Opposition Brief — Pan American Energy, LLC v. Candlewood Timber Group, LLC

Supreme Coun. US

FILED

Se, JAN / - 2005

No. 04-778

| OFFICE OF THE CLEHK

IN THE

Supreme Court of the United States

PAN AMERICAN ENERGY, LLC.

Petitioner,

¥

CANDLEWOOD TIMBER Group, LLC

and Forestat SANTA BARBARA SRL.

Respondents.

On PETITION FOR A WRIT OF CERTIORARI TO THE

SUPREME Court OF DELAWARE

BRIEF IN OPPOSITION

JOEL FRiEDLANDER Hans SMI

BoUCHARD MARGULES Henry PAUL MONAGHAN*

& FRIEDLANDER, P.A. 435 West 116" Street

222 Delaware Avenue New York, New York 10027

Suite 1400 (212) 854-2644

Wilmington, Delaware 19801

302) 573-3500

Counsel for Respondents

* Counsel of Record

191949 ce

ae

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QUESTIONS PRESENTED

1. Does this Court posses jurisdiction when (a) the petition

fails to show that any federal question was raised in or passed

upon by the state courts; and (b) contrary to the mandate of

28 U.S.C. § 1257, there is no final judgment?

2. In an ordinary common law action seeking money

damages for breach of contract and tort by a Delaware

plaintiff against a Delaware defendant that stemmed from

injury to land and chattels located in a foreign country and

plaintiff's business in the United States, did the Delaware

Supreme Court err in not finding some state court subject

matter jurisdiction limitation simply because defendant’s

business operations are also subject to certain foreign

regulatory controls?

il

RULE 29.6 STATEMENT

Respondent Forestal Santa Barbara SRL is a wholly

owned subsidiary of Candlewood Timber Group, LLC. There

is no parent or other publicly held corporation that owns more

than 10% of Candlewood’s stock.

ill

TABLE OF CONTENTS

Page

Questions Presented ......................... i

Rule 29.6 Statement ......................... il

Meme Ge GOI... og ncn cc cc cccncccccccccene. lil

Table of Cited Authorities ..................... iV

Counterstatement of the Facts ................. l

Reasons for Denying the Petition............... 5

Point I. This Court Has No Jurisdiction ....... 6

A. The Federal Question Presented For Review

Was Not Presented Or Passed On Below. .. 6

B. There Is No Final Judgment.............. 8

Point II. The Claim Raised Is Meritless, And Is

Not Presented On The Record....... 10

A. The Issue Raised Is Meritless. ........... 10

B. The Question Presented Is Not Raised by the

RS A eh ae en 12

a ee ee 13

;

iv

TABLE OF CITED AUTHORITIES

Page

Cases:

Bankers Life & Casualty Co. v. Crenshaw, 486 U.S.

ek | PEPE T PPE TEE TTT Pr rer ery 8

Barclay’s Bank, PLC v. Franchise Tax Bd., 521 U.S.

PERC e Te T eT Teer Ore ye rte 11

Cardinale v. Louisiana, 394 U.S. 437 (1969) ..... 8

Cox v. Louisiana, 420 U.S. 469 (1975) .......... 9, 10

Cromwell v. Rendell, 10 Pet. 368 (1836) ......... g |

General Foods Corp. v. Cryo-Maid, Inc., 198 A.2d

ee SU. cad bawad Ciateacsee sbuesee 3

Gulf Oil v. Gilbert, 330 U.S. 501 (1947) ......... 3

Herb v. Pitcairn, 324 U.S. 117 (1945) ........... 13

Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487

SEER cos VA REED SANE E ER CO EES CO eben een 1]

Nike v. Kasky, 539 U.S. 654 (2003) ...........-. 9 |

Taylor v. LSI Logic Corp., 715 A.2d 937 (Del. 1988) |

Er eer eee ey ery eee ree ree 4

{

Van Cauwenberghe v. Biard, 486 U.S. 517 (1988) ... 10 |

Cited Authorities

Page

W.S. Kirkpatrick & Co. v. Environmental Factories

Corp. International 493 U.S. 400 (1990) ...... 1]

