Court Opinion

ID: 870448
Source: CourtListenerOpinion
Date Created: 2013-05-25 00:42:45.249803+00
Date Added: 2024-06-11T15:13:09.556498
License: Public Domain

United States Court of Appeals
                      For the First Circuit

No. 12-1032

                  BACARDÍ INTERNATIONAL LIMITED,

                      Petitioner, Appellant,

                                v.

                      V. SUÁREZ & CO., INC.,

                      Respondent, Appellee.

          APPEAL FROM THE UNITED STATES DISTRICT COURT
                 FOR THE DISTRICT OF PUERTO RICO

          [Hon. Gustavo A. Gelpí, U.S. District Judge]

                              Before

                       Lynch, Chief Judge,
               Lipez and Thompson, Circuit Judges.

     Ricardo F. Casellas, with whom Rosalie Irizarry-Silvestrini,
Natalia Morales, and Casellas Alcover & Burgos, P.S.C., were on
brief, for appellant.
     Francisco G. Bruno, with whom Manuel Moreda-Toledo, Omar
Oquendo-Claudio, Kevin M. Acevedo-Carlson, and McConnell Valdés LLC
were on brief, for appellee.

                           May 8, 2013
          LYNCH, Chief Judge. This federal case seeks confirmation

of an arbitration award made at the first, non-liability stage of

arbitration as to a contract, and was filed approximately one month

after the arbitral opponents had filed a petition in the Puerto

Rico Court of First Instance to vacate the same award.

          We have to answer two questions.    The first is whether

the federal district court had jurisdiction, despite its conclusion

that it did not.   The second is whether the federal court should

stay its hand where the Court of First Instance confirmed the award

on July 23, 2012, and that decision has been pending on appeal in

the Court of Appeals since August 22, 2012.        We answer both

questions affirmatively.

          As to jurisdiction, the court concluded that an absent

party, Bacardí Corporation ("BC"), was an indispensable party whose

joinder would destroy complete diversity.    On this question, we

address whether BC, a party to an arbitration, which became a

successor party to the disputed contract, but which is absent from

this federal case brought to confirm the arbitration panel's

limited award (that certain contract damages provisions are valid

and binding), is a required party under Fed. R. Civ. P. 19.   On the

facts presented, we conclude that the district court abused its

discretion; it engaged in an incomplete Rule 19(a) analysis, and

its conclusions under Rule 19 were wrong.       As a result, the

                               -2-
proceeding should not have been dismissed for lack of subject-

matter jurisdiction under Fed. R. Civ. P. 12(b)(1).

               Given the existence of a first-filed parallel case now on

appeal in the local Puerto Rico courts involving the same issues,

which includes BC and all of the parties to the arbitration, we

direct the district court to stay these proceedings while the

proceedings in the Commonwealth courts are resolved.

                                        I.

A.             Factual Background

               The underlying arbitration resulted from the non-renewal

of a sub-distribution agreement between V. Suárez & Co., Inc.

("VSC") and Bacardí Caribbean Corporation ("BCC").                    We review the

events leading to the sub-distribution agreement, and explain the

various corporate entities involved and their relationships to each

other.

               The petitioner, Bacardí International Limited ("BIL"), is

a    Bermuda     corporation    engaged      in    the     sale,   promotion,   and

distribution of Bacardí Rum products and other alcoholic beverages.

BIL holds the sole and exclusive rights and authority to exploit

and   use   commercially       the   trademarks      and    related    intellectual

property of the Bacardí brands.                   Its wholly-owned subsidiary,

Bacardí & Company Limited ("BACO"), a Liechtenstein corporation, is

the registered owner and holds legal title to the trademarks and

intellectual property.

                                        -3-
              On November 1, 1998, BIL entered into a distribution

agreement      with    BCC,1    which     granted      BCC     the   exclusive    right,

privilege, and responsibility to sell and promote the sale of the

products covered by the agreement in Puerto Rico.                         Even though

Bacardí was the top selling brand of rum in Puerto Rico in 2004,

the distribution arrangement had become unprofitable for BCC.

Around the year 2000, BCC stopped distributing certain other brands

of alcohol, which left it with too high a cost structure.                         If the

costs    of    delivery        could    be     shed,     BCC     would   improve      its

profitability, and so it contemplated alternative arrangements

whereby profits could be shared with a sub-distributor that would

absorb certain costs of distribution.                  Eventually, in August 2004,

BCC executed an agreement with VSC, a Puerto Rico corporation with

revenues of more than $600 million in 2004.                     VSC is one of Puerto

Rico's major corporations, which, at the time of the agreement,

distributed over 140 brands of products, had an inventory of over

1300 stock keeping units, and was known to use its leverage in

contract negotiations.           For VSC, adding Bacardí Rum to its line of

products      would    make    it   the   leading       distributor      of    distilled

products in Puerto Rico.

              The     sub-distribution        agreement        between   VSC    and   BCC

provided for VSC to have the exclusive right to sell and sub-

     1
       The original agreement was actually with Bacardí-Martini
Caribbean Corp., the predecessor of BCC.

                                             -4-
distribute the covered products in Puerto Rico.       BIL consented to

the agreement, as did BC, an entity we discuss later.               The

agreement included grounds to permit termination for "just cause,"

limitations on damages, and provisions for dispute resolution

requiring arbitration.

          Of   particular   relevance   are   the   damages   provisions

contained in sections 9.4 and 9.5 of the contract.      In section 9.4,

VSC agreed that "[u]pon expiration or termination of the Agreement

in accordance with the terms and conditions hereof," it "shall have

no rights or claims to compensation of any kind whatsoever" from

any Bacardí entity, including compensation for expenditures for

advertising, marketing, sales, or promotion activities, certain

capital investments, or for any goodwill VSC might establish.        VSC

also agreed, in section 9.5, that any damages it could recover

against BCC (of which BC became the successor) would be offset by

roughly $2.1 million on a per-year basis because the distribution

rights had a value and VSC had not paid for that value.

