Court Opinion

ID: 31338
Source: CourtListenerOpinion
Date Created: 2010-04-25 10:15:17+00
Date Added: 2024-06-11T09:38:17.128046
License: Public Domain

United States Court of Appeals

                                                                         Fifth Circuit

                  IN THE UNITED STATES COURT OF APPEALS                F I L E D
                                                                        March 5, 2003
                            FOR THE FIFTH CIRCUIT

                             ____________________                  Charles R. Fulbruge III
                                                                           Clerk
                                 No. 02-20042
                             ____________________

                       KARAHA BODAS COMPANY, L.L.C.,

                                                         Plaintiff-Appellee,

                                     versus

      PERUSAHAAN PERAMBANGAN MINYAK DAN GAS BUMI NEGARA, ET AL.,
                                                 Defendants,

           PERUSAHAAN PERAMBANGAN MINYAK DAN GAS BUMI NEGARA,

                                                        Defendant-Appellant.

_________________________________________________________________

           Appeal from the United States District Court
                for the Southern District of Texas
                           (H-01-CV-634)
_________________________________________________________________

Before KING, Chief Judge, DAVIS, Circuit Judge, and ROSENTHAL*,
District Judge.

PER CURIAM:**

        Appellant, Perusahaan Perambangan Minyak Dan Gas Bumi Negara

(“Pertamina”)      contracted    with   appellee,    Karaha   Bodas     Company,

  *
        District Judge of the Southern District of Texas, sitting by designation.

   **
      Pursuant to 5TH CIR. R. 47.5, the Court has determined that this opinion
should be published and is not precedent except under the limited circumstances
set forth in 5TH CIR. R. 47.5.4.
L.L.C. (“KBC”) to develop geothermal energy sources in Indonesia

for   electrical    power   generation.           The   parties    executed     two

contracts.     Both     contained    an       arbitration   clause.      In   1998,

financial crises in Indonesia led to the suspension of the project.

KBC initiated arbitration proceedings, which were conducted in

Switzerland.      The Tribunal entered an award in favor of KBC for

damages resulting from the cancellation of the project.                  KBC then

filed suit in the federal district court in the Southern District

of Texas to confirm that award.           This appeal is from the district

court’s   grant    of   summary     judgment       confirming     the   award   and

rejecting Pertamina’s challenges to the arbitration procedures and

result.

      Months after briefing on this appeal concluded, Pertamina

filed in the district court a motion to set aside judgment under

Rule 60(b)(2), based on newly discovered evidence that Pertamina

contended should have been disclosed during the arbitration, and

under Rule 60(b)(5), based on the decision of an Indonesian court

annulling the arbitration award.                A few weeks later, Pertamina

filed in this court a motion to supplement the record and for

supplemental briefing, seeking to have this court include in the

appellate record both the recently discovered evidence and the

information as to the post-judgment decision of the Indonesian

court annulling the award.           The developments in the Indonesian

court are the subject of a separate appeal now pending before a

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different panel of this court; Pertamina urges this court to

supplement the record on this appeal with the record of the

separate pending appeal.

       Pertamina urges this court to supplement the record and

consider   the     additional     evidence       without      the    benefit    of   the

district court’s ruling on the Rule 60 motion pending in that

court.     KBC    urges    this    court       simply    to   deny    the   motion    to

supplement the record and for supplemental briefing. The threshold

questions presented in this case are how this court should address

the request to supplement the record to add materials that the

district court did not consider, and how the district court should

treat the Rule 60(b) motion to vacate its judgment when the appeal

from the judgment is pending.              Because the motion to supplement

raises the same questions that are before the district court in the

Rule   60(b)     motion,   the    district       court    should     consider    those

questions first.       The Rule 60(b) motion is still pending in the

district court, and that court has not yet indicated whether it

intends to grant or deny the motion.               Accordingly, the appeal from

the grant of summary judgment will be held in abeyance to permit a

limited remand for the district court to consider the merits of the

Rule 60(b) motion.

