Paramedics Electro. v. Ge Medical Systems

Decision Date25 May 2004
Docket NumberNo. 03-7896.,No. 03-7672.,03-7672.,03-7896.
PartiesPARAMEDICS ELECTROMEDICINA COMERCIAL, LTDA., Plaintiff-Counter-Defendant-Appellant, v. GE MEDICAL SYSTEMS INFORMATION TECHNOLOGIES, INC., Defendant-Counter-Claimant-Appellee.
CourtU.S. Court of Appeals — Second Circuit

William G. O'Donnell, Jr., O'Donnell & Fox, P.C., New York, NY, for Appellant.

José Astigarraga, Astigarraga Davis, Miami, FL (Edward M. Mullins and Scott A. Burr, on the brief), for Appellee.

Before: McLAUGHLIN and JACOBS, Circuit Judges, and COVELLO, District Judge.1

JACOBS, Circuit Judge.

Paramedics Electromedicina Comercial, Ltda. (known as "Tecnimed") was a distributor in Brazil for products of GE Medical Systems Information Technologies, Inc. ("GEMS-IT"), under agreements containing broad arbitration clauses. GEMS-IT invoked the arbitration process in April 2002; Tecnimed soon thereafter commenced a lawsuit in Porto Alegre, Brazil (the "Porto Alegre action") against GEMS-IT and a related company, General Electric do Brasil ("GE Brasil"), and petitioned in New York State court for a permanent stay of the arbitration. GEMS-IT removed the petition to federal court, and counterclaimed for an order to compel arbitration and for an anti-suit injunction to halt the Porto Alegre action.

On June 4, 2003, the district court (Eaton, M.J.) issued an order compelling arbitration and directing Tecnimed to "immediately take all steps necessary to cause dismissal of the" Porto Alegre suit. Instead, according to Tecnimed, it requested the Brazilian court to put the case on a "suspense" calendar. Not satisfied, the district court directed Tecnimed to sign a Joint Petition to Dismiss by a certain date, which Tecnimed failed to do. The court imposed a sanction of $1,000 for each day of continued noncompliance, and ordered Tecnimed's president, Paulo Werlang, to appear in person at the next scheduled court hearing. Werlang did not appear. The district court held Tecnimed and Werlang in civil contempt, and ordered Tecnimed and Werlang, jointly and severally, to pay GEMS-IT $1,000 until September 3, 2003, and $5,000 thereafter for each day of continued intransigence.

Tecnimed argues that the district court erred in enjoining the Porto Alegre action and in holding Tecnimed and Werlang in civil contempt. We conclude (i) that the anti-suit injunction was an appropriate measure to enforce and protect the judgment compelling arbitration; (ii) that the district court did not abuse its discretion in holding Tecnimed and Werlang in civil contempt; (iii) that we must dismiss Werlang's individual appeal because the notice of appeal — which makes scant reference to Werlang — does not make his intent to appeal objectively clear; but (iv) that because the contempt sanction was imposed in part as compensation, it must be remanded for reconsideration of the amount in light of its purpose and GEMS-IT's demonstrated loss.

BACKGROUND

GEMS-IT is a Wisconsin corporation that manufactures and distributes medical equipment. Tecnimed is a Brazilian corporation that markets and sells medical equipment, and has distributed GEMS-IT's products (and those of its predecessor companies) in Brazil since 1995.

In 1999, Tecnimed and GEMS-IT executed two agreements to govern their relationship, a Sales and Service Agreement and a Distribution Agreement (collectively, "the Agreements"). Unlike prior contracts between Tecnimed and predecessors of GEMS-IT, the 1999 Agreements did not grant Tecnimed exclusive distribution rights. Each Agreement contained an arbitration clause. The Sales and Service Agreement provided, in relevant part, that thirty days following notice given by one party to the other of "any controversy, claim or dispute between the Parties arising out of or relating in any way to this Agreement which the Parties are unable to resolve by mutual negotiation" or mediation, "either Party shall be entitled to have such controversy, claim or dispute finally settled by arbitration, in accordance with the [then-effective] rules of the Inter-American Commercial Arbitration Commission" ("IACAC"). The Distribution Agreement contained a clause to the same effect.

By early 2001, controversies had arisen: according to GEMS-IT, Tecnimed owed approximately $1.2 million on unpaid invoices; according to Tecnimed, GEMS-IT sold products directly into the Brazilian market, bypassing Tecnimed in violation of certain licenses. On March 18, 2002, after fruitless negotiations, GEMS-IT wrote to Tecnimed initiating the arbitration process outlined in the Agreements. Ten days later, Tecnimed advised GEMS-IT that it had commenced legal action in the Tenth Civil Circuit Court of Porto Alegre, Brazil.