Webb v. Webb, 451 U.S. 493 (1981) ............. 8, 10

Statutes:

ae Waa 8 URST 65550055450 a kee 1, 9, 10

y LE eee BY | rrr rrr rere rrr re afr 10

Ae Uk © WOE: 86k es eke rr er er eee 11

Rule:

U.S. Sup. Ct. Rule 14.1(g)i) «2.2.26... 6.2020. 6, 8

Other Authority:

William H. Rehnquist, The Prominence of the

Delaware Court of Chancery in the State-Federal

Joint Venture of Providing Justice, 48 Bus. Law

bh : re ree he ey Sue aS a 12

wre woo

l

COUNTERSTATEMENT OF THE FACTS

Since the petition scarcely makes any contact with the

case actually presented to, or decided by, the court below, a

brief counterstatement of the relevant facts is necessary. We,

therefore, focus directly upon the decision of the Delaware

Supreme Court. (App. 1a-32a).

FACTS. The Delaware Supreme Court opinion begins with

a description of the controversy before it: a common law

contract and tort dispute against a Delaware business entity

resulting from injury caused by defendant’s drilling

operations. Together with its wholly owned subsidiary,

plaintiff Candlewood, also a Delaware business entity,

engages in the business of “sell[ing] wood products derived

from South American forests that are managed consistently

with international standards of sustainable forestry.”

Defendant (petitioner here) “engages in oil and gas extraction,

[and] is the -second largest hydrocarbon producer in

Argentina.” (App. 2a). Defendant holds “concessionary rights

[granted] by the Argentine Republic (which owns all the oil

and gas rights in Argentina) to extract oil and gas in [the

Argentinian Province of] Salta,” a concession that covers

plaintiff's land. (App. 2a). Defendant sought permission to

extract oil and gas from plaintiff's iand; agreements were

executed to that effect (App. 2a); and plaintiff alleges that

defendant’s drilling program caused “damages to trees, use

of earth, and interference with the plaintiff's sustainable

forestry business.” (App. 28a n.50).

On January 28, 2003, plaintiff (and its wholly owned

and controlled Argentinian subsidiary, app. 2a) filed suit in

the Delaware Court of Chancery seeking both monetary and

injunctive relief. Defendant’s first response was to file a

2

counter-suit in the Supreme Court of Argentina alleging that

jurisdiction over the -dispute was exclusively in the

Argentinian courts and that the simple existence “of the ;

Delaware action and the threat of restraining orders”

threatened vital Argentinian interests. Defendant “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.” (App. 3a).

Plaintiff thereupon filed a second amended complaint

“that dropped all requests for injunctive relief, including

relief that would require supervision of [defendant’s] conduct

on [plaintiff's] land in Argentina.” (App. 3a-4a). The new

complaint now simply alleged claims for money damages

based upon various common law causes of action in contract

and tort (App. 4a). On June 23, 2003, defendant filed a second

action in an Argentine provincial court seeking to condemn

plaintiff's land. (App. 4a) Argentina also filed a pleading in

the Argentine Supreme Court, claiming that the “permanent :

injunctions being sought [in Delaware] put the basic

institutions of the Nation [at] risk.” (App. 5a). As the

Delaware Supreme Court observed, this intervention was the

result of defendant’s “access to the highest levels of the

Argentine government to influence both this litigation and

~{defendant’s] second-filed action in Argentina.” (App. Sa

n.4). The government’s pleading showed that the government

was wholly unaware that plaintiff “was seeking only damages

based upon common law claims arising out of private

contracts,” or that plaintiff had previously so informed both

the Delaware Court of Chancery and the defendant.

(App. 5a). In fact, the pleading made no reference whatsoever

to the then existing second amended complaint in the

Delaware court.

3

HOLDINGS. The Delaware Chancery Court dismissed the

complaint on two state law bases: first, want of subject matter

jurisdiction under state law, because the second amended

complaint alleged no equitable causes of action; and second,

the Delaware law of forum non conveniens. On appeal,

petitioner presented no federal question of any kind to the

Delaware Supreme Court. The solitary federal citation in its

brief is a “‘see also” reference to Gulf Oil v. Gilbert, 330 U.S.

