Petition for Writ of Certiorari — Pan American Energy, LLC v. Candlewood Timber Group, LLC
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— Supreme Court, U.S.
%) FILED
04-778 DEC 7 - 2004
No. 04-@PFICE OF THE CLERK
IN THE
Supreme Court of the Anited States
PAN AMERICAN ENERGY, LLC,
Petitioner,
. -
CANDLEWOOD TIMBER GROuP, LLC, AND
FORESTAL SANTA BARBARA SRL,
Respondents.
On Petition for a Writ of Certiorari
To The Supreme Court of Delaware
PETITION FOR A WRIT OF CERTIORARI
CARTER G. PHILLIPS*
STEPHEN B. KINNAIRD
MICHAEL C. SOULES
SIDLEY AUSTIN BROWN &
WoOobD LLP
1501 K Street, N.W.
Washington, D.C. 20005
(202) 736-8000
Counsel for Petitioners
December 7, 2004 * Counsel of Record
eine nS ERT ENRON NNR ER RE UR SRN RE GE FRE i ee a
WILSON-EPES PRINTING CO., INC. — (202) 789-0096 -— WASHINGTON, D. C. 20001
QUESTION PRESENTED FOR REVIEW
Whether a state court may wholly disregard foreign
sovereign interests in deciding whether to exercise
jurisdiction over a foreign dispute.
(i)
ii
PARTIES TO THE PROCEEDINGS
There are no other parties to this dispute.
RULE 29.6 STATEMENT
Petitioner Pan American Ener~y LLC is 60% indirectly
owned by BP p.I.c. No other publicly held corporation owns
more than 10% of its stock.
TABLE OF CONTENTS
Page
QUESTION PRESENTED FOR REVIEW .............c0000-. i
PARTIES TO THE PROCEEDINGG................ccccccseeceee. il
SUPA MOP PR PRR UIIIINOT cncccsteasssccisecnsesseccsosencnnevesvescnss il
I Ie TAR HI stsnctnsssnsscesennssenscnssinccnceonene iv
JUDGMENT FOR WHICH REVIEW IS SOUGHT....... l
SRSA ree ee ea ne I
PROVISIONS OF FEDERAL LAW INVOLVED......... l
POROUS WR UIS Roca ncsinsecisssecsnnininstentenanes l
A. Argentina’s Comprehensive System For The
Development And Regulation Of Hydro-
STII Uiaiisidaii nicki sed capbldaedatuidcnnohaceelinicisetanduipidlaseisiden 3
| LA RDI LT 5
IRATE TD 7
D. Finality of the Judgment ................0cccccccseeeeeee. 1]
REASONS FOR GRANTING THE PETITION............. 12
THERE IS A CONFLICT AMONG THE LOWER
COURTS OVER WHETHER TO DECLINE
JURISDICTION IN CASES THAT THREATEN A
FOREIGN STATE’S SOVEREIGN INTERESTG...... 14
I 25
iV
TABLE OF AUTHORITIES
CASES Page
Banco Nacional de Cuba v. Sabbatino, 376 U.S.
BE ei ssaicaiiuiicitiionscsiniitinemaaiantbniaeninnase 12, 13, 14
Callejo v. Bancomer, S.A., 764 F.2d 1101 (Sth
ass a cnnssieieitesdeccascsuacseatbassmniiiele ibidnecnsnaiaiesiadeania 11, 16
Cox Broad. Corp. v. Cohn, 420 U.S. 469 (1975).... 1, 11
First Nat’] City Bank v. Banco Para El Comercio
Exterior de Cuba, 462 U.S. 611 (1983)............. 13, 25
Flanagan v. United States, 465 U.S. 259 (1984)..... 12
Grynberg Prod. Corp. v. British Gas, P.L.C., 817
F. Supp. 1338 (E.D. Tex. 1993)........ccccseccssesesese 19, 20
Harrison v. Wyeth Labs. Div., 510 F. Supp. 1
(E.D. Pa. 1980), aff'd, 676 F.2d 685 (3d Cir.
Int'l Ass'n of Machinists & Aerospace Workers v.
OPEC, 477 F. Supp. 553 (C.D. Cal. 1979),
aff'd, 649 F.2d 1354 (9th Cir. 1981)... 19, 20
Int’l Ass’n of Machinists & Aerospace Workers v.
OPEC, 649 F.2d 1354 (9th Cir. 1981),
disapproved of on other grounds, Siderman de
Blake v. Republic of Arg., 965 F.2d 699 (9th
aR: We seisustsindaseadecenasnibnhsiendiandesdemuiiasemmammiinans 19
Jones v. Searles Labs., 444 N.E.2d 157 (Ill.
PUI csi ss-ccudcpssdacssnidhtnidetnlagmaataisteauaaisammisiaudamniania: 18
Jota v. Texaco Inc., 157 F.3d 153 (2d Cir. 1998)... 17
Marathon Oil Co. v. Ruhrgas, A.G., 115 F.3d 315
(5th Cir. 1997), vacated on her grounds, 145
F.3d 211 (Sth Cir. 1998), rev’d and remanded
on other grounds, 526 U.S. 574 (1999)............. 16, 19
Pacheco de Perez v. AT&T Co., 139 F.3d 1368
Oe Gs 0 i iccdnekadincatneennniecabiceondandaliccmacmines 16, 17
Patrickson v. Dole Food Co., 251 F.3d 795 (9th
Ia HIT Dicks sssichab Stcsniesdesabaia nid eoun cebu dleinsaial 18, 19
Republic of Philippines v. Marcos, 806 F.2d 344
AA ie SP acaccdsccksioandish ecdunbismiadiace ilemedinidabiens 12
Vv
TABLE OF AUTHORITIES - continued
Page
Sequihua v. Texaco, Inc., 847 F. Supp. 61 (S.D.
iis PoP ictacdasaebibdninssaehbiaphanhsgatiedaalcianetndee tie 17, 18
Texas Indus., Inc. v. Radcliff Materials, Inc., 451
Sais SP PT Discinsisaninniaisnelaceesuciauinaabteaaiaen 3
In re Tobacco/Govtl. Health Care Costs Litig.,
100 F. Supp. 2d 31 (D.D.C. 2000)... 17
Torres v. S. Peru Copper Corp., 113 F.3d 540
COR CR. FIT Ricenisitanciscnersntiapicticusaens 13, 15, 16
Turner Entm’t Co. v. Degeto Film GmbH, 25
Fe Nk Ce es Ee exccisinincnaainleae 17
United States v. Mitchell, 553 F.2d 996 (5th Cir.
PT ED csdeieiblsaiiasiaiisacdi tassel isi iiciliaanecimebedindela 19, 20
Van Cauwenberghe v. Biard, 486 U.S. 517
(CRI Pssnastnakichsnsahsinaehominaadeseaniacianinanaameene cane 12
STATUTES
BP SSA & EBS scvsnnsniiciiensstatnisesaaaaeaae 1,12
©} BAe ssissoianinscpiieemmnitanueaanntaee 12
\
PETITION FOR A WRIT OF CERTIORARI
Petitioner Pan American Energy LLC (“Pan American”)
respectfully petitions for a writ of certiorari to review the
judgment of the Supreme Court of Delaware.
JUDGMENT FOR WHICH REVIEW IS SOUGHT
The judgment for which review is sought is the decision of
the Supreme Court of Delaware in Candlewood Timber
Group LLC v. Pan American Energy, LLC, No. 543,2003.
The opinion of the Supreme Court of Delaware is
unpublished and is reproduced in the Petition Appendix
(“App.”) at la-32a. The opinion of the Court of Chancery of
Delaware is unpublished and is reproduced at App. 33a-47a.
JURISDICTION
The Supreme Court of Delaware entered judgment on
October 4, 2004. This Court has jurisdiction under 28 U.S.C.
§ 1257 and Cox Broadcasting Corp. v. Cohn, 420 U.S. 469
(1975).
PROVISIONS OF FEDERAL LAW INVOLVED
This case involves principles of the federal common law of
foreign relations.
STATEMENT OF THE CASE
This case raises important questions regarding the
intervention of American state courts in foreign commercial
disputes that threaten a foreign country’s sovereign interests.
In this action filed in Delaware state court, respondents have
asserted claims that implicate Argentina’s internal regulation
of real property, forest use, and hydrocarbons exploration and
development, all of which are extensively regulated by
2
Argentine law and over which Argentine courts have
exclusive jurisdiction. Moreover, the Nation of Argentina has
formally notified the United States that this case threatens its
overriding sovereign interests in the regulation and
development of its hydrocarbon fields, which are regarded as
federal utilities under Argentine law and from which the
Argentine government receives substantial royalties through
government concessions to oil and natural gas producers.
Both the Nation of Argentina and the Province of Salta
(where the property in dispute is located) have affirmatively
joined litigation pending in the Argentine Supreme Court that
would ultimately resolve the dispute between the litigants in
this case while protecting the important sovereign interests of
the Nation of Argentina and of the Province of Salta. In its
answer filed with the Argentine Supreme Court, the Nation of
Argentina objected to the Delaware Court’s jurisdiction.
Argentina declared that its “sovereignty and provision of
public services is at stake” in this dispute, noting that “one or
more rulings by a foreign court might jeopardize the exercise
of the Executive’s powers, the authority of laws enacted by
the Federal Congress and the jurisdiction of the Federal
Supreme Court.” App. 70a, 71a (Argentine Answer, dated
Sept. 16, 2003). :
Remarkably, the Delaware Supreme Court held below that
foreign sovereign interests must be excluded from any
decision of a state court to exercise jurisdiction because they
are “legally irrelevant.” App. 15a. Even in cases posing
grave threats to foreign sovereign interests, the only standard
the state court applies is the general principle governing a
forum non conveniens determination under state law in any
garden-variety case: namely, whether “[the defendant] will be
subjected to overwhelming hardship and inconvenience if
required to litigate in [state court],” a standard which the
Delaware Supreme Court acknowledges is met “only in a rare
case.” /d. (internal quotation marks omitted). According to
the state court, Argentina’s “far greater interest in the
3
controversy” cannot be considered because it has “no logical
relevance” to the hardship to the parties of litigating in
Delaware. /d. at 16a. Indeed, the “governmental interests of
Argentina would be a relevant factor” only if the “Argentine
governmental entities are indispensable parties, such that Pan
American would be prejudiced if this case proceeded in
Delaware without the presence of those Argentine
governmental entities.” Jd. at 18a.
The assertion of state court jurisdiction in wholesale
disregard of foreign sovereign interests in a foreign dispute is
destructive of the foreign relations of this country. The logic
of the Delaware Supreme Court is contrary to basic principles
of federal law and international comity. Federal common law
governs “international disputes implicating the conflicting
rights of States or our relations with foreign nations,” for “our
federal system does not permit the controversy to be resolved
under state law, either because the authority and duties of the
United States as sovereign are intimately involved or because
the interstate or international nature of the controversy makes
it inappropriate for state law to control.” Texas Indus., Inc. v.
Radcliff Materials, Inc., 451 U.S. 630, 641 (1981). The
decision below ‘s in conflict_with the decisions of the United
States Courts of Appeals for the Fifth and Eleventh Circuits
and of the Illincis Supreme Court, which recognize the rule
that American courts should abstain from exercising
jurisdiction over foreign disputes that trench upon foreign
sovereign interests. This Court’s intervention is imperative to
vindicate this settled rule of federal common law and to
protect Argentina’s fundamental interests.
A. Argentina’s Comprehensive System For The
Development And Regulation Of Hydrocarbons.
To ensure the uniform, orderly development of its oil and
natural gas reserves, the Nation of Argentina created a
comprehensive legal regime that governs virtually every
aspect of those resources’ production. This regulatory
framework aims to satisfy Argentina’s energy needs through
4
the development of its domestic hydrocarbon fields. App.
58a. The Argentine government’s strong interest in
developing its oil and gas resources is reflected in the
National Constitution, which established that Nation’s
hydrocarbon fields as federal public utilities. /d. at 59a.
As Professor Edmundo F. Catalano, petitioner’s expert on
Argentine law, explained, all of Argentina’s hydrocarbon
fields are publicly owned, and the federal and provincial
governments guide the exploration, development, and
transportation of these resources by granting permits and
concessions to private parties. Professor Catalano’s affidavit
is reproduced at App. 117a-138a. These concessions confer
an exclusive right to extract the hydrocarbons within a given
area and authorize any construction or other activities
necessary for that purpose. App. 60a. In return for these
rights, the Hydrocarbon Law requires concessionaires “to
make such investments as are necessary for the development
of the entire concession area, ensuring the largest
hydrocarbon production that is consistent with appropriate
and economic field management.” /d. at 6la, 53a n.1. In
other words, Argentine law affirmatively mandates the
aggressive development of Argentina’s oil and gas resources.
Concessionaires must also pay substantial concession fees
and royalties to both the federal and/or provincial
governments. /d. at 61a.
To minimize conflicts between the rights of surface owners
and the government’s hydrocarbon program, Argentina’s
statutes and regulations carefully delineate the legal
relationship between concessionaires and surface owners,
spelling out the rights and duties of each. The concession
holders — like petitioner in this case — enjoy a “public use”
privilege, by which the rights of surface owners are
subordinated to the needs of the hydrocarbon industry. App.
121a; see also App. 60a-61a. This broad privilege guarantees
access to the subsurface estate through government-
authorized easements over surface lands, for which the
5
surface owner’s consent is not needed, and even permitting
surface lands to be taken by eminent domain. App. 60a-61a;
App. 121a-122a. The procedures for creating easements or
taking land are both detailed in the Hydrocarbon Law.
Argentine law also defines the nature and scope of a
concessionaire’s obligations to surface owners. The law
contains standards that regulate the concessionaires’ mining
operations so as to minimize their effect on surface activities.
App. 62a-63a. In addition, the Hydrocarbon Law defines the
concessionaires’ duties to compensate surface owners for
damage to their property. Jd. at 62a. Under the Law, the
amount of compensation may be determined either judicially
or administratively, and the national government has even
established standard levels of compensation for property
within certain regions of the country. /d. at 62a-63a. As the
Argentine National Government has stated in regard to this
dispute,
unless a valid private agreement shall have been reached
between the concession holder and the surface owner
regarding the compensation amounts payable, these
amounts shall exclusively derive from the amounts
determined by: i) the Federal Executive, by zone, by
virtue of the powers vested in it by Section 98,
subsection h) and Section 100 of Act 17,319 [the
Hydrocarbon Law]; ii) the Federal Secretariat of Energy,
in accordance with the procedure set forth in Section 3
of Decree No. 6,803/68 and iii) the appropriate
Argentine courts, at the request of either party.
Id. at 63a.
B. Factual Background.
Petitioner Pan American Energy LLC (“Pan American”), a
Delaware limited liability company, is engaged through its
Argentine branch in the business of oil and gas exploration
and production. Pan American’s principal place of business
is Argentina, where it is the second largest producer of oil and
6
gas. See App. 140a (Second Amended Complaint § 2). Pan
American is the majority owner in an Argentine joint venture
that holds long-term concessionary rights to extract oil and
gas from land within the Argentine Province of Salta,
including the property in dispute here.
Respondent Forestal Santa Barbara, SRL (“FSB”) is an
Argentine company with its principal place of business in
Argentina. FSB is a wholly-owned subsidiary of respondent
Candlewood Timber Group, LLC, a Delaware limited liability
company that sells wood products from sustainably managed
forests. FSB owns and operates a forestry business on 70,000
acres of the San Pedrito forest in the Province of Salta (the
‘“Acambuco Property”). App. 141a-142a (Second Amended
Complaint 4 8). When FSB purchased the Acambuco
Property in 1998, the property had been for many years, and
continued to be, subject to the mining easements established
by Argentine law. App. 51a.
As the holder of a government-authorized concession
granted years before FSB stepped foot in the area, Pan
American contacted FSB in 1999 regarding Pan American’s
need to access the Acambuco Property in order to develop the
hydrocarbon resources on that property. If FSB had refused
access, Argentine law would have permitted Pan American to
enter the property as a matter of right. Though FSB’s consent
was unnecessary for the development of those hydrocarbon
resources, respondents allege that Pan American and FSB
ultimately reached an agreement permitting Pan American to
enter the Acambuco Property. App. 146a-147a (Second
Amended Complaint 4 24). The agreements attached to the
complaint required Pan American to purchase comprehensive
liability insurance for damage to FSB’s property and to
indemnify FSB for any damage that resulted. By protecting
FSB’s right to compensation while ensuring Pan American’s
right of access, these alleged agreements essentially
memorialized the preexisting rights and obligations of
concessionaires under Argentine law. The agreements could
7
hardly do otherwise, because these Argentine “public policy
rules cannot be ignored or set aside by agreements between
private entities.” App. 137a. Significantly, these putative
“contracts” are “Temporary Entry, Traffic and Stay
Permit[s],” of only a page in length each, and they contain no
definition of the substantive duties of Pan American in
building and operating pipelines on respondents’ lands. App.
158a-160a (Second Amended Complaint, Exs. A & B).
C. Proceedings Below.
On January 28, 2003, respondents filed this action against
Pan American in the Delaware Court of Chancery. In their
initial complaint, respondents sought damages and _far-
reaching equitable relief for damage to their property that was
allegedly caused by Pan American’s road construction and oil
and gas operations. In addition, respondents sought the
disgorgement of profits and cost savings from Pan
American’s operations, and permanent injunctions dictating
remediation of the lands, reporting and consent requirements,
and pipeline construction practices.
On March 5, 2003, Pan American filed a petition in the
Supreme Court of Argentina, seeking a declaration that FSB’s
action is subject to the exclusive jurisdiction of the Argentine
federal courts. Due to the country’s significant economic and
regulatory interest in the parties’ dispute, Pan American’s
declaratory action named the national and provincial
governments as parties, in addition to FSB and Candlewood.
