Ancile Investment Company Limited v. Archer Daniels Midland Company
Filing
140
OPINION & ORDER # 103906 re: 124 MOTION for Attorney Fees filed by Archer Daniels Midland Company: For the foregoing reasons, ADM's motion for attorney's fees is DENIED. (Signed by Judge Kimba M. Wood on 1/16/2014) (tn) Modified on 1/28/2014 (ca).
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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ANCILE INVESTMENT COMPANY
:
LIMITED,
:
Plaintiff,
:
:
-against:
:
ARCHER DANIELS MIDLAND
:
COMPANY,
:
Defendant.
:
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WOOD, U.S.D.J.:
08 Civ. 9492 (KMW) (FM)
Opinion & Order
Plaintiff Ancile Investment Company (“Ancile”) filed the above-captioned action on
November 5, 2008, against Defendant Archer Daniels Midland Company (“ADM”), seeking
damages for alleged violations of Brazilian and state law. [Dkt. No. 1]. After granting ADM’s
motion to dismiss Ancile’s state law claims, [Dkt. No. 79], this Court granted ADM’s motion to
dismiss Ancile’s sole remaining claim—alleging a violation of the extra-contractual duty of good
faith under Brazilian law—on November 29, 2012. [Dkt. No. 121]. ADM now seeks to recover
attorney’s fees that it incurred while successfully defending against Ancile’s Brazilian law claim.
[Dkt. No. 124].
For the reasons set forth below, ADM’s motion for attorney’s fees is DENIED.
I.
DISCUSSION1
ADM seeks to recover $433,193 of attorney’s fees pursuant to Federal Rule of Civil
Procedure 54(d)(2) and Brazilian Code of Civil Procedure Article 20. Ancile opposes any
award, and argues that (A) ADM’s eligibility for attorney’s fees is governed by New York law,
1
The Court assumes familiarity with the procedural history and factual background of this case, which is more fully
reviewed in the Court’s prior opinions. See Ancile Inv. Co. Ltd. v. Archer Daniels Midland Co., 08 Civ. 9492, 2012
WL 6098729 (S.D.N.Y. Nov. 30, 2012) (Wood, J.); Ancile Inv. Co. Ltd. v. Archer Daniels Midland Co., 784 F.
Supp. 2d 296 (S.D.N.Y. 2011) (Wood, J.); Ancile Inv. Co. Ltd. v. Archer Daniels Midland Co., 08 Civ. 9492, 2009
WL 3049604 (S.D.N.Y. Sept. 23, 2009) (Crotty, J.).
1
not Brazilian law; and (B) even if Brazilian law applies, ADM has failed to demonstrate that it is
entitled to fees. The Court finds (A) that New York law applies to ADM’s fee motion and ADM
is thus not entitled to fees; and, alternatively, (B) that even if Brazilian law applies to ADM’s
claims, ADM has failed to demonstrate that it is entitled to fees.
A. Choice of Laws
To determine whether Brazilian or New York law governs ADM’s fee motion, the Court
must consider two “conceptually distinct” issues. Liberty Synergistics Inc. v. Microflo Ltd., 718
F.3d 138, 151 (2d Cir. 2013). “First, a federal court exercising diversity jurisdiction must apply
the choice-of-law rules of the state in which the court sits to determine the rules of decision that
would apply if the suit were brought in state court.” Id. “Second, after using state conflict-oflaws principles to ascertain the rules of decision that would apply in the state courts of the
federal forum, federal courts apply those state rules of decision that are ‘substantive’ under [Erie
R. Co. v. Tompkins, 304 U.S. 64 (1938)], and are consistent with federal law.” Liberty
Synergistics, 718 F.3d at 151–52 (quoting Sun Oil Co. v. Wortman, 486 U.S. 717, 726–27
(1988)).
Accordingly, in order to adjudicate ADM’s fee motion, the Court must first apply New
York’s choice-of-law rules to determine which rule of decision—New York attorney’s fee law or
Brazilian attorney’s fee law—would apply to the suit if it were brought in state court. The Court
must then determine whether this rule of decision is “substantive” under Erie. If the rule of
decision is substantive under Erie, the Court must apply it in this case. For the reasons set out
below, the Court finds that (1) New York law governs ADM’s fee motion; and (2) the Court
must apply New York law because it is substantive under Erie. Alternatively, even if Brazilian
law applies, the Court finds that ADM has failed to establish that it is entitled to fees.