501 (1947). Nor did defendant even cite the Restatement of

Foreign Relations. In an opinion by Justice Jacobs, the

Delaware Supreme Court affirmed in part and reversed in

part:

* The Delaware Court of Chancery correctly held that

~ it lacked subject matter jurisdiction because no

equitable claims were presented. The case,

accordingly, should be transferred to the Delaware

Superior Court. Quite clearly, the allocation of

subject matter jurisdiction within the Delaware

judicial system presents no issue of federal

cognizance, and the petition does not suggest

otherwise.

¢ Turning to the issue of forum non conveniens, the

Delaware Supreme Court reversed, stating that

“its jurisprudence was clear and required proof of

‘overwhelming hardship’ from litigating a first-filed

case in Delaware.” (App. 16a). The court then

considered the six “Cryo-Maid” factors,’ which it

said the Court of Chancery had correctly identified,

but had misapplied. (App. 19a-25a). The petition, of

1. Referring to the factors set out General Foods Corp. v. Cryo-

Maid, Inc., 198 A.2d 681, 684 (Del. 1984) (Factors to be considered

in forum non conveniens analysis).

4

course, does not, and could not, challenge the

Delaware Supreme Court’s ruling on the application

of its own law. Rather, the petition’s entire focus

(pet. 14) is on a single point: the state court’s alleged

exclusion from its forum non conveniens analysis of

any claim that “Argentina has a far greater interest

in the controversy than does Delaware.” (App. 16a).

¢ The third holding of the Delaware Supreme Court is

one which (given its “exclusion” argument) petitioner

assiduously seeks to obscure. (App. 25a-32a). Noting

that “the real driver” of the Court of Chancery

opinion was “the possibility that the Argentine courts

have exclusive jurisdiction over the subject matter

of the Delaware action,” id. at 25a, the Delaware

Supreme Court, addressed that issue separately rather

than as one factor in its general forum non conveniens

analysis. (App. 25a). This, we emphasize, is the very

issue we are told over and over again by petitioner

that the Delaware Supreme Court ignored! Suffice it

at this point (see Point IIB, infra) to observe that the

Delaware Supreme Court held that defendant had not

established its claim of exclusive jurisdiction in the

Argentine courts, but if it had, the Delaware Supreme

Court would have given it the most careful respect

under its “Taylor” holding.2 Defendant not only did

not meet its affirmative burden in demonstrating that

Argentinian courts would have asserted exclusive

jurisdiction, but well-recognized authorities such as

2. The court (App. 30a-31a) referred to its decision in Taylor v.

LSI Logic Corp., 715 A.2d 937, 842 (Del. 1988), discussing the

Delaware courts’ receptivity, as a matter of Delaware substantive

law, to claims that foreign law localized the jurisdiction in foreign

tribunals.

5

Professor J.W. Moore’s treatise, and the declaration

by Professor Arthur von Mehren of Harvard Law

School, demonstrated that the common law contract

and tort claims asserted are transitory, not local, in

nature. (App. 29a). Accordingly, under standard

choice of law principles, these claims could be

asserted in any court with personal jurisdiction over

the litigants. And earlier in its opinion, the court

stressed that Delaware has “a significant .. . 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.” (App. 18a).

The Delaware Supreme Court decided no federal question

because no such issue was submitted to it for decision.

REASONS FOR DENYING THE PETITION

This petition should be denied for at least a half dozen,

independently dispositive, reasons. First, it seeks to persuade

the Court to hear a case for the purpose of applying an

asserted rule of federal foreign relations law that was never

raised in, let alone considered by, the courts below. Second,

there is no final judgment. Third, the petition seeks to

persuade the Court to apply an asserted federal rule of foreign

relations law that has never been considered, let alone

applied, by any other court in the United States. Fourth, the

petition is based on the factually incorrect assertion that the

courts below did not give any consideration to the interests

of Argentina, when they plainly did do so. Fifth, it asserts

the applicability of an asserted rule of federal foreign relations

law without remotely specifying the content of the proposed

6

rule. And sixth, there is no federal rule of foreign relations

law that specifies what consideration a state court, in denying

a forum non conveniens motion, must give to the interests of

a foreign state that is neither an actual party, nor an

indispensable party, to the action.

