Metals Dispute to Move on Parallel U.S. and English Tracks

Metals Dispute to Move on Parallel U.S. and English Tracks

A $70 million case over the lease of precious metals between family-owned companies is going to proceed in federal court in Philadelphia alongside an action in the English courts, a federal judge in Philadelphia has ruled.

U.S. District Senior Judge Michael M. Baylson of the Eastern District of Pennsylvania denied the defendant’s motion to dismiss or stay the U.S. action pending the outcome of the English case.

“The court initially determines that a dismissal in this case would be inappropriate, and unfair to plaintiffs, because of doubt that the English action is truly a parallel action,” Baylson said in Alliance Industries Ltd. v. A-1 Specialized Services. “The decision as to whether to stay this case is a closer one, but the court concludes that it would not be fair to plaintiffs to issue a stay at this time, which would delay, for a possibly lengthy period, any resolution of plaintiffs’ claims, and the court exercises its discretion to deny a stay,” he said.

One key consideration in deciding to proceed with the case in U.S. court while the English action moves along, Baylson said, is that discovery should get under way.

“It is well known that discovery in U.S. courts is much broader than in England, and the court believes that a robust and fair exchange of information between the parties is likely to be of value in the litigation of the disputes, whether in this court or in England, or both,” Baylson said.

He made the decision to keep open the U.S. case without clear guidance from the U.S. Court of Appeals for the Third Circuit, according to the opinion.

“In the absence of any recent Third Circuit guidance on the forum nonconveniens issue in an international context, the court will weigh concepts as ethereal as fairness and as concrete as discovery,” Baylson said.

The defendant, A-1 Specialized Services, markets and sells precious metals and processes salvaged automotive catalytic converters. It is incorporated in Pennsylvania.

There are two plaintiffs—one is Alliance Industries Ltd., which trades in precious metals and leases them, as well. It is incorporated in Gibraltar and has its principal place of business in the United Arab Emirates. The other is Alliance Industries FZC, which has a similar business model. The brothers who own them live in New Jersey, according to the opinion.

The dispute is over 11 leases for platinum and palladium, which is used in catalytic converters. The plaintiffs are seeking damages for the breach of the lease agreements, alleging that A-1 didn’t return the metals under the terms of the agreement and didn’t pay the interest that it owed.

The month before the action was filed in the Eastern District of Pennsylvania, which was in May 2013, A-1 filed an action with the English courts alleging that it was to have gotten a 60 percent interest in Alliance Industries Ltd., but the shares weren’t issued, among other things.

A-1 sought to either dismiss or stay the U.S. proceeding.

“Defendant concedes the British action would only address nine of the eleven lease agreements, requiring continued litigation over the final two breach of contract claims,” Baylson said. “Accordingly, these disputes will have to be litigated in some court.”

A-1 also argued that the case doesn’t have sufficient ties to Pennsylvania. It argued that the terms of leases specify that English law is to be applied and that some of the transactions were to take place in England.

Baylson decided, “The alleged breach of contract occurred in Pennsylvania where defendant operates. Pennsylvania does have an interest in defendant’s transactions because defendant operates in the commonwealth.”

And, as for any potential for conflict of law, Baylson said, “While there might [be] some variation in English and Pennsylvania law, the parties’ briefs on the conflicts of law show the central principals of contract interpretation are consistent, if not identical. This it to be expected, as our common law of contracts is based on English common law. Moreover, no translation from a foreign language is required.”

Saranac Hale Spencer can be contacted at 215-557-2449 or Follow her on Twitter @SSpencerTLI.

(Copies of the 20-page opinion in Alliance Industries Ltd. v. A-1 Specialized Services, PICS No. 14-0376, are available from The Legal Intelligencer. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.)