August 8, 2006. Judgment vacated; petition for rehearing granted September 28, 2006.
Appeal from the United States District Court for the District of Delaware (D.C. Civ. No. 95-cv-00410 ) District Judge: Honorable Sue L. Robinson.
The opinion of the court was delivered by: Weis, Circuit Judge.
Argued September 29, 2005
Before: RENDELL, FUENTES and WEIS, Circuit Judges.
The Convention on the Recognition and Enforcement of Foreign Arbitral Awards of June 10, 1958 imposes rigid restrictions on confirmation of awards issued by an arbitral entity in a signatory country. In the case before us, the District Court appropriately issued a confirmation judgment. However, some variances in the specific directions of execution on the judgment differ from those in the Award and will be modified to conform more closely to its text and to the circumstances that presently exist.
The Stephen and Mary Birch Foundation, Inc. is a Delaware not-for-profit corporation ("Birch"). In 1990, it entered into an agreement to buy "Luna Luna," an open-air exhibit composed of artwork created by approximately thirty renowned artists. One of the plaintiffs, Andre Heller, organized the exhibition.
The original sellers of Luna Luna were Andre Heller, Stefan Seigner and Heller Werkstatt GesmbH, an Austrian limited corporation. After the sale agreement was executed, Admart AG, a Swiss corporation, replaced Werkstatt, although it remained liable for completing the contract. We will refer to Andre Heller, Stefan Seigner, Heller Werkstatt GesmbH and Admart AG collectively as "Admart."
The sale agreement, executed on June 28, 1990, stated that the aggregate price was $6 million including a fee for the United States license rights for the various works of art. Birch paid $3 million, leaving due $2 million after delivery of Luna Luna to San Diego, California and $1 million after "termination of the on-site construction" and set-up, but no later than March 31 1992.
The agreement, governed by Swiss law, provided for arbitration of any disputes in Zurich. Admart agreed to provide evidence of the authenticity of the art and to indemnify Birch "from all claims from the artists, prior owners and lessees." Admart further promised to "deliver Luna [Luna] in materially and legally good standing with clear title." The agreement gave Birch the right to "examine the basic contracts" between Admart and the artists.
Andre Heller and Stefan Seigner provided personal guarantees for $500,000 "in case [Admart was] not in a position to fulfill the agreement." In the event of a dispute over the use of Luna Luna, Admart could replace any "single object by another one of similar artistic level and standard, within a reasonable length of time."
On July 26, 1990, the parties entered into an Addendum to the agreement that included confirmation that each of the artists had conveyed ownership and use of the original artwork to Admart as well as the right to transfer the artwork to third-parties. The amendment warranted that Admart's agreements with the artists would not restrict Birch's ownership of Luna Luna or its use within the United States.
Contending that it had not received sufficient documentary evidence of Admart's clear title to Luna Luna, Birch sent a notice of recission on October 2, 1991. Admart denied any breach of contract and the parties commenced arbitration in Zurich.
The Swiss arbitration panel issued its Final Arbitral Award in 1994 (the "Award"). The panel concluded that Birch's recission was invalid because Admart had no obligation to provide "clear title" until the date of delivery of Luna Luna, and because Birch was aware that Admart's ownership of the works of art was limited in various respects such that demand for "clear title" was never intended by the parties.
Birch contended that it could not display and operate Luna Luna in the United States without exposing itself to litigation with the artists. In response, the arbitrators indicated that they were persuaded by Admart's success in obtaining twenty seven "supplementary declarations" from the artists which, according to the panel, "specifically referr[ed] to the transfer of Luna Luna to [Birch] and specif[ied] that Luna Luna should have all rights of use of the copyrights and/or 'droit moral' for the artists [sic] work in the USA . . . ." Further, the arbitration panel emphasized that the sales agreement contained an indemnity provision as well as a statement that, in the event there was a problem with one of the artist agreements, Admart would substitute a similar piece of art.
The Award directed Birch to pay Admart the outstanding balance of $3 million -- $2 million within thirty days of the date of the Award on simultaneous exchange of the artwork and an additional $1 million after Luna Luna had been set up, but no later than eight months following the date of the Award. A setoff against the $1 million payment was "allowable only for [sic] amount for which on the due date a claim by [Birch] is pending in another arbitration." Birch was also directed to pay interest and storage fees.
As an alternative, the Award "authorized" Admart to deposit the property with a third-party storage company in Vienna after thirty-five days from the date of the Award. Upon this action, the $2 million would become due and payable.
The parties engaged in some unsuccessful efforts to comply with the Award. Then, Birch appealed to the Swiss Federal Supreme Court complaining, among other grounds, about the arbitrators' refusal to allow inspection of the goods before transfer. The Swiss court affirmed the Award on February 16, 1996, observing, inter alia, that the $1 million holdback was intended to adjust any claim for damage to the goods. The court did not rule on enforcement of the Award per se.
In June 1995, while the Swiss appeal was pending, Admart filed suit in the United States District Court for the District of Delaware asking that the Award be confirmed under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of June 10, 1958. 21 U.S.T. 2517, T.I.A.S. No. 6997; 9 U.S.C. § 201 et seq. The District Court stayed the confirmation proceedings pending the Swiss court's decision.
In 1999, Birch representatives attempted to examine the art in Vienna, but Admart allegedly denied them access. Birch then filed a petition to enforce the Award in the Austrian courts. That petition was dismissed in May 2002, apparently on the ground that, as the loser in the arbitration, Birch lacked standing to seek enforcement of the Award.
While the Austrian case was pending, Birch filed a request for a second arbitration in Switzerland, claiming damages for Admart's failure to comply with the Award. On March 21, 2005, the panel for the second arbitration decided it had jurisdiction over several of Birch's claims for damages to the art and loss of profits for the period of time since the Award was delivered in 1994. That panel has not yet ruled on the merits of those claims.
The District Court lifted its stay of the confirmation proceedings in 2003. When the proceedings resumed, Birch filed a request for production of the art based on evidence suggesting that several pieces had been repaired or improperly stored. The District Court denied the motion because the Award did not include such relief.
On January 29, 2004, the District Court required Birch to confirm that the monies required for satisfaction of the Award had been deposited in an interest-bearing account for the benefit of Admart. In turn, Admart was to submit to the District Court a description of the condition and location of the artwork. In its responsive affidavit, Admart explained that "a few" pieces of art needed minor restoration and four pieces had been destroyed by fire or had fallen apart. In addition, Admart noted that the shipping license for Luna Luna had expired so the containers holding the art could no longer be used. Birch submitted the affidavit of Thierry F. Ador, its attorney. He averred that "several years" earlier, Birch transferred funds "to [his control] so that the funds could be used to pay Admart AG to resolve [Birch's] dispute with Admart." Mr. Ador confirmed that the funds had been placed in "interest bearing bank accounts now holding in excess of $5,600,000 (USD) . . . ."
On June 8, 2004 the District Court confirmed the Award and issued the following order:
"(1) On or before July 8, 2004, [Birch] shall pay the total of $5,562,818.19*fn1 to [Admart], plus whatever interest said monies have earned since their deposition with Theirry F. Ador [Birch's attorney in Switzerland].*fn2 The court declines to ...