Court Opinion

ID: 807361
Source: CourtListenerOpinion
Date Created: 2012-08-24 14:59:02+00
Date Added: 2024-06-11T18:00:24.564229
License: Public Domain

11-1705-cv
     Zeevi Holdings Ltd. v. Republic of Bulgaria

                          UNITED STATES COURT OF APPEALS
                              FOR THE SECOND CIRCUIT

                                  SUMMARY ORDER

     RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION
     TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED
     AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND
     THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A
     DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE
     FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION
     “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY
     OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

 1         At a stated term of the United States Court of Appeals for the
 2   Second Circuit, held at the Daniel Patrick Moynihan United States
 3   Courthouse, 500 Pearl Street, in the City of New York, on the
 4   24th day of August, two thousand twelve.
 5
 6   PRESENT:   JON O. NEWMAN,
 7              RALPH K. WINTER,
 8              REENA RAGGI,
 9                        Circuit Judges.
10
11   ------------------------------------------------------------
12   ZEEVI HOLDINGS LTD.,
13                        Plaintiff-Appellant,
14
15                   v.                              No. 11-1705-cv
16
17   REPUBLIC OF BULGARIA,
18                       Defendant-Appellee.
19   ------------------------------------------------------------
20
21   APPEARING FOR APPELLANT:         FRANCIS HOLOZUBIEC (Melody Wells, on
22                                    the brief), Kirkland & Ellis LLP,
23                                    New York, N.Y.
24
25   APPEARING FOR APPELLEE:          ABBY COHEN SMUTNY (Anne D. Smith,
26                                    Jonathan C. Ulrich, on the brief),
27                                    White & Case LLP, Washington, D.C.

                                        1
 1        Appeal from a judgment of the United States District Court

 2   for the Southern District of New York (Richard J. Sullivan,

 3   Judge).

 4        UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND

 5   DECREED that the judgment entered on March 30, 2011, is AFFIRMED.

 6        Plaintiff Zeevi Holdings Ltd. (“Zeevi”), an Israeli

 7   corporation, appeals from the dismissal of its petition to

 8   confirm an international arbitration award against defendant

 9   Republic of Bulgaria (“Bulgaria”) due to improper venue.   We

10   assume the parties’ familiarity with the facts and the record of

11   prior proceedings, which we reference only as necessary to

12   explain our decision.

13   1.   Interpretation and Enforcement of Agreement

14        Zeevi argues that the district court erred in construing the

15   arbitral agreement’s forum selection clause to identify Bulgarian

16   courts as the exclusive forum for confirmation of arbitration

17   awards against Bulgaria.   See Zeevi Holdings Ltd. v. Republic of

18   Bulgaria, No. 09 Civ. 8856 (RJS), 2011 WL 1345155, at *4–9

19   (S.D.N.Y. Apr. 5, 2011).   On de novo review,1 see S.K.I. Beer

20   Corp. v. Baltika Brewery, 612 F.3d 705, 708 (2d Cir. 2010), we

21   disagree.

          1
1          In contrast, we review a district court’s decision whether to
2    abstain from decision due to the pendency or availability of
3    litigation in a foreign forum only for abuse of discretion. See
4    J.P. Morgan Chase Bank v. Altos Hornos de Mex., S.A. de C.V., 412
5 F.3d 418, 422 (2d Cir. 2005); Diorinou v. Mezitis, 237 F.3d 133,
6    139 (2d Cir. 2001).

                                      2
 1        Insofar as Zeevi contends that the district court

 2   “abandon[ed] its ‘strictly limited’ role and utilize[d] a highly

 3   expansive reading of a disputed contractual provision as a basis

 4   to deny confirmation,” Appellant’s Br. at 25, we are not

 5   persuaded.   Though Article V of the Convention on the Recognition

 6   and Enforcement of Foreign Arbitral Awards, June 10 1958, 21

 7   U.S.T. 2517, 330 U.N.T.S. 38 [hereinafter New York Convention],

 8   explicitly lists five grounds under which a court may refuse to

 9   recognize or enforce an international arbitration agreement on

10   the merits, see 9 U.S.C. § 207 (2006), confirmation proceedings

11   “are subject to the rules of procedure that are applied in the

12   courts where enforcement is sought,” In re Arbitration Between

13   Monegasque de Reassurances S.A.M. v. Nak Naftogaz of U.K.R., 311

14 F.3d 488, 495 (2d Cir. 2002) (affirming dismissal of confirmation

15   petition based on forum non conveniens), and “[t]he enforcement

16   of a forum selection clause through a Rule 12(b) motion to

17   dismiss is a well-established practice,” TradeComet.com LLC v.

18   Google, Inc., 647 F.3d 472, 475 (2d Cir. 2011).    In following

19   this practice, the district court did not impose conditions

20   substantially more onerous than those that would be imposed in a

21   proceeding to confirm a domestic arbitral award.   See Monegasque

22   de Reassurances S.A.M., 311 F.3d at 495.

