Travelport Global Distribution Systems B.V. v. Bellview Airlines Limited
Filing
17
OPINION AND ORDER: Travelport's May 2, 2012 petition to compel arbitration and for injunctive relief is granted. (Signed by Judge Denise L. Cote on 9/10/2012) (ago)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
----------------------------------------X
:
TRAVELPORT GLOBAL DISTRIBUTION SYSTEMS :
B.V.,
:
Petitioner,
:
:
-v:
:
BELLVIEW AIRLINES LIMITED
:
Respondent.
:
:
----------------------------------------X
12 Civ. 3483 (DLC)
OPINION & ORDER
APPEARANCES
For petitioner Travelport Global Distribution Systems B.V.:
Diane Westwood Wilson
405 Lexington Avenue
New York, NY 10006
For respondent Bellview Airlines Limited:
Bartholomew J. Banino
Condon & Forsyth LLP
Times Square Tower
7 Times Square, 18th Floor
New York, NY 10036
DENISE COTE, District Judge:
Travelport Global Distribution Systems B.V. (“Travelport”)
seeks an order compelling Bellview Airlines Limited (“Bellview”)
to arbitrate pursuant the terms of the parties’ written
Distribution Agreement.
is granted.
For the following reasons, its petition
BACKGROUND
The following facts are undisputed unless otherwise noted.
Travelport is a foreign business corporation organized and
existing under the laws of the Netherlands.
Nigeria corporation.
Bellview is a
On March 21, 1997, Travelport (then known
as Galileo International Partnership) entered into a
Distribution Agreement with Bellview, pursuant to which Bellview
was to distribute in Nigeria a computerized travel reservation
system owned by Travelport.
The Distribution Agreement
contained the following provision (the “Arbitration Provision”):
19.
GOVERNING LAW; JURISDICTION AND ARBITRATION
19.1 This Agreement and all disputes arising under or
in connection with this Agreement, including
actions in tort, shall be governed by the laws of
the State of New York, United States of America.
19.2 Any dispute or controversy, or claim arising out
of or related to this agreement, or the breach,
termination or invalidity thereof, may be
submitted to arbitration in the United States in
accordance with the UNCITRAL Arbitration rules in
force at the date of reference. The Appointing
Authority shall be the United States Council of
Arbitration and such appointment will be in
accordance with its “Procedures for Arbitration.”
On October 3, 2011, Travelport advised Bellview by letter
that it would terminate the Distribution Agreement due to
Bellview’s alleged material breach of multiple obligations
unless Bellview cured its breach within 30 days.
By letter
dated October 5, Bellview denied that it was in breach of the
2
agreement and requested that Travelport withdraw its notice of
termination.
Travelport responded by letter dated October 31
declining to withdraw the notice of termination.
By letter
dated November 1, Bellview stated as follows:
Obviously a dispute has arisen with respect to the
agreement and we think it is in the best interest of
both parties to submit to arbitration in the spirit of
clause 19.2 of the agreement.
Travelport terminated the Distribution Agreement by letter dated
November 3.
On November 10, Bellview initiated an action (the “Nigeria
Action”) in the Federal High Court in the Federal Republic of
Nigeria (the “Nigeria High Court”) by filing a summons.
The
summons sought a declaration that a dispute had arisen between
the parties and that Bellview was entitled to refer the dispute
to arbitration, and an order for injunctive relief.
On November
14, the Nigeria High Court issued a restraining order enjoining
Travelport from terminating the Distribution Agreement and from
appointing another entity to distribute its computerized travel
reservation system in Nigeria.
On November 24, Travelport filed
two applications to the Nigeria High Court to discharge the
restraining order.
Both applications were denied.
Travelport
submitted a response to Bellview’s November 10 summons by
affidavit dated December 16.
Travelport’s response agreed that
3
the dispute should be submitted to arbitration but contested the
other relief requested.
Travelport served a notice of arbitration on Bellview on
January 26, 2012 seeking damages, costs, and a declaration that
Travelport lawfully terminated the Distribution Agreement.
By
letter dated February 24, Bellview stated its intention to
continue pursuing the Nigeria Action because it had concluded
that the arbitral body specified in the Distribution Agreement,
the United States Council of Arbitration, is a “non-existent
body” and the Arbitration Provision was therefore “incapable of
being performed.”
