid. The procedural history began in 2002, with defendant Rheinmetall AG contesting personal jurisdiction and service under the Hague Convention, but resolution was stayed pending a consolidated motion to dismiss from other defendants. On April 8, 2009, the court partially granted and denied this motion. Rheinmetall subsequently sought to dismiss claims against it due to lack of personal jurisdiction and improper service, while plaintiffs sought alternative service authorization under Federal Rule of Civil Procedure 4(f)(3). The court denied Rheinmetall's motion to dismiss but allowed for re-filing after limited jurisdictional discovery, and granted the plaintiffs' motion for alternative service. Rheinmetall AG, a German holding company based in Düsseldorf, does not manufacture or sell products directly and is not registered to do business in the U.S. Its U.S. presence is minimal, limited primarily to executive participation in investor conferences. Rheinmetall owns several subsidiaries, including Rheinmetall Defence, which shares operations and governance with the parent company. The governance structure includes a member of Rheinmetall's management board serving as CEO of DeTec, emphasizing a unified corporate identity and compliance with international standards. Rheinmetall's subsidiaries have secured defense contracts exceeding $120 million with the U.S. military since fiscal year 2003. American Rheinmetall Munitions, Inc., a subsidiary focused on arms manufacture for the U.S. military, is part of this family of companies. Rheinmetall has collaborated with U.S. defense contractors on several weapons projects, including the naval Millennium Gun and the Skyshield 35 air defense system with Lockheed Martin, as well as the Prospector and Thunder unmanned aerial vehicles with Teledyne Brown. Plaintiffs initiated this legal action on November 11, 2002, and subsequently engaged Legal Language Services (LLS) for international litigation support. On March 20, 2003, LLS submitted a Hague Convention service request to the Central Authority for Northrhine-Westphalia, which included translated treaty documents and the Complaint. Rheinmetall contested the adequacy of this service in German courts, resulting in ongoing litigation that has persisted for over six years without resolution. This challenge is part of a broader trend where German courts have issued stays against Hague Convention service due to concerns over American class-action lawsuits, particularly highlighted by the Bertelsmann AG case, which led to a temporary injunction by the Bundesverfassungsgericht in July 2003. The injunction has since been extended multiple times, and the case settled without a ruling on its merits. In terms of applicable law, under Rule 12(b)(2), the plaintiff must demonstrate personal jurisdiction over the defendant, which can be established through pleadings and affidavits without a full evidentiary hearing. The court must view these in the light most favorable to the plaintiffs. Rule 4(k)(2) allows for establishing personal jurisdiction in federal claims when the defendant is not subject to any state's general jurisdiction and exercising jurisdiction aligns with constitutional principles. The plaintiff must certify that the information available indicates the defendant is not subject to jurisdiction in any state’s courts of general jurisdiction. If a plaintiff establishes a prima facie case, the burden shifts to the defendant to provide evidence demonstrating either the existence of specific states where it could be sued or that its contacts with the U.S. are insufficient for jurisdiction. This framework avoids forcing a defendant into a "Catch-22" where it must either concede to federal court jurisdiction or to identified state court jurisdiction. Under the Fifth Amendment's due process requirements, a court can exercise personal jurisdiction over a non-resident if it does not violate traditional notions of fair play and substantial justice. The Second Circuit employs a two-step analysis for personal jurisdiction: first, determining if the defendant has sufficient minimum contacts with the forum; second, assessing the reasonableness of asserting personal jurisdiction in that case. General jurisdiction allows a court to hear cases unrelated to a defendant's specific contacts with the forum based on the overall nature of those contacts. The focus is on whether the defendant has purposefully availed itself of conducting activities in the forum, thereby invoking its laws' protections and benefits. When invoking Rule 4(k)(2) for federal jurisdiction, the minimum contacts are evaluated based on the defendant's contacts with the entire U.S., requiring evidence of continuous and systematic business contacts. The analysis considers contacts leading up to the lawsuit, as jurisdiction is established at the time of filing. Jurisdiction can also be established through actions performed by an agent for a foreign corporation, as long as those actions go beyond mere solicitation and are