          About two years after the sub-distribution agreement was

executed between BCC and VSC, on April 1, 2006, BCC consummated a

merger with Castleton Holdings, Inc., the surviving corporation,

which then merged with BC, the surviving entity of that merger.      BC

is both a Delaware and a Puerto Rico corporation and is the

producer of Bacardí Rum and other alcoholic products in Puerto

Rico.   BC and BIL are both members of the Bacardí family of

                                 -5-
companies,       as   both    are    wholly-owned     subsidiaries        of    Bacardí

Limited.

             The dispute resulting in arbitration began on May 29,

2009, when the president and CEO of BC notified VSC by letter that

BC    (as   successor    to    BCC)    did   not    intend    to    renew      the   sub-

distribution agreement.             The letter stated that BC intended to use

the    alternative      dispute        resolution     mechanism      in     the      sub-

distribution agreement to resolve any disputes arising out of or

related to the non-renewal of the agreement.2

             On October 8, 2009, BIL, BC, and BCC filed a demand for

arbitration against VSC.             The Bacardí entities made two claims in

the    demand:    (1)   a    declaration     that    the     $2.1   million       offset

provision was valid and binding; and (2) in the alternative, that

the Bacardí entities had just cause to terminate or refuse to renew

the sub-distribution agreement. If the pertinent damages provision

were declared valid, VSC would not be entitled to any monetary

recovery because VSC's net profit from the prior fiscal year did

not exceed the offset amount, or so BC alleged.

       2
       The provision provides that the parties "shall first consult
and negotiate with each other, in good faith and recognizing their
mutual interests, and attempt to reach a prompt, just and equitable
solution to the Dispute that is satisfactory to both parties." If
direct negotiations do not resolve the dispute within thirty days
after one party provides written notification to the other of the
existence of a dispute, either party can exercise its right to have
the dispute resolved through arbitration.

                                          -6-
                  On November 3, 2009, VSC, accepting arbitration, filed a

response to the demand and its own counterclaim. VSC asserted that

certain damages            provisions     in    the    sub-distribution        agreement,

including the offset provision and other provisions that barred

compensation for certain expenses and investments, were null and

void because they violated Law 75, P.R. Law Ann. tit. 10, § 278 et

seq.       VSC also denied that BC had just cause not to renew or to

terminate the contract and asserted that it was entitled to receive

damages in excess of $30 million under Law 75.3

                  The    arbitration      panel      consisted    of       three   neutral

attorneys admitted to practice law in Puerto Rico.                           Rather than

deal       with    all    the    issues   before      it   in   one    proceeding,     the

arbitration         panel       bifurcated     the    proceedings     to    decide   first

whether the contested provisions of the contract were valid and

binding.          As a result, the panel would not pass on the just cause

defense, VSC's claims for damages, or the Bacardí entities' other

defenses until a later time, and then only if necessary.                           In other

words, at the first stage, liability was not at issue, only the

validity of certain clauses.                    It is the first portion of the

bifurcated proceedings that has led to the federal case now before

       3
       In response to VSC's response, BIL, BC, and BCC asserted
additional claims under Puerto Rico law for wrongful and/or
fraudulent misrepresentations and omissions, breach of the duty to
negotiate in good faith, and fraud.

                                             -7-
us.   The parties inform us that there has been no second stage of

the bifurcated proceedings to date.

           The panel issued a Final Partial Award (the "Award") on

the bifurcated issue on July 19, 2011.       In a seventy-two page

opinion, the panel found the contested provisions, including the

offset and the limitations on compensation for certain expenses and

investments, to be valid and enforceable.4   The majority wrote:

                  The parties thus agreed on an amicable,
           pre-established method to handle a post-
           termination scenario in case [VSC] decided to
           apply Law 75 against a supplier for the first
           time in its history as a distributor.     They
           settled not on a waiver of Law 75 damages, but
           on a on a [sic] way to calculate them with the
           statute specifically in mind. Theirs was an
           agreement between sophisticated parties, free
           (not forced) to do what was in their best
           business interest and fully aware (not misled)
           as to the advantages and consequences of what
           they were doing in pursuit of those business
           interests. All within an integrated agreement
           that allowed [VSC] to distribute products it
           did not distribute before and gain the benefit
           of the prior distributor's development of the
           market for 30 years or so without any up-front
           cost to [VSC].

The panel did not decide if the validity of those provisions meant

that VSC could not recover any monetary damages as the Bacardí

entities alleged, nor did it decide any other issues on liability.

      4
       One member of the three-member panel dissented and would
have found the provisions barring recovery for certain expenses and
investments, and the offset provision, to be null and void as
contrary to Law 75.

                                -8-
           Since then, the arbitration has not continued while the

parties have been waging pitched battles over the first stage of

the arbitration in both federal and Commonwealth courts.

B.         Procedural History

           Dissatisfied with the Award, VSC, on August 5, 2011,

initiated a special proceeding against BC, BCC, and BIL before the

Court of First Instance in Puerto Rico seeking to vacate the Award.

VSC argued that the Award should be vacated because: (1) the Award

was untimely under Puerto Rico law;5 (2) the Award was contrary to

law and public policy; and (3) the arbitrators were biased.6    VSC's

memorandum made no explicit federal claims.

