Opinion
Civil Action No. 3:01-CV-1576-L
November 10, 2003
AMENDED MEMORANDUM OPINION AND ORDER
The court issues this Amended Memorandum Opinion and Order in light of its order of November 10, 2003, granting Defendants' Motion to Amend. The Memorandum Opinion and Order issued on May 31, 2002 did not include conditions subsequent to ensure that the alternative forum would be available to Plaintiffs, or provide that Plaintiffs could reinstate their suit in the American courts in the event Defendants evade jurisdiction in Canada or Canada declines to exercise jurisdiction. This Amended Memorandum Opinion and Order corrects such omissions and sets forth the conditions subsequent to the court's dismissal for forum non conveniens. Accordingly, the court's Memorandum Opinion and Order of May 31, 2002 is hereby vacated, and the following opinion is substituted in its place.
Before the court are Defendants Bell Helicopter Textron Inc.'s and Textron Inc.'s (the "Bell Helicopter Defendants") Motion for Reconsideration, filed October 4, 2001; the Findings and Recommendation of the United States Magistrate Judge, filed April 23, 2002; Plaintiff's Objections to the Findings and Recommended Disposition of Defendant's Motion for Reconsideration and Motion to Dismiss on the Ground of Forum Non Conveniens, filed May 3, 2002; Defendants TIC United Corp., W. Pat Crow Forgings, Inc., and TIC Investment Corp.'s (the "TIC Defendants") Objections to the Findings and Recommendation of the United States Magistrate Judge, filed May 7, 2002; Bell Helicopter Textron Inc.'s and Textron Inc.'s Response to TIC's Objections to the Findings of Magistrate Judge Kaplan Dismissing the Case for Forum Non Conveniens, filed May 13, 2002; and Bell Helicopter Textron, Inc.'s and Textron, Inc.'s Response to Plaintiffs' Objections to the Findings and Recommendation of Magistrate Judge Kaplan, filed May 14, 2002. After having considered the magistrate's report, the parties objections, and the applicable law, the court accepts the magistrate's findings and conclusions, as modified by this opinion, as those of the court. Accordingly, the objections to the magistrate's findings and recommendations are sustained in part and overruled in part, and the Bell Helicopter Defendants' Motion for Reconsideration is hereby granted in part and denied in part.
I. Factual and Procedural Background
This is a products liability and negligence action arising out of a Bell Model 47 helicopter crash in Ontario, Canada on August 13, 1998. This case was originally filed in the Galveston Division of the United States District Court for the Southern District of Texas. Bell subsequently filed a motion to dismiss for forum non conveniens, contending that the case should proceed in Canada. The TIC Defendants joined in Bell's motion. On November 7, 2000, TIC United Corp. filed for bankruptcy in the Northern District of Texas. Upon the filing of the bankruptcy petition, the action in the Southern District of Texas was stayed pursuant 11 U.S.C. § 362. Thereafter, the case was transferred from the Southern District of Texas to this district pursuant to 28 U.S.C. § 157(b)(5).
The automatic stay provision provides
(a) [A] petition filed under section 301, 302, or 303 of this title . . . operates as a stay, applicable to all entities, of —
(1) the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title;11 U.S.C. § 362.
Section 157(b)(5) states "[t]he district court shall order that personal injury tort and wrongful death claims shall be tried in the district court in which the bankruptcy case is pending, or in the district court in which the claim arose, as determined by the district court in which the bankruptcy case is pending." 28 U.S.C. § 157(b)(5).
The case was originally assigned to Judge Joe Kendall. On September 24, 2001, the district judge summarily denied Bell's then pending motion to dismiss for forum non conveniens. On October 4, 2001, Bell filed a Motion to Reconsider or, alternatively, for findings of fact and conclusions of law. Upon Judge Kendall's resignation, the case was reassigned to this court and referred to Magistrate Judge Kaplan for pretrial management.
