Case of the Day: Ingaseosas v. Aconcagua
Posted on July 18, 2012
The case of the day is Ingaseosas International Co. v. Aconcagua Investing Ltd. (11th Cir. 2012). We first saw the case way back in February 2011. Here was my description of the facts from the earlier post:
Ingaseosas and Aconcagua were both British Virgin Islands firms. They entered into a stock purchase agreement concerning shares in another BVI company that owned a Coca-Cola franchise in Ecuador. The agreement contained an arbitration clause requiring arbitration in disputes in Miami, subject to New York law. When the parties failed to consummate the stock purchase agreement, Aconcagua demanded arbitration and asserted a claim for breach of contract. Ingaseosas counterclaimed. The tribunal’s award was in favor of Aconcagua. Aconcagua sought recognition and enforcement of the award in the courts of the British Virgin Islands, and Ingaseosas sought to vacate the award in the federal court in Miami. When Ingaseosas failed to post a bond in the BVI proceeding, the court there granted Aconcagua’s application and entered a judgment in its favor. Aconcagua then filed a motion in the U.S. proceeding to confirm the award.
The District Court dismissed the case on the grounds that it lacked subject matter jurisdiction because a motion to vacate an arbitral award does not arise under federal law. The interesting procedural quirk in the case was that the court would have had jurisdiction had Aconcagua sought confirmation first and Ingaseosas then moved to vacate.
On appeal, the Eleventh Circuit affirmed the dismissal in an unpublished opinion, but not on the jurisdictional grounds on which the district court had relied. Instead, the court noted the course of the proceedings in the BVI courts. After the courts there had recognized and enforced the award, they appointed a receiver for Ingaseosas. The receiver was able to collect enough funds to satisfy the judgment, and Ingaseosas, still solvent, then exited receivership. Moreover, the BVI court had refused to allow Ingaseosas’s shareholders to assume control of the motion to vacate in the US court (the receiver had hired independent counsel to prosecute the motion) on the grounds that even if the motion to vacate were successful, the motion to confirm had already gone to judgment in the BVI courts, and a vacatur in the US courts would not upset the BVI judgment. In light of these facts, the Eleventh Circuit held that the motion to vacate was moot, either as a constitutional matter or under the doctrine of prudential mootness. The basic idea is that in light of the satisfaction of the judgment and the BVI court’s view of the effect of a US judgment on its own judgment confirming the award, the US court could not afford effective relief to Ingaseosas.
The BVI court’s statement that it would not give effect to a US court’s vacatur probably short-circuited what could otherwise have been an interesting and scholarly look into the possibility that a party could seek restitution or some other relief from the enforcing court after an award was vacated by the court at the place of the arbitration. Maybe next time!