           On September 1, 2011, BIL, BC, and BCC filed a notice of

removal in the federal district court in Puerto Rico.      The Bacardí

entities   asserted   that   diversity   subject-matter   jurisdiction

existed under 28 U.S.C. § 1332(a)(2), on the grounds that BIL was

the only real party-in-interest since the Award "validates certain

contractual provisions recognizing BIL's exclusive ownership rights

of the distribution value and goodwill generated from the sale of

BIL's Bacardí-owned brands in Puerto Rico."

     5
       Although the parties have briefed the merits of confirming
and vacating the Award on appeal, the timeliness issue was not
raised in their appellate briefs.
     6
       In the motion filed in the Court of First Instance, VSC
argued for vacatur under standards of review of arbitral awards
under Puerto Rico law.

                                  -9-
           The next day, BIL filed a separate action, this case, in

federal court, in its name only, moving to confirm the Award under

the Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq.                         The

removed    matter   and    BIL's    FAA     confirmation       proceeding      were

consolidated on September 20, 2011.

           On September 29, 2011, VSC sought to remand the removed

action. VSC also sought to dismiss BIL's federal action under Fed.

R. Civ. P. 12(b)(1).       The heart of VSC's argument was that BC, a

Puerto Rico corporation, was a required and indispensable party

under Fed. R. Civ. P. 19, and since it was non-diverse with VSC,

diversity jurisdiction was lacking in both matters.7

           On December 5, 2011, the district court issued an opinion

and   order   addressing     the     removal     of    VSC's     case   and     the

jurisdictional questions raised by BIL's case.                The district court

remanded   the   removed   VSC     case.8      The    court    held   that    VSC's

      7
       BIL and VSC also both provided memoranda of law to the
district court on the merits of the motions to confirm and vacate
the Award. The district court had denied a motion by VSC to stay
the   proceedings  until   the   court   made  a   jurisdictional
determination. In its memorandum opposing BIL's motion to confirm
the Award, VSC briefed the alleged grounds for vacatur under the
FAA for argument purposes, while claiming that Puerto Rico law
should apply.
      8
       The remand order of VSC's action to the Commonwealth courts
is not subject to appeal, 28 U.S.C. § 1447(d), and is not before
us.   VSC argues that the remand order precludes the issues BIL
raises on appeal because of issue preclusion. Not so. The remand
decision only determined that BC's interest in the litigation is
real, not whether BC is a required party under Rule 19, the issue
before us. See Faigin v. Kelly, 184 F.3d 67, 78 (1st Cir. 1999)
(under federal common law identity of issues required for issue

                                     -10-
inclusion of BC in the case removed from state court was proper

because BC's interest in the litigation was real.    BC was not just

a nominal party named to destroy jurisdiction.      The court had to

consider BC's citizenship in the jurisdictional analysis and that

divested the federal court of jurisdiction because BC and VSC are

both citizens of Puerto Rico.9

          The court dismissed BIL's federal case.       The district

court found that BC was an indispensable party under Fed. R. Civ.

P. 19(b), that BC's presence would destroy diversity, and that

VSC's Rule 12(b)(1) motion should be granted.10

          On December 9, 2011, BIL filed a timely appeal from the

court's order of dismissal.      Before arguments were heard in ths

matter, the Commonwealth Court of First Instance decided the

remanded case on July 23, 2012.    The Court of First Instance denied

preclusion); see also García-Monagas v. De Arellano, 674 F.3d 45,
54-55 (1st Cir. 2012) (same under Puerto Rico law).
     9
       The district court determined that BCC was not a proper
party because it was effectively dissolved on April 1, 2006 by its
merger into Castleton Holdings. Under Puerto Rico law, P.R. Law
Ann. tit. 14, § 3708, BCC remained open to suit only until April 1,
2009. So, BCC could not destroy complete diversity.
     10
        The court found that all four Rule 19(b) factors favored a
finding of indispensability, stating that: (1) BC's interests are
implicated in the confirmation proceeding and an adverse decision
would expose BC to significant financial loss; (2) it could think
of no measure to alleviate any prejudice to BC due to BC's absence;
(3) judicial resources would be conserved if the local court, which
had the remanded action, decided the issues; and (4) BIL had an
alternative adequate remedy by proceeding in the local Puerto Rico
court.

                                  -11-
VSC's request to vacate the Award and confirmed the Award.                It

ruled that: the FAA, not Puerto Rico law, provided the proper

standards of judicial review; the arbitration panel acted with

integrity and impartiality; manifest disregard of the law and

violation of public policy are not proper grounds for vacatur under

the FAA; and that even if they were valid grounds, the Award was

still valid and in accord with Law 75.

           On this appeal of the district court's dismissal of BIL's

federal   case,   BIL   makes   sweeping   arguments   that   Rule   19   is

inapplicable11 because it is preempted by the FAA, and also argues

     11
        More specifically, the parties engage in a lively debate
about whether there is federal jurisdiction over petitions to
review arbitral decisions regardless of whether a party which is
required and indispensable under Rule 19 is absent and that party's
presence would destroy diversity jurisdiction.
     BIL argues that Rule 19 does not apply to confirmation
proceedings because Fed. R. Civ. P. 81(a)(6)(B) states that the
Rules of Civil Procedure do not apply to arbitration-related
proceedings where the FAA provides other procedures.        Because
Section 9 of the FAA states that "any party to the arbitration may
apply to the court" for "an order confirming [an] award, and
thereupon the court must grant such an order," 9 U.S.C. § 9, BIL
argues the FAA negates the standards in Rule 19. BIL argues that
its reading would not expand federal court jurisdiction, because
Rule 19 is an equitable and not a jurisdictional rule. BIL also
argues that if Rule 19 is not preempted by the language of section
9 of the FAA, Rule 19 would effectively, and improperly, expand the
grounds for a court to refuse to confirm an award under section 10
of the FAA. BIL also makes a less developed argument that section
6 of the FAA, which states that any application under the FAA
"shall be made and heard in the manner provided by law for the
making and hearing of motions," id. § 6, preempts Rule 12 defenses,
including Fed. R. Civ. P. 12(b)(7) (failure to join an
indispensable party). We have no reason to reach these issues.

