Court: District Court, S.D. New York; June 22, 2009; Federal District Court
Two class action lawsuits filed by South African plaintiffs allege that several multinational corporations, including Rheinmetall AG, violated customary international law by aiding and abetting torts connected to apartheid. Jurisdiction in U.S. courts is claimed under the Alien Tort Claims Act (ATCA). The cases highlight corporate obligations under international law and the role of U.S. courts in enforcing these norms. The procedural history began in 2002, with Rheinmetall contesting personal jurisdiction and service under the Hague Convention, though these issues were stayed pending a consolidated motion to dismiss by other defendants.
On April 8, 2009, the court partially granted and partially denied the defendants' motion to dismiss. Rheinmetall subsequently sought dismissal based on lack of personal jurisdiction and improper service, while plaintiffs requested 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 directly conduct business in the U.S. nor manufacture products, but participates in investor conferences. It owns subsidiaries, including Rheinmetall Defence, and has established a global labor agreement for social responsibility. Rheinmetall’s governance includes shared management with its subsidiaries, which have significant defense contracts with the U.S. military, totaling over $120 million since 2003. Specific subsidiaries, like American Rheinmetall Munitions, Inc., are dedicated to arms manufacturing for the U.S. military and collaborate on defense projects with American contractors.
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, including the necessary treaty documentation and a German translation of the Complaint. The defendant, Rheinmetall, contested the legitimacy of this service in German courts, resulting in an ongoing unresolved legal issue for over six years. This injunction against serving the Complaint is part of a broader trend of German court stays against Hague Convention service linked to American class-action lawsuits. A precedent was set when Bertelsmann AG successfully argued against service in March 2003, claiming that U.S. class-action and punitive damages laws violated German sovereignty. This matter escalated to the Bundesverfassungsgericht, which temporarily halted service on July 25, 2003, granting multiple extensions without resolving the core issue before Bertelsmann settled and withdrew in November 2005. Following this, other German companies have similarly thwarted service based on claims of sovereignty infringement.
In terms of personal jurisdiction, under Rule 12(b)(2), plaintiffs must demonstrate that the court has jurisdiction over the defendant. If the court relies on pleadings and affidavits without a full evidentiary hearing, plaintiffs need only show a prima facie case of jurisdiction, with all ambiguities resolved in their favor. Under Federal Rule of Civil Procedure 4(k)(2), when a claim arises under federal law, serving a summons or filing a waiver establishes personal jurisdiction if the defendant is not amenable to any state’s courts and exercising jurisdiction aligns with constitutional principles. A case arises under federal law if the complaint shows federal law creates the claim or if the plaintiffs’ entitlement to relief hinges on a significant federal legal question. Plaintiffs invoking Rule 4(k)(2) must certify that the defendant is not subject to suit in any state court of general jurisdiction. If plaintiffs establish a prima facie case, the burden shifts to the defendant to prove that it can be sued in specific states or that its U.S. contacts are insufficient for jurisdiction, preventing a scenario where a defendant must choose between acknowledging potential jurisdiction in federal court or admitting amenability in a specific state court.
Due process under the Fifth Amendment allows a court to assert personal jurisdiction over a non-resident if it does not violate fair play and substantial justice. This involves a two-step analysis: first, determining if the defendant has sufficient minimum contacts with the forum; second, assessing the reasonableness of exercising jurisdiction in the specific case. General jurisdiction is established through a defendant's ongoing business contacts with the forum, permitting jurisdiction even if the lawsuit's subject matter is unrelated to those contacts. The assessment focuses on whether the defendant has purposefully engaged in activities within the forum, thus invoking its laws' protections.
When a plaintiff cites Rule 4(k)(2) for federal jurisdiction, the analysis shifts to the defendant’s contacts with the entire United States. To satisfy the stringent minimum contacts requirement, the defendant must demonstrate continuous and systematic general business interactions with the nation. Relevant contacts are those before the lawsuit is filed, as jurisdiction is established at that point. Jurisdiction may also arise from activities conducted by an agent on behalf of the foreign corporation, particularly when those activities are crucial enough that the corporation would undertake them directly if no representative were present.
Reasonableness involves multiple factors, including the burden on the defendant, the interests of the forum state, the plaintiff’s need for relief, the efficiency of resolving disputes, and the shared interests of states in upholding substantive social policies. In transnational cases, courts must consider the additional burdens on defendants facing litigation in a foreign legal system, especially when the plaintiff does not reside in the forum, which diminishes the forum's interest in the dispute. Additionally, courts should account for the procedural and substantive policies of other nations impacted by the jurisdiction claim.
