Court Opinion

ID: 2963827
Source: CourtListenerOpinion
Date Created: 2015-09-21 21:15:46.464467+00
Date Added: 2024-06-11T11:42:46.921070
License: Public Domain

USCA1 Opinion

	

                            United States Court of Appeals
                                For the First Circuit

                                 ____________________
                                    
        No. 95-1495

                           MENORAH INSURANCE COMPANY, LTD.,

                                 Plaintiff-Appellee,

                                          v.

                             INX REINSURANCE CORPORATION,

                                 Defendant-Appellant.

                                 ____________________

        No. 95-1497

                           MENORAH INSURANCE COMPANY, LTD.,

                                 Plaintiff-Appellant,

                                          v.

                             INX REINSURANCE CORPORATION

                                 Defendant-Appellee.

                                   _______________

                    APPEALS FROM THE UNITED STATES DISTRICT COURT

                           FOR THE DISTRICT OF PUERTO RICO

                   [Hon. Jose Antonio Fuste, U.S. District Judge] 

                                 ____________________

                                        Before

                                 Lynch, Circuit Judge,
                                        _____________
                           Campbell, Senior Circuit Judge,
                                     ____________________
                                Watson,* Senior Judge.
                                         _____________

                                 ____________________

            Luis  A.  Melendez-Albizu,  Jaime  Sifre  Rodriguez,  and Sanchez-
            _________________________   _______________________       ________
        Betances & Sifre, were on brief for Menorah Insurance Company, Ltd.
        ________________
            Juan  H.  Saavedra  Castro  was   on  brief  for  INX  Reinsurance
            __________________________
        Corporation.

                                 ____________________

                                  December 26, 1995
                                 ____________________

        _________________
        *Of  the  United  States  Court of  International  Trade,  sitting  by
        designation.

                                         -2-           

                      LYNCH,   Circuit   Judge.     After  unsuccessfully
                      LYNCH,   Circuit   Judge.
                               _______________

            attempting to invoke arbitration under international business

            contracts,  Menorah Insurance  Company  obtained an  $812,907

            default judgment in an  Israeli court against INX Reinsurance

            Corporation  and then  sought to  enforce the  judgment in  a

            Puerto Rican court.  After waiting  a year, and on the eve of

            having an exequatur judgment  entered against it, INX removed

            the action to the  U.S. District Court for Puerto  Rico under

            the Convention on the  Recognition and Enforcement of Foreign

            Arbitral  Awards,  implemented  in 9  U.S.C.     201 et  seq.
                                                                 __  ____

            (1994).1   The  federal  court  found  that  INX  had  waived

            arbitration and  remanded.   We affirm  because INX  has both

            explicitly and implicitly waived arbitration.

                      Under  seven  reinsurance  treaties  between  them,

            Menorah,  an  Israeli  company,   and  INX,  a  Puerto  Rican

            corporation, agreed  that "all disputes"   between them would

            be arbitrated and should be  settled "in an equitable  rather

            than  in a strictly legal manner."2  The locus of arbitration

                                
            ____________________

            1.  The Convention was opened for signature on June 10, 1958,
            330  U.N.T.S. 38,  and is  reprinted in  9 U.S.C.A.    201 n.
            (West Supp. 1995).

            2.  The  arbitration   clause  presented  by   INX  as  being
            representative provides that:

                      All disputes which  may arise between the
                      two contracting parties with reference to
                      the Interpretation or the carrying out of
                      this   Agreement   or   to   any   matter
                      originating  therefrom  or  in   any  way
                      connected  with  the  same,  and  whether

                                         -3-
                                          3

            was  to be  Tel Aviv, Israel.   Each  side was  to appoint an

            arbitrator and  should the two arbitrators  disagree, then an

            "Umpire," previously designated by the two arbitrators, would

            decide.   There  was a  default provision  of sorts:  "In the

            event of either party failing to appoint an umpire within two

            months after  arbitration has  been supplied [sic]  for under

            the  question  in dispute,  then  in  either  such  case  the

            arbitrators and/or umpire shall  be appointed by the chairman

            for   the  time   being   of  the   Israeli  Fire   Insurance

            Association."

