FILED NEW YORK COUNTY CLERK 09/02/2016 0534 PM INDEX NO. 654716/2016 NYSCEF DOC. NO. 1 RECEIVED NYSCEF 09/02/2016 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x In the Matter of the Arbitration Between MEXVALO, S. DE R.L. DE C.V., Petitioner, against DESARROLLADORA FARALLON S. DE R.L. DE C.V., Respondent. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x Index No. /2016 PETITION TO CONFIRM FOREIGN ARBITRAL AWARD Petitioner Mexvalo, S. de R.L. de C.V. ( Mexvalo ), by and through its attorneys, Katten Muchin Rosenman LLP, as and for its Petition against Respondent Desarrolladora Farallon S. de R.L. de C.V. ( Farallon ), alleges as follows INTRODUCTION 1. Mexvalo brings this proceeding under CPLR 7510, the Inter-American Convention on International Commercial Arbitration (the Panama Convention ), Jan. 30, 1975, S. Treaty Doc. No. 97-12, O.A.S.T.S. No. 42, 14 I.L.M. 336, and Sections 9, 207 and 302 of the Federal Arbitration Act (9 U.S.C. 1, et seq.), confirming the Final Award of the Arbitral Tribunal in the arbitration proceedings between Mexvalo and Farallon, signed and issued on August 15, 2016 (the Award, attached hereto as Exhibit A) and directing that judgment be entered thereon in favor of Mexvalo and against Farallon in the total sum of $6,770.762.30, plus interest and the costs of this proceeding. 1 1 of 10
PARTIES 2. Petitioner Mexvalo is a limited liability partnership incorporated and existing under the laws of Mexico, with its registered offices at Antonio Dovali Jaime No. 70, Towers C and D, Floor 11, Colonia Santa Fe, Delegación Álvaro Obregón 01210, Mexico. 3. Respondent Farallon is a limited liability partnership incorporated and existing under the laws of Mexico, with its registered offices at Camino de la Plaza 145, Fraccionamiento El Pedregal, Cabo San Lucas, Baja California Sur, 23453, Mexico. JURISDICTION AND VENUE 4. This Court has subject matter jurisdiction under CPLR 7501, as the TGA s arbitration provision is a written agreement to submit any controversy thereafter arising or any existing controversy to arbitration that confers jurisdiction on the courts of the state to enforce it and to enter judgment on an award. 5. Alternatively, this Court has subject matter jurisdiction under 9 U.S.C. 203, incorporated by reference as to the Panama Convention, 9 U.S.C. 302, because, as an arbitration award rendered in an arbitration involving at least one foreign citizen, where the majority of the parties to the arbitration agreement are citizens of a State that has ratified or acceded to the Panama Convention and is a member State of the Organization of American States, the Award is subject to the Panama Convention. 9 U.S.C. 202, incorporated by reference as to the Panama Convention, 9 U.S.C. 302; 9 U.S.C. 305. 6. Farallon has commenced two litigations in this county (one in this Court and one in the U.S. District Court for the Southern District of New York) in which it has asserted claims relating to the development, ownership and operation of the Resort (as that term is defined below); has asserted claims in three litigations in this county, including two cases in this Court in which it has asserted claims against Mexvalo; and upon information and belief conducts business 2 2 of 10
in New York either directly or through its agents; and is therefore subject to personal jurisdiction under CPLR 302. 7. Venue is proper pursuant to CPLR 506 and/or CPLR 7502. FACTUAL ALLEGATIONS A. The CP Project Trust Governance Agreement ( TGA ) 8. Mexvalo and Farallon are the settlors and co-beneficiaries of Fideicomiso del Proyecto CP 00352 (the Trust ), a Mexican fideicomiso or land trust that was created to develop, own and operate a luxury resort in Cabo San Lucas, Mexico, previously known as the Capella Resort & Spa Pedregal de Cabo San Lucas and now known as The Resort at Pedregal (the Resort ). 9. On or about May 17, 2006 Farallon and Mexvalo, together with the developer of the Resort, entered into the CP Project Trust Governance Agreement (or TGA ) that, among other things, set forth the rights and obligations of the beneficiaries to one another and created a Technical Committee comprised of representatives of the beneficiaries and developer to manage the affairs of the Trust. Because of the confidential nature of certain provisions of the agreement, a redacted version of the TGA (containing pages 1-3, 27-28 and 46-49 of the main agreement form, exclusive of any exhibits thereto) is annexed hereto as Exhibit B. 10. The TGA contains an arbitration provision requiring that all disputes arising out of or in connection with the TGA be finally resolved under the Rules of Arbitration of the International Chamber of Commerce (the ICC ). This arbitration provision, set forth at Section 11.06 of the TGA, states as follows 11.06 Governing Law and Settle [sic] of Disputes. This Agreement shall be governed by the Laws of Mexico. All disputes arising out of or in connection with this Agreement shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce (the ICC ) in effect at the time of the 3 3 of 10