Jurisdictional discovery is at the district court's discretion, particularly when plaintiffs allege facts that may meet due process requirements. Courts can permit further fact-finding on personal jurisdiction, especially regarding general jurisdiction linked to an alleged agent's activities, which requires a detailed, multi-factor analysis.
For personal jurisdiction to be established, proper service of summons must be completed as per Federal Rule of Civil Procedure 12(b)(5). Insufficient service can lead to dismissal, but such dismissal must be without prejudice due to lack of jurisdiction if service is not perfected.
Service methods are outlined in Rule 4. For foreign corporations, Rule 4(h) mandates service either within a U.S. judicial district or as per Rule 4(f), which allows for international service through agreed means, such as those in the Hague Convention. The Convention facilitates serving foreign nationals via designated Central Authorities in member states. Germany, having objections to certain service methods, requires that American plaintiffs serve German defendants only through the Central Authority. While the Hague Convention details the service procedure, it does not specify the court's actions if a procedural element fails. If a plaintiff makes good faith efforts to comply with the Hague Convention and the defendant acknowledges receipt of the complaint, no prejudice occurs to the defendant.
Federal Rule of Civil Procedure 4(m) mandates 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. While failure to serve a foreign defendant can lead to dismissal, district courts have discretion to extend the 120-day period for service outside the U.S., even without good cause. Proper transmission of documents to a Hague Convention Central Authority allows for an extension due to circumstances beyond the plaintiff's control. However, if alternative service methods were available within the standard timeframe, an extension may not be warranted.
Rule 4(f)(3) allows for service by means not prohibited by international agreements, as ordered by the court, granting broad discretion to judges. This is especially relevant when a Hague Service Convention signatory fails to cooperate. Jurisdiction over a foreign defendant can be claimed if the plaintiff has not received a certificate of service, provided specific conditions are met, including that six months have passed since document transmission without receipt of a certificate despite reasonable efforts to obtain it.
Germany's objections to certain service methods under the Hague Convention do not preclude alternative service forms. The appropriateness of any ordered service method hinges on whether it is likely to provide actual notice to the affected party and ensure they have an opportunity to be heard, considering the practicalities of the situation.
In terms of personal jurisdiction, plaintiffs have not yet proven the court's jurisdiction over Rheinmetall at the time the suit was filed. However, they have demonstrated that exercising personal jurisdiction may satisfy due process, warranting jurisdictional discovery. The plaintiffs have established that their claims arise under federal law, satisfying the requirements of Rule 4(k)(2), as they pertain to the Alien Tort Claims Act (ATCA) and involve significant federal law questions, including international law and human rights.
Plaintiffs argue they do not need to demonstrate that Rheinmetall is not subject to jurisdiction in any particular state's court, based on Rheinmetall's assertion of not being subject to jurisdiction in any U.S. court. This position would undermine the requirement for plaintiffs to prove all three conditions under Rule 4(k)(2). Rule 4(k)(2) should only apply if plaintiffs can clearly show that the defendant lacks jurisdiction in any specific state. While plaintiffs have provided sufficient evidence to suggest Rheinmetall lacks a formal presence in the U.S., a formal certification confirming that Rheinmetall is not subject to jurisdiction in any state is necessary. This certification must be submitted within ten business days after the conclusion of jurisdictional discovery, after which the burden would shift to Rheinmetall to refute this claim.
Regarding the minimum-contacts requirement for jurisdiction under Rule 4(k)(2), Rheinmetall’s activities, such as attending trade shows, are insufficient to establish general jurisdiction. However, the plaintiffs allege a principal-agent relationship between Rheinmetall and its subsidiaries, which could challenge the notion of limited liability. The evidence presented suggests that Rheinmetall exercises direct control over DeTec, with shared resources and overlapping management, indicating that DeTec may act as an agent or alter ego of Rheinmetall. While these signs do not conclusively establish such a relationship, they support a plausible claim that DeTec's contacts could be attributed to Rheinmetall. If plaintiffs can prove this agency or alter ego relationship, linking DeTec to its subsidiaries would be easier, especially since DeTec's subsidiaries, particularly ARM, engage in significant business with the Department of Defense, indicating that DeTec would be inclined to provide those services directly if necessary.
