Case of the Day: Kozma Investmentos v. Duda

The case of the day is Kozma Investmentos, Ltda. v. Duda (M.D. Fla. 2017). Kozma had a $14 million Brazilian arbitral award against Edson and Natalina Duda. It brought an action in the Florida state court against the Dudas and Geby Investments, LLC alleging that the Dudas had made fraudulent transfers to Geby to the detriment of Kozma, the creditor. The defendants removed the case to the District Court, and Kozma moved to remand. The defendants’ argument was that the award hadn’t been confirmed, and that Kozma was “essentially seeking to enforce an unconfirmed arbitration award that was entered in Brazil by setting aside as fraudulent the Dudases’ conveyance to Geby of certain real property located in Collier County, Florida in order to avoid its creditors.” Kozma’s argument was that under Brazilian law (specifically, Article 31 of the Brazilian Arbitration Act), the award had the status of a court judgment, and that it was therefore entitled to enforcement in Florida as a foreign judgment. Thus, it argued, the case did not arise under the New York Convention.

The court got to what seems like the right outcome—it held that the case fell under the Convention—but its reasoning was difficult to follow. The court rejected the argument that the arbitral award should be treated like a judgment because it had not yet been recognized in Florida, and it rejected the argument that pointed out that under the Uniform Fraudulent Transfer Act, the status of the award as an award, a judgment, or a mere unliquidated claim is irrelevant to the question of a fraudulent transfer.

The easy way to get to the right answer here seems, to me at least, to be this: the plaintiff had an arbitral award that it wanted to enforce in the United States. The defendant, allegedly to avoid enforcement, made transfers that the plaintiff alleged were fraudulent. So the attempt to avoid the allegedly fraudulent transfer was pretty closely related to the arbitration and the award.

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