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1. Choice of Law Analysis
Courts in New York generally follow the “American Rule,” which considers attorney’s
fees to be the “ordinary incidents of litigation” and, therefore, unrecoverable “unless authorized
by agreement between the parties, statute, or court rule.” Oscar Gruss & Son, Inc. v. Hollander,
337 F.3d 186, 199 (2d Cir. 2003). According to ADM, in Brazil the prevailing party is
automatically awarded its reasonable attorney’s fees. (See Def.’s Mem. of Law in Supp. 3 [Dkt.
No. 126]; see also Yu Decl. Ex. A, at ¶¶ 55, 56 (“Coelho Report”) [Dkt. No. 125-1]). Given this
conflict, the Court must apply New York’s choice of law rules to determine which law should
apply.
In New York courts, “procedural questions are always governed by the law of the
forum.” Hausman v. Buckley, 299 F.2d 696, 700 (2d Cir. 1962); see also RLS Assocs., LLC v.
United Bank of Kuwait PLC, 464 F. Supp. 2d 206, 214 (S.D.N.Y. 2006) (Haight, J.) (“Under
common law rules matters of procedure are governed by the law of the forum . . . .” (internal
quotation marks omitted)). “New York courts classify legal rules as ‘substantive’ when they
relate closely to an underlying right and ‘procedural’ when they deal with the remedy by which
that right is enforced.” Mack Fin. Servs. v. Poczatek, 10 Civ. 3799, 2011 WL 4628695, at *6
(E.D.N.Y. Aug. 30, 2011). “New York courts also take into account policy considerations that
underlie the substance-procedure distinction. These policy concerns relate to: (1) judicial
efficiency, (2) forum-shopping, (3) fairness to the parties, and (4) New York public policy.” RLS
Assocs., 464 F. Supp. 2d at 219.
Decisions in this circuit are in conflict regarding whether attorney fee shifting should
generally be classified as substantive or procedural under New York law. There are no New
York state cases directly on point. Compare Bensen v. Am. Ultramar Ltd., 92 Civ. 4420, 1997
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WL 317343, at *13 (S.D.N.Y. June 12, 1997) (Buchwald, Mag. J.) (“[W]e think it clear that New
York law concerning the availability of attorney’s fees should be considered procedural.”), and
Mack Fin. Servs., 2011 WL 4628695, at *6 (“State laws governing the computation of attorney’s
fees in a contract action have generally been held to be procedural.”), with Tyco Int’l Ltd. v.
Walsh, 751 F. Supp. 2d 606, 627 (S.D.N.Y. 2010) (Cote, J.) (“New York choice-of-law analysis
would treat the Bermuda attorneys’ fees rule as substantive, rather than procedural . . . .”),
reversed on other grounds by 455 F. App’x 55 (2d Cir. 2012), and RLS Assocs., 464 F. Supp. 2d
at 220 (finding English rule for awarding attorney’s fees to be substantive under New York
choice of law principles).
The Court agrees with Ancile that a New York court would consider the issue of fee
shifting in this case to be procedural, rather than substantive. First, the cases finding this issue to
be substantive applied the English rule, which is analogous to the American rule in that it is a
“general rule that applies to all claims” and “operates as part of the general framework for how
litigation is conducted.” Tyco Int’l, 751 F. Supp. 2d at 627; RLS Assocs., 464 F. Supp. 2d at 218.
By contrast, the Brazilian fee shifting provision is located in a discrete section of the Brazilian
code, separate from the statutory provision giving rise to Ancile’s underlying Brazilian claim.
(Pl.’s Mem. of Law in Opp. 4 [Dkt No. 129]); cf. Conte v. Flota Mercante Del Estado, 277 F.2d
664, 672 (2d Cir. 1960) (considering such factors with respect to the Argentine code). Although
both the American and English rules are a “fundamental component of the state’s procedural
law,” ADM has presented no evidence to show that fee shifting occupies the same place in the
general framework of Brazilian law. Bensen, 1997 WL 317343, at *15.
