Corporacion Mexicana De Mantenimiento Integral v. Pemex-Exploracion Y Produccion, 080216 FED2, 13-4022

Docket Nº:13-4022
Opinion Judge:DENNIS JACOBS, Circuit Judge:
Party Name:Corporación Mexicana De Mantenimiento Integral, S. De R.L. De C.V, Petitioner-Appellee, v. Pemex-Exploración Y Producción, Respondent-Appellant.
Attorney:CATHERINE E. STETSON, HOGAN LOVELLS U.S. LLP, Washington, D.C.; on the brief: Dennis H. Tracey, III, Ira M. Feinberg, Hagan C. Scotten & Erin M. Meyer, Hogan Lovells U.S. LLP, New York, NY; Richard C. Lorenzo, Hogan Lovells U.S. LLP, Miami, FL, for Appellant. PAUL D. CLEMENT (with Zachary D. Trip...
Judge Panel:Before: WINTER, JACOBS, and RAGGI, Circuit Judges. WINTER, Circuit Judge, concurring:
Case Date:August 02, 2016
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit
 
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Corporación Mexicana De Mantenimiento Integral, S. De R.L. De C.V, Petitioner-Appellee,

v.

Pemex-Exploración Y Producción, Respondent-Appellant.

No. 13-4022

United States Court of Appeals, Second Circuit

August 2, 2016

Argued: November 20, 2014

Respondent-appellant Pemex-Exploración Y Producción ("PEP") appeals from the judgment of the United States District Court for the Southern District of New York (Hellerstein, J.) confirming an arbitral award notwithstanding that the award was nullified by a court in Mexico, where the award was rendered. We conclude that: (1) There is personal jurisdiction over PEP, and venue lies in the Southern District of New York;

(2) The district court did not abuse its discretion in confirming the award; and;

(3) The district court, which included in its judgment $106 million in performance bonds that PEP collected, did not thus exceed its authority.

Accordingly, we affirm the judgment of the district court in all respects. Judge Winter concurs in a separate opinion.

CATHERINE E. STETSON, HOGAN LOVELLS U.S. LLP, Washington, D.C.; on the brief: Dennis H. Tracey, III, Ira M. Feinberg, Hagan C. Scotten & Erin M. Meyer, Hogan Lovells U.S. LLP, New York, NY; Richard C. Lorenzo, Hogan Lovells U.S. LLP, Miami, FL, for Appellant.

PAUL D. CLEMENT (with Zachary D. Tripp & William R. Levi on the brief), BANCROFT PLLC, Washington, D.C.; also on the brief: Jeffrey S. Bucholtz & Brian Callanan, King & Spalding LLP, Washington, DC; Richard T. Marooney & Charles C. Correll, Jr., King & Spalding LLP, New York, NY, for Appellee.

Preet Bharara (with David S. Jones, Caleb Hayes-Deats & Emily E. Daughtry on the brief), United States Attorney for the Southern District of New York, for Amicus Curiae United States of America; also on the brief: Joyce Branda, Douglas N. Letter & Sharon Swingle, Civil Division, Department of Justice, Washington, D.C.; Mary E. McLeod, Department of State, Washington, D.C.

Erik S. Jaffe, Erik S. Jaffe, P.C., Washington, D.C., for Amicus Curiae The Government of the United Mexican States in support of Respondent-Appellant.

Peter B. Rutledge, Athens, GA, for Amicus Curiae The Chamber of Commerce of the United States of America in support of Petitioner-Appellee; on the brief: Kathryn Comerford Todd & Tyler R. Green, National Chamber Litigation Center, Inc., Washington, D.C.

Before: WINTER, JACOBS, and RAGGI, Circuit Judges.

DENNIS JACOBS, Circuit Judge:

The truly unusual procedural history of this case requires us to reconcile two settled principles that militate in favor of opposite results: a district court's discretion to confirm an arbitral award, and the comity owed to a foreign court's ruling on the validity of an arbitral award rendered in that country, here, Mexico. Petitioner-appellee Corporación Mexicana De Mantenimiento Integral, S. De R.L. De C.V. ("COMMISA") contracted with respondent-appellant Pemex- Exploración Y Producción ("PEP"), a state-owned enterprise, to build oil platforms in the Gulf of Mexico. The contracts provided that arbitration would be the exclusive mechanism for dispute resolution. When the parties' relationship disintegrated, each side accused the other of breach. COMMISA initiated arbitration proceedings, prevailed, and in 2009 obtained an award of approximately $300 million.