                                  I.    Background

       Petitioner-appellee        KBC    explores       and   develops      geothermal

energy   sources    and    builds       electric    generating       stations    using

                                           3
geothermal sources. Respondent-appellant Pertamina is an oil, gas,

and     geothermal    energy    company     owned   by    the    Government   of

Indonesia.***    KBC signed two contracts to produce electricity from

geothermal    sources    in    Indonesia    in   November    1994.   The   Joint

Operation Contact granted KBC the right to develop geothermal

energy sources in the Karaha area of Indonesia; Pertamina was to

manage the project and receive the electricity generated.                  (Final

Award, ¶ 4).         Under the Energy Sales Contract, PLN agreed to

purchase from Pertamina the energy generated by KBC’s facilities.

(Id. at ¶ 5).         Both contracts contained arbitration clauses,

calling for the application of            the Arbitral Rules of the United

Nations Commission on International Trade Law (“UNCITRAL”) and

specifying Geneva, Switzerland as the place of any arbitration. On

September 20, 1997, the Indonesian government suspended the project

because of the government’s financial crisis.                   The project was

indefinitely suspended on January 10, 1998.              On February 10, 1998,

KBC notified Pertamina and PLN that the government’s suspension

constituted an event of force majeure under the contracts.

        KBC initiated arbitration proceedings on April 30, 1998.

Pertamina disputes the procedures used in the appointment of the

arbitrators and the consolidation of the arbitrations under the two

contracts.      In its Preliminary Award, the Tribunal held that the

  ***
     PLN, an electric utility owned by the Government of Indonesia, was a party
to the arbitration but was dismissed from the district court action.

                                      4
Tribunal was properly constituted, that consolidation was proper,

and that the Government of Indonesia was not a proper party.                            KBC

filed   its    Revised         Statement      of    Claim   on    November     24,   1999.

Pertamina received a number of extensions before it filed its reply

brief on April 7, 2000, and KBC filed its rebuttal on May 8, 2000.

In response to the rebuttal, Pertamina sought additional discovery

and a continuance of the proceedings, scheduled to begin on June

19, 2000, claiming that KBC had raised new assertions and new

elements      of    its    case-in-chief           not   contained      in   the   Revised

Statement of Claims.            The parties had vigorously disputed whether

KBC could have obtained financing to build the project if the

government     had       not   issued    the       suspension     decree.      Pertamina

asserted that KBC’s rebuttal introduced a new theory as to how it

would have obtained financing, claiming that one of KBC’s direct

investors,         FPL    Energy   (“FPL”),         would   have       provided    project

financing if no other source was available.                            Pertamina sought

discovery of FPL documents relating to the claim that FPL was

prepared      to    finance      the    KBC    project.          The   Tribunal      denied

Pertamina’s requests for this discovery and for a continuance. The

hearing on the merits was held in June 2000.                      The Tribunal stated

in the final award that all parties had “waived their respective

requests for discovery” at the conclusion of the hearing.                            (Final

Award, ¶ 32).        Pertamina disputes any waiver.

                                              5
      In the Final Award, issued in December                    2000, the Tribunal

found   that      Pertamina    was    liable      for    nonperformance    of     the

contracts.       The Tribunal interpreted the contractual provisions as

“putting the consequences of a Governmental decision which prevents

the performance of the contract at Pertamina’s . . . sole risk.”

(Final Award, ¶ 57).          The Tribunal awarded KBC $111.1 million to

recoup its expenditures and $150 million in lost profits.

      KBC brought an action in the district court to enforce the

arbitral award.          Under the Convention on the Recognition and

Enforcement of Foreign Tribunal Awards (the “New York Convention”),

9   U.S.C.   §    201,   et   seq.,   a     district     court   must   confirm   an

arbitration award unless it finds one of seven grounds specified by

the New York Convention for refusal or deferral of the award.                      9

U.S.C. § 207; Yusuf Ahmed Alghanim & Sons v. Toys “R” Us, 126 F.3d

15, 23 (2d Cir. 1997).          Pertamina challenged the award on three

grounds under the New York Convention:                   the composition of the

arbitral authority or the arbitral procedure was not in accordance

with the agreement of the parties; Pertamina was “unable to present

its case” to the Tribunal; and enforcement of the award would

violate public policy of the United States, the country where

enforcement of the award was sought.                    As to the first ground,

Pertamina      contended      that    the       decision   to     consolidate     the

arbitrations under the two contracts was procedurally improper and

that KBC’s unilateral appointment of an arbitrator violated the

                                            6
rules specified in one of the contractual arbitration provisions.

