Goldgroup Resources, Inc. v. DynaResource de Mexico, S.A. de C.V. and DynaResource, Inc.

At a glance

Parties

Goldgroup Resources, Inc. (applicant) v. DynaResource de Mexico, S.A. de C.V. and DynaResource, Inc. (respondents)

Case no.

Civil Action No. 16-cv-02547-RM-KMT

Court

U.S. District Court for the District of Colorado (Magistrate Judge Kathleen M. Tafoya; District Judge Raymond P. Moore)

Underlying award(s)

Final Award of 24 August 2016 by sole arbitrator David B. Wilson, ICDR/AAA arbitration seated in Denver, Colorado

Forum and rules

Federal Arbitration Act; Panama Convention (9 U.S.C. § 301 et seq.) and New York Convention (9 U.S.C. § 201 et seq.); AAA International Dispute Resolution Procedures (1 June 2010)

Treaty

Arbitration clause in Article 8.16 of the Earn In/Option Agreement of 1 September 2006

Sector

Gold mining (San José de Gracia, Sinaloa, Mexico)

Outcome

The Magistrate Judge recommended vacating the award (13 February 2018). The District Judge rejected that recommendation, confirmed the award and denied the motion to vacate (9 May 2019).

Amount

Award: DynaResource, Inc. to pay Goldgroup USD 403,913.92 (USD 325,000.00 Holland & Hart fees and costs, USD 2,795.00 hearing transcript, USD 76,118.92 Loperena, Lerch y Martin Del Campo fees and costs), plus all amounts Goldgroup incurs to challenge the Mexico City Order, and declaratory relief. A separate Mexico City court order had awarded DynaResource almost USD 48,000,000 in damages.

The dispute

Under a 2006 Earn In/Option Agreement, Goldgroup, a British Columbia company, earned a 50% equity interest in DynaMexico, which holds the San José de Gracia gold mining project in Sinaloa, Mexico. Goldgroup alleged that at a shareholders' meeting in May 2013, held without notice to it, DynaMexico issued new shares to DynaUSA and so diluted Goldgroup's stake from 50% to 20%. Goldgroup began an ICDR/AAA arbitration in Denver in March 2014. DynaResource objected to arbitration. It sued in the District of Colorado (the Krieger case) and then in Mexico City, where on 5 October 2015 a court declared the arbitration clause "notoriously inefficient and unenforceable" because both parties had tacitly waived it by litigating in Mexico, and ordered the AAA to stop the arbitration. The arbitrator went ahead without DynaResource and ruled for Goldgroup. Goldgroup then applied to confirm the award, and DynaResource sought non-recognition or vacatur relying on the Mexico City Order, comity, and the FAA and Panama Convention grounds.

Key holdings

1. Magistrate Judge's recommendation: the Mexico City Order prevails. DynaResource did not engage in improper forum shopping. Judge Krieger's order was not final, and the arbitrator exceeded his powers under 9 U.S.C. § 10(a)(4) by proceeding after the Mexico City Order. The award should be vacated. Recommendation, pp. 26–30
2. The Mexico City Order did not find the arbitration agreement invalid. It found only that the parties had tacitly waived the agreement, making it unenforceable. The recommendation erred in treating it as a finding of invalidity. Order, pp. 15–16
3. Waiver of arbitration through litigation conduct is for a court, following Pre-Paid Legal Servs. v. Cahill. That court is one in Denver, Colorado, applying U.S. procedural law, because Articles 8.5 and 8.16 place venue and arbitration in Denver. DynaResource did not show that the Mexico City court had authority to decide waiver or to enjoin the arbitration. Order, pp. 19–25
4. Where the award is made in the United States, the domestic FAA grounds for vacatur apply alongside the Panama Convention, following Ario and Yusuf. Review is highly deferential, and the recommendation failed to apply that standard. Order, pp. 26–28
5. No vacatur under § 10(a)(4), § 10(a)(3) or § 10(a)(2). The arbitrator had a reasonable basis for refusing to postpone the hearing. DynaResource had notice and chose not to take part, a bind of its own making. Awarding fees from the other proceedings as damages for breach of the agreement to arbitrate was within his authority. Disagreement with his findings does not show evident partiality. Order, pp. 29–38
6. No ground for refusal under Panama Convention Articles 5(1)(a), (b), (d), (e) or 5(2)(b), nor under public policy, comity or manifest disregard of the law. The Mexico City Order does not control, and it could not annul or suspend an award made in the United States. Order, pp. 38–46
7. The recommendation is rejected, Goldgroup's application to confirm is granted, and DynaResource's petition for non-recognition or vacatur is denied. Order, p. 46

Procedural history

1. 1 September 2006The parties sign the Earn In/Option Agreement, with a Denver arbitration clause in Article 8.16.
2. 10 March 2014Goldgroup files its Demand for Arbitration with the ICDR/AAA in Denver.
3. 30 May 2014DynaResource sues in the District of Colorado (No. 14-cv-01527-MSK-KMT) to stay the arbitration.
4. 29 September 2015Chief Judge Krieger finds the arbitration agreement still operative and leaves the waiver issues to the arbitrator.
5. 5 October 2015The Mexico City court declares the arbitration clause unenforceable for tacit waiver and orders the AAA to abstain from the arbitration.
6. 11–16 November 2015Procedural Order No. 5 refuses to suspend the arbitration. The merits hearing is held on 16 November without DynaResource.
7. 24 August 2016The arbitrator issues the Final Award in Goldgroup's favour.
8. 24 August 2017A Mexican court dismisses Goldgroup's amparo action against the Mexico City Order as untimely.
9. 13 February 2018The Magistrate Judge recommends denying confirmation and vacating the award.
10. 9 May 2019The District Judge rejects the recommendation and confirms the award.

Tribunal, counsel and experts

Decided by

• Kathleen M. Tafoya Judge, U.S. District Court, District of Colorado (Magistrate Judge; recommendation rejected)
• Raymond P. Moore Judge, U.S. District Court, District of Colorado

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Keywords

• confirmation of arbitral award
• vacatur
• Panama Convention
• New York Convention
• Federal Arbitration Act § 10
• waiver of arbitration by litigation conduct
• exceeded powers
• refusal to postpone hearing
• evident partiality
• manifest disregard of the law
• international comity
• foreign anti-arbitration injunction
• Mexico City Order
• amparo
• gold mining
• San José de Gracia
• ICDR
• attorney fees as damages

Summary generated with AI from the published documents — refer to the award for the authoritative text.