Nat'l Aluminum Co. v. Peak Chem. Corp.

132 F.Supp.3d 990

National Aluminum Co., Ltd., Plaintiff,

v.Peak Chemical Corporation, Inc., Defendant.

Case No. 14–cv–01314

United States District Court, N.D. Illinois, Eastern Division.

Signed September 23, 2015

Andrew J. Jarzyna, Christopher N. Stanton, Victoria J. Langton, Ulmer & Berne LLP, Chicago, IL, for Plaintiff.

Brian D. Roche, David V. Goodsir, William Seth Weltman, Reed Smith LLP, Douglas Alan Albritton, Akerman LLP, Chicago, IL, for Defendant.

MEMORANDUM OPINION AND ORDER

JOHN Z. LEE, United States District Judge

On February 16, 2005, Plaintiff National Aluminum Co., Ltd. ("NALCO") won a final arbitral award ("Arbitral Award") under India's Arbitration and Conciliation Act against Defendant Peak Chemical Corporation, Inc. ("Peak"). After several years of appeals, this award was affirmed by the High Court of Delhi at New Delhi on February 7, 2012 ("High Court Judgment"). NALCO now seeks to enforce the Indian judgment under the Illinois Uniform Foreign–Country Money Judgments Recognition Act, 735 Ill. Comp. Stat. 5/12–661, et seq. Noting that the Seventh Circuit has yet to address the issue, Peak contends that NALCO's claim is barred by the three-year statute of limitations set forth in Section 2 of the Federal Arbitration Act ("FAA"). The parties have filed cross-motions for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. Because the Court concludes that Section 2 of the FAA does not preempt applicable state law governing the recognition of foreign judgments, even when a judgment is based upon a foreign arbitral award, the Court grants NALCO's motion and denies Peak's motion.

Factual Background

The facts are largely undisputed. NALCO began this decades-long litigation when it initiated arbitration proceedings in India against Peak on February 7, 1997. Def.'s L.R. 56.1(b)(3)(C) Stmt. ¶ 1. NALCO alleged that Peak breached a contract to supply 35,000 dry metric tons of caustic soda lye to NALCO; the arbitrator agreed. Compl., Ex. A, Arbitral Award, at 18, 40; Pl.'s L.R. 56.1(a)(3) Stmt. ¶ 7.

The Arbitral Award was issued on February 16, 2005, pursuant to India's Arbitration and Conciliation Act. Pl.'s L.R. 56.1(a)(3) Stmt. ¶ 5. It granted NALCO $3,983,120.78 "on account of extra cost incurred by NALCO in procuring the Caustic Soda from Rank Enterprises, Sabic Marketing Limited, and Bali Trading," and $27,107.00 "on account of excess amount paid against supply." Def.'s L.R. 56.1(b)(3) Stmt. ¶ 8. The Arbitral Award also awarded NALCO interest at the rate of ten percent per annum on these amounts "from the date of payment by NALCO to various suppliers covered by risk purchase transactions ... to the date of recovery of the awarded" and from "June 1994 ... to the date of recovery of the awarded amount," respectively. Id. ¶ 9.¹

Both Peak and NALCO challenged the Arbitral Award by filing petitions with the High Court of Delhi at New Delhi (the "High Court"). Pl.'s L.R. 56.1(a)(3) Stmt. ¶ 13. Peak petitioned to set aside the award, while NALCO cross-petitioned the arbitrator's denial of other claimed damages. Id. While the parties dispute the precise character of the resulting judgment, they agree that the High Court upheld the Arbitral Award on December 4, 2012. Id. ¶¶ 17–19. Peak appealed the High Court Judgment, but its appeal was dismissed after it failed to post security in accordance with Indian law. Id. ¶ 22. The Indian appellate court expressed frustration in dismissing the appeal, noting that Peak aimed "to leave [NALCO] high and dry without the possibility of recovering any amount under the award." Compl., Ex. C, at 1. NALCO instituted the present action to seek enforcement of the High Court Judgment in Illinois.

Legal Standard

"The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). The Court must evaluate evidence in the light most favorable to the nonmoving party and may not make credibility determinations or weigh evidence. Berry v. Chicago Transit Auth., 618 F.3d 688, 690–91 (7th Cir.2010).

Actions to recognize foreign money judgments and questions of preemption are often resolved at the summary judgment stage since legal questions generally predominate. See, e.g.,Soc'y of Lloyd's v. Ashenden, 233 F.3d 473, 481 (7th Cir.2000) (affirming summary judgment under Illinois Uniform–Money Judgments Recognition Act); NCR Corp. v. George A. Whiting Paper Co., 768 F.3d 682, 711–12 (7th Cir.2014) (affirming partial summary judgment on preemption issue). The Court addresses issues of foreign law as it would any question of law, except that it "may consider any relevant material or source, including testimony, whether or not submitted by a party or admissible under the Federal Rules of Evidence." Fed.R.Civ.P. 44.1 ; see alsoTwohy v. First Nat. Bank of Chicago, 758 F.2d 1185, 1193–94 (7th Cir.1985).