As to the second ground,          Pertamina argued that the Tribunal

improperly reversed its finding in the Preliminary Award that

Pertamina did not breach the contracts when it held Pertamina

liable for nonperformance in the Final Award; that the Tribunal’s

denial of Pertamina’s request for discovery of FPL’s records

prevented Pertamina from fully presenting its case; and that the

Tribunal’s denial of a continuance after KBC’s rebuttal prevented

Pertamina from fully preparing its response.              As to the third

ground, Pertamina argued that the award violated the international

“abuse of rights” doctrine and punished Pertamina for obeying the

Indonesian government’s decree.         In the district court, Pertamina

requested a delay in responding to the summary judgment motion

under Federal Rule of Civil Procedure 56(f), seeking discovery of

the   same   FPL   records   it   had    unsuccessfully    sought   in   the

arbitration.

      The district court confirmed the award, rejecting each of

Pertamina’s grounds for refusal.        In so doing, the district court

carefully considered the record relating to Pertamina’s ability in

the arbitration proceeding to challenge KBC’s claim that it could

have obtained project financing from its investor, FPL.                  The

district court denied Pertamina’s Rule 56(f) request for additional

discovery to obtain records.            The notice of appeal from the

district court judgment was filed on January 2, 2002.

                                    7
     In August 2002, an Indonesian court set aside the arbitral

award.   KBC contends that this order is void because the district

court had issued an injunction ordering Pertamina to “take no

action . . . to prosecute the action it filed against KBC in the

District Court of Central Jakarta.” Pertamina has another appeal,

pending before another panel of this court, challenging that

injunction. Karaha Bodas Co. LLC v. Perusahaan, Etc., Case No. 02-

20550.

     KBC had also filed suit in Canada to confirm the arbitral

award.     In October 2002, after Pertamina perfected its appeal to

this court, Pertamina discovered in the Canadian proceeding that

FPL and one other KBC investor, Caithness, held political risk

insurance covering the KBC project through Lloyd’s of London.

Pertamina also learned that Lloyds had paid $75 million under that

insurance policy to FPL and Caithness.

     In December 2002, Pertamina filed a motion in the district

court to vacate the judgment under Rule 60(b), and, in this court,

a motion to supplement the record and briefing.          In both motions,

Pertamina argues that the existence of the political risk insurance

coverage    in   favor   of   FPL   undermines   KBC’s   claims,   and   the

Tribunal’s finding, that the contracts allocated political risks

entirely to Pertamina. Pertamina also argues that the existence of

the insurance coverage undermines KBC’s arguments that FPL would

have financed the project in order to avoid losing an earlier

                                      8
investment which was significantly less than the amount of the

insurance proceeds FPL received. Pertamina argues that the payment

of the insurance proceeds undermines the Tribunal’s determination

of damages.    Pertamina urges that KBC’s failure to disclose the

policy during the arbitration provides a basis for refusing to

enforce the award, making the district court’s summary judgment

improper.     As part of the motion to supplement in this court,

Pertamina presents a report by an expert on arbitration proceedings

and legal ethics, providing an opinion as to the legal significance

of KBC’s failure to disclose the political risk insurance policy

during the arbitration proceedings.          KBC has opposed both the

motion to supplement the record in this court and the motion to

vacate the judgment filed in the district court.