Imputing the contacts of Rheinmetall’s subsidiaries to the parent company could establish sufficient contacts with the United States to meet the requirements for general personal jurisdiction under due process. A company engaging in over $100 million in federal business has purposefully acted within the U.S., thereby accepting jurisdiction in federal courts. The assertion that a company could conduct such extensive business without anticipating general jurisdiction is deemed implausible.
Plaintiffs have presented sufficient allegations supporting the reasonableness of exercising jurisdiction, notwithstanding that defending in Germany may be less burdensome for Rheinmetall. New York's status as a global capital provides centrality, accessibility, and resources that mitigate any potential burden. The plaintiffs have a strong interest in seeking relief, and the U.S. has a vested interest in resolving human rights claims, irrespective of where the violations occurred. Additionally, as the court has jurisdiction over five other defendants in the case, exercising jurisdiction over Rheinmetall enhances efficiency for all parties involved.
There is a collective international interest, including from Germany, in addressing violations of customary international law relevant to this case. The court will defer its final due process determination until a comprehensive evidentiary record is presented. While plaintiffs have met the threshold to argue Rheinmetall’s activities may satisfy due process for general jurisdiction, most evidence provided is post-filing and limited to a seven-year window prior to the lawsuit (1995-2002), constraining their ability to demonstrate jurisdiction. Consequently, the court will require a fully developed record to evaluate personal jurisdiction based on a preponderance of the evidence.
Regarding service of process, Rheinmetall has allegedly attempted to impede the plaintiffs' attempts to serve a summons and complaint in Germany and has requested dismissal for insufficient service. Even if the court finds the service inadequate, dismissal would be without prejudice, allowing for refiling, which could lead to a repetitive issue concerning service through the Central Authority in Germany. The court notes that the plaintiffs have made reasonable efforts to comply with service requirements under applicable rules and the Hague Convention.
Over six years have passed since the plaintiffs submitted documents to the Central Authority for Northrhine-Westphalia, which has not yet served the defendant, Rheinmetall. The German courts have not determined that the Central Authority can refuse service due to sovereignty or security concerns under Article Thirteen of the Hague Convention. Rheinmetall has not been prejudiced by this delay, as it is aware of the lawsuit and has been under a stay of proceedings. Although typically a six-year delay would warrant dismissal for failure to prosecute, this case is atypical due to the prolonged resolution of motions to dismiss and the commencement of discovery. The plaintiffs' persistent attempts to effect service demonstrate good cause for allowing service despite the delay. The court has decided to grant the plaintiffs' request for alternative service under Rule 4(f)(3). Although Germany prohibits service via judicial agents, mail, or diplomats, it does not preclude other reliable methods. The plaintiffs are given sixty days to serve Jerome S. Hirsch, Rheinmetall’s counsel, with the summons and the Corrected Second Amended Complaint in both English and German. This alternative service aligns with the Hague Convention's provisions, particularly Article Fifteen. The plaintiffs have fulfilled all requirements for the court to assert jurisdiction without a certificate of service, given the extensive time since the document transmission and the lack of a certificate confirming proper service attempts. Comity considerations do not justify denying the request for alternative service, as the German courts have not issued a final judgment indicating that Hague Convention processes would violate German sovereignty or security.
Over forty years ago, the New York Court of Appeals acknowledged the challenges faced by foreign corporations involved in U.S. litigation. The court emphasized that such litigation, while burdensome, is a necessary consequence for companies engaged in international trade. In the current case, the plaintiffs have not established that Rheinmetall is subject to suit in this jurisdiction. However, the court found their arguments compelling enough to allow for jurisdictional discovery, which will enable a comprehensive assessment of personal jurisdiction based on a complete evidentiary record.
Consequently, Rheinmetall's motion to dismiss is denied, with the option to renew it after jurisdictional discovery concludes. The plaintiffs' motion for alternative service is granted, mandating personal service on Rheinmetall’s counsel within sixty days. The timeline for Rheinmetall to respond to the complaint remains paused until the renewed motion to dismiss for lack of personal jurisdiction is resolved. A status conference regarding jurisdictional discovery is scheduled for July 6, 2009, at 4:30 p.m.
Additionally, the document references the Alien Tort Statute (28 U.S.C. § 1350) and the Hague Convention on the Service Abroad of Judicial and Extra-judicial Documents. It includes citations to previous related case law and mentions the existence of an American Depository Receipt program for Rheinmetall stock, which is currently unsponsored. The document also notes a change in the headquarters of Rheinmetall over time, although it does not negate the plaintiffs' claim of a shared headquarters.