Judge Kaplan filed his Findings and Recommendation on April 23, 2002, in which he recommended that Bell's motion for reconsideration be granted and the case dismissed without prejudice on the ground of forum non conveniens. Plaintiffs and the TIC Defendant's filed a number of objections to the findings and recommendation. Specifically, Plaintiffs contend (1) the Alien Tort Claims Act, 28 U.S.C. § 1350, ("ATCA") prohibits dismissal based on the doctrine of forum non conveniens; (2) the automatic bankruptcy stay issued pursuant to § 362 prohibits dismissal; (3) the § 157(b)(5) venue provision prohibits dismissal; and, finally, that (4) the case should not be dismissed because the magistrate court did not properly weigh the forum non conveniens factors. The TIC Defendants contend (1) § 157(b)(5) requires that the case be litigated in this district, and alternatively, that (2) § 362 prohibits the dismissal. The Bell Helicopter Defendants urge this court to dismiss the case in its entirety in accordance with the magistrate's recommendation.
The TIC Defendants appear to have changed their position regarding the dismissal of this case. The TIC Defendants initially joined in Bell's motion to dismiss the case on the ground of forum non conveniens at the time the case was pending in the Southern District of Texas. See Defendants TIC United Corp., [et al.]'s, Joinder in Defendants Bell Helicopter, [et al.]'s Motion to Dismiss on the Grounds of Forum Non Conveniens, filed August 13, 2001. Moreover, the TIC Defendant filed a "Conditional Stipulation" in which they agreed to submit to the personal jurisdiction of an appropriate court in Canada, accept service of process, waive jurisdiction defenses, be bound by discovery conducted in the case prior to dismissal, and make available witnesses and documentary evidence in Canada on the condition that the court dismiss the case from the Southern District of Texas on the ground of forum non conveniens.
II. Discussion
As an initial matter, the court considers Plaintiffs objections concerning the ATCA and the magistrate's application of the forum non conveniens factors. After having reviewed the magistrate's report and the applicable law, the court concludes the magistrate judge is correct in his finding that the ATCA does not preclude the court from dismissing this case under the doctrine of forum non conveniens. Similarly, the court concludes that the magistrate judge correctly stated and applied the law of forum non conveniens to the facts of this case. Accordingly, the court overrules Plaintiffs' objections concerning the magistrate judge's application of the forum non conveniens factors, and overrules Plaintiffs' objections concerning the ATCA. The remaining objections raised by Plaintiffs and the TIC Defendants, concerning the applicability of § 157(b)(5) and § 162, were not raised in the magistrate court. The court therefore considers these objections below. A. 28 U.S.C. § 157(b)(5)
Plaintiffs and the TIC Defendants first contend 28 U.S.C. § 157(b)(5) fixes venue in the Northern District of Texas. As a result, they contend, this provision prohibits dismissal based on forum non conveniens. The court disagrees. In Baumgart v. Fairchild Aircraft Corp., the Fifth Circuit directly examined this issue. 981 F.2d 824 (5th Cir. 1984). In Baumgart, nineteen German citizens filed suit in Texas state courts following the crash of an aircraft in Germany. Id. at 834. Thereafter, Fairchild filed a Chapter 11 bankruptcy and removed all of the state court cases to federal court. Id. Following removal, the district court dismissed the cases based on the doctrine of forum non conveniens and ordered the plaintiffs to file suit in Germany. After examining the language of § 157(b)(5) and its legislative history, the Fifth Circuit concluded that consolidation of actions in the district where the bankruptcy is pending is "permissible, but not mandatory." Id, at 831 (emphasis in original). Accordingly, the court held § 157(b)(5) "does not abrogate the doctrine of forum non conveniens in the context of foreign transfers and that the district court was not precluded by such statute from dismissing the instant action on forum non conveniens grounds." Id. at 834. Accordingly, the court overrules Plaintiffs' and the TIC Defendants' objections in this regard.
Plaintiffs and the TIC Defendants next contend the automatic bankruptcy stay issued pursuant to 11 U.S.C. § 362 prohibits the dismissal of this action based on the doctrine of forum non conveniens. The Bell Helicopter Defendants contend the court may dismiss the case notwithstanding the issuance of the automatic stay.