arbitration (the ICC Rules ), by one arbitrator (if agreed by the Parties) or by three arbitrators appointed one by each of the Trust Participants and the third one appointed by the two arbitrators appointed by the Trust Participants in accordance with the ICC Rules (the Arbitration Panel ). The seat of the arbitration shall be in Mexico City, Mexico, and it shall be conducted in English. The Arbitration Panel shall decide based on the substantive laws of Mexico, without regard to conflict of laws principles. B. Related Litigation 11. In April 2014 Cargill Soluciones Empresariales, S.A. de C.V., SOFOM, E.N.R. ( Cargill SOFOM ), as successor to the mortgage holder under a 2007 Construction Loan Agreement that financed the construction of the Resort, commenced an action against the manager of the Resort for various breaches of a Subordination, Non-Disturbance and Attornment Agreement ( SNDA ) executed by the manager as an inducement to the lender to make the construction loan for the Resort, Cargill Soluciones Empresariales, S.A. de C.V., SOFOM, E.N.R. v. WPHG Mexico Operating, L.L.C. (New York County Index No. 651242/2014) (the SNDA Action ). By Stipulation of Discontinuance that was So Ordered by the Court on April 26, 2016, the SNDA Action was dismissed with prejudice. As indicated in the Award, the SNDA Action was one of the specific matters for which damages were awarded against Farallon. Ex. A 211-213; 181. 12. In May 2014, Cargill SOFOM, in its capacity as successor to the mortgage holder, brought an action in this Court against Farallon and its principal Juan Diaz Rivera ( Diaz Rivera ) for breaches of their covenants under the loan agreement, including those of Farallon as an indemnitor and guarantor, Cargill Soluciones Empresariales, S.A. de C.V., SOFOM, ENR v. Desarrolladora Farallon, S. de. R.L. C.V. et al. (New York County Index No. 651607/2014) (the Guaranty Action ). Farallon and Diaz Rivera joined issue in May 2015, and on June 23, 2016 Farallon filed a third-party complaint against Mexvalo and the developer, seeking contribution 4 4 of 10
for any amounts Cargill SOFOM is awarded against Farallon. The Guaranty Action is pending before the Hon. Shirley Werner Kornreich, J.S.C. 13. On January 23, 2015, Farallon filed a Complaint in the U.S. District Court for the Southern District of New York against, inter alia, entities affiliated with Mexvalo in the action entitled Desarrolladora Farallon S. de R.L. de C.V. v. Cargill, Inc., et al. (S.D.N.Y. Case No. 115-cv-00532-SAS). By Opinion and Order dated December 3, 2015, Judge Shira A. Scheindlin granted the defendants motion to dismiss Farallon s amended complaint in that action. Desarrolladora Farallon S. de R.L. de C.V. v. Cargill, Inc., 2015 WL 7871040 (S.D.N.Y. Dec. 3, 2015). In a subsequent Opinion and Order dated April 29, 2016, the same district court denied Farallon s post-judgment motion to vacate its earlier decision based on evidence that Farallon claimed was newly discovered. Desarrolladora Farallon S. de R.L. de C.V. v. Cargill, Inc., 2016 WL 1732754 (S.D.N.Y. Apr. 29, 2016). Farallon has appealed these decisions to the U.S. Court of Appeals for the Second Circuit, which has scheduled oral argument for October 13, 2016. 14. On May 28, 2015, Farallon commenced an action against Mexvalo, among other defendants, in an action originally entitled Desarrolladora Farallon S. de R.L. de C.V. v. Mexvalo, S. de R.L. de C.V., et al., Index No. 651867/2015 (Kornreich, J.) (the Farallon State Action ). In that action, Farallon asserted various claims for lender liability and breach of fiduciary duty against the defendants. On February 2, 2016, the Court, ruling from the bench, granted the defendants motion to dismiss Farallon s First Amended Complaint and denied Farallon s motion for leave to further amend its complaint. On March 4, 2016, Farallon filed its Notice of Appeal with the Appellate Division, First Department, where the appeal has been fully briefed and submitted for the September 2016 Term. As discussed at oral argument and in 5 5 of 10
briefing, the Farallon State Action like Farallon s other conduct to impede the exercise of Cargill SOFOM s rights as lender is one of the categories of damages that Cargill SOFOM seeks to recover through the Guaranty Action. 15. Mexvalo brings this action in state court instead of the federal district court in hopes that it will eventually be assigned to Justice Kornreich, who has adjudicated two prior actions (i.e., the SNDA Action and the Farallon State Action) and has one pending action (i.e., the Guaranty Action) based on substantially the same parties and facts. This will serve the interests of judicial economy, as her considerable experience with the extensive and complex facts common to these matters will allow her to adjudicate this action more quickly and efficiently than a judge without such prior knowledge. Because the Award at issue is based the same loan guaranty that is the subject of the Guaranty Action that remains pending before Justice Kornreich, and in fact constitutes a portion of the damages owed by Farallon for breaching that loan guaranty, Justice Kornreich is also in the best position to insure that there is no double or inconsistent recoveries between the Award and the remaining Guaranty Action. C. The Arbitration 16. By Request for Arbitration dated April 22, 2015, Mexvalo initiated an ICC arbitration against Farallon, entitled Mexvalo, S. de R.L. de C.V. v. Desarrolladora Farallon S. de R.L. de C.V. (No. 21024/RD), for various breaches of the TGA (the ICC Arbitration ). Ex. A 40. 17. On June 4, 2015, Farallon submitted its Answering Statement and Counterclaims against Mexvalo in the ICC Arbitration, alleging that Mexvalo had breached the TGA. Id. 6 6 of 10
