SDNY Denies Motion to Seal Petition to Confirm

On September 13, 2023, the Southern District of New York denied Petitioners Eletson Holdings, Inc. and Eletson Corporation's motion to file a redacted version of their petition to confirm an arbitration award that had previously been filed completely under seal. The Opinion explains the interests at stake when it comes to redacting information in award confirmation proceedings.

The Court emphasized that presumption of public access is of the highest in connection with petitions to confirm arbitration awards which are papers that "directly affect an adjudication," as they are treated like summary judgment motions in the Southern District. The Court explained that, as such, public access to the petition to confirm and supporting materials implicates "all of the interests that the Second Circuit has held justify the presumption of public access: 'the need for federal courts,' in the discharge of their substantive duties and 'particularly because they are independent,' 'to have a measure of accountability and for the public to have confidence in the administration of justice.'" Sealing a petition to confirm, explained the Court, "would leave the public unaware of the basis for the court's decision, frustrating the twin goals of 'educating the public about the operation of the courts ... and informing the public [about] matters of public concern.'"

The Court found no countervailing factors that would require it to depart from this reasoning. Most interestingly, the Court reminded the parties that, as to "information regarding the consideration to be paid," court have been "skeptical" to seal it, especially where it is highly relevant to the dispute and to the public's understanding of the decision.

The Court also explained that the arbitration award--the object and the "very heart" of such a dispute, cannot be filed under seal. The award is not "filed gratuitously," but the movant is required to include it with the petition.

The case is Eletson Holdings, Inc. et al. v. Levona Holdings Ltd., No. 23-cv-7331 (S.D.N.Y). The petitioners are represented by Colin Underwood and Louis Solomon of Reed Smith LLP, and there is no information yet as to the respondents' counsel.

The opinion can be downloaded below.

ABC v. DEF, 1_23-cv-07331, No. 10 (S.D.N.Y. Sep. 13, 2023).pdf

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Award Confirmed in Terra Towers

On September 6, 2023, the Southern District of New York confirmed the arbitration award held by Telecom Business Solutions, LLC, LATAM Towers, LLC, and AMLQ Holdings Ltd. against Terra Towers Corp., TBS Management S.A., and DT Holdings, Inc.

The respondents in this case sought to vacate the award on four bases: (1) the Tribunal acted in "manifest disregard of law," (2) the Tribunal denied the respondents a full and fair opportunity to be heard, (3) the Tribunal exceeded its authority, and (4) the Tribunal demonstrated "evident partiality." The Court found these arguments to be "without merit."

In rejecting respondents' arguments, the Southern District emphasized that the "manifest disregard of law" basis for vacating an award is a "doctrine of last resort" limited to "exceedingly rare instances where some egregious impropriety on the part of the arbitrators is apparent." Similarly, vacatur under FAA Section 10(a)(3) is limited to those "most egregious error[s] which adversely affect the rights of a party." The Court found that not to be the case here where "[r]espondents had ample opportunity to be heard during the proceedings ... including -- by [r]espondents' own estimation -- 'more than 80 (mostly signle spaced) pages of briefing,' 'more than 1,300 pages of exhibits,' and a three-hour hearing with arguments from both sides." The Court further found that the Tribunal had a "broad grant of authority" and that respondents' claim of bias fails, among other reasons, because they had agreed to abide by the AAA Commercial Arbitration Rules stating that decisions by the ICDR shall be conclusive.

The case is Telecom Business Solution, LLC v. Terra Towers Corp., No. 22-cv-1761 (S.D.N.Y.). Petitioners were represented by David Landman, Gregory Djordjevic, Karherine Michelle Poldneff, and Michael Ungar from Ulmer & Berne LLP, as well as Gregg Weiner, Andrew Simon Todres, Daniel Ward, Ethan Fitzgerald, and Katherine McDonald of Ropes & Gray LLP. Respondents were represented by George Kroup and John Baughman from the Law Offices of John F. Baughman, Jonathan Lupkin and Michael B. Smith of Lupkin PLLC, John Basinger of Saul Ewing Arnstein & Lehr LLP, as well as Luke Jacobs and Juan Jose Rodriguez of Carey Rodrigues Milian, LLP.

The opinion may be downloaded below.