Rheinmetall's contact information was included in a DeTec press release. Klaus Eberhardt serves as both a member of the Rheinmetall executive board and CEO of DeTec, while Ernst-Otto Kramer is a member of the Rheinmetall AG management board and chairman of DeTec’s executive board. There is a notable pattern of senior executives being transferred among various Rheinmetall subsidiaries. References to press releases and reports highlight the operational structure and defense capabilities of Rheinmetall, including various dates of communications and documents submitted in declarations. The ongoing legal question is before the Third Civil Appeals Court, with additional context provided by affidavits and publications discussing related disputes. The legal framework for international civil litigation is also cited, emphasizing the evolving standards for personal jurisdiction and burden-shifting in federal courts. Key cases and decisions from various appellate courts are referenced, illustrating the application of legal principles in this context.
The excerpt addresses the principles surrounding personal jurisdiction and jurisdictional discovery in U.S. federal courts, citing multiple cases. It establishes that specific jurisdiction can be found in instances where a defendant has continuously and deliberately engaged with a state’s market, referencing a New Hampshire case. It discusses limitations on jurisdictional discovery, highlighting a reasonable six-year period for such discovery as determined by prior rulings. The excerpt notes that New York law regarding the activities of agents was applied in specific cases without violating federal due process standards. It emphasizes the importance of making specific factual allegations to support claims of jurisdiction, and it critiques the interpretation of legal standards surrounding jurisdictional discovery. Furthermore, it references the Federal Rules of Civil Procedure regarding service of process, particularly in international contexts, and mentions the Hague Convention on service of documents, detailing conditions under which alternative service methods are permissible. The excerpt concludes by drawing connections to various legal precedents concerning service and jurisdictional matters.
The document provides various case law references related to service of process and jurisdictional issues under the Hague Convention and relevant Federal Rules of Civil Procedure. Key points include:
1. **Inadequate Service**: In *In re Bulk Extruded Graphite Products*, the court denied dismissal due to inadequate service when plaintiffs acted promptly by sending documents to the German Central Authority, which failed to serve the defendant timely.
2. **Equitable Tolling**: The *Paracelsus Healthcare Corp.* case found that equitable tolling was inappropriate as the plaintiff could not demonstrate being prevented from suing through alternate service methods allowed by the Hague Convention.
3. **Ministerial Delays**: In *Conservatorship of Prom*, a predictable delay was deemed insufficient to extend the service deadline.
4. **Service Methods**: The excerpt discusses rulings on various methods of service, highlighting that service by facsimile to a German defendant was denied as Germany had objected to such methods, emphasizing the necessity of adhering to Hague Convention protocols.
5. **Default Judgments**: The *Anticevic* case permitted a default judgment when service requirements were satisfied, demonstrating the court's willingness to proceed under certain conditions.
6. **International Law and Federal Common Law**: References to cases such as *Agha v. Jacobs* and *Banco Nacional de Cuba v. Sabbatino* illustrate the intersection of international law with U.S. federal common law regarding private claims under the Alien Tort Claims Act (ATCA).
7. **Jurisdictional Frameworks**: The excerpt highlights the legal framework for establishing jurisdiction, particularly under Federal Rule of Civil Procedure 4(k)(2), allowing for jurisdiction in cases involving foreign defendants.
8. **Employee Activities and Jurisdiction**: The *Landoil Res. Corp.* case clarified that sporadic employee visits to the U.S. for servicing accounts did not amount to "systematic and continuous contact," affecting jurisdictional determinations.
Overall, the excerpt underscores the complexities of international service of process, jurisdictional standards, and the application of both federal and international law in these contexts.
The court can infer that sales figures leading up to 2002 were not significantly lower, despite the figures being post-litigation. Under the Torture Victim Protection Act, liability for torture or extrajudicial killings is established for acts in foreign nations. Germany has played a key role in the establishment of the International Criminal Court, and an agreement between Israel and Germany provided for reparations for past crimes. Rheinmetall AG asserts that the plaintiffs are improperly seeking jurisdiction through online research. The court references a precedent that evaluates a defendant's contacts within a seven-year period for jurisdiction analysis. Current evidence supports personal jurisdiction over Rheinmetall, though issues of dismissal and re-filing may impact the statute of limitations. The plaintiffs may argue for equitable tolling due to delays caused by the German Central Authority's refusal to execute service. Rheinmetall retains the right to seek dismissal even after other defendants have responded. Service of process for American class actions must be conducted in Germany, as noted by Germany's leading research institution.
