PAUL G. GARDEPHE, District Judge:
On September 25, 2009, Plaintiffs Dennis Rogers and Kevin Burlew initiated the above actions against Petróleo Brasileiro, S.A. ("Petrobrás"), alleging that Petrobrás committed breach of contract by failing to convert certain Petrobrás bearer bonds owned by Plaintiffs into preferred stock. (Docket No. 1)
For purposes of deciding Defendant's motions to dismiss, the Court assumes that the following factual allegations in the complaints
Defendant Petrobrás is a Brazilian, government-owned oil company created pursuant to Brazilian Law No. 2,004 on
Petrobrás' Series 1 bearer bonds, issued on May 31, 1956, read as follows (in translation):
The following are conditions of this issuance:
(Petrobrás Ex. 1 (Series 1 bond)) The other Series bonds are identical, except that the Series 3 bonds were issued on November 30, 1957, and had a redemption period from January 1, 1960 to December 31, 1979 (Petrobrás Ex. 2 (Series 3 bond), and the Series 4 bonds were issued on February 17, 1959, and had a redemption period from January 1, 1961 to December 31, 1980.
On September 25, 2009, Plaintiffs filed separate actions in this Court claiming breach of contract based on Petrobrás' refusal to convert the bonds into preferred shares. (Docket No. 1) Defendant filed its motions to dismiss on January 6, 2010.
Defendant moves to dismiss pursuant to Fed. R. Civ. P. 12(b)(1) for lack of subject matter jurisdiction, and under Fed. R. Civ. P. 12(b)(6) for failure to state a claim upon which relief can be granted. A claim is "properly dismissed for lack of subject matter jurisdiction under Rule 12(b)(1) when the district court lacks the statutory or constitutional power to adjudicate it." Makarova v. United States, 201 F.3d 110, 113 (2d Cir.2000). "When jurisdiction is challenged, the plaintiff `bears the burden of showing by a preponderance of the evidence that subject matter jurisdiction exists.'" Arar v. Ashcroft, 532 F.3d 157, 168 (2d Cir.2008) (quoting APWU v. Potter, 343 F.3d 619, 623 (2d Cir.2003)). In deciding a motion to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1), courts may consider evidence outside the pleadings. See Makarova, 201 F.3d at 113; City of New York v. FDIC, 40 F.Supp.2d 153, 160 (S.D.N.Y. 1999) (citing Kamen v. AT & T Co., 791 F.2d 1006, 1011 (2d Cir.1986)).
A Rule 12(b)(6) motion, in contrast, challenges the legal sufficiency of the pleaded claims. "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to `state a claim for relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. ___, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). To meet this standard, a complaint's factual allegations must permit the Court, "draw[ing] on its judicial experience and common sense," "to infer more than the mere possibility of misconduct." Id. at 1950. "In considering a motion to dismiss . . . the court is to accept as true all facts alleged in the complaint," Kassner v. 2nd Ave. Delicatessen Inc., 496 F.3d 229, 237 (2d Cir.2007) (citing Dougherty v. Town of N. Hempstead Bd. of Zoning Appeals, 282 F.3d 83, 87 (2d Cir.2002)), and must "draw all reasonable inferences in favor of the plaintiff." Id. (citing Fernandez v. Chertoff, 471 F.3d 45, 51 (2d Cir.2006)). For purposes of a motion to dismiss, the "complaint is deemed to include any written instrument attached to it as an exhibit or any statements or documents incorporated in it by reference," and the court may consider any document "which is integral to the complaint." Int'l Audiotext Network, Inc. v. Am. Tel. and Telegraph Co., 62 F.3d 69, 72 (2d Cir.1995).
In resolving Defendant's motions to dismiss for forum non conveniens, this
The Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. §§ 1602, et seq., is "the sole basis for obtaining jurisdiction over a foreign state" in United States courts. Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 439, 109 S.Ct. 683, 102 L.Ed.2d 818 (1989). The FSIA provides that a "foreign state shall be immune from the jurisdiction of the courts of the United States and of the States except as provided in sections 1605 to 1607 of this chapter." 28 U.S.C. § 1604.