essential to the corporation's operations. Several factors influence the reasonableness of exercising personal jurisdiction: the burden on the defendant, the interests of the forum state, the plaintiff's interest in relief, the efficiency of judicial resolution, and the shared interests of states in furthering substantive social policies. In transnational cases, the Supreme Court emphasizes the significant burden on defendants in foreign legal systems when considering personal jurisdiction across national borders. When a plaintiff is not a resident of the forum, the forum's legitimate interests in the case are significantly reduced. Courts must also consider the procedural and substantive policies of other nations affected by the assertion of jurisdiction. Jurisdictional discovery is at the district court's discretion; if plaintiffs present facts that may satisfy due process, courts can permit further development before concluding a lack of prima facie showing on personal jurisdiction. General jurisdiction inquiries involving an alleged agent require a multi-factor, fact-specific test and allow for discovery regarding the agency relationship and activities in the forum. For service of process, under Federal Rule of Civil Procedure 12(b)(5), a court can dismiss an action due to insufficient service. Plaintiffs bear the burden of proving effective service, and without it, a court lacks jurisdiction to dismiss with prejudice, necessitating a dismissal without prejudice. Rule 4(h) outlines that foreign corporations must be served within a U.S. judicial district or through methods defined in Rule 4(f), which allows for service outside the U.S. using internationally agreed means, such as those provided by the Hague Convention. The Convention specifies a process for serving foreign nationals through designated Central Authorities, which must serve the documents or arrange for appropriate service. If a plaintiff has made a good faith effort to comply with the Hague Convention and the defendant acknowledges receipt of the complaint, there is no resulting prejudice. Federal Rule of Civil Procedure 4(m) states that actions may be dismissed without prejudice if service is not completed within 120 days, but this rule does not apply to service in foreign countries, which lack a specified deadline. However, failure to attempt service in a foreign country can lead to dismissal, although the 120-day period can be extended for international service. District courts can grant extensions for service of process even without good cause, particularly after documents have been transmitted to a Hague Convention Central Authority, as the timing of service is beyond a plaintiff's control. However, if a plaintiff has alternative means to serve within the standard timeframe without needing a judicial order, an extension is not warranted. Under Rule 4(f)(3), defendants may be served by methods not prohibited by international agreement, and courts have broad discretion in determining these methods, especially when a Hague Convention signatory refuses to cooperate. Jurisdiction over a foreign defendant can be established if documents were transmitted per the Convention, six months have passed since transmission, and no certificate of service has been received despite reasonable efforts. Although Germany has objected to certain service methods, it has not prohibited all alternative methods. The appropriateness of alternative service hinges on whether it is reasonably calculated to provide actual notice and an opportunity to be heard. Regarding personal jurisdiction, plaintiffs have not yet proven that the court had jurisdiction over Rheinmetall at the time the suit was filed in 2002. However, they have shown sufficient grounds that exercising personal jurisdiction could meet due process requirements, justifying jurisdictional discovery. The claims fall under federal law, as they relate to the Alien Tort Claims Act (ATCA) and customary international law. Plaintiffs argue that they do not need to demonstrate Rheinmetall's lack of jurisdiction in any specific state since Rheinmetall claims it is not subject to any U.S. court's jurisdiction. This assertion could potentially relieve plaintiffs of the burden to satisfy all jurisdictional requirements, but Rule 4(k)(2) should only be applied if plaintiffs can show that Rheinmetall is not subject to jurisdiction in any state. Plaintiffs have sufficiently demonstrated that Rheinmetall lacks general jurisdiction in any U.S. state due to its absence of a formal presence in the country. A formal certification confirming this lack of jurisdiction must be submitted by the plaintiffs within ten business days after the conclusion of jurisdictional discovery. Once this certification is provided, the burden will shift to Rheinmetall to contest it through a renewed motion to dismiss. Regarding the minimum-contacts requirement under Rule 4(k)(2), Rheinmetall's activities alone do not establish general jurisdiction, as participation in trade shows or conferences