Aguas Lenders Recovery Group v. Suez, S.A.

• Decision Date: 23 October 2009
• Docket Number: Docket No. 08-1589-cv.
• Citation: 585 F.3d 696
• Parties: AGUAS LENDERS RECOVERY GROUP LLC, Plaintiff-Appellant, v. SUEZ, S.A., Sociedad General de Aguas de Barcelona, S.A., Defendants, Agua y Saneamientos Argentinos, S.A., Defendant-Appellee.<SMALL><SUP>*</SUP></SMALL>
• Court: U.S. Court of Appeals — Second Circuit

585 F.3d 696

AGUAS LENDERS RECOVERY GROUP LLC, Plaintiff-Appellant, v. SUEZ, S.A., Sociedad General de Aguas de Barcelona, S.A., Defendants, Agua y Saneamientos Argentinos, S.A., Defendant-Appellee.^*

Docket No. 08-1589-cv.

United States Court of Appeals, Second Circuit.

Argued: April 15, 2009.

Decided: October 23, 2009.

Jennifer R. Scullion (Louis M. Solomon, Daniella M. Rudy, on the brief), Proskauer Rose LLP, New York, NY, for Plaintiff-Appellant.

John J. Kerr, Jr., Simpson Thatcher & Bartlett LLP, New York, NY, for Defendant-Appellee.

Before: WINTER, CABRANES, and SACK, Circuit Judges.

WINTER, Circuit Judge:

Aguas Lenders Recovery Group, LLC ("ALRG") appeals from Judge Carter's dismissal of its complaint on the ground of forum non conveniens. The principal issue is whether, for the purposes of the doctrine of forum non conveniens, a non-signatory to an agreement may be bound by a forum selection clause and forum non conveniens waiver contained in contracts entered into by an entity alleged to be a predecessor in interest.

We hold that such a non-signatory may be so bound. We therefore vacate the judgment and remand for limited discovery and a hearing on whether Agua y Saneamientos Argentinos, S.A. ("AySA") is a successor in interest to Aguas Argentinas, S.A. ("Aguas").

BACKGROUND

This is an appeal from a dismissal of a complaint without a factual hearing on the grounds of forum non conveniens. We therefore accept the facts alleged in the complaint as true. See Wiwa v. Royal Dutch Petroleum Co., 226 F.3d 88, 93 n. 1 (2d Cir.2000).¹

In 1992, the Republic of Argentina solicited bids from private companies for a thirty-year concession, which allowed the winning bidder to modernize and operate Buenos Aires' residential water and sewer system and collect fees for its use. Until then, a wholly government-owned company, Obras Sanitarias de la Nación, had provided the services.

Aguas was the winning bidder. It consisted of a consortium of seven companies that included two multinational water companies, Suez, S.A., and Sociedad General de Aguas de Barcelona, S.A. On April 28, 1993, Aguas entered into the concession agreement with the Argentine government and was thereafter incorporated under the laws of Argentina. Under the terms of the concession, the Argentine government ceded to Aquas the right to possess and use certain assets necessary to the operation and maintenance of the water and sewer system, but expressly reserved title to the assets. Aguas provided water and sewer services to Buenos Aires from 1993 to 2006.

The concession was expected to require $4.1 billion in capital investments over its duration, but a substantial portion had to be invested early for modernization and expansion of the systems. Aguas secured financing, primarily by recourse to international capital markets, including the United States. On July 15, 2004, following a series of defaults on the loan agreements, Aguas restructured a number of these loans in two interim financial agreements ("IFA's"). Pursuant to these agreements, the lenders bought out some of Aguas's debt in exchange for payment of past-due interest according to a schedule of installments. The IFA's contained a New York forum selection clause and a forum non conveniens waiver (collectively "forum provisions"). They also contained a New York choice of law provision and a provision binding "successors and assigns."²

In January 2005, Aguas defaulted on the interest payments owed under the IFA's. Subsequently, in July 2005, Aquas initiated a contractually established procedure for the termination of the concession. Thereafter, on March 21, 2006, the Argentine government terminated the concession, alleging that Aguas had failed to meet its obligations under the concession, at least in part due to toxic levels of nitrates found in various water sources. The Argentine government temporarily assumed operation of the water and sewer facilities pursuant to an executive decree. It soon after assigned the concession to AySA, the appellee here, an entity incorporated on March 3, 2006 for that purpose.

The Argentine government currently owns ninety percent of AySA's stock while AySA's employees, virtually all of whom are former employees of Aguas, own the remaining ten percent pursuant to an employee stock ownership program. The assets transferred to AySA included not only the concession itself but physical assets that had been built, improved, or acquired with the money borrowed by Aguas. No payment was made to Aguas for the transfer of the assets, or to any of its lenders on the outstanding debt.

