The case of the day is Blue Ridge Investments, LLC v. Republic of Argentina (2d Cir. 2013). In 1989, Argentina privatized the gas transportation industry, leading to the creation of Transportadora de Gas del Norte, or TGN. In 1995, CMS Gas Transmission Co. bought a 25% stake in TGN from the Argentine government. At first, under Argentina law TGN was permitted to adjust its gas tariffs periodically in accordance with the US producer price index. But later, the government took away TGN’s right to adjust its tariffs.
In 2001, CMS initiated an arbitration before an ICSID tribunal, claiming Argentina had breached its obligation of fair and equitable treatment under the US/Argentina investment treaty. In 2005, the tribunal entered an award in favor of CMS of $133.2 million plus interest. The ICSID annulment committee rejected Argentina’s application to annul the award, and it instead confirmed the award.
In 2008, CMS filed a petition to confirm the award in New York, but CMS later filed a notice of voluntary dismissal without prejudice. Later that year, Blue Ridge, which had purchased CMS’s interest in the award, filed another petition to confirm the award. As the court described what happened next:
In mid-August 2009, Blue Ridge informed Judge Lynch’s chambers that it did not intend to move forward with the confirmation proceeding at that time, and wished to withdraw its petition without prejudice. On August 31, 2009, Judge Lynch, noting that the parties stated they had “reached a settlement in principle,” issued a so-called “thirty-day order,” which stated “that this action is dismissed without costs and without prejudice to restoring the action to the Court’s calendar, provided the application to restore the action is made within thirty days.”
In 2010, Blue Ridge filed another petition to confirm the award, and Argentina moved to dismiss. It raised several arguments, but I am going to consider only two: its FSIA arguments, and its res judicata arguments. The judge denied the motion to dismiss. Argentina sought a certificate of appealability from the judge’s interlocutory order, but no certificate was forthcoming, and Argentina appealed, asserting that the Second Circuit had jurisdiction of the FSIA argument under the collateral order doctrine. The Second Circuit held that it did have jurisdiction to consider the FSIA issue.
The FSIA issue turned out to be simple. Signing up to the ICSID Convention was an implied waiver of sovereign immunity under 28 USC § 1605(a)(1), and the arbitral award exception of § 1605(a)(6) also applied.
The issue of res judicata wasn’t raised on appeal but could, I suppose, be raised on an appeal after final judgment. Here is the issue. Under FRCP 41(a)(1)(A)(i), a plaintiff can file a notice of dismissal as of right as long as the opposing party has not yet served an answer or a motion for summary judgment. Such a notice is without prejudice to refiling the action, unless the plaintiff “previously dismissed any federal- or state-court action based on or including the same claim.” In that case, under FRCP 41(a)(1)(B), the notice “operates as an adjudication on the merits.” A plaintiff can also ask the court to order an action dismissed under FRCP 41(a)(2), and “unless the order states otherwise, a dismissal under this paragraph (2) is without prejudice.”
Here, CMS filed one petition and then voluntarily dismissed it without prejudice. That’s the freebie. Then Blue Ridge filed a second petition. Let’s assume that the assignee stands in the shoes of the assignor for these purposes, i.e., that a plaintiff can’t evade the limits on voluntary dismissals. Presumably Blue Ridge was aware of the problem, which is why it didn’t file a notice of voluntary dismissal of the second petition but instead asked the judge to order a dismissal without prejudice. The judge, however, issued an order that seems to say that the dismissal was without prejudice only if the action were revived within thirty days. So there is a kernel of an issue here under FRCP 41(a)(2): at a later stage the Second Circuit might disagree with the judge’s decision that the order of dismissal “did not provide the clarity required of a dismissal with prejudice.”