Foods Pacific Ltd v HJ Heinz Co Australia Ltd [2001] FMSC 4; 10 FSM Intrm. 200 (Pon. 2001) (21 May 2001)

FEDERATED STATES OF MICRONESIA
SUPREME COURT TRIAL DIVISION

Cite as Foods Pacific, Ltd. v. H.J. Heinz Co. Australia,
[2001] FMSC 4; 10 FSM Intrm. 200 (Pon. 2001)

[2001] FMSC 4; [10 FSM Intrm. 200]

FOODS PACIFIC, LTD.,
Plaintiff,

vs.

H.J. HEINZ CO. AUSTRALIA, LTD., and JOHN DOES 1-10,
Defendants.

CIVIL ACTION 2001-001

ORDER DENYING AND GRANTING MOTIONS

Andon L. Amaraich
Chief Justice

Decided: May 21, 2001

APPEARANCES:

For the Plaintiff:
Fredrick L. Ramp, Esq.
Law Offices of Fredrick L. Ramp
P.O. Box 1480
Kolonia, Pohnpei FM 96941

For the Defendant:
Stephen V. Finnen, Esq.
Law Offices of Saimon & Associates
P.O. Box 1450
Kolonia, Pohnpei FM 96941

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HEADNOTES

Commerce
32 F.S.M.C. 306(2) creates a civil cause of action under national law for violations of the prohibitions against anti-competitive practices. Foods Pacific, Ltd. v. H.J. Heinz Co. Australia, [2001] FMSC 4; 10 FSM Intrm. 200, 203 (Pon. 2001).

Torts ; Defamation; Torts ; Interference with a Contractual Relationship; Torts ; Interference with Prospective Business Opportunity
Tort claims for tortious interference with contractual relationships, defamation, and interference with prospective business opportunities are causes of action that arise under state law. Foods Pacific, Ltd. v. H.J. Heinz Co. Australia, [2001] FMSC 4; 10 FSM Intrm. 200, 203 (Pon. 2001).

Jurisdiction ; Diversity
The FSM Supreme Court does not have diversity jurisdiction under Article XI, section 6(b) over disputes between two foreign citizens, even if they are citizens of different countries. Foods Pacific,

[10 FSM Intrm. 201]

Ltd. v. H.J. Heinz Co. Australia, [2001] FMSC 4; 10 FSM Intrm. 200, 203 (Pon. 2001).

Commerce; Jurisdiction ; National Law
A case that asserts five causes of action under 32 F.S.M.C. 301 et seq., is one that "arises under national law" within the meaning of Article XI, section 6(b). Foods Pacific, Ltd. v. H.J. Heinz Co. Australia, [2001] FMSC 4; 10 FSM Intrm. 200, 203 (Pon. 2001).

Civil Procedure ; Service; Civil Procedure ; Venue; Commerce
The venue provision of 32 F.S.M.C. 306(2) must be read in conjunction with the service provisions of the FSM "long-arm statute," 4 F.S.M.C. 204, and with the FSM Code's venue provisions. Foods Pacific, Ltd. v. H.J. Heinz Co. Australia, [2001] FMSC 4; 10 FSM Intrm. 200, 204 (Pon. 2001).

Jurisdiction ; Personal
A "long-arm statute" is a legislative act that provides for personal jurisdiction over persons and corporations which are non-residents of a state or country, and which go in to a state or country voluntarily, directly or by agent, for limited purposes, and in which the claim is related to those purposes. Foods Pacific, Ltd. v. H.J. Heinz Co. Australia, [2001] FMSC 4; 10 FSM Intrm. 200, 204 n.2 (Pon. 2001).

Civil Procedure ; Service; Civil Procedure ; Venue; Jurisdiction; Jurisdiction ; Personal
A venue provision that permits a civil action against a defendant who does not live in the FSM to be brought in a court within whose jurisdiction the defendant can be served or his property can be attached does not limit the FSM Supreme Court's subject matter jurisdiction, and does not render the long-arm statute superfluous. Such provisions do not preclude actions which are made procedurally possible by the long-arm statute, which gives litigants the means to effect service on entities not found within the FSM. Foods Pacific, Ltd. v. H.J. Heinz Co. Australia, [2001] FMSC 4; 10 FSM Intrm. 200, 204 (Pon. 2001).

Civil Procedure ; Venue
An action not connected with a contract may be brought in a court within whose jurisdiction the cause of action arose. Foods Pacific, Ltd. v. H.J. Heinz Co. Australia, [2001] FMSC 4; 10 FSM Intrm. 200, 204 & n.3 (Pon. 2001).

