Compañía De Inversiones Mercantiles, S.A., v. Grupo Cementos De Chihuahua S.A.B. De C.V., No. 19-1151

• Decision Date: 17 August 2020
• Docket Number: No. 19-1151
• Parties: COMPAÑÍA DE INVERSIONES MERCANTILES, S.A., Plaintiff - Appellee, v. GRUPO CEMENTOS DE CHIHUAHUA S.A.B. DE C.V.; GCC Latinoamérica, S.A. de C.V., Defendants - Appellants.
• Court: U.S. Court of Appeals — Tenth Circuit

970 F.3d 1269

COMPAÑÍA DE INVERSIONES MERCANTILES, S.A., Plaintiff - Appellee,

v.GRUPO CEMENTOS DE CHIHUAHUA S.A.B. DE C.V.; GCC Latinoamérica, S.A. de C.V., Defendants - Appellants.

No. 19-1151

United States Court of Appeals, Tenth Circuit.

FILED August 17, 2020

David M. Cooper, Quinn Emanuel Urquhart & Sullivan, LLP, New York, New York (Juan P. Morillo and Daniel Pulecio-Boek, Quinn Emanuel Urquhart & Sullivan, LLP, Washington, DC, with him on the briefs), appearing for the Appellants.

Eliot Lauer, Curtis, Mallet-Prevost, Colt & Mosle, LLP, New York, New York (Gabriel Hertzberg and Sylvi Sareva, Curtis, Mallet-Prevost, Colt & Mosle, LLP, New York, New York; and Michael A. Rollin, Fox Rothschild LLP, Denver, Colorado, with him on the brief), appearing for the Appellee.

Before BRISCOE, EBEL, and LUCERO, Circuit Judges.

BRISCOE, Circuit Judge.

This case involves a Bolivian company known as Compañía de Inversiones Mercantiles S.A. ("CIMSA") and Mexican companies known as Grupo Cementos de Chihuahua, S.A.B. de C.V. and GCC Latinoamerica, S.A. de C.V. (collectively "GCC"). Plaintiff - Appellant CIMSA brought a district court action in 2015 pursuant to the Federal Arbitration Act, 9 U.S.C. § 207, to confirm a foreign arbitral award issued in Bolivia against Defendant - Appellee GCC. The action has been prolonged by ongoing litigation abroad and obstacles to effectuating service. The underlying dispute arises out of an agreement under which CIMSA and GCC arranged to give each other a right of first refusal if either party decided to sell its shares in a Bolivian cement company known as Sociedad Boliviana de Cemento, S.A. ("SOBOCE"). GCC sold its SOBOCE shares to a third party after taking the position that CIMSA failed to properly exercise its right of first refusal. In 2011, CIMSA initiated an arbitration proceeding in Bolivia. The arbitration tribunal determined that GCC violated the contract and the parties’ expectations. The arbitration tribunal later awarded CIMSA tens of millions of dollars for GCC's breach.

GCC initiated Bolivian and Mexican court actions challenging the arbitration tribunal's decisions. A Bolivian judge, holding a position similar to that of an American trial judge, rejected GCC's challenge to the arbitration tribunal's decision on the merits. A Bolivian court, acting in a capacity similar to that of an American intermediate appellate court, reversed and remanded. On remand, the matter was temporarily assigned to a different trial judge, who granted GCC's request for relief before the original trial judge could return from a planned vacation. While these remand proceedings were occurring, however, Bolivia's highest court reversed the Bolivian appellate court and affirmed the original trial judge. But as a result of the simultaneous remand proceedings, Bolivia's highest court also issued arguably contradictory orders suggesting the second trial judge's ruling on the merits remained in effect. GCC filed a separate Bolivian court action challenging the arbitration tribunal's damages award. That case made its way to Bolivia's highest court as well, which reversed an intermediate appellate court's nullification of the award and remanded for further proceedings. The parties continue to litigate the damages award in Bolivia.

Invoking the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the "New York Convention"), June 10, 1958, 21 U.S.T. 2517, CIMSA filed a confirmation action in the United States District Court for the District of Colorado. After encountering difficulties with conventional service of process in Mexico under the Hague Convention on Service Abroad of Judicial and Extrajudicial Documents (the "Hague Service Convention" or "Convention"), Nov. 15, 1965, 20 U.S.T. 361, CIMSA sought and received permission from the district court to serve GCC through its American counsel pursuant to Federal Rule of Civil Procedure ("Rule") 4(f)(3). The district court then rejected GCC's challenges to personal jurisdiction, holding (among other things) that (1) it was appropriate to aggregate GCC's contacts with the United States; (2) CIMSA's injury arose out of GCC's contacts; (3) exercising jurisdiction was consistent with fair play and substantial justice; and (4) alternative service was proper. The district court further rejected GCC's defenses to CIMSA's claim under the New York Convention, concluding that (1) the arbitration tribunal's ruling on the merits had not been set aside by a competent Bolivian authority; and (2) the arbitration tribunal's ruling on damages was sufficiently "binding" to allow confirmation. These issues are now before us on appeal.

