Terra Towers Corp. v. Gelber Schachter & Greenberg, P.A.

Background

The dispute concerns shareholders of Continental Towers LATAM Holdings Limited, a telecommunications-infrastructure company. Terra Towers Corp. and TBS Management, S.A. were described as Continental’s majority shareholders. Telecom Business Solution, LLC, LATAM Towers, LLC, and AMLQ Holdings (Cay) Ltd. were described as minority shareholders. DT Holdings, Inc. was described in the complaint as a contractual counterparty of Continental.

The parties were involved in an ongoing international arbitration in New York concerning Continental’s management and operations. A shareholders agreement required certain disputes relating to that agreement to be resolved through binding arbitration. The lawsuit concerned a separate Framework Agreement governing Gelber Schachter & Greenberg, P.A.’s representation of Continental in the arbitration.

Terra alleged that Jorge Gaitan Castro had been removed as Continental’s chief executive officer and appointed chief operating officer, but nevertheless represented himself as chief executive officer and retained the law firm. Terra alleged that it joined the Framework Agreement while mistakenly believing Gaitan had authority to retain the law firm. Terra filed the lawsuit in state court seeking rescission, or undoing, of the Framework Agreement and an injunction against its continued implementation. The defendants removed the case to federal court under the New York Convention.

Motion to Remand

The court denied Terra’s motion to remand, meaning it refused to return the case to state court. Under 9 U.S.C. § 205, the New York Convention provides a broad basis for removing a state-court case connected to an arbitration agreement covered by the Convention.

The court applied a two-part jurisdictional inquiry. First, the removal notice had to describe a written arbitration agreement that might fall under the Convention. The court found that requirement satisfied because the agreement was written, provided for arbitration in a Convention-signatory territory, arose from a commercial legal relationship, and involved a non-American party. Terra did not dispute that the shareholders agreement fell under the Convention.

Second, there had to be a non-frivolous basis for concluding that the arbitration agreement sufficiently related to the lawsuit such that it could conceivably affect the outcome. The court found that requirement satisfied because Terra’s allegations depended substantially on the shareholders agreement’s provisions governing authority over Continental’s business and affairs. The court concluded that it could not resolve the lawsuit without considering that agreement and its broad arbitration clause.

The court did not decide whether Terra’s claims were actually subject to arbitration. It explained that the jurisdictional question was separate from the merits-based question of arbitrability. The court also found that Terra’s proposed amended complaint did not affect the removal analysis because jurisdiction is evaluated based on the operative complaint when the case is removed, and Terra had not yet received permission to amend.

Motion to Transfer Venue

The court granted the defendants’ motion to transfer venue under 28 U.S.C. § 1404(a). That statute permits transfer, for the convenience of the parties and witnesses and in the interest of justice, to another federal district where the case could have been brought.

The court found that the case could have been brought in the Southern District of New York. It then considered private and public-interest factors, including the parties’ and witnesses’ convenience, access to evidence, the plaintiff’s choice of forum, the forum’s familiarity with the governing law, each forum’s interest in the dispute, and trial efficiency.

The court determined that the factors strongly favored New York. The Framework Agreement was connected to the ongoing New York arbitration, the law firm’s representation was to occur in that arbitration, and related litigation was already pending in the Southern District of New York. The court also noted that, except for the law firm, none of the defendants had ties to Florida, and the law firm and Schachter had consented to jurisdiction in New York for this litigation.

The court gave Terra’s choice of a Florida forum less weight because it found that Florida had no significant connection to the underlying claims. It rejected Terra’s argument that the agreement’s alleged execution in Miami made Florida the main location of the relevant events, reasoning that the agreement’s performance was to occur in New York. The court concluded that the New York connections outweighed the case’s connections to southern Florida.

Disposition

Judge Scola denied Terra’s motion for remand and granted the Active Defendants’ motion to transfer venue. The court directed the Clerk to transfer the case to the United States District Court for the Southern District of New York. It declined to decide the pending motions to dismiss, motion to compel arbitration, motion to amend the complaint, and motion for jurisdictional discovery.