COMMISA then petitioned the United States District Court for the Southern District of New York (Hellerstein, J.) ("Southern District") for confirmation of the award, which was done. PEP appealed the district court's judgment to this Court ("First Appeal") and simultaneously attacked the arbitral award in the Mexican courts. The Eleventh Collegiate Court in Mexico set aside the arbitral award on the ground that PEP, as an entity deemed part of the Mexican government, could not be forced to arbitrate. Armed with that decision, PEP moved in this Court to vacate the Southern District's judgment and remand the First Appeal in light of the Eleventh Collegiate Court's decision. We granted that motion. On remand, the Southern District conducted an evidentiary hearing, adhered to its previous ruling, issued a new judgment confirming the arbitral award, and thus set the stage for the present appeal.

We hold that the Southern District properly exercised its discretion in confirming the award because giving effect to the subsequent nullification of the award in Mexico would run counter to United States public policy and would (in the operative phrasing) be "repugnant to fundamental notions of what is decent and just" in this country. We further conclude that PEP's personal jurisdiction and venue objections are without merit. Finally, we hold that the Southern District did not exceed its authority by including in its judgment $106 million attributed to performance bonds that PEP collected. The judgment is affirmed.

BACKGROUND

This protracted litigation, begun in 2004, has challenged the courts of two countries. We summarize here only those facts useful for understanding the issues presented and our resolution of them.

1.

COMMISA is a Mexican subsidiary of KBR, Inc., a United States construction and military-contracting corporation. PEP is one of four subsidiaries of Petroleos Mexicanos ("PEMEX"), an oil and gas company acting on behalf of the Mexican government. PEMEX and PEP are public entities of the Mexican government, but have the capacity to independently own property and carry out business under their own names. Together, PEMEX and its subsidiaries "comprise the state oil and gas company of . . . Mexico." Joint Appendix ("J.A.") at 1515.

In 1997, COMMISA and PEP contracted for COMMISA to build oil platforms in the Gulf of Mexico. The contract, governed by Mexican law, contained the following arbitration clause: 23.3 Arbitration. Any controversy, claim, difference, or dispute that may arise from or that is related to, or associated with, the present Contract or any instance of breach with the present Contract, shall be definitively settled through arbitration conducted in Mexico City, D.F., in accordance with the Conciliation and Arbitration Regulations of the International Chamber of Commerce that are in effect at that time. The arbitrators shall be three in number, and the language in which the arbitration shall be conducted shall be Spanish.

J.A. at 93. PEP's (now disputed) authority to bind itself to arbitration was premised on the following provision of the "PEMEX and Affiliates Organic Law": In the event of international legal acts, Petróleos Mexicanos or its Affiliates may agree upon the application of foreign law, the jurisdiction of foreign courts in trade matters, and execute arbitration agreements whenever deemed appropriate in furtherance of their purpose.

Special Appendix ("SPA") at 41.

Two other provisions of the contracts bear on this appeal. One clause gave PEP the unilateral right to "Administrative Rescission" if COMMISA breached the contract or abandoned its work; another clause required COMMISA to post performance bonds.

2.

Difficulties arose, in part over PEP's insistence that the platforms be fully constructed before being put into place in the Gulf of Mexico, something COMMISA considered impractical given the weight of the completed platforms. Logistics and cost issues abounded, prompting the parties to execute a new contract in May 2003. The 2003 contract contained virtually-identical arbitration and administrative rescission clauses.

The 2003 contract failed to resolve the parties' differences, and the conflict reached climax in March 2004 when PEP, alleging that COMMISA had failed to meet contractual milestones and had abandoned the project, gave notice of its intent to administratively rescind the contract. PEP seized the platforms, which were 94 percent complete; ejected COMMISA from the work sites; and gave notice by letter of its intention to administratively rescind the contracts. After a fruitless conciliation effort, COMMISA filed a demand for arbitration with the International Chamber of Commerce in December 2004. When PEP informed COMMISA two weeks later that it was indeed effecting administrative rescission, COMMISA filed an amparo action in the District Court on Administrative Matters for the Federal District ("Mexican District Court") challenging the constitutionality, appropriateness, and timeliness of PEP's administrative rescission1; COMMISA lost on all counts.

During the pendency of the amparo action, arbitration proceedings began in Mexico City in May 2005, with the active participation of both parties.

In November 2006, the arbitration panel issued its Preliminary Award, finding that it possessed jurisdiction over the dispute and enjoining PEP from attempting to collect on the performance...

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