                            II.   Analysis

     A.     The Motion to Supplement

            Federal Rule of Appellate Procedure 10(e), providing for

correction or modification of the appellate record, does not

generally permit an appellate court to add to the record materials

that were not before the district court.      See Morrison v. Hall, 261

F.3d 896 n.4 (9th Cir. 2001)(“Rule 10(e) cannot be used to add to

or enlarge the record on appeal to include material which was not

before the district court”)(citations omitted); In re Capital

Cities/ABC, 913 F.2d 89, 97 (3d Cir. 1990); Ross v. Kemp, 785 F.2d

1467, 1474 (11th Cir. 1986); U.S. v. Hillsberg, 812 F.2d 328, 336

                                  9
(7th Cir. 1987)(“Rule 10(e) does not give this court authority to

admit on appeal any document which was not made a part of the

record in the district court); Kemlon Prod. and Dev. Co. v. U.S.,

646 F.2d 223, 224 (5th Cir. 1981)(“A court of appeals will not

ordinarily enlarge the record on appeal to include material not

before the district court”); U.S. v. Page, 661 F.2d 1080, 1082 (5th

Cir. 1980)(“Rule 10(e) exists to allow the district court to

conform the record to what happened, not what did not.”)(citations

omitted).    The Fifth Circuit has ordinarily refused to supplement

an appellate record with materials contained in the record of

related pending cases.   See U.S. v. Flores, 887 F.2d 543, 546 (5th

Cir. 1989); Kemlon, 646 F.2d at 224.     Pertamina does not allege

that the information it seeks to add to the record was omitted by

error or accident.   It considers the information “newly discovered

evidence.”    Although appellate courts have an inherent equitable

power to supplement the record on appeal to include information not

presented to the district court, it is limited to circumstances not

present here.   See Dakota Indus., Inc. v. Dakota Sportswear, Inc.,

988 F.2d 61, 63 (8th Cir. 1993); Ross v. Kemp, 785 F.2d 1467, 1474-

75 (11th Cir. 1986); Gibson v. Blackburn, 744 F.2d 403, n.3 (5th

Cir. 1984); Dickerson v. Alabama, 667 F.2d 1364, 1367 (11th Cir.

1982).   Pertamina cannot add the newly discovered evidence to the

record under appellate Rule 10(e).    Pertamina’s Rule 60(b) motion

                                 10
in the district court is based on this newly discovered evidence.

      Pertamina’s motion to supplement the appellate record is

denied.****

      B.      The Rule 60(b) Motion

      The Fifth Circuit, with other appellate courts, has addressed

how to treat a Rule 60(b) motion for relief from a judgment filed

while that judgment is on appeal.           Winchester v. U.S. Attorney for

the Southern District of Texas, 68 F.3d 947, 949 (5th Cir. 1995).

The procedure adopted recognizes the “primacy of a district court’s

authority over motions for relief from its own judgments and the

prohibition      against     two    courts     simultaneously       exercising

jurisdiction over a case.” Fobian v. Storage Technology Corp., 164

F.3d 887, 889 (4th Cir. 1999).         Under this procedure, a notice of

appeal divests the district court of jurisdiction “except to take

action in aid of the appeal until the case is remanded to it by the

appellate court, or to correct clerical errors under Rule 60(a).”

Winchester, 68 F.3d at 949 (quoting Travelers Ins. Co. v. Liljeberg

Enters., 38 F.3d 1404, 1407 n.3 (5th Cir. 1994)).                The district

court has the power to consider and deny a Rule 60(b) motion filed

after a notice of appeal, because the denial of the Rule 60(b)

   ****
      This court can take judicial notice of another court’s judicial action.
See Maher v. Hyde, 272 F.3d 83, n.3 (1st Cir. 2001); Najjar v. Ashcroft, 257 F.3d
1262, 1283 (11th Cir. 2001); U.S. v. Jones, 29 F.3d 1549, 1553-54 (11th Cir.
1994)(an appellate court may take judicial “notice of another court’s ruling .
. . for the limited purpose of recognizing the ‘judicial act’ that the order
represents or the subject matter of the litigation and related filings.”)

                                       11
motion is in furtherance of the appeal.         Winchester, 68 F.3d at

949.    However, a district court may not grant a Rule 60(b) motion

filed after a notice of appeal, without leave from the appellate

court.    “When the district court is inclined to grant the 60(b)

motion, . . . then it is necessary to obtain the leave of the court

of appeals. Without obtaining leave, the district court is without

jurisdiction, and cannot grant the motion.”           Id.; Ferrell v.

Trailmobile, Inc., 223 F.2d 697, 698-699 (5th Cir. 1955).

       Under the Fifth Circuit’s procedure, the appellate court asks

the district court to indicate, in writing, its inclination to

grant or deny the Rule 60(b) motion.            If the district court

determines that the motion is meritless, the appeal from the denial

is consolidated with the appeal from the underlying order.         If the

district court is inclined to grant the motion, it should issue a

short memorandum so stating.    Appellant may then move this court

for a limited remand so that the district court can grant the Rule

60(b) relief.     After the Rule 60(b) motion is granted and the

record reopened, the parties may then appeal to this court from any

subsequent    final   order.   See    Fobian,   164   F.3d   at   890-91;

Winchester, 68 F.3d at 949; Tolliver v. County of Sullivan, 957

F.2d 47, 49 (2d Cir. 1992); Summers v. Utah, 927 F.2d 1165, 1168-69

(10th Cir. 1991); Com. of Puerto Rico v. SS Zoe Colcotrone, 601

F.2d 39, 41-42 (1st Cir. 1979); First Nat’l Bank of Salem, Ohio v.