Although the jurisdictional questions are difficult, we consider this appeal pursuant to 28 U.S.C. § 1291 and affirm the district court. The district court appropriately aggregated GCC's contacts with the United States as a whole under Rule 4(k)(2). GCC forfeited arguments based on Rule 4(k)(2) and, regardless, we conclude that those arguments fall short on the merits. The district court properly determined that CIMSA's injury arose out of or related to GCC's nationwide contacts. Contacts concerning GCC's underlying breach of contract are pertinent, and those contacts satisfy the applicable version of the test for "proximate cause." The district court correctly decided that exercising personal jurisdiction over GCC comported with fair play and substantial justice because CIMSA established minimum contacts and GCC did not make a compelling case to the contrary. Last, the district court accurately concluded that substitute service on GCC's United States counsel did not run afoul of the Hague Service Convention or Rule 4(f)(3).

We also affirm the district court's confirmation of the arbitration tribunal's decisions. We agree with the district court that the best reading of the Bolivian proceedings is that the arbitration panel's merits award has not been set aside, because the Bolivian court orders supporting the second trial judge's decision favoring GCC lost any legal effect after Bolivia's highest court affirmed the initial trial judge's decision favoring CIMSA. In addition, the arbitration tribunal's damages award may be confirmed in the United States under the New York Convention even if GCC's Bolivian judicial challenge remains pending. By necessity, we highlight in today's opinion some differences between the American judicial system and the Bolivian judicial system (and, at times, the Mexican judicial system). We note these differences only to place this case in context, not as a critique.

I. Background

CIMSA is a Bolivian company. Appellant's Appendix ("App.") at 130. GCC is a set of Mexican companies. Id. The relationship between CIMSA and GCC began no later than 2005, when the parties met in Miami to discuss a potential joint venture relating to SOBOCE. Appellee's Supplemental Appendix ("Supp. App.") at 6–7. SOBOCE is Bolivia's largest cement company. Id. at 6. After the Miami meeting, GCC made an offer to purchase a substantial interest in SOBOCE for approximately $59 million. Id. at 7. That offer was accepted and consummated a few months later, as GCC and CIMSA simultaneously entered into a shareholder agreement (the "2005 Shareholder Agreement"). Id. The 2005 Shareholder Agreement was governed by Bolivian law. App. at 561. GCC paid for the acquired SOBOCE shares (and later distributed SOBOCE dividends) through a San Francisco bank account. Supp. App. at 8. GCC's General Counsel is located in Colorado. Id. at 60.

Several years after the execution of the 2005 Shareholder Agreement, a disagreement arose between CIMSA and GCC involving a right of first refusal. The 2005 Shareholder Agreement enabled each party to transfer its shares in SOBOCE to a third party after a period of five years, provided that the transferring party gave notice and afforded the other party an opportunity to purchase the shares on the same or better terms within 30 days. Id. at 8. In late 2009, after GCC signaled its intention to sell its SOBOCE shares at the end of the five-year holding period, CIMSA and GCC again met in Miami. Id. at 8–9. In early 2010, the parties met six more times in Miami, and the discussions included price, sales terms, valuation, and other features of a possible deal in which CIMSA would purchase GCC's SOBOCE shares. Id. at 9–10. The parties reached agreement on the fundamental terms of the sale during an April 2010 meeting in Miami, and signed an agreement (the "2010 Shareholder Agreement") in May 2010 in La Paz, Bolivia. Id. at 10. The transaction contemplated by the 2010 Shareholder Agreement did not close, however, because the Bolivian government expropriated a division of SOBOCE's business. Id.

In the wake of the expropriation, CIMSA and GCC began negotiating a new agreement. In mid-2011, the parties met in Houston, where CIMSA proposed two alternative payment structures. Id. at 10–11. In the weeks following the Houston meeting, the parties continued to discuss CIMSA's proposals via telephone and email. Id. at 11. In July 2011, GCC notified CIMSA that a Peruvian company had tendered a firm offer to buy GCC's SOBOCE shares. Id. CIMSA reiterated its willingness to purchase the shares, and requested a longer payment schedule than the one proposed by the Peruvian company. Id. GCC indicated that, assuming the parties could reach an agreement on all relevant terms, GCC would accept one of the payment terms proposed by CIMSA at the Houston meeting. Id.

By early August 2011, CIMSA and GCC had nearly finalized the terms of the new SOBOCE transaction. Id. GCC instructed CIMSA to hire New York counsel to draft a final agreement. Id. CIMSA did so, and GCC hired its own New York counsel. Id. GCC sent CIMSA a draft purchase agreement (the "2011 Agreement") that was governed by New York law. Id. Right before the transaction was set to close, GCC demanded an increase in the number of SOBOCE shares CIMSA would place in trust,...