Seguros Del Estado S.A. v. Scientific Games Inc., 99-14166

• Decision Date: 20 August 2001
• Docket Number: No. 99-14166,99-14166
• Citation: 262 F.3d 1164
• Parties: (11th Cir. 2001) SEGUROS DEL ESTADO, S.A., Plaintiff-Appellee, v. SCIENTIFIC GAMES, INC., Defendant-Appellant
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1164

262 F.3d 1164 (11th Cir. 2001)

SEGUROS DEL ESTADO, S.A., Plaintiff-Appellee, v. SCIENTIFIC GAMES, INC., Defendant-Appellant.

No. 99-14166

UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT

August 20, 2001

[Copyrighted Material Omitted] Appeal from the United States District Court for the Northern District of Georgia.

Before BLACK, FAY, and COX, Circuit Judges.

BLACK, Circuit Judge:

Appellant Scientific Games, Inc., appeals the district court's denial of its motion to dismiss, wherein Appellant asserted the applicable limitations period expired and the doctrine of lis alibi pendens applied. Appellant also appeals the district court's grant of summary judgment to Appellee Seguros del Estado, S.A. The district court effectively determined Appellant was in breach of an indemnification agreement because Appellant did not reimburse Appellee for its payment of $2.4 million in accordance with an obligation on a bond. Finally, Appellant appeals an adverse judgment of approximately $7 million. This judgment is comprised of a principal amount of $2.4 million and pre-judgment interest at an annual rate of 38.76%.

This case involves three agreements: (1) a contract between Appellant and Empresa Colombiana de Recursos Para la Salud, S.A. (Ecosalud), a Colombian governmental entity, under which Appellant created and managed a national instant lottery in Colombia (Lottery Contract); (2) a bond which was required under the Lottery Contract, taken out by Appellant and payable by Appellee to Ecosalud (Bond);¹ and (3) an indemnification agreement which required Appellant to reimburse Appellee for sums paid to Ecosalud and for any interest paid on such sums (Indemnification Agreement). On appeal, Appellant raises four arguments: (1) in light of pending litigation in Colombia, this case should be dismissed under principles of international comity and the lis alibi pendens doctrine; (2) alternatively, this case should be dismissed under Colombia's 2-year statute of limitations governing insurance disputes; (3) the entry of summary judgment for Appellee should be reversed due to factual issues regarding whether the Bond's effective date was extended, whether the Indemnification Agreement's term expired, whether Appellee made a valid payment under the Bond, and whether Appellee's settlement with Ecosalud was reasonable; and (4) the award of pre-judgment of interest of 38.76% per annum should be vacated in favor of either an interest amount based on Colombian pesos converted to U.S. dollars or a requirement that Appellee provide proof of Colombian bank interest paid on U.S. dollar transactions.

We affirm the denial of the motion to dismiss, the grant of summary judgment, and the $2.4 million principal judgment, but we vacate the portions of the order and the judgment related to the pre-judgment interest payment. We remand with instructions to determine the interest rate that Colombian banks would have applied to U.S. dollar deposits on November 1, 1994, and to recalculate the interest due.

I. BACKGROUND²

On March 12, 1992, Ecosalud entered the Lottery Contract with (1) Appellant, (2) PKI Associates, Inc., a New York corporation, and (3) Daibutsu, Inc., a Panamanian corporation (collectively, Contractors). The Contractors formed a Colombian operating company, Wintech de Colombia, S.A. (Wintech), to run the lottery and thereafter assigned the Lottery Contract to Wintech. Clause 41 of the Lottery Contract required the Contractors to obtain a bond from a Colombian insurance company in the amount of $4 million or its equivalent in Colombian pesos. This bond was to guarantee the Contractors' performance of their obligations under the Lottery Contract, including the payment of any penalties. Appellee issued to Appellant³ the Bond, whose initial term was from March 12, 1992, to March 12, 1993. As partial consideration for the Bond, Appellant executed the Indemnification Agreement with Appellee. This Agreement required Appellant to "immediately reimburse" Appellee for any sums paid to Ecosalud under the terms of the Bond and to pay interest to Appellee on these sums "at the current banking interest rate in effect in Colombia." An amendment to the Bond, dated May 15, 1992, provided for the automatic renewal of the policy at the end of each period until one year after the expiration of the Lottery Contract. Another amendment, dated March 2, 1993, extended the Bond's term of effectiveness through March 12, 1994.

