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Citigroup Inc. v. Sayeg, No. 21-cv-10413 (S.D.N.Y. Jan. 20, 2022)[1]

Factual Background

Luis Sebastian Sayeg Seade (“Sayeg”) was employed by Banco Nacional de México, S.A. (“Banamex”), a wholly-owned indirect subsidiary of Citigroup, organized under the laws of Mexico with a principal place of business in Mexico. During Sayeg’s employment with Banamex, Citigroup had in place various incentive plans (the “Plans”), which granted incentive compensation to its employees. All of the Plans contained arbitration clauses.

Sayeg’s employment ended in 2019 when he signed a Termination and Release agreement with Banamex. Sayeg was paid the equivalent of $3.5 million U.S. dollars in exchange for a broad, general release in favor of Banamex and Citigroup. The Termination and Release agreement contained an arbitration clause, as well as a commitment by Sayeg not to file suit in Mexico or the U.S. against Banamex or Citigroup.

The Mexican Action

Nevertheless, in December 2020, Sayeg filed suit against Banamex in Mexico (the “Mexican Action”), arguing that he was entitled to additional compensation from certain of the Citigroup incentive compensation programs. In response, Banamex raised the arbitration agreements in the Plans. However, Sayeg denied any agreements to arbitrate and stated that he intended to proceed with the Mexican Action.

Arbitration and U.S. Lawsuit

Shortly thereafter, Citigroup filed a Demand for Arbitration with the American Arbitration Association. Citigroup also filed a lawsuit in the U.S. District Court for the Southern District of New York seeking to compel arbitration and to obtain a temporary restraining order (“TRO”) preventing Sayeg from commencing or prosecuting any action or proceeding arising out of or related to the Plans, and to immediately cease the prosecution of and dismiss any such proceeding. Sayeg did not submit any responsive briefing, and did not attend a scheduled hearing. The court granted the TRO.

The court then scheduled a hearing to show cause why a preliminary injunction should not be issued. Sayeg did not attend this hearing either, and the court entered a preliminary injunction enjoining Sayeg from prosecuting his claims in Mexico until the conclusion of the arbitration, or until the court decided on the petition to compel arbitration. The court stated that it would consider directing Sayeg to withdraw his lawsuit in Mexico when it resolved the petition to compel arbitration.

The court then set a briefing schedule on the petition to compel arbitration. Sayeg failed to submit any briefing or attend the hearing. Although the petition was thus unopposed, the court still considered whether Citigroup had met its burden of showing that arbitration was required and what relief was appropriate.

First, the Court considered whether the parties had entered into a valid arbitration agreement. Citigroup was able to show that Sayeg had signed arbitration agreements both in conjunction with the Termination and Release agreement, as well as in order to participate in the incentive compensation plans from which the disputes arose. Given these agreements, the court found that the parties had entered into unambiguous agreements to arbitrate any disputes arising from the Plans.

The court then considered whether the parties had agreed to arbitrate the question of arbitrability. While this issue was not specifically addressed in the arbitration agreements, the agreements did specify that the American Arbitration Association (“AAA”) Commercial Arbitration Rules would apply. Those rules empower an arbitrator to determine issues of arbitrability. While this did not show per se that the parties intended to delegate the question of arbitrability, the court held that the broad nature of the arbitration agreements, combined with the parties’ selection of the AAA Rules, indicated that the parties agreed to have an arbitrator decide questions of arbitrability. The court accordingly ordered the parties to arbitration.

The court next considered whether it should continue the preliminary injunction, and if so, in what form. The court acknowledged its power to enjoin a party before it from pursuing litigation in a foreign forum, but explained that principles of comity required it to use that power sparingly. The party seeking this type of anti-suit injunction must show (1) that the parties are the same in both matters; and (2) that resolution of the case before the enjoining court would be dispositive of the action to be enjoined. If those requirements are met, courts consider whether the parallel litigation would: (1) frustrate a policy in the enjoining forum; (2) be vexatious; (3) threaten the issuing court’s in rem or quasi in rem jurisdiction; (4) prejudice other equitable considerations; or (5) result in delay, inconvenience, expense, inconsistency, or a race to judgment.

The Court held that these factors strongly favored continuing the preliminary injunction and expanding the relief to require that Sayeg withdraw his claims in Mexico. While Citigroup was not a party to the Mexican Action, its wholly owned subsidiary was, and thus the “real parties in interest” were close enough to be considered the same in both matters. Additionally, a finding by an arbitrator that the claims in the Mexican Action were arbitrable would be dispositive of the Mexican Action, as Sayeg would be unable to litigate those claims. These and all of the secondary discretionary factors pointed in favor of relief for Citigroup.

Turning to the preliminary injunction standards, the court cited multiple cases for the proposition that being forced to litigate rather than arbitrate claims covered by a valid arbitration agreement would constitute irreparable harm. The court then specified that the relevant issue for the “likelihood of success” analysis was the likelihood that “the claims would be subject to arbitration.” Given the broad scope of the relevant arbitration agreement, the court found that this factor was met.

As a result, the court continued its injunction against Sayeg, ordering him not to commence or prosecute any actions related to the claims in question, in Mexico or elsewhere. The court further ordered Sayeg to dismiss his claims in Mexico no later than two weeks after the order was released.

[1] Click for opinion.

This article was originally published in the North America Newsletter. 

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