On March 7, Bellview initiated contempt proceedings against
Travelport’s directors and officers for alleged violations of
the November 14 restraining order.
Also on March 7, the Nigeria
High Court issued an order notifying these directors and
officers that disobedience of its orders would result in them
being found in contempt of court.
On March 15, Bellview filed a motion before the Nigeria
High Court requesting leave to amend its November 10 summons in
order to allow the Nigeria High Court to adjudicate the
underlying dispute directly instead of referring it to
arbitration.
The motion alleges that the Arbitration Provision
cannot be performed and “is not mandatory.”
On April 26, 2012,
Bellview filed a second summons before the Nigeria High Court
4
for damages and declaratory and injunctive relief, requesting
that the Nigeria High Court resolve the underlying dispute
directly.
Traveport filed its petition in this Court to compel
arbitration and for injunctive relied on May 2, 2012.
The
petition was fully submitted on June 1.
DISCUSSION
Travelport seeks, inter alia, an order compelling
arbitration and for an anti-suit injunction as to the Nigeria
Action.
The petition to compel arbitration is granted pursuant
to the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1 et seq.,
and the plain language of the Distribution Agreement.
An anti-
suit injunction is granted pursuant to the five so-called “China
Trade factors,” enunciated in China Trade & Dev. Corp. v. M.V.
Choong Yong, 837 F.2d 33, 35 (2d Cir. 1987), that are to be
considered when determining whether a foreign action should be
enjoined.
I.
These two issues shall be addressed in turn.
Petition to Compel Arbitration
A.
Standard of Review
As a preliminary matter, the Distribution Agreement falls
within the Convention on the Recognition and Enforcement of
Foreign Arbitral Awards, 21 U.S.T. 2517, 330 U.N.T.S. 38 (Dec.
29, 1970), reprinted at 9 U.S.C. § 201 (“New York Convention” or
5
“Convention”).
Chapter 2 of the Federal Arbitration Act
(“FAA”), 9 U.S.C. §§ 201–208, governs non-domestic arbitral
agreements and codifies the New York Convention.
See
Smith/Enron Cogeneration Ltd. P'ship, Inc. v. Smith Cogeneration
Int'l, Inc., 198 F.3d 88, 93 (2d Cir. 1999).
Pursuant to 9
U.S.C. § 202, an agreement falls within the Convention when it
“involv[es] parties domiciled or having their principal place of
business outside” the United States.
Yusuf Ahmed Alghanim &
Sons v. Toys "R" Us, Inc., 126 F.3d 15, 19 (2d Cir. 1997)
(citation omitted).
Here, both parties fulfill this
requirement: Travelport is organized and exists under the laws
of the Netherlands and Bellview is a Nigerian corporation.
Subject matter jurisdiction therefore exists in this case, and
the Court has authority to compel arbitration.1
See 9 U.S.C. §§
203, 206.
The FAA is “an expression of a strong federal policy
favoring arbitration as an alternative means of dispute
resolution.”
Ragone v. Atl. Video at Manhattan Ctr., 595 F.3d
115, 121 (2d Cir. 2010) (citation omitted).
1
“[W]hether parties
The FAA does not “independently confer subject matter
jurisdiction on the federal courts.” Durant, Nichols, Houston,
Hodgson & Cortese–Costa, P.C. v. Dupont, 565 F.3d 56, 63 (2d
Cir. 2009) (citation omitted). “Thus, there must be an
independent basis of jurisdiction before a district court may
entertain petitions under the Act.” Id. (citation omitted). 9
U.S.C. § 203 provides subject matter jurisdiction for any
“action or proceeding falling under the Convention.” 9 U.S.C.A.
§ 203.
6
have agreed to submit a particular dispute to arbitration is
typically an issue for judicial determination.”
Granite Rock
Co. v. Int'l B'hood of Teamsters, 130 S.Ct. 2847, 2855 (2010)
(citation omitted).
The FAA provides that an arbitration clause
in a contract “shall be valid, irrevocable, and enforceable,
save upon such grounds as exist at law or in equity for the
revocation of any contract.”
