Les Telecommunications D'Haiti S.A.M. v. Cine

Citations: 77 F. Supp. 3d 263; 2014 U.S. Dist. LEXIS 176038; 2014 WL 7461445Docket: No. 13-CV-6462

Court: District Court, E.D. New York; December 18, 2014; Federal District Court

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The legal memorandum addresses a dispute over payment rights for a radio wave band essential for operating Haiti’s mobile telephone system. The plaintiff, Les Télécommunications d’Haiti S.A.M. Tele-co, argues the case falls under the jurisdiction of a Haitian court, while the defendant, Ciné, seeks arbitration. A bench trial held on October 27 and 29, 2014, focused on two main issues under Haitian law: the applicability of a June 1998 agreement with a dispute resolution clause favoring Haitian courts, and whether a subsequent November 1998 agreement supersedes the earlier one and contains an enforceable arbitration provision.

The court ruled that the November 1998 agreement does not bind the plaintiff, as it was not a party to it; thus, the arbitration provision is not enforceable against Teleco. The plaintiff's motion to permanently stay the demand for arbitration is granted. The court's findings are based on the evidence presented and comply with Rule 52 of the Federal Rules of Civil Procedure.

Key findings include the establishment of Haitel, Haiti's first mobile telephone company, founded by Franck Ciné. Haitel required a radio frequency band for operation, which Teleco owned and licensed to Haitel for 15 years. The licensing agreement was approved by Teleco’s board on June 3, 1998, though it was only signed on June 25, 1998. Additionally, on June 14, 1998, Haitel collected subscriptions for its shares, leading to a formal share capital increase to 300,000 shares by June 29, 1998.

The value of USD $1 averaged 31.60 Gourdes from 1994 to 2014, peaking at 50 Gourdes in February 2003 and dropping to a low of 14.85 Gourdes in August 1996. Between May 29, 1998, and August 31, 1999, it fluctuated between 16 and 17 Gourdes. On June 29, 1998, Haitel raised its capital by creating 300,000 shares at 250 Gourdes each, with variable value in USD. A licensing agreement between Teleco and Haitel was signed on June 25, 1998, with Teleco represented by Julio Cadet and Fritz Jean, and Haitel by Robert Bernard Denis. This agreement stipulated a fifteen-year lease of the 1.9 GHz frequency band for a fee of $14.5 million, with Haitel also required to pay 5% of its net turnover annually to Teleco. Disputes were to be negotiated before potentially being referred to a Haitian tribunal.

On September 16, 1998, Cadet, without board authorization, wrote to Haitel about using shares to secure the $14.5 million payment. Subsequently, on November 24, 1998, a shareholders agreement was signed by various parties, including banks and MCI, to protect Teleco’s payment rights through escrow on Haitel’s stock. This agreement was also not authorized by Teleco’s board, and Cadet was not authorized to sign on behalf of Teleco. Key provisions of the shareholders agreement included the capitalization structure and a clause for depositing Teleco shares with a trustee under the terms of the Share Escrow Agreement.

Disputes between Teleco and Haitel are to be resolved through arbitration under UNCITRAL Rules, conducted in English, with arbitration taking place in Bermuda. The Bermuda International Arbitration Act of 1993 governs the proceedings, while the validity and interpretation of this arbitration clause are subject to New York law, excluding its conflict of laws principles.

The agreement supersedes all previous contracts, including a 1998 contract between Teleco and Haitel, and includes a shareholders agreement that reallocates Haitel’s 300,000 shares to new shareholders. There is no credible evidence that the share distribution occurred or that it was communicated to Teleco’s board. A detailed table lists the shareholders, their shares, and related financial considerations, indicating that Haitel valued its shares at approximately USD $1,000 each, which exceeds their market value at that time.

Under the terms of a November 24, 1998 agreement, Teleco was to receive 15,000 shares in exchange for rights to exploit a frequency band in Haiti, thereby offsetting a USD $14.5 million debt owed by Haitel to Teleco. This arrangement was intended as a substitute for cash payment and involved placing the shares in trust for Teleco. The shareholders agreement, along with an unsigned subscription agreement and escrow agreement, details this arrangement, although the subscription and escrow agreements were not signed by one of the involved parties, Cadet.