                                   -12-
that, in any event, the district court erred in its Rule 19

analysis.

            We agree with BIL's narrower argument that the district

court erred in its Rule 19 analysis.         As a result, we do not reach

BIL's arguments about whether the FAA preempts Rule 19, nor need we

discuss     the   relationship     between     diversity   subject-matter

jurisdiction and Rule 19.        See Picciotto v. Cont'l Cas. Co., 512

F.3d 9, 22 n.19 (1st Cir. 2008) (stating Rule 19 inquiry is

equitable, but conclusion that non-diverse party is indispensable

destroys diversity).

                                    II.

            We review a district court's conclusion regarding the

lack of subject-matter jurisdiction de novo, and its findings of

fact for clear error.   Valentin v. Hosp. Bella Vista, 254 F.3d 358,

365 (1st Cir. 2001). The court's Rule 19 determination is reviewed

for abuse of discretion.    Picciotto, 512 F.3d at 14-15.        An error

of law is an abuse of discretion.         Aronov v. Napolitano, 562 F.3d

84, 88 (1st Cir. 2009) (en banc).          An abuse also "occurs when a

court, in making a discretionary decision, relies upon an improper

factor, neglects a factor entitled to substantial weight, or

considers the correct mix of factors but makes a clear error of

judgment in weighing them." Matamoros v. Starbucks Corp., 699 F.3d

129, 138 (1st Cir. 2012).

                                   -13-
            Rule    19   addresses    situations   where     a   lawsuit    is

proceeding without a party whose interests are central to the suit.

Picciotto, 512 F.3d at 15.            The Rule provides for joinder of

required parties when feasible, Fed. R. Civ. P. 19(a), and for

dismissal of suits when joinder of a required party is not feasible

and that party is indispensable, Fed. R. Civ. P. 19(b).             The Rule

calls for courts to make pragmatic, practical judgments that are

heavily influenced by the facts of each case.           See Picciotto, 512

F.3d at 14-15; Travelers Indem. Co. v. Dingwell, 884 F.2d 629, 635

(1st Cir. 1989);; see also 7 C. Wright & A. Miller, Federal

Practice & Procedure § 1604 ("By its very nature Rule 19(a) calls

for determinations that are heavily influenced by the facts and

circumstances of individual cases . . . .").

            We start with the problem that the district court failed

to do a required party analysis, and if it did so without labeling

its analysis as such, it failed to articulate why BC is a required

party to this particular proceeding.         If the court was wrong on its

assumption that BC is a required party, then it was wrong to make

an indispensability determination under Rule 19(b).              Fed. R. Civ.

P. 19; Picciotto, 512 F.3d at 15-16; Pujol v. Shearson/Am. Express,

Inc., 877 F.2d 132, 134 (1st Cir. 1989).

            It was an abuse of discretion for the court not to

provide reasoned analysis on this required party point.             Further,

to   the   extent   reasoning   was    provided,   it   is   incomplete    and

                                      -14-
inadequate.     That alone would warrant reversal.           See, e.g., Bakia

v.   Los   Angeles   Cnty.,   687    F.2d    299,   301-02   (9th   Cir.   1982)

(vacating and remanding where district court offered insufficient

reasoning on Rule 19 analysis for appeals court to review).

            We see no point in remanding this issue.           The undisputed

record before us is adequate to decide it, and the policies of the

FAA encourage speedy and efficient resolution of judicial review of

arbitral awards.     Cf. Moses H. Cone Mem'l Hosp. v. Mercury Constr.

Corp., 460 U.S. 1, 29 (1983) (FAA calls for "speedy disposition" of

motions to enforce arbitration clauses); T.Co Metals, LLC v.

Dempsey Pipe & Supply, Inc., 592 F.3d 329, 342 (2d Cir. 2010)

(grounds for vacatur strictly limited to provide parties with

"efficient dispute resolution"); Positive Software Solutions, Inc.

v. New Century Mortg. Corp., 476 F.3d 278, 280 (5th Cir. 2007) (FAA

narrowly restricts judicial review "[t]o assure that arbitration

serves     as   an   efficient      and   cost-effective      alternative     to

litigation").

            It is clear to us that BC is not a required party under

Rule 19(a)(1) in the petition to confirm the first-stage arbitral

award.     We stress that this is not a question of whether BC would

have been a required party if the contract dispute were being

adjudicated in the district court and not in arbitration, nor is it

an issue of the parties who were proper in the arbitration.                  VSC

confuses the issues.     Ours is the different issue of whether BC is

                                      -15-
a required party in the petition to confirm given the limited

nature of the arbitration award in the bifurcated arbitration and

the very limited nature of judicial review.

          Questions under Rule 19(a) are fact-bound and driven by

the nature of the issues before the court.    We reject any notion

that the analysis required by Rule 19(a) may be displaced by a flat

rule that whoever is a party to an arbitration, no matter how

limited the award, is automatically a required party in a petition

to confirm an award.