Second, policy considerations relating to predictability, fairness, and efficient judicial
administration compel the Court to find that a New York court would consider attorney fee
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shifting procedural in this case. Although ADM prevailed on its Brazilian law claim, Ancile
stated claims under both Brazilian and New York state law, and brought the action in New York
court. The parties also actively litigated choice of law issues. See Ancile, 2011 WL 3516128, at
*1, *2–6 (“At an earlier stage of the litigation, defendant . . . argued vigorously that this case
was controlled by Brazilian law. Plaintiff . . . argued equally vigorously that . . . Illinois law (or
other U.S. law) should apply to this case. Now, on a motion by Defendant to determine the body
of law that should apply to the one remaining claim in the case, the parties each contend the
exact opposite of what they previously argued.”). Given this uncertainty over the applicable
substantive law, and given that New York is the forum state, the parties could not reasonably
have anticipated that Brazilian law would apply to attorney fee shifting.
Third, decisions holding fee shifting rules to be substantive typically involve contract
disputes in which the parties expressly agreed to an English choice of law provision, which
provided the parties with notice that any litigation over contract claims would be subject to the
English rule. See, e.g., RLS Assocs., 464 F. Supp. 2d at 217 (“[B]oth [parties] assumed, well into
the litigation, that the English rule on attorneys’ fees would apply.”); Katz v. Berisford Int’l PLC,
96 Civ. 8695, 2000 WL 959721, at *9 (S.D.N.Y. July 10, 2000) (Koeltl, J.) (noting that
application of the English rule was “wholly . . . consistent with the parties’ justified
expectations” (internal quotation marks omitted)). In this case, the parties had no expectation
that the Brazilian rule on attorney fee shifting would apply; indeed, there is no contract between
Ancile and ADM. Given that applying Brazilian law would undermine the parties’ “justified
expectations,” the Court finds a New York court would consider fee shifting to be procedural and
thus applies New York law to ADM’s request for attorney’s fees.
2. Erie Analysis
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An analysis under Erie results in the same conclusion. Because entitlement to fee
shifting is viewed as substantive under Erie (as opposed to procedural under New York law) and
New York’s law on this issue does not conflict with federal law, this Court must follow New
York state law regarding entitlement to attorney’s fees.2 The Court thus applies the American
rule to ADM’s motion for attorney’s fees; under that rule, ADM is not entitled to recover fees.
B. ADM’s Eligibility for Fees Under Brazilian Law
Even assuming, arguendo, that Brazilian law applies, ADM has failed to demonstrate that
it is entitled to attorney’s fees under Brazilian law. “In determining foreign law, the court may
consider any relevant material or source, including testimony, whether or not submitted by a
party or admissible under the Federal Rules of Evidence.” Fed. R. Civ. P. 44.1. Although the
Court may consider expert testimony, it need not accept the expert’s opinions, and the ultimate
determination of foreign law rests with the Court. See Rationis Enters. Inc. of Panama v.
Hyundai Mipo Dockyard Co., Ltd., 426 F.3d 580, 586 (2d Cir. 2005); see also British Int’l Ins.
Co. Ltd. v. Seguros La Republica, S.A., 90 Civ. 2370, 2000 WL 713057, at *7 (S.D.N.Y. June 2,
2000) (Maas, Mag. J.) (finding expert testimony, unsupported by any case law, insufficient
evidence from which to accept either parties’ understanding of the law).
Courts will dismiss claims resting on the application of foreign law where the party
advancing the claim fails to provide authority for their interpretation of the law. See Eli Lilly Do
2
“Whether a particular state rule of decision is ‘substantive’ under Erie is a question of federal law . . . .” Liberty
Synergistics, 718 F.3d at 152. Indeed, to determine whether a rule of decision is substantive or procedural for Erie
purposes, “it is ‘immaterial’ whether that state rule of decision is labelled [sic] by state law as ‘procedural,’
‘substantive,’ both, or neither.” Id. (quoting Guaranty Trust Co. v. York, 326 U.S. 99, 109 (1945)). Thus “a state’s
‘procedural’ rules under its own choice-of-law principles can be ‘substantive’ for purposes of federal diversity
jurisdiction.” Id. The Court finds that attorney’s fees are considered substantive under Erie. See Alyeska Pipeline
Serv. Co. v. Wilderness Soc’y, 421 U.S. 240, 259 n.31 (1975) (“[I]n an ordinary diversity case where the state law
does not run counter to a valid federal statute or rule of court, and usually it will not, state law denying the right to
attorney’s fees or giving a right thereto, which reflects a substantial policy of the state, should be followed.”