Upon the filing of a bankruptcy proceeding, all other proceedings are automatically stayed pursuant to 11 U.S.C. § 362. The purpose of the automatic stay is "to protect creditors in a manner consistent with the bankruptcy goal of equal treatment," and to prevent a "chaotic and uncontrolled scramble for the debtor's assets in a variety of uncoordinated proceedings in different courts." Hunt v. Bankers Trust Co., 799 F.2d 1060, 1069 (5th Cir. 1986) (quoting In re Holtkamp, 669 F.2d 505 (7th Cir. 1982)). Notwithstanding the issuance of an automatic stay, courts retain jurisdiction "to determine the applicability of the stay to litigation pending before them, and to enter orders not inconsistent with the terms of the stay." Picco v. Global Marine Drilling Co., 900 F.2d 846, 850 (5th Cir. 1990); Arnold v. Garlock, Inc., 288 F.3d 234, 236 (5th Cir. 2002) ("Garlock II") (citing cases).
In Pope v. Manville Forest Products Corp., the Fifth Circuit noted that a bankruptcy stay, by its statutory terms, operates against "the commencement or continuation" of judicial proceedings. 778 F.2d 238, 239 (5th Cir. 1985). The court construed the term "continuation" to apply to court ordered dismissals, explaining that
if either of the parties takes any step to obtain dismissal, such as [a] motion to dismiss or a motion for summary judgment, there is clearly a continuation of the judicial proceeding. Second, in the more technical sense, just the entry of an order of dismissal, even if entered sua sponte, constitutes a judicial act toward the disposition of the case and hence may be construed as a "continuation" of a judicial proceeding. . . . Thus, absent the bankruptcy court's lift of the stay, or perhaps a stipulation of dismissal, a case such as the one before us must, as a general rule, simply languish on the court's docket until final disposition of the bankruptcy proceeding.Id. Thus, according to Pope, a court may not dismiss a case until the bankruptcy court lifts or modifies the stay.
The Fifth Circuit recently clarified the Pope rule in two cases styled Arnold v. Garlock, 278 F.3d 426 (5th Cir. 2001) ("Garlock I") and Garlock II. In Garlock I, the Fifth Circuit considered, inter alia, whether a district court has authority to remand a lawsuit brought against a large group of codefendants, after one of the codefendants has declared bankruptcy. The defendants contended that § 362 prohibited the district court from remanding the cases. Garlock I, 278 F.3d at 436. The court determined that § 362 protection did not apply to the non-debtor codefendants and permitted the district court's remand. Id. ("Section 362 is rarely, however, a valid basis on which to stay actions against non-debtors.") (citing Wedgeworth v. Fibreboard Corp., 706 F.2d 541, 544 (5th Cir. 1983) (concluding "that the protections of § 362 neither apply to co-defendants nor preclude severance)).
With these principles in mind, the court concludes that § 362 does not prevent the dismissal of the Bell Helicopter Defendants. The Bell Helicopter Defendants are not in bankruptcy and are thus not subject to the § 362 stay. Accordingly, the court overrules Plaintiffs' § 362 objections and hereby dismisses the Bell Helicopter Defendants based on the doctrine of forum non conveniens.
Whether a district court has authority to dismiss a debtor defendant presents a more vexing question. In Garlock II, the Fifth Circuit further distinguished Pope, and clarified Garlock I, stating
[i]n [ Garlock I], the issue was not protecting a plaintiff's direct claim under Title VII from the preclusive effect of another court's ruling [as in Pope], but whether to permit a plaintiff to voluntarily dismiss a claim under FED. R. CIV. P. 41(a) and a district court's interest in granting such a motion.Id. at 236 (quoting Pope, 778 F.2d at 239). Although the court limited the holding of Pope, "not wish[ing] unnecessarily, or with technicality, to impede the district court in maintaining a current docket," it did so only after noting that the Garlock I plaintiffs voluntarily dismissed the debtor defendants to avoid the bankruptcy stay. Id. Thus, the Fifth Circuit held that "[t]he district courts in the [Garlock] cases were . . . entitled to dismiss the debtor on the plaintiffs' motions as a matter consistent with the terms of § 362(a) and the effective management of their dockets." Id. at 237.