Civil Procedure ; Venue
Pohnpei is the appropriate venue for a case against a foreign defendant when all of the claims asserted by plaintiff allegedly arose in Pohnpei. Foods Pacific, Ltd. v. H.J. Heinz Co. Australia, [2001] FMSC 4; 10 FSM Intrm. 200, 204 (Pon. 2001).

Civil Procedure ; Service; Jurisdiction ; Personal
The long-arm statute provides how service may be effected, outside of the FSM Supreme Court's territorial jurisdiction, against those who have done certain acts which subject them to the personal jurisdiction of the FSM Supreme Court, and such service has the same force and effect as though it had been personally made within the FSM. Foods Pacific, Ltd. v. H.J. Heinz Co. Australia, [2001] FMSC 4; 10 FSM Intrm. 200, 204 (Pon. 2001).

Civil Procedure ; Service; Commerce; Jurisdiction ; National Law; Jurisdiction ; Personal
A foreign corporation served pursuant to 4 F.S.M.C. 204 may be sued within the FSM for violations of 32 F.S.M.C. 302 or 303, regardless of where the service occurs, so long as that foreign corporation has done specific acts within the FSM to bring it within the jurisdiction of the FSM Supreme Court. Foods Pacific, Ltd. v. H.J. Heinz Co. Australia, [2001] FMSC 4; 10 FSM Intrm. 200, 204-05 (Pon. 2001).

Jurisdiction ; Personal
Transacting business in the FSM, engaging in tortious activity within the FSM, and causing injury

[10 FSM Intrm. 202]

within the FSM related to sales of products within the FSM, are arguably sufficient to bring a foreign defendant under the personal jurisdiction of the FSM Supreme Court. Foods Pacific, Ltd. v. H.J. Heinz Co. Australia, [2001] FMSC 4; 10 FSM Intrm. 200, 205 n.4 (Pon. 2001).

Jurisdiction ; Pendent
A national court may exercise pendent jurisdiction over state law claims included in a plaintiff's complaint if they arise out of a common nucleus of operative fact and are such that they ordinarily would be expected to be tried in one judicial proceeding. Foods Pacific, Ltd. v. H.J. Heinz Co. Australia, [2001] FMSC 4; 10 FSM Intrm. 200, 205 (Pon. 2001).

Jurisdiction ; Pendent
The FSM Supreme Court has jurisdiction over state law claims of tortious interference with contractual relationships, defamation, and interference with prospective business opportunities when they are based on the same nucleus of operative facts as the claims under the national statute prohibiting anti-competitive practices. Foods Pacific, Ltd. v. H.J. Heinz Co. Australia, [2001] FMSC 4; 10 FSM Intrm. 200, 205 (Pon. 2001).

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COURT'S OPINION

ANDON L. AMARAICH, Chief Justice:

On March 12, 2001, defendant H.J. Heinz Co., Australia, Ltd., ("Heinz") filed a special appearance and moved this Court to quash service of the summons and complaint and to dismiss this action on the basis that this Court does not have jurisdiction. Heinz renewed its Motion to Dismiss on April 24, 2001, after personal service of the summons and complaint was effected upon Mr. Jason Arnheim, a Heinz Company Secretary authorized by Heinz to receive process. Accordingly, the Court now considers Heinz' Motion to Quash Service to be moot, and will address Heinz' Motion to Dismiss the complaint for lack of jurisdiction.

Additionally, Heinz has requested that the hearing on plaintiff Foods Pacific, Ltd.'s ("Foods Pacific") Motion for a Preliminary Injunction be continued until the jurisdictional issues in this case are resolved. This order resolves those jurisdictional issues; however, the Court will grant Heinz' motion to continue the hearing. At this point Heinz has appeared solely for the purpose of contesting this Court's jurisdiction. The Court will allow Heinz ten (10) days, until June 1, 2001, to answer plaintiff's complaint and to file any substantive opposition to plaintiff's motion for a preliminary injunction. Accordingly, the hearing on plaintiff's motion for a preliminary injunction is continued until June 6, 2001, at 10:00 a.m.

I. Plaintiff's Complaint

Foods Pacific filed its complaint, along with a motion for a preliminary injunction, on February 20, 2001. Foods Pacific is a Fijian corporation, and Heinz is an Australian corporation. There are no allegations that either corporation has any shareholders who are citizens of the FSM.