                      Menorah made a claim to INX for over $750,000 under

            the reinsurance treaties,  to which INX replied  that it owed

            no more than $178,000 and intimated that fraud accounted  for

            the  $500,000 difference.   After  unsuccessful negotiations,

            Menorah,  on July  1, 1992,  informed INX  by letter  that it

            would seek  arbitration, asked  INX to assent  to arbitration

            and  appoint its arbitrator, said if INX failed to appoint an

                                
            ____________________

                      arising before or  after the  termination
                      of  notice under this  agreement shall be
                      entitled  [sic]  in  an equitable  rather
                      than a  strictly legal manner and in such
                      cases the parties agree to submit  to the
                      decision  of arbitrator, one to be chosen
                      by  the  Company  and  the  other  by the
                      Reinsurer   and   in    the   event    of
                      disagreement between these  two, then  an
                      Umpire, who shall have been chosen by the
                      said  two  arbitrators previous  to their
                      entering   upon    the   reference,   the
                      arbitrators   and/or   umpire  shall   be
                      managers  or  chief  officials   of  fire
                      Insurance and/or reinsurance companies.

                                         -4-
                                          4

            arbitrator, Menorah would ask that one  be appointed for INX,

            and that if  INX failed  to assent, then  Menorah would  feel

            "free  to  pursue  all  other  legal  and  judicial  measures

            available."    INX  responded  promptly  that  it  would  not

            arbitrate, that its financial  condition was precarious,  and

            that even  if ordered  to arbitrate, its  financial condition

            would preclude it from doing so.  

                      On September  10, 1992,  Menorah filed suit  in Tel

            Aviv against INX.  Although actually served, INX chose not to

            respond or contest, and  default judgment was entered against

            it for $812,907, interest at an annual rate of 11%, costs and

            attorneys' fees.   INX did not pay nor did  it seek to remove

            the default.

                      On September  2, 1993, Menorah filed  an exequatur3

            action  in  the Superior  Court in  San  Juan to  enforce the

            judgment.   INX moved to dismiss, claiming for the first time

            that  the  controversies  between   the  parties  had  to  be

            arbitrated.   On August 8, 1994, the court denied the motion,

            finding that INX had waived arbitration  and that the Israeli

            judgment was valid, and ordered INX to answer.  INX answered,

            again claiming arbitration, and counterclaimed that Menorah's

                                
            ____________________

            3.  "Exequatur"  refers to  an action  to execute  a judgment
            from another  jurisdiction.   See Seetransport Wiking  Trader
                                          ___ ___________________________
            Schiffahrtsgesellschaft   MBH  &  Co.  v.  Navimpex  Centrala
            _____________________________________      __________________
            Navala, 29 F.3d 79, 81-82 (2d Cir. 1994). 
            ______

             

                                         -5-
                                          5

            failure to submit the exequatur action  to arbitration was in

            breach of its contractual duty of good faith.  On October 14,

            1994,  the Superior Court issued  an order to  show cause why

            the  petition  for  exequatur  should  not  be  granted.   In

            response, INX removed the action to the federal court under 9

            U.S.C.   205.4 

                      The federal  court remanded  the case on  March 15,

            1995,  finding  that  INX  had  waived  arbitration  and  the

            remaining claims were not  subject to the federal arbitration

            scheme.    Now, over  three  years  after Menorah's  original

            request for arbitration  was refused and after the  travel of

            this matter  internationally through three  different courts,

                                
            ____________________

            4.  Section 205 provides:

                      Where the subject matter  of an action or
                      proceeding  pending  in  a   State  court
                      relates  to  an arbitration  agreement or
                      award falling under  the Convention,  the
                      defendant or  the defendants may,  at any
                      time  before  the  trial thereof,  remove
                      such action or proceeding to the district
                      court  of  the   United  States  for  the
                      district and division embracing the place
                      where   the   action  or   proceeding  is
                      pending.   The  procedure for  removal of
                      causes  otherwise  provided by  law shall
                      apply, except that the ground for removal
                      provided in this  section need not appear
                      on the  face of the complaint  but may be
                      shown in the  petition for removal.   For
                      the purposes of  Chapter 1 of this  title
                      any  action  or proceeding  removed under
                      this section  shall  be deemed   to  have
                      been  brought in  the  district court  to
                      which it is removed.   