Under the FSIA, "foreign state" includes "an agency or instrumentality of a foreign state," defined as:
28 U.S.C. § 1603(a)-(b).
Petrobrás argues that because Brazil owns a majority of its common or voting shares, it is an organ of the Brazilian government and immune from suit under the FSIA. (Def. Br. 6-11). Plaintiffs argue that Petrobrás is not entitled to FSIA immunity, however, because Brazil does not own a majority of its shares when all classes of stock are considered. At the very least, Plaintiffs argue, they should be permitted discovery as to whether Petrobrás is an organ of Brazil. (Pltf. Br. 8-9)
Defendant's foreign state status merits little discussion. Case law makes clear that Petrobrás is considered immune under the FSIA. See U.S. Fidelity & Guar. Co. v. Braspetro Oil Servs., Co., 199 F.3d 94, 98 (2d Cir.1999) (per curiam ) (noting that "acts of Petrobras" were "[a]cts of the state" but upholding the exercise of subject matter jurisdiction over Petrobrás under the FSIA's commercial activity exception); Strata Heights Int'l Corp. v. Petroleo Brasileiro, S.A., 67 Fed.Appx. 247, 2003 WL 21145663, at *4 (5th Cir.2003) ("The district court properly applied the third clause of the commercial activity of the FSIA . . . to determine that Petrobras was not entitled to foreign sovereign immunity."); Atwood Turnkey Drilling, Inc. v. Petroleo Brasileiro, 875 F.2d 1174, 1176 (5th Cir.1989) ("Petrobras is entitled to sovereign immunity under the FSIA").
Because Petrobrás falls under the definition of a "foreign state," this Court must consider whether any of the FSIA's exceptions to immunity apply. Petrobrás argues that Plaintiffs fail to, and cannot, demonstrate that any of the three "commercial activity" exceptions set forth in Section 1605 of the FSIA apply:
28 U.S.C. § 1605(a) (emphasis added).
Plaintiffs argue that all three exceptions apply. First, Plaintiffs contend that the alleged breach of contract occurred in New York—when Defendant's New York office rejected Plaintiffs' request to convert their bonds to preferred stock—and arose from the Defendant's commercial activities in Brazil.
Second, Plaintiffs contend that Petrobrás' breach "is based on a commercial activity carried on in the United States," as demonstrated by the existence of Petrobrás' New York office, its SEC filings, and Helms' statement that the New York office "regularly receive[s] inquiries about these bonds."
Lastly, Plaintiffs contend that even if the decision to refuse conversion took place in Brazil, this refusal caused "a direct effect felt by Rogers and Burlew in New York." (Pltf. Br. 4-7)
The threshold inquiry of whether Defendant was engaged in "commercial activity" sufficient to trigger the statutory exceptions to immunity is quickly resolved. "Whether an activity is commercial is determined with reference to its nature rather than its purpose," Braka v. Bancomer, S.A., 589 F.Supp. 1465, 1469 (S.D.N.Y. 1984), aff'd, 762 F.2d 222 (2d Cir.1985) (citing 28 U.S.C. § 1603(d)), and the "legislative history suggests that courts should `inquire whether the activity in question is one which private parties ordinarily perform or whether it is peculiarly within the realm of governments.'" Braka, 589 F.Supp. at 1469 (citing Jurisdiction of U.S. Courts in Suits Against Foreign States: Hearings on H.R. 11315 Before Subcomm. on Admin. Law and Gov't Relations of the House Comm. on the Judiciary, 94th Cong. 2d Sess. 53 (1976) (statement of Monroe Leigh, Legal Advisor, U.S. Dep't of State)); accord Texas Trading & Milling Corp. v. Fed. Republic of Nigeria, 647 F.2d 300, 309 (2d Cir.1981), cert. denied, 454 U.S. 1148, 102 S.Ct. 1012, 71 L.Ed.2d 301 (1982), overruled in part by, Frontera Res. of Azerbaijan v. State Oil Co. of Azerbaijan Republic, 582 F.3d 393 (2d Cir.2009).
Here, Petrobrás' issuance of bearer bonds is the underlying activity at issue. This activity "is one which private parties ordinarily perform" and is not "peculiarly within the realm of governments." Braka, 589 F.Supp. at 1469.
