Telenor Mobile Communications As v. Storm LLC

584 F.3d 396

TELENOR MOBILE COMMUNICATIONS AS, Petitioner-Appellee, v. STORM LLC, Respondent-Appellant Altimo Holdings & Investments Limited, Alpren Limited, Hardlake Limited, Additional, Contemnors-Appellants.

Docket No. 07-4974-cv(L).

Docket No. 08-6184-cv(CON).

Docket No. 08-6188-cv(CON).

United States Court of Appeals, Second Circuit.

Argued: February 4, 2009.

Decided: October 8, 2009.

Robert L. Sills, Orrick, Herrington & Sutcliffe LLP (Jay K. Musoff, of counsel), New York, NY, for Petitioner-Appellee.

Pieter Van Tol, Lovells LLP (Gonzalo S. Zeballos, of counsel), New York, NY, for Respondent-Appellant.

Ronald S. Rolfe, Cravath, Swaine & Moore LLP, New York, NY, for Additional Contemnors-Appellants.

Before: SACK and PARKER, Circuit Judges, and STANCEU, Judge.^*

SACK, Circuit Judge:

Telenor Mobile Communications AS ("Telenor"), a Norwegian company, and Storm LLC ("Storm"), a Ukrainian company, own Kyivstar G.S.M. ("Kyivstar"), a Ukrainian mobile telecommunications company. A shareholders agreement among the three companies dated January 30, 2004 (the "2004 Agreement") sets forth the terms of such ownership and provides that any disputes that arise in connection with the agreement will be submitted to arbitration. The present consolidated appeals¹ result from an arbitration, commenced by Telenor, seeking relief for Storm's alleged breach of the 2004 Agreement.

This opinion addresses appeal No. 07-4974-cv, in which Storm challenges a judgment of the United States District Court for the Southern District of New York.² The district court (Gerard E. Lynch, Judge) granted Telenor's petition to confirm the arbitral award in its favor and denied Storm's cross-motion for vacatur.

On appeal, Storm argues that the arbitration panel "manifestly disregarded" the law in two respects. First, Storm contends it was reversible error for the panel to fail to give preclusive effect to Ukrainian court judgments concluding that the 2004 Agreement was not arbitrable because, according to the Ukrainian courts, the agent who signed the agreement on behalf of Storm was not authorized to do so. In the alternative, Storm contends the panel manifestly disregarded our decision in Sphere Drake Ins. Ltd. v. Clarendon Nat'l Ins. Co., 263 F.3d 26 (2d Cir. 2001), by failing to require a trial on the arbitrability issue in the district court. We conclude that the panel had colorable reasons for rejecting both arguments and it therefore did not manifestly disregard the law in either respect. Storm also contends, on the merits, that the 2004 Agreement is not arbitrable. We conclude, as did the arbitration panel and the district court, that Storm's agent had at least the apparent authority to execute the 2004 Agreement on behalf of Storm, and, therefore, that the agreement is arbitrable.

The judgment of the district court is therefore affirmed.

BACKGROUND

Events Prior to 2004

In 2002, a shareholders agreement dated March 26, 1998, (the "1998 Agreement") set forth the terms of the ownership of Kyivstar's shares. The 1998 Agreement contemplated the existence of five stakeholders, including Telenor and Storm. At some point in early 2002, however, Telenor and Storm agreed to attempt to buy out the other three stakeholders. By August of that year, they had nearly succeeded: only Omega JSC ("Omega") remained. In light of Kyivstar's newly altered ownership structure and in anticipation of Omega's eventual capitulation, Storm and Telenor negotiated an interim voting agreement between themselves (the "Voting Agreement"), which supplemented and altered their rights and obligations as to each other under the 1998 Agreement.

The Voting Agreement was executed on September 2, 2002. Valeriy Nilov, Storm's "General Director," signed for Storm. Three days earlier, Storm had sent Telenor a copy of a unanimous resolution by Storm shareholders authorizing Nilov to do so. See Storm LLC, Notice Regarding Resolutions Adopted by Written Polling, Aug. 30, 2002, at 2-3 ("Authorization of the General Director of ... `Storm', Nilov Valeriy Vladimirovich, to execute and deliver [inter alia, the Voting Agreement] and ... take or cause to be taken any and all other actions, as are required or desirable in connection with this Resolution and the above-referenced agreements.").

The Voting Agreement contained a promise by each of the parties to execute a new shareholders agreement once Storm bought Omega's shares or the 1998 Agreement was terminated, whichever occurred first. See Voting Agreement § 2.05 (providing that, within three days after the earlier of either condition, "the Shareholders [viz., Telenor and Storm] agree to, and to cause [Kyivstar] to, execute and deliver the New Shareholders Agreement"). A form for the contemplated new shareholders agreement was attached to the Voting Agreement as an exhibit. It was in all substantive respects but one—a provision setting forth the terms of material breach, which was later amended at Storm's request identical to what would be the 2004 Agreement.