The Attorney General of Argentina issued an opinion
supporting Pan American’s petition, and the federal and
provincial governments both entered appearances shortly
thereafter. Those governments agreed that this dispute is
governed by Argentine law and that the Argentine courts have
exclusive jurisdiction over the case. On March 14, 2003, Pan
American filed a motion in Delaware Chancery Court seeking
to dismiss or stay the Delaware action pending final judgment
in the Argentine case.
8
On May 21, 2003, in an attempt to salvage state court
jurisdiction, FSB filed a second amended complaint that
dropped certain far-reaching claims for injunctive relief, but
still sought an injunction to obtain comprehensive insurance
policies and disgorgement of “all savings and avoided costs
retained by Pan American by virtue of its unlawful and
improper actions on Candlewood Forest Property.” App.
156a (Second Amended Complaint at 18). More critically, in
asserting various common law tort and contract claims, FSB
has asked the Delaware state courts to determine the
lawfulness of Pan American’s conduct in constructing
pipelines by applying “international standards for forest
engineering.” /d. at 153a (Second Amended Complaint § 48).
FSB requested the Delaware state courts to determine that
Pan American’s Argentine operations were “negligent and
reckless” because of,
(i) the massive, uncontrolled excavation and clearing of
forest and vegetation; (ii) the sidecasting of more than
one million cubic yards of soil, rock, earth and
vegetation; (iii) the constructing of roadways, spur roads
and pipeline that are overly invasive and that cause a
significant risk of fire, erosion, landslides and runoff, as
well as damage to wildlife; and (iv) the storing and
disposal of toxic and/or flammable materials on the
Candlewood Forest property.
Id. Respondents also charged petitioner, among other things,
with misappropriation of earth, timber, and water, and with
precluding forest productivity. Jd. at 155a (§ 56).
While Pan American’s motion to dismiss or stay was
pending, the Nation of Argentina formally notified the
Department of State about its profound concerns with the
pendency of the Delaware state court action. Argentina
asserted “its utmost interest that legal questions arising within
the framework of the Ley de Hidrocaburos (Hydrocarbon
Law)... between the licensee of hydrocarbon and the owners
of the surface realty be dealt with in conformity with
9
Argentine law and before the Courts of the Argentine
Republic.” App. 115a (Letter from Embassy of Argentina to
the Department of State, Office of Legal Advisor, dated June
19, 2003.) In an answer filed with the Argentine Supreme
Court on September 16, 2003, the Argentine government
reiterated that its sovereign interests were impaired by the
Delaware litigation and that Argentine courts have exclusive
jurisdiction over this dispute. App. 57a-7la. These concerns
were echoed by the Ministry of Federal Planning, Public
Investment and Services, which concluded that “the
sovereignty of the Argentine Government . . . [and the]. . .
possible effects on the continuity and regularity of
hydrocarbon exploration, exploitation and transportation
activities carried out in Argentina are at stake.” App. 107a
(Letter from the Undersecretary of Fuels to Pan American,
dated June 24, 2003).
On October 22, 2003, the Delaware Court of Chancery
dismissed respondents’ action. In addition to finding that
respondents had failed to establish equity jurisdiction, the
court dismissed these claims based on the doctrine of forum
non conveniens. App. 47a. The Chancery Court recognized
not only the enormous practical difficulties of litigating this
case in the United States, but also that Argentine law would
“almost certainly govern” because “[t]he heart of this case
involves a land use dispute arising under the laws of
Argentina.” Jd. at 42a, 43a. The court further noted that “[a]
decision in this action will likely implicate Argentina’s right
to regulate access to surface property that lies above
government owned oil and gas fields” and would “implicate
Argentina’s economic interests because a decision adverse to
Pan American may reduce the revenues Argentina derives
from Pan American’s extraction activities.” Jd. at 44a. The
court cautioned that “although the complaint sounds in simple
breach of contract and negligence language, it is clear that
resolution of this dispute will require thorough consideration
of Argentine hydrocarbon law and policy, as well as a careful
10
policing of the boundaries between Argentine tort, contract,
and real property law.” /d. at 45a n.36. Although
respondents sought to bolster their complaint by including the
report of a forestry expert, their own expert noted that there
was disagreement over whether FSB even owned the land that
had allegedly been damaged. App. 162a-163a (Second
Amended Complaint, Ex. C).
Eschewing the foreign relations concerns highlighted by the
Court of Chancery, the Supreme Court of Delaware reversed.
It held that the Chancery Court had “imported into its analysis
a consideration that is legally irrelevant” when it gave
“predominate weight” to Argentina’s “far greater interest in
the controversy.” App. 15a, 16a. Rather, the state court must
determine whether “[the defendant] will be subjected to
overwhelming hardship and inconvenience if required to
litigate in [state court],” a standard which the Delaware
Supreme Court acknowledged is met “only in a rare case.”
Id. at 15a (internal quotation marks omitted). The Delaware
Court concluded that foreign sovereign interests in a
controversy are legally irrelevant because they have “no
logical relevance” to the hardship to the parties of litigating in
Delaware. /d. at 16a. Indeed, the “governmental interests of
Argentina would be a relevant factor” only if the “Argentine
governmental entities are indispensable parties, such that Pan
American would be prejudiced if this case proceeded in
Delaware without the presence of those Argentine
governmental entities.” /d. at 18a. The court further ruled
that Argentina’s courts did not have exclusive jurisdiction
over respondents’ claims and those claims against Pan
American were transitory. Jd. at 27a-29a. Finding Delaware
to be an adequate forum for the resolution of FSB’s claims,
but that those claims are primarily legal in nature, the court
transferred jurisdiction to the Superior Court of Delaware. /d.
at 32a.
1]
D. Finality of the Judgment.
The judgment below is a final judgment under Cox
Broadcasting Corp. v. Cohn, 420 U.S. 469 (1975). The state
court’s exclusion of foreign sovereign interests from the
calculus of deciding whether to accept jurisdiction is contrary
to the federal common law of foreign relations. See infra 12-
25. The decision below is immediately reviewable by this
Court even though the case is on remand to the Superior
Court. This Court has jurisdiction,
where the federal issue has been finally decided in the
state courts with further proceedings pending in which
the party seeking review here might prevail on the merits
on nonfederal grounds, thus rendering unnecessary
review of the federal issue by this Court, and where
reversal of the state court on the federal issue would be
preclusive of any further litigation on the relevant cause
of action rather than merely controlling the nature and
character of, or determining the admissibility of
evidence in, the state proceedings still to come. In these
circumstances, if a refusal immediately to review the
state-court decision might seriously erode federal policy,
the Court has entertained and decided the federal issue,
which itself has been finally determined by the state
courts for purposes of the state litigation.
420 U.S. at 482-83. The state court’s assertion of jurisdiction
over this dispute, which would entangle the Delaware courts
in a foreign nation’s regulatory system and deeply implicate
that country’s sovereign interests, seriously erodes federal
policy. “‘It is fundamental to our constitutional scheme that
in dealing with other nations the country must speak with a
united voice.’” Callejo v. Bancomer, S.A., 764 F.2d 1101,
1122 (Sth Cir. 1985) (quoting Republic of Iraq v. First Nat'l
City Bank, 353 F.2d 47, 50 (2d Cir. 1965)). And, because this
Court’s “reversal of the state court on the federal issue would
be preclusive of any further litigation,” 420 U.S. at 482-83,
12
this case falls squarely within Cox Broadcasting’s fourth
category of exceptions to the finality requirement. '
REASONS FOR GRANTING THE PETITION
Although respondents have framed their counts as simple
common law claims, “an examination [of their complaint]
shows that the[ir] . . . claims necessarily require determin-
ations that will directly and significantly affect American
foreign relations.” Republic of Philippines v. Marcos, 806
F.2d 344, 352 (2d Cir. 1986). As the Court of Chancery
noted, deciding this case would force the Delaware courts to
decide issues of the duties of hydrocarbon producers to
surface land owners that are of fundamental sovereign
importance to Argentina and exclusively governed by its
statutes and regulations. Because this case presents the issue
of whether courts may exercise jurisdiction in disregard of
foreign sovereign interests, the “basic choice regarding the
competence and function of the Judiciary and National
Executive in ordering our relationships with other members of
the international community must be treated exclusively as an
aspect of federal law.” Banco Nacional de Cuba v.
Sabbatino, 376 U.S. 398, 425 (1964). Accordingly, “matters
' Reviewability is not affected by Van Cauwenberghe v. Biard, in
which this Court held that a federal court of appeals lacked jurisdiction
under the collateral order doctrine of 28 U.S.C. § 1291 to review a district
court’s order denying a forum non conveniens motion. 486 U.S. 517
(1988). The principal reason is that petitioner does not seek review of the
overall balancing of private and public interest factors, which was the
issue in Biard, and which this Court held would unduly enmesh the
reviewing court in the merits of the case. /d. at 527-29. Here, petitioner
asks this Court to review the federal issue of whether a state court may
wholly disregard foreign sovereign interests in deciding to exercise
jurisdiction over foreign disputes. Moreover, the Cox Broadcasting
finality factors under 28 U.S.C. § 1257 are not limited to the collateral
order doctrine of § 1291. See Flanagan v. United States, 465 U.S. 259,
265 n.3 (1984) (distinguishing the finality requirements of § 1257 from
those of § 1291).
Le)
13
bearing on the Nation’s foreign relations ‘should not be left to
divergent and perhaps parochial state interpretations.’” First
Nat’l City Bank v. Banco Para El Comercio Exterior de
Cuba, 462 U.S. 611, 622 n.11 (1983) (quoting Sabbatino, 376
U.S. at 425).
The need for a federal rule requiring that state courts give
proper deference to foreign sovereign interests in deciding to
exercise jurisdiction is starkly apparent in this case. The
exercise of jurisdiction by the Delaware courts threatens to
interfere with Argentina’s legal framework regulating the
government-owned hydrocarbon reserves. Whether or not a
plaintiff brings only state-law claims against another private
party, that action invokes the federal common law of foreign
relations if the complaint substantially affects a foreign
country’s sovereign interests. See Torres v. S. Peru Copper
Corp., 113 F.3d 540, 542-43 (Sth Cir. 1997). Deciding this
case would “require thorough consideration of Argentine
hydrocarbon law and policy, as well as a careful policing of
the boundaries between Argentine tort, contract, and real
property law.” App. 45a n.36. These are not matters of
purely private concern in Argentina, as they might be in this
country. Insteaa, they are of fundamental concern to
Argentina’s sovereign interests as both an owner and
regulator of its natural resources. Accordingly, this critical
issue of federal law must be decided “to protect uniquely
federal interests.” Sabbatino, 376 U.S. at 426.
Review is especially warranted in this case because the
decision below, which transferred jurisdiction to the Delaware
common law court instead of dismissing or staying the action,
conflicts with the decisions of other jurisdictions.
Specifically, the Delaware Supreme Court and the Ninth
Circuit’s refusal to consider the significance of foreign
sovereign interests, especially when the foreign nation itself
protests the exercise of jurisdiction, conflicts with the analysis
employed by the Fifth and the Eleventh Circuits and the
Illinois Supreme Court. It is intolerable for Argentina’s
14
sovereign interests to be fully protected in litigation in
lilinois, Georgia, or Texas, but for those same interests to be
“legally irrelevant” in Delaware or California. Review by this
Court is thus warranted to resolve this split of authority and to
ensure “uniformity in this country’s dealings with foreign
nations.” /d. at 427 n.25.
THERE IS A CONFLICT AMONG THE LOWER
COURTS OVER WHETHER TO DECLINE
JURISDICTION IN CASES THAT THREATEN A
FOREIGN STATE’S SOVEREIGN INTERESTS.
The rule announced below is breathtaking in_ its
implications for the foreign relations of this Nation. The
Delaware Supreme Court held that whenever a plaintiff
invokes state court jurisdiction to determine a foreign dispute,
even one unquestionably governed by foreign law, the state
court will exercise jurisdictiun unless the defendant meets
““the heavy burden’” of “‘establish[ing] with particularity that
{the defendant] will be subjected to overwhelming hardship
and inconvenience if required to litigate in [state court].””
App. 15a. Critically, the Delaware Supreme Court has
declared that foreign sovereign interests are “legally
irrelevant” to a state court’s assertion of jurisdiction over
foreign disputes. /d. Abstention from jurisdiction is strictly a
matter of hardship to the parties litigating in Delaware under
ordinary forum non conveniens principles, and “only in a rare
case” of overwhelming hardship to defendants will a
plaintiff's choice of the American state forum be disturbed.
Federal law forbids the assertion of state law powers that does
serious violence to the foreign relations of this country.
Furthermore, in vesting jurisdiction in the Delaware
Superior Court, the decision below conflicts with precedents
from other jurisdictions that decline jurisdiction if a case
implicates a foreign country’s sovereign interests.
Specifically, other courts have abstained (i) when a foreign
government has given formal notice that the pending action
oer OC
15
threatens its sovereign interests, and/or (ii) if asserting
jurisdiction would enmesh the court in a foreign country’s
internal regulations and policies.
1. The decision below conflicts with precedents from the
United States Courts of Appeals for the Fifth and Eleventh
Circuits and frora the Illinois Supreme Court. The Fifth
Circuit’s decision in Torres, is squarely on point. There, as
here, private plaintiffs brought tort claims against a Latin
American natural resources producer (a Peruvian copper
mining corporation). As the Argentine national government
has done here, in Jorres the State of Peru notified the
Department of State that “the litigation implicates some of its
most vital interests and, hence, will affect its relations with
the United States.” 113 F.3d at 542. Although Peru was not a
party to the case, the Peruvian government’s notice alerted the
Fifth Circuit “to the foreign policy issues implicated by this
case.” Jd. at 542-43.
Unlike the Delaware Supreme Court, the Fifth Circuit did
not exclude foreign sovereign interests from its review of a
forum non conveniens order. To the contrary, the Torres
court upheld the dismissal of the tort action precisely out of
deference to those sovereign interests. The Fifth Circuit first
established that, even though the complaint raised only state
law claims, the district court had federal question jurisdiction
under the federal common law of foreign relations, which was
a necessary predicate to a forum non conveniens order. Id.
The Court noted that the Peruvian government owned mining
and land interests, and “grant[ed] concessions that allow [the
defendant] to operate in return for an annual fee. Moreover,
the government extensively regulates the mining industry.”
Id. at 543. The Fifth Circuit concluded that
[t}his action therefore strikes not only at vital economic
interests but also at Peru’s sovereign interests by seeking
damages for activities and policies in which the
government actively has been engaged. On the record
before us we must conclude that plaintiffs’ complaint
16
raises substantial questions of federal common law by
implicating important foreign policy concerns.
Id. Accordingly, the Fifth Circuit upheld the district court’s
dismissal of the actions “on the basis of forum non conveniens
and comity among nations.” /d. at 542, 544. The Fifth
Circuit’s analysis is diametrically opposed to the Delaware
Supreme Court’s. See also Marathon Oil Co. v. Ruhrgas,
A.G., 115 F.3d 315, 320 (Sth Cir. 1997) (characterizing
Torres as a case in which “the suit itself struck directly at
vital economic interests of the nation, and, indeed, at the very
sovereignty of the Republic of Peru”), vacated on other
grounds, 145 F.3d 211 (Sth Cir. 1998) (en banc), rev'd and
remanded on other grounds, 526 U.S. 574 (1999).
Consistent with its holding in Torres, and at odds with the
decision below, the Fifth Circuit in Callejo v. Bancomer, S.A.
affirmed the dismissal of a case due to the foreign relations
implications of asserting jurisdiction. 764 F.2d 1101 (Sth Cir.
1985). The plaintiffs in Callejo had brought an action for
breach of contract whose adjudication “would necessarily call
into question” Mexico’s currency exchange control
regulations. /d. at 1115-16. Because the defendant bank had
discharged its obligations according to those regulations, the
court could provide relief on the plaintiffs’ claim “only by
disregarding the regulations.” /d. at 1116. Similarly,
entertaining the respondents’ claims in this case would
effectively establish a mew standard, one contrary to
Argentina’s hydrocarbon framework. Just as the Mexican
government’s “power to issue exchange control regulations is
paradigmatically sovereign in nature,” id., so too is
Argentina’s power to establish rules governing the rights and
obligations of hydrocarbon concessionaires.
The Eleventh Circuit follows a similar approach. In
Pacheco de Perez v. AT&T Co., 139 F.3d 1368 (11th Cir.
1998), the court found “it significant, for purposes of this
case, that the Venezuelan government has taken no position
on whether this lawsuit proceeds in the United States or in
Fe
17
Venezuela.” Jd. at 1378. It concluded that “[w]ithout such an
indication from the foreign nation, we are reluctant to find
that the plaintiffs’ private cause of action sounding in Georgia
tort law implicates important foreign policy on the face of the
plaintiffs’ pleadings.” Jd. Likewise, in Turner Entertainment
Co. v. Degeto Film GmbH, the Eleventh Circuit affirmed the
dismissal of a case based on principles of international
comity. 25 F.3d 1512 (11th Cir. 1994). The Eleventh Circuit
noted that “[a]lthough Turner attempts to portray the case as a
garden variety contract action, there are complicated issues
surrounding the case that require extensive knowledge of the
European television market.” /d. at 1521. Thus, the Eleventh
Circuit, like the Fifth Circuit, accords significant, if not
dispositive, weight to foreign sovereign interests, at least
when the foreign sovereign opposes the suit. The Eleventh
Circuit does not ignore those interests in deciding whether to
accept jurisdiction, as the Delaware Supreme Court does.’
