Court Opinion

ID: 620307
Source: CourtListenerOpinion
Date Created: 2012-01-05 18:38:33+00
Date Added: 2024-06-11T17:50:51.426300
License: Public Domain

Case: 11-20400     Document: 00511715335         Page: 1     Date Filed: 01/05/2012

            IN THE UNITED STATES COURT OF APPEALS
                     FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                     Fifth Circuit

                                                                            FILED
                                                                          January 5, 2012

                                     No. 11-20400                          Lyle W. Cayce
                                   Summary Calendar                             Clerk

S & T OIL EQUIPMENT & MACHINERY, LTD.; VALERIAN SIMIRICA

                                                  Plaintiffs - Appellants
v.

JURIDICA INVESTMENTS LIMITED; JURIDICA CAPITAL
MANAGEMENT LTD.; JURIDICA CAPITAL MANAGEMENT (US) INC.

                                                  Defendants - Appellees

                   Appeal from the United States District Court
                        for the Southern District of Texas
                                 No. 4:11-cv-00542

Before BENAVIDES, STEWART, and CLEMENT, Circuit Judges.
PER CURIAM:*
        In February 2011, S&T Oil Equipment & Machinery, Ltd. and Valerian
Simirica (collectively, “S&T”) filed suit against Juridica Investments Limited,
Juridica Capital Management Ltd., and Juridica Capital Management (US) Inc.
The district court subsequently dismissed S&T’s complaint in favor of
arbitration. S&T now appeals the dismissal of its suit and the denial of a

        *
         Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
   Case: 11-20400   Document: 00511715335      Page: 2   Date Filed: 01/05/2012

                                  No. 11-20400

temporary restraining order. We affirm the dismissal of S&T’s suit and dismiss
its appeal of the denial of a temporary restraining order.
                                        I.
      Juridica Investments Ltd. (“JIL”) provides litigation financing to
businesses involved in expensive commercial legal disputes. In May 2008, S&T
Oil Equipment & Machinery, Ltd. entered into a contract (“Investment
Agreement”) with JIL. Pursuant to the contract, JIL agreed to fund part of the
legal fees and costs of an arbitration before the International Center for the
Settlement of Investment Disputes (“ICSID”). This arbitration was brought by
S&T against the Romanian government, and arose from commercial activity in
Romania (the “Romanian Arbitration”).
      In relevant part, the Investment Agreement provides:
      [With exceptions not pertinent to this case], all actions, disputes,
      claims and controversies under common law, statutory law or in
      equity of any type or nature whatsoever, whether arising before or
      after the date of this Agreement, and whether directly or indirectly
      relating to (a) this Agreement and/or any amendments and addenda
      hereto, or the breach, invalidity or termination hereof; (b) any
      previous or subsequent agreement between [JIL] and [S&T]; (c) any
      act committed by [JIL] or by any parent company, subsidiary or
      affiliated company of [JIL] (the “[JIL] Companies”), or by any
      employee, agent, officer or director of a[] [JIL] Company whether or
      not arising within the scope and course of employment or other
      contractual representation of the [JIL] Companies . . . (d) any act
      committed by [S&T] or by any parent company, subsidiary or
      affiliated company of S&T. . . (e) any other relationship, transaction
      or dealing between [JIL] and [S&T] (collectively the “Disputes”), will
      be subject to and resolved by binding arbitration.

      The Investment Agreement also states that “[a]ll arbitration will be
conducted in accordance with the Arbitration Rules . . . of The London Court of
International Arbitration,” and that the “seat and situs of the arbitration and of
all oral arbitration hearings will be in St. Peter Port, Guernsey, Channel

                                        2
   Case: 11-20400    Document: 00511715335      Page: 3   Date Filed: 01/05/2012

                                  No. 11-20400

Islands.” Notably, the Investment Agreement also states that it was executed
in Guernsey and would “be performed by [JIL] exclusively and wholly in and
from Guernsey.”
      JIL initiated arbitration proceedings against S&T on December 22, 2010.
On February 14, 2011, S&T not only filed a sealed complaint in federal district
court, but also an “Ex Parte Emergency Application for Temporary Restraining
Order and Order to Show Cause Regarding Preliminary Injunction” which
sought to enjoin the arbitration JIL had initiated against it. Later that same
month, JIL filed a motion to dismiss in favor of arbitration.
      In March 2011, the district court denied S&T’s application for a temporary
restraining order. The following month, the district court, after construing JIL’s
motion to dismiss as a motion to compel arbitration, dismissed S&T’s complaint
in favor of arbitration in Guernsey. This appeal ensued.
                                        II.
      On appeal, S&T challenges both the dismissal of its complaint and the
denial of its request for a temporary restraining order. We will limit our review
to considering the district court’s judgment compelling arbitration.
      S&T argues that the district court erred in granting the motion to compel
arbitration because the “arbitration provision in the Investment [A]greement
violates Article 2 of the Convention on the Recognition and Enforcement of
Foreign Arbitral Awards (the ‘Convention’).” We review a district court’s grant
of a motion to compel arbitration de novo. Hadnot v. Bay, Ltd., 344 F.3d 474,
476 (5th Cir. 2003). The district court’s factual findings are reviewed for clear
error. Cal. Fina Grp., Inc. v. Herrin, 379 F.3d 311, 315 (5th Cir. 2004).
      “In determining whether the Convention requires compelling arbitration
in a given case, courts conduct only a very limited inquiry.” Freudensprung v.
Offshore Technical Servs., Inc., 379 F.3d 327, 340 (5th Cir. 2004) (citations
omitted). “Accordingly, a court should compel arbitration if (1) there is a written