23        “Determining whether to dismiss a claim based on a forum

24   selection clause involves a four-part analysis,” Phillips v.

                                      3
 1   Audio Active, Ltd., 494 F.3d 378, 383 (2d Cir. 2007), only the

 2   third and fourth parts of which are in dispute here.   The third

 3   part asks whether the claims and parties are subject to the forum

 4   selection clause, a question of contract interpretation.     See id.

 5   at 383, 386.   Here, the agreement has two forum selection

 6   clauses, the first of which requires the parties to arbitrate

 7   disputes in Paris, as was done here; and the second of which

 8   provides that “[t]he execution of an award against the Seller

 9   [i.e., the Privatization Agency of the Republic of Bulgaria] may

10   be conducted only in Bulgaria in accordance with the provisions

11   of Bulgarian law.”   J.A. 996–97.

12        In urging that this action does not fall within the latter

13   forum selection clause, Zeevi maintains that it is seeking only

14   the recognition of the award, and that the word “recognition” is

15   customarily used to describe proceedings to convert an arbitral

16   award into a domestic court judgment, whereas the terms

17   “execution” and “enforcement” are customarily used to refer to

18   later proceedings to collect on such a judgment.   See Inter-

19   American Convention on International Commercial Arbitration art.

20   V, Jan. 30, 1975, 14 I.L.M. 336 (implemented at 9 U.S.C. § 301-

21   07) (discussing “recognition and execution” of awards); New York

22   Convention art. V, § 2, June 10, 1958, 21 U.S.T. 2517, 330

23   U.N.T.S. 38 (discussing “recognition and enforcement” of awards).

                                         4
 1        Much of the present dispute arises from the facts that the

 2   parties stipulated that the English-language version of the

 3   arbitral agreement would control, J.A. 1051, and the English word

 4   “execution” does not necessarily cover confirmation of an award.

 5   The district court reasoned that because “the parties provided

 6   explicit procedures for arbitration and ‘execution’ of an award,

 7   it is . . . implausible that the parties specifically

 8   contemplated, but then remained silent on, an intermediate”

 9   recognition or confirmation step that could properly occur

10   outside Bulgaria.   Zeevi Holdings Ltd. v. Republic of Bulgaria,

11   2011 WL 1345155, at *5.   It concluded, therefore, that the

12   agreement is properly construed to provide for arbitration of all

13   disputes in Paris, and for all proceedings on an award (whether

14   seeking judicial recognition or enforcement) in Bulgarian courts.

15        While this inference from structure is arguable, it suffers

16   from implicitly acknowledging that confirmation and execution are

17   English words that generally distinguish between different

18   proceedings.   However, while the English language version of the

19   contract governs, the arbitral agreement is to be “governed by

20   and construed in accordance with the laws of Bulgaria.”

21   J.A.1050.   The parties agreed at oral argument that, under

22   Bulgarian law, a foreign arbitral award cannot be executed upon

23   in Bulgaria until it has been confirmed by a Bulgarian court.

24   While confirmation and execution are separate proceedings under

                                      5
 1   Bulgarian law, execution in Bulgaria must be preceded by

 2   confirmation in Bulgaria.    By requiring execution only in

 3   Bulgaria, the parties necessarily also required confirmation in

 4   Bulgaria, and the district court’s view that the parties would

 5   not have left the forum for recognition - confirmation –

 6   unspecified is sustainable.

 7          Zeevi also does not show that the district court erred, at

 8   part four of the Phillips analysis, in finding that Zeevi failed

 9   to rebut the presumption that the forum selection clause is

10   enforceable.    See Phillips v. Audio Active, Ltd., 494 F.3d at

11   383.     A party may avoid enforcement of a forum selection clause

12   only where (1) the clause is the result of fraud or overreaching,

13   (2) the complaining party will for all practical purposes be

14   deprived of a day in court due to the grave inconvenience or

15   unfairness of the selected forum, (3) the fundamental unfairness

16   of the chosen law may deprive the plaintiff of a remedy, or (4)

17   the clause contravenes a strong public policy of the forum state.

18   See Roby v. Corp. of Lloyd’s, 996 F.2d 1353, 1363 (2d Cir. 1993).

19          Insofar as Zeevi relies on (2), we identify no error in the

20   district court’s conclusion that Zeevi failed to make the

21   required “strong showing,” Phillips v. Audio Active Ltd., 494

22   F.3d at 384, that the grave inconvenience or unfairness of the

23   selected forum would cause Zeevi to be deprived of its day in

24   court.    Even assuming that Zeevi’s employees and agents were

                                        6
 1   subjected to harassment by Bulgarian government officials,

 2   nothing in the record suggests that the courts of Bulgaria are

 3   gravely inconvenient or unfair.       See Roby v. Corp. of Lloyd’s,

 4   996 F.2d at 1363.   Weidner Commc’ns, Inc. v. H.R.H. Prince Bandar

 5   al Faisal, 859 F.2d 1302 (7th Cir. 1988), and Harris Corp. v.