? The ruled adopted by the Fifth and Eleventh Circuits is consistent
with other precedent. For example, in Sequihua v. Texaco, Inc., the
Southern District of Texas emphasized the foreign government’s
objections in its decision dismissing the case based on the doctrines of
comity and forum non conveniens. 847 F. Supp. 61 (S.D. Tex. 1994).
Sequihua involved a series of tort claims brought by Ecuadoran residents
for the contamination of their community. In its order dismissing the case,
the Sequihua court emphasized that the “Republic of Ecuador has
officially protested this litigation, asserting that it will do ‘violence’ to the
international legal system, and has asked that the case be dismissed.” Id.
at 62. The court dismissed the case under the doctrine of comity of
nations because, inter alia, “the Republic of Ecuador has expressed its
strenuous objection to the exercise of jurisdiction by this Court.” /d. at 63.
See also Jota v. Texaco Inc., 157 F.3d 153, 160 (2d Cir. 1998)
(recognizing the prior significance of Sequihua when the Ecuadoran
government “had repeatedly written the District Court arguing that this
case implicated Ecuador’s sovereign interests and should not be decided in
a United States court”); cf In re Tobacco/Govtl. Health Care Costs Litig.,
100 F. Supp. 2d 31, 37 (D.D.C. 2000) (emphasizing, in its decision
remanding the case to state court, the foreign sovereigns’ resistance to
federal court jurisdiction); Harrison v. Wyeth Labs. Div., 510 F. Supp. 1, 4
(E.D. Pa. 1980) (“the courts of the United States are ill-equipped to set a
">
18
The Illinois Supreme Court is also aligned against the
Delaware Supreme Court on this issue. In Jones v. Searles
Laboratories, the Illinois Supreme Court affirmed the
dismissal of a tort action based on forum non conveniens. 444
N.E.2d 157 (Ill. 1982). The plaintiffs in Jones, who were all
citizens of the United Kingdom, sought damages from their
use of the defendant company’s pharmaceuticals. In its
decision, the Illinois Supreme Court emphasized that the
defendant’s British subsidiary had controlled the issuance of
drug warnings, allowing the subsidiary “to conform to the
rules of local regulatory authorities.” Jd. at 161. The court
raised the specter that “a court in Illinois could determine that
defendant’s warnings were inadequate although they
conformed to the law of the country in which the drugs were
marketed.” /d. The Illinois Supreme Court considered it “‘an
inappropriate usurpation of a foreign court’s proper authority
to decide a matter of local interest, for a court in this country
to set a higher standard of care_than is required by the
government of the country in which the product is sold and
used.”” Jd.
By contrast, the Ninth Circuit is aligned with the Delaware
Supreme Court, and against the Fifth and Eleventh Circuits.
In Patrickson v. Dole Food Co., the Ninth Circuit considered
whether to assert jurisdiction over a class action brought by
Latin American workers against a group of multinaiional
companies for exposure to a toxic pesticide. 251 F.3d 795
(9th Cir. 2001). Dismissing the foreign relations concerns
highlighted by the Fifth and Eleventh Circuits, the Ninth
Circuit expressly repudiated the notion that a foreign
government’s formal notice should affect the decision to
standard of product safety for drugs sold in other countries”), aff'd, 676
F.2d 685 (3d Cir. 1982) (table); Sequihua, 847 F. Supp. at 63 (noting that
the plaintiffs’ request for a privately-financed trust fund “asks this Court
to step into the shoes of the Ecuadoran Health Ministry and supervise a
medical monitoring scheme of unknown costs, scope or duration for as
many as 500,000 Ecuadoran citizens over the protest of the government of
Ecuador”).
——————
19
abstain. Rather than promoting comity between nations, the
Ninth Circuit feared that,
[i]f courts were to take the interests of the foreign
government into account, they would be conducting
foreign policy by deciding whether it serves our national
interests to continue with the litigation, dismiss it on
some ground such as forum non conveniens, or deal with
it in some other way. .
Id. at 804. This mature division in the lower courts over the
recurring question of what is the proper treetment of foreign
sovereign interests is an important question of federal law that
this Court should resolve.
2. Courts have long recognized that the “control over a
nation’s natural resources stems from the nature of
sovereignty.” Int’l Ass'n of Machinists & Aerospace Workers
v. OPEC, 477 F. Supp. 553, 568 (C.D. Cal. 1979) (“IAM 1”).
Even the Ninth Circuit has acknowledged that both the
“United States and other nations have supported the principle
of supreme state sovereignty over natural resources.” Jnt’l
Ass’n of Machinists & Aerospace Workers v. OPEC, 649 F.2d
1354, 1361 (9th Cir. 1981), disapproved of on other grounds,
Siderman de Blake v. Republic of Arg., 965 F.2d 699 (9th Cir.
1992); IAM I, 477 F. Supp. at 568 (“The defendants’ control
over their oil resources is an especially sovereign function
because oil, as their primary, if not sole, revenue-producing
resource, is crucial to the welfare of their nations’ peoples.”);
see also United States v. Mitchell, 553 F.2d 996, 1002 (Sth
Cir. 1977) (noting “the control that a sovereign . . . has over
the natural resources within its territory”). Courts acknow-
ledge this sovereign interest regardless of whether the foreign
government is a named party in the suit. See, e.g., Grynberg
Prod. Corp. v. British Gas, P.L.C., 817 F. Supp. 1338, 1356
(E.D. Tex. 1993) (concluding that “[a]lthough the Republic of
Kazakhstan is not a party to this lawsuit, its interests in
allocating its own mineral resources are vitally affected by the
outcome’’).
20
Critical sovereign interests are present in this case. Not
only do the Argentine federal and provincial governments
own all the oil and gas fields in the country, but also they
derive substantial royalties from the development of those
resources. Moreover, though Peru and Argentina both
granted concessions to private parties, a government’s legal
relationship with its natural resources “persists even after it
conveys away any concession interest. This relationship
exists by right of sovereignty.” /d. at 1359. By contrast, the
Delaware Supreme Court credited none of _ those
considerations in its decision.
An action that interferes with a foreign government’s
internal regulations likewise “strike[s] at the sovereignty of a
foreign nation.” Ruhrgas, 115 F.3d at 315. There is “little
question that establishing the terms and conditions for
removal of natural resources from its territory, when done by
a sovereign state, individually and separately, is a
governmental activity.” JAM I, 477 F. Supp. at 568.
Interference with a foreign country’s internal policies is
especially likely in this case, where the decisions of the
Delaware state courts would likely supplant the Argentine
government’s carefully prescribed rules for the development
of oil and gas. On this issue, the Delaware Supreme Court
stands virtually alone, its disposition of this case
irreconcilable with along line of consistent precedent.
Courts have recognized “the conflict of national interests
that is created by the attempt of one state to regulate resource
development in another state.” Mitchell, 553 F.2d at 1003
n.13. Just as Congress “presumably recognizes the authority
of other sovereigns to protect and exploif their own
resources,” id. at 1002, this Court must be vigilant to see that
the federal and state judiciary does not interfere improperly
with foreign sovereign interests and undermine American
relations with those sovereigns.
The risk of interference with Argentina’s internal
regulations is particularly acute in this case. As noted, the
21
federal and provincial governments of Argentina have
extensively regulated every facet of the Argentine oil and gas
development process. From granting concessions to
companies like Pan American, to ensuring access to
hydrocarbon fields through the power of eminent domain, to
defining the rights and obligations of concessionaires and
surface owners, the Argentine government has supplied the
governing rule. Not only does the Hydrocarbon Law
establish certain rights, like the “public use” privilege by
which concessionaires are empowered with the eminent
domain authority, but also it sets forth the procedures that
must be followed in order to exercise those rights. Most
relevant for this case, Argentine law requires concessionaires
both to compensate surface owners and to conduct their
mining operations in a manner that minimizes the effect on
surface activities. Through its statutes and regulations,
Argentina carefully demarcated the boundary between a
concessionaire’s permissible and impermissible conduct, and
the courts of Argentina clearly are available to protect the
private and public rights implicated in a dispute such as the
one involved in this case. In sum, Argentina protects the
~ property rights of surface owners in a manner consistent with
the concessionaire’s obligation to “ensur[e] the largest
hydrocarbon production” reasonably possible. App. 61a, 53a
n.1.
The Delaware Supreme Court simply dismissed these
sovereign interests, notwithstanding their formal assertion by
the Argentine Government (both diplomatically and
judicially). - Remarkably, the court shunted aside the
Argentine government’s answer in the Argentine Supreme
Court, which stated that “the ‘basic institutions of the Nation
[were] at risk’ because of ‘the possibility that gas production
in the Acambuco area could be ... affected’ by ‘one or more
22
3993
rulings by a foreign court. App. 5a (alteration and
omission in original). The Delaware Supreme Court
discounted that official statement of position because,
{t]hat pleading did not disclose to the Argentine Court
that Candlewood was seeking only damages based on
common law claims arising out of private contracts with
Pan American. Nor did that pleading disclose that
= Candlewood had previously informed the Court of
Chancery (and Pan American) that they were “not
seeking any injunctive relief requiring supervision of
Pan American’s conduct on the land in Argentina.”
Id.
The Delaware Supreme Court misses the point. Whether
respondents dropped the most brazen of their requests for
permanent injunctive relief is unclear and is not the issue. If
Pan American is subject to a claim for massive damages in
Delaware courts, for Pan American’s construction and
engineering practices that allegedly violate claimed
“international standards for forest engineering,” App. 153a
(Second Amended Complaint { 48), the effect is no different
than injunctive relief. If found liable, Pan American, in order
* Not only did the Delaware Supreme Court announce a cavalier rule of
unyielding state court jurisdiction, but it also insulted the Argentine
National Government by implying that it simply bent to the “influence” of
Pan American in its submissions to the Argentina Supreme Court. The
Delaware Supreme Court stated that “Pan American appears to have used
its access to the highest levels of the Argentine government to influence
both this litigation and Pan American’s second-filed action in Argentina.”
App. 5a n.4. Solicitation of government intervention in litigation is
legitimate. In Argentina as in this country, persons are free to ask the
Government to intervene in court cases, just as litigants in this country
solicit the legal support of federal agencies or the Department of Justice in
the federal and state courts. The state court had no basis for suggesting
that the official position of the Argentine government in court filings
should be disregarded because it sides with the interests of one litigant
over another.
23
to avoid subsequent awards of damages, will be forced either
to conform its construction and engineering methods to
whatever “international standards” the Delaware court sees fit
to endorse, or perhaps to forgo development and construction
where the risks are too great. The proper construction and
production practices for hydrocarbon development in
Argentina, and the respective rights and duties of
concessionaires and surface owners, are matters of vital
Argentine sovereign interest that should not be determined by
Delaware courts. Indeed, the Argentine Government has
emphasized that the issue of compensation of surface owners
is one of the fundamental reasons why Argentine courts have
exclusive jurisdiction over this matter. App. 64a."
The Delaware Supreme Court was also improperly
dismissive of the Argentine government’s conclusion “that
Argentine jurisdiction is absolute and exclusive to decide on
any claims” related to the relationship between
concessionaires and surface owners. App. 116a (Letter to
State Department); App. 66a. In proceedings before the
Argentine Supreme Court, the Argentine Attorney General
cited the conditions which independently establish the
exclusive jurisdiction of the Argentine federal courts: namely,
that the Argentine Hydrocarbon and Natural Gas laws govern
the dispute, and that there is a federal interest in the dispute
triggering Argentine federal jurisdiction because hydrocarbon
* Indeed, respondents “do not coicede the inapplicability of Delaware
law,” Resp. Br. at 24, and the Delaware Supreme Court left the issue open,
despite the Court of Chancery’s finding that Argentine law applied.
Respondents thus will argue that Delaware law governs Pan American’s
hydrocarbon development in Argentina notwithstanding (as their own
expert acknowledges) that Argentine legislation provides “substantive
rules of decision for the resolution of issues raised by the facts alleged in
the complaint.” App. 167a (Litvinoff Aff. ¥ 11). See also App. 98a (Naon
Aff. 4 51) (noting that respondents’ “claims cannot be decided without
determining the scope and limitations of [FSB’s] real property nghts on
the surface of the Acambuco Area. . . vis-a-vis the nights of [Pan
American]”).
24
fields are “federal public utilities” and there is a strong federal
interest that the Argentine government’s “legal powers be not
impaired” and “the provision of an essential public service be
not hampered.” Jd. at 65a, 66a. The Argentine Attorney
General’s ee was corroborated by Dr. Naon’s expert
opinion that was submitted in the Court of Chancery. Dr.
Naon set forth in great detail the exclusive jurisdiction created
by Federal Law 48 on the Jurisdiction and Competence of
National and Federal Courts, and discussed how the rules of
exclusive jurisdiction apply to substantive mandatory laws
that are closely associated with the public or national interest
of the forum (Ley de Policia, like the Hydrocarbon Law).
Moreover, Dr. Naon confirmed that “mixed actions,” those
“relating to personal rights that only come into existence
because of the rights in rem held by the claimant in
connection with an immovable,” are subject to the Argentine
courts’ exclusive jurisdiction. App. 87a (Naon Aff. 31).
The Delaware Supreme Court simply dismissed this
analysis, relying on the cursory affidavit of respondents’
expert, Dr. Litvinoff, which baldly asserts that the Argentine
constitution and codes do not directly provide for exclusive
jurisdiction. But Dr. Litvinoff concedes that if the Argentine
Supreme Court finds that Argentina has a “substantial direct
and immediate interest in the matter,” then the case belongs to
the exclusive jurisdiction of the Argentine courts. See App.
104a; id. at 105a (agreeing that if the Argentine Supreme
Court finds the federal or provincial governments to be
“proper parties to this dispute,” then “the dispute is properly
heard in the Argentine federal courts”’)). It is remarkable that
the Delaware Supreme Court would simply call it a draw
between party experts and hold that petitioner failed to show
exclusive jurisdiction, and more remarkable still that it would
credit the views of Dr. Litvinoff over the official position of
the Argentine government presented to that Nation’s court by
the Argentine Attorney General.
25
This case vividly illustrates why “matters bearing on the
Nation’s foreign relations ‘should not be left to divergent and
perhaps parochial state interpretations.” First Nat'l City
Bank, 462 U.S. at 622 n.11 (quoting Sabbatino, 376 U.S. at
425). The decision below has deepened an existing judicial
split on what deference is owed as a matter of federal
common law to foreign sovereign interests when a court is
deciding whether to exercise jurisdiction over a foreign
dispute. This Court should remedy the conflict.
CONCLUSION
For the foregoing reasons, the petition for a writ of
certiorari should be granted.
Respectfully submitted,
CARTER G. PHILLIPS*
STEPHEN B. KINNAIRD
MICHAEL C. SOULES
SIDLEY AUSTIN BROWN &
WOOD LLP
1501 K Street, N.W.
Washington, D.C. 20005
(202) 736-8000
Counsel for Petitioners
December 7, 2004 * Counsel of Record
APPENDICES
la
APPENDIX A
SUPREME COURT OF DELAWARE
No. 543,2003
CANDLEWOOD TIMBER GROUP, LLC and Forestal Santa
Barbara SRL, Plaintiffs Below,
Appellants,
v.
PAN AMERICAN ENERGY, LLC, Defendant Below,
Appellee.
Submitted April 27, 2004
Decided Oct. 4, 2004
Upon appeal from the Court of Chancery. Affirmed in Part,
Reversed in Part and Remanded.
Before HOLLAND, BERGER and JACOBS, Justices.
JACOBS, J.
The plaintiffs below, Candlewood Timber Group LLC
(“Candlewood”) and Forestal Santa Barbara SRL (“FSB”), '
appeal from an order of the Court of Chancery dismissing
their complaint against the defendant below, Pan American
Energy, LLC (“Pan American”), for lack of subject matter
jurisdiction and on the ground of forum non conveniens.’ We
affirm the dismissal insofar as it is predicated on lack of
subject matter jurisdiction, but reverse the dismissal insofar
' Except where the context requires a more specific reference, Can-
dlewood and FSB are referred to collectively in this Opinion as
“Candlewood.”
? Candlewood Timber Group, LLC v. Pan Am. Energy LLC, C.A. No.
20135, 2003 WL 22417235 (Del. Ch. Oct. 22, 2003).
2a
as it is based on forum non conveniens. We also remand the
case with directions that it be transferred from the Court of
Chancery to the Superior Court.
FACTS
Procedural History
Candlewood is a Delaware limited liability company that is
engaged in a venture with its wholly-owned and controlled
Argentine subsidiary, FSB, to sell wood products derived
from South American forests that are managed consistently
with international standards of sustainable forestry.’ FSB is
the vehicle through which Candlewood purchased approxi-
mately 250,000 acres of forest land, including 70,000
acres that are located in the Province of Salta, Republic
of Argentina.
Pan American, a Delaware limited liability company that
engages in oil and gas extraction, is the second largest
hydrocarbon producer in .irgentina. Pan American is the
majority owner and the operator of a consortium of
companies that were granted concessionary rights by the
Argentine Republic (which owns all of the oil and gas rights
in Argentina) to extract oil and gas in the Province of Salta.
That concession covers the land owned by FSB in the Salta
Province. The majority owner of Pan American is a
subsidiary of BP p.l.c., and the minority owner is Bridas
Corporation, an oil company controlled by one of Argentina’s
wealthiest families.
> According to Candlewood's complaint, sustainable forestry is de-
signed to foster the renewal of prime forest resources and employment
opportunities for local residents. It operates to preserve the long term
environmental benefits of forest lands while realizing the economic and
social values of marketable timber. Sustainable forestry involves the
extraction of such timber from prime forest lands, while preserving intact
the forest and its valuable environmental habitats and biodiversity.
