EGI-VSR, LLC v. Huber

Background

EGI-VSR, LLC sought recognition and enforcement of a foreign arbitral award under the Inter-American Convention on International Commercial Arbitration, known as the Panama Convention, as incorporated by the Federal Arbitration Act. The arbitration arose from a shareholders’ agreement involving Viña San Rafael, a Chilean winery. That agreement gave EGI-VSR a right to require certain controlling shareholders to purchase EGI-VSR’s shares if specified violations occurred and required disputes to be arbitrated in Chile.

The arbitrator issued a final award on January 13, 2012. EGI-VSR alleged that the award made the respondents jointly and severally liable for the purchase price of its shares, which EGI-VSR calculated as $28,700,450.07. EGI-VSR later entered into a standstill agreement with the respondents. The agreement prevented enforcement against them for a time, purported to toll applicable limitations periods and other time bars, and prohibited the respondents from asserting limitations defenses until the agreement ended. EGI-VSR terminated that agreement in May 2019 and filed this enforcement proceeding on June 28, 2019.

Arguments and Issues

The respondents moved to dismiss on three principal grounds: lack of personal jurisdiction over Alexander Leslie Huber, Catrex Limitada, and Dicrex Limitada; five exceptions to enforcement under Article V of the Panama Convention; and the Federal Arbitration Act’s three-year limitations period for enforcement petitions. EGI-VSR also moved to strike part of a declaration submitted by the respondents’ purported Chilean-law expert, or alternatively sought permission to submit another declaration.

Personal Jurisdiction

The court held that the respondents consented to personal jurisdiction through the standstill agreement. The agreement stated that disputes under it would be resolved in a New York court and required the respondents to accept service of process in New York in connection with the Chilean arbitration proceedings and other actions. The court interpreted the agreement’s reference to “any dispute” broadly enough to cover this enforcement proceeding because the proceeding depended on the parties’ rights and obligations under the standstill agreement.

The court did not conclusively decide whether New York’s long-arm statute independently provided jurisdiction over the respondents. Because the court found consent sufficient, it stated that no further determination under that statute was necessary.

Panama Convention Exceptions

The court rejected the respondents’ arguments that the award should not be enforced under five Panama Convention provisions. First, the respondents argued that they had been unable to present a defense because they relied on EGI-VSR’s assurances that they were not targets of the arbitration. The court held that choosing not to defend oneself is different from being unable to defend oneself. The respondents had not shown that they lacked an opportunity to be heard or that the arbitration was fundamentally unfair.

Second, the respondents argued that the award concerned disputes outside the arbitration agreement and that the arbitration procedure did not follow that agreement because Richard and Alexander Huber had transferred their shares before the arbitration. The court rejected that argument because both men were listed as “Controlling Shareholders” in the agreement, were signatories, and entered the arbitration. The court also held that they could have raised their objections during the arbitration and could not use their holding companies to avoid the arbitration agreement.

Third, the respondents argued that the award was not a binding monetary award. The court disagreed, finding that the award provided a framework for calculating the amount owed and ordered payment with adjustments and interest. Fourth, the court rejected the respondents’ public-policy argument because EGI-VSR was asking the court to convert an arbitral monetary award into a judgment under the Federal Arbitration Act and Panama Convention, not to enforce an already-existing judicial money judgment.

Statute of Limitations

The Federal Arbitration Act imposes a three-year limitations period on petitions to enforce awards covered by the Panama Convention. Because the award was issued on January 13, 2012, and EGI-VSR filed its petition on June 28, 2019, the petition was untimely unless the standstill agreement effectively tolled the limitations period.

The court applied New York law because the standstill agreement selected New York law. New York General Obligations Law § 17-103 permits certain private agreements to extend or waive limitations defenses, but it does not permit an indefinite extension. The court held that the enforcement petition arose from the contractual put right in the shareholders’ agreement, even though arbitration and the Federal Arbitration Act supplied the procedural means for enforcement. The standstill agreement purported to toll the limitations period indefinitely and did not limit the tolling to a period allowed by § 17-103. The court therefore held the tolling provision unenforceable and the petition time-barred.

The court separately held that New York’s borrowing provision, New York Civil Practice Law and Rules § 202, did not apply. That statute concerns the limitations period for certain actions accruing outside New York, while this proceeding involved a federal cause of action with a congressionally prescribed three-year limitations period. The court also stated that EGI-VSR had not shown grounds for equitable tolling.

Disposition

The court granted the respondents’ motion to dismiss and dismissed EGI-VSR’s petition to enforce the award as time-barred. The court denied EGI-VSR’s motion to strike as moot, directed the Clerk to terminate the petition, and closed the case.