The FSIA also requires "a nexus [] between the commercial activity in the United States and the cause of action." Barkanic v. Gen. Admin. of Civil Aviation of the Peoples Republic of China, 822 F.2d 11, 13 (2d Cir.1987) (citations omitted); accord Shapiro, 930 F.2d at 1018 (the issue under the first clause of Section 1605(a)(2) is "whether the particular conduct giving rise to the claim is a part of commercial activity having substantial contact with the United States") (citations omitted); Colonial Bank v. Compagnie Generale Maritime et Financiere, 645 F.Supp. 1457, 1463 (S.D.N.Y.1986); Am. W. Airlines, Inc. v. GPA Grp., Ltd., 877 F.2d 793, 796 (9th Cir.1989) ("There must be a nexus between the defendant's commercial activity in the United States and the plaintiff's grievance."); H.R. Rep. No. 1487 at 17, reprinted in 1976 U.S.C.C.A.N. 6604, 6615 (referring to "commercial transaction or act having a `substantial contact' with the United States"). "[I]t is clear[, moreover,] that Congress intended a tighter nexus than the `minimum contacts' standard for due process.'" Shapiro, 930 F.2d at 1018 (citing Maritime Int'l Nominees Establishment v. Republic of Guinea, 693 F.2d 1094, 1109 (D.C.Cir.), cert. denied, 464 U.S. 815, 104 S.Ct. 71, 78 L.Ed.2d 84 (1983); Verlinden B.V. v. Cent. Bank of Nigeria, 488 F.Supp. 1284, 1296 (S.D.N.Y.1980), aff'd on other grounds, 647 F.2d 320 (2d Cir.1981), rev'd on other grounds, 461 U.S. 480, 103 S.Ct. 1962, 76 L.Ed.2d 81 (1983)); see also H.R.Rep. No. 1487 at 17, reprinted in 1976 U.S.C.C.A.N. at 6616 (statute was "intended to reflect a degree of contact beyond that occasioned simply by U.S. citizenship or U.S. residence of the plaintiff").
While Plaintiffs cite all three exceptions set forth in Section 1605(a)(2), they rely primarily on the exception concerning acts performed in the United States in connection with commercial activity elsewhere. "This [exception] `is generally understood to apply to non-commercial acts in the United States that relate to commercial acts abroad.'" Kensington Int'l, Ltd. v. Itoua, 505 F.3d 147, 157 (2d Cir.2007) (quoting Byrd v. Corporacion Forestal y Industrial de Olancho S.A., 182 F.3d 380, 390 (5th Cir.1999)). Plaintiffs argue that the "Complaints assert claims for breaches of contract that occurred in New York.... Thus, the breach by Petrobras of the contractual right of Rogers and Burlew to convert their Bonds into Petrobras preferred stock occurred in New York." (Pltf. Br. 4) Plaintiffs assert that they had no communication with Brazil, nor were they instructed to direct their conversion requests to any Brazilian office or representative. (Id.) Moreover, the record presently before this Court demonstrates that Defendant—from its New York office— communicated with U.S. clients and creditors about their rights under Petrobrás debt instruments. Although the bonds were issued in Brazil and are denominated in Brazilian currency, the Complaints are based on actions the Defendant took in New York: its communications to Plaintiffs that it would not honor the bonds' conversion provisions.
Defendant argues that Plaintiffs' claims are not based upon an "act" performed in the United States, because "the document reflecting Petrobras' policy of rejecting conversion claims bears the address of Petrobras' Rio headquarters ... and is in fact a translation of a Portuguese language document produced by that office." (Reply 5) While that may be, Defendant used its New York office and its New York representative to carry out and finalize the "act" of alleged breach at issue. Accordingly,
Even if the "act" exception did not apply, however—and no act related to Defendant's commercial activity in Brazil was "performed in" the United States, as Defendant argues—the "direct effect" exception provides a basis for jurisdiction. In evaluating the applicability of the "direct effects" exception to FSIA immunity, courts "consider[] whether th[e] lawsuit is (1) based ... upon an act outside the territory of the United States; (2) that was taken in connection with a commercial activity of [defendant] outside this country; and (3) that caused a direct effect in the United States." Republic of Argentina, 504 U.S. at 611, 112 S.Ct. 2160 (U.S.1992) (internal citation and quotations omitted).
For an act to have
Guirlando v. T.C. Ziraat Bankasi A.S., 602 F.3d 69, 75 (2d Cir.2010).
Here, even if the decision not to honor the bonds' conversion term was made in Brazil, Defendant communicated its rejection of Plaintiffs' conversion request through its New York representative. The immediate consequence of Defendant's rejection of Plaintiffs' conversion request was that Plaintiffs were denied the preferred shares to which they claim to be contractually entitled. It is well established that financial loss experienced through breach of contract may constitute a "direct effect." Morris v. People's Republic of China, 478 F.Supp.2d 561, 568 (S.D.N.Y.2007) (citing Texas Trading & Milling Corp., 647 F.2d at 312).
