1st Source Bank v. Neto

Decision Date26 June 2017
Docket NumberNo. 17-1058,17-1058
Citation861 F.3d 607
Parties 1ST SOURCE BANK, Plaintiff-Appellee, v. Joaquim Salles Leite NETO, Defendant-Appellant.
CourtU.S. Court of Appeals — Seventh Circuit

Timothy Joseph Abeska, Attorney, BARNES & THORNBURG LLP, South Bend, IN, Alice Jane Springer, Attorney, BARNES & THORNBURG LLP, Elkhart, IN, for Plaintiff-Appellee.

Matthew S. Ryan, Terence H. Campbell, Attorneys, COTSIRILOS, TIGHE & STREICKER, POULOS & CAMPBELL, Chicago, IL, for Defendant-Appellant.

Before Flaum, Easterbrook, and Sykes, Circuit Judges.

Flaum, Circuit Judge.

Joaquim Salles Leite Neto is a defendant in parallel civil litigation brought by 1st Source Bank in Indiana and Brazil. Neto sought antisuit injunctive relief in Indiana district court to prevent 1st Source from pursuing its claims in Brazil. The district court denied Neto's motion, and Neto appeals. For the following reasons, we affirm.

I. Background

In 2009, Neto entered into a trust agreement with Wells Fargo Bank to purchase an airplane for use in his business. Wells Fargo borrowed $6 million from 1st Source and pledged the aircraft as collateral. In January 2011, Neto signed a guarantee for that loan. The guarantee contains the following disputed choice-of-law and venue provisions:

3.02 Governing Law . This guarantee shall be governed by and construed in accordance with the laws of the state of Indiana.... In relation to any dispute arising out of or in connection with this guarantee the guarantor [i.e. , Neto] hereby irrevocably and unconditionally agrees that all legal proceedings in connection with this guarantee shall be brought in the United States District Court for the District of Indiana located in South Bend, Indiana, or in the judicial district court of St. Joseph County, Indiana, and the guarantor waives all rights to a trial by jury provided however that the lender [i.e. , 1st Source] shall have the option, in its sole and exclusive discretion, in addition to the two courts mentioned above, to institute legal proceedings against the guarantor for repossession of the aircraft in any jurisdiction where the aircraft may be located from time to time, or against the guarantor for recovery of moneys due to the lender from the guarantor, in any jurisdiction where the guarantor maintains, temporarily or permanently, any asset. The parties hereby consent and agree to be subject to the jurisdiction of all of the aforesaid courts and, to the greatest extent permitted by applicable law, the parties hereby waive any right to seek to avoid the jurisdiction of the above courts on the basis of the doctrine of forum non conveniens .

("Section 3.02") (capitalization removed). In June 2012, the Brazilian government seized the airplane. For several years, Neto continued to pay 1st Source for his debt on the plane, making almost $3 million in payments. Neto stopped making payments in December 2014.

In June 2015, 1st Source sued Neto in the Northern District of Indiana to collect the remainder of the debt. 1st Source's amended complaint asserted:

Venue in the Northern District of Indiana and the South Bend Division is proper.... A substantial part of the events or omissions giving rise to 1st Source's claim occurred in St. Joseph County, Indiana. Moreover, 1st Source and the Defendants have contractually agreed that any litigation between the[m] must be venued in St. Joseph County, Indiana. Further, under 28 U.S.C. § 1391(c)(3), [Neto] may be sued in any judicial district.

The parties conducted some discovery and attempted to resolve the dispute short of trial: 1st Source filed one document-production request, and Neto traveled to Chicago for a deposition and mediation session related to this dispute and another case not relevant to this appeal. In July 2016, 1st Source filed a substantively similar complaint against Neto in São Paolo, Brazil, seeking to recoup the remainder of the debt from the airplane transaction. At the time that 1st Source filed the Brazil lawsuit, Neto maintained certain assets, including the airplane at issue, in Brazil. In October, Neto sought antisuit injunctive relief in Indiana district court in an effort to prevent 1st Source from proceeding with the parallel action in Brazil. He argued that § 3.02 of the loan guarantee prohibited 1st Source from bringing suit in Brazil, and that the Brazil litigation was vexatious and duplicative. The district court denied Neto's motion, concluding that § 3.02 allowed for the parallel litigation, and that Neto had not met his burden for showing that the Brazil litigation was vexatious. This appeal followed.

II. Discussion

On appeal from decisions on injunctive relief, "[w]e review legal conclusions de novo, findings of fact for clear error, and equitable balancing for abuse of discretion." Korte v. Sebelius , 735 F.3d 654, 665 (7th Cir. 2013). "Our review of contract meaning is de novo." Metavante Corp. v. Emigrant Sav. Bank , 619 F.3d 748, 763 (7th Cir. 2010).