On July 1, 1993, Ecosalud issued a Declaration of Caducity, Administrative Resolution No. 246 (the Declaration).⁴ In this Declaration, Ecosalud terminated the Lottery Contract based on a determination that the Contractors breached the Contract.⁵ Furthermore, Ecosalud found the Contractors and Wintech jointly and severally liable and proclaimed Ecosalud was owed in excess of $4 million under the terms of the Lottery Contract. Finally, Ecosalud stated in the Declaration that Appellee was jointly and severally liable for $4 million pursuant to the Bond. The Bond provides that "[a] casualty shall be deemed to have occurred[,] . . . in the event of breach of the contract, when the Administrative Resolution that declared the caducity of the contract or the breach thereof for reasons attributable to the contractor is final and binding . . . ." The Bond obligates Appellee, under these circumstances, to pay Ecosalud within a month following a request for payment. Appellee received notice of the Declaration on July 7, 1993, and provided Appellant with written notice on July 12, 1993.

Pursuant to the request of Appellant and Appellee that it reconsider the Declaration, Ecosalud confirmed the Declaration by issuing Administrative Resolution No. 493 on October 15, 1993.⁶ On March 15, 1994, Appellant challenged the Declaration and Resolution No. 493 in a Colombian administrative court and sought temporary suspension of the Declaration during the appeal. In May 1994, the administrative court denied the request for temporary suspension. The appeal remains pending.

Following negotiations, Appellee reached a settlement with Ecosalud on September 29, 1994. The settlement obligated Appellee to pay Ecosalud $2.4 million, in lieu of the contractually mandated sum of $4 million. On November 1, 1994, Appellee paid Ecosalud $2.4 million. The next day, Appellee notified Appellant of this payment and demanded reimbursement pursuant to the Indemnification Agreement.⁷ Appellant failed to reimburse Appellee, thereby giving rise to this litigation.

On April 2, 1998, Appellee filed suit in United States District Court, Northern District of Georgia, seeking to recover from Appellant for breach of contract and unjust enrichment. On May 7, 1998, Appellee filed a motion for summary judgment based on its breach of contract claim. Appellee sought a $2.4 million reimbursement plus pre-judgment interest on that amount at the rate specified in the Indemnification Agreement. On May 12, 1998, Appellant filed a motion to dismiss based on the statute of limitations or, in the alternative, based on the legal doctrines of lis alibi pendens and forum non conveniens.⁸

In its order dated September 28, 1999, the district court denied Appellant's motion to dismiss. Concluding that Georgia law governs, the court held the suit was not barred by Georgia's 6-year statute of limitations and that lis alibi pendens was inapplicable.⁹ The district court proceeded to grant Appellee's motion for summary judgment. In so doing, the court concluded as follows: the Bond and Indemnification Agreement were in effect when the Declaration was issued; Resolution No. 493 rendered the Declaration "final and binding;" Appellee properly notified Appellant; Appellee's settlement with Ecosalud was reasonable; and Appellant is liable to Appellee for reimbursement of the principal amount, plus interest. The district court therefore ordered judgment for Appellee in the principal amount of $2.4 million, plus pre-judgment interest at the annual rate of 38.76%. The district court interpreted "the normal banking interest rate that is then in effect in Colombia[]"¹⁰ to mean the standard rate applied to pesos, noting that Appellant knew when it executed the Bond and Indemnification Agreement "that payment was contemplated in United States dollars." This appeal followed.

II. DISCUSSION

A. Motion to Dismiss

Appellant asserts its motion to dismiss should have been granted since (1) the doctrine of lis alibi pendens applies due to related, ongoing litigation in Colombia, and (2) a 2-year statute of limitations under Colombian law had expired prior to the filing of this case. We affirm as to these issues.

1. International Comity and Lis Alibi Pendens

We review the district court's decision declining to apply the principle of lis alibi pendens for abuse of discretion. See Philadelphia Gear Corp. v. Philadelphia Gear de Mexico, S.A., 44 F.3d 187, 191 (3d Cir. 1994); Allstate Life Ins. Co. v. Linter Group Ltd., 994 F.2d 996, 999 (2d Cir. 1993). Lis alibi pendens is a doctrine rooted in international comity which permits a court to refuse to exercise jurisdiction in the face of parallel litigation that is ongoing in another country. Cf. Hilton v. Guyot, 159 U.S. 113, 163-64, 16 S. Ct. 139, 143 (1895) (defining "comity of nations"); Turner Entm't Co. v. Degeto Film, 25 F.3d 1512, 1518 (11th Cir. 1994) (discussing doctrine of international abstention where foreign court has rendered final decision on the merits, but has not issued final judgment).

Appellant argues the district court should have stayed this case in the face of the suit challenging the Declaration which is pending before a Colombian administrative court. See supra, Part I. Specifically, Appellant argues the invalidation of the Declaration by the Colombian court would render Appellee's indemnification claim baseless, as Appellee would have no obligation to pay on the Bond. According to Appellant, the central issue in both this...