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Inversiones Y Procesadora Tropical Inprotsa, S.A. v. Del Monte International GMBH

United States Court of Appeals, Eleventh Circuit

April 23, 2019

INVERSIONES Y PROCESADORA TROPICAL INPROTSA, S.A., a Costa Rican Corporation, Plaintiff-Appellant,
v.
DEL MONTE INTERNATIONAL GMBH, a Swiss Corporation, Defendant-Appellee.

          Appeals from the United States District Court No. 1:16-cv-24275-FAM for the Southern District of Florida

          Before MARCUS, BLACK and WALKER, [*] Circuit Judges.

          BLACK, CIRCUIT JUDGE

         Appellant Inversiones y Procesadora Tropical INPROTSA, S.A. (INPROTSA) appeals from the district court's orders denying its petition to vacate and confirming an international arbitral award issued in favor of Appellee Del Monte International GmbH (Del Monte). INPROTSA contends the district court lacked subject-matter jurisdiction over its petition to vacate the arbitral award, which Del Monte removed from state court. It further contends that, even if the district court had jurisdiction, the petition to vacate should not have been dismissed on the ground that INPROTSA failed to assert a valid defense under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the Convention). Finally, INPROTSA contends the district court erred by granting Del Monte's motion to confirm the award. We affirm the district court.

         I. BACKGROUND

         The MD-2 pineapple variety was developed by the Pineapple Research Institute of Hawaii (the Institute), an agricultural research organization that at one point was run jointly by Del Monte, the Dole Fruit Company (Dole), and the Maui Pineapple Company (Maui). Dole withdrew from the Institute before the MD-2 was created. And Maui, for its part, played little to no role in developing the MD-2. Instead, the MD-2's commercial development was driven largely (if not solely) by Del Monte. Del Monte initiated tests on the variety in 1980, released the variety to its Hawaiian operations in 1981, began selling the MD-2 in North America and Europe in 1987, and introduced the variety to Costa Rica in 1994, where it worked to adapt the MD-2 to that country's climate and conditions. According to Del Monte, through its efforts, the MD-2 became the most popular pineapple variety in the world.

         Del Monte did not, however, hold a patent on the MD-2. And given the MD-2's commercial success, Del Monte was not the only pineapple producer interested in selling the variety. Indeed, Dole commercialized the MD-2 in 2000, which prompted a federal lawsuit from Del Monte (the Dole Litigation). Del Monte asserted claims for unfair competition, trade-secret violations, and conversion of vegetative material, alleging that Dole infringed its rights by- among other things-misappropriating knowledge and materials Del Monte developed in Costa Rica.

         The Dole Litigation eventually settled in 2002 and, as a result, Del Monte acknowledged it did not have the exclusive right to sell the MD-2. But before that settlement, while the Dole Litigation was pending, INPROTSA weighed offers from both Dole and Del Monte to begin producing the MD-2 at its Costa Rican plantation. In the end, INPROTSA chose to go with Del Monte, noting among other factors that a ruling against Dole in the Dole Litigation might leave INPROTSA without a market for its pineapples.

         In May 2001, against that backdrop, INPROTSA and Del Monte entered into an agreement (the Agreement) for the production, packaging, and sale of MD-2 pineapples. Under the Agreement, Del Monte agreed to provide INPROTSA with MD-2 seeds[1] at no cost. INPROTSA, in turn, acknowledged that Del Monte maintained ownership of all MD-2 seeds used on INPROTSA's plantation. INPROTSA further agreed to grow, sell, package, and deliver MD-2 pineapples exclusively to Del Monte. The parties also stipulated that Del Monte was "the exclusive owner of the variety known as MD-2," and they agreed that if the Agreement were terminated for any reason, including its expiration, INPROTSA would cease producing the MD-2 and either destroy its plant stock or return it to Del Monte.