POINT I. THIS COURT HAS NO JURISDICTION

A. The Federal Question Presented For Review Was Not

Presented Or Passed On Below.

Petitioner’s Question Presented does not identify any

federal question with anything approaching clarity.* See Point

IIA, infra. In the section entitled Provisions of Federal Law

Involved (pet. 1) we are told that “[t]his case involves

principles of the federal common law of foreign relations.”

What we are not told, however, is where petitioner presented

any issue of federal law for adjudication by the state courts,

of where they passed upon such issues.

This Court’s Rule 14.1(g)(i) requires that a petition for

a writ of certiorari must set out with specificity when, how,

and where the federal question sought to be reviewed was

raised in the state court.* The petition makes no effort — none

3. “Whether a state court may wholly disregard foreign sovereign

interests in deciding whether to exercise jurisdiction over a foreign

dispute.”

4. Sup. Ct. Rule 14.1(g)(i) provides:

If review of a state-court judgment is sought,

specification of the stage in the proceedings both in the

court of first instance and in the appellate courts, when the

federal questions sought to be reviewed were raised; the

(Cont'd)

7

whatsoever — to comply with this rule. The petition does not

specify when, where, or in what manner, defendant raised in

the state proceedings the federal question sought to be

reviewed. The issues raised in the Court of Chancery

proceeding and on appeal before the Delaware Supreme

Court were all framed solely in terms of Delaware law.

The Delaware courts were never told that they were required

to apply federal law. For that reason, neither the Court of

Chancery nor the Delaware Supreme Court opinions make

any reference to a federal common law of foreign relations.

Here, we note, defendant has failed to explicitly raise below

not some federal question which could be claimed to be

obvious on the face of the complaint, or elsewhere in the

record, but a federal common law outside the established

doctrine of state action, as to the scope of which this Court

has expressed serious reservations (see p. 11 n.6), as to which

defendant cites no state case in which there is even a reference

to the doctrine, and as to which the Delaware courts were

not alerted by any Argentine governmental expressions of

interest because these were all predicated upon an earlier,

and quite different, version of the Delaware complaint.

(Cont'd)

method or manner of raising them and the way in which

they were passed on by those courts; and pertinent

quotations of specific portions of the record or summary

thereof, with specific references to the places in the record

where the matter appears (e.g., court opinion, ruling on

exception, portion of court’s charge and exception thereto,

assignment of error), so as to show that the federal question

was timely and properly raised and that this Court has

jurisdiction to review the judgment on the writ of certiorari.

When the portions of the record relied on under this

subparagraph are voluminous, they shall be included in the

appendix referred to in subparagraph 1(i).

8

The jurisdictional nature of petitioner’s failure to present

its federal claims to the state court needs no extended

elaboration. “It was very early established that the Court will

not decide federal constitutional issues raised here for the

first time. In Cromwell v. Rendell, 10 Pet. 368 (1836), Justice

Story reviewed the earlier cases ... and came to the

conclusion that the Judiciary Act of 1789, c. 20, 25, vested

this Court with no jurisdiction unless a federal question was

raised and decided below ... This Court has consistently

refused to decide federal constitutional issues raised here for

the first time on a review of state court decisions both before

the Cromwell opinion ... and since .. .” Cardinale v.

Louisiana, 394 U.S. 437, 438 (1969). See also 28 U.S.C.

§ 1257, which requires that the federal question have been

“drawn in question” or “specially set up and claimed.”

See also, for example, Webb v. Webb, 451 U.S. 493, 498-99

(1981) (stressing the importance of the requirement that

federal claims be presented to the state courts).°

Petitioner’s failure to make any effort to comply with

Rule 14.1(g)(i1) speaks volumes: To repeat, the Delaware

courts were never told that they must apply federal law.

B. There Is No Final Judgment.

Ever since the Judiciary Act of 1789, Supreme Court

review of state courts has been limited to “final judgments

or decrees” in order to minimize unwarranted intrusions upon

5. “Oblique” references to federal law will not do. “The vague

appeal to constitutional principles does not preserve appellant’s

[constitutional] claims.” Bankers Life & Casualty Co. v. Crenshaw,

486 U.S. 71, 77 (1988). “[A]t a minimum there should be no doubt

from the record” where the federal claim was raised. Webb v. Webb,

451 U.S. 493, 501 (1981).

TE PDA ttt TRETI EN ME MGI SORA Halt EE at no

9

state sovereignty. 1 Stat. 73, 85 (“final judgment or decree.”)