          In a Rule 19 analysis, a court must first determine if an

absent party is a "required party"12 under Rule 19(a).   Picciotto,

512 F.3d at 16.    Rule 19(a) provides the standard, stating in

relevant part:

          (1) Required Party. A person who is subject
          to service of process and whose joinder will
          not deprive the court of subject-matter
          jurisdiction must be joined as a party if:
                 (A) in that person's absence, the court
          cannot accord complete relief among existing
          parties; or
                 (B) that person claims an interest
          relating to the subject of the action and is
          so situated that disposing of the action in
          the person's absence may:
                       (i) as a practical matter impair
          or impede the person's ability to protect the
          interest; or
                       (ii) leave an existing party
          subject to a substantial risk of incurring

     12
       The Rule used to refer to a required party as a "necessary
party." See Pujol v. Shearson/Am. Express, Inc., 877 F.3d 132, 134
(1st Cir. 1989). To be consistent with the term now used in the
Rule, we use the phrase "required party."

                               -16-
           double, multiple, or otherwise inconsistent
           obligations because of the interest.

Fed. R. Civ. P. 19(a)(1).

A.         Rule    19(a)(1)(A):    Whether    in    BC's    Absence,
           Complete Relief Cannot be Afforded Among Existing Parties

           Complete relief can be afforded among those already

parties in BC's absence under Rule 19(a)(1)(A). The district court

can easily confirm or vacate the Award with respect to BIL and VSC

without BC being a party to this petition.        See, e.g., Mastercard

Int'l Inc. v. Visa Int'l Serv. Ass'n, Inc., 471 F.2d 377, 385 (2d

Cir. 2006) (explaining that existing parties can resolve their

dispute and obtain complete relief as to each other without absent

party's presence although a dispute with absent party may be left

unresolved); Northrop Corp. v. McDonnell Douglas Corp., 705 F.2d

1030, 1043 (9th Cir. 1983) ("McDonnell does not directly contend

that the Government's absence would preclude the district court

from being   able   to   fashion    meaningful   relief   as   between   the

parties, and we discern no reason for so concluding." (emphasis

added)).   VSC argues that any relief would only be partial because

it would not apply to BC and a different result could be reached in

a local Puerto Rico court.         But, we view those concerns as more

relevant to the issues of prejudice and risk of inconsistent

obligations, which, as we detail later, are not practical concerns

on these facts.

                                    -17-
             VSC,     then,   must    turn       to    the    provisions        of    Rule

19(a)(1)(B) and its two subparts.

B.           Rule 19(a)(1)(B)(i): BC's                Ability   to        Protect    Its
             Interests Is Not Impaired

             This     subsection     is     concerned        with     protecting          the

interests of the absent party.              In the first place, BC does not

claim it has an interest which will be impaired.                          Rather, it is

BC's opponent, VSC, which makes the claim.                      Resolution of this

petition in BC's absence will not impair or impede BC's ability to

protect its interest.         Fed. R. Civ. P. 19(b)(1)(B)(i).

             In     this   confirmation      proceeding,        BIL       and   BC    have

virtually identical interests -- the confirmation of the bifurcated

award.13     In Pujol v. Shearson/Am. Express, Inc., 877 F.2d 132,

then-Judge Breyer held that a subsidiary was not a required party

under Rule 19(a) because the parent and subsidiary had "virtually

identical" interests because they would each wish to show the same

thing.     Id. at 135.     Here, BIL will argue that the Award should not

be vacated because there is no bias, manifest disregard of the law,

or violation of Puerto Rico's public policy.                  That is exactly what

BC would wish to show if it were present.

             We do not read Shearson, as the district court did, as

standing for the proposition that the absent party has to be a

wholly-owned      subsidiary    of    a    present      party       for    there     to   be

     13
        VSC has never claimed, including in its state                                court
petition, that the bifurcation order should be set aside.

                                          -18-
virtually identical interests in order to avoid the impairment of

an absent party's interests.          Moreover, Shearson makes clear that

an absent party's interests cannot be harmed or impaired if they

are identical to those of a present party.             Id. ("[W]e fail to see

how proceeding without [the absent party] would 'as a practical

matter impair or impede' the [absent party's] interests, interests

that    [the    present    party's]   counsel    can    adequately    protect."

(quoting Fed. R. Civ. P. 19(a)(1)(B)(i)).              We do not suggest that

the test requires "virtually identical" interests, only that such

is the situation here. There is no divergence in interests between

BC and BIL at this stage of the arbitration.

               As an example, the facts in this case differ sharply from

those in Picciotto where an attorney (Casher) was sued by former

clients for malpractice in state court, 512 F.3d at 13-14, and

those    same    clients   also    sued   insurance     companies,    including

Casher's    malpractice      insurer,     for   tortious   interference    with

contractual relations in federal court, id. at 14.             Casher's state

settlement position could have been impaired by an adverse judgment

in the federal case, and such an outcome also could have deprived

Casher of insurance coverage in the state case against her.               Id. at

17.     Plainly, neither the plaintiffs nor the insurance company

defendants,       in   defending      themselves    against    the     tortious

interference claims, represented Casher's interests.                 The shared

                                       -19-
interests of BIL and BC more closely resemble the situation in

Shearson.

            VSC argues that there is no virtual identity of interests

as BIL only has, at best, a "fleeting interest" in the confirmation

proceeding because BC is the successor to BCC and BCC negotiated

the contract.

            It   is   not   true   that   BIL   has   no    interest   in   the

confirmation proceeding. Section 9.4(d) of the contract, which was

one of the contested damages provisions, both affects BIL's rights,

and provides more than a fleeting interest.                The section states

"[VSC] shall have no rights or claims to compensation of any kind

whatsoever from any of the BCC Parties," and "BCC Parties" is

defined in the contract as "BCC and any of its affiliates, and/or

their respective directors, officers, employees, agents, or other

representatives."     BIL and BC are wholly-owned subsidiaries of the

same entity, and are affiliates.           Black's Law Dictionary 67 (9th

ed. 2009) (defining affiliate as "[a] corporation related to

another corporation by shareholdings or other means of control; a

subsidiary, parent, or sibling corporation" (emphasis added)).