Telecom Business Solutions v. Terra Towers Opinion .pdf

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SDNY Dismisses Petition against Republic of Congo for Turnover of Property

On May 23, 2023, the Southern District of New York dismissed a petition against the Republic of Congo and Ecree LLC seeking turnover of a New York condo allegedly bought using funds embezzled from the Republic.

The action seeks enforcement of two arbitration awards against the Republic of Congo, which were confirmed and reduced to judgment in the District of Columbia, and then registered in the Southern District of New York.

The Court held that while the Petitioner alleged a theory within the Court's ancillary jurisdiction (as it involved a fraudulent conveyance of the property of Petitioner's debtor), the Petition had to be dismissed as it failed to make any allegations regarding the Republic itself.

The Court's discussion of ancillary jurisdiction related to fraudulent conveyance is notable. The Court explained:

The Second Circuit has held that an action to collect a judgment does not require an independent jurisdictional basis even where parties are nondiverse. See Epperson, 242 F.3d at 104. As Epperson explains, a fraudulent conveyance claim is a quintessential example of a follow-on action to collect a judgment that does not require an independent jurisdictional basis, inasmuch as failing to allow ancillary jurisdiction over such actions “would encourage judgment debtors to engage in such conduct, not only to avoid payment of the judgment but also to force the winning plaintiff to pursue him to another jurisdiction.” Id. at 107 n.10. Since Epperson, courts within the Second Circuit have routinely found that ancillary jurisdiction exists where the plaintiff or petitioner adequately pleads that the judgment debtor’s assets have been fraudulently conveyed in order to avoid payment of the subject judgment. See, e.g., Nat’l Council on Comp. Ins., Inc. v. Caro & Graifman, P.C., 259 F. Supp. 2d 172, 177 (D. Conn. 2003) (finding, in context of plaintiffs’ action seeking declaration that granting of mortgage was fraudulent and designed to avoid restitution order, that “action is within the ancillary jurisdiction of [the] court” and declining to dismiss due to non-diverse parties).

The Court explained that, however, the ancillary jurisdiction is not without limits. It does not, for example, extend beyond attempts to execute, or to guarantee eventual executability of, a federal judgment. This means, the Court continued, that a "federal court does not have ancillary jurisdiction over a 'new theor[y] of liability,' such as a veil-piercing claim that seeks to hold a third party independently liable for a judgment." The Second Circuit and courts within it have thus "draw[n] a distinction between post-judgment proceedings to collect an existing judgment and proceedings, such as claims of alter ego liability and veilpiercing, that raise an independent controversy with a new party in an effort to shift liability.”

The Court however held that the Petition failed to allege that the Republic has fraudulently conveyed the funds. The Court reviewed the state of the law and recognized "the well-accepted principle that 'not every action that happens to be taken by officials of a foreign state is properly attributable to that state.'” The Court explained that "[u]nder the act-of-state doctrine, courts distinguish between public acts taken by individual government actors that are attributable to the state and protected, and private acts that are not attributable to the state and not protected." Therefore, the question here was whether "Petitioner has alleged facts supporting a conclusion that the President (or any member of his family) was acting as an agent of the Republic when they allegedly fraudulently transferred the funds."

The Southern District found that "Petitioner has not asserted any non-conclusory allegations suggesting that the President was acting as an agent of the Republic when he allegedly misappropriated the funds at issue." It noted that the "Petitioner has not alleged that the President was acting within the scope of his employment, or that he acted with actual or apparent authority to bind the Congo when making the transfers. Embezzling funds for private use is undoubtedly a 'private' act — a 'useful [determination of] whether a foreign official’s conduct is attributable to his government or sovereign state[.]'”

The Court also dismissed the Petition on the grounds that Petitioner has not sufficiently pleaded that the condo is not immune from execution under the Foreign Sovereign Immunity Act (FSIA). The Court sided with Petitioner in finding that the alleged holding of the condo by a sovereign as a real estate investment constituted "commercial activity" under the FSIA. Nevertheless, the Court found that Petitioner failed to allege that it was the Republic's commercial activity. Thus, the use of the condo appeared to be a “private” act and not one that may be “attributable to [the] government.”

The case is Commissions Import Export S.A. v. Republic of the Congo et al., No. 1:19-mc-00195 (S.D.N.Y.).

Read the entire opinion here:

Commissions Import Export S.A. v. Republic of the Congo et al, 1_19-mc-00195, No. 127 (S.D

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