3a
Pan American sought permission from FSB to extract the
oil and gas from underneath FSB’s land. At Candlewood’s
direction, FSB gave Pan American permission to enter FSB’s
forest land, conditioned on Pan American’s written agreement
that it would (among other things) purchase comprehensive
liability insurence and indemnify FSB against any damage
Pan Americai: caused to the property. Thereafter, according
to Candlewood’s complaint, Pan American violated those
obligations by undertaking a drilling program that inflicted
massive unremediated property damage to FSB’s land,
thereby making it impossible for Candlewood to obtain the
environmental certifications required for their sustainable
forestry business.
On January 28, 2003, Candlewood filed an action against
Pan American in the Court of Chancery for monetary and
injunctive relief. On March 4, 2003, Candlewood filed an
amended complaint. The following day, Pan American filed
an original action in the Supreme Court of Argentina against
Candlewood and FSB. In its Argentine action, Pan American
sought a declaration that the parties’ dispute was subject to
the original jurisdiction of the Argentine Supreme Court, the
Argentine federal courts, or the Argentine provincial courts.
In support of its application, Pan American alleged that the
“mere existence of the Delaware action,” and the threat of
restraining orders had caused Pan American to suspend its
drilling operations, and that orders of a Delaware court might
interrupt its operations and force Pan American to breach its
supply contracts. Pan American also sought to join the
Nation of Argentina and the Province of Salta as third
parties, so as to create original jurisdiction in the Argentine
Supreme Court.
Pan American responded to Candlewood’s Delaware Chan-
cery complaint by filing a motion to dismiss or, alternatively,
to stay the Delaware action in favor of its Argentine action.
Thereafter, Candlewood filed a second amended complaint
4a
that dropped all its requests for injunctive relief, including
relief that would require supervision of Pan American’s
conduct on FSB’s land in Argentina. Candiewood and FSB
did, however, continue to assert claim for specific perform-
ance of Pan American’s contractual obligation to purchase
liability insurance.
In their second amended complaint, which is the operative
complaint for purposes of this appeal, Candlewood included
claims for breach of contract, negligence, fraud, tortious
infringement of property rights, and tortious interference with
business relations. Candlewood’s contract claim alleges that
Pari American breached its obligation under the extraction
permits and accompanying correspendence, and that “Can-
dlewood and FSB are entitled to indemnification for their
losses, and [to] specific performance to compel Pan American
to purchase comprehensive liability insurance. . . .” Can-
dlewood’s request for specific performance is the only
reference in its complaint to an equitable remedy.
On May 30, 2003, Candlewood filed a motion in the Court
of Chancery to restrain Pan American from prosecuting its
Argentine action. Candlewood also moved for a declaration
that the Court of Chancery is the appropriate forum to
adjudicate their claims. On June 26, 2003, after a hearing, the
Court of Chancery entered an order restraining Pan American
from interfering with the prosecution of Candlewood’s
motion for a declaration that the Court of Chancery was the
proper forum to adjudicate their claims.
Meanwhile, on June 23, 2003, Pan American filed a second
action in an Argentine provincial court, seeking partial
expropriation of FSB’s land. On September 12, 2003, after
admitted discussions and a meeting among representatives of
Pan American and the Argentine Government, the Nation of
Argentina filed a pleading in Pan American’s Argentine
Supreme Court action, attacking the jurisdiction of the
Delaware courts. In that pleading, the Nation of Argentina,
Sa
referencing the “permanent injunctions” being sought in
Candlewood’s original complaint, claimed that the “basic
institutions of the Nation [were] at risk” because of “the
possibility that gas production in the Acambuco area could be
. . affected” by “one or more rulings by a foreign court.”
That pleading did not disclose to the Argentine Court that
Candlewood was seeking only damages based on common
law claims arising out of private contracts with Pan
American. Nor did that pleading disclose that Candlewood
had previously informed the Court of Chancery (and Pan
American) that they were “not seeking any injunctive relief
requiring supervision of Pan American’s conduct on the land
in Argentina.”
Facts Relating To Forum Non Conveniens Motion
The facts relating to Pan American’s motion to dismiss
Candlewood’s Court «* Chancery action are uncontroverted.
Pan American has tremendous resources at its disposal.
Describing itself as a “leading regional player” in oil and gas
production with operations throughout the Southern Cone of
* Pan American appears to hae used its access to the highest levels of
the Argentine government to influence both this litigation and Pan
American’s second-filed action in Argentina. In connection with the
preliminary injunction hearing in the Court of Chancery, Pan American
wrote a letter to Argentina’s Secretary of Foreign Relations, met with the
legal advisor to the Ministry of Foreign Affairs, wrote a letter to the
Secretary of Energy, and spoke with the Secretary of Energy’s legal
advisors. Officials from both ministries wrote letters in support of Pan
American’s position, which Pan American submitted to the Court of
Chancery. Pan American also met with the legal advisor to the Argentine
Ministry of Foreign Affairs, after which the Nation of Argentina appeared
in Pan American’s second-filed Argentine action and attacked the
jurisdiction of the Delaware courts.
>The reason for that omission, Candlewood contends, is that Pan
American did not inform the relevant Argentine governmental officials
that Candlewood intended to seek only money damages relief.
6a
South America, Pan American is the principal vehicle for
BP’s oil and gas activity in Argentina, Bolivia, Brazi!, Chile
and Uruguay. Pan American’s certified reserves approach 2
billion barrels of oil equivalent, and its exploration block
portfolio approximates 5 million net acres.
Pan American conducts significant business in the United
States. When asked in an interrogatory to identify which of its
employees traveled to the United States on business, Pan
American replied that many of its employees “travel abroad
on a regular basis, including to the United States.” Pan
American also stated that it “does not contend that it would
be an undue hardship for some of its employees to travel to
the United States, but it would be unduly burdensome to seek
to identify each person who has traveled to the United States
and the dates of such travel.”
To conduct its international business, Pan American
regularly agrees to litigate in the United States. Its gas export
contracts and crude oil sales contracts provide exclusively for
dispute resolution in the United States, and its financial
agreements specify either English or United States fora. On
three occasions in recent years Pan American has been a
litigant in the United States, including in a Court of Chancery
trial in which Pan American successfully defended a claim
that it be required to post $41 million in collateral under an
indemnity agreement.°
During the discovery proceedings that ultimately resulted
in the decision on Pan American’s motion to dismiss, Pan
American submitted a single “Affidavit Re-Location and
Access to Witnesses and Evidence.” That affidavit identified
no potential witnesses, documents, or evidence outside of Pan
American’s control, or any reason why Pan American would
be unable to present factual evidence respecting damage to
° Ins. Co. of the State of Pa. v. Pan Am. Energy, LLC, C.A. No. 19629,
2003 WL 1432419 (Del. Ch. Mar. 19, 2003).
Ta
FSB’s property through expert testimony, assisted by visual
aids. The discovery also revealed that of the six Pan
American employees who were identified as having the most
knowledge about Pan American’s activities on FSB’s land,
four had traveled internationally on business and three had
traveled to the United States.
Summary of the Court Of Chancery Opinion
In an opinion handed down on October 22, 2003, the Court
of Chancery granted Pan American’s motion to dismiss on
the grounds of lack of subject matter jurisdiction and,
alternatively, forum non conveniens.
As for subject matter jurisdiction, the Court held that none
of Candlewood’s claims was equitable in character and that
although on its face the complaint purported to seek an
equitable remedy—specific performance of Pan American’s
contractual obligation to purchase a policy insuring against
damage to FSB’s land—in reality, Candlewood and FSB’s
claim was one at law for money damages. Because the harm
to the land had already occurred, the remedy would have to
take the form of a monetary award, whether or not Pan
American had purchased an insurance policy. Therefore,
because the complaint did not allege that the remedy at law
was inadequate and specific performance was not necessary
for the relief sought by Candlewood, the Court dismissed the
complaint for lack of subject matter jurisdiction.
To summarize meaningfully the Court of Chancery’s forum
non conveniens rulings, it is helpful to discuss first the legal
standard for dismissal under the forum non conveniens
doctrine. Under Delaware law the moving party must
demonstrate, with particularity, that being required to litigate
in Delaware would subject it to overwhelming hardship.
8a
As this Court stated in Warburg, Pincus Ventures, L.P. v.
Schrapper:
Our jurisprudence is clear that a complaint will not be
dismissed on the ground of forum non conveniens
without a showing of overwhelming hardship. While this
standard is not “preclusive,” it requires a defendant to
show that the case “is one of the rare cases where the
drastic relief of dismissal is warranted based on a strong
showing that the burden of litigating in this forum is so
severe as to result in manifest hardship to the
defendant.”
In assessing whether or not overwhelming hardship has
been shown, Delaware courts employ an analysis predicated
upon the six so-called Cryo-Maid” factors,® which are:
(1) the relative ease of access to proof;
(2) the availability of compulsory process for witnesses;
(3) the possibility of a view of the premises;
(4) whether the controversy is dependent upon the
application of Delaware law which the courts of this
State more properly should decide than those of another
jurisdiction;
(5) the pendency or nonpendency of a similar action or
actions in another jurisdiction; and
(6) all other practical problems that would make trial of
the case easy, expeditious, and inexpensive.”
’ 774 A.2d 264, 267 (Del.2001) (footnotes omitted).
* Referring to Gen. Foods Corp. v. Crvo-Maid, Inc., 198 A.2d 681, 684
(Del. 1964).
. Warburg, Pincus, 774 A.2d at 267; Ison v. E.J. DuPont de Nemours
& Co., Inc., 729 A.2d 832, 837-38 (Del.1999).
9a
In its opinion, the Court of Chancery identified these legal
standards accurately. The Court also appropriately framed the
issue, as being “not whether Pan American has shown that
Argentina is a better forum for the litigation, but whether Pan
American has shown with particularity, through one or more
of the Cryo-Maid factors, that litigating in Delaware con-
stitutes an overwhelming hardship.”’° Having analyzed each
of the Cryo-Maid factors, the Court of Chancery ruled-that all
of them favored Pan American, reasoning as follows:
Access To Proof: The Court found that (1) all the
witnesses, physical evidence and documents relating to
Pan American’s defense are located in a remote area of
Argentina, from which traveling to Delaware to litigate
would be “extremely inconvenient;” (2) the five em-
ployees most knowledgeable of Pan American’s activ-
ities in Argentina live in Argentina, speak minimal
English, and are so critical to normal business operations
that if those employees are required to travel to
Delaware for trial, Pan American’s business will suffer
“significant disruption;” (3) the relevant documents are
virtually all in Spanish and are in active use in
Argentina; and (4) securing live testimony of the wit-
nesses and producing English translations of the relevant
documents in Delaware will entail “substantial burdens”
to Pan American, and as a practical matter may cause
Pan American to “suffer the deprivation of live testi-
mony and, resultantly . . . have difficulty presenting
rebuttal testimony.”
Compulsory Process for Witnesses: The Court of Chan-
cery found that it “may have limited powers to compel
access to witnesses and documents,” because although
Argentina is a signatory to the Hague Convention To
'° Candlewood, 2003 WL 22417235 at *3.
11
Id.
10a
The Taking Of Evidence Abroad In Civil And Com-
mercial Matters, the Argentine Republic will not execute
Letters of Request for the purpose of obtaining pre-trial
discovery of documents. Because of that reservation to
the Hague Convention, the Court of Chancery stated that
“Pan American may have no pre-trial discovery.”
View of The Premises: The Court of Chancery found that
“the need to view the premises . . . is greater” than in
cases that do not involve injury to real property.
Although video is a substitute, “it is only that--a
substitute,” for which reason (the Court concluded) “Pan
American will clearly suffer difficulties if forced to
litigate in Delaware because the finder of fact cannot
view the premises.””?
Delaware’s Interest in the Litigation: The Court found
Delaware’s interest in a dispute over injury to land in
Argentina is “minimal,” but that:
Argentina, as owner of all oil and gas resources in
Argentina, has a bona fide interest in any com-
pensation paid to FSB due to damage allegedly caused
by Pan American’s operations pursuant to extraction
rights granted to it by Argentina. This interest is not
speculative and is evidenced by the Nation of
Argentina and Province of Salta’s submissions before
the Supreme Court of Argentina. A decision in this
action will likely implicate Argentina’s right to
regulate access to surface property that lies above
government owned oil and gas fields. Furthermore, a
decision will implicate Argentina’s economic interests
because a decision adverse to Pan American may
reduce the revenues Argentina derives from Pan
American’s extraction activities. [Given] the signifi-
2 Td. at *4.
'3 Id.
lla
cant interests of Argentine governmental entities, the
Argentine courts may have exclusive jurisdiction over
this dispute . . . [that] . . . may independently deprive
this Court of its jurisdiction. Regardless, Argentina’s
significant interest in this litigation and Delaware’s
limited interest in this litigation, counsels judicial
discretion strongly in favor of dismissal.'*
Other Pending Litigation: The Court found that an
action “similar to this litigation” was pending before the
Argentine courts, which are as fully capable as the
Delaware courts of resolving disputes of this nature.
Actually, the Argentine courts may be more capable (the
Court of Chancery opined), since they can exercise juris-
diction over the Nation of Argentina and the Province
of Salta.
Other Practical Problems: Lastly, the Court of Chancery
identified a practical problem. FSB had previously
executed and delivered to Pan American, Receipts for
Indemnification in exchange for compensation that Pan
American had paid to FSB for damage caused by its
seismic surveying activity on FSB’s property. The
Receipts for Indemnification contained an exclusive
Argentine forum selection clause. That created a prac-
tical problem, the Court of Chancery found, namely that
because only the Argentine courts had jurisdiction over
damage claims resulting from seismic activities, “it will
be necessary to delineate clearly the line between the
damage caused by the seismic activities and the damage
caused by oil and gas extraction . . . . a complicated task
that could prove unmanageable. Argentine courts would
not face this same definitional problem and could hear
all issues surrounding Pan American’s activities.”
'* Id., 2003 WL 22417235 at *5 (emphasis in original).
'S Id. at *6.
12a
Taking these factors into consideration, the Court of Chan-
cery concluded they showed, in the aggregate, that:
[L]itigating this dispute in Delaware would constitute an
overwhelming hardship to Pan American. Delaware has
little or no interest in resolving this dispute. Plaintiffs
purchased real estate in Argentina. They formed an
Argentine entity to develop the resources located in
Argentina. They negotiated and executed contracts in
Argentina. The breach of these contracts, and the al-
leged tortious conduct attendant thereto, all occurred in
Argentina. Argentine law will govern this dispute.
Finally, Argentine governmental authorities have ex-
pressed a direct interest in this controversy. Litigating
this matter in Delaware, rather than in Argentina, defies
common sense.'°
The Subject Matter Jurisdiction Issue
The first issue raised on this appeal is whether the Court of
Chancery erred in dismissing the complaint for lack of
subject matter jurisdiction. On questions of subject matter
jurisdiction, the applicable standard of review by this Court is
whether the trial court correctly formulated and applied legal
principles.'’ The scope of our review is de novo.'*
As Delaware’s Constitutional court of equity, the Court of
Chancery can acquire subject matter jurisdiction over a cause
in only three ways, namely, if: (1) one or more of the
plaintiff's claims for relief is equitable in character,’ (2) the
ad |
'? Sanders v. Sanders, 570 A.2d 1189, 1190 (Del.1990).
'® Taylor v. LSI Logic Corp., 715 A.2d 837, 839 (Del.1998) (citing
Sanders v. Sanders, 570 A.2d at 1190).
'? 10 Del. C. § 341 (“The Court of Chancery shall have jurisdiction to
hear and determine all matters and causes in equity.”); Monroe Park v.
Metro. Life Ins. Co., 457 A.2d 734 (Del.1983).
13a
plaintiff requests relief that is equitable in nature,”’ or (3)
subject matter jurisdiction is conferred by statute. Here, as the
Court of Chancery correctly observed, Candlewood asserts no
equitable claims for relief, nor does it advance any claim
under a statute that vests jurisdiction in the Court of
Chancery. The only claims that Candlewood asserts are
common law claims sounding in tort and contract. Ac-
cordingly, the sole basis for equitable jurisdiction is that
Candlewood’s complaint seeks equitable relief, viz, specific
performance of Pan American’s contractual obligation to
obtain liability insurance covering damage caused to FSB’s
property by Pan American’s extraction activities.
Although specific performance is an equitable remedy
upon which equity jurisdiction might be predicated, that is
true only if the complaint, objectively viewed, discloses a
genuine need for such equitable relief. The fact that a
complaint contains a prayer for an equitable remedy, without
more, does not conclude the jurisdictional analysis. In
deciding whether or not equitable jurisdiction exists, the
Court must look beyond the remedies nominally being
sought, and focus upon the allegations of the complaint in
light of what the plaintiff really seeks to gain by bringing his
or her claim.”’ To say it differently, the appropriate analysis
requires a “realistic assessment of the nature of the wrong
alleged and the remedy available in order to determine
whether a legal remedy is available and fully adequate.”
° 10 Del. C. § 342 (“The Court of Chancery shall not have jurisdiction
to determine any matter wherein sufficient remedy may be had by com-
mon law, or statute, before any other court or jurisdiction of this State.”’);
Heathergreen Commons Condo. Ass'n. v. Paul, 503 A.2d 636
(Del.Ch.1985).
2! Diebold Computer Leasing, Inc. v. Commercial Credit Corp., 267
A.2d 586 (Del.1970); Hughes Tool, Inc. v. Fawcett Publ’n Inc., 297 A.2d
428 (Del.Ch.1972), rev'd on other grounds, 315 A.2d 577 (Del.1974).