The Bell Helicopter Defendants cite Baumgart v. Fairchild Aircraft Co. and Picco v. Global Marine Drilling CO. as authority for the proposition that a court may dismiss an action against all codefendants despite the issuance of an automatic stay. Defendant's reliance on Baumgart is misplaced. As noted above, the Baumgart court dismissed the action based on the doctrine of forum non conveniens only after it issued an order lifting the automatic stay. Baumgart, 981 F.2d at 828. The court did not hold, as the Bell Helicopter Defendants contend, that a court may dismiss a case against a bankrupt defendant based on the doctrine of forum non conveniens. See Bell's Objections at 3.
Defendants' reliance on Picco is similarly misplaced. In Picco, the district court dismissed Piece's case on the ground of forum non conveniens notwithstanding the existence of a § 362 stay. Picco did not appeal the court's dismissal, nor did he object to the dismissal being entered while the automatic stay was in effect. Thereafter, Picco filed suit in Canada, but eventually became dissatisfied with the progress of his case. In light of these events, Picco filed a Rule 60(b) motion, asking the district court to set aside its earlier dismissal. In the interim, the bankruptcy court lifted the automatic stay. The district court considered Piece's Rule 60(b) motion and set aside its prior dismissal, but again dismissed Piece's action without prejudice on the ground of forum non conveniens, subject to certain conditions preventing the defendants from asserting a statute of limitations defense in state court. The defendants appealed the court's second dismissal, challenging the district court's Rule 60 authority to set aside its initial dismissal of Piece's case.
On appeal, Picco argued that the initial dismissal order was void, and therefore the district court had authority to set it aside pursuant to FED. R. CIV. P. 60(b)(4). Id. at 850. The Fifth Circuit did not reach the merits of the Piece's jurisdictional argument. Instead, the Fifth Circuit determined that Picco had waived this argument and concluded that "even if the district court's [initial] decision did violate the automatic stay, when it was entered, the bankruptcy court's order lifting the stay cured any defect. Id. Thus, the Fifth Circuit did not resolve in Picco whether a district court retains jurisdiction to dismiss a case based on forum non conveniens when there exists a bankruptcy stay in place.
The Plaintiffs in this case, unlike the Plaintiffs in Garlock I and II, have not moved to dismiss the TIC Defendants pursuant to Fed.R.CIV. P. 41(a). On the contrary, Plaintiffs wish to proceed against the debtor defendants in the Northern District of Texas. Moreover, the TIC Defendants are themselves not in favor of a dismissal without prejudice, no doubt based on their reticence to litigate a products liability case in Canada while engaged in bankruptcy proceedings in Texas. Based on these facts, the court does not believe the Garlock I and II exceptions apply. Accordingly, the court sustains Plaintiffs' objections and the objections of the TIC Defendants with regard to the § 362 stay.
On December 5, 2000, Plaintiffs moved to sever their claims against TIC United Corp., W. Pat Crow Forgings, Inc., and TIC Investment Corp. in light of the voluntary petition for bankruptcy filed on November 7, 2000, by TIC United Corp. In their motion, Plaintiffs noted that Defendant W. Pat Crow Forgings is a division of TIC United Corp. and Defendant TIC Investment Corp. is or was a related entity. On December 19, 2000, the Southern District of Texas denied Plaintiffs' motion "for now," but invited a renewed motion to sever if the stay was not subsequently lifted by the bankruptcy judge.
III. Conclusion
After an independent review of the pleadings, the record, the findings and recommendation of the magistrate judge, and the applicable law, the court concludes that the findings and conclusions of the magistrate judge are correct. The court hereby accepts the findings and conclusions of the magistrate judge, as modified by this opinion and order, as the findings and conclusions of the court. Plaintiffs' objections and the objections of the TIC Defendants to the magistrate judge's report are sustained in part and overruled in part. Defendants' Motion for Reconsideration is granted in part and denied in part. Accordingly, for the reasons stated in the magistrate's report and the reasons stated herein, Defendants Bell Helicopter Textron, Inc. and Textron, Inc. are hereby dismissed without prejudice based on the doctrine of forum non conveniens. Also for the reasons stated herein, this action is stayed pursuant to 11 U.S.C. § 362 with respect to Defendants TIC United Corp., W. Pat Crow Forgings, Inc., and TIC Investment Corp.
