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Beit Midrash Series P'ninat Mishpat

Chapter 453

Place of Jurisdiction

The plaintiff (=pl), a resident of Israel, and the defendant (=def), a resident of the US, jointly established a company in 2008 and registered it in Israel in 2009, with each of them holding shares. Def became the CEO in 2009. There is a financial dispute between the sides, with the following claims. Pl claims that def illegally diluted the company’s stocks and misled pl into investing hundreds of thousands of dollars, and pl wants compensation for that. Pl is also suing for pay for the work he did for the company. Pl sued def in our beit din, whereas def demands that adjudication be held in a beit din in the US. Pl argues that most of the company’s workers are in Israel, as is its legal headquarters. Def argues that as an internet company, there is no headquarters and a significant number of workers work in the US, including def himself, so that the adjudication should be there.
Various RabbisIyar 2 5778
42
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Based on ruling 77027 of the Eretz Hemdah-Gazit Rabbinical Courts
P'ninat Mishpat (576)
Various Rabbis
452 - Disputes Between Neighbors over Rights in a Building– part III
453 - Place of Jurisdiction
454 - Disputes Between Neighbors over Rights in a Building – part II
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Case:
The plaintiff (=pl), a resident of Israel, and the defendant (=def), a resident of the US, jointly established a company in 2008 and registered it in Israel in 2009, with each of them holding shares. Def became the CEO in 2009. There is a financial dispute between the sides, with the following claims. Pl claims that def illegally diluted the company’s stocks and misled pl into investing hundreds of thousands of dollars, and pl wants compensation for that. Pl is also suing for pay for the work he did for the company. Pl sued def in our beit din, whereas def demands that adjudication be held in a beit din in the US. Pl argues that most of the company’s workers are in Israel, as is its legal headquarters. Def argues that as an internet company, there is no headquarters and a significant number of workers work in the US, including def himself, so that the adjudication should be there.



Ruling: The general rule is that when the plaintiff and the defendant are from different locations, adjudication is held in the defendant’s location (Rama, Choshen Mishpat 12:1). Many poskim (including the Rashba II,344 and Maharshdam Choshen Mishpat 103) say that when the work upon which the dispute is focused was in a certain place, the defendant cannot refuse to adjudicate there. In this case, though, most of the interaction between the sides took place when each one was located in separate countries.

Rav Yisraeli (Mishpetei Shaul 42) explains the Rashba based on the assumption that the defendant will have to, in any case, come to the plaintiff’s place due to his resources there, in which case he has no excuse not to adjudicate there. However, in this case, def’s holdings in Israel are small compared to the scope of the adjudication, and so this is not a reason to hold the adjudication in Israel.

The Maharashdam focuses more on the adjudication being in the place that the sides decided to conduct their business. In this case, in contrast, def did not come to Israel to do the negotiations. Acharonim dispute (see opinions of Rav Eliyahu and Rav Yisraeli in Mishpetei Shaul 40) what happens if the dealings happened in the plaintiff’s place, but were held by representatives of the defendant. However, here in any case, def said that he himself signed the papers in the US. Furthermore, it is accepted to apply the Maharshdam only to cases in which both sides’ residence was in the same place and the defendant moved out later.

Although Rav Yisraeli (ibid. 42) said that the batei din in Israel have a status of makom hava’ad (a judicial center), to which cases should be brought when possible, that is only in regard to matters in which the Rabbanut batei din have special jurisdiction. It does not apply to cases where adjudication will be based on arbitration law. While pl cites an opinion that the reason to adjudicate in the defendant’s place is for the concerns of the plaintiff to be able to receive payment, that opinion is not accepted. We note that in this case, should there be payment, it would be taken from def’s resources in the US. Therefore, adjudication should take place at a beit din in the US.
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