22 McMahon v. New Castle Assoc., 532 A.2d 601, 603 (Del.Ch.1987).
l4a
Applying those principles to Candlewood’s complaint, the
Court of Chancery concluded that it did not have equitable
subject matter jurisdiction, because the plaintiffs failed to
allege that they had no adequate remedy at law, and also (and
more importantly) because:
Even if the plaintiffs had alleged that they had an
inadequate remedy at law, a realistic assessment of
whether money damages are sufficient to remedy the
alleged breach of contract demonstrates that such an
allegation would be a facade. The plaintiffs seek to
require Pan American to purchase ‘an insurance policy
covering damage to their property, damage that has
already been inflicted by Pan American’s actions. Even
if Pan American had such an insurance policy, it would
presumably direct monetary payment to the plaintiffs if
damage was done to the property-monetary payment that
plaintiffs can recover as damages without resort to the
extraordinary remedy of specific performance. In fact,
the complaint itself demonstrates that there is an
adequate remedy at law; the complaint seeks money
damages for those harms that would have been covered
by the insurance policy that Pan American allegedly
never purchased. Because plaintiffs can adequately seek
monetary damages in a court of law for Pan American’s
alleged breach of contract, this Court cannot grant
specific performance and, hence, does not have juris-
diction to hear and decide this matter.”
We agree with that analysis. The Court of Chancery did not
err in applying legal precepts or in concluding that it did not
possess subject matter jurisdiction to adjudicate Candle-
wood’s claim. Accordingly, if Delaware is a proper forum for
this dispute, then the court that would have subject matter
jurisdiction is the Superior Court.
> Candlewood, 2003 WL 224172335 at *2.
1Sa
That brings us to the second question, which is whether the
Court of Chancery erred in determining, under forum non
conveniens principles, that the only proper forum for this
dispute is Argentina. We conclude, for the reasons next
discussed, that the Court did so err.
The Forum Non Conveniens Issue
This Court has repeatedly reaffirmed that a defendant that
seeks the dismissal of a first-filed Delaware action on the
ground of forum non conveniens “must establish with
particularity that [it] will be subjected to overwhelming hard-
ship and inconvenience if required to litigate in Delaware.”
That standard imposes a “heavy burden” that a defendant will
meet “only in a ‘rare case.’”*
The Court of Chancery articulated the proper standard for a
forum non conveniens dismissal, but it applied that standard
incorrectly to the facts of the case, for three reasons. First, the
Court imported into its analysis a consideration that is legally
irrelevant and untethered to any hardship to Pan American.
Second, the Court made Cryo-Maid-related factual findings
that were not adequately supported by the record. Third, the
record discloses no other basis to support a finding that Pan
American would suffer overwhelming hardship if required to
litigate in Delaware. To the contrary, the undisputed facts of
record only further confirm that Pan American would not
suffer any significant hardship.
* Ison v. E.l. duPont de Nemours & Co., 729 A.2d 832, 838 (Del.
1999); Mar-Land Indus. Contractors, Inc. v. Carribean Petroleum Ref,
L.P., 777 A.2d 774, 778 (Del.2001); Warburg, Pincus Ventures L.P. v.
Schrapper, 774 A.2d at 267; Taylor v. LSI Logic Corp., 689 A.2d 1196,
1199 (Del. 1997).
*S Mar-Land, 777 A.2d at 778 (quoting /son, 729 A.2d at 842).
l6a
1. The Relative Interests of Argentina And Delaware in This
Controversy
The factor found to weigh most heavily in favor of the
Court of Chancery’s determination that litigating in Delaware
would constitute an overwhelming hardship to Pan American,
was that Argentina has a far greater interest in the controversy
than does Delaware. The predominate weight given that
factor emerges clearly from the Court’s opinion. Immediately
after finding that overwhelming hardship had been estab-
lished, the Court of Chancery (i) stated that “Delaware has
little or no interest in resolving this dispute;” (11) observed
that all the parties, the contracts and the alleged wrongful
conduct were located in or occurred in Argentina and that
Argentina law would apply; and then (iii) concluded that
“Argentine governmental authorities have expressed a direct
interest in this controversy.””°
The problem with this analysis is that factors that bear on
choice of law or upon the relative interests of Delaware and
Argentina in adjudicating this dispute have no logical rele-
vance to the critical issue, which is whether Pan American
will suffer overwhelming hardship if required to litigate in
Delaware. Because the defendant has the burden to
demonstrate “overwhelming hardship” from litigating a first-
filed case in Delaware, this Court has previously held that
“whether an alternative forum would be more convenient for
the litigation, or perhaps a better location, is irrelevant[;]”~’
and that “the trial court is not permitted to compare Delaware,
the plaintiffs chosen forum, with an alternate forum and
decide which is the more appropriate location for the dispute
to proceed.””* That is what prompted this Court, in Mar-Land
6 Candlewood, 2003 WL 22417235 at *6.
2? Mar-Land, 777 A.2d at 779.
°8 Id., 777 A.2d at 781 (“the Superior Court improperly weighed the
plaintiff's chosen forum versus the defendant’s preferred forum.”); Tay-
17a
Industries Contractors, Inc. v. Caribbean Petroleum Refining,
L.P., to reverse a dismissal on forum non conveniens grounds,
and to hold that “the Superior Court improperly weighed the
plaintiff's chosen forum versus the defendant’s preferred
forum, a balancing analysis not contemplated by this Court’s
forum non conveniens jurisprudence.”
Even if Argentine law is found to be applicable, “the
application of foreign law is not sufficient reason to warrant
dismissal under the doctrine of forum non conveniens.”*” In
Warburg, Pincus Ventures v. Schrapper, this Court rejected
the argument that “some lesser hardship standard applies”
where the plaintiff is not a Delaware citizen and where “the
defendant’s ‘only connection’ to Delaware is its status as a
Delaware business entity.””’ Affirming the denial of a forum
non conveniens motion, the Warburg Court found that the
defendant “had not established with particularity that it would
face overwhelming hardship if required to litigate in Dela-
ware[,]” observing that:
All of the activities that are the basis of [plaintiff's]
complaint occurred outside of the United States. The
negotiations between the parties took place in Germany
and England, which is also where . . . all of the evidence
is located. Similarly, [plaintiffs] alleged damages
involve interference with his relationships with vari-
ous German entities. ... Warburg argues . . . that either
German law or possibly English law would apply to this
action. . . .°”
lor, 689 A.2d at 1197 (holding that the trial court improperly dismissed on
grounds that a foreign court “would be a ‘more appropriate forum’”).
?9 Mar-Land, 777 A.2d at 781.
* Taylor, 689 A.2d at 1200.
*!'774 A.2d at 268, 269.
32-774 A.2d at 267.
18a
By injecting an irrelevant factor into the forum non
conveniens analysis, the Court of Chancery lowered the
applicable standard. It also minimized a significant Delaware
interest in the lawsuit, which is to make available to litigants
a neutral forum to adjudicate commercial disputes against
Delaware entities, even where the dispute involves foreign
law and the parties and conduct are centered in a foreign
jurisdiction. Where, as here, the Delaware action is first-filed,
our jurisprudence views that interest to be sufficiently
important as to impose upon the moving defendant the
“heavy burden” of demonstrating overwhelming hardship
from being required to litigate in Delaware.”°
The governmental interests of Argentina would be a
relevant factor had Pan American moved to dismiss under
Chancery Court Rule 19, on the basis that the Argentine
governmental entities are indispensable parties, such that Pan
American would be prejudiced if this case proceeded in
Delaware without the presence of those Argentine govern-
mental entities. Pan American did advance the argument that
the Argentine courts have exclusive jurisdiction, and both
sides briefed that issue; but rather than decide that juris-
3 The Court of Chancery relied in part upon JM2 Merchandising &
Mfg., Inc. v. Tirex Corp., C.A. No. 18077, 2000 WL 1664168 (Del.Ch.
Nov.2, 2000). That case, which was decided before Warburg, Pincus and
Mar-Land, was cited by the Court of Chancery for the proposition that
“Argentina’s significant interest in this litigation, and Delaware’s limited
interest . . . counsels judicial discretion strongly in favor of dismissal.”
Candlewood, 2003 WL 22417235 at *5. But /M2 turned less on the
interests of a foreign forum than on the financial hardship facing the
Quebec-based defendant, which had “iost a good deal of money and [was]
apparently in default of its tax obligations,” and could not “easily bear”
the “markedly increased” costs of litigating in Delaware. Jm2, 2000 WL
1664168 at *9. Pan American faces no such hardship, and it admittedly
“does not contend that it would be an undue hardship for some of its
employees to travel to the United States.” Def.’s Resp. to Pl.’s First Set of
Interrogs., Appellant’s Appendix at 339.
19a
dictional issue directly, the Court of Chancery folded that
question into the “Delaware interest in the litigation” factor of
its forum non conveniens analysis.
It is within that framework that the Court of Chancery
concluded that for it to entertain this breach of contract and
tort action against a private party, “will likely implicate
Argentina’s right to regulate access to surface property . . .
[and] . . . will implicate Argentina’s economic interests,” and
also that “[b]ecause of the significant interests of Argentine
governmental entities, the Argentine courts may have
exclusive jurisdiction over this dispute . . . [that] ma
independently deprive this Court of its jurisdiction.‘
Because that concern was untethered to any asserted hardship
to Pan American, overwhelming or otherwise, the Court of
Chancery erred by injecting the exclusive jurisdiction issue
into a forum non conveniens analytic framework.
2. Erroneous Cryo-Maid Factual Findings
In its opinion the Court of Chancery considered and
assessed the six factors prescribed by Cryo-Maid and its
progeny, that are legally relevant to a forum non conveniens
analysis. Regrettably, the Court’s conclusions relating to
several of those factors were based upon conclusory affidavits
that Pan American had submitted. The Court’s conclusions
failed to take into account controverting evidence submitted
by Candlewood as well as critical admissions by Pan
American. This Court will not upset a trial court’s factual
findings if they are supported by the record and are the
product of an orderly and logical deductive process.*° Here,
several of the Court of Chancery’s critical findings were not
adequately supported by the record and, thus, were erroneous.
#2003 WL 22417235 at *5 (italics in original, underscoring added).
35 See Moss v. Prudential-Bache Sec., Inc., 581 A.2d 1138, 1139-40
(Del.1990).
20a
¢ Access To Proof
Relying solely on two paragraphs in an affidavit describing
the location of certain Pan American employees and
documents, the Court of Chancery found that Pan American’s
expected defense would depend on “witnesses, physical
evidence and documents . . . located in a remote area of
Argentina;” that travel for these witnesses to Delaware for
trial would be “extremely inconvenient” and cause Pan
American to “suffer significant disruption;” and that pro-
ducing English translations of relevant documents in Dela-
ware “will entail substantial burdens to Pan American” and
may cause Pan American to “suffer the deprivation of
live testimony” and to “have difficulty presenting rebuttal
testimony.””°
These findings lack proper record support, and they ignore
admissions by Pan American that significantly, if not fatally,
undercut Pan American’s assertions. Pan American’s affi-
davit amounts essentially to bare conclusions that do not
constitute a “particularized showing that witnesses, docu-
ments, or other evidence necessary to defend the allegations
contained in [Candlewood’s] complaint cannot be brought to
or otherwise produced in Delaware.”*’ Pan American did not
identify any damages evidence that could not be assimilated
and presented in Delaware by an_ expert. Nor
did Pan American show why it needs any fact testimony
(whether live or by deposition) from any Pan American
employee concerning the effect of its extraction activities
upon FSB’s land.
The Court of Chancery’s findings also do not take into
account admissions by Pan American that significantly under-
cut its assertions of hardship. In its response to inter-
*€ Candlewood, 2003 WL 22417235 at *3-6.
37 Mar-Land, 777 A.2d at 781.
\
2la
rogatories, Pan American admitted that “it does not contend
that it would be an undue hardship for some of its employees
to travel to the United States.”** Pan American also admitted
that four of the six employees referenced in its affidavit as
most knowledgeable, had traveled internationally on business
in recent years, and that three had traveled to the United
States. Finally, Pan American admitted that it customarily
enters into contracts that include forum selection clauses that
require it to litigate in the United States and the United
Kingdom, and that recently it had defended a case in the
Court of Chancery. The Court of Chancery’s opinion does not
come to grips with, or acknowledge, those admitted facts.
* Availability of Compulsory Process
Regarding this factor, the Court found that “[a]s a result of
Argentina’s reservation to the Hague Convention, Pan
American may have no pre-trial discovery.” Aside from the
fact that Pan American never made that argument in the Court
of Chancery (and its brief on appeal cites no record evidence
to support this claim), Pan American never identified any
potential witnesses or documents that are not under its
control, or any third party witness in Argentina or elsewhere
from whom it would wish to obtain discovery. Nor did Pan
American suggest that there exists potential evidence in
Argentina or elsewhere that Pan American might want or be
unable to obtain in discovery. Consequently, there is no
identified record support for the Court of Chancery’s finding
that Pan American “may have no pre-trial discovery.”
¢ View of the Premises
Although Candlewood attached to its complaint its expert’s
reports that contain various charts and drawings, Pan
American asserted in the Court of Chancery, and urges on
this appeal, that this action “unquestionably requires that the
- See, note 33, supra.
22a
finder of fact undertake an up close and detailed view of the
premises at issue.’ Pan American did not explain how its
expert or factual presentation would be inhibited by the
absence of a view of the premises, or how an “up close and
detailed view” would help the Court assess how many
hundred acres of forest were taken out of production, or how
many hundreds of thousands of square meters of earth were
excavated. Pan American also made no effort to explain why
video technology and other visual aids would be less
informative than an in-person expedition.
Despite the lack of a particularized record on these issues,
the Court of Chancery appears to have accepted uncritically
Pan American’s assertion that “this factual dispute cannot
come to resolution without a view of the premises and,
therefore, it will suffer overwhelming hardship if forced to
litigate here.”*° Neither Pan American nor the Court cited any
case in which forced reliance on video or other visual aids, in
lieu of a personal inspection, was found to constitute a
hardship." The Court’s finding on this factor lacks
evidentiary and legal support.
¢ Whether The Controversy is Dependent Upon The Appli-
cation of Delaware Law
The fourth Cryo-Maid factor is “whether the controversy is
dependent upon the application of Delaware law which the
courts of this State more properly should decide than those of
°° Appellee’s Ans. Br. at 19.
*° Candlewood, 2003 WL 22417235 at *4.
*! The Court of Chancery relied upon a pre-video-era case, in which a
jury’s view of real property years after its condemnation was deemed to
be not misleading and prejudicial and a “valuable aid,” chiefly because the
jury otherwise would have “had to guess as to the surroundings and the
neighborhood.” Woodlands Cemetery Co. v. U.S., 110 F.Supp. 704, 706
(E.D.Pa.1953).
23a
another jurisdiction.””** This factor weighs slightly, although
not significantly, in Pan American’s favor. The Court of
Chancery found that Argentine law would apply to Can-
dlewood’s claims.*? Candlewood disputes that finding, but
even if Delaware law were applicable, it has not been shown
that this case depends upon the application of Delaware law
that more properly should be decided by Delaware courts. On
the other hand, if Argentine law is found to apply, that alone
“is not sufficient reason to warrant dismissal under the
doctrine of forum non conveniens.”™
9942
Pan American has failed to articulate any hardship that
would result from a Delaware court applying Argentine law.
The expense and inconvenience of translating pertinent legal
precedent, of retaining foreign lawyers, and of producing
foreign law experts to testify at trial, has not been shown to
be of material weight in an overwhelming hardship analysis
in this particular case.*° Accordingly, this factor, although
favoring Pan American, falls far short of satisfying the
standard for a forum non conveniens dismissal.
* Lack of A Prior Pending Action
Although the Court of Chancery found that “an action
similar to this litigation . . . [is] . . . pending before the
Argentine courts,””° the record shows that the Pan American
lawsuits pending in Argentina are not “similar.” No action
was “pending” in Argentina at the time Candlewood filed this
Delaware action asserting common law tort and contract
claims for damage to property. Pan American’s second-filed
action in the Argentina Supreme Court does not seek a
* Ison, 729 A.2d at 838.
* Candlewood, 2003 WL 22427235 at *4, n. 30.
7 Taylor v. LSI Logic, Inc., 689 A.2d at 1200; Ison, 729 A.2d at 838.
* See Warburg, Pincus, 774 A.2d at 271.
“© Candlewood, 2003 WL 22417235 at *5.
24a
declarution to the contrary, i.e, that it is not liable to
Candlewood for property damage. Pan American’s lawsuit
seeks only a declaration that its dispute with Candlewood
is subject to the exclusive jurisdiction of specified Argen-
tine courts.
Pan American’s second Argentine lawsuit does not impli-
cate Candlewood’s Delaware claims either, because (1) that
action does not seek a declaration of non-liability for damage
to land resulting from expropriation, (ii) that action seeks
only a partial court-ordered expropriation of FSB’s land, and
(111) even if expropriation relief were granted, that would not
affect Candlewood’s claims, all of which would have arisen
pre-expropriation. Thus, the Court’s finding of an action
“similar to this litigation” pending in Argentina lacks support
in the record.
¢ Other Practical Problems
The “practical problem” identified by the Court of Chan-
cery is that it will be difficult to distinguish between the
extraction-related property damage claimed by plaintiffs in
this action and the property damage resulting from Pan
American’s seismic activities for which FSB has already been
compensated and given a release. That factor favored the
Argentine forum, the Court of Chancery found, because
Argentine courts would not face that definitional problem,
whereas a Delaware court would.
That conclusion is erroneous, because whichever court
hears and decides Candlewood’s claims, whether in Delaware
or Argentina, will be required to engage in the task of
delineating between the two different sources of damage.
This practical problem, to the extent it exists, does not depend
on the locus of the litigation. That is, if this constitutes a
hardship to Pan American (or to anyone else), it is not a
hardship that results from litigating in Delaware. Accord-
ingly, the finding that this factor favored Argentina rests on
an incorrect premise.