                                        3
   Case: 11-20400        Document: 00511715335          Page: 4     Date Filed: 01/05/2012

                                        No. 11-20400

agreement to arbitrate the matter; (2) the agreement provides for arbitration in
a Convention signatory nation; (3) the agreement arises out of a commercial
legal relationship; and (4) a party to the agreement is not an American citizen.”
Id. (internal quotation marks and citations omitted).
       The parties dispute whether the fourth Freudensprung factor is satisfied
in this case. In considering this fourth factor, courts must ask the following: Is
a party to the agreement not an American citizen or does the commercial
relationship have some reasonable relation with one or more foreign states? Id.
(internal quotation marks and citations omitted). If either question is answered
in the affirmative, then the fourth Freudensprung factor is satisfied.
       In its brief, S&T argues that because JIL is an American citizen, the
fourth Freudensprung factor is not met. For purposes of the Convention, “a
corporation is a citizen of the United States if it is incorporated or has its
principal place of business in the United States.” 9 U.S.C. § 202. Neither party
contends that JIL is incorporated in the United States. We are therefore faced
with deciding where JIL has its principal place of business.
       The Convention itself does not define what “principal place of business”
means. The parties also do not point to any binding case law interpreting this
phrase as it appears in the Convention. They do, however, draw a link between
this language and the text of the federal diversity jurisdiction statute which also
uses the “principal place of business” language.1 In Hertz Corp. v. Friend, 130
S. Ct. 1181, 1193 (2010), the Supreme Court concluded that, as used at 28 U.S.C.
§ 1332(c)(1), “‘principal place of business’ is best read as referring to the place
where a corporation’s officers direct, control, and coordinate the corporation’s

       1
          In relevant part, the federal diversity jurisdiction statute provides: “For the purposes
of this section and section 1441 of this title--(1) a corporation shall be deemed to be a citizen
of any State by which it has been incorporated and of the State where it has its principal place
of business[.]” 28 U.S.C. § 1332(c)(1).

                                                4
   Case: 11-20400      Document: 00511715335   Page: 5   Date Filed: 01/05/2012

                                  No. 11-20400

activities.” In doing so, the Supreme Court adopted the “nerve center” approach
that had been used by various courts of appeals. Id.
      To answer the question regarding JIL’s principal place of business, we
would have to consider whether the nerve center approach that applies for
Section 1332 purposes can also be used to interpret similar phrasing in the
Convention. On the facts before us, we need not provide an answer to this query.
      Although it is not absolutely clear where JIL has its principal place of
business, it is evident that the commercial relationship between S&T and JIL
has some reasonable relation with one or more foreign states. Even if JIL’s
principal place of business is in the United States, the Investment Agreement’s
arbitral clause can still be enforceable under the Convention if the legal
relationship between JIL and S&T involved “property abroad, envisages
performance or enforcement abroad, or has some other reasonable relation with
on or more foreign states.” 9 U.S.C. § 202. As we stated in Freudensprung, this
reasonable relation with a foreign state must be “independent of the arbitral
clause itself.” 379 F.3d at 341 (citing Lander Co., Inc. v. MMP Invs., Inc., 107
F.3d 476, 482 (7th Cir. 1997); Jones v. Sea Tow Servs. Freeport NY Inc., 30 F.3d
360 (2d Cir. 1994)).
      Here, it is evident that the legal relationship between JIL and S&T
envisaged performance abroad. The Investment Agreement specifically states
that it was executed in Guernsey and would be performed by JIL “exclusively
and wholly in and from Guernsey.” Indeed, pursuant to the terms of the
Investment Agreement, JIL performed part of the agreement abroad when it
wired funds from Guernsey to cover some of the legal fees and costs of the
Romanian Arbitration. Not only was performance envisaged abroad, but the
legal relationship between JIL and S&T also involves foreign property.
Specifically, the Investment Agreement between the two parties states that S&T

                                        5
   Case: 11-20400    Document: 00511715335      Page: 6   Date Filed: 01/05/2012

                                  No. 11-20400

was to provide its interest in a Romanian joint stock company as collateral to
JIL.
       Given these facts, it is evident that the commercial relationship between
S&T and JIL has some reasonable relation with one or more foreign states that
is independent of the arbitral clause itself. As such, the fourth Freudensprung
factor is satisfied in this case. The district court therefore did not err in
compelling arbitration.
                                       III.
       For these reasons, we AFFIRM the district court’s judgment compelling
arbitration. We DISMISS S&T’s appeal of the denial of its application for a
temporary restraining order for lack of appellate jurisdiction. See Matter of Lieb,
915 F.2d 180, 183 (5th Cir. 1990) (“This court has long held that the denial of an
application for a temporary restraining order is not appealable.”).

                                        6