Hence, BIL has an interest in the validity of that provision.

            In addition, BIL's actions throughout the confirmation

proceedings evidence a vigorous representation of BIL's interest in

confirmation of the Award, which it holds in common with BC.                In

the district court BIL provided substantial briefing in an effort

                                    -20-
to refute VSC's arguments for vacatur.             Similarly on appeal, BIL

has extensively briefed the merits of the confirmation request,

seeking complete confirmation of the Award.14            Where an existing

party has "vigorously addressed" the interests of absent parties,

we have no need to protect a possible required party from a threat

of serious injury.     See Nat'l Ass'n of Chain Stores v. New Eng.

Carpenters Health Benefits Fund, 582 F.3d 30, 43-44 (1st Cir.

2009).

            Further, BC has not taken any action to indicate that BIL

cannot adequately represent its interests at this stage.                  In

Picciotto, our circuit held an absent party was a required party

where the absent party opposed litigation of a federal case without

her.    512 F.3d at 16-17.   The absent party filed an affidavit with

the district court in that case.             Id.   BC could similarly have

filed an affidavit with the district court or provided some notice

that its interests would be impaired, but did not do so.

            Nevertheless, VSC argues that BC has to be a party to the

confirmation proceeding because BC's predecessor selected VSC as

the sub-distributor, drafted the letter of intent, negotiated the

contract, executed the contract, and terminated the contract. That

argument is unavailing.      To the extent VSC is arguing BC, through

its    predecessor,   must   be   a   party    because   it   somehow   acted

       14
       The district court did not address the merits, nor do we
here. But the record shows BIL's vigorous efforts to confirm the
Award.

                                      -21-
improperly, this court rejected that notion in Shearson.               There,

the court stated, "[t]he mere fact, however, that Party A, in a

suit against Party B, intends to introduce evidence that will

indicate that a non-party, C, behaved improperly does not, by

itself, make C a necessary party."        877 F.2d at 136.

          VSC falls back to Rule 19(a)(1)(B)(ii), arguing that it

is at risk of facing inconsistent obligations unless BC is joined.

C.        Rule 19(a)(1)(B)(ii): Risk of Inconsistent Obligations

          Disposition of this petition in BC's absence will not

leave BIL or VSC subject to a substantial risk of double, multiple,

or otherwise inconsistent obligations because of BC's absence.

Fed. R. Civ. P. 19(a)(1)(B)(ii).

          Misinterpreting "inconsistent obligations," VSC argues

that it faces a substantial risk of incurring conflicting judgments

because of the earlier-filed petition in Commonwealth court.                VSC

ignores the distinction this circuit has drawn in the Rule 19

context   between    inconsistent     obligations        and    inconsistent

adjudications or results.   In Delgado v. Plaza Las Americas, Inc.,

139 F.3d 1 (1st Cir. 1998) (per curiam), this court explained that

"'[i]nconsistent    obligations'    are    not   .   .    .    the   same   as

inconsistent adjudications or results," because "[i]nconsistent

obligations occur when a party is unable to comply with one court's

order without breaching another court's order concerning the same

incident."   Id. at 3.   In contrast, inconsistent adjudications or

                                   -22-
results occur when a party wins on a claim in one forum and loses

on another claim from the same incident in another forum. Id.; see

Am. Ins. Co. v. St. Jude Med., Inc., 597 F. Supp. 2d 973, 978 (D.

Minn. 2009).   The risk of inconsistent adjudications results from

the fact that there are two proceedings, not from BC not being a

party in the federal case.

          Even if the federal proceeding and the Commonwealth

proceeding produced different results, VSC would not be subject to

different obligations because of BC's absence from this case.   The

confirmation of an arbitration award finalizes the award and makes

the award a judgment of the court.     6 J. Bourdeau & E. Mayer,

C.J.S. Arbitration § 178; see Irving R. Boody & Co. v. Win Holdings

Int'l, Inc., 213 F. Supp. 2d 378, 380 (S.D.N.Y. 2002) ("The

confirmation of an arbitration award converts the final arbitration

award into the judgment of the court.").15

          Even so, the risk that there would be inconsistent

results is low because of the deferential manner in which the FAA

requires arbitral awards to be reviewed.16       "[R]eview of the

     15
        The parties do not present arguments concerning the
preclusive effect that the first proceeding to reach judgment would
have on the other proceeding.
     16
       Although it appears as if VSC may have argued unsuccessfully
to the Commonwealth court that the FAA does not apply under the
terms of the contract, it has not advanced any such argument in its
briefing before this court even though BIL advances a number of
arguments that depend on the FAA's applicability. We assume the
FAA would apply, and also note that our own case law requires that
to use local arbitration rules instead of the FAA, the contract

                               -23-
arbitration award itself is 'extremely narrow and exceedingly

deferential.'"        Bangor Gas Co., LLC v. H.Q. Energy Servs. (U.S.),

Inc., 695 F.3d 181, 186 (1st Cir. 2012)(quoting Bull HN Info. Sys.,

Inc. v. Hutson, 229 F.3d 321, 330 (1st Cir. 2000)).

