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Rico v. Vitol S.A.

United States Court of Appeals, First Circuit

June 13, 2017

AUTORIDAD DE ENERGÍA ELÉCTRICA DE PUERTO RICO, Plaintiff, Appellee,
v.
VITOL S.A.; VITOL, INC., Defendants, Appellants, FIDELITY AND DEPOSIT CO. OF MARYLAND; FULANO DE TAL; FIADORAS A, B AND C; ASEGURADORAS X, Y AND Z; CARLOS M. BENÍTEZ, INC., Defendants.

         APPEALS FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO [Hon. Steven J. McAuliffe, [*] U.S. Senior District Judge]

          Gregory G. Garre, with whom Alexandra Shechtel, Latham & Watkins, LLP, Neal S. Manne, Alexander L. Kaplan, Weston L. O'Black, Michael C. Kelso, Susman Godfrey L.L.P., Eduardo A. Zayas-Marxuach, Francisco G. Bruno-Rovira, McConnell Valdés LLC, Andrés W. López and The Law Offices of Andrés W. López, P.S.C., were on brief, for appellants.

          Eduardo J. Corretjer-Reyes, with whom Corretjer, L.L.C. was on brief, for appellee.

          Before Torruella, Kayatta, and Barron, Circuit Judges.

          TORRUELLA, Circuit Judge.

         The district court remanded this case to the Commonwealth of Puerto Rico Court of First Instance, San Juan Part, because it determined that the forum selection clauses at issue were enforceable, and that the unanimity requirement of 28 U.S.C. § 1446(b)(2)(A) therefore could not be satisfied. We affirm.

         I. Background[1]

         Between August 2005 and December 2008, the Autoridad de Energía Eléctrica de Puerto Rico (the Puerto Rico Electric Power Authority or "PREPA") executed six contracts for the delivery of fuel oil with entities whose names all began with "Vitol" -- and we shall refer to them as such here. For present purposes, it suffices that at least one of the entities before us -- namely Vitol, Inc., a Delaware corporation headquartered in Houston, Texas -- admits that it is a party or assignee to the six contracts before us. PREPA is a public corporation and governmental instrumentality of the Commonwealth of Puerto Rico. P.R. Laws Ann. tit. 22, § 193.

          After PREPA learned that Vitol, S.A. -- following a United Nations investigation that concluded that Vitol, S.A. had paid, or had caused illegal surcharges to be paid, to Iraqi public officials -- had pled guilty to first degree grand larceny in New York state court, PREPA filed suit under, inter alia, Puerto Rico Law No. 458 of December 29, 2000, P.R. Laws Ann. tit. 3, §§ 928-928i ("Law 458"). This law prohibits government instrumentalities and public corporations, such as PREPA, from awarding bids or contracts to persons (including juridical persons) who have been convicted of "crimes that constitute fraud, embezzlement or misappropriation of public funds listed in § 928b of this title." P.R. Laws Ann. tit. 3, § 928. "Undue intervention in the processes of awarding bids or in government operations, " "[b]ribery, in all its modalities, " and "[o]ffer[s] to bribe" are among the crimes listed in section 928b. Id. § 928b.

         Each of the contracts at issue in this case included a substantively identical choice of law and forum selection clause:

The Contract shall be governed by, and construed in accordance with the laws of the Commonwealth of Puerto Rico. Also, the contracting parties expressly agree that only the state courts of Puerto Rico will be the courts of competent and exclusive jurisdiction to decide over the judicial controversies that the appearing parties may have among them regarding the terms and conditions of this Contract.

         All but the first contract also included a "Sworn Statement" clause which read as follows:[2]

Previous to the signing of this Contract, the Seller will have to submit a sworn statement that neither [the] Seller nor any of its partners have been convicted, nor have they plead [sic] guilty of any felony or misdemeanor involving fraud, misuse or illegal appropriation of public funds as enumerated in Article 3 of Public Law number 428 of September 22, 2004, as amended.[3]

         Note that, although the "Sworn Statement" clauses only speak to convictions and guilty pleas, in the actual sworn statements, the seller also stated -- as Law 458 required -- that it had "no knowledge of being under judicial, legislative or administrative investigation in Puerto Rico, the United States, or in any other country." See P.R. Laws Ann. tit. 3, § 928f.

         Each contract also included a "Contingent Fees" clause, which provided, inter alia:

The Seller represents and warrants that it is authorized to enter into, and to perform its obligations under this Contract and that it is not prohibited from doing business in Puerto Rico or barred from contracting with agencies ...

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