                                         -6-
                                          6

            INX asks us to reverse the district court and send the matter

            to arbitration. 

                      Review  of  a  district  court's  determination  of

            waiver of arbitration is plenary.  See Commercial Union  Ins.
                                               ___ ______________________

            Co. v. Gilbane  Bldg. Co., 992 F.2d 386, 390 (1st Cir. 1993);
            ___    __________________

            Leadertex,  Inc. v.  Morganton Dyeing  & Finishing  Corp., 67
            ________________     ____________________________________

            F.3d 20, 25  (2d Cir. 1995).  "[T]he  findings upon which the

            [legal]  conclusion  [of  waiver]  is   based  are  predicate

            questions of fact, which may not be overturned unless clearly

            erroneous."  Price v. Drexel Burnham  Lambert, Inc., 791 F.2d
                         _____    _____________________________

            1156, 1159 (5th Cir. 1986).  

                      In the increasingly  international business  world,

            the  use  of  arbitration   agreements  may  be  particularly

            important to avoid the

                      uncertainty [that] will almost inevitably
                      exist  with  respect   to  any   contract
                      touching two or more countries, each with
                      its own substantive laws and conflict-of-
                      laws  rules.    A  contractual  provision
                      specifying  in advance the forum in which
                      disputes shall  be litigated and  the law
                      to  be applied  is, therefore,  an almost
                      indispensable precondition to achievement
                      of  the  orderliness  and  predictability
                      essential  to any  international business
                      transaction.

            Scherk  v.  Alberto-Culver Co.,  417  U.S.  506, 516  (1974).
            ______      __________________

            These  same interests  motivated  this country  to adopt  and

            implement the  Convention, under which this  case was removed

            to federal court:

                                         -7-
                                          7

                      The  goal  of  the  Convention,  and  the
                      principal  purpose   underlying  American
                      adoption and implementation of it, was to
                      encourage the recognition and enforcement
                      of  commercial arbitration  agreements in
                      international contracts and to  unify the
                      standards   by    which   agreements   to
                      arbitrate   are  observed   and  arbitral
                      awardsareenforcedinthesignatorycountries.

            Id. at 520 n.15.
            ___

                      Against  this backdrop  of a  strong United  States

            policy  favoring  arbitration,  INX  essentially   makes  two

            arguments.   The district court  erred, it says,  in deciding

            that it  waived arbitration in  the events of  1992.  In  any

            event, INX says, it now has the right to have the question of

            the enforceability of the  Israeli judgment, including  INX's

            counterclaim, determined by an arbitrator.

                      The district court did not  err on either the facts

            or the law.  The explicit waiver came when INX was invited to

            arbitrate in July 1992.  INX  expressly declined.  It is  not

            saved from  that  declination by  the fact  that Menorah  had

            offered  in the  July 1,  1992 letter  to have  an arbitrator

            appointed for INX.   That offer too was declined and INX said

            it  was  both unwilling  and  unable  to  participate in  the

            arbitration.5  

                                
            ____________________

            5.  INX  claims  the  agreement  required  an  arbitrator  be
                                             ________
            appointed  for it  if it declined  to do  so.   The language,
            hardly  a model of clarity, does not so directly provide, and
            easily could have done so were that the intent. 

                                         -8-
                                          8

                      The implicit waiver  came from INX's entire  course

            of conduct.  This court has repeatedly held that "parties may

            waive their right to arbitration and present their dispute to

            a  court."   Caribbean Insurance  Services, Inc.  v. American
                         ___________________________________     ________

            Bankers  Life Assurance Co., 715 F.2d 17, 19 (1st Cir. 1983).
            ___________________________

            In  Caribbean,  we  found  waiver where  the  party  claiming
                _________

            arbitration delayed doing  so until six  months after it  was

            sued  and it had entered a stipulation  for a speedy trial in

            exchange  for a  "reprieve from  a likely  contempt finding."