(internal quotation marks omitted)); see also RLS Assocs., 464 F. Supp. 2d at 213 (“[A]ttorneys’ fees are considered
substantive under the Erie doctrine, and should be analyzed under state law in diversity cases.”). Federal courts
follow the forum state’s choice of law on such substantive questions. Liberty Synergistics, 718 F.3d at 151–52.
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Brasil, Ltda. v. Fed. Express Corp., 502 F.3d 78, 84 (2d Cir. 2007) (refusing to apply Brazilian
law where the party relying on Brazilian law provided “no real support in the record” for its
contentions); see also Esso Standard Oil S.A. v. S.S. Gasbras Sul, 387 F.2d 573, 581 (2d Cir.
1967) (denying petition for rehearing after finding plaintiff failed to carry its burden to prove
strict liability existed under Guatemalan law); Batruk v. Mitsubishi Motors Corp., 94 Civ. 7593,
8677, 1998 WL 307383, at *3 (S.D.N.Y. June 19, 1998) (Wood, J.) (refusing to apply Haitian
law without a more complete presentation by counsel); Fed. R. Civ. P. 44.1 Advisory
Committee’s Note (“[T]he court is free to insist on a complete presentation by counsel.”). The
Court finds that ADM has failed to carry its burden of showing that it is entitled to attorney’s
fees under Brazilian law.
ADM relies on testimony from Ancile’s expert on Brazilian law, Fabio Ulhoa Coelho.
Mr. Coelho stated that, in Brazil, “the defeated party in a lawsuit must bear the costs and
expenses and the attorneys’ fees of the party who actually won the lawsuit.” (Coelho Report ¶
55). Coelho failed to explain, however, how a Brazilian judge would calculate the amount of
fees to which a given party was entitled. (Def.’s Mem. of Law in Supp. 3–4). Moreover, ADM
failed to provide an adequate translation of the relevant law. In fact, the only translation
proffered by ADM to the Court was a hyperlink to an online version of the Brazilian Code of
Civil Procedure—in Portuguese—coupled with the suggestion that the Court use an online
translation service to translate the Code into English. (Def.’s Mem. of Law in Supp. 4 n.2).3
3
Following ADM’s suggested procedure led to confusing, although amusing, results. For example, the translation
of Article 20 § 2 of the Code states that costs shall include “compensation for witness travel and remuneration of the
assistant coach, daily,” and the translation of Article 32 states that “[i]f the assisted getting beaten, the wizard will
pay the costs in proportion to the activity that has exercised in the process.” World Intellectual Prop. Org., Brazil
Law No. 5.869 of January 11, 1973 (Code of Civil Procedure),
http://www.wipo.int/wipolex/en/text.jsp?file_id=226720 (last visited Jan, 8, 2014). ADM argues that “the text of
the statute speaks for itself.” (Reply Mem. of Law of Def. in Further Supp. 6 [Dkt. No. 131]).
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Although these submissions suggest that Brazilian law does award fees to the prevailing
party, ADM has failed to make a complete presentation on how these fees should be calculated.
In a claim where there is no monetary judgment, as in the instant claim, Brazilian courts use their
discretion in calculating attorney’s fees. See Alexandre Alcino de Barros & Silvia Julio Bueno
de Miranda, Cost and Fee Allocation in Civil Procedure, “Chapter 5: Major Shifting: The
Brazilian Way,” 11 IUS Gentium 89, 92 (2012). Coelho stated that the recoverable attorney’s
fees can range between 10% and 20% over the amount of the judgment depending on the
lawyer’s care and diligence, the place where legal service was rendered, the nature and
importance of the suit, the time spent by the attorney, and the services rendered. (Coelho Report
¶ 56). ADM argues that the American “lodestar” method of calculating attorney’s fees would be
a reasonable method to apply under Brazilian law. (Def.’s Mem. of Law in Supp. 4–6).
However, ADM offers no Brazilian authority to justify application of the American “lodestar”
method or any other method of calculating the award of attorney’s fees in this case. Moreover,
the proffered translation of the statute is insufficient to establish the proper measure of attorney’s
fees under Brazilian law. Thus, ADM has failed to show that their proposal for using the
“lodestar” method is valid under Brazilian law.
II.
CONCLUSION
For the foregoing reasons, ADM’s motion for attorney’s fees is DENIED.
SO ORDERED.
Dated: New York, New York
January 16, 2014
/s/____________________________
Kimba M. Wood
United States District Judge
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