The United States District Court for the Southern District of Florida, in Inversiones y Procesadora Tropical INPROTSA, S.A. v. Del Monte Int’l GmbH, Case No. 16-24275-CIV (S.D. Fla. May 1, 2017), recently confirmed an ICC award in favor of Del Monte International GmbH against Costa Rican pineapple grower Inversiones y Procesadora Tropical INPROTSA, S.A.  Del Monte and INPROTSA were parties to an exclusive Pineapple Sales Agreement that called for ICC arbitration in the event of a dispute.  Del Monte commenced arbitration proceedings in March 2014, alleging INPROTSA breached the Pineapple Sales Agreement by selling pineapples grown from Del Monte’s seeds to competitors.  The arbitrator issued a final award for Del Monte in June 2016, ordering INPROTSA to pay Del Monte $26.133 million, plus interest, $650,000 in arbitration costs, and more than $2.5 million in attorneys’ fees.

In its decision confirming the ICC award, the court addressed and rejected several novel and judicially unresolved defenses to confirmation put forth by INPROSTA. The court specifically dealt with five issues: (1) its subject matter jurisdiction to rule on a petition to vacate; (2) a party’s ability to re-argue a claim of fraud in the inducement when objecting to confirmation of the award; (3) the effect of an arbitrator’s failure to consider evidence as a defense to confirmation; (4) whether confirmation of the arbitral award should be denied as contrary to “notions of justice”; and (5) whether the three month statute of limitations for filing a vacature action is satisfied when a petition is filed, but not served within the three month period.

Procedural History.  The case has an involved procedural history.  A petition to vacate the arbitral award was filed as well as a counter-petition to confirm. The court initially denied INPROTSA’s petition to vacate the arbitral award without ruling on the counter-petition to confirm.  INPROTSA immediately appealed, and Del Monte sought clarification regarding whether the dismissal of INPROTSA’s petition to vacate reflected a decision by the court to affirm the award.  The court denied Del Monte’s motion for clarification, concluding it was divested of jurisdiction in light of INPROTSA’s pending appeal.  The Eleventh Circuit granted a limited remand for the district court to consider the merits of Del Monte’s cross-petition to confirm the award.

Court determines it has subject matter jurisdiction over the petition to vacate.  On the limited remand, INPROTSA incongruously argued the court lacked subject matter jurisdiction under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”) over its petition to vacate.  INPROTSA asserted that the Federal Arbitration Act provides jurisdiction only to confirm an arbitral award or to compel arbitration, but not over a petition to vacate an arbitral award.  The court rejected INPROTSA’s hairsplitting argument, explaining that many federal courts have found jurisdiction over vacatur actions under Section 203 of the FAA.  Accordingly, the court determined it had jurisdiction over both the petition to vacate and the cross-petition to confirm the award.

In this regard, the court declined to follow the lead of one of its sister courts in the Southern District of Florida.  In the case of Ingaseosas International Co. v. Aconcagua Investing Ltd., Case No. 09-23078-CIV-Huck, 2011 WL 500042 at *3 (S.D. Fla. Feb. 10, 2011), the court issued a 50 page order finding that the New York Convention only deals with claims to enforce arbitration agreements or arbitration awards and, consequently, the FAA’s adoption of the New York Convention does not provide federal question jurisdiction relating to petitions to vacate.  Instead, a petition to vacate under Section 10 of the FAA could only be brought in Federal Court if there was an independent basis for subject matter jurisdiction (either diversity or federal question jurisdiction).  The Eleventh Circuit ultimately failed to address the specific question of subject matter jurisdiction finding that the matter had been rendered moot.  But the court’s ruling in Del Monte is firmly on the opposite side of this legal issue finding that Section 203 of the FAA provides the requisite federal question that affords subject matter jurisdiction.

INPROSTA’s defenses to confirmation fail.  Turning to Del Monte’s cross-petition to confirm, on receipt of a duly-authenticated award or a certified copy of the award, and the original arbitration agreement or a certified copy thereof, a court must confirm a final arbitration award unless it finds one of the enumerated grounds for refusal of recognition or enforcement under the New York Convention is established.  The district court recognized that “[t]here is a high threshold required to overturn an arbitration award under the New York Convention,” as the Federal Arbitration Act creates a presumption favoring confirmation of arbitration awards and provides for only limited judicial review of arbitral decisions.

INPROTSA argued three points in opposing confirmation of the award: (1) that the arbitrator’s decision was based on fraud; (2) that its due process rights were violated when the arbitrator failed to give probative value to a certain piece of evidence; and (3) that the award was contrary to notions of justice.

In support of its fraud and public policy argument against recognition, INPROTSA claimed that it had only agreed to a factual stipulation in its contract that Del Monte owned the MD-2 pineapple variety because Del Monte had falsely stated in letters to Costa Rican growers that it owned this variety.  In prior litigation between Del Monte and Dole, a court held (one year after INPROTSA’s contractual stipulation was entered into) that Del Monte knew it did not have a patent on the MD-2 pineapple variety.  INPROTSA thus asserted that the arbitral award should not be confirmed because it is based on a stipulation procured by fraud.  However, the arbitral tribunal considered the findings of the judge in the Del Monte-Dole dispute, and it specifically held that there was no fraud in the inducement of the parties’ agreement.  INPROTSA’s fraud defense to the confirmation of the award was found to be an improper attempt “to rehash a losing argument before the arbitration panel” and was denied.

For its due process and public policy argument, INPROTSA alleged the arbitrator violated its due process rights by failing to afford weight to a letter to the tribunal from INPROTSA’s general manager, stating he was unaware that Del Monte was not the exclusive owner of the M-2 pineapple.  The court rejected this argument as “[e]videntiary decisions are not grounds to refuse confirmation of an arbitral award under the New York Convention’s public policy defense.”

In addition, taking a page out of the COMMISA v. Pemex case (2d Cir. Aug. 2, 2016) discussed here, INPROTSA argued the award was contrary to “notions of justice” as it requires INPROTSA to return or destroy MD-2 seeds that are INPROTSA’s own property.  The court rejected this contention, finding the tribunal simply, and appropriately, gave effect to the parties’ agreement.

Finally, Del Monte posited that INPROTSA should be precluded by the statute of limitations from opposing Del Monte’s cross-petition to confirm the award, as INPROTSA filed—but failed to serve—its opposition within the FAA’s three-month timeframe.  The court agreed and held INPROTSA was barred from raising affirmative defenses to Del Monte’s cross-petition to confirm the arbitral award.  In summary, the court concluded that even if INPROTSA’s objections had merit (which they did not), they were untimely in any event.  Therefore, the arbitral award in favor of Del Monte was confirmed.