            Id. at 20.   In Jones Motor Co. v.  Chauffeurs, Teamsters and
            ___             _______________     _________________________

            Helpers  Local Union  No. 633,  671 F.2d  38, 43  (1st Cir.),
            _____________________________

            cert.  denied, 459  U.S. 943  (1982), we  found waiver  where
            _____  ______

            eleven months  of litigation occurred before  arbitration was

            first raised, saying:

                      [T]o   require   that   parties   go   to
                      arbitration despite their having advanced
                      so  far  in   court  proceedings   before
                      seeking   arbitration   would  often   be
                      unfair, for it would effectively  allow a
                      party sensing an adverse court decision a
                      second chance in another forum.

            That  sentiment applies here.   In Gutor Int'l  AG v. Raymond
                                               _______________    _______

            Packer  Co.,  493 F.2d  938, 945  (1st  Cir. 1974),  we found
            ___________

            waiver  where a  party unconditionally  submitted part  of an

            arbitrable matter to the courts, but later attempted to  take

            advantage of  the arbitration clause when  the opposing party

            counterclaimed.    Cf.  Raytheon  Co.  v.  Automated Business
                               ___  _____________      __________________

            Systems,  Inc.,  882 F.2d  6,  8 (1st  Cir.  1989) (defendant
            ______________

                                         -9-
                                          9

            waived issue of  whether it  consented to  issue of  punitive

            damages being  submitted to arbitration by  delaying and then

            raising it  in desultory manner  on first day  of arbitration

            and not pursuing it). 

                      It  has been the rule in this Circuit that in order

            for plaintiffs  to prevail on  "their claim  of waiver,  they

            must  show prejudice."    Sevinor v.  Merrill Lynch,  Pierce,
                                      _______     _______________________

            Fenner  &  Smith,  Inc., 807  F.2d  16,  18  (1st Cir.  1986)
            _______________________

            (finding  no   prejudice  where  defendants   explicitly  and

            promptly raised arbitration as  a defense to a  suit); accord
                                                                   ______

            Commercial Union, 992 F.2d  at 390.  Because there  was ample
            ________________

            prejudice  here, as  the  district court  found,  we have  no

            reason  to reconsider whether to  apply the litmus  test of a

            showing  of  prejudice to  establish  waiver  or to  apply  a

            totality of circumstances test,  as other circuits have done.

            See Metz v. Merrill  Lynch, Pierce, Fenner & Smith,  Inc., 39
            ___ ____    _____________________________________________

            F.3d 1482, 1489 (10th Cir. 1994) (applying a "totality of the

            circumstances"  test for  the determination of  waiver, where

            prejudice was but  one factor);   S+L+H S.p.A. v.  Miller-St.
                                              ____________     __________

            Nazianz, Inc., 988 F.2d 1518, 1527 (7th Cir. 1993). 
            _____________

                      Ignoring  its  failure  to appear  in  the  Israeli

            action,6  INX characterizes  its  delay  of  over a  year  in

                                
            ____________________

            6.  INX asserts  that its inaction during  the proceedings in
            Israel was justified by  its desire to preserve its  right to
            challenge the  jurisdiction of the  Israeli court.   But  INX
            voluntarily  entered  into  reinsurance  agreements  with  an
            Israeli  corporation that specified Tel  Aviv as the site for

                                         -10-
                                          10

            seeking arbitration as insufficient to show prejudice.  There

            is  no per  se  rule that  a  one  year delay  is  or is  not
                   ___  __

            sufficient to support waiver.  Cf. J & S Constr. Co., Inc. v.
                                           ___ _______________________

            Travelers Indem. Co., 520 F.2d 809 (1st Cir. 1975)  (thirteen
            ____________________

            month delay and participation in  discovery was not enough to

            constitute a showing of prejudice).  The period of delay here

            was  not  one in  which  information useful  to  the ultimate

            resolution  of  the   dispute  was  being  procured   through

            discovery.    Cf.  Cabinetree  of  Wis.,  Inc.  v.  Kraftmaid
                          ___  ___________________________      _________

            Cabinetry, Inc., 50 F.3d 388, 391 (7th Cir. 1995) (explaining
            _______________

            that delay alone  is not automatically a source  of prejudice

            and that on occasion  it can comprise time the  parties spend

            in  determining information  they would  need in  arbitration

            anyway).   INX chose not to invoke arbitration from July 1992

            until  October 1993 and Menorah bore  the costs of proceeding

            to  try to  obtain the sums  it thought  owed.   See Van Ness
                                                             ___ ________

