Case of the Day: Fiorilla v. Citigroup Global Markets
Posted on July 4, 2018
The case of the day is Fiorilla v. Citigroup Global Markets, Inc. (S.D.N.Y. 2018). John Leopoldo Fiorilla brought an arbitration against Citigroup in 2010. Fiorilla, a self-described “unsophisticated” investor, opened an account with Citi in 2006 to manage his $19.5 million life savings. He alleged that through “mismanagement and malfeasance,” Citi “eviscerated” his savings, which in the end were worth just $20,000. In 2012, Fiorilla’s lawyer accepted Citi’s offer to settle for $800,000, subject to negotiation of a mutually agreeable settlement agreement. But the parties disputed whether a real settlement had been reached or whether there were still material terms to be worked out. The tribunal rejected Citi’s motion to enforce the settlement agreement and its motion to terminate the arbitration based on the settlement. It awarded $10.75 million to Fiorilla.
In 2013, Citi brought a petition to vacate the award in the New York Supreme Court, arguing that the award was in manifest disregard of the law. The judge agreed and vacated the award, and the Appellate Division affirmed.
Fiorilla, who said he was a dual citizen of the United States and “the European Union” (really? Maybe this means France?) then brought an ex parte application to confirm the award before the Tribunal de Grande Instance de Paris. That court confirmed the award under the New York Convention. Fiorilla then returned to New York and sought to vacate the judgment that had vacated the award. The judge rejected the motion to vacate as “frivolous,” and the French proceedings as contrary to “respect for law.” He granted Citi a worldwide anti-suit injunction. The Appellate Division again affirmed, on the grounds that the motion to vacate was untimely. The Court of Appeals denied leave to appeal.
Fiorilla then brought an action in the District Court seeking a declaration that the New York decision was erroneous and preempted by the FAA. Citi moved to dismiss for want of subject-matter jurisdiction. The judge, apparently correctly, granted the motion on the grounds that under the Rooker-Feldman doctrine, a District Court has no jurisdiction to hear claims that, in effect, ask it to sit in judgment on prior state court proceedings.
Okay, but I think Fiorilla was probably right on the merits—the tribunal considered and rejected Citi’s view of the settlement agreement, and it’s not clear why the court substituted its judgment for the tribunal’s—it’s not even clear that manifest disregard of law is available as grounds for vacatur under the New York Convention. So what should Fiorilla have done? Well, for one thing, it’s not clear why he didn’t seek to remove the case when Citi brought it in the Supreme Court. For another thing, it’s not clear how vigorously he defended the French court’s action, at least from the discussion in the District Court’s decision. Rather than writing something new about this, I am just going to reprint a footnote about “delocalization”—the unmooring of an arbitration and an award from the law of the place of the arbitration—from a book chapter my law partner David Evans and I published several years ago:
For a generally positive view of delocalization, see Dejan Janicijevic, Delocalization in International Commercial Arbitration, 3 FACTA UNIVERSITATIS 63, 64 (2005). For a negative view, see REDFERN at 192. Delocalization is certainly a fact of life insofar as some national courts, when asked to enforce awards made in other countries, do not regard the law of the place of the arbitration as the lex arbitri for determining whether the award is enforceable. In France, for example, an award may be enforced even though it is invalid under the law of the place of the arbitration, on the theory that the arbitration is an international proceeding that does not depend on the law of the place of the arbitration for its validity. See Société PT Putrabali Adyamulia v. Rena Holdings, Cass. [Supreme Court for Judicial Matters] 1e civ., Jun. 29, 2007, Bull. Civ. I, No. 250. On the other hand, it is not clear that the courts of one state will always respect what courts of a second state have to say about the second state’s attitude towards delocalization. Thus in Dallah Real Estate & Tourism Holding Co. v. Ministry of Religious Affairs,  UKSC 46 (Nov. 3, 2010), in which the prevailing party in an ICC arbitration sought enforcement in England of the award (which was made in France) over a challenge by the losing party to the validity of the award under the New York Convention, the court held that the award was invalid under French law even though the French courts, applying the delocalization theory, would not have regarded French law as the lex arbitri. It seems that the English court was actually disagreeing with the French court about the content of French law. See, e.g., id. ¶¶ 124-25 (Collins L.) (the “transnational law” the French courts say they are applying is actually French law), ¶ 15 (Mance L.) (transnational principles are part of French law). But the French may have had the last word: the Paris Court of Appeal, disagreeing with the British decision, refused Pakistan’s request to set aside the decision. See Gilles Cuniberti, Dallah: French Court Pays No Attention to Lords’ Lecture, CONFLICT OF LAWS .NET (Feb. 18, 2011), http://alturl.com/ho2eb. The Dallah case is fascinating, both on account of its facts (it arose out of a contract involving the Pakistani government for the provision of housing for pilgrims on the Hajj) and the legal questions it raises. A full discussion is beyond the scope of this chapter. Early reactions include Gilles Cuniberti, No Renvoi in Dallah, CONFLICT OF LAWS .NET (Nov. 14, 2010 ), http://conflictoflaws.net/2010/no-renvoi-in-dallah; Ashutosh Ray, Dallah v. Pakistan: Why the Buzz? LEX ARBITRI—THE INDIAN ARBITRATION BLOG (Nov. 11, 2010), http://lexarbitri.blogspot.com/2010/11/dallah-v-pakistan-why-buzz.html.
While American courts have sometimes also disregarded the invalidity of an award under the law of the place of the arbitration in confirming foreign arbitral awards, they have done so on the theory that the parties had agreed not to appeal the award. See, e.g., In re Arbitration Between Chromalloy Aeroservices and Arab Republic of Egypt, 939 F.Supp. 907, 912 (D.D.C. 1996). The outcome in Chromalloy did not really rely on any particular theory of the relationship between the tribunal and the law of the state in whose territory the arbitration takes place, as did the French case. Later American decisions have called Chromalloy into question in any case. See, e.g., Baker Marine (Nig.), Ltd. v. Chevron (Nig.) Ltd., 191 F.3d 194 (1999) (refusing to enforce awards from Nigerian arbitration where the Nigerian courts had refused to enforce them). For a general comparison of the French and American approaches, see Michael Haravon, Enforcement of Annulled Foreign Arbitral Awards: The French Supreme Court Confirms The Hilmarton Trend, 22 MEALEY’S INT’L ARB. REP. #9 (Sept. 2007).