The "effect," however, must not only be "direct" but must have been felt in the United States. Mere citizenship or residency does not establish that direct effects were felt in the United States. Adler v. Federal Republic of Nigeria, 107 F.3d 720, 726-27 (9th Cir.1997) (citations omitted); accord Guirlando, 602 F.3d at 78-79; Zedan v. Kingdom of Saudi Arabia, 849 F.2d 1511, 1515 (D.C.Cir.1988). In such cases, "courts often look to the place where legally significant acts giving rise to the claim took place." Weltover v. Republic of Argentina (Weltover I), 941 F.2d 145, 152 (2d Cir.1991), aff'd, 504 U.S. 607, 112 S.Ct. 2160, 119 L.Ed.2d 394 (1992) (citing Zedan, 849 F.2d at 1515); accord Morris, 478 F.Supp.2d at 570 (holding that "the locus of contractual obligation" is essential to deciding whether a direct effect occurred in the United States) (citing Virtual Countries, Inc. v. Republic of South Africa, 300 F.3d 230, 240 (2d Cir.2002)).
Here, the plain language of the bonds neither limits nor indicates the place of exchange or redemption, but broadly reads: "Petrobrás entitles to the holder of this obligation the option for receiving preferred nominative shares without voting rights, after the bond party meets the Corporation Law and Section 18 of Law No. 2,004 of October 3, 1953." (Petrobrás Exs. 1 (Series 1 bearer bond) & 3 (Series 4 bearer bond)) Nor do the bonds place any restrictions on negotiability or sale outside of Brazil. That the bonds do not specify or require a place of payment or exchange within the United States does not foreclose that Plaintiffs reasonably expected they could make such a request in New York, given the open ended terms of the bonds and the fact that Petrobrás has a New York office. See United States Fid. & Guar. Co. v. Braspetro Oil Servs. Co., No. 97 Civ. 6124(JGK), 1999 WL 307666, at **12-13, 1999 U.S. Dist. LEXIS 7236, at **40-41 (S.D.N.Y. May 13, 1999) (finding direct effect where bonds "understood to be (although not contractually obliged to be) payable in New York"). Defendant was free to limit the terms of the bearer bonds by restricting their negotiability and place of redemption or exchange, but it did not do so. Moreover, Defendant does not argue that it would not have had to honor redemption or conversion requests made in the United States if such a request had been made prior to the "lapse" of an investor's redemption or conversion right. (Pltfs. Ex. C) Because Plaintiffs are and were U.S. residents, purchased the bonds in the United States with U.S. currency, communicated with Petrobrás' New York representative at its New York office regarding these bonds, and were told by that New York representative that Petrobrás would not honor the bonds' conversion provision, this Court finds that the direct effect of Defendant's alleged breach was felt within the United States.
Defendant next argues that these actions should be dismissed on grounds of forum non conveniens. (Def. Br. 13)
The Supreme Court has "characterized forum non conveniens as, essentially, `a supervening venue provision, permitting displacement of the ordinary rules of venue when, in light of certain conditions, the trial court thinks that jurisdiction ought to be declined.'" Sinochem Int'l Co. v. Malay. Int'l Shipping Corp., 549 U.S. 422, 429-30, 127 S.Ct. 1184, 167 L.Ed.2d 15 (2007) (quoting American Dredging Co. v. Miller, 510 U.S. 443, 453, 114 S.Ct. 981, 127 L.Ed.2d 285 (1994)). "The decision to dismiss a case on forum non conveniens grounds `lies wholly within the broad discretion of the district court....'" Iragorri v. United Techs. Corp., 274 F.3d 65, 72 (2d Cir.2001) (en banc) (quoting Scottish Air Int'l, Inc. v. British Caledonian Group, PLC, 81 F.3d 1224, 1232 (2d Cir.1996)). Dismissal based on forum non conveniens requires a three-step analysis: (1) the court must "determine[] the degree of deference properly accorded the plaintiff's choice of forum"; (2) the court must consider "whether the alternative forum proposed by the defendants is adequate to adjudicate the parties' dispute"; and (3) the court must "balance[] the private and public interests implicated in the choice of forum." Norex Petroleum, Ltd. v. Access Indus., 416 F.3d 146, 153 (2d Cir.2005). "The burden of demonstrating that the plaintiff's chosen forum is not convenient is on the defendant seeking dismissal." DiRienzo v. Philip Servs. Corp., 294 F.3d 21, 29 (2d Cir.2002). Because Defendant has failed to meet this burden, and because the interests at stake favor maintaining these actions in the United States, they will not be dismissed on forum non conveniens grounds.
