Inversiones y Procesadora Tropical Inprotsa, S.A. v. Del Monte International GmbH

At a glance

Parties

Inversiones y Procesadora Tropical INPROTSA, S.A. (Costa Rica) v. Del Monte International GmbH (Switzerland)

Case no.

U.S. Court of Appeals, Eleventh Circuit, No. 18-14807 (earlier appeals Nos. 16-17623 and 17-12163); S.D. Fla. Case No. 16-24275-CIV-MORENO

Forum and rules

U.S. federal courts; New York Convention as implemented by Chapter 2 of the Federal Arbitration Act (9 U.S.C. §§ 201 ff.)

Treaty

Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention)

Court

S.D. Fla.: Judge Federico A. Moreno; Magistrate Judge Lauren Louis. Eleventh Circuit: Judges Marcus, Black and Walker (April 2019); Judges Wilson, Newsom and Black (September 2019)

Underlying award(s)

ICC final award of 10 June 2016 (arbitration seated in Miami), in favour of Del Monte, with a dissent

Sector

Agriculture; MD-2 pineapples

Outcome

The award was confirmed and INPROTSA's petition to vacate was dismissed; both rulings were affirmed on appeal. Attorney's fees awarded to Del Monte as sanctions for a frivolous challenge were also affirmed.

Amount

Award: USD 26,133,000 in damages, USD 650,000 in arbitral costs and USD 2,507,440.54 in legal fees (total USD 29,290,440.54), plus pre- and post-award interest. Unsatisfied judgment including interest: USD 33,531,329.40.

The dispute

INPROTSA, a Costa Rican pineapple grower, and Del Monte International GmbH, a Swiss company, signed an exclusive Pineapple Sales Agreement in May 2001. Del Monte supplied MD-2 pineapple seeds free of charge. INPROTSA agreed to sell its MD-2 fruit only to Del Monte and, when the Agreement ended, to destroy or return the plant stock. After the Agreement expired in 2013, INPROTSA kept the plant stock and sold MD-2 pineapples to third parties. Del Monte began ICC arbitration in Miami in March 2014. On 10 June 2016 the tribunal, by majority, ordered INPROTSA to return or destroy 93% of the MD-2 vegetative material, barred it from selling MD-2 fruit to third parties until it did so, and awarded damages and costs. INPROTSA then fought the award in the U.S. courts. It argued that the federal court had no subject-matter jurisdiction over a petition to vacate, that the tribunal exceeded its powers, and that public policy barred confirmation because Del Monte had fraudulently induced the stipulation that it exclusively owned the MD-2 variety.

Key holdings

1. The district court has jurisdiction under 9 U.S.C. § 203 over the removed petition to vacate and over the cross-petition to confirm. On the merits, INPROTSA's public-policy defenses fail: the tribunal had already decided the fraudulent-inducement claim, and its handling of the Baeza letter and its enforcement of the restrictive covenants are not contrary to public policy. The award is confirmed. Order of 2 May 2017, pp. 6–12
2. In the alternative, INPROTSA may not raise affirmative defenses to confirmation. It filed its petition to vacate within three months but did not serve it on the non-resident Del Monte under Rule 4 within the time required by 9 U.S.C. § 12. Order of 2 May 2017, pp. 12–14
3. An action 'falls under the Convention' for the purposes of § 203 when it relates closely enough to an agreement or award governed by the Convention. The district court therefore had subject-matter jurisdiction over the petition to vacate once it was removed under § 205. 11th Cir. Opinion of 23 April 2019, pp. 15–17
4. Industrial Risk Insurers remains binding: the Convention's defenses are the exclusive grounds for vacating an award governed by the Convention, and BG Group v. Argentina did not overrule that holding. In any event, the tribunal did not exceed its powers in construing the ambiguous 'as long as' clause, in awarding disgorgement measured by revenues, or in refusing to reconsider the merits under ICC Article 35. 11th Cir. Opinion of 23 April 2019, pp. 19–26
5. The public-policy defense cannot be used to relitigate a fraudulent-inducement claim that the arbitrators already decided. INPROTSA knew of the Dole Litigation when it contracted, so enforcing the award does not offend public policy. Confirmation was affirmed. 11th Cir. Opinion of 23 April 2019, pp. 26–29
6. The magistrate judge recommended denying INPROTSA's motion to abstain in favour of the stayed Costa Rican confirmation proceeding. She recommended granting proceedings supplementary against INPROTSA's rights under its contracts with Fruver. She also recommended that INPROTSA and its officers be ordered to show cause why they should not be held in contempt: after the final judgment, INPROTSA sold MD-2 fruit beyond the 7% cap, with USD 16,373,684 in excess sales between May 2017 and September 2018. She recommended denying contempt against Fruver and denying damages for the period before the judgment. Report and Recommendation of 24 January 2019, pp. 9–26
7. The court affirmed the award of attorney's fees to Del Monte as Hercules Steel sanctions. The Hercules Steel standard itself contains the bad-faith finding, and INPROTSA attacked the award without any real legal basis. 11th Cir. Opinion of 5 September 2019, pp. 4–5

Procedural history

1. May 2001INPROTSA and Del Monte enter into the Pineapple Sales Agreement. It expires in 2013.
2. March 2014Del Monte starts ICC arbitration in Miami.
3. 10 June 2016The ICC tribunal issues its final award in favour of Del Monte, with a dissent.
4. 18 July 2016Del Monte petitions the First Chamber of the Supreme Court of Costa Rica to confirm the award. That court stays the proceeding on 9 May 2017.
5. 9 September 2016INPROTSA petitions a Florida state court to vacate the award. Del Monte removes the case to the S.D. Fla. on 7 October 2016.
6. 6 December 2016The district court dismisses the petition to vacate.
7. 2 May 2017On limited remand from the Eleventh Circuit, the district court grants Del Monte's cross-petition and confirms the award. Final judgment is entered on 17 May 2017.
8. 24 January 2019Magistrate Judge Louis issues a Report and Recommendation on abstention, proceedings supplementary and contempt.
9. 23 April 2019The Eleventh Circuit affirms jurisdiction, the dismissal of the petition to vacate, and the confirmation of the award.
10. 5 September 2019The Eleventh Circuit affirms the award of attorney's fees to Del Monte as sanctions.

Tribunal, counsel and experts

Decided by

• Federico A. Moreno Judge, U.S. District Court, Southern District of Florida
• Lauren Louis Judge, U.S. District Court, Southern District of Florida (Magistrate Judge)
• Jr. John M. Walker Judge, U.S. Court of Appeals, Eleventh Circuit (Second Circuit judge sitting by designation)

Experts

Patrick Gannon (claimant)

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Keywords

• New York Convention
• 9 U.S.C. § 203
• removal 9 U.S.C. § 205
• subject-matter jurisdiction
• vacatur
• confirmation
• public policy defense
• fraudulent inducement
• Industrial Risk Insurers
• BG Group
• Hercules Steel sanctions
• attorney's fees
• contempt
• international abstention
• MD-2 pineapple
• Del Monte
• ICC arbitration Miami
• 9 U.S.C. § 12 service

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