In its complaint, Foods Pacific asserts eight causes of action. The first five causes of action allege violations of Chapter 3 of Title 32 of the FSM Code, which prohibits anti-competitive practices. Foods Pacific alleges separate violations of 32 F.S.M.C. 302(1), 302(2), 302(3), and two violations of 32 F.S.M.C. 303. Under 32 F.S.M.C. 306(2), any person who is injured by another's violation of 32 F.S.M.C. 302 or 303 may: "sue therefor in the High Court in the district where the defendant resides

[10 FSM Intrm. 203]

or where service may be obtained, and may recover three times the damages sustained by him together with a reasonable attorney's fee and the costs of suit . .㼠." 32 F.S.M.C. 306. 306(2). Thus, 32 F.S.M.C. 306(2) creates a civil cause of action under national law for violations of the prohibitions against anti-compve practices.

The remaining three causes of actf action asserted by Foods Pacific are tort claims for tortious interference with contractual relationships, defamation, and interference with prospective business opportunities. As tort claims, these causes of action arise under Pohnpei state law. See Edwards v. Pohnpei, [1988] FMSC 6; 3 FSM Intrm. 350 (Pon. 1988) (primary lawmaking powers for field of tort law is with the states).

II. Defendant's Motion to Dismiss

Heinz moves this Court to dismiss Foods Pacific's complaint for lack of subject matter jurisdiction. Heinz claims that (1) there is no diversity jurisdiction in this Court, and (2) this Court does not have jurisdiction to hear Foods Pacific's claims under 32 F.S.M.C. 302 and 303, because that jurisdiction is specifically limited by the language in 32 F.S.M.C. 306(2).

A. Diversity Jurisdiction

There is no dispute that this Court does not have diversity jurisdiction in this case. Foods Pacific concedes that neither plaintiff nor defendant corporation is organized under the laws of the FSM or has any FSM citizens as shareholders. Pl. Opp'n to Renewed Mot. at 3-4 (May 1, 2001).

Under Article XI, section 6(b) of the FSM Constitution, the FSM Supreme Court has concurrent jurisdiction over disputes (1) between a state and a citizen of another state; (2) between citizens of different states; (3) between a state or a citizen thereof and a foreign state, citizen, or subject. This Court does not have diversity jurisdiction under Article XI, section 6(b) over disputes between two foreign citizens, even if they are citizens of different countries. See Trance v. Penta Ocean Constr. Co., [1995] FMSC 23; 7 FSM Intrm. 147, 148 (Chk. 1995). In such cases, this Court's subject matter jurisdiction must be based on other grounds.^[1]

B. Violation of National Statute

Plaintiff also maintains that this Court has jurisdiction over this case because Foods Pacific asserts five causes of action under 32 F.S.M.C. 301 et seq., and, accordingly, the case is one that "arises under national law" within the meaning of Article XI, section 6(b). The Court agrees that this is a case that arises under national law, and denies defendant's motion to dismiss this case for lack of jurisdiction.

Defendant's Motion to Dismiss is based upon a reading of 32 F.S.M.C. 306 that would unduly limit the enforcement of this national law. As stated earlier, under 32 F.S.M.C. 306(2), any person who is injured by another's violation of 32 F.S.M.C. 302 or 303: "may sue therefor in the High Court in the district where the defendant resides or where service may be obtained . . . ." 32 F.S.M.C. 306(2). Acngrding to defendant, because Heinz is an Australian corporation (and thus does not reside in the FSM), and service against Heinz could only be obtained in Australia, the only Court with jurisdiction over claims under 32 F.S.M.C. 302 or 303 is an Australian court.

[10 FSM Intrm.204]

The Court disagrees with defendant's interpretation. Nothing in the legislative history of 32 F.S.M.C. 301 et seq. suggests that this provision was intended to limit the jurisdiction of this Court to hear claims against foreign corporations which transact business within the FSM and are otherwise subject to the jurisdiction of this Court. See SCREP No. 207, House J. of 3rd Cong., 3rd Reg. Sess. 287-88 (1970) (stated purpose of bill to prevent business practices that result in the reduction of competition or in the creation of monopolies).

Rather, it is necessary to read this provision in conjunction with the service provisions of the FSM "long-arm statute,"^[2] 4 F.S.M.C. 204, and with the FSM Code's venue provisions.

First, it should be noted that the provision in 32 F.S.M.C. 306(2) relied upon by defendants is similar to venue provisions in the FSM Code, which were adopted from the Trust Territory Code. One venue provision applicable to "a civil action against a defendant who does not live in the Trust Territory" states that such action "may be brought in a court within whose jurisdiction the defendant can be served or his property can be attached." 6 F.S.M.C. 301(4). To interpret this venue provision to limit the Court's subject matter jurisdiction, as defendant urges the Court to do with the similar provision in 32 F.S.M.C. 306(2), would render the long-arm statute superfluous in many cases.^[3] It would require that cases brought against foreign defendants who cannot be served within the FSM be brought within foreign courts, unless the foreign defendants had attachable property in the FSM.