That restriction is carried forward in 28 U.S.C. § 1257.

(“Final judgments or decrees.”) Seeking to avoid the

consequences of this obvious bar to jurisdiction, petitioner

(pet. 11-12) invokes the standard refuge of litigants: the

fourth exception described in Cox v. Louisiana, 420 U.S.

469, 482-83 (1975).

Petitioner argues that the judgment falls “squarely”

within the fourth Cox exception, but in fact it clearly fails to

meet several of its requirements. First, Cox requires that the

“federal issue has been finally decided in the state court,”

id. at 482, but here, as discussed above, it was neither raised

nor decided. Second, and importantly, Cox requires that

“reversal of the state court on the federal issue would be

preclusive of any further litigation on the relevant causes of

action,” rather than merely affecting the structure of future

proceedings. (/d. at 482-83). That condition cannot be

satisfied here. Were this Court to fashion a new federal rule

of forum non conveniens that states must follow, the rule

could “take a number of [other] paths” that would not

“preclude further proceedings in the state courts.” Nike v.

Kasky, 539 U.S. 654, 660 (2003). (Stevens, J. concurring).

Most likely, for example, the Court would simply remand

the matter to the Delaware Supreme Court for further

proceedings in accordance with the new federal rule. And

surely, continuance of the Delaware action can hardly

“seriously erode foreign policy.” 420 U.S. at 483 Defendant,

it shall be noted, is not the government of Argentina. And

because this is a suit for money damages, no Delaware court

will order anyone in Argentina to do anything or supervise

activities performed there.

10

The final judgment rule serves important federalism

concerns. Webb v. Webb, supra, 451 U.S. at 499. It is not to be

undercut by loose construction. In Van Cauwenberghe v. Biard,

486 U.S. 517 (1988), this Court construed the collateral order

doctrine with respect to 28 U.S.C. § 1291, which governs appeals

from “final decisions” of the district courts. It held that a denial

of a plea of forum non conveniens was not appealable. Petitioner

seeks to distinguish this quite dispositive holding in a footnote

(pet. 12 n.1) with the unexplained assertion that § 1257 finality

is not limited by the collateral order doctrine. This gets matters

backwards. The tradition has been to cite precedents from the

two statutes interchangeably, see Cox, 420 U.S. at 478 n.7;

moreover, any difference between the two statutes would cut in

favor of a stricter approach to the finality requirement in cases

under § 1257. See Cox, 420 U.S. at 502-03 (Rehnquist, C_J.,

dissenting).

POINT II. THE CLAIM RAISED IS MERITLESS, AND

IS NOT PRESENTED ON THE RECORD

Petitioner’s Question Presented is, “Whether a state may

wholly disregard foreign sovereign interests in deciding whether

to exercise jurisdiction over a foreign dispute.” (Pet. i) This we

are told “involves principles of the federal common law of

foreign relations (Pet. 1), on which (in a newly minted argument)

there is now a “mature division in the lower courts.” (Pet. 19).

A. The Issue Raised Is Meritless. The petition presents, not

a question, but an invitation for a law review essay. Petitioner

invites this Court to tell state courts they “must consider” and

give “proper deference” to foreign relations issues while

exercising forum non conveniens discretion, but is entirely silent

on the content of the federal rule to be administered. (Pet. 13)

What are the relevant variables? How much “consideration”

11

must be given to foreign sovereign interests: a little? a lot? Is a

state court’s statement that it had considered those interests

sufficient? Is the suggestion that “the federal common law of

foreign relations” somehow federalizes choice of law rules

thereby overriding, in whole or part, the Rules of Decision Act,

28 U.S.C. § 1652, as applied in Klaxon Co. v. Stentor Elec.

Mfg. Co., 313 U.S. 487 (1941)?° How does an ordinary

commercial dispute involving a claim for money damages

jeopardize United States foreign affairs interests? And how does

any federal common law governing forum non conveniens affect

subject matter jurisdiction rather than choice of law?