On November 24, 1998, Cadet lacked authorization from Teleco's board of directors to sign a shareholders agreement on behalf of Teleco, and there is no evidence that the board was aware of any negotiations or that someone would sign on Teleco's behalf. At this time, Cadet was not a board member, and no credible evidence indicates that Teleco authorized any representative to attend Haitel shareholder meetings. By late 2006 or early 2007, Teleco's new General Director, Michel Présum, demanded that Haitel pay a debt of USD $14.5 million under a licensing agreement from June 25, 1998. On March 12, 2007, Ciné stated Haitel was ready to pay based on eight years of operation but argued that only USD $4,896,854.56 was owed. Ciné referenced the 1998 agreement, which stipulated that Haitel was to pay Teleco USD $14.5 million by June 25, 2013, with annual payments based on net sales. Ciné also claimed that Teleco became a shareholder of Haitel on November 24, 1998. 

On March 20, 2007, Présum reiterated Teleco's commitment to the licensing agreement, suggesting that Teleco's claimed shareholding in Haitel was an attempt to delay contractual obligations. Ciné requested a meeting to resolve the dispute, asserting that this communication was not excludable under Rule 408 of the Federal Rules of Evidence as it pertained to negotiations; however, it held no probative value concerning whether Teleco entered the November 24, 1998 agreement. On July 5, 2007, Teleco sued Haitel for breach of the licensing agreement, in which Ciné participated without raising the defense of arbitration until over six years later on September 17, 2013.

Regarding the determination of foreign law, courts are responsible for finding and applying it as a matter of law, not fact, under Rule 44.1 of the Federal Rules of Civil Procedure. This rule allows courts to consider various materials and sources, treating their determinations as legal rulings. The Court of Appeals for the Second Circuit encourages district courts to utilize Rule 44.1 flexibly, anticipating an increase in issues related to foreign law due to globalization and cross-border transactions.

Determination of a foreign country's law is a legal issue, with the persuasive force of expert opinions being more relevant than their credibility. Under Rule 44.1, courts can independently examine foreign legal sources but are not required to do so without indications of potential benefit or assistance from the parties involved. 

The plaintiff's expert, Bernard H. Gousse, is deemed significantly more credible and persuasive than the defendant's expert, Jean Sénat Fleury, due to Gousse's extensive experience with Haitian law. According to Haitian law, shareholders appoint a board of directors, which possesses broad powers to manage the corporation. The board can delegate its authority through mandates, which may be specific or general. While verbal mandates are permissible for certain transactions, written authorization is necessary when delegating authority to non-board members.

Confirmation of a contract is defined as a unilateral act where a party waives its right to nullify a contract by performing under it voluntarily. Apparent mandate arises when a third party reasonably believes that an individual has the authority to act on behalf of a principal, requiring the representative's apparent competence, the principal's creation of this appearance, and the third party's good faith. This doctrine applies to laypersons but not to experienced businesspersons in Haiti.

The action for nullity of a contract, which seeks to cancel a contract due to legal formation violations, has a ten-year statute of limitations. This is supported by the principle that as long as a party does not perform the contract, they can claim its nullity at any time. The application of law indicates that the plaintiff's expert's opinion is significantly more persuasive than that of the defendant's expert, who lacks corporate law experience in Haiti.

Gousse, a corporate lawyer in Haiti, established that Cadet lacked authority to sign the November 24, 1998 shareholders agreement on behalf of Teleco, as the board of directors never granted him a mandate. The board's resolution on June 3, 1998, which authorized Jean to bind Teleco, did not extend that authority to Cadet. The lease of a significant asset, involving valuable radio wave rights, required board approval, which was not obtained. The agreement resulted in Teleco receiving stocks of uncertain value instead of cash, and the board did not ratify the agreement through any actions. The court rejected the defendant's argument that a licensing agreement signed by both Jean and Cadet implied authorization, citing five reasons: lack of a written mandate for Cadet, absence of delegated authority from Jean to Cadet, the inadmissibility of verbal mandates under the law, failure of Teleco to ratify the agreement, and inapplicability of the doctrine of apparent mandate to a professional like Ciné. Consequently, the shareholders agreement is deemed invalid for Teleco. The court determined that the ten-year statute of limitations for nullity actions does not apply, maintaining that Teleco's defense against the November 24, 1998 agreement is perpetual. Additionally, the issue of whether the defendant waived his right to arbitration by participating in litigation was not addressed. The plaintiff's motion to permanently stay the arbitration demand was granted, and the case was closed with costs awarded to the plaintiff.