Belize Telecom, Ltd. v. Government of Belize

• Decision Date: 28 May 2008
• Docket Number: No. 06-12158.,06-12158.
• Citation: 528 F.3d 1298
• Parties: BELIZE TELECOM, LTD., Innovative Communications Company, LLC, Plaintiffs-Appellants, v. GOVERNMENT OF BELIZE, The, Defendant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

528 F.3d 1298

BELIZE TELECOM, LTD., Innovative Communications Company, LLC, Plaintiffs-Appellants, v. GOVERNMENT OF BELIZE, The, Defendant-Appellee.

No. 06-12158.

United States Court of Appeals, Eleventh Circuit.

May 28, 2008.

Lanny J. Davis, Raymond G. Mullady, Jr., Orrick, Herrington & Sutcliffe, LLP, Washington, DC, George J. Wade, Shearman & Sterling, New York City, Alexander Angueira, Stearns, Weaver, Miller, Weisler, Alhadeff & Sitterson, PA, Miami, FL, for Plaintiffs-Appellants.

Barry R. Davidson, Thomas R. Julin, Hunton & Williams, Jane W. Moscowitz, Moscowitz & Moscowitz, P.A., Joel S. Perwin, Miami, FL, for Defendant-Appellee.

Appeal from the United States District Court for the Southern District of Florida.

Before ANDERSON and PRYOR, Circuit Judges, and ALBRITTON,^* District Judge.

ANDERSON, Circuit Judge:

Innovative Communications Company ("ICC") and Belize Telecom ("BT") appeal from a district court judgment holding that the Government of Belize did not breach the parties' agreements or the Belize Telecommunications Limited ("BTL") Articles of Association when it removed six directors from the BTL board and appointed new directors in their place. Appellants also appeal the district court decision to vacate a contempt order entered against the Government of Belize prior to the district court's final adjudication of the case.

The primary issue in the parties' dispute is the proper interpretation of two of the BTL Articles that govern the appointment and removal of BTL directors. Prior to final judgment in the district court, the Belize Court of Appeals, in parallel proceedings, ruled on the interpretation of one of these articles, Article 90(D)(ii). The district court's judgment is, in part, contrary to the Belize court's interpretation. Therefore, in reviewing the district court's interpretation of the BTL Articles of Association, this Court must consider whether the district court should have deferred to the Belizean judgment in regard to Article 90(D)(ii). For the reasons explained below, we affirm the district court's judgment in part, reverse in part, and remand for further proceedings.

I. FACTS

The dispute in this case arises from a sale of stock in Belize Telecommunications Limited and the subsequent removal and election of directors to the BTL Board. BTL is a Belizean limited liability company and the primary provider of telecommunications in Belize. In the fall of 2003, the Government of Belize ("Government") entered into negotiations with Innovative Communications Company for the sale of BTL shares. Under the anticipated agreement, ICC would gain a super-majority ownership interest in BTL. ICC negotiated a memorandum of understanding and share purchase agreement with the Government, but created a subsidiary in Belize, Belize Telecom, to close the share purchase agreement and take ownership of the shares.

The BTL Articles of Association provide for an eight-member board. There are three classes of shares: the special share, "B" shares, and "C" shares. Two directors are appointed and removed by the holder of the special share. A majority of B shareholders can appoint and remove another two directors, known as B directors. Pursuant to Article 90(D)(i), a majority of C shareholders "apart from the holder of the Special Share or any Associate of such holder" can appoint the remaining four directors, known as C directors. However, under Article 90(D)(ii), the special shareholder can appoint and remove two of the four C directors "so long as it [the special shareholder] is the holder of `C' ordinary shares amounting to 37.5% or more of the issued share capital of the Company." Under Article 90(E), C directors appointed pursuant to Article 90(D)(i) can be removed by a majority of C shareholders. Article 90(E) provides: "Each `C' Director shall hold office subject only to Article 112 of Table A as extended hereunder, but (except as regards any Director appointed pursuant to paragraph D(ii) above) may at any time be removed from office by the holders of a majority of the `C' ordinary shares." Thus, the C directors appointed under Art. 90(D)(ii) are removable by the special shareholder and are specifically exempted from the Article 90(E) removal provision.¹

Pursuant to the parties' agreement, ICC and BT (collectively "appellants") obtained 8,000,000 class B shares, 23,294,114 class C shares, and the special share. Appellants thus owned 100% of the B shares and approximately 79% of the C shares. In accordance with these super-majority shareholdings, on April 14, 2004, appellants appointed three new C directors, two new B directors, and two special share directors.

