Blanco v. Banco Indus. de Venezuela, S.A.

• Decision Date: 10 June 1993
• Docket Number: No. 242,D,242
• Citation: 997 F.2d 974
• Parties: Pedro Pablo BLANCO, F. and Jesus Vasquez Mancera, as Trustees for Proyecfin de Venezuela, S.A., Plaintiffs-Appellees, Inversiones Eufrates, S.A., Inversiones Gusanca, C.A., Plaintiffs-Intervenors-Appellants, v. BANCO INDUSTRIAL DE VENEZUELA, S.A., Defendant-Appellee. ocket 92-7523.
• Court: U.S. Court of Appeals — Second Circuit

Page 974

997 F.2d 974

Pedro Pablo BLANCO, F. and Jesus Vasquez Mancera, as

Trustees for Proyecfin de Venezuela, S.A., Plaintiffs-Appellees, Inversiones Eufrates, S.A., Inversiones Gusanca, C.A., Plaintiffs-Intervenors-Appellants, v. BANCO INDUSTRIAL DE VENEZUELA, S.A., Defendant-Appellee.

No. 242, Docket 92-7523.

United States Court of Appeals,

Second Circuit.

Argued Oct. 21, 1992.

Decided April 30, 1993.

As Amended June 10, 1993.

Stuart L. Potter, New York City (David J. McCarthy, Butler, Fitzgerald & Potter, of counsel), for plaintiffs-appellees Pedro Pablo Blanco, F. and Jesus Vasquez Manera, as Trustees for plaintiff-appellee Proyecfin De Venezuela, S.A.

Sidney B. Silverman, New York City (Jay H. Schafrann, Joan T. Harnes, Harold B. Obstfeld, John F. Harnes, Silverman, Harnes, Obstfeld & Harnes, of counsel), for plaintiffs-intervenors-appellants Inversiones Eufrates, S.A. and Inversiones Gusanca, C.A.

Janis M. Meyer, New York City (P.B. Konrad Knake, Henry Diamond, White & Case, of counsel), for defendant-appellee Banco Industrial De Venezuela, C.A.

Before: OAKES, NEWMAN, and MAHONEY, Circuit Judges.

MAHONEY, Circuit Judge:

This is an appeal from a judgment entered April 8, 1992 in the United States District Court for the Southern District of New York, Vincent L. Broderick, Judge, that dismissed this action on forum non conveniens grounds, and from an order of that court entered May 4, 1992 that adhered to that judgment upon reargument, 141 B.R. 25.

The district court ruled that the Southern District of New York was an inconvenient forum to resolve a contract dispute between Venezuelan entities in a litigation commenced in the Supreme Court of the State of New York, County of New York, pursuant to a contractual provision permitting legal proceedings to be brought in the state courts of New York or federal courts located in New York, and removed to the United States District Court for the Southern District of New York pursuant to 28 U.S.C. § 1441(d).

We modify, and affirm as modified, the judgment of the district court, and remand for further proceedings.

Background

This action arises out of the construction and development of a large, privately owned, residential apartment development in Maracay, Venezuela (the "Project"). On March 19, 1980, Proyecfin de Venezuela, S.A., a construction contractor, and a number of its subsidiaries (collectively "Proyecfin"), together with defendant-appellee Banco Industrial de Venezuela, S.A. ("BIV"), a Venezuelan bank whose outstanding stock is predominantly owned by the government of Venezuela, entered into an agreement (the "Loan Agreement") with a consortium of Middle East banks (the "Consortium"), not party to this action, under which the Consortium agreed to lend Proyecfin $43 million for the construction of the Project. The amount of the loan was subsequently increased to $63 million. BIV guaranteed Proyecfin's obligations under the Loan Agreement. BIV and Proyecfin also entered into an agreement (the "Supervisory Agreement") by which BIV undertook to: (1) act as trustee of all funds advanced by the Consortium for the Project; (2) make progress payments to Proyecfin based upon the progress of construction; and (3) monitor Proyecfin's performance.

Section 30(A) of the Loan Agreement (the "Forum Provision") states:

[Proyecfin and BIV agree] that any legal action or proceedings arising out of or in connection with this Agreement may be brought [emphasis added] in the High Court of Justice in England, the Courts of the State of New York, the Courts of the United States of America in New York or the Courts of the City of Caracas, Venezuela, irrevocably submit[ ] to the jurisdiction of each such court and agree[ ] that any writ, judgment or other notice of legal process shall be sufficiently served on [them] (i) in connection with proceedings in England, if delivered to the Law Debenture Corporation, Limited at Estates House, 66 Gresham Street, London, EC2V 7HX or its other registered office for the time being and (ii) in connection with proceedings in New York, if delivered to CT Corporation System at 277 Park Avenue, New York, N.Y. 10017, U.S.A. or [its other] principal place of business in New York for the time being.

