Goldgroup Res., Inc. v. Dynaresource De Mex.

994 F.3d 1181

GOLDGROUP RESOURCES, INC., Applicant - Appellee,

v.DYNARESOURCE DE MEXICO, S.A. DE C.V. ; DynaResource, Inc., Respondents - Appellants.

No. 20-1143

United States Court of Appeals, Tenth Circuit.

FILED April 16, 2021

Jason P. Kathman (Gerrit M. Pronske, with him on the briefs), Pronske & Kathman, P.C., Plano, Texas, for Respondents-Appellants.

Christopher M. Jackson (Christopher H. Toll, Marcy G. Glenn, and Kevin C. McAdam, with him on the brief), Holland & Hart, L.L.P., Denver, Colorado, for Petitioner - Appellee.

Before TYMKOVICH, Chief Judge, KELLY, and PHILLIPS, Circuit Judges.

KELLY, Circuit Judge.

Respondents-Appellants DynaResource de Mexico, S.A. de C.V. and DynaResource, Inc. ("DynaResources") appeal from the district court's confirmation of an arbitration award in Applicant-Appellee Goldgroup's favor. We have jurisdiction under 28 U.S.C. § 1291 and 9 U.S.C. § 16, and we affirm.

Background

This case involves a protracted dispute over a contract relating to a gold mining operation in Mexico. Goldgroup is a subsidiary of a Canadian company with a portfolio of projects in Mexico. DynaUSA, a Texas-based company, incorporated DynaMexico specifically for the purpose of developing the San Jose de Gracia property in the Sinaloa region of Northern Mexico. DynaUSA and DynaMexico jointly comprise DynaResources.

In 2006, Goldgroup and DynaResources entered into an Earn In/Option Agreement (the "Option Agreement") which gave Goldgroup the right to earn up to a 50 percent equity interest in DynaMexico if Goldgroup invested a total of $18 million in four phases over approximately four years. The Option Agreement provided for the appointment of two Goldgroup representatives to DynaMexico's board of directors upon timely completion of the option. At that point, DynaMexico's board would be expanded to five members: two DynaUSA representatives, two Goldgroup representatives, and a fifth member that DynaUSA and Goldgroup would agree upon. The Option Agreement also established a three-person Management Committee comprised of one DynaUSA representative and two Goldgroup representatives.

Most relevant here, the Option Agreement contains a dispute resolution provision specifying that "[a]ll questions or matters in dispute under this Agreement shall be submitted to binding arbitration ... in Denver, Colorado under the Rules of the American Arbitration Association (‘AAA’) by a single arbitrator selected by the parties." 4 Aplt. App. 1083. The Option Agreement also states that Mexican law applies "in respect to the shares of DynaMexico and the acquisition thereof," and that venue and jurisdiction for any dispute under the Option Agreement would be in Denver. 4 Aplt. App. 1081.

In 2011, Goldgroup exercised its option, became a 50 percent shareholder in DynaMexico, and appointed two directors. However, before the parties could agree on the fifth director, their relationship broke down due to a dispute over management issues. DynaMexico has not held a board meeting since the dispute arose.

In 2012, DynaResources filed the first of numerous lawsuits between the parties, suing Goldgroup in Texas state court (the "Texas Lawsuit") for a variety of tort claims. Goldgroup defended in part by arguing that DynaResources's claims were subject to arbitration.

In 2013, DynaUSA convened a DynaMexico shareholders meeting without Goldgroup. At the meeting, the attending shareholders purported to issue new DynaMexico shares to DynaUSA as repayment for a debt. The effect was to dilute Goldgroup's interest in DynaMexico from 50 percent to 20 percent. After obtaining the meeting minutes, Goldgroup filed an action in federal court in Mazatlán, Mexico (the "Mazatlán Lawsuit"). Goldgroup sought an annulment of the actions taken at the meeting. The Mazatlán court awarded Goldgroup declaratory and injunctive relief invalidating the issuance of the shares.

In March 2014, DynaResources dismissed the Texas Lawsuit. Goldgroup then initiated arbitration in Denver to resolve the parties’ disputes under the Option Agreement (the "Arbitration"). In its Demand for Arbitration, Goldgroup alleged a number of claims, including breach of contract, breach of fiduciary duty, and civil conspiracy. In May 2014, DynaResources filed suit in Colorado federal district court to prevent the Arbitration from moving forward. The case was assigned to Judge Krieger (the "Judge Krieger Lawsuit"). DynaResources raised the following arguments: (1) the Arbitration should be stayed until the question of arbitrability is resolved by courts in Mexico, and (2) the arbitration clause in the Agreement was invalid because (a) the Option Agreement ceased to be effective after Goldgroup exercised its option, (b) the claims at issue were not covered by the arbitration clause, and (c) Goldgroup's initiation of the Mazatlán Lawsuit constituted a waiver of its right to arbitrate. DynaResources then asked the arbitrator to dismiss or stay the Arbitration until either Judge Krieger or a Mexico court could rule on the validity and scope of the arbitration agreement.