After appellants were unable to obtain financing to complete their payment for the BTL shares, the parties entered into a new set of agreements. These agreements—the payment agreement, the forbearance agreement, and the share pledge agreement—obligated appellants to make payments to the International Bank of Miami ("Bank") on unrelated debts owed to the Bank by the Government. In exchange for making these payments, the Government would extend the deadline for appellants' debt and give a dollar-for-dollar credit against the amount owed for the payments made to the Bank. In addition, appellants pledged part of their BTL shares as security for the agreement. If appellants defaulted on a payment, the Government could cure the default and receive the shares pledged as security in return. Appellants retained their voting rights in the BTL shares as long as there was no default.

Appellants made the scheduled debt payments from May to September 2004. However, appellants failed to make the November 22, 2004 payment. The Government stepped in to cure the default, resulting in an assignment of the pledged shares to the Government on November 24, 2004. Appellants appointed an entirely new board of directors on November 23, 2004. On December 10, 2004, the Government granted appellants a seventy-five day extension to make the missed payment, giving them until February 7, 2005. Unable to obtain financing, appellants failed to make the payment on February 7, 2005. Two days later, the Government seized the pledged BTL shares, removed all four C directors who had been appointed by appellants and appointed four new C directors.² At that time, appellants owned the special share, a minority of B shares, and approximately 38% of the C shares, amounting to approximately 30% of the issued share capital.³ The Government owned the majority of B shares and approximately 41% of the C shares. The remaining C shares were owned by minority shareholders.

In response to the Government's appointments, appellants filed suit in the District Court for the Southern District of Florida, pursuant to the non-exclusive forum selection clause in the parties' payment and share pledge agreements. The district court granted a preliminary injunction on March 11, 2005, reinstating appellants' four C directors to office and requiring that any further removal and appointment of C directors be conducted in accordance with the BTL articles. On March 21, 2005, the Government and minority C shareholders, who together held a majority of the C shares, voted to replace the C directors appointed by appellants. Appellants initiated contempt proceedings against the Government, resulting in a contempt order entered against the Government after an evidentiary hearing. The contempt order provided for attorneys' fees and a per diem fine of $50,000 that would accrue until the Government complied with the preliminary injunction. After a bench trial in June 2005, the district court held for the Government, finding that the Government had breached neither the share pledge agreement nor the Florida Uniform Commercial Code. The court also vacated the preliminary injunction and contempt order.

After the issuance of the preliminary injunction, the Government filed an action in Belize for a declaratory judgment on the proper interpretation of the BTL Articles of Association. On April 6, 2005, Chief Justice Abdulai Conteh of the Belize Supreme Court⁴ heard the case. Both parties participated in the proceedings. Justice Conteh issued a ruling on the interpretation of Article 90(D)(ii) that was favorable to the Government's position. The Government urged the district court to recognize the ruling at trial. Holding that it was not obligated to defer to the Belizean decision, the district court considered the opinion along with the other evidence presented at trial. After an appeal to the Belize Court of Appeals resulted in a reversal of the Supreme Court decision, appellants filed a motion for reconsideration with the district court. The district court upheld its earlier decision not to defer to the Belizean court decisions and declined to change its ruling. In the initial briefs, neither party challenged the district court's refusal to defer. However, because this case involves deference to a foreign court and therefore raises international comity concerns, we sought supplemental briefing. We consider the propriety of these rulings below and find that the district court should have abstained from ruling on Article 90(D)(ii).

II. STANDARDS OF REVIEW

This Court reviews a district court's conclusions of law and foreign law de novo. MiTek Holdings v. Arce Eng'g Co., Inc., 89 F.3d 1548, 1554 (11th Cir. 1996); Escobio v. Am. Int'l Group, Inc., 262 F.3d 1207, 1211 (11th Cir.2001). The district court's findings of fact are reviewed for clear error. Fed.R.Civ.P. 52(a)(6). We review a district court's imposition of contempt sanctions for abuse of discretion. United States v. Pennington (In re Newton), 718 F.2d 1015, 1022 (11th Cir.1983). This Court also reviews a district court's grant or denial of comity to a foreign judgment for abuse of discretion. Daewoo Motor Am., Inc. v. Gen. Motors Corp., 459 F.3d 1249, 1256 (11th Cir.2006). A district court abuses its discretion when the court fails to apply the...