             The     Rule   19     inquiry    may    require        "some   preliminary

assessment      of    the   merits     of    certain       claims."         Republic    of

Philippines v. Pimentel, 553 U.S. 851, 869 (2008); see Picciotto,

512 F.3d at 14-15 (stating Rule 19 "requires the trial court to

make pragmatic judgments and to 'decide whether considerations of

efficiency      and     fairness,       growing         out    of     the    particular

circumstances of the case, require that a particular person be

joined as a party'" (footnote omitted) (quoting Shearson, 877 F.2d

at 134)); 7 C. Wright & A. Miller, Federal Practice & Procedure

§    1608   ("[C]ourts      must    look     to   the    practical      likelihood      of

prejudice . . . .").         Taking into account that consideration, the

risk of inconsistency may be theoretically possible, but is not a

practical concern.

             VSC's real argument is that at the second stage of the

arbitration BC will be needed to give VSC monetary relief, if any

is   ordered.        That   may or     may    not    be,      but that      argument    is

premature.         There    is   and   has    been      no    second    stage    to    the

arbitration, nor any petition to review such a second stage.

must say so unequivocally. See, e.g., PaineWebber Inc. v. Elahi,
87 F.3d 589, 593-94 (1st Cir. 1996).

                                           -24-
Review of this stage of the arbitration does not require that BC be

a party.   There is diversity jurisdiction.

                                 III.

           Having found dismissal for want of jurisdiction to be in

error, we would ordinarily reverse the district court's dismissal

and remand for further proceedings. However, in this unusual case,

we remand and order the court to stay further proceedings pending

the outcome of the Commonwealth court proceedings. Considerations,

including those of wise and sound judicial administration and

comity, persuade us that a stay is warranted until the parallel

case in the Commonwealth courts is concluded. See Cruz v. Melecio,

204 F.3d 14, 22 (1st Cir. 2000).   Although neither party raised the

possibility of deferring the exercise of federal jurisdiction, we

may do so sua sponte.    Rivera-Feliciano v. Acevedo-Vilá, 438 F.3d

50, 59 (1st Cir. 2006); see Jiménez v. Rodríguez-Pagán, 597 F.3d

18, 27 n.4 (1st Cir. 2010); Cruz, 204 F.3d at 22 n.7.

           Parallel litigation is not uncommon in our federal system

and "[i]t has long been established that the presence of parallel

litigation in state court will not in and of itself merit [a stay]

in federal court."     Jiménez, 597 F.3d at 27 (citing McClellan v.

Carland, 217 U.S. 268, 282 (1910)).        However, federal courts

appropriately consider "a complex of considerations designed to

soften the tensions inherent in a system that contemplates parallel

judicial processes."    Pennzoil Co. v. Texaco, Inc., 481 U.S. 1, 11

                                 -25-
n.9 (1987).   In some circumstances, the doctrine of comity, which

is designed to avoid "unseemly conflict between two sovereignties,"

warrants a stay.     Cruz, 204 F.3d at 23 (quoting Glen Oaks Utils.,

Inc. v. City of Houston, 280 F.3d 330, 334 (5th Cir. 1960))

(internal quotation marks omitted); see Quackenbush v. Allstate

Ins. Co., 517 U.S. 706, 733 (1996) (Kennedy, J., concurring)

(stating that "obligations of comity" are "an important part of the

justification and authority" to defer the exercise of federal

jurisdiction).     In other circumstances, "considerations of 'wise

judicial administration'" may warrant a stay as well.             Cruz, 204

F.3d at 23 (quoting Colo. River Water Conservation Dist. v. United

States, 424 U.S. 800, 818 (1976)).         Here there is more than simple

parallel litigation.       Rather, the two considerations of comity and

wise   judicial   administration     together    counsel   a    stay.      The

Commonwealth proceeding involves the same legal issues as the

federal one, includes all parties to the arbitration, has already

been decided by the initial reviewing court, and is now on appeal.

In addition, the Commonwealth proceeding was filed first, this

federal proceeding was filed about a month later, and we have some

concern that BIL has engaged in forum-shopping.

           Whether    or    not   this   case   fits   within   the     formal

strictures of Colorado River or other formal categories of staying

                                    -26-
the exercise of federal jurisdiction,17 a stay is appropriate.        See

Cruz, 204 F.3d at 23 (stay appropriate even where case "arguably

does not fit into any of the established doctrinal boxes"); see

also Pennzoil, 481 U.S. at 12 n.9 (explaining that doctrines of

withholding the exercise of federal jurisdiction "are not rigid

pigeonholes into which federal courts must try to fit cases").          A

line of cases in our circuit involving parallel state and federal

actions, which includes Currie v. Group Insurance Commission, 290

F.3d 1 (1st Cir. 2002), Rivera-Feliciano v. Acevedo-Vilá, 438 F.3d

50, and Jiménez v. Rodríguez-Pagán, 597 F.3d 18, support the result

we reach.

            In Jiménez, this court recognized that when non-diverse

parties are absent from the federal litigation, but are part of the

advanced state litigation, as BC is in this case, the desirability

of   avoiding   piecemeal   litigation   favors   staying   the   federal

      17
        The stay here would most comfortably fit into the Colorado
River doctrine, where the Supreme Court held that when state and
federal    courts    are   exercising    concurrent    jurisdiction
contemporaneously it may be appropriate in some instances for the
federal court to defer to the state court. See Colo. River Water
Conservation Dist. v. United States, 424 U.S. 800, 817 (1976);
Currie v. Grp. Ins. Comm'n, 290 F.3d 1, 9 (1st Cir. 2002). We have
previously found at least eight non-exhaustive factors that are
considered under that doctrine: (1) whether any court has
jurisdiction over a res; (2) the geographical inconvenience of the
federal forum; (3) the desirability of avoiding piecemeal
litigation; (4) the order in which the forums obtained
jurisdiction; (5) whether federal or state law controls; (6) the
adequacy of the state forum to protect the parties' interests; (7)
the vexatious nature of the federal claim; and (8) respect for the
principles underlying removal jurisdiction. Jiménez v. Rodríguez-
Pagán, 597 F.3d 18, 27-28 (1st Cir. 2010); Currie, 290 F.3d at 10.