does not equate to continuous and systematic business operations. However, plaintiffs allege a principal-agent relationship between Rheinmetall and its wholly-owned subsidiaries, suggesting that Rheinmetall cannot evade liability by incorporating its divisions separately. Evidence of direct control over DeTec by Rheinmetall, shared resources, and overlapping management supports the plausibility of DeTec being an agent or alter ego of Rheinmetall. Should plaintiffs establish this agency or alter ego relationship, linking DeTec to its subsidiaries becomes simpler. DeTec's subsidiaries, especially ARM, engage significantly with the Department of Defense, indicating that DeTec would perform these services directly if ARM were unavailable, thus implying that Rheinmetall's subsidiary contacts could be attributed to the parent company. Given that Rheinmetall conducts over $100 million in business with the federal government, it has purposefully engaged in activities within the U.S., which suggests a reasonable expectation of being subject to U.S. jurisdiction. Furthermore, while defending this case in Germany might be less burdensome for Rheinmetall, New York presents advantages such as accessibility and resources, making jurisdiction there reasonable. Plaintiffs have a vested interest in seeking relief, supported by the United States' interest in addressing human rights claims, regardless of where the violations occurred. The Court has jurisdiction over five other defendants, making it efficient to also include Rheinmetall. There is a collective international interest, including from Germany, in resolving violations of customary international law. The Court will postpone a final decision on due process until a complete evidentiary record is available. Although plaintiffs have met the initial threshold for establishing general jurisdiction over Rheinmetall, most supporting evidence is from after the Complaint was filed, limiting the relevant documentation to 1995-2002. As a result, plaintiffs have not yet sufficiently demonstrated Rheinmetall's jurisdiction in this Court. Regarding service of process, Rheinmetall has attempted to impede proper service, claiming insufficient service as grounds for dismissal. If the Court finds service inadequate, dismissal would be without prejudice, allowing for re-filing, which would lead to repeated issues with service in Germany. Plaintiffs have made reasonable efforts to serve Rheinmetall, but the Central Authority has not completed service even after six years. German courts have not ruled on the Central Authority's ability to decline service due to sovereignty or security concerns. Rheinmetall has not been prejudiced by the delay, as it is aware of the lawsuit. Despite the six-year delay typically warranting dismissal for failure to prosecute, the unique circumstances of this case and the plaintiffs' diligent efforts justify proceeding without dismissal. Consequently, the Court grants plaintiffs' request for alternative service under Rule 4(f)(3), noting that while Germany restricts certain service methods, it does not prohibit others that could effectively inform the defendant of the allegations. Plaintiffs are granted sixty days to serve Jerome S. Hirsch, counsel for Rheinmetall, with a summons and copies of the Corrected Second Amended Complaint in English and German. This alternative service complies with the Hague Convention, particularly Article Fifteen, and meets the jurisdictional criteria despite the lack of a certificate of service. The documents were appropriately transmitted to the Central Authority for Northrhine-Westphalia, and over six years have passed since this transmission, which the Court deems sufficient. Plaintiffs have made reasonable efforts to secure proper service without receiving a certificate. While Rheinmetall raises concerns about ongoing issues in German courts, the Hague Convention limits delays by the Central Authority, allowing the originating court to exercise jurisdiction without foreign cooperation. Comity considerations do not preclude the plaintiffs' request, as no final judgment from German courts has been presented that would hinder service under Hague processes. The Court acknowledges the burdens of litigation on foreign corporations but emphasizes the necessity of jurisdictional discovery to determine personal jurisdiction based on a complete evidentiary record. Rheinmetall's motion to dismiss is denied, with the option to renew after jurisdictional discovery. Plaintiffs are authorized to serve Rheinmetall’s counsel personally within sixty days, while the deadline for Rheinmetall to respond to the Complaint is stayed until the resolution of the renewed motion to dismiss. A status conference regarding jurisdictional discovery is scheduled for July 6, 2009. The motion has been officially closed by the Court. Rheinmetall AG's motion to dismiss a case based on lack of personal jurisdiction and insufficient service of process is opposed by the plaintiffs, who reference several key