Indagro v. Nilva

INDAGRO, S.A., Plaintiff, v. VENIAMIN NILVA and VIVA CHEMICAL CORPORATION, Defendants.

Civil Action No. 07-3742 (MCA)

UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY

June 30, 2016

NOT FOR PUBLICATION

OPINION

ARLEO, UNITED STATES DISTRICT JUDGE

This matter comes before the Court upon Defendant Veniamin Nilva's ("Defendant" or "Nilva") motion for summary judgment. Dkt. No. 132. Plaintiff Indagro, S.A. ("Plaintiff" or "Indagro") opposes the motion. Dkt. No. 140. Upon the Court's request, the parties submitted supplemental briefing. Dkt. Nos. 148, 149. This motion was decided on the papers pursuant to Federal Rule of Civil Procedure 78. For the reasons set forth below, Defendant's motion is GRANTED.

I. BACKGROUND

This matter arises from a contractual dispute between Indagro and Defendant Viva Chemical Corporation ("Viva") and a subsequent arbitration before the International Chamber of Commerce ("ICC").

In 1995, Viva was incorporated in New Jersey and maintained a home office in Fort Lee, New Jersey, and a satellite office in Moscow, Russia. Defendant's Rule 56.1 Statement of Undisputed Material Facts ("Def. Statement") ¶¶ 1-2, Dkt. No. 137-8. From its inception through 1998, Viva was owned 75% by Nilva and 25% by Constantine Lutsenko ("Lutsenko"), Viva's Vice President. Id. ¶ 3. Beginning in 1999, Nilva and Lutsenko became equal partners in Viva, and their respective ownership interests in Viva remained at 50% each through the relevant time period of Viva's dispute with Indagro. Id. ¶ 4.

Viva was engaged in the business of the purchase, resale, and transportation of commodities internationally. Id. ¶ 5. Viva purchased hundreds of thousands of metric tons per year of chemical products such as urea, ammonium nitrate, ammonium sulfate, methanol, and sulfur, among others, from a number of major chemical manufacturers based in Russia and in former Soviet republics and resold its product to numerous international buyers. Id. ¶ 8.

On or about August 25, 2004, Indagro and Viva entered into a Joint Venture Agreement ("JVA") for the purpose of purchasing and reselling sulfur in bulk. Def. Statement ¶ 11; Compl. Ex. 1, Dkt. No. 1-1. In April 2005, a dispute arose between the parties whereby Indagro claimed that Viva wrongfully appropriated for its own account sulfur that was supposed to be sold by Indagro pursuant to the terms of the JVA. Def. Statement ¶ 14. The JVA contained a broad arbitration provision which provided that: "[a]ny dispute that cannot be settled amicably to be referred for arbitration at ICC Paris in English language." JVA, Compl. Ex. 1 at 3, Dkt. No. 1-1. Efforts to amicably settle the dispute failed, and Indagro commenced arbitration against Viva on October 18, 2005 at the ICC in accordance with the terms of the JVA. Def. Statement ¶ 15. The only named parties to the arbitration were Indagro and Viva. Def. Statement ¶ 17.

The evidentiary hearing for the arbitration was scheduled to take place in London, England on July 11, 2006. Id. ¶ 20. On behalf of Viva, the hearing was attended by Lutsenko, Viva's Vice President, and Andrew Meads ("Meads"), Viva's counsel. Id. Nilva, who was in the United States at the time, did not attend the hearing. Id. Indagro was represented at the hearing by its attorney, Andrew de Klerk ("de Klerk"), who was accompanied by Theo Del Conte ("Del Conte"), Indagro's Managing Director, Joseph Efthimiades ("Efthimiades"), a trader at Indagro, and Esti Martinez ("Martinez"), Indagro's in-house counsel. Id.

During the first day of the hearing, Viva proposed a settlement whereby the hearing would be adjourned to allow the parties to each conduct an accounting procedure of the JVA's finances as opposed to a protracted arbitration hearing. Id.; Plaintiff's Rule 56.1 Response Statement ("Pl. Statement") ¶ 20. Indagro indicated that its agreement to this proposal—to conduct an accounting procedure—was conditioned on each party securing reciprocal personal guarantees from their respective principals, including Nilva and Lutsenko on behalf of Viva, to cover any obligation on the part of the respective corporations. Def. Statement ¶ 22; Pl. Statement ¶ 22. Lutsenko left the conference room and telephoned Nilva to discuss the proposal and Indagro's insistence on reciprocal guarantees. Def. Statement ¶ 23. Meads remained in the room with the other attendees and did not participate in or overhear Lutsenko's telephone conversation with Nilva. Id. Lutsenko returned to the conference room and informed those in attendance that Nilva had agreed to provide a personal guarantee on behalf of Viva, that he would also provide a personal guarantee, and that Viva agreed to resolve the dispute based on the accounting procedure. Def. Statement ¶ 25. The arbitrator entered "Procedural Order No. 4 into the record that day and signed it. Id. ¶ 26. The Order provided that the parties "decided to continue this arbitration as set out in the 'Text of Procedural Order by Consent,' appended to this Procedural Order No. 4." See Meads Decl. Ex. A, Dkt. No. 137-2.