9 U.S.C. § 2; Stolt-Nielsen S.A.
v. AnimalFeeds Int'l Corp., 130 S. Ct. 1758, 1773 (2010).
Under
§ 4 of the FAA, “a party to an arbitration agreement may
petition a United States district court for an order directing
that ‘arbitration proceed in the manner provided for in such
agreement.’” Id. (quoting 9 U.S.C. § 4).
It is well established that “arbitration is a matter of
contract and a party cannot be required to submit to arbitration
any dispute which he has not agreed so to submit.”
AT & T
Techs., Inc. v. Comm. Workers of Am., 475 U.S. 643, 648 (1986)
(citation omitted).
“When deciding whether the parties agreed
to arbitrate a certain matter (including arbitrability), courts
generally . . . should apply ordinary state-law principles that
govern the formation of contracts.”
First Options of Chicago,
Inc. v. Kaplan, 514 U.S. 938, 944 (1995).
In the context of
motions to compel arbitration brought under the FAA, 9 U.S.C. §
4, unless the parties have unambiguously provided for an
arbitrator to decide questions of arbitrability, it is for
7
courts to decide whether the parties agreed to arbitrate the
claims at issue.
Telenor Mobile Commc'ns AS v. Storm LLC, 584
F.3d 396, 406 (2d Cir. 2009).
In making this determination, the
Court must consider: (1) whether the parties agreed to
arbitrate; (2) the scope of that agreement; (3) if federal
statutory claims are asserted, whether Congress intended those
claims to be nonarbitrable; and (4) if some, but not all, of the
claims in the case are arbitrable, whether to stay the balance
of the proceedings pending arbitration.
JLM Indus., Inc. v.
Stolt-Nielsen SA, 387 F.3d 163, 169 (2d Cir. 2004).
Here, as
the only issues that Travelport wishes to submit to arbitration
concern Bellview’s alleged breach of contract and Travelport’s
right to terminate, the third and fourth issues are not
relevant.
Furthermore, the respondent does not dispute that, if
there was an agreement to arbitrate, this dispute would fall
within the scope of that agreement.
Therefore, only the first
issue, whether the parties agreed to arbitrate, must be
considered.
B.
The Arbitration Clause
The parties do not dispute that the Distribution Agreement
constitutes a valid and enforceable contract; they dispute only
whether the Arbitration Provision triggers “mandatory” or
8
“permissive” arbitration.2
In determining this issue, it is
necessary to look first, of course, to the plain language of the
agreement.
The Distribution Agreement states that disputes and
claims arising out of or relating to the agreement “may be
submitted to arbitration in the United States.”
supplied.)
(Emphasis
This language mandates arbitration in the instant
case for two reasons: first, the respondent fails to distinguish
the Arbitration Provision from similar provisions in other
agreements that courts have consistently determined to be
mandatory, and, second, absent such an interpretation the
Arbitration Provision would be superfluous.
The overwhelming balance of authority in this circuit and
elsewhere indicates that, absent some separate suggestion that
an Arbitration Provision is intended to trigger permissive
arbitration, provisions with the word “may” trigger mandatory
arbitration.
See, e.g., Allis-Chalmers Corp. v. Lueck, 471 U.S.
202, 204 n.1 (1985) (“The use of the permissive ‘may’ is not
sufficient to overcome the presumption that parties are not free
to avoid the contract's arbitration procedures.”); Local 771,
I.A.T.S.E., AFL-CIO v. RKO Gen., Inc. WOR Div., 546 F.2d 1107,
1115-16 (2d Cir. 1977) (holding that agreement stating “the
parties may submit to arbitration” triggers mandatory
2
“Mandatory” arbitration requires arbitration if either of the
parties elects to pursue it; “permissive” arbitration requires
arbitration only with the consent of both parties.
9
arbitration and that “[n]either the word ‘may’ nor any other
language used in the Agreement implies that the parties had the
option of invoking some remedy other than arbitration”)
(emphasis supplied).
The respondent acknowledges the “many cases” in the Second
Circuit that have construed arbitration clauses with the word
“may” as mandatory clauses.
Indeed, it offers no explanation as
to why the parties might have chosen to include the Arbitration
Provision in the first place if it is not mandatory.
