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EIG Energy fund XIV, L.P. v. Petroleo Brasileiro S.A

United States District Court, District of Columbia

July 30, 2019

EIG ENERGY FUND XIV, L.P., et al., Plaintiffs,
v.
PETRÓLEO BRASILEIRO S.A., et al., Defendants.

          MEMORANDUM OPINION AND ORDER

          AMIT P. MEHTA UNITED STATES DISTRICT COURT JUDGE.

         Before the court is Defendant Petroleo Brasileiro S.A.'s Motion to Stay Pending Arbitration. See Def.'s Mot. to Stay, ECF No. 100 [hereinafter Def.'s Mot. to Stay]. For the reasons that follow, Defendant's Motion is denied as untimely and on the merits.

         I.

         A litigant cannot sit on its right to arbitrate. In this Circuit, “[a] defendant seeking a stay pending arbitration under Section 3 [of the Federal Arbitration Act] who has not invoked the right to arbitrate on the record at the first available opportunity, typically in filing his first responsive pleading or motion to dismiss, has presumptively forfeited that right.” Zuckerman Spaeder LLP v. Auffenberg, 646 F.3d 919, 922 (D.C. Cir. 2011). To overcome this presumption, a defendant must show “his delay did not prejudice his opponent or the court.” Id. at 923.

         A.

         Defendant here did not invoke its right to arbitrate at the “first available opportunity.” That would have been when Defendant filed its motion to dismiss nearly three years ago, on August 12, 2016. See Def.'s Mot. to Dismiss, ECF No. 58. Defendant moved to dismiss on multiple grounds, but mandatory arbitration was not one of them. See generally Def.'s Mem. of P. & A. in Supp. of Def.'s Mot. to Dismiss, ECF No. 58-1 [hereinafter Def.'s Mot. to Dismiss Mem.]. Defendant only asserted its right to arbitrate for the first time more than 30 months later, on December 4, 2018, by identifying “mandatory arbitration pursuant to an agreement” as one of its affirmative defenses in its Answer. See Def.'s Answer and Affirmative Defenses, ECF No. 91, at 18. Defendant did not, however, actually move to compel arbitration for another four months, filing its Motion to Stay on April 5, 2019. See Def.'s Mot. to Stay. Zuckerman Spaeder's presumption of forfeiture therefore applies here. See Kelleher v. Dream Catcher, LLC, 729 Fed.Appx. 4, 6 (D.C. Cir. 2018) (finding that the presumption of forfeiture applied when the defendant moved to stay proceedings and compel arbitration six months after it removed the case to federal court and after it filed an answer that did not invoke its right to arbitrate).

         Defendant's attempt to avoid the presumption is unpersuasive. Defendant argues that it invoked its right to arbitrate at the “first available opportunity” when it filed its Answer and then moved to vindicate that right “just weeks” after the Supreme Court denied its petition for writ of certiorari. See Def.'s Mem. of P&A in Supp. of its Mot. to Stay, ECF No. 100-1 [hereinafter Def.'s Mem.], at 1, 16-18. The Supreme Court's decision ended more than two years of litigation over whether Defendant was completely immune from suit under the Foreign Sovereign Immunities Act. This court and the D.C. Circuit held that it was not. See EIG Energy Fund XIV, L.P. v. Petróleo Brasileiro S.A., 246 F.Supp.3d 52 (D.D.C. 2017), aff'd, 894 F.3d 339 (D.C. Cir. 2018), cert. denied, 139 S.Ct. 1324 (2019). Defendant insists that litigating its immunity defense to its conclusion before invoking its right to arbitrate did not result in forfeiture because “[t]o hold otherwise would encourage additional and unnecessary efforts be expended at the early stages of litigation: parties would need to brief arguments regarding the applicability of arbitration clauses when other arguments stand as a potential bar to judicial proceedings in general.” Def.'s Mem. at 17-18. Defendant also contends that “asserting foreign sovereign immunity provides an additional strong policy reason not to find forfeiture here.” Id. at 18. Requiring sovereign entities to raise their arbitration right before a final ruling on immunity, Defendant says, “would directly undercut the core purpose of foreign sovereign immunity.” Id.