To ensure that Plaintiffs have an adequate alternative forum within which to pursue this litigation, the court enters the following stipulated conditions subsequent:
1. Jurisdiction — The Bell Defendants submit to the personal jurisdiction of an appropriate Court in Canada.
2. Service — The Bell Defendants accept service of process, or its Canadian equivalent, by certified mail, return receipt requested, upon Mr. Robert N. Kohn, P.O. Box 482, Fort Worth, Texas 76101.
3. Waiver of Limitations — The Bell Defendants agree to waive any applicable statute of limitation defense that might arise between the date this case is dismissed and the date that the Plaintiffs refile it in Canada provided that the Plaintiffs refile this case in Canada on or March 7, 2003. The Bell Defendants are neither requested nor required to waive any statute of limitations to which they were entitled when this case was originally filed. Furthermore, the Bell Defendants are neither requested nor required to waive any statute of limitation defense which they have now or may have in the future against any plaintiffs not currently named as a party in this lawsuit.
4. Use of Documents on File — The documents that are on file in this case currently may be used as if originally filed in any lawsuit filed by the Plaintiff in a court in the appropriate court in Canada.
5. Discovery and Trial Setting — The Bell Defendants will exercise their best efforts to expedite discovery in a reasonable manner and to obtain a reasonable trial setting if the Plaintiffs refile this lawsuit in an appropriate court in Canada.
6. Witnesses and Documents — The Bell Defendants will make a reasonable number of witnesses with knowledge of relevant facts who are within the Bell Defendants' control available in Canada at a mutually agreeable time and place. The Bell Defendants are neither requested nor required to submit to the court in Canada any dispute regarding the number of such witnesses or the times, duration, terms, and/or circumstances under which any such witnesses are to be made available. The Bell Defendants will produce in Canada relevant and non-privileged documents within their possession, custody or control; however, the Bell Defendants are neither requested nor required to bear the cost of copying such documents. Plaintiffs shall bear the cost of copying any such documents.
7. Expenses — The Bell Defendants are neither requested nor required to pay or reimburse any of Plaintiffs' costs incurred in obtaining depositions, statements or copies of documents, including but not limited to attorneys' fees, court costs, photocopying costs, transportation costs or travel costs. This stipulation, however, shall not apply in the event Plaintiffs prevail in the lawsuit and are entitled to payment of such expenses under the applicable law.
8. Judgment — The Bell Defendants agree to the enforceability of a judgment entered by a Canadian court, and will not contest any judgment rendered in Canada solely because it is rendered in Canada. The Bell Defendants may reserve all rights to appeal, contest or object to any judgment rendered in Canada on any other applicable legal or factual ground.
9. Limitation of Effect and Use — These conditions subsequent are applicable to and limited to this case and do not apply to any other case or litigation. These conditions subsequent are made only for the purpose of the court's Amended Memorandum Opinion and Order, dismissing this action against the Bell Defendants' on the grounds of forum non conveniens in favor of a more appropriate Canadian court. These conditions subsequent shall not be used in any other case or for any other purpose in this case by the parties.
The court further conditions the dismissal on the following additional condition that the Bell Defendants consent to reinstatement of the action in its present posture in the Northern District of Texas if Canada proves to be unavailable, because the highest court of Canada declines to exercise jurisdiction despite Plaintiffs' good faith efforts to initiate the action in Canada. See Baris v. Sulpicio Lines, Inc., 932 F.2d 1540, 1551, (setting forth measures a court can take to ensure that a defendant will not attempt to evade the jurisdiction of the foreign court), overruled on other grounds, In re Air Crash Disaster Near New Orleans, Louisiana on July 9, 1982, 821 F.2d 1147 (5th Cir. 1987) (en banc).
The court conditions any reinstatement of the present action on: (1) a certification by Plaintiffs following the present forum non conveniens dismissal, that Plaintiffs made a good faith effort to initiate the action in Canada and was unable to receive an adjudication on the merits under the laws of that country so that Canada was unavailable within the meaning of the pertinent authorities, and (2) that upon the filing of a motion for reinstatement, a reassessment will be made as to the availability of the Canadian forum, and if it is determined that it was not available, Plaintiffs' motion for reinstatement will be granted and any applicable statute of limitations will be deemed to have been tolled by the initiation of the present action.
It is so ordered