“An
interpretation of a contract that has the effect of rendering at
least one clause superfluous or meaningless is not preferred and
will be avoided if possible.”
LaSalle Bank Nat. Ass'n v. Nomura
Asset Capital Corp., 424 F.3d 195, 206 (2d Cir. 2005) (citation
omitted).
After all, parties can always submit a dispute to
arbitration if both consent.
Bellview makes two brief arguments in support of a
permissive reading of the Arbitration Provision.
First, it
mistakenly relies on Chiarella v. Vetta Sports, Inc., 94 Civ.
5933 (PKL), 1994 WL 557114 (S.D.N.Y. Oct. 7, 1994).
The court
in Chiarella determined that language similar to that at issue
here required arbitration if the provision was invoked by either
party; arbitration was therefore mandatory upon plaintiff’s
bringing of a petition to compel arbitration.
See id. at *3.
This is exactly the same situation as in the case at hand, and
10
Travelport’s petition to compel arbitration is granted for the
same reason.
Bellview also attempts to introduce extrinsic evidence
suggesting that the parties intended arbitration to be
permissive.
According to the head of Bellview’s legal
department Andrew Orji (“Orji”), Travelport assured Bellview
during negotiations that the Distribution Agreement would
contain a “non-exclusive arbitration clause.”
Orji further
alleges that Bellview was “a relatively new company and did not
have legal counsel” at that time.
The language of the contract
is unambiguous, however, and recourse to extrinsic evidence is
therefore not necessary.
See, e.g., Seabury Const. Corp. v.
Jeffrey Chain Corp., 289 F.3d 63, 68 (2d Cir. 2002) (“Where the
contract is unambiguous, courts must effectuate its plain
language.”).
Regardless, there is no suggestion that the
declarant has any direct knowledge of the facts alleged.
In
fact, the declarant states that he is the head of Bellview’s
legal department, but concedes that Bellview had no lawyer at
the time of the events about which he testifies.
C.
Imperfect Naming of Arbitral Authority
In its February 24, 2012 letter to Travelport, Bellview
alleged that the Distribution Agreement’s Arbitration Provision
could not be performed because the “United States Council for
Arbitration,” the “Appointing Authority” named in the provision,
11
is a “non-existent body.”
Bellview does not pursue this
argument in its brief in opposition to this petition; regardless
it is without merit.
The parties clearly expressed their
intention to resolve this dispute through arbitration in the
Distribution Agreement.
This was the parties’ primary
intention; the agreement as to the particular forum was
secondary.
body.
The Court may therefore designate a proper arbitral
See, e.g., In Matter of Petition of HZI Research Ctr. v.
Sun Instruments Japan Co., Inc., 94 Civ. 2146 (CSH), 1995 WL
562181, at *3 (S.D.N.Y. Sept. 20, 1995) (collecting cites).
In this case, the UNCITRAL Arbitration Rules referenced in
the agreement itself provide a method for constituting an
arbitral tribunal in the absence of a prior agreement by the
parties.
See UNCITRAL Arbitration Rules (as revised in 2010),
Arts. 7.1, 9.1.3
The Distribution Agreement is construed so as
to mandate composition of an arbitral panel in accordance with
these rules.
3
Article 7.1 states, “If the parties have not previously agreed
on the number of arbitrators, and if within 30 days after the
receipt by the respondent of the notice of arbitration the
parties have not agreed that there shall be only one arbitrator,
three arbitrators shall be appointed.” And Article 9.1 states,
“If three arbitrators are to be appointed, each party shall
appoint one arbitrator. The two arbitrators thus appointed
shall choose the third arbitrator who will act as the presiding
arbitrator of the arbitral tribunal.” UNCITRAL Arbitration
Rules (as revised in 2010), Arts. 7.1, 9.1.
12
D.
Venue and Personal Jurisdiction
Bellview argues that venue is not appropriate in the
Southern District of New York and that this Court lacks personal
jurisdiction over Bellview.
Bellview is wrong.
“[A] federal
court generally may not rule on the merits of a case without
first determining that it has jurisdiction over . . . the
parties.”
Sinochem Int’l Co. Ltd. v. Malaysia Int’l Shipping
Corp., 549 U.S. 422, 430–31 (2007).