A. Section 3.02

The personal guarantee between Neto and 1st Source contains an Indiana choice-of-law provision. In Indiana, "courts ... interpret a contract so as to ascertain the intent of the parties." First Fed. Sav. Bank of Ind. v. Key Markets, Inc. , 559 N.E.2d 600, 603 (Ind. 1990). "When a court finds a contract to be clear in its terms and the intentions of the parties apparent, the court will require the parties to perform consistently with the bargain they made," unless some equitable reason justifies non-enforcement. Id. at 604.

Neto first argues that § 3.02 forbids 1st Source from filing suit in Brazil because giving effect to § 3.02's second clause renders the first clause—which, in Neto's view, limits the venue to Indiana—meaningless. This reading of the loan guarantee is incorrect for two reasons. First, the language of the first clause only applies to Neto, not to 1st Source. It reads: "[T]he guarantor [Neto] hereby irrevocably and unconditionally agrees that all legal proceedings in connection with this guarantee shall be brought in [Indiana]...." Section 3.02 contains no complementary promise on the part of 1st Source to agree to bring "all legal proceedings" in Indiana. On the contrary, § 3.02's second clause plainly gives 1st Source discretion to institute recovery proceedings against Neto wherever he keeps assets: "[T]he lender ... shall have the option ... to institute legal proceedings ... against the guarantor for recovery of moneys due ... in any jurisdiction where the guarantor maintains ... any asset." That is exactly what 1st Source did here.

Second, § 3.02's first clause is not rendered meaningless by the second clause, as Neto argues. The first clause grants 1st Source the ability to pursue claims against Neto in Indiana, regardless of where Neto keeps his assets. The second clause allows 1st Source to initiate legal proceedings against Neto wherever his airplane or other assets are located. Thus, the clauses have independent meanings, and giving effect to one does not render the other meaningless. Moreover, the two clauses are part of the same sentence and are connected by the phrase "provided however," meaning the first clause was intended to be read in conjunction with, and not instead of, the second.

Next, Neto argues that § 3.02 may permit a lawsuit in either Brazil or Indiana, but not simultaneously in both venues. However, the language of the second clause speaks of "legal proceedings" in the plural, that can be taken "in addition to" legal proceedings in Indiana. And the next sentence in § 3.02 states, "[t]he parties hereby consent and agree to be subject to the jurisdiction of all of the aforesaid courts." This language indicates that the loan agreement contemplated the existence of multiple lawsuits, and Neto points to no language suggesting the opposite. Section 3.02 is much more expansive than, for example, the forum-selection clause—on which Neto relies—in Galco Food Prods., Ltd. v. Goldberg , No. CIV.A. 71 C 1201, 1971 WL 16640 (N.D. Ill. July 16, 1971), where the district court did enjoin the defendant from pursuing parallel litigation in Canada. The agreement in that case provided, "In the event either party shall desire any construction, interpretation, direction, or enforcement by a Court, of any of the terms of this agreement, such party may select a Court of proper jurisdiction of its own choosing, whether such Court be in ... Ontario or in ... Illinois." Id. at *2. That agreement's repeated references to "a court," in the singular and the choice between "Ontario or ... Illinois," id . (emphasis added), differ from § 3.02's language, which contemplates "legal proceedings" that can be initiated in other fora "in addition to the [Indiana] courts," and binds the parties to agree to jurisdiction in "all of the ... courts," in the plural.

Neto also contends that 1st Source is judicially estopped from arguing that it was permitted to sue in Brazil under § 3.02. He points to 1st Source's amended complaint, which asserted, "1st Source and the Defendants [Neto and Wells Fargo] have contractually agreed that any litigation between them must be venued in St. Joseph County, Indiana." Whether a party is judicially estopped from making an argument is a question of law subject to de novo review. United States v. Hook , 195 F.3d 299, 305 (7th Cir. 1999) (citation omitted). As a preliminary matter, Neto forfeited this judicial-estoppel theory by failing to raise it before the district court. See Econ. Folding Box Corp. v. Anchor Frozen Foods Corp. , 515 F.3d 718, 720 (7th Cir. 2008) ("[i]t is axiomatic that an issue not first presented to the district court may not be raised before the appellate court as a ground for reversal") (citation omitted). However, because estoppel is designed "to protect the courts rather than the litigants ... an appellate court[ ] may raise the estoppel on its own motion in an appropriate case." In re Cassidy , 892 F.2d 637, 641 (7th Cir. 1990) (footnote omitted).

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