                                 12
Hirsch, 535 F.2d 343, 345-46 (6th Cir. 1976) (quoting Smith v.

Pollin, 194 F.2d 349, 350 (D.C. Cir. 1952)).

     This procedure balances efficiency considerations with the

prohibition against dual exercise of jurisdiction by a district

court and an appellate court.       “It would be both inefficient and

unfortunate   to   require   the   district   court   to   wait   until   the

underlying appeal is completed before giving any indication of its

desire to grant a pending Rule 60(b) motion.          Such a prohibition

would likely render the initial appeal pointless in cases where the

district court ultimately grants the motion following appeal.”

Fobian, 164 F.3d at 890.      However, if the district court were to

grant the Rule 60(b) motion and reopen the record while the appeal

was still pending, this court and the appellate court would be

impermissibly exercising jurisdiction over the same case.             These

conflicting concerns are resolved by having the district court

deny, or indicate its intention to grant, the Rule 60(b) motion

before this court proceeds with the appeal.

     In this case, “the trial court is in a much better position to

pass upon the issues presented in a motion pursuant to Rule 60(b).”

Standard Oil Co. of Ca. v. U.S., 429 U.S. 17, 19, 97 S. Ct. 31, 50

L.Ed.2d 21 (1976).      The district court’s familiarity with the

record makes it far better situated than this appellate court to

determine quickly and easily whether the Rule 60(b) motion has

merit.   The district court is better situated than this court

                                    13
initially to determine the impact of Pertamina’s newly-discovered

evidence of the existence of political risk insurance coverage on

the judgment confirming the arbitration award.   That determination

will require an examination of the relationship between that

evidence and the existing record.       Pertamina asserts that the

evidence of the insurance calls into question the Tribunal’s

decisions on discovery in the arbitration process; the Tribunal’s

decision that the contracts allocated political risks entirely to

Pertamina; KBC’s contention in the arbitration that FPL was willing

to provide financing to protect its earlier investment; and the

Tribunal’s calculation of damages suffered by KBC.        Pertamina

asserts that KBC perpetrated fraud on the Tribunal by failing to

disclose the insurance; KBC asserts that Pertamina failed to

exercise due diligence that would have revealed the insurance

coverage during the arbitration proceeding.    The district court’s

familiarity with the record puts it in a better position initially

to rule on these contentions.

     If the district court decides that the Rule 60(b) motion

should be denied, the district court can do so without disturbing

appellate jurisdiction over the underlying judgment, permitting the

appeal from the denial of the Rule 60(b) motion to be consolidated

with the underlying appeal. If the district court decides to grant

the Rule 60(b) motion, it must necessarily vacate the underlying

judgment and reopen the record.      The reopening of the record is

                                14
precisely the result Pertamina seeks in this court by its motion to

supplement, based on the same arguments the district court must

consider in determining whether to grant or deny the motion to

vacate.

     This court remands for the limited purpose of asking the

district court to consider the merits of the Rule 60(b) motion.

This court does so without expressing any opinion on the merits of

that motion and without ruling at this time on the appeal from the

grant of summary judgment.   The appeal is in abeyance pending the

resolution of the Rule 60(b) motion.   If the district court finds

the Rule 60(b) motion meritless, the appeal from that denial can be

consolidated with this appeal.    If the district court determines

that it is inclined to grant the Rule 60(b) motion, it should issue

a short memorandum so stating.   Pertamina can then move this court

for a limited remand so that the district court can grant the Rule

60(b) relief, vacating the judgment and reopening the record. Once

that has been accomplished, the parties can appeal to this court

from any final order.

     This court retains jurisdiction over the cause appealed except

for the limited REMAND to permit the district court to state, in

writing, whether it is inclined to deny or grant the Rule 60(b)

motion.

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