On October 29, 2002, Storm sent Telenor a document, signed by Nilov, entitled "Certificate of Senior Officer of Purchaser." The Certificate included, among other things, a copy of the Storm shareholders resolution authorizing Nilov to execute the Voting Agreement, and minutes of a meeting occurring on October 7, 2002, which confirmed the resolutions adopted by written polling on August 30, 2002. The Certificate provided that those documents "constitute[ ] valid approval under the laws of Ukraine of [Storm's] execution, delivery and performance of [inter alia, the Voting Agreement] and any other documents in implementation of [inter alia, the Voting Agreement]."

The 2004 Agreement

In January 2004, Storm purchased the outstanding Kyivstar shares from Omega. After negotiations between Storm and Telenor about possible alteration of the material breach provision of the contemplated new shareholders agreement, a negotiator for Storm wrote to Telenor by email on January 29, saying: "Storm reviewed the language of the New Shareholders Agreement that you distributed yesterday and agreed to it. We are ready to sign it tomorrow."

The following day, Nilov and representatives from Telenor and Kyivstar signed the 2004 Agreement. Storm sent Telenor two documents, each entitled "Certificate of Incumbency and Authority of Storm," which were signed by the chairman of Storm and another Storm official, respectively. The documents each certified that Nilov was "duly authorized to sign, on behalf of Storm[,] ... the Shareholders Agreement dated January 30, 2004 between and among Telenor, Storm, Omega and Kyivstar." Unlike the 2002 "Certificate of Senior Officer of Purchaser," however, the "Certificate[s] of Incumbency and Authority of Storm" did not attach or incorporate by reference copies of documentation of the shareholder authorization.

The 2004 Agreement contains an arbitration provision stating that "[a]ny and all disputes and controversies arising under, relating to or in connection with this Agreement shall be settled by arbitration by a panel of three (3) arbitrators under the United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules then in force." 2004 Agreement § 12.01(a). It precludes any other sort of action "in connection with any matter arising out of or in connection with this Agreement," except for actions in connection with arbitration. Id. § 12.01(b).

The Arbitration and the Ukrainian Proceedings

Pursuant to the 2004 Agreement's arbitration provision, Telenor instituted an arbitration against Storm on February 7, 2006, alleging that Storm had breached the 2004 Agreement by (1) violating its obligation thereunder not to frustrate Kyivstar board activities through Storm's absence; (2) violating a noncompete provision therein by "acquiring an equity interest in at least one other company engaged in the mobile telecommunications business in Ukraine"; and (3) violating the arbitration provision therein by "prosecut[ing] a series of court actions throughout Ukraine, attacking provisions of the Shareholders Agreement and Kyivstar's charter." Telenor among other relief, a declaration that Storm had breached the 2004 Agreement, an injunction requiring Storm to participate in the governance and management of Kyivstar, an anti-suit injunction, and damages.

On April 14, 2006—the day of the first conference of the arbitration panel—Alpren Limited ("Alpren"), a Cyprus—based subsidiary of Altimo Holdings & Investment Limited ("Altimo"), brought suit in a Ukrainian court against Storm. Alpren and Altimo are the owners of Storm, and Alpren, Altimo, and Storm all belong to the same Russian corporate group, the Alfa Group Consortium. Alpren applied to the Ukrainian court for a declaration that the 2004 Agreement was invalid because Nilov lacked the authority to execute it on Storm's behalf. Apparently, neither Telenor nor the arbitration panel were notified of the Alpren lawsuit.

Storm retained no counsel and submitted no written defense to the Alpren suit. Instead, Vadim Klymenko, an Altimo officer responsible for that company's "litigation" and "arbitration" but who is not an attorney-at-law, appeared for Storm and registered an oral opposition on the ground that the arbitration panel had jurisdiction over Alpren's claim. The proceeding lasted approximately 20 minutes.

On April 25, 2006, the Ukrainian court concluded that Nilov lacked the authority to execute the 2004 Agreement on behalf of Storm. The court's decision "rendered" that agreement "null and void in full, including the arbitration clause, from the time of [Nilov's] execution [of the document]." Storm appealed. On May 25, 2006, the Ukrainian appeals court affirmed.

Five days later, Storm filed a statement of defense in the arbitration panel arguing, among other things, that Telenor's claims were not arbitrable in light of the Ukrainian judgment. Storm also moved before the panel to...