            Townhouses v. Mar  Indus. Co.,  862 F.2d 754,  759 (9th  Cir.
            __________    _______________

            1988) (waiver  found where  party made conscious  decision to

            delay  demand   for  arbitration  while  continuing  to  seek

            judicial determination  of arbitrable claims).   There was no

            error in  the district court's finding  that Menorah incurred

                                
            ____________________

            any  arbitration proceedings.   In  the commercial  context a
            forum selection  clause,  even one  for arbitration,  confers
            personal jurisdiction on the courts of the chosen forum.  See
                                                                      ___
            Unionmutual Stock  Life Ins.  Co. of Am.  v. Beneficial  Life
            ________________________________________     ________________
            Ins. Co., 774 F.2d 524, 527 (1st Cir. 1985).
            ________

                                         -11-
                                          11

            expenses as a  direct result of  INX's dilatory behavior  and

            that that was prejudice enough.

                      INX  suggests that  the  question of  arbitrability

            should be decided  in the first  instance by the  arbitrator.

            As  to that  and to  INX's  argument that  the  issue of  the

            enforceability  of  the  Israeli   judgment  must  itself  be

            arbitrated,  we are guided by  First Options of Chicago, Inc.
                                           ______________________________

            v. Kaplan,  115 S.  Ct. 1920  (1995).   There, the court  was
               ______

            faced  with  the question  of who  has  the primary  power to

            decide  whether parties  agreed  to arbitrate  the merits  of

            their dispute.  Id. at 1923.  Here, we face a variant of that
                            ___

            question -- who has  the primary power to decide  whether the

            parties agreed to arbitrate the issue of enforceability of  a

            default  judgment following  failure  to  arbitrate under  an

            arbitration clause.  That  question is appropriate because it

            is  conceivable   that   parties  could   decide  that   such

            enforceability   disputes   are   subject   to   arbitration.

            "[A]rbitration  is simply  a matter  of contract  between the

            parties; it is a  way to resolve those  disputes -- but  only

            those disputes -- that  the parties have agreed to  submit to

            arbitration."7  Id. at 1924.
                            ___

                                
            ____________________

            7.  There is precedent that,  as a matter of law,  actions to
            enforce  foreign  money   judgments,  even  those  confirming
            arbitration awards, are not preempted by the Convention.  See
                                                                      ___
            Island Territory  of Curacao  v. Solitron Devices,  Inc., 489
            ____________________________     _______________________
            F.2d  1313, 1319 (2d Cir.  1973), cert. denied,  416 U.S. 986
                                              _____ ______
            (1974).  We think, however, the better rule here is to follow
            First  Options.   See  also  Mastrobuono  v. Shearson  Lehman
            ______________    ___  ____  ___________     ________________

                                         -12-
                                          12

                      So we apply the  First Options rule: "Courts should
                                       _____________

            not assume that the parties agreed to arbitrate arbitrability

            unless there  is 'clear and unmistakable'  evidence that they

            did  so." Id. (citations omitted).   There is  nothing in the
                      ___

            agreement between  INX and  Menorah clearly stating  that the

            question of  arbitrability of judgments should  be decided by

            an arbitrator.  Thequestion is onefor resolution by thecourt.

                      We  also  agree   with  the  district  court   that

            arbitration of the enforceability  of the Israeli judgment is

            not required.   "[G]iven the  principle that a  party can  be

            forced  to arbitrate  only those  issues it  specifically has

            agreed  to submit  to arbitration,"  id. at  1925, we  do not
                                                 ___

            interpret  the  silence of  the  agreement on  this  point to

            create a right of arbitration.  And if the agreement could be

            read for such an implication, INX has nevertheless waived its

            right to arbitrate enforceability of the judgment. 

                      The  law does not  lend itself to  INX's claims and

            ultimately,  the strong  policy reasons  favoring arbitration

            and  underlying  the  adoption  of the  Convention  would  be

            undercut,  not  served,  by  acceptance  of  INX's  position.