25a
For these reasons, the Court of Chancery’s assessment of
the Cryo-Maid factors, and its conclusion that those factors
establish overwhelming hardship, are not adequately
supported by the record.
3. The Absence Of A Showing Of Overwhelming Hardship
Although the foregoing analysis would be a sufficient
basis, in and of itself, to conclude that Pan American failed to
meet its forum non conveniens burden, we have searched the
record for other significant evidence of hardship, but have
found none. Indeed, all the relevant evidence points to the
conclusion that Pan American is in no position to argue that
being required to litigate in Delaware would inflict a hardship
upon it.
Pan American is a corporation with vast economic
resources. It engages in operations on an international scale.
As previously noted, Pan American’s operations cause it
frequently to enter into oil and gas supply contracts that
contain forum selection clauses which require Pan American
to litigate in the United States. Those facts are flatly
inconsistent with Pan American’s claim of hardship, as is the
fact that Pan American recently defended a litigation in the
Court of Chancery.
* * *
As earlier noted, it is our view that the real “driver” of the
result reached by the Court of Chancery is the possibility that
the Argentine courts have exclusive jurisdiction over the
subject matter of the Delaware action. The parties argued
both sides of that issue before the Court of Chancery and this
Court. Had the Court of Chancery addressed this issue
directly, as distinguished from treating it as a Cryo-Maid
factor within the framework of a forum non conveniens
analysis, a decision on that question, if favorable to Pan
American’s position, would have constituted an independent
basis for dismissing the action.
26a
Normally, we would remand the case to the trial court to
decide that question in the first instance. But because all
parties ask this Court to decide whether subject matter
jurisdiction is concurrent or is vested exclusively in the
Argentine courts, and because that issue is one of law and
if resolved in favor of Pan American would result in
an affirmance, we decide that question in the interests of judi-
cial economy.’
The Exclusive Jurisdiction Issue
In limited circumstances as discussed below, Delaware
courts will not exercise subject matter jurisdiction over a
dispute that is predicated on foreign law where the foreign
state has vested jurisdiction exclusively in its own courts."
The issue is whether Argentina has vested jurisdiction over
this particular kind of dispute exclusively in its own courts.
Pan American argues that Argentina has done that, because:
(1) the Argentine Constitution vests exclusive jurisdiction in
its courts over actions where the Argentine Nation or a
Province is a party; (2) Argentine law vests exclusive
jurisdiction in its courts (a) over disputes concerning real
property, and (b) over disputes involving issues of envir-
onmental protection, especially where the rights and obli-
gations of an oil and gas concessionaire are implicated; and
(3) the dispute implicates issues of public policy which
demand that exclusive jurisdiction be in Argentina.
*’ This Court may decide any issue fairly presented to the trial court
and a question not so presented if the interests of justice require re-
view. Supr. Ct. R. 8; Standard Distrib. Co. v. Nally, 630 A.2d 640, 647
(Del.1993).
*8 See Taylor v. LSI Logic Corp., 715 A.2d 837 (Del.1998); see also
Ison v. E.l. DuPont de Nemours & Co., Inc., 729 A.2d 832, 838, n. 14
(Del.1999) (in Taylor v. LSI Logic Corp., “[{t}his Court affirmed the
dismissal . . . finding that the Canadian law at issue actually required
adjudication in a Canadian Court, leaving the Court of Chancery with no
subject matter jurisdiction.”)
27a
On the question of whether exclusive jurisdiction has been
vested in the Argentine courts, Pan American, as the
proponent of that contention, has the burden of persuasion.
We conclude that none of Pan American’s arguments has
merit and that Pan American has not met its burden. We
further conclude that the claims for relief being asserted by
Candlewood in Delaware are transitory claims that have not
been localized under Argentine law, and over which the
courts of Delaware have concurrent jurisdiction.
1. The Demerit of Pan American’s Exclusive Jurisdiction
Arguments
Pan American first argues that Article 117 of the Argentine
Constitution confers ab initio jurisdiction to hear and decide
all disputes involving the Argentine national government or a
Province thereof. Even if correct, that proposition has no
relevance to this Delaware action, because no claims are
being asserted in Delaware against the Argentine national
government or the Province of Salta. Nor does Pan American
claim that those Argentine governmental entities are indis-
pensable to a just adjudication of Candlewood’s claims,
within the meaning of Court of Chancery Rule 19.”
Similarly irrelevant is Pan American’s second argument,
which is that Argentine law vests exclusive jurisdiction in its
” According to the unrebutted Affidavit of Professor Saul Litvinoff,
one of Candlewood’s foreign law experts, under Argentine law the
Argentine nation or an Argentine province can only be made a party to
litigation if they have “a direct, substantial and immediate interest in the
merits of the litigation involved. A formal or indirect interest will not
suffice.” (Litvinoff Supplementary Aff., {J 3, 5). According to Professor
Litvinoff, the Argentine government has no such direct, substantial or
immediate interest, because this dispute does not involve title to minerals
owned by the government, the government will not be directly affected by
a money judgment against Pan American, and resolution of the dispute is
based on clear rules of law, not discretionary principles of public policy.
(/d., at {9} 5, 9).
28a
courts over disputes concerning real property and disputes
involving issues of environmental protection. That argument
is not analytically helpful, because this dispute is about
compensation for harm to privately-owned land, not about
ownership rights to real property or issues involving
protection of the environment. As set forth in Section 87 of
the Restatement (Second) Conflict of Laws (1971), “[a] state
may entertain an action that seeks to recover compensation
for a trespass upon or harm done to land in another state.”
Comment a to that Section explains that “[sJuch an action
does not seek to affect title to foreign land, as would a bill to
quiet titlef.]”°°
Finally, Pan American relies upon a theory of its foreign
law expert, Dr. Horacio A. Grigera Naon, that there are issues
of public policy implicated in this dispute that require
exclusive jurisdiction in Argentina. Dr. Naén’s opinion, how-
ever, is disputed by an equally plausible opinion artic-
ulating the contrary view. According to Professor Litvinoff,
there are no principles of public policy that affect the parties’
legal rights, but even in cases that do involve the Argentine
public interest, “this does not mean that the jurisdiction of
Argentine courts is exclusive; thus, the fact that rules of
public policy must be applied in the resolution of a particular
case does not negate the existence of concurrent jurisdiction
in other courts[.]’°' Given these disputed expert opinions and
~ Consistent with the Restatement rule is Professor Litvinoff’s
affidavit testimony that under the Argentine Civil Code, “an action by the
owner of immovable property against an oil and gas concessionaire for
trespass, damage to property, or breach of contract can be brought in
Argentina or abroad.” (Litvinoff Supplementary Aff., § 7). Pan American
argues that ownership of an oil or gas concession is a “real” or “in rem”
right, but this case does not involve Pan American’s or FSB’s title. While
FSB owns real property, what is principally at issue here is compensation
for damage to trees, use of earth, and interference with the plaintiffs’
sustainable forestry business.
*' Id., at 910.
29a
Pan American’s inability to cite any Argentine legal authority
supportive of its position—including any statute that purports
to localize the claims being asserted here in the Argentine
courts—we conclude that Pan American has not miet its
burden of establishing that jurisdiction over this dispute has
been vested exclusively in the Argentine courts.
2. Delaware’s Concurrent Jurisdiction Over The Plaintiffs’
Transitory Causes of Action
Our conclusion does not rest solely upon Pan American’s
failure to carry its burden, however. The facts of record in
this case, and the rules of law applicable thereto, affirm-
atively establish that Candlewood’s claims against Pan
American are transitory. By definition a transitory claim is
one that can be brought in the jurisdiction where a defendant
resides, in this case, Delaware.
As stated in Professor Moore’s treatise, “[an] action is
transitory, even though it may affect land, if the type of relief
requested is personal in nature so that the court acts on the
defendant’s person or personal property, which is within its
control, and not directly on the lands involved... . [M]ost
types of actions are considered transitory even though the
outcome of the litigation may affect property.”*” Consistent
with that fundamental principle is the uncontroverted opinion
testimony of Arthur Taylor Von Mehren, Story Professor of
Law Emeritus at Harvard Law School. Professor Von Mehren
States that the “contract and tort claims pled by the plaintiffs
are today considered transitory in nature,” and that “(njo
*? Moore's Federal Practice, § 110.20[2] (3rd ed.2002).
* Affidavit of Arthur T. Von Mehren, § 12: accord, Forest Products
Co. v. Magistrelli, 14 A.2d 397, 400 (Del.Super.1940) (“An action to
recover damages for breach of contract is transitory{.]”); Eugene F.
Scoles, et. al., Conflict of Laws 368 (3rd ed.2000) (stating that jurisdiction
over tort claims respecting injury to real property “exists in the state that
is the situs of the realty, and other states with which the defendant has a
purposeful, related connection.”’)
30a
contemporary legal order’s law of contract or tort seeks to
localize in principle actions sounding in tort or contract.”°*
Pan American does not straightforwardly confront this
issue or address that analysis. Instead, it contends that this
dispute is akin to that involved in Taylor v. LSI Logic Corp.,
where this Court held that a Canadian statute (Section 241 of
the Canada Business Corporations Act) which provided
an “oppression remedy” for minority stockholders and
authorized suit only in specified Canadian courts, deprived
the Delaware courts of subject matter jurisdiction to grant the
requested equitable relief that the plaintiff was seeking under
that statute.°’ We disagree. Taylor undercuts Pan American’s
case rather than supports it.
Taylor is properly analyzed within the framework of the
general rule that was first articulated in 1914 in Tennessee
Coal, Iron & R.R. Co. v. George.*® The issue in Tennessee
Coal was whether an injured employee could bring suit
against his employer in Georgia, under an Alabama statute
that created tort liability for an employer if the employee
suffered injury due to defective machinery. The Alabama
statute also provided that relief under the statute could only
be sought in an Alabama court. The United States Supreme
Court held that the employee could bring suit under the
statute in Georgia, because “the place of bringing the suit is
not part of the cause of action—the right and remedy are not
so inseparably united as to make the right dependent upon its
*# Von Mehren Aff., 4] 23. Consistent with Professor Von Mehren’s
testimony on that point is that of Professor Litvinoff, who states that
damage claims for breach of contract, tort and restitution under the Civil
Code of Argentina against a private entity are similarly transitory.
(Litvinoff Aff., 4% 7-9; Litvinoff Supplementary Aff., 4] 3-5).
°° 715 A.2d 837, 842 (Del.1988).
© 933 U.S. 354, 34 S.Ct. 587, 58 L.Ed. 997 (1914).
3la
being enforced in a particular tribunal.”*’ Observing that for
various practical reasons a plaintiff might want to bring suit
“in a state other than where the injury was inflicted,” the
Court held that:
“[A] state cannot create a transitory cause of action and
at the same time destroy the right to sue on that
transitory cause of action in any court having jurisdic-
tion. That jurisdiction is to be determined by the law of
the court’s creation and cannot be defeated by the
extraterritorial operation of a statute of another State,
even though it created the right of action.””®
In Taylor this Court found that the general rule of
Tennessee Coal did not apply, because “the oppression rem-
edy in Section 241[was] purely a legislatively created
statutory remedy,” and “it was the intent of the [Canadian]
Parliament that actions brought under Section 241 of the
Canada Business Corporations Act be brought only in the
courts of Canada identified in Section 2 of the Canadian
Act.” That is, in Taylor, the right and the remedy were
found to be so inseparably intertwined that equitable relief
under the statute could only be obtained from one of the
specific Canadian tribunals mandated in the statute. That is
not the case here.
This case requires the application of the general rule of
Tennessee Coal rather than the analysis applied in Taylor.
Here, unlike Taylor (or, for that matter, unlike Tennessee
Coal ), the plaintiffs here are asserting claims arising under
common law, not under an Argentine statute that purports to
localize those claims exclusively within the Argentine court
*” Id. at 359.
*8 Id. at 360.
® Taylor, 715 A.2d at 840, n. 13.
© Id. at 841.
32a
system. Moreover, here the plaintiffs’ causes of action are not
(as was found to be the case in Taylor) so inseparabiy
intertwined with a statutorily-created remedy that the right
can be enforced only in the statutorily-mandated tribunal.
This case is more akin to Randall v. Arabian American Oil
Co.,°' where the plaintiff brought a claim in the United States
District Court for wrongful discharge from his employment
with a Saudi Arabian oil company. Rejecting the argument
that the Saudi Arabian Labor Law vested exclusive
jurisdiction over such claims in the Saudi Arabian courts, the
Fifth Circuit described the claim as “a classic example of a
transitory cause of action that may be enforced in any foreign
court having subject matter and in personam jurisdiction, and
it held that:
It stands to reason that if the Full Faith and Credit
Clause of the United States Constitution, which is the
Supreme Law of the land, does not compel one state
from recognizing the exclusive jurisdiction provisions of
a sister state, then we see little or no reason why in a
transnational case, such as this, where no higher positive
law binds us, we should be compelled to give effect to a
foreign state’s exclusive jurisdiction provision.
For these reasons, we conclude that the claims being
asserted here, although not sufficient to confer equitable juris-
diction, are by their nature transitory, and therefore are prop-
erly brought in the Superior Court of the State of Delaware.
Conclusion
For the foregoing reasons, the judgment of the Court of
Chancery is affirmed in part, reversed in part, and remanded
with instructions that the case be transferred to the Superior
Court under 10 Del. C. § 1902.
°' 778 F.2d 1146 (Sth Cir.1985).
°° Id. at 1153.
33a
APPENDIX B
COURT OF CHANCERY OF DELAWARE
No. Civ. A. 20135-NC
CANDLEWOOD TIMBER GROUP LLC and
Forestal Santa Barbara SRL,
Plaintiffs,
V.
PAN AMERICAN ENERGY LLC,
Defendant.
Submitted Sept. 29, 2003
Decided Oct. 22, 2003
MEMORANDUM OPINION
CHANDLER, J.
I. BACKGROUND
Plaintiff Candlewood Timber Group LLC (“Candlewood’’)
is a Delaware limited liability company that formed an
Argentine subsidiary, Forestal Santa Barbara SRL (“FSB”),
which purchased approximately 250,000 acres of land in the
Argentine Province of Salta. Candlewood and FSB are in the
business of selling wood products derived from forests
managed in an environmentally friendly manner. Candlewood
and FSB allege that their business depends on the ability to
obtain certification from an internationally recognized fores-
try organization that FSB’s lands are managed sustainably.
Defendant Pan American Energy L.L.C. (“Pan American”) is
a Delaware limited liability company that engages in oil and
34a
gas extraction.’ Pan American is the majority owner and
operator of a consortium of companies that were granted
concessionary rights by the Argentine Republic, the owner of
al! oil and gas rights in Argentina, to extract oil and gas in the
Province of Salta, including lands owned by FSB.
Pan American has the right to extract oil and gas under-
neath FSB’s land and sought permission from FSB to enter its
land for this purpose. FSB, at Candlewood’s direction, issued
two permits for Pan American to enter FSB’s land. These
permits obligated Pan American to purchase comprehensive
liability insurance, to hold harmless FSB: from any claims by
third parties, and indemnify FSB for any damage caused to
“properties or any other assets (moveable or real estate)
owned by FSB whether the damage is produced directly or
indirectly by any employee or person or company contracted
by Pan American, with obligation to repair or replace the
asset damaged at the choice of FSB, immediately.”
Pan American initialed one of the permits and proceeded to
enter FSB’s land to perform oil and gas exploration and
extraction. Candlewood and FSB allege that Pan American
operations inflicted significant damage on the property.
They also allege that this damage has prevented the plaintiffs
from having their forest products certified as coming from
sustainable sources.
' Pan American operates in Argentina through a “branch,” that is sim-
ilar to a wholly-owned subsidiary.
> Second Am. Compl. § 24. Plaintiffs also allege that there was
accompanying correspondence and oral communications to the issuance
of the permits in which plaintiffs explained to Pan American their
sustainable forestry plans and the need to obtain third-party certification.
It is also alleged that in these communications Pan American agreed to
limit its impact to the land, conduct environmental impact assessments,
and engage in certain environmental remediation activities. See Second
Am. Compl. 4 21-27.
35a
Plaintiffs allege five counts in their Second Amended
Complaint: (1) Breach of Contract; (2) Negligence; (3) Fraud;
(4) Tortious Infringement of Property Rights; and (5)
Tortious Interference with Business Relations. The contract
claim alleges that Pan American breached its obligations
under the permits and accompanying correspondence and that
“Candlewood and FSB are entitled to indemnification for
their losses, and specific performance to compel Pan Ameri-
can to purchase comprehensive liability insurance, as Pan
American committed to do.”? The prayer for relief seeks an
“order compelling Pan American to obtain and maintain in
effect sufficient casualty, liability and fire insurance policies
to protect FSB against any loss of value to the Candlewood
Forest Property from casualty, including, without limitation,
forest fire, and any liability and injury to employees, agents,
contractors or other representatives of Plaintiffs, and to
include Plaintiffs as named insureds of such policies.’ This
request for specific performance is the only reference in the
complaint to an equitable remedy.
If. ANALYSIS
The plaintiffs’ complaint is dismissed on two independent
and alternative grounds. First, the complaint fails to invoke
this Court’s equity jurisdiction. Second, Delaware is not the
proper forum for this dispute.
A. Equity Jurisdiction
By common-law tradition and statute, this Court does “not
have jurisdiction to determine any matter wherein sufficient
remedy may be had by common law, or statute, before any
other court or jurisdiction of this State.”° A legal remedy, i.e.,
* Second Am. Compl. 4 45.
* Second Am. Compl. 4 (A).
* 10 Del. C. § 342.
36a
money damages, is “sufficient” if it is “complete, practical,
and efficient.”° As applied to this action, if money damages
are a sufficient remedy to Pan American’s alleged breach of
contract, I will dismiss the complaint for lack of jurisdiction.’