In addition, the Loan Agreement contains implementing provisions regarding issuance of process, enforcement and execution of court orders and judgments, and waiver of any immunity therefrom, specifically including (in the case of actions in state or federal courts in New York) any immunity provided by the Foreign Sovereign Immunities Act of 1976 (the "FSIA"), Pub.L. No. 94-583, 90 Stat. 2891 (codified as amended in scattered sections of 28 U.S.C.). The Loan Agreement also provides that it is to be "governed by and construed in accordance with English law," and "signed in the English language and subsequently translated into the Spanish language[,] provided however that in the event of any conflict arising as to the interpretation of any provision the English version shall prevail." It further specifies that "[t]he dollar is the currency of account ... hereunder," and that payments thereunder are to be made in New York City.

The Supervisory Agreement stipulates that the Loan Agreement, "together with all its annexes, is understood to be fully reproduced herein and is considered to form part of this contract." It also contains the following provision (the "Caracas Provision"): "For all purposes deriving from this contract, the city of Caracas, Venezuela, is chosen as special and exclusive domicile, to whose Court the parties expressly agree to submit."

Proyecfin sought protection in a Venezuelan bankruptcy court (the "Bankruptcy Court") in December 1983, allegedly as a result of BIV's failure to make required payments to Proyecfin pursuant to, and other breaches of, the Supervisory Agreement. By orders dated December 13, 1983, the Bankruptcy Court permitted Proyecfin to operate as a debtor-in-possession under the Bankruptcy Court's supervision. Proyecfin subsequently commenced a separate action against BIV in a Venezuelan court in January 1984. This action has not been prosecuted. Proyecfin contends that the Venezuelan court in which the action was filed frustrated its prosecution by refusing to order service of process, resulting in Proyecfin's decision to sue BIV in New York.

Proyecfin commenced the instant action against BIV in the Supreme Court of the State of New York, County of New York, on July 3, 1984, claiming that BIV had withheld from Proyecfin funds and documentation necessary for the sale of completed housing units, in violation of the Supervisory Agreement, and also charging breach of fiduciary duty, conversion, and wrongful exaction of fees and interest. BIV removed the action to the United States District Court for the Southern District of New York pursuant to 28 U.S.C. § 1441(d) (1988).

The district court then dismissed the action sua sponte for lack of subject matter jurisdiction, and an appeal was taken to this court. Our opinion on that appeal is reported as Proyecfin de Venezuela, S.A. v. Banco Industrial de Venezuela, S.A., 760 F.2d 390 (2d Cir.1985) ("Proyecfin I "), familiarity with which is assumed.

In Proyecfin I, we reversed the district court's ruling on subject matter jurisdiction. We determined that the Forum Provision of the Loan Agreement was incorporated by reference in the Supervisory Agreement as a result of the latter's wholesale adoption of the Loan Agreement. 760 F.2d at 393. We then held that: (1) BIV, an instrumentality of the Venezuelan government, had contractually waived its sovereign immunity from litigation in the United States in accordance with 28 U.S.C. 1605(a) (1982), a provision of the FSIA; (2) BIV had contractually agreed (via the Forum Provision) ¹ to be sued in New York and thus had consented to jurisdiction here; and (3) BIV had not waived its right to remove the action to federal court. 760 F.2d at 397. We also noted that:

We are not concerned that United States courts will become the courts of choice for local disputes between foreign plaintiffs and foreign sovereign defendants and thus be reduced to "international courts of claims". Verlinden [B.V. v. Central Bank of Nigeria, 461 U.S. 480, 490, 103 S.Ct. 1962, 1969, 76 L.Ed.2d 81 (1983) ]. The traditional doctrine of forum non conveniens is still applicable in cases arising under the [FSIA]. Appellee, of course, may raise that issue in the district court on remand from this Court.

760 F.2d at 394 (citations partially omitted).

Subsequently, on September 15, 1985, Proyecfin sought a continuation of its debtor-in-possession status from the Bankruptcy Court. The Attorney General of Venezuela objected to Proyecfin's motion, and requested that the Bankruptcy Court appoint trustees to supervise the liquidation of Proyecfin. On November 14, 1986, after consulting with Proyecfin's creditors, the court granted the Attorney General's request and appointed two provisional trustees, Pedro Pablo Blanco, F. and Jesus Alberto Vasquez Mancera (the "Trustees"), the plaintiffs-appellees herein. On June 9, 1987, although BIV had requested the confirmation of only one trustee, Mr. Blanco, both Trustees were confirmed as final trustees by the Bankruptcy Court.

BIV thereafter submitted to the Bankruptcy Court a proof of claim amounting to $445,037,740 for guarantee payments made to the Consortium pursuant to the Loan Agreement, advances to Proyecfin pursuant to the Supervisory Agreement, and independent direct loans made by BIV to Proyecfin, plus interest accruing on these debts, paralleling counterclaims asserted by BIV in the instant action. The Trustees opposed BIV's proof of claim on various grounds and submitted various setoff claims on behalf of Proyecfin, including a claim for approximately $7,200,000 representing expenses incurred by Proyecfin in furtherance of the Project. Proyecfin submitted a more extensive opposition to all the...