documents. The Corrected Second Amended Complaint (CSAC) and declarations from Rheinmetall AG's General Counsel, Andreas Beyer, indicate that while Rheinmetall DeTec was previously headquartered in Ratigen, it is currently in Düsseldorf, although the plaintiffs assert both companies share a headquarters. The Bank of New York Mellon facilitates trading of Rheinmetall stock through an unsponsored American Depository Receipt (ADR) program. The document also details the interconnectedness of Rheinmetall AG and its subsidiaries, noting that executives frequently move between these entities, as shown in various press releases and annual reports. There are ongoing legal proceedings in an intermediate appeals court regarding related jurisdictional issues, with references to legal literature that describe disputes in the context of class action notices in Germany. Several legal precedents are cited, highlighting the criteria for establishing personal jurisdiction, including the necessity of a three-part test based on previous case law. The summary reflects the complexities of the corporate structure, jurisdictional claims, and ongoing legal challenges faced by Rheinmetall AG in this litigation. Bay Shore Union Free School Dist. v. Kain establishes legal precedents regarding personal jurisdiction, referencing several key cases. Empire Healthchoice Assur. v. McVeigh underscores the framework for determining jurisdiction, while United States v. Swiss Am. Bank, Ltd. discusses the burden-shifting approach in jurisdictional cases. The importance of Rule 4(k)(2) is highlighted as a mechanism for establishing personal jurisdiction in federal courts, as noted in various cases like Aqua Shield, Inc. v. Inter Pool Cover Team. The excerpt emphasizes the necessity of "minimum contacts" for specific jurisdiction, citing International Shoe Co. v. Washington as foundational. Additional references include Metropolitan Life Ins. Co. v. Robertson-Ceco Corp., which clarifies the criteria for jurisdictional discovery limits. The excerpt also addresses the constitutional implications of applying New York law to personal jurisdiction, noting that it does not contravene due process as established in cases like Wiwa v. Royal Dutch Petroleum Co. and Gelfand v. Tanner Motor Tours, Ltd. Asahi Metal Indus. Co. v. Superior Court of California is referenced to illustrate the parameters of due process in asserting jurisdiction over foreign entities. Finally, the excerpt notes that specific factual allegations supporting jurisdictional claims are necessary, as highlighted in In re Terrorist Attacks on September 11, 2001 and In re Magnetic Audiotape Antitrust Litig. The excerpt addresses legal standards regarding jurisdictional discovery and service of process in international contexts. It emphasizes that a District Court errs if it interprets the Jazini ruling as requiring a prima facie showing of jurisdiction before permitting jurisdictional discovery. Various cases are cited to support the premise that jurisdictional discovery should not be denied solely based on a lack of prima facie evidence. The excerpt also outlines the provisions of Federal Rule of Civil Procedure 4 regarding alternative service methods, particularly in the absence of an internationally agreed means of service. Additionally, it references the Hague Convention articles that govern service of process, indicating that delays in service by authorities do not automatically warrant an extension for completing service. The excerpt concludes by highlighting that a predictable ministerial delay is insufficient grounds for extending service deadlines, reinforcing the need for plaintiffs to actively pursue available means for serving defendants under the Hague Convention. The excerpt references multiple legal cases and statutes regarding international service of process and personal jurisdiction. It highlights a decision denying service by facsimile to a German defendant, emphasizing that the plaintiff failed to utilize the Central Authority for service, as required by German law. The text discusses the recognition of private claims under the Alien Tort Claims Act (ATCA) and the application of federal common law principles, particularly in cases involving vicarious liability. It mentions the Federal Rules of Civil Procedure, specifically Rule 4(k)(2), which permits jurisdiction in federal court under certain conditions when a defendant has sufficient contacts with the U.S. The excerpt notes that evidence could establish personal jurisdiction over Rheinmetall if assessed based on current facts and considers the implications of statute of limitations and equitable tolling due to delays caused by the German Central Authority. It also indicates the ongoing right of Rheinmetall to file a motion to dismiss irrespective of other defendants' actions. Lastly, it cites a study asserting that service for American class actions involving punitive damages must occur in Germany, suggesting that the Hague Service Convention does not apply in these instances.