Four Seasons Hotels and Resorts, B v. Four Seasons Hotels (Barbados), Four Seasons Hotels Limited, Four Seasons Caracas, C.A. v. Consorcio Barr S.A., Four Seasons Hotels and Resorts, B v. Four Seasons Hotels Limited, Four Seasons Caracas, C.A. v. Consorcio Barr S.A.
Docket: 03-13418
Court: Court of Appeals for the Eleventh Circuit; July 20, 2004; Federal Appellate Court
The consolidated cases involve Four Seasons Hotels and Consorcio Barr, S.A., centered on their business relationship concerning a hotel complex in Venezuela, governed by agreements containing arbitration clauses. Disputes arose, leading Four Seasons to file a lawsuit in the U.S. District Court for the Southern District of Florida regarding non-arbitrable claims and to invoke arbitration clauses for other disputes. Consorcio contested the arbitration's validity and sought a ruling in Venezuela declaring it improper.
Four Seasons sought a preliminary injunction to compel arbitration and to halt Consorcio's Venezuelan litigation, which the district court denied. Four Seasons appealed this decision. Meanwhile, the arbitral panel ruled in favor of arbitration, but a Venezuelan court later determined that the disputes did not fall under the arbitration agreement, declaring the arbitration improper.
The Eleventh Circuit Court found that the district judge mistakenly concluded that participating in arbitration waives a party’s right to challenge the arbitral award in court. Consequently, the court vacated the district court's order confirming the arbitral award and remanded for further proceedings, while dismissing the appeal in the related case as moot.
Four Seasons initiated a case in the Southern District of Florida to confirm an arbitral award, which was again assigned to Judge Moore. Consorcio opposed the confirmation, citing a Venezuelan court ruling that the dispute was not subject to arbitration. The district judge ruled in favor of Four Seasons, confirming the partial arbitral award, stating that Consorcio's involvement in the arbitration process barred it from contesting the award in federal court. Consorcio appealed this decision, leading to the consolidation of appeals regarding whether the disputes should continue in arbitration or be resolved in Venezuelan courts.
Four Seasons argued that the district court initially erred by not granting a preliminary injunction to compel Consorcio to arbitrate and withdraw its Venezuelan cases, but later remedied this by confirming the arbitral award. Conversely, Consorcio claimed the court correctly denied the preliminary injunction but erred in confirming the award.
The confirmation case is regulated by the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the Convention). Article V of the Convention outlines circumstances under which recognition and enforcement of an arbitral award may be refused, including issues of incapacity, lack of notice, decisions beyond the scope of the arbitration agreement, procedural irregularities, or if the award has not become binding. Additionally, enforcement may be denied if the dispute is not arbitrable under the applicable law or if it conflicts with the public policy of the enforcement jurisdiction.
Consorcio challenges the confirmation of a partial arbitral award on three main grounds. First, it argues that the confirmation violates Article V(1)(c) because the parties did not agree to arbitrate the issue of arbitrability. Second, Consorcio claims that the award acts as an "anti-suit injunction" in violation of public policy under Article V(2)(b). Third, it contends that Article V(1)(a) prohibits confirmation since Venezuelan courts have already ruled there was no agreement to arbitrate under Venezuelan law. Consorcio further asserts that Judge Moore incorrectly determined that it waived its right to contest the award by engaging in arbitration.
The arbitral panel based its award on its interpretation that the contracts granted it exclusive authority to decide the issue of arbitrability, arguing that Venezuelan courts lack the power to decide if the dispute is subject to arbitration. Consorcio counters that the panel exceeded its authority since the contracts explicitly state that courts should adjudicate the scope of the panel's authority if requested. Article V(1)(c) of the Convention stipulates that awards should not be confirmed for disputes not covered by the arbitration submission. The crux of the dispute revolves around the contracts' language, which allows the parties to seek court intervention to define their rights and obligations pending arbitration. Consorcio interprets this as permitting courts to determine arbitrability, whereas Four Seasons argues that court involvement is limited to supporting the arbitral process or addressing urgent disputes not yet resolved by the panel.
Consorcio did not raise its argument regarding the contracts' language prohibiting the arbitral panel from determining arbitrability in its district court brief; thus, the appellate court declines to address its merits. Typically, appellate courts do not consider issues first raised on appeal. Consorcio’s brief, spanning twenty-five pages, failed to cite Article V(1)(c) for contesting the arbitration award confirmation, instead focusing on Articles V(1)(a) and V(1)(e), as well as Article VI. It also neglected to reference case law supporting its claim that arbitration agreements must explicitly include arbitrability provisions. Moreover, Consorcio did not quote or cite the contractual language that underpins its argument. Despite these omissions, Consorcio points to a section of its brief asserting that the Arbitral Tribunal exceeded its authority, claiming that the tribunal ignored the applicability of Venezuelan law and the jurisdiction of Venezuelan courts. Consorcio argues that the tribunal's actions violate international comity and exceed the powers granted by the parties because they contradict previous Venezuelan court decisions. These points are presented as factors that should lead the court to deny the Petitioners' Motion.
