Not So Fast! Proper Jurisdiction for Award Confirmation

by Lionel M. Schooler, FCIArb
Jackson Walker LLP¹

Introduction. In Conti 11. Container Schiffarts-GMBH & Co. KG M.S., MSC Flaminia v. MSC Mediterranean Shipping Company, S.A., ____ F.4th ____, 2024 U.S. App. LEXIS 1928 (5th Cir. 2024), the United States Court of Appeals for the Fifth Circuit recently addressed a rare arbitration problem: proper personal jurisdiction to confirm an arbitration award.

Background. For ease of reference, in this article the parties are referred to as “Conti” (Appellee) and “MSC” (Appellant). Conti chartered a cargo vessel to MSC. On one voyage, the vessel received three chemical tanks from the Port of New Orleans. The tanks then exploded during Atlantic transit, causing damages and death. The dispute triggered by these events was submitted to arbitration in London, and a panel awarded Conti $200,000,000. Conti then sought to confirm the award against MSC in the Eastern District of Louisiana, where the tanks had been loaded onto MSC’s vessel.

Issue Presented. Did the federal court in New Orleans have personal jurisdiction over MSC to empower it to confirm the arbitration award?

Lower Court’s Ruling. The District Court said “yes.” It based this determination on the fact that the tanks in question had been loaded onto MSC’s chartered vessel in New Orleans. It therefore overruled MSC’s motion to dismiss for lack of personal jurisdiction, and confirmed the arbitration award.

Court’s Analysis. On appeal, the Fifth Circuit rejected the District Court’s jurisdictional ruling as to MSC, concluding that in this case, the District Court lacked such specific personal jurisdiction.

The Court first determined that the District Court correctly established the appropriate backdrop for evaluating personal jurisdiction in an award confirmation submitted under the New York Convention, because the District Court focused upon the contacts related to the underlying dispute, rather than the contacts related to the arbitration itself. The District Court accordingly rejected MSC’s argument that the only source of jurisdiction over it was its refusal to pay the arbitral award.

In a first-time ruling by the Fifth Circuit, the Court agreed with the District Court’s methodology on this issue. Indeed, in reaching that conclusion, the Court specifically rejected MSC’s argument that the U.S. Supreme Court decision in Badgerow v. Walters, 596 U.S. 1 (2022) dictated the jurisdictional outcome here, because not only did Badgerow focus upon subject matter jurisdiction, but also this case did not necessitate “looking through” the arbitration petition to evaluate personal jurisdiction.

The Court then progressed to the issue of MSC’s contact with the forum. It concluded that based upon the record before it, the sole contact that MSC had with the forum, the loading of tanks in New Orleans, was insufficient to confer personal jurisdiction over MSC. Indeed, the Court concluded that such contact arose solely from the unilateral activities of other parties whose actions were not attributable to MSC, even though one of those entities was MSC’s wholly-owned American subsidiary.

It accordingly held that the forum contacts required to impose jurisdiction over a party must be contacts of that party’s own choosing and not be “random, isolated, or fortuitous.” It further held that Conti’s claim had to “arise out of or relate to” such contacts. It interpreted this requirement to mean that personal jurisdiction had to result from “an affiliation between the forum and the underlying controversy,” an element lacking in this case.

Conclusion. The Fifth Circuit’s decision in Conti focuses upon the extent to which a putative defendant’s actions qualify to expose it to personal jurisdiction in a particular forum. In so doing, the Fifth Circuit has highlighted the extent to which superficial contact with a forum does not automatically translate into personal jurisdiction in that forum.

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¹ Mr. Schooler is former Board Member of the North American Branch of the Chartered Institute of Arbitrators, and the immediate Past Chair of its Texas Chapter.