 6   National Iranian Radio and Television, 691 F.2d 1344 (11th Cir.

 7   1982), are inapposite, as neither involved the

 8   inconvenience/unfairness exception.      Indeed, Harris Corp. did not

 9   even involve a forum selection clause.

10        Nor do we identify any error in the district court’s

11   determination that Zeevi failed to make a strong showing that

12   Bulgarian law is so fundamentally unfair that Zeevi may be

13   deprived of a remedy.   As the district court observed, Bulgaria’s

14   expert cited numerous cases in which that nation’s courts issued

15   judgments against state entities and recognized foreign arbitral

16   awards against the government.    See Zeevi Holdings Ltd. v.

17   Republic of Bulgaria, 2011 WL 1345155, at *7.      Insofar as Zeevi

18   contends that Bulgarian law is unfair because it provides no

19   legal mechanism to force the government to actually pay a

20   judgment obtained against it, the argument is irrelevant to this

21   proceeding.   The only remedy sought here by Zeevi is recognition

22   or confirmation of the arbitration award, as opposed to execution

23   or enforcement of a court judgment, which the parties agree may

24   only occur in the Bulgarian courts.

                                       7
 1   2.   Deference as a Matter of Comity

 2        Zeevi also contends that the district court erred in

 3   refusing to defer, as a matter of comity, to an Israeli court’s

 4   decision declining to construe a forum selection clause to

 5   require that confirmation proceedings be brought in Bulgarian

 6   courts.   While a domestic court may give preclusive effect to a

 7   foreign court’s adjudication of a particular issue as a matter of

 8   comity, it is not obliged to do so.      See Paramedics

 9   Electromedicina Comercial, Ltda v. GE Med. Sys. Info. Techs.,

10   Inc., 369 F.3d 645, 654 (2d Cir. 2004); Diorinou v. Mezitis, 237

11 F.3d 133, 139–40 (2d Cir. 2001).       Although comity, even when used

12   in this sense, is not mandatory, we have held that a district

13   court’s decision whether to defer to a foreign tribunal’s prior

14   adjudication of an issue is a mixed question of law and fact,

15   which we review de novo, mindful that American courts normally

16   accord considerable deference to foreign adjudications.      See

17   Diorinou, 237 F.3d at 140, 142.

18        Under ordinary preclusion principles, issue preclusion

19   applies only where (1) the identical issue was raised in the

20   prior proceeding; (2) the issue was actually litigated and

21   decided; (3) the party against whom preclusion is urged had a

22   full and fair opportunity to litigate the issue; and (4)

23   resolution of the issue was necessary to support a valid and

24   final judgment on the merits.   See In re Teligent, Inc., 640 F.3d
8
 1   53, 61 (2d Cir. 2011)(emphasis added).   “[I]ssues are not

 2   identical when the legal standards governing their resolution are

 3   significantly different.”   Computer Assocs. Int’l, Inc. v. Altai,

 4   Inc., 126 F.3d 365, 371 (2d Cir. 1997); see generally 18 Charles

 5   Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal

 6   Practice and Procedure: Jurisdiction § 4417, at 448–65 (2d ed.

 7   2002).

 8        This last point is critical here because the Israeli court’s

 9   construction of the forum selection clause was informed by a

10   contract interpretation principle of Israeli law that a

11   “stipulation that impairs the extent of the authority of the

12   court . . . must be interpreted narrowly.”   J.A. 1678; see also

13   id. at 1679–80 (“When we are to choose between two ways of

14   interpretation, one that preserves the authority of the court and

15   the other which revokes it, the tendency is to lean toward that

16   which preserves the authority of the court.”).2   Here, however,

17   the parties agree that Bulgarian contract law, rather than

18   Israeli contract law, properly governs the interpretation of the

19   forum selection clause, and Zeevi points to no similar principle

20   of contract interpretation followed by Bulgarian courts.     In

21   light of this significant difference in the applicable law, see

          2
 1          Although Zeevi faults Bulgaria for failing to argue before
 2   the Israeli court that it should apply Bulgarian contract law, the
 3   record is clear that Bulgaria did argue repeatedly before the
 4   Israeli court that Bulgarian contract law should have governed that
 5   court’s interpretation of the forum selection clause.

                                      9
1    Computer Assocs., 126 F.3d at 371, we conclude that the issue

2    decided by the Israeli court was different from the issue

3    presented in this case and, thus, that the district court

4    properly declined to defer to the Israeli court’s construction of

 5   the forum selection clause.3

 6   3.   Conclusion

 7        We have considered Zeevi’s remaining arguments and conclude

 8   that they are without merit.   Accordingly, the district court’s

 9   judgment is AFFIRMED.

10                            FOR THE COURT:
11                            CATHERINE O’HAGAN WOLFE,
12                            Clerk of Court
13
14
15

          3
 1         In light of this conclusion, we need not reach Bulgaria’s
 2   argument that comity and preclusion principles do not apply to
 3   international arbitration award confirmation proceedings.

                                     10