         During the 12-year term of the Agreement, Del Monte provided tens of millions of MD-2 seeds at no cost, and Del Monte purchased more than $200 million in pineapples from INPROTSA. After the Agreement expired in 2013, however, INPROTSA neither destroyed nor returned its MD-2 plant stock to Del Monte. Instead, it sold the MD-2 pineapples to third parties.

         Del Monte initiated an arbitration against INPROTSA in the International Court of Arbitration of the International Chamber of Commerce (ICC) in Miami. Del Monte alleged that INPROTSA breached the Agreement and converted its plant stock, for which Del Monte sought specific performance, injunctive relief, and damages. INPROTSA responded by arguing-among other things-that because Del Monte did not exclusively own the MD-2 variety, which INPROTSA contended was a condition precedent to its obligations under the Agreement, INPROTSA was not obligated to sell exclusively to Del Monte or return its MD-2 plant stock. INPROTSA also contended it was fraudulently induced to enter the Agreement by Del Monte's false representation that it had exclusive ownership of the MD-2 variety.

         The arbitration tribunal issued its award (the Award) on June 10, 2016. In a thorough opinion, to which there was a dissent, [2] the tribunal ruled in favor of Del Monte on its claim that INPROTSA breached the Agreement. Specifically, the tribunal concluded that Del Monte's exclusive ownership of the MD-2 variety (as against third parties) was not a condition precedent to INPROTSA's contractual obligation to return or destroy the plants derived from seeds Del Monte provided at no cost under the Agreement. Thus, INPROTSA breached the Agreement by selling, rather than returning or destroying, the pineapples it derived from Del Monte's seeds.

         Further, the tribunal rejected INPROTSA's contention that it was fraudulently induced to enter into the Agreement. After considering the evidence provided by the parties, the tribunal first determined that Del Monte's claim to exclusive ownership of the MD-2 was not fraudulent, because it was based on Del Monte's reasonable belief at the time that it had a proprietary interest grounded in its commercial development of the MD-2-regardless of whether it held a patent on the variety.[3] The fact that Del Monte subsequently renounced any broader rights to exclusive ownership of the MD-2 as against third parties did not render any prior representations knowingly false.

         The tribunal also found that the Agreement's statement regarding exclusive ownership of the MD-2 was not a unilateral representation proffered by Del Monte; rather, it was a joint stipulation, accepted as true by sophisticated parties with knowledge of both the pineapple industry and the contested nature of Del Monte's claim to a proprietary interest in the MD-2. And even if it were a false representation, INPROTSA could not reasonably have relied on it because INPROTSA knew Del Monte's claim to exclusive ownership was contested when it entered into the Agreement.

         Finally, the tribunal determined INPROTSA was aware of the falsity of any purported representation by at least 2002, after which INPROTSA ratified the Agreement:

[INPROTSA] cannot blow cold and hot at the same time: enjoy the benefits of the Agreement for 12 years in which it never raised Del Monte's supposed fraudulent conduct, particularly after the Settlement Agreement putting an end to the [Dole] Litigation in 2002 . . ., but then seek to liberate itself under Florida law from contractual stipulations it freely and knowingly accepted to be bound by and enforce[d].

USDC Doc. 1 at 119-20.

         The tribunal thus awarded Del Monte specific performance, injunctive relief, damages, interest, costs, and attorney's fees. More specifically, it required INPROTSA to either return or destroy 93% of the MD-2 vegetative materials on its plantation-which the tribunal found were attributable to the seeds provided by Del Monte. It also enjoined INPROTSA from selling 93% of its MD-2 pineapples to third parties until it complied with its obligation to destroy or return the MD-2 plant stock. With respect to damages, the tribunal determined that, under Florida law, Del Monte was entitled to disgorgement of the money INPROTSA received by selling the MD-2 pineapples to third parties in breach of the Agreement.