But “[w]hen a party agrees
to arbitrate in a state, where the [FAA] makes such agreements
specifically enforceable, that party must be deemed to have
consented to the jurisdiction of the court that could compel the
arbitration proceeding in that state.”
Doctor's Assocs., Inc.
v. Stuart, 85 F.3d 975, 979 (2d Cir. 1996) (citation omitted).
The Court has personal jurisdiction over Bellview because
the parties agreed to arbitrate their disputes in the United
States, pursuant to New York law, and in accordance with laws
promulgated by UNCITRAL, a body within the United Nations
system, which is headquartered in New York.
agreement to arbitrate in New York.
This constitutes an
See Merrill Lynch, Pierce,
Fenner & Smith Inc. v. Lecopulos, 553 F.2d 842, 843 n.1, 844 (2d
Cir. 1977) (construing agreement that a contract is to be
governed by New York law and that arbitration is to be conducted
“under the provisions of the Constitution and Rules of the Board
of Governors of the New York Stock Exchange” as agreement to
13
arbitrate in New York).
Because Bellview agreed to be subject
to personal jurisdiction in this district, Bellview is deemed to
reside in this district for all venue purposes.
therefore proper.
Venue is
See 28 U.S.C. § 1391(b) and (c).
Bellview argues that the Arbitration Provision constitutes
a permissive forum selection clause because it lacks “specific
language of exclusion,” and that the Nigeria High Court is
therefore a proper forum.
In making this argument, Bellview
fails to address the clear authority, identified above,
indicating that the Arbitration Provision is mandatory and that
this Court has full authority to compel arbitration.
Moreover,
the cases to which it cites do not construe arbitration clauses,
but refer instead to forum selection clauses for litigation.
See, e.g., Global Seafood Inc. v. Bantry Bay Mussels Ltd., 659
F.3d 221, 226 (2d Cir. 2011).
E.
Waiver
Bellview asserts that Travelport waived its right to compel
arbitration through its participation in the Nigeria Action.
This is incorrect.
In determining whether a party has waived
its right to arbitration, factors that must be considered
include: “(1) the time elapsed from the commencement of
litigation to the request for arbitration, (2) the amount of
litigation (including any substantive motions and discovery),
and (3) proof of prejudice.”
PPG Indus., Inc. v. Webster Auto
14
Parts, Inc., 128 F.3d 103, 107 (2d Cir. 1997).
Any
determination of waiver “must be based on the circumstances and
context of the particular case, with a healthy regard for the
policy of promoting arbitration.”
Doctor's Assocs., Inc. v.
Distajo, 107 F.3d 126, 130 (2d Cir. 1996 (citation omitted).
Courts must “resolve doubts as to whether waiver occurred in
favor of arbitration.”
Id.
The above factors strongly weigh against a finding of
waiver.
It is true that almost six months elapsed between the
initiation of the Nigeria Action and Travelport’s petition to
compel arbitration.
But, Travelport served Bellview with a
notice of arbitration roughly two and a half months after
commencement of the Nigeria Action, and Bellview only indicated
its unwillingness to arbitrate on February 24, 2012.
In short,
Travelport has consistently sought arbitration; there has been
no excessive lapse of time.
Nor has there been a substantial amount of litigation in
the Nigeria Action.
There have been no substantive rulings
interpreting the Distribution Agreement, or findings as to
Bellview’s alleged material breach.
discovery.
There has been no
Moreover, all of Travelport’s filings -- seeking to
resist the jurisdiction of the Nigeria High Court and lift the
restraining order entered against it, and answering Bellview’s
summons -- have been defensive in nature.
15
Finally, Bellview can
provide no proof of prejudice because it is Bellview that is
responsible for pursuing the Nigeria Action, and it is Bellview
that has refused to arbitrate this dispute despite agreeing to
mandatory arbitration in the Distribution Agreement and
indicating at least twice since being served with the notice of
termination that it would agree to arbitrate this dispute.
II.
Anti-Suit Injunction
Petitioner requests an order compelling the respondent to
dismiss, or cause to be dismissed, the Nigeria Action.