On April 22, 2002, GEMS-IT filed a notice and request for arbitration with the IACAC. After further fruitless negotiations, Tecnimed advised the IACAC that the Commission lacked jurisdiction to consider GEMS-IT's claims, and that Tecnimed would not be participating in the arbitration. The IACAC nonetheless appointed a panel, consisting of one arbitrator from Brazil, one from the United States, and one from Canada.

On May 23, 2002, Tecnimed filed its complaint with the Porto Alegre court, naming as defendants GEMS-IT and GE Brasil, and alleging, inter alia: (i) that the Agreements lacked "contractual equilibrium" and were unenforceable under Brazilian law; (ii) that Tecnimed was not required to arbitrate its dispute with GEMS-IT because the Agreements had expired; (iii) that GEMS-IT wrongfully terminated the Agreements, causing a loss of profits to Tecnimed; (iv) that GEMS-IT illegally imported three pieces of equipment into Brazil without Tecnimed's authorization, causing Tecnimed to suffer "moral" damages; (v) that GEMS-IT breached the Agreements by failing to pay Tecnimed sales commissions for certain products; (vi) that Tecnimed was entitled to exclusive distributorship of GEMS-IT products in Brazil; and (vii) that Tecnimed was entitled to a declaration of non-existence of debt to GEMS-IT for equipment purchased by Tecnimed under the Agreements.

GEMS-IT moved on both fronts; it answered the Porto Alegre complaint, and filed a statement of claim with the IACAC arbitral panel. In response, Tecnimed filed a petition in New York State court seeking a permanent stay of the arbitration (the "New York action"). GEMS-IT removed the petition to the United States District Court for the Southern District of New York, and asserted counterclaims for an order compelling arbitration and for an anti-suit injunction to bar Tecnimed from prosecuting the Porto Alegre action.

In April 2003 (while Tecnimed's petition for a stay of arbitration was pending in the district court), the IACAC panel rejected Tecnimed's challenge to arbitral jurisdiction, ruling that the arbitration clauses were valid and binding; that the claims GEMS-IT had submitted to the panel were within the scope of the arbitration clauses, as were the claims Tecnimed was asserting in Porto Alegre; and that the panel would consider the issues in the Porto Alegre action to the extent deemed necessary.

On June 4, 2003, the district court (Eaton, M.J.) ruled that the arbitration clauses were valid and that all of GEMS-IT's claims, as well as all of Tecnimed's claims asserted in the Porto Alegre action, were arbitrable. The court thereupon granted GEMS-IT's motion to compel arbitration, rejected Tecnimed's request for a stay, entered an anti-suit injunction, and ordered Tecnimed to "immediately take all steps necessary to cause dismissal of the [Porto Alegre] Action." If the suit in Porto Alegre was not dismissed by June 17, 2003, Tecnimed had until June 20, 2003 to explain why.

On June 17, 2003, Tecnimed filed a notice with the Porto Alegre court requesting that its case be placed on the "suspense" calendar. According to GEMS-IT's expert on Brazilian law, placement on the suspense calendar would halt the case for no more than six months. In any event, the Porto Alegre court notified GEMS-IT on June 30, 2003 that it was required to file a "manifestation" (the Brazilian equivalent of a sur-reply) to Tecnimed's reply to GEMS-IT's answer to the complaint.

Apprised of these developments, the district court directed GEMS-IT to draft a Joint Petition to Dismiss (the "Petition") pursuant to Brazilian law by July 1, 2003, and ordered Tecnimed either to sign it by July 8, 2003, or to register objections to the draft by that date. Tecnimed's counsel refused to sign the Petition on the grounds that it did not protect Tecnimed from the running of the applicable statute of limitations and that, under Brazilian law, Tecnimed would have to pay a large "honorarium" fee of 10-20% of the value of the claim as a consequence of dismissing the case.2

On July 14, 2003, GEMS-IT filed a motion to hold Tecnimed and its president, Paulo Werlang, in civil contempt for failing to dismiss the Porto Alegre action. GEMS-IT argued: that Tecnimed's notice of suspension to the Porto Alegre court was defective because it failed to furnish a Portuguese translation of the district court's order; that the honorarium fee — based on the stated value of the claim — would be nominal; and that under Brazilian law the statute of limitations would be tolled automatically pending arbitration.

On July 21, 2003, the district court ordered the parties to amend the Petition to provide expressly that the statute of limitations would be tolled pending the arbitration, ordered Tecnimed to sign the modified Petition by July 24, 2003, and warned that noncompliance would trigger sanctions. Tecnimed did not sign. Instead, it moved for a stay of the injunction pending appeal and for postponement of the scheduled July 31 hearing. The district court denied the postponement, found that Tecnimed had violated its July 21 order to sign the Petition, and ordered Tecnimed to pay GEMS-IT $1,000 for each day of...

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