Petitioner’s effort to bar Delaware jurisdiction here is

breathtaking. It wholly ignores the vital interests that Delaware

has in providing fair and efficient forums to decide claims against

Delaware business entities. Delaware is the state of incorporation

for many major United States corporations, and also for many

companies operating principally abroad, including defendant.

Companies locate in Delaware to take advantage of Delaware’s

corporate law reputation, including Delaware courts’ reputation

for fairness and efficiency in adjudicating commercial disputes.

Maintaining Delaware’s unparalleled corporate law status is

among the state’s vital interests. Firms conducting business in

foreign places, such as respondents — a Delaware business entity,

and its wholly-owned subsidiary — transact business with other

Delaware companies on conditions and with a flexibility they

6. Any displacement of state law by way of a judge made federal

common law of foreign relations is exceedingly rare. See Barclay’s

Bank, PLC v. Franchise Tax Bd., 521 U.S. 298, 327-28 (1983)

and W.S. Kirkpatrick & Co. v. Environmental Factories Corp.

International 493 U.S. 400 (1990), neither of which is even

mentioned by petitioner, let alone discussed, but both of which

rejected displacement claims based upon claims that the state law

interfered with foreign affairs.

12

might otherwise decline to risk, because they know that, if they

believe themselves injured, they can sue in Delaware’s courts

and get an impartial hearing. This readiness to hear disputes

redounds to the benefit of all Delaware corporations, and it

increases the state’s attractiveness as a provider of corporation

related services. Delaware is surely allowed to believe this, and

its Supreme Court announced Delaware’s “significant interest

[in making] available to litigants a neutral forum to adjudicate

commercial disputes against Delaware entities” in this very case.

(App. 18a) See William H. Rehnquist, The Prominence of the

Delaware Court of Chancery in the State-Federal Joint Venture

of Providing Justice, 48 Bus. Law 351 (1992).

B. The Question Presented Is Not Raised by the Record.

We see no need to further multiply the difficulties inherent in

petitioner’s ill-conceived Question Presented. Nor need we

explore here the allegedly “mature” conflict now pending in

the lower courts, because it is not remotely implicated by this

record. The Delaware Supreme Court did not “wholly disregard

... foreign sovereign interests.” (Pet. 3) Far from it. The court

gave elaborate consideration to those interests. (App. 25a-32a).

The Delaware Supreme Court carefully analyzed the works

of recognized treatise writers and the expert testimony before

it, including that of Professor von Mehren and several

Argentinian authorities. On that basis it decided that

(a) Delaware courts could apply Argentina law, if necessary;

(b) neither Argentina nor any instrumentality thereof was a

necessary party, or otherwise bound by a Delaware judgment

for money damages; (c) Argentina’s law does not vest exclusive

jurisdiction over this suit in Argentine courts, and, in any event,

a simple contract and tort suit for damage to property could not

be so “‘localized;” and (d) the declarations of Argentine interests

that defendant procured and itself communicated to the court

13

showed, on their face, that the declarants did not understand

the current posture of this lawsuit. (App. 25a-32a). What

approach could be more sensitive to foreign sovereign interests?

The petition does not challenge any of these subsidiary

holdings, ones that constitute the foundation for the Delaware

court’s decision. Nor could it because these are not reviewable

federal questions. Petitioner received from the state court the

very review it seeks here. This Court is asked to fashion a new

limit on state power, and then say to the Delaware Supreme

Court that it must do by one name, what it has already done by

another. This bizarre contention ignores that the Court’s

jurisdiction exists “to correct wrong judgments, not to revise

opinions.” Herb v. Pitcairn, 324 U.S. 117, 126 (1945).

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted,

JOEL FRIEDLANDER Hans SMIT

BouUCHARD MARGULES HENRY PAuL MONAGHAN*

& FRIEDLANDER, P.A. 435 West 116" Street

222 Delaware Avenue New York, New York 10027

Suite 1400 (212) 854-2644

Wilmington, Delaware 19801

302) 573-3500

‘ Counsel for Respondents

* Counsel of Record