            Arbitration clauses  were not meant  to be another  weapon in

            the  arsenal  for imposing  delay  and costs  in  the dispute

                                
            ____________________

            Hutton,  Inc., 115 S. Ct. 1212, 1216 (1995) (issue of whether
            _____________
            arbitrator may award punitive damages "comes down to what the
            contract has  to say about the  arbitrability of petitioners'
            claim for punitive damages"). 

                                         -13-
                                          13

            resolution  process.    Underlying  the policy  of  enforcing

            contracts to  arbitrate is  a belief that  where parties  can

            agree  to a  mutually optimal  method and  forum for  dispute

            resolution, it serves the interests of efficiency and economy

            to allow them to do so.  Cf. Mitsubishi Motors Corp. v. Soler
                                     ___ _______________________    _____

            Chrysler-Plymouth, Inc.,  473 U.S.  614, 633 (1985);  Glass &
            _______________________                               _______

            Allied Workers  Int'l Union, Local 182B  v. Excelsior Foundry
            _______________________________________     _________________

            Co.,  56 F.3d  844, 848  (7th Cir.  1995) ("Arbitration  is a
            ___

            service sold in a  competitive market.  The rules  adopted by

            the sellers  are presumptively efficient.");  see also Steven
                                                          ___ ____

            Shavell,   Alternative   Dispute   Resolution:  An   Economic
                       __________________________________________________

            Analysis,  24  J.  Legal  Stud.  1,  8-9  (1995)  (a  central
            ________

            rationale for  encouraging parties to contract  for their own

            method of dispute resolution is that they are likely to agree

            to the most efficient forum to serve their needs).   

                      In  the context  of  international  contracts,  the

            opportunities for increasing the cost, time and complexity of

            resolving disputes are magnified  by the presence of multiple

            possible fora, each with its own different substantive rules,

            procedural schematas,  and legal  cultures.  This  is fertile

            ground for manipulation and mischief, and acceptance of INX's

            arguments  would lead  to  the very  problems the  Convention

            sought  to   avoid.     Cf.   Elizabeth  Warren,   Bankruptcy
                                    ___                        __________

            Policymaking in  an Imperfect World,  92 Mich.  L. Rev.  336,
            ___________________________________

            348-49   (1993)  (Differences  among  legal  systems  provide

                                         -14-
                                          14

            incentives  for "nonproductive strategic behavior" as debtors

            attempt to take advantage  of opportunities presented in ways

            that  are wasteful  and  drive up  costs.).   "The  intention

            behind   such  [arbitration]  clauses,  and  the  reason  for

            judicial enforcement of  them, are not to  allow or encourage

            parties to proceed, either  simultaneously or sequentially in

            multiple forums."  Cabinetree, 50 F.3d at 390.  
                               __________

                      Neither  efficiency  nor  economy  are   served  by

            adopting  INX's arguments.  The  scenario here --  in which a

            party  knowingly opts out of the arbitration for which it has

            contracted (even  if driven by looming  insolvency8), sits on

            its  hands while  a default  judgment is  entered against  it

            after service, refuses to pay, requires an enforcement action

            be filed  against it,  and only  then cries  "arbitration" --

            undermines  both  the   certainty  and  predictability  which

            arbitration agreements  are meant to foster.   Cf. Mitsubishi
                                                           ___ __________

            Motors,  473  U.S.  at  631  (Courts  should  avoid  inviting
            ______

            "'unseemly  and mutually destructive jockeying by the parties

            to secure tactical litigation  advantages. . . .   [It would]

            damage the  fabric of  international commerce and  trade, and

            imperil the  willingness and ability of  businessmen to enter

                                
            ____________________

            8.  Ordinarily  in  a  dispute  between  on-going  commercial
            players  "reputational" costs serve to soften inclinations to
            obtain an advantage  in a single dispute.  But  where a party
            is  in financial distress,  these reputational  checks become
            far  less effective. Cf. Ronald J.  Gilson, Value Creation by
                                 ___                    _________________
            Business  Lawyers: Legal Skills and Asset Pricing, 94 Yale L.
            _________________________________________________
            J. 239, 289-90 (1984).