After the Argentine government terminated the concession with Aguas, Aguas filed for protection from its creditors on April 28, 2006. At the time of the district court's decision under review, Aguas's insolvency proceedings were pending in Argentina.

ALRG was formed under the laws of New York. It is composed of original and subsequent parties to various loan agreements with Aguas between 1998 and 2004. ALRG's constituent members include entities organized under the laws of Delaware, Germany, the Cayman Islands, the British Virgin Islands, and the Bahamas. On September 29, 2006, these various lenders assigned to ALRG their claims to unpaid amounts under financing agreements with Aguas. ALRG appears to hold no assets other than the claims based on the loan agreements.

On September 29, 2006, ALRG brought the present action against AySA to recover on the defaulted loans and IFA's.³ ALRG's complaint alleged that AySA is "not entitled to step into Aguas'[s] shoes, yet disclaim Aguas'[s] loans" and is liable to ALRG for the full amount of Aguas's loans, unpaid interest, and other charges. Specifically, ALRG alleged that AySA: (i) as successor in interest to Aguas, breached the underlying loan agreements, which had been modified by the IFA's; and (ii) received a fraudulent transfer of Aguas's assets to AySA.

On March 3, 2008, the district court dismissed ALRG's claims against AySA on the ground of forum non conveniens. See Aguas Lenders Recovery Group, LLC v. Suez S.A., 2008 WL 612669 (S.D.N.Y. Mar.3, 2008). The court reasoned that "district courts need not afford great deference to waivers of forum non conveniens upon non-signatories, even where the non-signatory is an alleged successor to the waiver." Id. at *4 (citing Yung v. Lee, 160 Fed.Appx. 37, 40 (2d Cir.2005)). It concluded that because neither party to the suit was a signatory to the IFA's and the defendant "did not even exist when the agreements were created," ALRG could not invoke the forum provisions. Id. Absent a binding contractual provision, the district court declined to apply the strict, contract-based forum non conveniens analysis dictated by M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972), which held that contractual forum selection clauses should be enforced absent a showing of unreasonableness, fraud, or overreaching. Instead, applying the traditional forum non conveniens analysis set out by Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 67 S.Ct. 839, 91 L.Ed. 1055 (1947), the district court concluded dismissal was appropriate. See Aguas, 2008 WL 612669 at *4, *9. ALRG then brought this appeal.

DISCUSSION

A district court's dismissal of a complaint on the ground of forum non conveniens is reviewed for abuse of discretion. Norex Petroleum Ltd. v. Access Indus., Inc., 416 F.3d 146, 153 (2d Cir.2005). A district court abuses its discretion in dismissing on the ground of forum non conveniens when its decision "(1) rests either on an error of law or on a clearly erroneous finding of fact, or (2) cannot be located within the range of permissible decisions, or (3) fails to consider all the relevant factors or unreasonably balances those factors." Pollux Holding Ltd. v. Chase Manhattan Bank, 329 F.3d 64, 70 (2d Cir.2003) (citations omitted). We disagree with the district court's conclusion that because AySA was a non-signatory of the contracts at issue, it was per se not bound by their forum provisions for purposes of applying the doctrine of forum non conveniens.

The enforcement of forum selection clauses in international disputes is governed by M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972). M/S. Bremen noted the important role of forum selection and choice of law clauses in eliminating uncertainty in international commerce and held that such clauses are entitled to a presumption of enforceability, unless "enforcement would be unreasonable and unjust, or ... the clause was invalid for such reasons as fraud or overreaching." M/S Bremen, 407 U.S. at 15, 92 S.Ct. 1907. Thus, where parties contract to a so-called mandatory forum selection clause, in which they agree in advance on a forum that is exclusive of all others, the choice of forum is accorded the M/S Bremen presumption of enforceablity. Phillips v. Audio Active Ltd., 494 F.3d 378, 386 (2d Cir.2007).

In contrast, where parties contract to a so-called permissive forum selection clause, that is, one that designates a forum in advance, but does not preclude a different choice, the M/S Bremen presumption of enforceability does not apply. See id.; see also Blanco v. Banco Industrial de Venezuela, S.A., 997 F.2d 974, 979-80 (2d Cir.1993). Instead, in such cases, the traditional forum non conveniens standards articulated by the Supreme Court in Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 67 S.Ct. 839, 91 L.Ed. 1055 (1947), apply. Blanco, 997 F.2d at 980; see also Iragorri v. United Techs. Corp., 274 F.3d 65, 71-74 (2d Cir.2001) (en banc) (articulating three-step forum non conveniens analysis based on Gilbert).

We need not decide whether the forum selection clauses in the present matter are, standing alone, mandatory or permissive. At least one of the contracts— one of the IFA's—contains a waiver of any claims of forum non conveniens in addition to a forum selection clause. The combination...