Although
“[i]t is beyond question that a federal court may enjoin a party
before it from pursuing litigation in a foreign forum,” so, too,
must courts be cognizant that “principles of comity counsel that
injunctions restraining foreign litigation be used sparingly and
granted only with care and great restraint.”
Paramedics
Electromedicina Comercial, Ltda. v. GE Med. Sys. Info. Techs.,
Inc., 369 F.3d 645, 652 (2d Cir. 2004) (citation omitted).
This
is because, “while such an injunction in terms is leveled
against the party bringing the suit, it nonetheless effectively
restricts the jurisdiction of the court of a foreign sovereign.”
Id. at 655 (citation omitted).
There are two threshold requirements for the issuance of an
anti-suit injunction as to foreign litigation: “(1) the parties
must be the same in both matters, and (2) resolution of the case
before the enjoining court must be dispositive of the action to
16
be enjoined.”
China Trade, 837 F.2d at 35.
Once these
threshold requirements are met, there are five suggested factors
for determining whether the foreign action should be enjoined -the so-called “China Trade factors”:
(1) frustration of a policy in the enjoining forum;
(2) the foreign action would be vexatious; (3) a
threat to the issuing court's in rem or quasi in rem
jurisdiction; (4) the proceedings in the other forum
prejudice other equitable considerations; or (5)
adjudication of the same issues in separate actions
would result in delay, inconvenience, expense,
inconsistency, or a race to judgment.
Id.
As to the two threshold requirements, first, there is no
dispute that the parties in this action, Travelport and
Bellview, are the same as the parties in the Nigeria Action.
Second, judgment in this case is dispositive of the Nigeria
Action because it will compel arbitration of those same issues
that are currently being litigated in the Nigeria Action, namely
Travelport’s right to terminate the Distribution Agreement and
Bellview’s alleged material breach.
In other words, by virtue
of this Court's judgment, the issues in the Nigeria Action “are
reserved to arbitration” and cannot be litigated.
Paramedics,
369 F.3d at 653.
The China Trade factors also strongly support issuance of
an injunction.
As to the first factor, “it is difficult to
overstate the strong federal policy in favor of arbitration,”
17
Arciniaga v. General Motors Corp., 460 F.3d 231, 234 (2d Cir.
2006) (citation omitted), and Bellview’s efforts to “sidestep”
arbitration strongly support an anti-suit injunction in this
case.
Paramedics, 369 F.3d at 654.
The policy in favor of
arbitration “applies with particular force in international
disputes.”
Id.
Although Bellview contends that the U.S. has no
interest in the outcome of dispute because the parties are not
American and the relevant events did not occur in the U.S.,
China Trade requires an analysis of federal policy, and the
policy in support of arbitration is exceptionally strong.
As to the remaining factors, the Nigeria Action is
vexatious.
Despite Bellview’s agreement to resolve this dispute
in an arbitral forum, Bellview has obtained a restraining order
and initiated contempt proceedings against Travelport through
litigation.
After initially requesting, arbitration, Bellview
now resists it and, in its briefing papers, accuses Travelport
of delay.
These actions are nothing if not vexatious.
The delay and expense that have resulted from Bellview’s
actions are palpable.
Travelport first accepted Bellview’s
invitation to arbitrate on January 26, 2012, but arbitration
still has not commenced more than eight months later.
Instead,
Travelport has been forced to engage in litigation on multiple
fronts and defend itself in an action on Bellview’s home turf.
Although the Nigeria Action has been ongoing for more than ten
18
months,
scovery has not yet even begun.
The Nigeria High
Court has apparently not yet ruled on Bellview's March 15 motion
for leave to amend its summons.
The Nigeria Action also creates a serious risk of
inconsistency and a race to judgment.
Absent an anti suit
injunction, the Nigeria High Court could go forward and try the
case notwithstanding this Court's determination that arbitration
is mandatory.
Accordingly, it is proper to enj
n Bel
ew from
further pursuing the Nigeria Action, or any other action that
would interfere with the parties' arbitration proceedings in New
York.
CONCLUSION
Travelport's May 2, 2012 petition to compel arbitration and
injunctive relief is granted.
SO ORDERED
Dated:
New York, New York
September 10, 2012
Unit
19
ates District Judge
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