"Any review of a forum non conveniens motion starts with `a strong presumption in favor of the plaintiff's choice of forum.'" Norex Petroleum, Ltd., 416 F.3d at 154 (quoting Piper Aircraft Co. v. Reyno, 454 U.S. 235, 255, 102 S.Ct. 252, 70 L.Ed.2d 419 (1981)). Moreover, a "plaintiff's choice of forum is generally entitled to great deference when the plaintiff has sued in the plaintiff's home forum." Iragorri, 274 F.3d at 71 (citing Koster v. (Am.) Lumbermens Mut. Cas. Co., 330 U.S. 518, 524, 67 S.Ct. 828, 91 L.Ed. 1067 (1947)); see also Piper, 454 U.S. at 255-56, 256 n. 23, 102 S.Ct. 252. The Second Circuit has stated that "the degree of deference to be given to a plaintiff's choice of forum moves on a sliding scale depending on several relevant considerations," Iragorri, 274 F.3d at 71, including whether the plaintiff is a U.S. citizen, "the convenience of the plaintiff's residence in relation to the chosen forum, the availability of witnesses or evidence to the forum district, the defendant's amenability to suit in the forum district, [and] the availability of appropriate legal assistance." Plaintiff's choice of forum is entitled to less deference where it is based on "forum-shopping
Analysis of these factors here indicates that deference to the Plaintiffs' forum choice is appropriate. While neither plaintiff lives in New York—Rogers is a citizen of Florida (Rogers Cmplt. ¶ 1) and Burlew is a citizen of Connecticut (Burlew Cmplt. ¶ 1)—they are both citizens of the United States who engaged in business communications with Defendant's New York office. Moreover, while "[t]he fact that a plaintiff is not a resident of the district in which he seeks to sue is not irrelevant, ... [a] plaintiff should not be penalized for suing outside their home district." BFI Grp. Divino Corp. v. JSC Russian Aluminum, 298 Fed.Appx. 87, 90 (2d Cir.2008) (citing Iragorri, 274 F.3d at 73, 74; Piper Aircraft Co., 454 U.S. at 255 n. 23, 102 S.Ct. 252). This is particularly true where the alternative forum is in a foreign country:
Iragorri, 274 F.3d at 73.
Here, Plaintiffs' choice of a New York forum is grounded in the fact that their communications with Petrobrás' New York City office provides the basis for their claims. (Cmplt. ¶ 8). Plaintiffs further argue that they do not have the resources to travel to and prosecute an action in Brazil. (Rogers Decl. ¶ 5; Burlew Decl. ¶ 5; see Opp. at 16) Nor have they ever lived in or travelled to Brazil. They do not speak Portuguese. (Rogers Decl. ¶ 3) Accordingly, Plaintiffs face significant challenges in bringing these actions in Brazil.
Petrobrás claims that these actions should proceed in Brazil, because a majority of the relevant witnesses—including its employees and all of the other bondholders—reside in Brazil. (Def. Br. 17; Reply 7-8) Defendant does not explain, however, how testimony from Brazilian bondholders and Petrobrás employees will be relevant to Plaintiffs' breach of contract claim, or why Defendant could not have local counsel take declarations of any necessary witnesses in Brazil for use before this Court. In any event, because Petrobrás has not identified any witnesses in Brazil, this factor does not weigh in favor of dismissal.
As to the other forum non conveniens factors, it appears that Petrobrás is amenable to suit in New York, as it has defended at least one other action in this district and has even initiated an action in this district—Petroleo Brasileiro S.A. v. IBE Grp., Inc., No. 93 Civ.3305 (TPG), 1995 WL 326502 (S.D.N.Y. May 31, 1995).