“Equitable jurisdiction must be determined from the face of
the complaint as of the time of filing, with all material factual
allegations viewed as true.”® But this Court will go behind the
“facade of prayers” to determine the “true reason” for which
Candlewood and FSB brought suit.” Then-Chancellor Allen
described the applicable jurisdictional analysis as “a realistic
assessment of the nature of the wrong allegéd and the remedy
available in order to determine whether legal remedy is
available and fully adequate.”"”
I should i>te at the outset that the plaintiffs’ complaint
does not allege “at there is an inadequate remedy at law.
There is no allegation that a multiplicity of suits at common
law will be required to cure the asserted wrong with finality.
° In re Wife, K., 297 A.2d 424 (Del. Ch.1972).
’ None of the plaintiffs’ five claims implicate matters over which this
Court has jurisdiction pursuant to 10 Del. C. § 341, e.g., a claim for
breach of fiduciary duty. If jurisdiction exists, it only exists because there
is no adequate remedy at law. The parties did not brief this issue directly,
but “it is clear that, unlike many jurisdictions, judges in the Delaware
Court of Chancery are obligated to decide whether a matter comes within
the equitable jurisdiction of this Court regardless of whether the issue has
been raised by the parties.” JBM Corp. v. Comdisco, Inc., 602 A.2d 74, 77
n. 5 (Del. Ch.1991). See also Glanding v. Industrial Trust Co., 45 A.2d
553, 554 (Del.1945) (issue of equitable jurisdiction was raised on appeal
“not by the parties but by the Court itself’); Del. Ch. Ct. R. 12(h)(3)
(“whenever it appears by suggestion of the parties or otherwise that the
court jacks jurisdiction of the subject matter, the Court shall dismiss
the matter’).
5 IBM Corp. v. Comdisco, Inc., 602 A.2d 74, 78 (Del. Ch.1991).
” Id.
'° McMahon v. New Castle Assocs., 532 A.2d 601, 603 (Del. Ch.1987).
5
37a
There is no allegation that Pan American is insolvent or
otherwise in such dire financial straits that execution on a
money judgment would fail. It does not appear from the face
of the complaint that a trier of fact would be unable to
quantify the damages arising from the alleged breach of
contract. And there is no allegation that the subject matter of
the action is unique or of some special value to Candlewood
and FSB that defies valuation. In short, the complaint sets out
no basis at all for establishing equity jurisdiction other than
“a kind of formulaic ‘open sesame’”'’ by the use of the
words “specific performance.” Such an “incantation of magic
words” is insufficient. '*
Even if the plaintiffs had alleged that they had an inade-
quate remedy at law, a realistic assessment of whether money
damages are sufficient to remedy the alleged breach of
contract demonstrates that such an allegation would be a
facade. The plaintiffs seek to require Pan American to
purchase an insurance policy covering damage to their
property, damage that has already been inflicted by Pan
American’s actions. Even if Pan American had such an
insurance policy, it would presumably direct monetary
payment to the plaintiffs if damage was done to the property-
monetary payment that plaintiffs can recover as damages
without resort to the extraordinary remedy of specific
performance. In fact, the complaint itself demonstrates that
there is an adequate remedy at law; the complaint seeks
money damages for those harms that would have been
covered by the insurance policy that Pan American allegedly
'' IBM Corp., 602 A.2d at 78.
- McMahon, 532 A.2d at 603. In fact, looking at the complaint as a
whole, it appears that the request for specific performance is a
disingenuous jurisdictional hook and that plaintiffs truly seek money
damages. But for my conclusion that Delaware is an inconvenient forum,
this matter would be transferred to the Superior Court pursuant to 10 Del.
C. § 1902.
38a
never purchased. Because plaintiffs can adequately seek
monetary damages in a court of law for Pan American's
alleged breach of contract, this Court can not grant specific
performance and, hence, does not have jurisdiction to hear
and decide this matter.’
B. Forum Non Conveniens
A complaint is dismissed on forum non conveniens grounds
when a defendant demonstrates that litigating in Delaware
would impose on it an “overwhelming hardship.”'* In
determining whether Pan American has demonstrated an
overwhelming hardship, this Court considers the six Cyro-
Maid factors.' The six factors are: (1) ease of access to
proof; (2) availability of compulsory process for witnesses;
(3) possibility of the view of the premises; (4) whether the
controversy is dependent upon application of Delaware law;
(5) the pendency of a similar action in another jurisdiction;
and (6) other practical problems. '°
Pan American “must show ‘with particularity’ that one or
more of these factors, individually or together, imposes an
‘overwhelming hardship.’””'’ The Supreme Court’s reference
'? See, e.g., Theis v. Board of Education, 2000 Del. LEXIS 48 (Del.
Ch.) (dismissing for lack of jurisdiction where adequate remedy at law
existed for breach of contract claim); Manchester v. Narragansett Capital,
Inc., 1989 Del. LEXIS 141 (Del. Ch.) (finding specific performance an
unnecessary remedy where money damages are adequate).
'* Mar-Land Industrial Contractors, Inc. v. Caribbean Petroleum Re-
fining, L.P., 777 A.2d 774 (Del.2001); Warburg, Pincus Ventures, L.P. v.
Dietrich K.H. Schrapper, M.D., 774 A.2d 264 (Del.2001).
'S Mar-Land, 777 A.2d at 778.
” / (citing /son v. DuPont de Nemours, 729 A.2d 832 (Del.1999);
General Foods Corp. v. Cyro-Maid, Inc., 474 A.2d 681 (Del.1964)).
'7 Id. (citing Ison, 729 A.2d at 838; Williams Gas Supply Co. v. Apache
Corp., 594 A.2d 34, 36 (Del.1991). See also Warburg, 774 A.2d at 271
(“through the combination and weight of any or all of the . . . factors”).
39a
to “particularity” has established that “bare allegations of
inconvenience without an adequate showing of particulars of
the hardships” will not suffice.'* Furthermore, the Supreme
Court has held that “it does not matter whether only one of
the Cyro-Maid factors favors defendant or all of them do”!”
because “whether an alternative forum would be more
convenient for the litigation, or perhaps a better location, is
irrelevant.”*” The issue is not whether Pan American has
shown that Argentina is a better forum for the litigation, but
whether Pan American has shown with particularity, through
one or more of the Cyro-Maid factors, that litigating in
Delaware constitutes an overwhelming hardship.
Access to Proof and Compulsory Process for Witnesses.
The first two factors involve similar considerations and
essentially seek to ascertain whether Pan American’s ability
to establish its defense is significantly impaired by litigating
in Delaware. This analysis requires a consideration of what
defenses Pan American proposes to rely on and an
identification of “specific pieces of evidence [or witnesses]
necessary to its defense that it will not be able to produce in
Delaware.””'
Although Pan American has not filed an answer in this
case, it is clear that Pan American intends to contest that it
damaged FSB’s land to the extent alleged and that the
witnesses, physical evidence, and documents related to this
defense are located in a remote area of Argentina. Travel to
and from this location for litigation in Delaware is extremely
inconvenient. The travel time is of a magnitude considerably
greater than that found not to work an overwhelming hardship
in Warburg.*’ Moreover, the five employees most knowl-
'* Id. at 780.
'° Chrysler First, 669 A.2d at 108 (emphasis added).
°° Mar-Land, 777 A.2d at 779.
*" Id. at 781.
*? Warburg involved travel to and from major metropolitan areas in
40a
edgeable of Pan American’s activities in Argentina live,
unsurprisingly, in Argentina and speak minimal English.”
These employees are also critical to normal business oper-
ations and Pan American’s business will suffer significant
disruption if they must travel to Delaware for trial.
Furthermore, all of the documents relating to this case are in
active use in Argentina and virtually all of the documents are
in Spanish. Securing live testimony of these witnesses and
producing English translations of the relevant documents in
Delaware will entail substantial burdens to Pan American.
Practically, in order to litigate in Delaware, Pan American
may suffer the deprivation of live testimony and, resultantly,
may have difficulty presenting rebuttal testimony.
Additionally, this Court may have limited powers to com-
pel access to witnesses and documents, at least at a pre-trial
stage. Argentina is a signatory of the Hague Convention on
Taking of Evidence Abroad in Civil and Commercial
Matters.** The Supreme Court has recognized that use of
the Hague Convention’s procedures for securing evidence is
cumbersome.2> Under the Convention’s procedures, this
Court may issue a “Letter of Request” directed at the
Argentine Ministry of Foreign Relations and Culture to obtain
evidence. The Ministry of Foreign Relations and Culture then
transmits the letter to a judicial authority competent to
execute the request. Notably, however, Argentina included as
a reservation to its accession to the Convention the following
language: “The Argentine Republic will not execute Letters
Germany and England, 774 A.2d at 270.
*> The facts regarding the location and access to witnesses and evi-
dence were established through the affidavit of Fernando Villarreal, Gas
Operations Vice President at Pan American.
** Opened for signature March 18, 1970, 23 U.S.T. 2555, 28 U.S.C.
§ 1781.
5 Ison, 729 A.2d at 843.
4la
of Request issued for the purpose of obtaining pre-trial
discovery of documents as known in the common law
countries.”“° As a result of Argentina’s reservation to the
Hague Convention, Pan American may have no pre-
trial discovery.
View of the Premises. As noted, the essential damages
issue in this case is whether Pan American caused harm to
FSB’s land. Plaintiffs’ central allegation is that “Pan
American has engaged in mammoth excavation activities on
FSB’s property that have inflicted and continue to inflict
widespread, unremediated damage.””’ The case will un-
doubtedly contain dueling expert opinions on the scope of the
alleged damage. Pan American asserts that this factual
dispute cannot come to resolution without a view of the
premises and, therefore, it will suffer overwhelming hardship
if forced to litigate here. Delaware cases that have considered
this factor have concluded that, to the extent that a view of
the premises is necessary, video is a reasonable substitute.”®
*° See Hague Conference on Private International Law, Full Status
Report Convention # 20 (Aug. 21, 2003), at Attp:/www.hcch . net/e/
status/stat20e.html.
” Second Am. Compl. § 4. The plaintiffs allege that this damage has
resulted in “degradation of the environment and biodiversity” of FSB’s
land through “fragmentation of habitats,” “creation of access corridors
that facilitated the illegal intrusion of hunters and cattle,” and “invasion of
exotic .. . species.” /d. at § 37.
8 See Ison v. E.l. Dupont De Nemours & Co., 729 A.2d 832, 837
(Del.1999); Texas Instruments v. Cyrix Corp., 1994 Del. LEXIS 31, 18-19
(Del. Ch.); Sequa Corp. v. Aetna Casualty & Surety Co., 1990 Del.
LEXIS 303 (Del.Super.). But see McDonald’s Corp. v. Bukele, 960
F.Supp. 1311, 1319 (U.S.Dist.1997) (“a view of the premises may be
necessary”); Miller v. Phillips Petroleum Co., 529 A.2d 263, 270 (Del.
Super. 1987) (“[t]o the extent it is necessary .. . it is more easily done by
the [foreign court]”); Moffitt v. Illinois Power Co., 248 Ill.App.3d 752,
761 (Ill_App.1993) (“if a view of the premises were necessary it would be
more convenient” to travel from the foreign court).
42a
None of these cases, however, involved complex factual
disputes related to injury done to real property; the need to
view the premises, in my opinion, is greater in the instant
case. Video is a substitute, but it is only that-a substitute. Pan
American will clearly suffer difficulties if forced to litigate
in Delaware because the finder of fact cannot view the
premises.””
Delaware’s Interest in the Litigation. Delaware’s interest in
a dispute regarding injury to land located in Argentina is
minimal, especially since the conduct alleged to have caused
that injury occurred in Argentina. A preliminary analysis of
the relevant choice of law principles indicates that Argentine
law will almost certainly govern this dispute.’ Although
** In Woodlands Cemetery Co. v. United States, 110 F.Supp. 704, 706
(E.D.Pa.1953), the court found that in a takings case “the jury were in a
much better position to properly evaluate the property after having seen it
with its own surroundings” and “in view of the great disparity in the
testimony of the two sets of experts as to the value of the land, that the
jury would have been in no position to properly evaluate the estimates of
the experts without personally viewing the land, its location and
surroundings. .. .”
*° Delaware has adopted the Restatement approach to resolving choice
of law issues. Oliver B. Cannon & Son, Inc. v. Dorr-Oliver, Inc., 394
A.2d 1160 (Del.1978). The Restatement establishes the broad principle
that rights and liabilities with respect to the particular issue are determined
by the local law of the State that, as to that issue, has “the most significant
relationship” to the occurrence and the parties. In this case, Argentina has
the most significant relationship to the dispute and the parties: the land is
located in Argentina, the relevant conduct occurred in Argentina, and two
parties are Argentine companies. See Restatement (Second) of Conflict of
Laws § 147. Plaintiffs’ contract claim is also governed by Argentine law.
The place of contracting, negotiation, and performance was Argentina.
The subject matter of the contract is located in Argentina. And again two
parties are Argentine companies. See Restatement (Second) of Conflict of
Laws § 188. The preceding concerns are amplified in this case since the
contract concerns interests in land located in Argentina. See Restatement
(Second) of Conflict of Laws § 189.
43a
Delaware courts “wrestle” with open questions of the law of
foreign countries on occasion,’' this case presents a unique
combination of circumstances that warrants a careful and
thorough examination of this factor.
The heart of this case involves a land use dispute arising
under the laws of Argentina. Delaware has a very limited
interest in this litigation, but Argentina’s interest in this
litigation is substantial. In fact, Pan American has argued that
Argentine courts have exclusive jurisdiction to resolve the
issues in this case because the resolution of this litigation will
implicate Argentina’s interests in the oil and gas that Pan
American was seeking to extract from FSB’s land.*? Pan
American filed a petition on March 5, 2003, in the Supreme
Court of Argentina, seeking a declaration that this dispute is
subject to the exclusive jurisdiction of Argentine courts. The
Argentine Attorney General issued an opinion concerning
Pan American’s petition, in which the Attorney General
opined that Argentine courts should have exclusive
jurisdiction over any dispute concerning Pan American’s
operations on FSB’s land under the concessionary rights
provided by Argentina to Pan American.*? Based on the
Attorney General’s opinion, the Supreme Court of Argentina
ordered service on all defendants, including the Nation of
Argentina and the Province of Salta. On July 11, 2003, the
Province of Salta entered an appearance in the Argentine
*' See Taylor v. LSI Logic Corp., 689 A.2d 1196, 1120 (Del.1997).
* As noted above, all oil and gas in Argentina is owned by the national
government and the right to extract oil and gas is granted to private parties
like Pan American. The right to extract the oil and gas is accompanied by
an easement to access any land under which the oil and gas is located. The
Nation of Argentina and the Province of Salta derive significant revenues
from Pan American’s extraction of oil and gas reserves. Aff. of Francisco
J. Romano, Ex. 2 (op. of Argentine Att’y Gen.); Aff. of Haracio A.
Grigera Naon, $j 47-53; Aff. of Edmundo F. Catalano, J 3-5.
°3 Aff. of Francisco J. Romano, Ex. 2.
44a
Supreme Court and asserted that the Argentine courts are the
proper forum for this dispute. On September 12, 2003, the
Nation of Argentina also entered its appearance, stated that it
had a direct interest in the outcome of the dispute, and
reiterated the Province of Salta’s assertion that the Argentine
courts are the only appropriate forum.
Argentina, as owner of all oil and gas resources in Argen-
tina, has a bona fide interest in any compensation paid to FSB
due to damage allegedly caused by Pan American’s opera-
tions pursuant to extraction rights granted to it by Argentina.
This interest is not speculative, and is evidenced by the
Nation of Argentina and Province of Salta’s submissions
before the Supreme Court of Argentina. A decision in this
action will likely implicate Argentina’s right to regulate
access to surface property that lies above government owned
oil and gas fields. Furthermore, a decision will implicate
Argentina’s economic interests because a decision adverse to
Pan American may reduce the revenues Argentina derives
from Pan American’s extraction activities. Because of the
significant interests of Argentine governmental entities, the
Argentine courts may have exclusive jurisdiction over this
dispute.** This exclusive jurisdiction may independently de-
prive this Court of its jurisdiction.*> Regardless, Argentina’s
significant interest in this litigation, and Delaware’s limited
interest in this litigation, counsels judicial discretion strongly
in favor of dismissal.*°
** Although the resolution of this issue is pending before the Argentine
Supreme Court, it appears that under Articles 116 and 117 of the Argen-
tine Constitution a dispute where the Nation of Argentina and a province
thereof are interested parties requires resolution in an Argentine court, not
a foreign country.
* See Taylor v. LSI Logic Corp., 715 A.2d 837 (Del.1998) (dismissing
complaint where foreign country recognized exclusive jurisdiction over
subject of dispute).
*© See IM2 Merchandising & Mfg., Inc. v. Tirex Corp., 2000 Del.
\
PA. Ge. Se ee OS eS ea
45a
Other Pending Litigation. As discussed, there is an action
similar to this litigation pending before the Argentine courts.
Both parties’ legal experts have testified that the Argentine
courts are fully capable of resolving disputes of this nature.