The "Text of Procedural Order by Consent" ("Procedural Order") provided, inter alia, that "this arbitration will be decided on documents only, save as to procedural hearings which will ordinarily be by telephone and subject to the liberty of either party to apply to show cause why there should be a reversion to an oral procedure." Id. The agreement also provided a date for the parties to exchange documents by, as well as a procedure and sanction to follow if one side failed to comply. Id. It provided that the parties would serve written submissions on one another indicating what amounts, if any, were owed, followed by a procedural hearing by telephone with the arbitrator, and the issuance of an award on the merits. Id. The Procedural Order was signed by de Klerk, for and on behalf of Claimant, Indagro, and by Meads, for and on behalf of Respondent, Viva. Id. There was no mention of any reciprocal personal guarantee in the Procedural Order. See id.

The following morning, on July 12, 2006, Meads, Viva's counsel, emailed de Klerk, Indagro's counsel, to explain that contrary to what Lutsenko reported, Nilva had not agreed to give a personal guarantee on behalf of Viva. Def. Statement ¶ 29; Meads Decl. Ex B, Dkt. No 137-3. Meads relayed an alternative offer by Viva for Nilva and Lutsenko to give alternative security to Indagro. Def. Statement ¶ 29. On July 13, 2006, Meads notified the ICC arbitrator about this development. Def. Statement ¶ 30; Meads Decl. Ex. C, Dkt. No. 137-4.

On July 14, 2006, de Klerk emailed the arbitrator and explained that: "Nilva refused to abide by the agreement reached between the parties" and that Viva has "reneged." Meads Decl. Ex. D, Dkt. No. 137-5; see also Def. Statement ¶ 33. De Klerk explained that "there is no doubt that the provision of the personal guarantee by both parties . . . was the fundamental basis of the agreement to change the process to one of accounting, and to enter the Consent Procedural Order." Meads Decl. Ex. D. He explained that "[i]f the Respondents do not fulfill their part of the agreement as promised within one week of today, Claimants will make application to set aside the Procedural Order and reset the evidentiary hearing." Id. Indagro noted that "[t]he application will include a prayer for a cost award to cover the wasted expense of the hearing just held" and that "either we proceed as agreed or the parties are put back in the position they were before the Respondents breached the agreement that was made on July 11." Id.

During a subsequent conference call with the arbitrator addressing Indagro's request, the arbitrator noted that without the personal guarantees, the agreement to conduct an accounting procedure would fall. Def. Statement ¶ 34. The arbitrator, however, suggested that the parties continue with the accounting procedure, with Indagro reserving its right to renew its application to revert to an oral evidentiary hearing once that was complete. Id. ¶ 35; see also Grand Decl. Exs. A and B, Dkt. Nos. 149-2, 149-3. The parties proceeded on this basis. Id. Following an exchange of statements of account, Indagro renewed its application to revert to an oral hearing pursuant to its right in the Procedural Order. See Def. Statement ¶ 36; Meads Decl. Ex. E, Dkt. No. 137-6.

On October 31, 2006, the arbitrator granted Indagro's request to revert to an oral procedure. See Def. Statement ¶ 37; Meads Decl. Ex. F ¶ 4.22, Dkt. No. 137-7. A full evidentiary oral hearing on the merits took place in December 2006. Def. Statement ¶ 37; Compl. ¶ 16. On May 1, 2007, the ICC ruled in favor of Indagro, awarding it $678,909.91 in damages, plus interest, legal fees, and costs. Def. Statement, ¶ 38; Meads Decl. Ex. F, Dkt. No. 137-7. The arbitrator determined that he could not consider Viva's counterclaims as offset based on the ICC rules, but that Viva could pursue those claims in a separate arbitration. Id.¹

On August 8, 2007, Indagro filed the instant action in this Court asserting four causes of action: (1) to confirm the arbitration award against Viva; (2) for breach of contract against Nilva based on his authorized representatives agreement "to post a personal guarantee to pay the amount of any award set by the Arbitrator..." ; (3) "piercing the corporate veil" of Viva to collect the judgment against Viva from Nilva; and (4) specific performance to order Nilva to provide a personal guarantee to pay the award issued by the arbitrator. Compl. ¶¶ 20-39.

On November 19, 2008, the District Court confirmed the ICC Arbitration Award dated May 1, 2007 against Viva (Count One), and awarded Indagro the full amount requested of $678,900.91 as damages, plus interest, legal expenses in the amount of $191,610.00, £4,791.84, and £5,440, and arbitration expenses in the amount of $55,000 pursuant to the Arbitration Award. See Dkt. No. 26. The Court stayed the Order pending the conclusion of the second arbitration proceeding...