Analysis

Resolution of this dispute hinges on two questions: (1) whether the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1, et seq., preempts recognition of the High Court Judgment under Illinois law; and, if not, (2) whether the High Court Judgment is cognizable under Illinois law.

I. Doctrine of Conflict Preemption

Peak first argues that Chapter 2 of the FAA's three-year statute of limitations on the enforcement of foreign arbitration awards preempts state law recognition of the High Court Judgment. See 9 U.S.C. § 207. Chapter 2 of the FAA was enacted to codify the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the "New York Convention"). See 9 U.S.C. §§ 201 –08 ; Scherk v. Alberto–Culver Co., 417 U.S. 506, 520 n. 15, 94 S.Ct. 2449, 41 L.Ed.2d 270 (1974). The relevant provision provides that "within three years after an arbitral award falling under the Convention is made, any party to the arbitration may apply to any court ... for an order confirming the award." 9 U.S.C. § 207.

The parties do not dispute that recognition of the Arbitral Award itself is governed by the New York Convention, as enacted through the FAA and Indian law, and is time barred by § 207. See Def.'s Mem. at 4. NALCO, however, takes a different tack and argues that, although recognition of the Arbitral Award per se may be time barred, the High Court Judgment that affirms the Arbitral Award is enforceable as a matter of Illinois law. Indeed, Illinois' Uniform Foreign–Country Money Judgments Recognition Act allows for the recognition of a foreign-country judgment within 15 years, provided the judgment is still enforceable in its home country. 735 Ill. Comp. Stat. 5/12–669. Thus, so long as the Act's statute of limitations is not preempted by the FAA, this action is timely.

While there is little case law on the issue, the two Courts of Appeals that have addressed the preemptive effect of § 207 conclude that the FAA does not preempt a state's power to recognize a foreign judgment. In the leading case, the Second Circuit held that the FAA limitation "go[es] only to the enforcement of a foreign arbitral award and not to the enforcement of foreign judgments confirming foreign arbitral awards." Island Territory of Curacao v. Solitron Devices, Inc., 489 F.2d 1313, 1319 (2d Cir.1973). Since its initial Solitron decision, the Second Circuit has consistently maintained this approach and has treated foreign judgments enforcing arbitration decisions as being separate and distinct from the underlying arbitral award itself. See, e.g.,Seetransport Wiking Trader Schiffahrtsgesellschaft MBH & Co. v. Navimpex Centrala Navala, 29 F.3d 79, 80–81 (2d Cir.1994) ("Seetransport II") (holding that the New York Convention and FAA Chapter 2 "go only to the enforcement of a foreign arbitral award and not to the enforcement of foreign judgments confirming foreign arbitral awards"). More recently, the D.C. Circuit has adopted this approach, finding that Chapter 2 of the FAA does not preempt state statutes of limitations on the recognition of foreign money judgments. Commissions Imp. Exp. S.A. v. Republic of the Congo, 757 F.3d 321, 332 (D.C.Cir.2014).²

Despite these rulings, the Seventh Circuit has not addressed this issue directly, and Peak asks the Court to depart from the approach endorsed by the Second Circuit and D.C. Circuit. In so doing, Peak sets forth a number of arguments as to why those decisions are erroneous and enforcement of the Illinois Act would violate the intentions of Congress when enacting the FAA. But the Court is unconvinced that the Seventh Circuit would not follow the approach employed by its sister courts.

"Preemption can take on three different forms: express preemption, field preemption, and conflict preemption." SeeAux Sable Liquid Prods. v. Murphy, 526 F.3d 1028, 1033 (7th Cir.2008). Express preemption exists only when a federal statute "explicitly states that it overrides state or local law." Id. Field preemption, meanwhile, occurs when federal law "so thoroughly occupies a legislative field" that there is no room for state law to act. Id. (internal quotation marks omitted). Neither express nor field preemption theories apply in this case, and Peak does not otherwise advance that they do. See Def.'s Mem. at 8–9. Instead, Peak relies on conflict preemption to assert that NALCO's action is time-barred. Seeid. at 9.

"[T]he purpose of Congress is the ultimate touchstone in every pre-emption case." Medtronic, Inc. v. Lohr, 518 U.S. 470, 485, 116 S.Ct. 2240, 135 L.Ed.2d 700 (1996). Thus, in assessing conflict preemption, the Court inquires "whether, under the circumstances of this particular case, [the state's] law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress." MITE Corp. v. Dixon, 633 F.2d 486, 492 (7th Cir.1980) (quoting Hines v. Davidowitz, 312 U.S. 52, 67, 61 S.Ct. 399, 85 L.Ed. 581 (1941) ). While the analysis is guided by Congressional intent, the Court should consider "the relationship between state...