Arbitration Upheld: District Court Supports Protection OF U.S. Companies Against Extortion from Overseas Lawsuits
11-01-2000
An arbitration award protecting U.S. companies from extortionate lawsuits brought in foreign countries was upheld in a recent ruling by the U.S. District Court for the District of Columbia in Constellation Power, Inc., et al v. L. E. International, Ltd., Civil Action No. 00-1991. The Chicago-based litigation law firm of Novack and Macey successfully represented defendants Constellation Power, Inc. and its affiliates and officers.
Constellation Power, Inc., based in Baltimore, Md., and nine of its affiliates, plus four officers (the Constellation Parties), had sought relief via arbitration from two lawsuits initiated in Guatemala by L. E. International, Ltd. (LEI), a Cayman Islands company. The arbitrator found that LEI's Guatemalan lawsuits were groundless and had been filed in bad faith in an effort to prevent the U.S. companies and their affiliates from carrying out a planned sale of their assets in Guatemala. When LEI sought to vacate the arbitration award, disputing the arbitrator's jurisdiction as well as the terms of the award, the District Court in a recent decision found for Constellation Power in upholding both jurisdiction and terms.
The arbitrator's ruling protected the U.S. companies and their officers and affiliates from litigation in foreign courts and potential extortion by a foreign company by enforcing a provision in a draft contract stipulating that such disputes would be settled by binding arbitration by the American Arbitration Association (AAA) in Washington, D.C.
In September 2000, the arbitrator issued an "anti-suit injunction" against LEI, requiring it to dismiss the Guatemala lawsuits, and directed LEI to pay all of the Constellation Parties' attorney's fees and expenses in connection with the arbitration. It was these terms which LEI sought to vacate, claiming that the Constellation Parties' contention that no contract existed must invalidate the arbitration requirements contained in the draft contract.
The court disagreed, noting that LEI had "repeatedly asserted the existence of the. Contract requiring arbitration." Thus, the court found, LEI must abide by the terms of that contract, including arbitration.
"The court's support of the arbitrator's decision meant that U.S. companies can enter into negotiations for a commercial project in a foreign country and receive protection against baseless strike suits in a foreign court in an effort to extort a settlement," says founding partner Eric N. Macey, who presented the case with partner Stephen J. Siegel of Novack and Macey.
Initiated by LEI in February and May, 2000, the lawsuits against the Constellation Parties concerned the construction of a proposed electrical power plant in Guatemala, with a joint venture between LEI and Mitsubishi Corporation seeking to act as general contractor. In the lawsuits, LEI alleged that the Constellation Parties had breached the alleged construction contract with LEI/Mitsubishi when an affiliate of Constellation Power entered into a construction contract with a third party. The lawsuits sought to put liens on the affiliate's assets in Guatemala to prevent their sale. "LEI was obviously hoping to be paid off to stop its harassment," Macey explains.
The Constellation Parties responded by following the contract's provisions for arbitrating disputes even while contesting the contract's validity. The arbitrator determined, and the court affirmed, that LEI's use of the alleged contract as a "sword" in litigation entitled the Constellation Parties to use the same contract as a "shield."
"The arbitrator was right, and so is the court," Macey says. "You can't try to enforce an alleged contract - in this country, in a foreign country, anywhere -- while directly violating its terms."
Founded in 1984, Novack and Macey is a litigation firm that specializes in complex commercial cases. The firm has successfully represented clients in a wide variety of business disputes, including matters involving banking, contracts, class actions, RICO, securities, real estate, partnerships and close corporations, unfair competition, insurance coverage, environmental matters, business torts and employment-related issues. Novack and Macey attorneys have honed their skills in courtrooms, mediations and arbitrations nationwide. Clients include corporations, institutions, investment ventures, partnerships and individuals.
For further information about L. E. International Ltd. v. Constellation Power, Inc., Civil Action No. 00-1997, please contact Eric N. Macey, Esq., at 312.419.6900.
Constellation Power, Inc., based in Baltimore, Md., and nine of its affiliates, plus four officers (the Constellation Parties), had sought relief via arbitration from two lawsuits initiated in Guatemala by L. E. International, Ltd. (LEI), a Cayman Islands company. The arbitrator found that LEI's Guatemalan lawsuits were groundless and had been filed in bad faith in an effort to prevent the U.S. companies and their affiliates from carrying out a planned sale of their assets in Guatemala. When LEI sought to vacate the arbitration award, disputing the arbitrator's jurisdiction as well as the terms of the award, the District Court in a recent decision found for Constellation Power in upholding both jurisdiction and terms.
The arbitrator's ruling protected the U.S. companies and their officers and affiliates from litigation in foreign courts and potential extortion by a foreign company by enforcing a provision in a draft contract stipulating that such disputes would be settled by binding arbitration by the American Arbitration Association (AAA) in Washington, D.C.
In September 2000, the arbitrator issued an "anti-suit injunction" against LEI, requiring it to dismiss the Guatemala lawsuits, and directed LEI to pay all of the Constellation Parties' attorney's fees and expenses in connection with the arbitration. It was these terms which LEI sought to vacate, claiming that the Constellation Parties' contention that no contract existed must invalidate the arbitration requirements contained in the draft contract.
The court disagreed, noting that LEI had "repeatedly asserted the existence of the. Contract requiring arbitration." Thus, the court found, LEI must abide by the terms of that contract, including arbitration.
"The court's support of the arbitrator's decision meant that U.S. companies can enter into negotiations for a commercial project in a foreign country and receive protection against baseless strike suits in a foreign court in an effort to extort a settlement," says founding partner Eric N. Macey, who presented the case with partner Stephen J. Siegel of Novack and Macey.
Initiated by LEI in February and May, 2000, the lawsuits against the Constellation Parties concerned the construction of a proposed electrical power plant in Guatemala, with a joint venture between LEI and Mitsubishi Corporation seeking to act as general contractor. In the lawsuits, LEI alleged that the Constellation Parties had breached the alleged construction contract with LEI/Mitsubishi when an affiliate of Constellation Power entered into a construction contract with a third party. The lawsuits sought to put liens on the affiliate's assets in Guatemala to prevent their sale. "LEI was obviously hoping to be paid off to stop its harassment," Macey explains.
The Constellation Parties responded by following the contract's provisions for arbitrating disputes even while contesting the contract's validity. The arbitrator determined, and the court affirmed, that LEI's use of the alleged contract as a "sword" in litigation entitled the Constellation Parties to use the same contract as a "shield."
"The arbitrator was right, and so is the court," Macey says. "You can't try to enforce an alleged contract - in this country, in a foreign country, anywhere -- while directly violating its terms."
Founded in 1984, Novack and Macey is a litigation firm that specializes in complex commercial cases. The firm has successfully represented clients in a wide variety of business disputes, including matters involving banking, contracts, class actions, RICO, securities, real estate, partnerships and close corporations, unfair competition, insurance coverage, environmental matters, business torts and employment-related issues. Novack and Macey attorneys have honed their skills in courtrooms, mediations and arbitrations nationwide. Clients include corporations, institutions, investment ventures, partnerships and individuals.
For further information about L. E. International Ltd. v. Constellation Power, Inc., Civil Action No. 00-1997, please contact Eric N. Macey, Esq., at 312.419.6900.