         Defendant's argument is disingenuous. Defendant would make it seem that its motion to dismiss focused solely on asserting sovereign immunity and left no room for any other arguments. Nothing could be further from the truth. In addition to seeking dismissal on immunity grounds, Defendant moved to dismiss based on forum non conveniens, lack of standing, and for failure to state a claim. Defendant devoted more than half of its brief to these arguments. See Def.'s Mot. to Dismiss Mem. at 9-17, 26-45. It is hard to conceive how requiring Defendant to invoke its right to arbitrate at the same time it raised various jurisdictional and non-jurisdictional grounds for dismissal would have caused it to expend “additional and unnecessary” efforts at the early stages of this litigation. Def.'s Mem. at 17. Surely, Defendant could have devoted some space to asserting a claimed right that, if recognized, would have as effectively removed it from the United States courts as the claim of sovereign immunity.

         But there is more. Defendant could have moved to arbitrate months before the Supreme Court ruled on its petition. After the D.C. Circuit denied en banc review, the matter returned to this court when the mandate issued on October 9, 2018. See Mandate, ECF No. 83. Once here, Defendant immediately could have moved for a stay of these proceedings and sought to compel arbitration. The court had jurisdiction to do so. See Johnson v. Bechtel Assocs. Prof'l Corp., D.C., 801 F.2d 412, 415 (D.C. Cir. 1986) (“Issuance of the mandate formally marks the end of appellate jurisdiction.”); Hr'g Tr. 1/11/19, ECF No. 102, at 20 (Defendant acknowledging the court's jurisdiction to compel arbitration post-remand). But Defendant chose a different path. It asked instead to stay this matter while its petition for writ certiorari ran its course-a stay this court would ultimately deny. See generally Def.'s Mot. to Stay Pending Cert. Decision, ECF No. 85; Mem. of P&A in Supp. of Def.'s Mot. to Stay, ECF No. 85-1 [hereinafter Mot. to Stay Pending Cert.]; Order, ECF No. 90.[1] All told, Defendant waited six months after the mandate issued to file its motion to compel arbitration. It therefore did not avail itself of the “first available opportunity” to assert its right to arbitrate when the matter returned to this court.[2] The presumption of forfeiture therefore squarely applies, and applying it does not undercut the “core purpose” of sovereign immunity.

         B.

         Defendant's attempt to overcome the presumption of forfeiture is a nonstarter. Defendant is dismissive of the costs incurred by Plaintiffs and the courts, insisting that this “litigation remains in its preliminary stages” and that the burdens imposed largely have come from its assertion of sovereign immunity. See Def.'s Reply in Support of Def.'s Mot., ECF No. 106 [hereinafter Def.'s Reply], at 5. The first contention is inaccurate and the second beside the point.

         This case is not in its early stages. After the court denied Defendant's post-remand motion to stay, the parties prepared for and conducted discovery for a four-month period before Defendant filed its motion to compel. See Order, ECF No. 92 (setting initial scheduling conference); Order, ECF No. 95 (setting discovery schedule). Plaintiffs, in particular, exchanged initial disclosures; served requests for production; negotiated a document production protocol; reviewed produced records; participated in multiple meet and confers in person and in writing; and prepared and issued letters of request for testimony of witnesses in Brazil. See Pls.' Opp'n to Def.'s Mot. to Stay, Decl. of Daniel B. Goldman, ECF No. 104-1, ¶¶ 4(a)-(1) (Plaintiffs' counsel's affidavit detailing the extent of Plaintiffs' discovery efforts during this period of time). Plaintiffs have not quantified these costs, but they are no doubt substantial. Had Defendant moved to stay and compel arbitration when this matter returned from the Court of Appeals-let alone done so when it moved to dismiss years earlier-these costs would have been avoided.

         Nor does it help Defendant that a significant portion of the costs incurred by Plaintiffs and the courts before it moved to compel were incurred due to prosecuting its sovereign immunity defense. Had Defendant moved to arbitrate contemporaneously with its motion to dismiss, the costs incurred by and before this court would have been largely the same. Plaintiffs and the appellate courts, however, would have avoided the costs associated with Defendant's direct appeal, request for en banc review, and petition for writ of certiorari. The resources expended during those proceedings is no small matter.

         The court also acknowledges the ultimate prejudice Plaintiffs could suffer were the court to stay this matter and compel arbitration: dismissal of their claim on statute of limitations grounds. In opposing the motion to dismiss, Plaintiffs offered the expert declaration of a Brazilian law expert, Professor José Rogério Cruz e Tucci. Professor Tucci opined that, under Brazilian law, Plaintiffs' fraud-in-the-inducement claim might be time barred due to uncertainty under Brazilian law ...


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