18. Pursuant to the procedure set forth in the TGA s arbitration provision, Mexvalo and Farallon each appointed an arbitrator, who together nominated a third arbitrator to complete the Arbitral Tribunal. Id. 3-4, 6. 19. The parties submitted their respective fact and expert reports, with accompanying exhibits, to the Arbitral Tribunal on January 22, 2016. Id. 47. 20. The hearing took place in New York, New York over nine days between March 7, 2016 and March 18, 2016. Ex. A 64. 21. Although the parties mutually agreed that the hearing would take place in New York, New York, the law of the ICC Arbitration was Mexican law, and, pursuant to Section 11.06 of the TGA, the legal place of the arbitration was Mexico City. Id. 36. 22. On August 15, 2016, the Arbitral Tribunal issued its Award, finding that Farallon had breached the terms of the TGA and therefore granting Mexvalo the total sum of $6,770.762.30, broken down as follows (a) the Arbitral Tribunal ruled that Farallon is liable to pay Mexvalo $6,114,810 for various costs incurred by Mexvalo in response to Farallon s willful misconduct, bad faith and breaches of the TGA (id. 193-96, 211, 217-18); (b) the Arbitral Tribunal ruled that Farallon is liable to pay Mexvalo $270,952.30, the amount of costs incurred by Mexvalo in the ICC Arbitration (i.e., lodging expenses, expert witness fees, hearing facility and transcription costs, and meals) (id. 287, 290, 292); and (c) the Arbitral Tribunal ruled that Farallon is liable to pay Mexvalo $385,000, representing Mexvalo s advance of one half of the Arbitral Tribunal s fees and administrative costs of $770,000 for the ICC Arbitration (id. 291-92). 7 7 of 10
23. In its Award, the Arbitral Tribunal denied all 19 counterclaims Farallon asserted against Mexvalo. Id. 219-84. The Arbitral Tribunal ruled that [b]ecause all of Farallon s counterclaims are denied, all of its requests for relief, including monetary and non-monetary relief, are also denied. Id. 285. 24. To date, Farallon has not paid Mexvalo any part of the $6,770.762.30 Award, nor has it responded to Mexvalo s request that it make payment without the need to bring enforcement proceedings. AS AND FOR A FIRST CAUSE OF ACTION (Confirmation Under CPLR 7510) 25. Mexvalo repeats and realleges the allegations set forth in paragraphs 1 through 24 as if fully set forth herein. 26. Pursuant to CPLR 7510, [t]he court shall confirm an award upon application of a party made within one year after its delivery to him, unless the award is vacated or modified upon a ground specified in section 7511. 27. None of the grounds specified in CPLR 7511 for any party to the arbitration to move to vacate or modify the Award exist. 28. Under CPLR 7510, Mexvalo is entitled to an Order confirming the Award. AS AND FOR A SECOND CAUSE OF ACTION (Confirmation Under the Panama Convention) 29. Mexvalo repeats and realleges the allegations set forth in paragraphs 1 through 28 as if fully set forth herein. 30. Under legislation enacted by Congress to implement the Panama Convention, any party to the arbitration may apply to any court having jurisdiction for an order confirming the award as against any other party to the arbitration. 9 U.S.C. 207, incorporated by 8 8 of 10
reference as to the Panama Convention, 9 U.S.C. 302. The Court shall confirm the award unless it finds one of the grounds for refusal or deferral of recognition or enforcement of the award specified in the said Convention. Id. 31. No grounds exist for this Court to refuse or defer recognition or enforcement of the Award under the Panama Convention. 32. If Mexvalo is unable for any reason to obtain an order confirming the Award under CPLR 7510, then Mexvalo is entitled in the alternative to an order under the Panama Convention confirming the Award. AS AND FOR A THIRD CAUSE OF ACTION (Confirmation Under the Federal Arbitration Act) 33. Mexvalo repeats and realleges the allegations set forth in paragraphs 1 through 32 as if fully set forth herein. 34. Section 9 of the Federal Arbitration Act, 9 U.S.C. 9, provides that any party to the arbitration may apply to the court for an order confirming the award and thereupon the court must grant such an order unless the award is vacated modified or corrected as prescribed in sections 10 and 11 of this title. 35. No party to the arbitration has moved to vacate, modify or correct the Award under Sections 9, 10 or 11 of the Federal Arbitration Act, 9 U.S.C. 9-11. 36. No grounds exist for any party to the arbitration to move to vacate, modify or correct the Award under Sections 9 10 or 11 of the Federal Arbitration Act, 9 U.S.C. 9-11. 37. If Mexvalo is unable for any reason to obtain an order confirming the Award under CPLR 7510 or the Panama Convention, then Mexvalo is entitled in the alternative to an order under the Federal Arbitration Act confirming the Award. 9 9 of 10
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