                                 -27-
proceeding. 597 F.3d at 29-30; see also Rivera-Feliciano, 438 F.3d

at 62 (better to avoid piecemeal litigation and allow Puerto Rico

courts to decide controlling issues of Puerto Rico law). There, we

stated that "[t]his disparity in inclusiveness thus creates a

greater practical risk of piecemeal litigation than the baseline

inefficiencies of the average exercise of concurrent federal-state

jurisdiction," because the state court action could comprehensively

adjudicate the claims.   Jiménez, 597 F.3d at 30.   In this matter,

the claims before both courts are the same and arise from the exact

same arbitration.   In the Puerto Rico matter, BC is a party and in

the federal case it is not.       As in Jiménez, the state court

proceeding can completely dispose of the matter.    In Jiménez, we

favored a stay where the federal case "foundered on jurisdictional

questions" and the Commonwealth action was "already well into the

discovery stage."   Id. at 31.

          "Here the doctrine of sound judicial administration" that

underlies decisions to defer to state courts "has even more force

because the state proceeding is already on appeal on a fully

developed record."18     Currie, 290 F.3d at 11 n.8; cf. In re

President & Fellows of Harvard Coll., 149 F.2d 69, 72-73 (1st Cir.

     18
        We were informed at oral argument that technically VSC has
only petitioned the appeals court for review because there is no
appeal as of right from the lower court confirmation of the Award.
For simplicity, and because the distinction makes no difference in
this case, we have referred to the appellate proceedings as an
appeal.

                                 -28-
1945) (holding stay improper absent a state court judgment, but

suggesting that an opposite decision would result if a state court

judgment had been rendered and was pending on appeal in the state

system).      Indeed, the Seventh Circuit has also held that in some

instances it is appropriate to stay a federal proceeding pending

the outcome of the appeal in a parallel state court proceeding.

See Hearne v. Bd. of Educ., 185 F.3d 770, 778 (7th Cir. 1999)

(finding   a    stay    appropriate    where    fired     teacher      appealed   an

administrative decision to terminate the teacher to a state appeals

court and also filed a federal action); Rogers v. Desiderio, 58

F.3d   299,    302   (7th    Cir.   1995).      In   a   case   involving      claim

splitting,     the   Seventh    Circuit      decided     that   when    plaintiffs'

earlier-filed state court action was already on appeal, "[i]t is

sensible to stay [federal] proceedings until [the state case] has

reached a conclusion" on appeal, and that under these circumstances

a federal judge "need not barge ahead on the off-chance of beating

the state court to a conclusion."             Rogers, 58 F.3d at 302; accord

Glen Oaks, 280 F.2d at 334 (reasoning that doctrine of comity

required a stay and stating that "[s]ince an appeal was pending

from the state court judgment . . . it was proper that the

proceedings     in     the   federal   court    be   stayed     until    the   final

termination of the proceedings in the state court," and that "it

would have been error if the district court had not stayed its

hand").

                                       -29-
              Another consideration, discouragement of forum-shopping,

also favors a stay.       In Cruz v. Melecio, 204 F.3d 14, we stated

that   we    could   consider   "the    discomforting   specter    of   forum-

shopping" in the "decisional calculus" to enter a stay order.             Id.

at 24.      For obvious reasons, that is a concern here.

              At oral argument BIL argued that a stay should not be

granted because the Puerto Rico courts are not adequate: they are

slow and BIL may not receive a prompt decision in VSC's appeal from

the order entered in BIL's favor.         BIL also asserted that there is

a risk that the Puerto Rico courts will incorrectly apply Puerto

Rico law, rather than the FAA, in reviewing the Award, which,

according to BIL, offers less deferential review than the FAA.

              In other contexts this circuit has rejected the notion

that Puerto Rico courts offer an inadequate forum.                 See Coors

Brewing Co. v. Méndez-Torres, 678 F.3d 15, 28-30 (1st Cir. 2012);

see generally Pleasures of San Patricio, Inc. v. Méndez-Torres, 596

F.3d 1 (1st Cir. 2010).

              As to the risk that the Puerto Rico courts would apply

what BIL argues is the incorrect substantive law, the Court of

First Instance in fact found the FAA to govern, which is BIL's

position, so we do not see what the prejudice is.                 Further, if

Puerto Rico's Supreme Court were to find the FAA inapplicable, BIL

could seek further review in the U.S. Supreme Court.                See Coors

                                       -30-
Brewing, 678 F.3d at 29-30.     Additionally, concern that a party

will lose its case does not demonstrate the inadequacy of a forum.

Id. at 29 (party "could not demonstrate the inadequacy of the

Puerto Rico courts merely by predicting that they would lose their

case" (citing San Patricio, 596 F.3d at 9)).

           In situations involving parallel state court litigation

where deferring the exercise of jurisdiction is proper, this

circuit has historically ordered a stay rather than a dismissal.

Jiménez, 597 F.3d at 32.     Accordingly, we instruct the district

court to stay these proceedings pending final disposition of the

appellate process in the Puerto Rico courts.

                                  IV.

           Given our resolution of this appeal, we need not address

a number of arguments raised on appeal, including whether Rule 19

is preempted by the FAA, whether the district court engaged in

"constructive" abstention through Rule 19, or whether the Award

should be confirmed or vacated.

           The district court's order dismissing the case under Fed.

R. Civ. P. 12(b)(1) is reversed and the case is remanded.       The

district court shall proceed in a manner consistent with this

opinion.   So ordered.   No costs are awarded.

                                -31-