EGI-VSR, LLC v. Huber
| Decision Date | 27 March 2020 |
| Docket Number | 19 Civ. 6099 (ER) |
| Parties | EGI-VSR, LLC, Petitioner, v. RICHARD LESLIE HUBER, ALEXANDER LESLIE HUBER, CATREX LIMITADA, and DICREX LIMITADA, Respondents. |
| Court | U.S. District Court — Southern District of New York |
Ramos, D.J.:
This case concerns a foreign arbitral award entered in favor of EGI-VSR, LLC ("EGI"). On June 28, 2019, EGI petitioned this Court to recognize and enforce that award pursuant to the Inter-American Convention on International Commercial Arbitration of January 30, 1975 (the "Panama Convention") as incorporated by the Federal Arbitration Act ("FAA"), 9 U.S.C. § 300 et seq. The respondents—Richard Leslie Huber ("Richard"), Alexander Leslie Huber ("Alex"), Catrex Limitada ("Catrex"), and Dicrex Limitada ("Dicrex," and collectively the "Hubers")—have moved to dismiss the petition, arguing (1) that the Court lacks personal jurisdiction over three of the respondents, (2) that the award is unenforceable under specific provisions of the Panama Convention, and (3) that the petition is time-barred. Although the Court disagrees with the Hubers' first and second positions, it finds that the petition is time-barred and, accordingly, GRANTS the motion to dismiss.
In 1999, Juan and Jorge Coderch, two Chilean businessmen, secured an investment from Richard Huber, a New York resident, to help kickstart Viña San Rafael ("VSR"), a boutique Chilean winery. Resp'ts' Mem. Supp. Mot. Dismiss 4-5, Doc. 14 (hereinafter "Resp'ts' Mem. MD"). In 2001, Alex Huber—Richard's son and a U.S. citizen living in Chile—joined VSR, where he served as CFO and helped to raise capital for the company. Id. at 5; Alexander L. Huber Decl. ¶¶ 10-13, Doc. 17 (hereinafter "A.H. Decl."). In 2002, while VSR was still relatively young, Richard became familiar with Sam Zell, the founder of EGI—a limited liability company incorporated in Delaware with a principal place of business in Chicago, Illinois. After learning of VSR, Zell purportedly asked Richard about investing in the company. Pet. to Recognize and Enforce Foreign Arbitral Award ¶ 1, 5, Doc. 1 (hereinafter "Pet."). Although the Hubers claim to have played no role in negotiating EGI's eventual investment, Richard did introduce Zell to Juan Coderch, the two of whom negotiated over several months in 2005. Id. ¶ 5.
On October 19, 2005, EGI purchased 4,240,000 preferred shares of VSR's stock, making it a minority shareholder of VSR. Id. ¶ 11. Over time, EGI purchased a total of 7,544,449 shares of VSR, representing an investment of approximately $17 million. Alex and Richard, on the other hand, claim that they collectively owned less than 18% of VSR's total common shares, never held more than one seat on the Board of Directors, and never had any control over Board or management decisions. Resp'ts' Mem. MD 5-6. In 2008, Alex and Richard transferred ownership of their shares to Catrex and Dicrex, respectively, id. at 5, both of which are limited liability partnerships formed under Chilean law for the sole purpose of holding the Hubers' shares in VSR, id. at 4, 17.
As a part of its initial investment, EGI requested that all of VSR's shareholders enter an agreement to protect EGI's interests by, inter alia, creating a Put Right exercisable by EGI in theevent that VSR's Controlling Shareholders breached specific provisions of the agreement.1 Vail. Decl. Supp. Petition I, Ex. E ¶ 10, Doc. 4 (hereinafter the "Shareholders' Agreement"). Once exercised, the Put Right required the Controlling Shareholders to "purchase all of [EGI's] shares at a price equivalent to 103% of the preferred liquidation price within a set deadline." Pet. 4 (citing Shareholders' Agreement ¶ 10). In addition to the Put Right, the Shareholders' Agreement provided that "[a]ny difficulty or controversy arising among the parties with respect to [the Agreement] shall be submitted to Arbitration," which was to be held in Chile. ¶ 23.
By early 2008, the Hubers were concerned that VSR was losing money and underutilizing its assets, and in August 2008, after they allegedly attempted to rectify those issues to no avail, Alex was, according to the Hubers, ousted from the company. Resp'ts' Mem. MD 6; R.H. Decl. ¶¶ 26-28; A.H. Decl. ¶¶ 28-30. More than a year later, on September 2, 2009, EGI expressed in a letter to the Controlling Shareholders that it believed certain activities had violated the Shareholders' Agreement in a manner that triggered the Put Right. Resp'ts' Mem. MD 6-7. On October 13, 2009, EGI sent another letter to the Controlling Shareholders, this time officially exercising the Put Right and invoking the Agreement's arbitration clause. On November 27, 2009, the parties submitted their dispute to arbitration. Pet. ¶¶ 14-15.
