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January 2015: Equate Wins Dismissal of Claims for Breach of Alleged Distributorship Agreement

January 2015

The firm recently obtained a victory for client EQUATE Petrochemical Company, a Kuwaiti chemical products manufacturer, in the Second Circuit. EQUATE had a sales arrangement in Turkey with a Turkish company, Continental Kimya Sanayi Ve Dis Tic, A.S. (“CIG-Turkey”). When EQUATE phased out the relationship, CIG-Turkey’s U.S. affiliate, Continental Industries Group (“CIG-NY”), filed suit against EQUATE in federal district court in New York, alleging multiple causes of action, including breach of contract, unfair competition, promissory estoppel, and tortious interference with contractual relations.

The firm moved to dismiss CIG-NY’s lawsuit on multiple grounds, including lack of personal jurisdiction and the doctrine of forum non conveniens. On September 9, 2013, the district court (Nathan, J.) agreed with EQUATE and dismissed the lawsuit against EQUATE concluding that CIG-NY had not met its burden of establishing a prima facie case of personal jurisdiction over EQUATE. The court did not reach EQUATE’s other arguments. CIG-NY appealed the district court’s September 9, 2013 Order.

On October 10, 2014, a week after the oral argument, the Second Circuit unanimously affirmed the district court’s order dismissing CIG-NY’s lawsuit against EQUATE. The Second Circuit held that exercising general jurisdiction over EQUATE would be inconsistent with due process under the U.S. constitution because CIG-NY did not allege facts sufficient to show that EQUATE is either headquartered or incorporated in New York or otherwise at home in New York. Further, the Second Circuit held that there is no specific jurisdiction over EQUATE because: (i) the sales arrangement between EQUATE and CIG-NY concerned distribution of EQUATE’s products in the Turkish market rather than New York; (ii) EQUATE’s employees never visited New York to negotiate or execute the sales arrangement with CIG-NY; (iii) CIG-NY failed to allege sufficient facts to show that Union Carbide acted on behalf of EQUATE in order to attribute the New York contacts to EQUATE; (iv) EQUATE’s purchase orders are governed by English law; and (iv) the invoices sent by EQUATE to CIG-NY were incidental to EQUATE’s shipment of goods from Kuwait to Turkey. Moreover, the Second Circuit held that there is no specific jurisdiction based on EQUATE’s alleged tortious interference with the contract because the situs of the injury was Turkey not New York. The court explained that the first effect of the tort as felt by CIG-NY’s customer was in Turkey and, as a result, the situs of the injury was Turkey, not in New York. Finally, based on the determination that CIG-NY failed to establish a prima facie case for jurisdiction, the Second Circuit held that the district court did not abuse its discretion in declining to permit jurisdictional discovery.