It is also worth noting that the language in both the venue statute, 6 F.S.M.C. 601(4), and the provision of 32 F.S.M.C. 306(2) upon which defendant relies is permissive. Both set forth where certain actions "may" be brought, not where they "shall" be brought. Accordingly, the Court will not read them to preclude actions which are made procedurally possible by the long-arm statute, which gives litigants the means to effect service on entities not found within the FSM. Title 6, section 301(2) provides that an action not connected with a contract "may be brought in a court within whose jurisdiction the cause of action arose." 6 F.S.M.C. 301(2). Reading the various permissive venue provisions of 32 F.S.M.C. 301 et seq. and 6 F.S.M.C. 301 et seq. together, the appropriate venue for this case is in Pohnpei, where all of the claims asserted by plaintiff allegedly arose.

Title 4, section 204 of the FSM Code also aids in interpreting 32 F.S.M.C. 306(2). Generally, the long-arm statute provides how service may be effected outside of the territorial jurisdiction of this Court, against those who have done certain acts which subject them to the personal jurisdiction of this Court. Significantly, 4 F.S.M.C. 204(2) recognizes that "[s]uch service has the same force and effect as though service had been personally made within the Federated States of Micronesia." 4 F.S.M.C. 204(2). Reading this in conjunction with 32 F.S.M.C. 306(2), a foreign corporation served pursuant to 4 F.S.M.C. 204 may be sued within the FSM for violations of 32 F.S.M.C. 302 or 303, regardless of where the service occurs, so long as that foreign corporation has done specific acts within the FSM

[10 FSM Intrm. 205]

to bring it within the jurisdiction of this Court.^[4]

In sum, the Court does not read 32 F.S.M.C. 306(2) to limit its jurisdiction over the subject matter of this case. The first five claims in plaintiff's complaint, under 32 F.S.M.C. 301 et seq., arise under national law and it is appropriate for this Court to exercise jurisdiction over them.

C. Pendent Jurisdiction over State Law Claims

A national court may exercise pendent jurisdiction over state law claims included in a plaintiff's complaint if they arise out of a common nucleus of operative fact and are such that they ordinarily would be expected to be tried in one judicial proceeding. Ponape Constr. Co. v. Pohnpei, [1993] FMSC 23; 6 FSM Intrm. 114, 116 (Pon. 1993).

It is clear that the three tort claims asserted in plaintiff's complaint are based on the same nucleus of operative facts as the claims under 32 F.S.M.C. 301 et seq. Accordingly, this Court also has jurisdiction of the related state law claims of tortious interference with contractual relationships, defamation, and interference with prospective business opportunities.

III. Conclusion

Accordingly, the Court HEREBY DENIES defendant's Motion to Dismiss, and HEREBY GRANTS defendant's Motion to Continue Hearing on Plaintiff's Motion for a Preliminary Injunction. Heinz shall have until June 1, 2001 to file any answer or opposition to plaintiff's Motion for a Preliminary Injunction. The hearing on plaintiff's Motion for a Preliminary Injunction shall be held on June 6, 2001, at 10:00 a.m. at the FSM Supreme Court in Palikir.

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^[1] It appears that the "John Does 1-10" named by plaintiff in its complaint have not yet been identified, and accordingly have not been considered for purposes of determining diversity jurisdiction.

^[2] A "long-arm statute" is a legislative act that provides for personal jurisdiction over persons and corporations which are non-residents of a state or country, and which go in to a state or country voluntarily, directly or by agent, for limited purposes, and in which the claim is related to those purposes. BLACK'S LAW DICTIONARY 849 (5th ed. 1979).

^[3] Specifically, it would deprive this Court of jurisdiction over foreign defendants against whom contract claims are brought, as 6 F.S.M.C. 301(2) provides that an action not connected with a contract "may be brought in a court within whose jurisdiction the cause of action arose." 6 F.S.M.C. 301(2).

^[4] Plaintiff alleges in its complaint that Heinz has transacted business in the FSM, engaged in tortious activity within the FSM, and caused injury within the FSM related to sales of its products within the FSM, which arguably are sufficient to bring Heinz under the personal jurisdiction of this Court under 4 F.S.M.C. 204(1)(a),(e), or (j), although this Court's personal jurisdiction over Heinz has not been directly questioned.