Opinion ID: 1435659
Heading Depth: 3
Heading Rank: 1

Heading: The Ukrainian Judgments

Text: Storm argues that the arbitration panel manifestly disregarded the law governing the preclusive effect of foreign judgments when it failed to give such effect to the Ukrainian court judgments holding that the 2004 Agreement was never executed by Storm and is therefore not arbitrable. Storm also argues that its compliance with the arbitral award as enforced by the district court would entail actions that would place it in contempt of the Ukrainian courts, contrary to New York public policy.
In Ackermann v. Levine, 788 F.2d 830 (2d Cir.1986), we reiterated the well-settled rule that a final judgment obtained through sound procedures in a foreign country is generally conclusive as to its merits unless (1) the foreign court lacked jurisdiction ...; (2) the judgment was fraudulently obtained; or (3) enforcement of the judgment would offend the public policy of the state in which enforcement is sought. Id. at 837 (emphasis in original). Storm contends that the arbitration panel manifestly disregarded this rule by failing to give conclusive weight to the Ukrainian judgments that the 2004 Agreement is not arbitrable. [7] The district court disagreed. It concluded that the judgments obtained by Alpren against Storm had contravened the rule against friendly litigation, see Lord v. Veazie, 49 U.S. (8 How.) 251, 256, 12 L.Ed. 1067 (1850) (concluding that such litigation results in a judgment which is a mere form and is therefore a nullity). The district court remarked that it and the arbitration panel had both previously found the Alpren litigation to have been collusive. Telenor, 524 F.Supp.2d at 346-47. The district court also concluded that the Ukrainian proceedings had afforded Telenor no notice or opportunity to be heard prior to the entry of the judgment, and that they were intended to undermine a possible confirmation of an award in Telenor's favor. Id. at 347. In light of those conclusions, the court found that the Ukrainian procedures were not sound for Ackermann purposes and therefore not binding on the arbitration panel. Id. at 348. Storm argues that the arbitration panel did not actually find that the Ukrainian actions by Alpren were collusive. To be sure, the panel did not employ the word collusive in its partial or final award. But the panel does mention, repeatedly, that the Alpren litigation was conducted among related corporate entities, see, e.g., Final Award 21 (As previously noted, Alpren and Storm were under the direct or indirect control of Altimo, and the ultimate control of Alfa.), without notice to or appearance by Telenor, see, e.g., id. at 17 (Telenor ... had no notice of the Ukrainian proceedings until after the order of the Ukrainian appellate court....); id. ([T]he April-May 2006 Ukrainian court proceedings came as a surprise to both the Tribunal and to Telenor....). The panel's repeated observations along these lines make clear that the panel considered the Ukrainian proceedings to have been collusive, even though the panel understandably elected to avoid using that term in relation to proceedings before a duly constituted foreign court. See id. at 25 (noting that the panel had previously made clear that it was not ignoring the decisions of the Ukrainian courts ... [or] impugning the integrity of those courts or their decisions). Politic or not, in light of the strong presumption that an arbitration tribunal has not manifest[ly] disregarded the law, Westerbeke, 304 F.3d at 212 n. 8, the panel's multiple references to the Alfa-internal and ex parte nature of the Alpren litigation supply a sufficiently colorable justification for its refusal to give the Ukrainian judgments controlling weight. Cf. Motorola Credit Corp. v. Uzan, 388 F.3d 39, 60-61 (2d Cir.2004) (affirming denial of comity to injunctions entered by Turkish courts that were the product of collusion). Storm does not seriously dispute that the Alpren litigation was a cooperative venture among allied interests. [8] It argues, instead, that Storm had no contact with its adversary during the litigation, that it presented a defense in the proceedings, and that it appealed. Appellant Br. 42. But these assertions, if true, would not refute the panel's finding of collusion on the facts of this case and would not be a basis upon which the district court was required to overturn that finding. The panel was not obliged to interpret Storm's decidedly modest efforts in the Alpren suit to be material or meaningful. [9] Moreover, the force of the Ukrainian judgments as against Telenor is further reduced by the fact that Telenor was not a party to the Alpren litigation and was continually denied notice of the proceedings. Final Award 34; see also id. at 21-22, 25-27; Telenor, 524 F.Supp.2d at 346-47. The failure of the Ukranian court to afford Telenor what we would regard as rudimentary due process, see Parklane Hosiery Co. v. Shore, 439 U.S. 322, 327 n. 7, 99 S.Ct. 645, 58 L.Ed.2d 552 (1979) (It is a violation of due process for a judgment to be binding on a litigant who was not a party or privy and therefore never had an opportunity to be heard.), provides an independent colorable justification for the panel's conclusion that the Ukrainian proceedings were unsound for Ackermann preclusion purposes. It was the opinion of a witness whom Storm proffered as an expert that Telenor... could have intervened in the Alpren litigation after it was notified of the judgment against it for purposes of filing an appeal to Ukraine's highest court but chose not to do so. That is beside the point for at least two reasons. First, this opinion testimony, if assumed to constitute competent evidence of the process actually available to Telenor in the Alpren litigation, would fail to demonstrate that Telenor, after intervening solely for purposes of appeal, would have been afforded a full and fair opportunity to be heard on the merits of the issues decided in that litigation. Second, it would not in any event be sufficient to have warranted a reversal by the district court under the manifest disregard standard. See Stolt-Nielsen, 548 F.3d at 91 (We do not ... `recognize manifest disregard of the evidence as proper ground for vacating an arbitrator's award.' (quoting Wallace, 378 F.3d at 193) (emphasis added in Stolt-Nielsen )). The Ukrainian decisions therefore provide no basis for a denial of enforcement of the final arbitral award on manifest disregard grounds.
Storm argues that the arbitral award should nonetheless be vacated pursuant to Article V(2)(b) of the New York Convention because, Storm says, it is contrary to New York public policy to force a party to comply with an arbitral award that will cause it to violate a foreign judgment. We do not think that Storm can properly invoke the protection of any such policy. Two factfinders have concluded that Storm brought the Ukrainian judgments upon itself through use of highly questionable litigation tactics. See Final Award 21, 25; Telenor, 524 F.Supp.2d at 346-47, 356-58. Storm's situation, like that of the apocryphal parricide seeking mercy because he had been orphaned, is entirely of its own making. Our view, in light of the findings of the arbitration panel and the district court, is that it is Storm's improper collateral litigation, not the arbitral award, that is contrary to public policy, viz., the well-established federal public policy in favor of arbitration. See, e.g., Chelsea Square Textiles, Inc. v. Bombay Dyeing & Mfg. Co., 189 F.3d 289, 294 (2d Cir.1999) (Through the FAA, Congress has declared a strong federal policy favoring arbitration as an alternative means of dispute resolution. (internal quotation marks omitted)). Collateral and unilateral litigation of arbitrabilityor any other issue pertinent to an arbitration, for that matterundertaken in a foreign forum by a party to that arbitration in an attempt to protect itself from an adverse arbitral award would, if indulged, tend seriously to undermine the underlying scheme of the FAA and the New York Convention. Article V(2)(b) must be construed very narrowly to encompass only those circumstances where enforcement would violate our most basic notions of morality and justice. Europcar Italia S.p.A. v. Maiellano Tours, Inc., 156 F.3d 310, 315 (2d Cir.1998) (internal quotation marks omitted). Consistent with that rule, we conclude that enforcing the arbitral award as against Storm would not be contrary to public policy.