The arbitrator denied DynaResources's request in Procedural Order No. 1, ruling that (1) the arbitrator had authority to determine the arbitrability of Goldgroup's claims under the American Arbitration Association's International Centre for Dispute Resolution ("AAA-ICDR") Rules, (2) at least some of Goldgroup's claims were arbitrable, and (3) the arbitrator had authority to determine whether Goldgroup waived its right to arbitration.

Meanwhile, DynaResources filed a separate lawsuit against Goldgroup and the AAA in federal court in Mexico City seeking essentially the same relief sought in the Judge Krieger Lawsuit, i.e., an injunction of the Arbitration on the basis that the arbitration provision in the Agreement was invalid or waived (the "Mexico City Lawsuit"). Neither Goldgroup nor the AAA appeared in the Mexico City Lawsuit and contend that they were not properly served.

In September 2015, Judge Krieger entered an order affirming the validity of the Agreement's arbitration provision (the "Judge Krieger Order"). The court concluded that the only arbitrability issue for it to consider was DynaResources's contention that the Option Agreement automatically expired after it was completed, thereby extinguishing the parties’ agreement to arbitrate disputes arising under the Option Agreement. The court "reject[ed] that argument out of hand." DynaResource de Mexico, S.A. de C.V. v. Goldgroup Res., Inc., No. 14-cv-01527, 2015 WL 5693560, at *7 (D. Colo. Sept. 29, 2015). It concluded that at least some of Goldgroup's claims in the Demand for Arbitration were subject to arbitration. It instructed that the arbitrator should address DynaResources's remaining "litany of arguments" as to why the Arbitration should not proceed, including the argument that Goldgroup waived its right to arbitrate.

In October 2015, the court in the Mexico City Lawsuit reached the opposite conclusion. It ruled that the arbitration agreement was unenforceable because Goldgroup had waived its right to arbitration by submitting to the jurisdiction of Mexican courts in prior disputes (the "Mexico City Order"). Shortly thereafter Goldgroup filed an amparo action¹ challenging the Mexico City Order on the basis of ineffective service of process.² At the same time, DynaResources claimed in the Arbitration that the Mexico City Order barred the arbitration of Goldgroup's claims. The arbitrator rejected that argument in Procedural Order No. 5, finding that (1) Procedural Order No. 1 bound the parties because they had submitted the arbitrability and jurisdictional questions for his decision, (2) the Judge Krieger Order also bound the parties regarding the arbitrability of Goldgroup's claims, and (3) Goldgroup and the AAA were not properly served in the Mexico City Lawsuit, the Mexico City Court was not informed of Procedural Order No. 1 or the Judge Krieger Order, and DynaResources had engaged in forum shopping.

The arbitration proceeded to a merits hearing in November 2015. DynaResources refused to participate in the hearing, arguing that the Mexico City Order was "way more mandatory" than the arbitrator's and Judge Krieger's orders permitting the arbitration to proceed. 1 Aplt. App. 67. After Goldgroup presented its arguments, DynaResources was given another opportunity to provide written comments. It did not do so. Several months later, it voluntarily dismissed the Judge Krieger Lawsuit.

In August 2016, the arbitrator ruled in Goldgroup's favor and awarded Goldgroup monetary and equitable relief. The arbitrator made a number of findings in connection with the award, including that (1) the arbitration clause was valid and enforceable, (2) Goldgroup had not waived its right to arbitrate under Mexican or U.S. law by filing the Mazatlán Lawsuit or defending the Texas Lawsuit, and (3) DynaResources breached the Option Agreement and engaged in forum shopping by asking the Mexico City court to rule on the arbitrability of Goldgroup's claims.

Goldgroup next sought confirmation of the award in Colorado federal district court. After answering Goldgroup's application for confirmation of the award, DynaResources filed a petition for nonrecognition of the award under the Inter-American Convention on International Arbitration ("Panama Convention" or "Convention") and moved to vacate the award under the Federal Arbitration Act ("FAA"). Among other reasons, DynaResources argued that the award should not be confirmed because (1) the arbitrator exceeded the scope of his authority by ruling on the issue of whether Goldgroup had waived its right to arbitrate and (2) the Mexico City Order effectively annulled the subsequent award issued in the Arbitration. The matter was first referred to a magistrate judge who recommended that the district court vacate the award. Goldgroup objected to the magistrate's recommendation. In May 2019, the district court rejected the magistrate's recommendation and issued...