Prime Venture Corporation v. Fennix Global Holdings, Inc.

At a glance

Parties

Prime Venture Corporation (Puerto Rico) v. Fennix Global Holdings, Inc. (Panama)

Case no.

Civil No. 18-1473 (RAM)

Court

U.S. District Court for the District of Puerto Rico (Judge Raúl M. Arias-Marxuach)

Treaty

Arbitration clause in the Memorandum of Understanding of 20 April 2016 (¶ 4.4); Inter-American (Panama) Convention, implemented by Chapter 3 of the Federal Arbitration Act

Sector

Software development (law-enforcement monitoring software); equity investment

Outcome

Declaratory judgment denied and complaint dismissed with prejudice (15 June 2020).

Amount

Underlying dispute: whether Fennix owes USD 250,000 plus attorney's fees and interest.

The dispute

Under a Memorandum of Understanding dated 20 April 2016, Prime Venture Corporation, a Puerto Rico company, acquired 10% of the stock of Fennix Global Holdings, Inc., a Panamanian company, for USD 250,000. Fennix undertook to develop monitoring software for persons under law-enforcement supervision. Paragraph 4.4 of the MOU provided for arbitration under the Arbitration Center of the Chamber of Commerce, Industry and Agriculture of Panama "or its equivalent in the Commonwealth of Puerto Rico". A dispute arose over whether Fennix owed the USD 250,000 plus fees and interest. Both sides accepted that the dispute had to be arbitrated, but disagreed on the forum. Fennix said the arbitration could only take place in Panama. Prime said the Puerto Rico Chamber of Commerce had stopped administering arbitrations after Hurricane María, and asked the court to declare that JAMS arbitration in Boca Raton, Florida was the Puerto Rican "equivalent". Fennix was in default and did not take part.

Key holdings

1. The Inter-American Convention applies rather than the New York Convention. The four DiMercurio criteria are met, and both parties are citizens of States (Panama and the United States) that have ratified the Convention and are members of the Organization of American States (9 U.S.C. § 305). pp. 14–15
2. The court left open whether arbitration administered by JAMS is functionally equivalent to arbitration administered by CeCap. It noted that Prime offered nothing on this point except that JAMS has 23 Spanish-speaking arbitrators. p. 16
3. Arbitration in Boca Raton, Florida is not "equivalent" to arbitration in Puerto Rico. The MOU provides for arbitration in Panama or Puerto Rico only. Under 9 U.S.C. § 303(a) and In re Mercurio, a court may not rewrite the agreement or compel arbitration in a forum the agreement does not list. pp. 16–18
4. Prime did not show that it was coerced into choosing Panama or Puerto Rico. Nor did it meet the heavy burden needed to set aside a forum-selection clause for inconvenience: the forum chosen in Panama remains available, and Florida's only link to the case is Prime's own choice of administrator. pp. 17–18
5. Acting on its own motion under Rule 12(b)(6), the court denied the declaratory judgment and dismissed the complaint with prejudice. pp. 1, 19

Procedural history

1. 20 April 2016Prime and Fennix sign the MOU, which contains the arbitration clause in ¶ 4.4.
2. Prime files a complaint for declaratory judgment. Default is entered against Fennix (Docket No. 27), and Prime then files a Second Amended Complaint (Docket No. 33).
3. 26 March 2020The court orders Prime to show cause why it should not declare that JAMS is not an alternative arbitral forum.
4. 21 April 2020Prime files its response to the order to show cause.
5. 15 June 2020Opinion and Order: the declaratory judgment is denied and the complaint is dismissed with prejudice.

Tribunal, counsel and experts

Decided by

• Raúl M. Arias-Marxuach Judge, U.S. District Court for the District of Puerto Rico

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Keywords

• Inter-American Convention
• Panama Convention
• New York Convention
• Federal Arbitration Act
• 9 U.S.C. § 303
• declaratory judgment
• place of arbitration
• forum selection clause
• equivalent arbitral institution
• JAMS
• CeCap
• Chamber of Commerce, Industry and Agriculture of Panama
• Puerto Rico
• Hurricane María
• Rule 12(b)(6)
• sua sponte dismissal
• software development

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