                                         -15-
                                          15

            into international commercial agreements.'") (quoting Scherk,
                                                                  ______

            417  U.S.  at 516-17);    see  also  Gilmore v.  Shearson/Am.
                                      ___  ____  _______     ____________

            Express  Inc., 811  F.2d  108, 112  (2d  Cir. 1987)  (parties
            _____________

            should  not  be  permitted  to  use  a  delayed  assertion of

            arbitration  as a "tactic in  a war of  attrition designed to

            make the  litigation too  expensive for  plaintiff"); Allied-
                                                                  _______

            Bruce Terminix Cos. v. Dobson, 115 S. Ct. 834, 841 (1995) (in
            ___________________    ______

            interpreting  the  Federal Arbitration  Act court  notes that

            Congress intended to help parties avoid costs and delay).

                      The order remanding this case to the Superior Court

            of Puerto  Rico  is also  appropriate,  under either  of  two

            alternative interpretations of the  Convention.  Section  205

            allows  removal if  the subject matter  of the  [state] court

            action "relates  to an  arbitration agreement  . .  . falling

            under the  Convention," and it  is arguable, though  far from

            certain, that an action to enforce a default judgment where a

            defense  is that the parties agreed to arbitrate is an action

            "relating  to an  arbitration  agreement."   If  the case  is

            viewed as being  properly removed  on the basis  of both  the

            plaintiff's enforcement action and the counterclaim, then the

            finding of  waiver ultimately  removed the basis  for federal

            jurisdiction.9

                                
            ____________________

            9.  Menorah   argues   that   this   court   lacks  appellate
            jurisdiction  because the district  court's remand  order was
            based on  a  determination  of  its lack  of  subject  matter
            jurisdiction over  the  removed case  and  that 28  U.S.C.   
            1447(d)  (1994) bars the review of such a determination.  See
                                                                      ___

                                         -16-
                                          16

                      If, on the other hand, the removal was based on the

            counterclaim alone,  the  pendent claim  could  be  remanded.

            Principles of pendent jurisdiction allowed the district court

            to exercise its discretion and relinquish jurisdiction over a

            removed  case where all the federal claims were gone and only

            pendent  exequatur claims remained.  See  28 U.S.C.   1367(c)
                                                 ___

            (1994); Carnegie-Mellon  Univ. v. Cohill, 484  U.S. 343, 348-
                    ______________________    ______

            52,  355 n.11 (1988); Rodriguez  v. Comas, 888  F.2d 899, 904
                                  _________     _____

            n.20 (1st  Cir.  1989).   Since  this case  had been  in  the

            Commonwealth's courts for  over a year  prior to its  removal

            and was on the  verge of resolution, the court's  exercise of

            discretion  to  remand  the pendent  claims  was particularly

            appropriate.

                      The district  court's order  remanding the  case to

            the  Superior Court  of  Puerto Rico,  so that  the exequatur

                                
            ____________________

            Things Remembered,  Inc. v. Petrarca, 64  U.S.L.W. 4035, 4036
            ________________________    ________
            (U.S. Dec. 5, 1995).       Menorah   also  argues   that  the
            district court  erred in granting removal  of the proceedings
            in  the first place.  Since Menorah easily wins an affirmance
            on  the substantive issue of waiver, we decline to decide the
            jurisdictional issues raised  by it.  See Norton  v. Mathews,
                                                  ___ ______     _______
            427  U.S.  524, 528-33  (1976)  (where merits  can  be easily
            resolved  in favor  of  the party  challenging  jurisdiction,
            resolution of complex jurisdictional inquiry may be avoided);
            Lambert v. Kysar, 983  F.2d 1110, 1118 n.11 (1st  Cir. 1993);
            _______    _____
            Rhode Island Hosp. Trust  Nat'l Bank v. Howard Communications
            ____________________________________    _____________________
            Corp., 980 F.2d 823, 829 (1st Cir. 1992).  INX in turn argues
            _____
            that there is no jurisdiction to hear Menorah's argument that
            the case was improperly removed to federal court.  Because we
            do  not  reach those  arguments,  we  need  not address  that
            jurisdictional issue either.

                                         -17-
                                          17

            action may proceed, is affirmed.  Double costs are awarded to
                                   ________   ___________________________

            Menorah.
            _______

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                                          18