         The tribunal recognized that the evidence on which a damages award might be fashioned was limited. Although it had evidence concerning INPROTSA's gross sales in 2014, it lacked any information concerning INPROTSA's sales in 2015. Likewise, because INPROTSA refused to provide any information about its profits or expenses during discovery, it was impossible to calculate an award based solely on the profits INPROTSA improperly obtained after the expiration of the Agreement. Thus, the tribunal concluded that, under the circumstances and evidence provided, Del Monte's damages should be limited to $26.133 million- 93% of INPROTSA's MD-2 sales in 2014. In other words, the tribunal refused to speculate about either INPROTSA's 2015 sales (which would have increased damages) or INPROTSA's expenses (which would have decreased damages).

         INPROTSA promptly moved for correction and clarification of the Award under Article 35 of the ICC rules governing the arbitration, ostensibly seeking "to correct or clarify certain clerical, computational or typographical errors, or errors of a similar nature, contained in the Award."[4] USDC 1 at 190. INPROTSA contended the tribunal's damages award was erroneous as a matter of Florida law because Del Monte did not prove the amount of INPROTSA's profits from the breach. According to INPROTSA, because Del Monte provided evidence of only INPROTSA's revenues, [5] Del Monte's claim for damages should have been dismissed in its entirety.

         The tribunal denied the motion, concluding it lacked authority to revisit the merits of its substantive damages award. The tribunal reasoned that Article 35 of the governing ICC Arbitration Rules allowed only for interpretation of the Award or correction of errors of the clerical, computational, and typographical variety. Article 35 did not provide authority to revise an Award on the merits, based on an alleged substantive error of law.

         II. PROCEDURAL HISTORY

         In September 2016, INPROTSA filed a petition to vacate the Award in Florida's Eleventh Judicial Circuit. Del Monte then removed the petition to the United States District Court for the Southern District of Florida, citing 9 U.S.C. §§ 203 and 205, as well as 28 U.S.C. §§ 1331 and 1441. Soon after, Del Monte filed a combined motion to dismiss the petition to vacate and cross-petition to confirm the Award. INPROTSA, in turn, filed a motion to remand the proceeding to state court, contending the district court lacked subject-matter jurisdiction.

         The district court granted Del Monte's motion to dismiss the petition to vacate and denied INPROTSA's motion to remand, reasoning that INPROTSA's petition to vacate-which was based on Florida law-failed to assert a valid defense under the Convention, as required by our opinion in Industrial Risk Insurers v. M.A.N. Gutehoffnungshütte GmbH, 141 F.3d 1434, 1446 (11th Cir. 1998). The district court did not, however, expressly address Del Monte's cross-petition to confirm the Award. As a result, there were some procedural detours that need not be recounted in detail here. Ultimately, on limited remand from this Court, the district court granted Del Monte's cross-petition and confirmed the Award in a reasoned opinion.[6]

         The district court concluded it had subject-matter jurisdiction under 9 U.S.C. § 203. It then determined that INPROTSA failed to establish a valid ground for resisting confirmation under the Convention.[7] Specifically, as is relevant to the issues on appeal, the district court rejected INPROTSA's contention that the Award was procured through fraud. The district court first noted there were no arguments being raised that the arbitration process itself "was fraudulent, that the arbitration tribunal acted fraudulently, or that the final award was procured by fraud." USDC Doc. 47 at 9. It continued by noting that the tribunal reviewed the evidence submitted by INPROTSA and determined there was no fraud. INPROTSA could not avoid the Award simply because it disagreed with the arbitrator's conclusion on that issue. Otherwise, "any losing party raising a fraud defense in an international arbitration[] could relitigate the issue in federal court." Id. at 10. Such a result itself would violate this country's public policy favoring arbitration as an efficient means for resolving disputes. In the end, the district court concluded that "[t]he arbitration panel's consideration and ruling on the merits of INPROTSA's fraud defense does not violate the most basic notions of morality and justice requiring this Court to deny confirmation of the arbitral award." Id. (quotation omitted).

         INPROTSA timely appealed the district court's orders both dismissing its petition to vacate the Award and granting Del ...


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