Pedro Pablo Blanco F. v. BANCO INDUSTRIAL, 84 Civ. 5352 (VLB).
| Decision Date | 30 April 1992 |
| Docket Number | No. 84 Civ. 5352 (VLB).,84 Civ. 5352 (VLB). |
| Citation | 141 BR 25 |
| Parties | PEDRO PABLO BLANCO F. and Jesus A. Vasquez Mancera, as Trustees for Proyecfin De Venezuela, S.A. and Inversiones Eufrates, S.A. and Inversiones Gusanco, C.A., Plaintiffs-Intervenors, v. BANCO INDUSTRIAL DE VENEZUELA, S.A., Defendant. |
| Court | U.S. District Court — Southern District of New York |
Stuart Potter, Butler, Fitzgerald & Potter, New York City.
White & Case, New York City, for Banco Industrial De Venezuela.
Sidney B. Silverman, Silverman, Harnes, Obstfeld & Harnes, New York City, for Proyecfin De Venezuela.
This litigation involves a large construction project in Venezuela conducted by a Venezuelan corporation, Proyecfin de Venezuela, S.A. ("the corporation") and financed in part by a Venezuelan bank, Banco Industrial de Venezuela ("the bank") with offices in New York City under a loan agreement providing for the bank to supervise aspects of the project. On July 3, 1984, this lawsuit was commenced by the corporation against the bank in New York state court alleging failure to fulfill the bank's obligations under agreements with the corporation. The suit was removed to this court and on November 14, 1984, I dismissed the action for lack of subject matter jurisdiction.
The Court of Appeals reversed this dismissal on April 4, 1985, holding that the court possessed jurisdiction under 28 U.S.C. § 1605(a)(1) because the foreign governmental entities involved had waived sovereign immunity by means of a clause in the loan agreement. Proyecfin de Venezuela, S.A. v. Banco Industrial de Venezuela, S.A., 760 F.2d 390 (2d Cir.1985). The loan agreement explicitly provided that sovereign or other immunity was waived, but it did not make New York the sole or exclusive situs for litigation, nor did it contain waivers other than with respect to immunity. The Court of Appeals rejected the argument that United States courts would become "international courts of claims," noting the continued potential applicability of the doctrine of forum non conveniens:
Id. at 394.
In 1986, based on the circumstances then existing and the state of the law at that time, this court denied defendant's motion to dismiss on forum non conveniens grounds.
On November 14, 1986 an order of liquidation of the plaintiff corporation was entered by a Venezuelan bankruptcy court. The trustees for the corporation have moved to dismiss the action or to stay it until the Venezuelan bankruptcy proceeding is finally determined.
Meanwhile, I permitted parties claiming to be shareholders in the plaintiff corporation to intervene; they filed pleadings seeking relief on behalf of the corporation and individually. The defendant bank and the trustees for the plaintiff corporation have moved to dismiss the intervenors' complaint.
The principal issues presently in dispute concern whether shareholder derivative actions, or direct shareholder suits against third parties or trustees, are permissible in this case. Determination of those issues would involve factual inquiry into the actual workings of public or quasi-public sector entities in Venezuela with particular charter provisions and history, as well as into Venezuelan or other applicable corporate law in the abstract. Material factual issues — which may or may not turn out to be in genuine dispute if tested upon summary judgment — would have to be determined to dispose of the intervenors' complaint on the merits. Thus, it would appear that the motion to dismiss the intervenors' complaint on its face for failure to state a claim, or to strike portions of the intervenor complaint, should appropriately be denied. For the reasons which follow, however, these matters need not be addressed.
Where the principal entity, the affairs of which are the focus of the action, is undergoing liquidation by a foreign court, and where virtually all of the facts in dispute occurred in the foreign country conducting the liquidation and involve nationals of that country, it is no longer appropriate to retain this litigation in the United States. My decision in 1986 declining to dismiss on forum non conveniens grounds was rendered under entirely different circumstances and is not binding or persuasive in the current posture of the case.
Were plaintiff corporation's bankruptcy case being handled in the United States, an automatic stay of this litigation would be applicable under 11 U.S.C. § 362(a); litigation elsewhere can also be enjoined under 11 U.S.C. § 105(a).
