Europcar Italia, S.p.A. v. Maiellano Tours, Inc.

• Decision Date: 02 September 1998
• Docket Number: Docket No. 97-7224
• Citation: 156 F.3d 310
• Parties: EUROPCAR ITALIA, S.p.A., Plaintiff-Appellee, v. MAIELLANO TOURS, INC., Defendant-Appellant.
• Court: U.S. Court of Appeals — Second Circuit

Page 310

156 F.3d 310

EUROPCAR ITALIA, S.p.A., Plaintiff-Appellee, v. MAIELLANO TOURS, INC., Defendant-Appellant.

Docket No. 97-7224.

United States Court of Appeals Second Circuit.

Argued Nov. 24, 1997.

Decided Sept. 2, 1998.

Thomas V. Dana, New York City, for Defendant-Appellant.

John P. Perfetti, New York City, for Plaintiff-Appellee.

Before: OAKES and WALKER, Circuit Judges, and BRIEANT, ^* District Judge.

JOHN M. WALKER, Jr., Circuit Judge:

Defendant-appellant Maiellano Tours, Inc. ("Maiellano") appeals from the January 21, 1997, judgment of the United States District Court for the Eastern District of New York (Carol Bagley Amon, Judge) granting plaintiff-appellee Europcar Italia S.p.A.'s ("Europcar") motion for summary judgment on its action for the enforcement of a foreign arbitration award under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958, 21 U.S.T. 2517, T.I.A.S. No. 6997, implemented by 9 U.S.C. § 201 et seq. (the "Convention").

In October 1988, the parties entered into an agreement (the "1988 agreement") whereby Europcar, an Italian car rental business, agreed to provide rental car services in Italy to customers sent to it by Maiellano, an American travel agency. The 1988 agreement contained an arbitration clause providing that the agreement would be governed by Italian law and that

[a]ny dispute arising from or in connection with this agreement, included [sic] those related to its validity, performance or termination will be submitted to and finally resolved by a sole arbitrator appointed by the legal counsels selected by the parties. The sole arbitrator shall decide under the rules known in the Italian legal system as 'arbitrato irrituale in equita' (informal proceedings).

A dispute arose in 1991 as to which party was entitled to certain value-added-tax refunds that had been remitted by the Italian tax authority to Maiellano. Unable to agree on a sole arbitrator as required by the 1988 agreement, the parties entered into a supplemental arbitration agreement, which provided in relevant part:

[t]he agreement between Maiellano Tours, Inc. and Europcar Italia S.p.A. is regulated by Italian law.

In the event that any dispute shall arise with respect to the application of this agreement, including its validity, execution or resolution, it shall be settled by a final arbitration by an Arbitration Panel of three arbitrators, as amicable adjusters, appointed as follows: each part [sic] will appoint an arbitrator, and the third arbitrator, who will act as President of the Panel will be mutually appointed by the two arbitrators so appointed....

The Panel will decide the controversy pursuant to the rules set forth in the Italian legal system for the "Arbitrato Irrituale in Equita (procedimento informale)", (Informal arbitration on equitable grounds).

Thus, as in the 1988 agreement, the procedure to be used was "arbitrato irrituale" and the arbitration panel's decision was to be a "final arbitration." Following written submissions and hearings, the selected panel issued an award in favor of Europcar in June of 1992.

In July 1992, Europcar commenced an action in the Italian courts to confirm the arbitration award and to obtain an order of payment. Maiellano countered by commencing a collateral action to have the award set aside on the ground of fraud, alleging that the arbitrator's decision was based on a February 20, 1979, agreement (the "1979 agreement") that contained a forged Maiellano signature.

The Tribunal of Rome consolidated the actions and by a decision dated March 30, 1996, ruled in favor of Europcar and rejected all of Maiellano's claims. The tribunal found that Maiellano had not raised the issue of forgery to the arbitrators and that the arbitrators' decision was based principally on the parties' ten-year business relationship rather than on any particular written agreement. Maiellano appealed the Tribunal of Rome's confirmation of the arbitral award to the Roman Court of Appeals.

On August 4, 1994, while the above litigation was underway in the Italian courts, but before the outcome of the proceedings in the Tribunal of Rome, Europcar filed an action in the Eastern District of New York seeking recognition and enforcement of the arbitral award pursuant to the Convention and 9 U.S.C. § 207. Maiellano opposed enforcement, arguing, inter alia, that the district court lacked subject matter jurisdiction because arbitrato irrituale is not covered by the Convention and, in the alternative, that the district court should defer its decision pending the outcome of the trial of the Tribunal of Rome in accordance with Spier v. Calzaturificio Tecnica S.p.A., 663 F.Supp. 871 (S.D.N.Y.1987).