And the Argentine courts may actually have greater capacity
to resolve this dispute since they can exercise jurisdiction
over the governmental entities, the Nation of Argentina and
the Province of Salta, with an interest in the outcome of this
dispute.*’
Another Practical Problem. Before Pan American began
extensive oil and gas extraction, Pan American conducted
preliminary seismic surveying on FSB’s land. This pre-
liminary activity apparently caused some damage to FSB’s
land. Pan American paid FSB for damage caused by the
seismic surveying, and in June 2000, George Brooking,
attorney-in-fact for FSB, signed a Receipt for Indemnification
Payment that included an exclusive Argentine forum selec-
tion clause.** Pan American argues that the forum selection
LEXIS 156, *37 (Del. Ch.) (“The great weight given to a plaintiffs inter-
est in having novel Delaware law questions, decided in our own courts
under the Cyro-Maid test suggests that a defendant’s interest in having the
courts of the jurisdiction of the governing law decide important legal
issues Ought also be given some weight”) (footnotes omitted). In addition,
it is notable that although the complaint sounds in simple breach of
contract and negligence language, it is clear that resolution of this dispute
will require thorough consideration of Argentine hydrocarbon law and
policy, as well as a careful policing of the boundaries between Argentine
tort, contract, and real property law. “Modesty and consistency in ap-
proach suggest that the evaluation of these issues may best be accom-
plished by the courts in the jurisdiction of the governing law.” /d. at *39.
*’ This Court is limited in its exercise over foreign governments by the
Foreign Sovereign Immunities Act of 1976, 28 U.S.C. §§ 1330, 1332(a),
1391(f), and 1601-1611.
*® FSB signed a similar Receipt, which also contained an exclusive
Argentine forum selection clause, in August of 2000.
46a
clauses contained in the Receipts strip this Court of subject-
matter jurisdiction.”
Pan American, however, must establish that the claims
alleged in the complaint are governed by the forum selection
clauses contained in the Receipts. The Receipts were signed
as acknowledgement of monies paid by Pan American to FSB
for damage related to the conduct of seismic surveying. The
Receipts do not purport to cover Pan American’s more inten-
sive activities of establishing an oil well and constructing a
road to that oil well. Plaintiffs argue that those activities are
governed by different contracts that do no contain a forum
selection clause and that the claims in the Second Amended
Complaint only relate to damage from the drilling and road
constructing covered by those contracts.”
Pan American argues, however, that it would be impossible
in some circumstances to determine what damage was caused
by clearing land to conduct seismic activities, which would be
governed by the forum selection clauses, as opposed to
damage caused by building an oil well and connecting road.
In In re IBP, Inc. S’holders Litig., the Court of Chancery
assumed jurisdiction over a dispute that was partially
governed by a forum selection clause (specifying the Dela-
ware Court of Chancery) because otherwise no single
jurisdiction could hear all of the relevant claims.*' Similarly,
Pan American argues that this Court should decline juris-
diction because only the courts of Argentina can hear claims
for damages arising out of both the seismic surveying and oil
drilling/road clearing activities. Although I decline to dismiss
this action solely because of the forum selection clauses in the
°° This Court may dismiss an action where the parties have consented
to have their dispute resolved in another forum. Elf Atochem North Amer-
ica, Inc. v. Jaffari, 727 A.2d 286 (Del.1999).
*° See supra n. 2 and accompanying text.
*' 2001 WL 406292 (Del. Ch.).
47a
Receipts, I note that it will be necessary to delineate clearly
the line between the damage caused by the seismic activities
and the damage caused by oil and gas extraction during the
course of this litigation-a complicated task that could prove
unmanageable. Argentine courts would not face this same
definitional problem and could bear all issues surrounding
Pan American’s activities.”
Taking all of these various factors into consideration and
giving each the weight it deserves, I conclude that litigating
this dispute in Delaware would constitute an overwhelming
hardship te Pan American. Delaware has little or no interest
in resolving this dispute. Plaintiffs purchased real estate in
Argentina. They formed an Argentine entity to develop the
resources located in Argentina. They negotiated and executed
contracts in Argentina. The breach of these contracts, and the
alleged tortious conduct attendant thereto, all occurred in
Argentina. Argentine law will govern this dispute. Finally,
Argentine governmental authorities have expressed a direct
interest in this controversy. Litigating this matter in
Delaware, rather than in Argentina, defies common sense.
III. CONCLUSION
For the foregoing reasons, the plaintiffs’ claims are
dismissed based on a lack of subject matter jurisdiction.
Alternatively, plaintiffs’ claims are dismissed based on forum
non conveniens.
IT IS SO ORDERED.
ag Independently, FSB’s agreement to an exclusive Argentine forum
selection clause evidences a willingness to adjudicate some disputes relat-
ing to Pan American’s activities in Argentina. This further supports, in my
opinion, the appropriateness of Argentine courts as the forum for this dis-
pute. It also undercuts plaintiffs’ repeated efforts to disparage the Argen-
tine court system.
48a
APPENDIX C
TRADUCCION PUBLICA/CERTIFIED TRANSLATION ....
[Terms between square brackets are translator’s notes]............
[Pages are numbered, in handwriting, from 525 to 539. On
the reverse side of all pages there appear: a seal which reads:
“COPY”; a seal of the Federal Supreme Court and an illegible
signature and a seal which reads: “Alicia M. Carbajales de
Fassina—Deputy Clerk—Federal Supreme Court’}.................
TREASURY DEPARTMENT GENERAL ATTORNEY’S
I MMe ass snsniscsadAsianahictnsidaniinsediasnctadtandaldducadasnaeaemamaaniaaeal
THE FEDERAL GOVERNMENT ANSWERS SUMMONS
Fe Pe ee Tae Be ML 0 eiissdisscsncsccrrnctenrmsnebnennnns
TO the Homorete Supers Gti acc csccencssccicsacesssacscsscassanssatanes
Silvia Mabel PALACIOS, attorney-at-law (CPACF,
Volume 65, Folio 492), for and on behalf of the Federal
Government—Ministry of Economy, as evidenced herein
below, Maria Cecilia PINTOS PRAT, attorney-at-law
(CPACF, Volume 11, Folio 786) and Maria Ida A.
RICARDONE, attorney-at-law (CPACF, Volume 19, Folio
247), represented by attorney-of-record Dr. Horacio Daniel
ROSATTI, General Attorney for the Argentine Federal
Treasury Department, appointed by Decree No. 255/03
(Official Gazette 06-25-03), who intervenes pursuant to the
provisions of Act No. 12,954 § 6, Act No. 25,344 § 6 and
Decree No. 1116/00 § 15, establishing domicile ad litem in
the City of Buenos Aires, at 186 Balcarce, 3rd floor, in re
“Pan American Energy LLC, Argentine Branch v. Forestal
Santa Barbara S.R.L. et al—the Province of Salta and the
Federal Government having been summoned to appear as
third parties) in the matter of Declaratory Action”—File No.
P.204.2003—Record Xxxxix—, hereby appear before Your
Honor and respectfully state as fOllOWS: ............cccceeeseeeeeeeeeenees
49a
ae a
LEGAL CAPACITY
As evidenced by the enclosed certified copy of Resolution
S.L. y A. No. 9 of the Ministry of Economy dated January 13,
2003—which we hereby declare under oath to be a true copy
of the original Resolution in full force and effect—we are
attorneys-in-fact of the Federal Government with power to
intervene in any and all actions to which the said Ministry is a
party, wherefore we request Your Honor to enter record of
Our appearance in such capacity. ............ccccccsccssesscsscessessesceecees
a ioe
PURPOSE
We hereby answer the summons to appear as third party
petitioned by the plaintiff, Pan American Energy LLC
(hereinafter, “PAE”), issued by the court under the provisions
of the Federal Civil and Commercial Code of Procedures
§ 94, and notified under official letter dated May 29, 2003. ....
It is expressly represented that this answer will be limited
to stating the position of the Federal Government as to the
jurisdiction of the Supreme Court over matters related to the
concession, wherefore we will not answer as to any matter
outside the purpose of the declaratory action to determine
jurisdiction, or any document making reference to such other
matters, as they are alien to the purposes for which the
Federal Government has been summoned. Accordingly,
nothing in this answer should be construed as an acknowledg-
ment or rebuttal of any statement made in the complaint in
WOMMENOM BD GY SUCH TATIETS. ...........cecccsccesceccccssecsccsecccscsceccseces
In this context, and subject to the foregoing provisos, the
Federal Government intervenes on an autonomous basis and
requests Your Honor to rule that matters related to the hydro-
carbon concession granted by the Federal Government under
Contract No. 20,510 (as amended), of which Pan American
Energy LLC is a co-holder, are governed by special Argen-
50a
tine laws and that any dispute arising out of or in connection
therewith shall be submitted to the jurisdiction of the
PPAR TOUT COMI. iiccciicsnisissiccsiacesllsseacmcennaitiabtannciansansanias
—ITI—
BACKGROUND RELEVANT TO THIS CASE
Ds FEOOY cantsincistintinnsdminiannvicingpmaininaminniainats
The hydrocarbon fields located in the area known as
‘*‘Acambuco”, in the Province of Salta, were discovered in the
PRE: ac sticsnissienstniasenhedusiaeniioniedaeaiaaaaamaaaaaee oe
The fields have been mined for several decades, initially
and during many years by Standard Oil of New Jersey (now
“Exxon”) and subsequently by Yacimientos Petroliferos
PIECE . ccncesnsisinnticnncassnecnitanihiiniitokaesuonmaamouiad
In 1979, YPF and Bridas S.A.P.I. y C., Socma S.A. and
Inalruco S.A.P. entered into Contract No. 20,510, as approved
by Decree No. 3,121/79, under which YPF granted a
concession for hydrocarbon exploration, development and
SPOCAMTRION 1 ACRE BOI. ssscsccinccssnssscascoasesoncenonsssasennacnante
The concession lasted several years, with some changes in
the membership of the concession holder (Decree No.
EIR TIN EED: ssitnsiniehistianitsniaaaihaastaciabpldaamnn
2. The significance and standing of the fields and the
concession.
It is relevant to point out to this Court that the Acambuco
area is one of the major hydrocarbon—specially gas—
producing areas, in the Argentine Northwestern Basin. .......... ,
The gas supply necessary to meet the requirements of the
people and industries established in the region depend upon
CUO SPERM COT GAG III. sss cen enccsssssiasscctnsnssnciennincnnrutistonzonsiens
Sla
3. The participation of * an American Energy LLC..............
As a direct consequence of the enactment of Act 23,696
(sections 9, 10, 11 and 15) Decree No. 2,175/91 (Official
Gazette 10-25-91) was issued, which approved the memoran-
dum of agreement entered into between YPF and a group of
companies making up the Acambuco Joint Venture. Said
memorandum of agreement approved conversion of Contract
No. 20,510 for hydrocarbon production in the Acambuco
MIT, <csnssensesusiinennsicapinusinie ati siipielandsiuniocatuisiabiihdaapabiaatenbnapieinbindsensisidinusis
Subsequentiy, Pan American Energy LLC joined this
business group, upon prior approval by the enforcement
authority under Administrative Resolution of the Head
Minister No. 18/00 (Official Gazette 11-2-2000). oo...
4. The surface Owner (Forestal Santa Barbara: its going
on stage and filing of action in foreign jurisdiction). ...............
In 1998, Forestal Santa Barbara S.R.L. (hereinafter
“FSB”), purchased the surface lands, in Acambuco Area, in
which the hydrocarbon fields are located, ..........cccccccssseesseeeeees
As already noted and as may be easily inferred, the
property at issue had been for several decades, and was, at the
time it was purchased, subject to mining easements held by
the various mining companies referred to above. ................000.
In January 2003, FSB filed an action with the Delaware
(United States) courts against Pan American Energy LLC and
BP Argentina Exploration Company, as described in the
complaint, seeking relief under the rules and principles of
Equity in the amount of US$50,000,000. They have further
petitioned that permanent injunctions be issued ordering PAE
to repair and reinstate the soil, to withdraw toxic, unproduc-
tive or waste material, to restrain from unloading toxic or
flammable material, and to deliver to FSB, prior to com-
mencing construction work, all elements necessary to estab-
lish a detailed supervision and application program that will
52a
allow plaintiffs to ensure and enforce compliance with the
terms therool, ..........:0:sssissitessaiiielsllaeannaaeanGnne anasaamameuaiis
iit.
THE CLAIM, THE FACTS AND THE INTERVENTION
OF THE FEDERAL GOVERNMENT
DFO CURRIE osccacecssnissssacacani seen aes
PAE has filed a declaratory action (Federal Civil and
Commercial Code of Procedures § 322) seeking the Court to
declare that: a) based on the fact that the interests of the
Province of Salta and the Federal Government, as well as
constitutional guarantees, are at stake, the dispute between
PAE and the defendants in connection with the concession—
which is the subject matter of the action filed by the
defendants in USA—falls within the original jurisdiction of
the Court; b) subsidiarily, that Argentine Federal Courts have
sole and exclusive jurisdiction over that matter or c) again
subsidiarily, that Argentine ordinary judges have jurisdiction
over that matter, according to the internal rules for determina-
thom Of NEFERMICTORR, .......:cccnssicneeees nena
2. Position of the Federal Government with respect to the
facts and tht CMB. cna FELLA ARES
Subject to the provisos in Chapter II hereof and beyond any
considerations on the plaintiffs uncertainty regarding the
action pending in the State of Delaware, USA, this party is
convinced that the extent and modalities of the legal relation-
ship arising from the hydrocarbon concession is governed by
Act 17,319, the Mining Code, and other special regulations
enacted to that effect, and that, consequently, any dispute
arising out of or in connection with such maiters should be
settled by the Argentine federal Courts. ............:csscceeeseeeeeseeeeees
This party does not admit that the risk of losing gas supply
agreements or the potential loss or damagje claimed by the
53a
plaintiff in its brief and translated into damages constitute
grounds for suspending the Macueta Sur drilling operations....
In this regard, PAE claims that the “mere existence of the
Delaware action affects the drilling program” which the
company expected to implement in the Macueta Sur area, and
has led PAE to “suspend the works it is required to perform
under a concession granted by the Argentine government”
because “the mere service of the Complaint fled in Delaware
have produced the effects desired by the complainants:
namely, to force the concession holder to suspend the works it
is required to perform under the concession contract’. ............
PAE further claims that the foreign court’s potential ruling
ordering the suspension of gas supply involves the risk of
losing its gas supply agreements with third parties. ................
It should be noted that in connection with the foregoing,
the Argentine Hydrocarbon Act No. 17,319 § 66 provides, in
its pertinent part, that “Under no circumstance shall the
surface owner’s objection to occupation of its lands or
disagreement with the compensation amounts determined be
sufficient grounds to interrupt or prevent authorized works,
provided the concession holder satisfactorily guarantees
payment for potential damage”. ........ccccccccccsssssesscssessesseseescseeees
This legal provision entitles PAE to continue with the
hydrocarbon works and projects at issue. .........0..ccccccccseeeeeeeeeees
Therefore, this party cannot admit the loss or damage
claimed by the concession holder, much less if claimed as
grounds for non-performance of its legal obligations under
the concession contract, in particular the provisions of section
31 of the Hydrocarbon Act). ........csccsccscsscsscssssssssssscsssesscsssseseess
' Section 31, Act 17,319. Each production concession holder is under
an obligation to make, within reasonable terms, such investments as are
necessary to carry out the works required to develop the entire concession
4rea, in accordance with the most rational and efficient practices and the
54a
Finally, and pursuant to the requirement of the Code of
Procedures § 356, ss 1, we do not acknowledge, because it is
not known to our party, the documentary evidence submitted
by the plaintiff and identified as Exhibits 005 to and including
I: sesh tesichacicasanscotasins ca cae penta balabarbge dace punamnloahaelcataaidnieaahaniodies
3. Capacity in which the Federal Government was
summoned and its role in the Process. .......ccsssesseeceeeeeeseessnsnsneees
The Federal Government was summoned as third party to
intervene in these proceedings pursuant to the provisions of
Section 94 of the Code of Procedures. Such summons were
petitioned on the grounds that ceitain Federal Government’s
powers are at stake in this suit, namely: the Executive’s
police power over Argentine public utilities, the Executive’s
power under the Hydrocarbon Act to determine the compen-
sation payable to surface owners, and the concession holder’s
right to abide by the provisions of the concession contract. .....
In other words, because it is understood that this is a
common dispute, and the Court’s decision may affect the
ee I cis cccuasicninncandccmerncnsananacaueianenineneenins
Therefore, according to procedural laws and regulations,
this is a “mandatory or compulsory” intervention, in which,
upon appearing in the process, the third party may play the
role of a passive observer or assume other roles such as co-
plaintiff or co-defendant, or third party defendant or plaintiff,
or propose complaints or counterclaims, and, in turn, the
characteristics and quantity of proved reserves, ensuring the largest
hydro-carbon production that is consistent with appropriate and economic
field management and adherence to guidelines for an appropriate
MINIS OE PION sicdiscsicsientiihansdcndostndanatineansiniitibissesaninmsnesdsiaieaMetinaansmeiiaee
* See Palacio Lino Enrique, “Manual de Derecho Procesal Civil’,
Volume I, Buenos Aires, 1987, pages 334 et S€q..........ceseceeeeesecceeeseeeeeeeneees
5Sa
parties to the process may propose complaints, motions or
counterclaims against such third party? ...cccccccccccccssssesescssssseseoss
Thus, the possibility of the Federal Government interven-
ing in the capacity of a third party plaintiff (also known as
adhesive simple intervention) is excluded because this would
only apply if it were to intervene to support the plaintiff's
TE. .issusinpsiessinlataccideniaiieinsnenemnatial aa ere
On the basis of the foregoing premises, the Federal
Government is assumed to be a co-plaintiff to this dispute
(adhesive autonomous intervention or joinder) for, while in
certain respects it supports PAE’s rights, this brief asserts the
effectiveness and application of specific federal laws and
regulations to all aspects of the concession, in particular the
police power, but does not admit the damage claimed by PAE
and its alleged inability to perform the obligations legally
assumed under the concession Contract. .........cccccccsssscssescscecesees
Any permanent injunction might affect and even limit
the powers vested in the Federal Government’. This circum-
stance would allow us to assume the existence of a common
I siesce
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