Where a supervised entity such as an insurer is in liquidation in the United States, procedures are generally followed which respect the primary role of the liquidating entity in supervising the liquidation, in part to avoid favoring some claimants over others because of vicissitudes of differing forums in which the claimants are pursuing their claims. See N.Y. Insurance Law art. 74; Alliance of American Insurers v. Cuomo, 854 F.2d 591 (2d Cir.1988); Corcoran v. Ardra Ins. Co., 842 F.2d 31 (2d Cir.1988); Law Enforcement Ins. Co. v. Corcoran, 807 F.2d 38 (2d Cir.1986); Levy v. Lewis, 635 F.2d 960 (2d Cir.1980); G.C. Murphy Co. v. Reserve Insurance Co., 54 N.Y.2d 69, 444 N.Y.S.2d 592, 429 N.E.2d 111 (1981); Lac D'Amiane Du Quebec v. American Home Ins. Co., 864 F.2d 1033 (3d Cir.1988).
This lawsuit involves almost exclusively the conduct and workings of a Venezuelan public corporation and its relationship with other Venezuelan nationals and public sector entities. The lawsuit can no longer be conveniently handled in the United States without running the risk of prejudicing the orderly processing of the Venezuelan bankruptcy proceeding.
Dismissal rather than stay of the proceedings has numerous advantages to the parties and to the administration of justice. Litigation, ongoing or contemplated, in two different countries involving the same subject matter is certain to involve difficulties of coordination, and it will entail additional expense for parties and witnesses forced to deal with two jurisdictions. It will present, to the courts of either or both countries, serious questions concerning the appropriate deference which is owed to the courts of the other. All of this is contrary to the objectives set forth in Rule 1 of the Federal Rules of Civil Procedure.
Since Venezuelan litigation is already in progress involving the core treatment of the bankrupt corporation, convenience favors Venezuelan adjudication of all related claims. The Supreme Court has specifically recognized this consideration as relevant (although not by itself controlling) in Leroy v. Great Western United Corp., 443 U.S. 173, 184, 99 S.Ct. 2710, 2717, 61 L.Ed.2d 464 (1979), referring to the "desirability of consolidating similar claims in a single proceeding. . . ." Here, as in Great Western, id. at 185, 99 S.Ct. at 2717, ". . . the claim involved has only one obvious locus. . . ." Since the corporation is in bankruptcy in Venezuela, that locus must be Venezuela.
It has also become increasingly evident, especially since the plaintiff intervenors have raised issues of internal corporate affairs, that in the case at bar only a Venezuelan court can properly evaluate the nuances of factual patterns against background knowledge of local practice. An analogy suggests itself: within the United States the so-called "internal affairs doctrine" favors placement of internal corporate litigation in the state of incorporation, and district courts familiar with the law of the state of incorporation are deemed best qualified initially to interpret such law. See Leroy v. Great Western United Corp., 443 U.S. 173, 186, 99 S.Ct. 2710, 2718, 61 L.Ed.2d 464 (1979):
". . . The merits of the claims may well depend on a proper interpretation of the State\'s statute, and federal judges sitting in Idaho are better qualified to construe Idaho law, and to assess the character of Idaho\'s probable enforcement of that law, than are judges sitting elsewhere."
The provision of the loan agreement on which jurisdiction in New York has been based does not suggest the contrary. It merely waives sovereign or other immunity: it does not affirmatively or exclusively select New York as the only proper, or preferred forum. To the contrary, the silence of this carefully worded document on this point indicates that the parties intended otherwise applicable rules to control except in regard to claims of immunity. The intent of the parties, both sophisticated entities, should be respected in that regard. See generally Stewart Organization v. Ricoh Corp., 487 U.S. 22, 108 S.Ct. 2239, 101 L.Ed.2d 22 (1988) (); Carnival Cruise Lines v. Shute, ___ U.S. ___, 111 S.Ct. 1522, 113 L.Ed.2d 622 (1991) (); Northwestern National Insurance Co. v. Donovan, 916 F.2d 372 (7th Cir.1990) ().
Based on circumstances not in existence when the prior motion was denied, this action is dismissed on grounds of forum non conveniens.
SO ORDERED.
This case was dismissed on forum non conveniens grounds on April 2, 1992 at the behest of both the original plaintiff and...
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