The Hubers claim that, although they were "nominally" named as respondents in the arbitration, "EGI never alleged that they engaged in wrongdoing" and, as the Hubers understood from EGI's conduct and conversations, "EGI saw the Hubers as allies and had no intention of enforcing the Put Right against them." Resp'ts' Mem. MD 7; accord. R.H. Decl. ¶¶ 35-36, 50.Supposedly relying on their understanding of EGI's conduct, the Hubers refrained from mounting any affirmative defense during arbitration and allegedly assisted EGI in making its claims against Juan and Jorge Coderch, to whom the Hubers attribute fault for the misconduct leading to the arbitration. Resp'ts' Mem. MD 7-8; R.H. Decl. ¶¶ 37-38. Moreover, they claim that EGI made "repeated assurances that [they] would never seek to collect from the Hubers" or "betray their trust in supporting EGI's efforts to win the arbitration against the Coderches." Resp'ts' Mem. MD 8, 10; accord. R.H. Decl. ¶¶ 41-51.
EGI views the events surrounding the arbitration in a different light. First, they suggest that while the Hubers "chose" not to present any defense at arbitration, they were neither prevented from doing so nor lulled into abstaining. Pet'r's Mem. Supp. Pet. & Opp'n Mot. Dismiss 16, Doc. 20 (hereinafter "Pet'r's Mem. MD"). Second, they note that they did not believe that the Hubers were blameless and that, during arbitration, EGI alleged the Hubers had "induced [EGI] to invest and . . . voted to authorize the wrongful actions that triggered [EGI's] put right." Id. 17 ). Lastly, they note that, during the proceedings, EGI submitted that they were "not an ally of the Huber Parties" and were not engaged in any joint action or agreement therewith. Id (quoting Award at 53).
In any event, the arbitrator issued a final award on January 13, 2012, which determined that the Controlling Shareholders had violated numerous sections of the Shareholders' Agreement. Pet. ¶ 16. As a result, the arbitrator ordered "each and every one of the respondents . . . [to] buy and pay for all the shares of the claimant, [EGI], in the company [VSR] in the way requested in the claim." Id. EGI maintains that, based on the various purchase prices and share totals authorized by the Final Award, they are entitled to recover $28,700,450.07, an amountequaling the total put purchase price, from any of the respondents to the arbitration, all of whom were held jointly and severally liable thereunder. Id. ¶¶ 17-18, appx. A.
On January 12, 2015, EGI initiated enforcement proceedings against Juan Coderch in the Southern District of Florida. Id. ¶ 18. On June 4, 2018, that Court issued an opinion recognizing the award and requiring Coderch to pay the aforementioned put purchase price of $28,700,450.07. Id. At this time, Coderch has not satisfied any portion of that judgment, and he has appealed the decision to the Eleventh Circuit. Id.
About a month before bringing that action, EGI entered into an agreement with the Hubers that prevented EGI from enforcing the award against them, tolled "the statute of limitations and other laws, rules or treaties that might in any jurisdiction time bar or extinguish any [of EGI's claims concerning VSR], or the enforcement [thereof] or the ability to recover [thereunder]," and barred the Hubers from raising all statute of limitations-based defenses "from the date of this Agreement until the expiration of this Agreement." Vail. Decl. I, Ex. B ¶¶ 1-2 (hereinafter the "Standstill Agreement"). Both parties were empowered to terminate the agreement after providing sufficient notice, at which point EGI could seek to enforce the award against the Hubers. Id. ¶ 8.2 On May 7, 2019, EGI exercised that right and sent notice to the Hubers that, in thirty days from that date, the Standstill Agreement would be terminated. Vail. Decl. I, Ex. D (hereinafter the "Termination Letter").
Not long after, on June 28, 2019, EGI initiated this action, seeking to enforce the award against the Hubers pursuant to the Panama Convention and the FAA. 9 U.S.C. § 300 et seq. On August 16, 2019, the Hubers moved to dismiss that petition for lack of jurisdiction, untimeliness, and unenforceability under the Panama Convention. Resp'ts' Mem. MD 1-4. EGI subsequently moved to strike a portion of the second declaration submitted by the Hubers' purported "Chilean law expert," Professor Carolina Coppo Diez, id. at 2, which concerned the availability of joint and several liability under Chilean law, Carolina Coppo Diez Decl. II, Doc. 27 (hereinafter "Coppo Decl. II"). In the alternative, EGI requested that it be permitted to submit an additional declaration challenging that of Professor Coppo. Pet'r's Mot. Strike, Doc. 28 (hereinafter "Mot. Strike").
Arbitral awards are not self-enforcing and must therefore be "given force and effect by being converted to judicial orders by courts." Power Partners MasTec, LLC v. Premier Power Renewable Energy, Inc., No. 14 Civ. 8420 (WHP), 2015 WL 774714, at *1 (S.D.N.Y. Feb. 20, 2015) (quoting D.H. Blair & Co., Inc. v. Gottdiener, 462 F.3d 95, 104 (2d Cir. 2006)). The FAA provides for enforcement of foreign...
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