The district judge was not alerted to Consorcio's argument regarding the limitation of the arbitral panel's authority in determining the arbitrability of the dispute, which was not raised in the initial proceedings. Consorcio's prior argument focused on the panel exceeding its authority under Venezuelan law, not on the contractual terms governing arbitration. In its brief, Consorcio explicitly disclaimed reliance on statutory grounds for refusing to confirm the arbitral award, indicating the basis for rejection was not applicable to a non-domestic award. The judge correctly noted that statutory provisions for refusing non-domestic awards are exclusive, thus non-statutory defenses cannot be considered. Consequently, Consorcio's failure to raise this argument previously led to the decision not to address it on appeal. Furthermore, regarding public policy considerations under Article V(2)(b) of the Convention, Consorcio claimed that confirming the award would violate U.S. public policy favoring international comity due to its characterization as an anti-suit injunction. However, this argument was also not presented at the district court level, as the brief did not reference Article V(2)(b) or public policy in relation to the award, leading to a decision not to consider the merits of this claim.
Consorcio argues that a specific sentence in paragraph III(A)(3)(f) of its brief raises a defense under Article V(2)(b) in addition to its existing Article V(1)(c) defense. The sentence claims an attempt to override previous court decisions in Venezuela, which Consorcio deems offensive to international comity. However, the court finds that this isolated sentence, lacking context and supporting argument, fails to inform the district judge of Consorcio’s intent to assert a public policy argument. Moreover, Consorcio explicitly disavowed any statutory basis for its claims in paragraph (f), leading the court to decline addressing this argument at the appellate level.
Regarding Consorcio's participation in the arbitral proceeding, it contended that, under Article V(1)(a), the arbitration award should not be confirmed due to a Venezuelan court's ruling that the arbitration agreement was invalid. The district judge rejected this claim, stating that Consorcio waived its right to contest the panel's decisions by participating in the arbitration. However, the appellate court agrees with Consorcio that participation does not preclude a challenge to the arbitral award in federal court. The court emphasizes that forcing a party to choose between participating in arbitration and preserving its right to appeal creates an untenable situation, with no support from the Convention or case law for such a preclusive rule.
As a result, the case is remanded to the district court to consider the merits of Consorcio's argument regarding the Venezuelan court’s ruling on non-confirmation. The court is instructed to weigh the Convention's preference for confirming arbitral awards against the principle of international comity when making its determination.
Four Seasons' appeal regarding the denial of a preliminary injunction is deemed moot due to the ongoing confirmation case, which determines if Consorcio can proceed in Venezuela. If the district court confirms the arbitration, Four Seasons will achieve its intended outcome from the injunction motion. Conversely, if confirmation is denied based on the Venezuelan court's prohibition of arbitration, the injunction would likewise be inappropriate. As a result, the appeal is dismissed as moot, and the underlying judgment is vacated, referencing Ethredge v. Hail. The court lacks jurisdiction to decide on moot cases and must dismiss the appeal along with vacating the district court's order. Additionally, the court vacates and remands the decision confirming the partial arbitral award.
Consorcio argues that the arbitration clause does not cover all disputes, particularly those regarding arbitrability. Four Seasons contends that all disputes were agreed to be arbitrated. The parties acknowledge that under the Hotel Licensing Agreement, Four Seasons could pursue certain claims in U.S. courts despite the arbitration agreement. Consorcio asserts that a Venezuelan court ruled the dispute was about real property, which under Venezuelan law may only be arbitrated if the intent to do so is clear in the contract. The court found the intent ambiguous, ruling arbitration improper. This interpretation of the Venezuelan court's decision is not contested by Four Seasons.
Consorcio attempted to incorporate additional arguments from its lower court brief into its appellate brief due to space limitations. This practice, however, has not been directly addressed by this Circuit, prompting a review of its appropriateness. The court notes that Consorcio's approach effectively requests the panel to sift through its lower court submissions, bypassing page limitations and evading its responsibility to articulate its arguments clearly. The Federal Rules of Appellate Procedure require that briefs include specific arguments and a statement of issues presented for review, neither of which Consorcio adequately fulfilled with its referenced incorporation. Consequently, the court aligns with other Circuits in rejecting this incorporation practice and concludes that Consorcio has waived its unpresented arguments.
Furthermore, the district court's primary case, Slaney v. Int'l Amateur Athletic Fed'n, establishes that a party cannot challenge an arbitral award on the basis of no agreement to arbitrate if it did not attempt to prevent the arbitration initially. In contrast, Consorcio actively contested the arbitration's authority from the outset and sought to halt it through legal action in Venezuela, indicating that it did not submit to arbitration willingly. Therefore, Consorcio retains the right to argue against the confirmation of the arbitral award based on its prior objections to the arbitration's legitimacy.
Recognition and enforcement of an arbitral award may be denied if the arbitration agreement is invalid under the applicable law, here Venezuelan law, as per the Convention, Article V. The term "may" implies that courts have discretion to confirm the award despite defenses against it. Additionally, U.S. courts and others have enforced arbitration awards even after annulments in different jurisdictions. Article V outlines five specific grounds for denying recognition and enforcement upon a defendant's request. During oral arguments, it was indicated that the Venezuelan ruling against arbitration is under appeal. The district court may consider staying the enforcement action to await a final decision from Venezuelan courts, thus preventing duplicative litigation. While the Convention does not explicitly provide for a stay under Article V(1)(a), district courts have the inherent authority to manage their dockets, including issuing stays. The court’s discretion is guided by the circumstances of the case, including the status and timeframe of Venezuelan proceedings, potential hardships on both parties, and any relevant factors that may influence the decision to stay the case.