Europcar moved for summary judgment in October of 1994, and the district court referred the motion to Magistrate Judge Gold. Judge Gold rejected Maiellano's arguments and recommended that Europcar's motion for summary judgment be granted. Apart from one modification not relevant here, Judge Amon adopted Judge Gold's Report and Recommendation in its entirety and entered judgment for Europcar in the amount of $1,102,283 with interest and costs. This appeal followed.

DISCUSSION

The Convention provides for the enforcement of arbitration agreements and the confirmation of foreign arbitral awards. Convention, arts. II, III. District courts have been given original jurisdiction over actions or proceedings falling under the Convention, 9 U.S.C. § 203, and any party to a foreign arbitration may seek confirmation in a district court of an arbitral award within three years after the award is made, 9 U.S.C. § 207. "The court shall confirm the award unless it finds one of the grounds for refusal or deferral of recognition or enforcement of the award specified in the ... Convention." Id. The grounds for refusing to enforce an award are limited to the specific defenses enumerated in Article V of the Convention, which provides in relevant part:

1. Recognition and enforcement of the award may be refused ... only if [the] party [requesting refusal] furnishes ... proof that:

....

(e) The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.

2. Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that:

....

(b) The recognition or enforcement of the award would be contrary to the public policy of [the] country [in which enforcement is sought].

The party opposing enforcement has the burden of proving the existence of one of these enumerated defenses. See Fotochrome, Inc. v. Copal Co., 517 F.2d 512, 518 (2d Cir.1975); Parsons & Whittemore Overseas Co. v. Societe Generale de L'Industrie du Papier (RAKTA), 508 F.2d 969, 973 (2d Cir.1974).

On appeal, Maiellano argues, inter alia, that (1) the district court did not have jurisdiction under the Convention to confirm an award granted under arbitrato irrituale; (2) the award should not have been enforced because the parties did not intend to be bound by the arbitration award; (3) the district court should have refused to enforce the award because it was based on a forged contract and, therefore, is contrary to United States public policy; and, in any event, (4) the district court should have suspended its decision to await the outcome of the pending Italian litigation.

A. Enforceability of arbitrato irrituale Award

Maiellano contends that awards granted under the Italian rules known as arbitrato irrituale do not give rise to a binding arbitral award of the sort entitled to enforcement under the Convention because arbitrato irrituale is an informal, extralegal process that lacks procedural safeguards. Moreover, confirmation of the award here would give it Europcar, on the other hand, points to four decisions of the Italian Supreme Court, the Corte de Cassazione, that have expressly held that arbitrato irrituale does fall under the Convention. See Agracommerz A.G. v. Privilegiata Fabbrica Maraschino Excelsior Girolamo Luxardo S.p.A., Cass., 15 Jan. 1992, n. 405; Federal Commerce and Navigation Ltd. v. Rocco Giuseppe e Figli s.n.c., Cass., sez. un., 15 Dec. 1982, n. 6915, Foro. It. 1983, I, 2200; Carey Hirsch Lumber Co. v. Colella Legnami S.p.A., Cass., sez. un., 6 July 1982, n. 4039, Foro It.1983, I, 736-40; Butera v. Pagnan, Cass., sez. un., 18 Sept. 1978, n. 4167. The Corte di Cassazione recognized that such awards would be treated differently under the Convention than under Italian law. Nevertheless, it held that in order to be enforceable under the Convention, awards must only be binding on the parties, not necessarily judicially binding in the originating country, and that although awards under arbitrato irrituale are merely contractual, and therefore are not immediately enforceable in Italy, they are nevertheless binding on the parties. See, e.g., Butera, n. 4167; Colella Legnami S.p.A., n. 4039. See also Giorgio Bernini, Domestic and International Arbitration in Italy after the Legislative Reform, 5 Pace L.Rev. 543, 544 (1985) ("[t]he arbitral award stemming from an arbitrato irrituale is binding upon the parties but has no executory force") [Hereinafter Bernini, Italian Arbitration ]; Susan Choi, Note, Judicial Enforcement of Arbitration Awards under the ICSID and New York Conventions, 28 N.Y.U. J. Int'l L. & Pol. 175, 195-96 (Fall 1995--Winter 1996) (discussing arbitrato irrituale and noting that, according to Italian case law and authorities, awards are "binding" within meaning of Convention) [hereinafter Choi, Judicial Enforcement ]. The Corte di Cassazione concluded that in light of the differences in arbitration among the signatory countries, the Convention should be read broadly to cover both formal and informal arbitration. See, e.g., Collela Legnami, n. 4039; Butera, n. 4167.

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