Petrobrás argues, however, that Plaintiffs "appear to be forum shopping to avoid
While analysis of the relevant factors overwhelmingly suggests that Plaintiffs' choice of forum here is entitled to great deference, this "is only the first level of inquiry," Iragorri, 274 F.3d at 73, and "simply recalibrate[s] the balance for purposes of the remaining analysis." Norex Petroleum, Ltd., 416 F.3d at 157. This Court must go on to consider whether Brazil is "an adequate alternative forum." In the event that Brazil is an "adequate alternative forum," this Court must then weigh a number of private and public interest factors, as discussed below. Iragorri, 274 F.3d at 73.
"To secure dismissal of an action on grounds of forum non conveniens, a movant must demonstrate the availability of an adequate alternative forum." Norex Petroleum, Ltd., 416 F.3d at 157. "`An alternative forum is adequate if the defendants are amenable to service of process there, and if it permits litigation of the subject matter of the dispute.'" Id. (quoting Pollux Holding Ltd. v. Chase Manhattan Bank, 329 F.3d 64, 75 (2d Cir. 2003)). However, "`the availability of an adequate alternative forum does not depend on the existence of the identical cause of action in the other forum,' nor on identical remedies." Norex Petroleum, Ltd., 416 F.3d at 158 (quoting PT United Can Co. v. Crown Cork & Seal Co., 138 F.3d 65, 74 (2d Cir.1998)).
Petrobrás states that it "is amenable to service of process in Brazil, and, in any event, will consent to the jurisdiction of the appropriate Brazil[ian] court." (Def. Br. 16) The prosecution of numerous actions against Petrobrás on the bonds at issue clearly evidences that Brazilian courts "permit[] litigation of the subject matter of the dispute." See Norex Petroleum, Ltd., 416 F.3d at 157. (See Def. Exs. 6-13) Plaintiffs, while not conceding that Brazil is an adequate alternative forum, present no arguments to the contrary. (Pltf. Br. 20) Accordingly, based on the record thus far, this Court concludes that Brazilian courts would provide an adequate alternative forum for the current actions.
Courts "will not dismiss for forum non conveniens ... merely because an adequate alternative forum exists," however.
The final step in a forum non conveniens analysis is to balance factors of private and public interest. Private interest factors include: "(1) ease of access to evidence; (2) the availability of compulsory process for the attendance of unwilling witnesses; (3) the cost of willing witnesses' attendance; (4) if relevant, the possibility of a view of premises; and (5) all other factors that might make the trial quicker or less expensive." DiRienzo v. Philip Servs. Corp., 294 F.3d 21, 29-30 (2d Cir. 2002) (citing Gilbert, 330 U.S. at 508, 67 S.Ct. 839); see also Iragorri, 274 F.3d at 73-74. Public interest factors include: "(1) administrative difficulties associated with court congestion; (2) the unfairness of imposing jury duty on a community with no relation to the litigation; (3) the `local interest in having localized controversies decided at home;' and (4) avoiding difficult problems in conflict of laws and the application of foreign law." DiRienzo, 294 F.3d at 31 (quoting Gilbert, 330 U.S. at 508-09, 67 S.Ct. 839); see also Iragorri, 274 F.3d at 74.
In considering the private interest factors, "`the court should focus on the precise issues that are likely to be actually tried, taking into consideration the convenience of the parties and the availability of witnesses and the evidence needed for the trial of these issues.'" Monegasque De Reassurances S.A.M. v. Nak Naftogaz of Ukraine, 311 F.3d 488, 500 (2d Cir.2002) (quoting Iragorri, 274 F.3d at 74). Petrobrás argues that "[a]ccess to proof is a particular problem," because Brazil has not signed either of the two international conventions regarding evidence in civil and commercial matters.
Petrobrás has indicated that it may seek testimony from current and former employees and from bondholders who have attempted to redeem or convert, the majority of whom reside in Brazil. (Def. Br. 17; Reply 7-8) Plaintiffs note, however, that Petrobrás has not identified any specific witnesses in Brazil, and that the Company presumably could compel the testimony of its own employees. (Opp. at 22)
It also appears that testimony of relevant witnesses could be taken in Brazil for use in litigation in New York. While U.S. attorneys are not permitted to take depositions in Brazil, depositions for use in foreign courts may be conducted before Brazilian judicial authorities. (Petrobras Ex. 15 at 1 (U.S. Dep't of State, Brazil Judicial Assistance)) Defendant presumably has Brazilian counsel who could conduct whatever depositions are required. Letters rogatory
The Court also considers the convenience of the parties in assessing the private interests at stake. See Monegasque De Reassurances S.A.M. v. Nak Naftogaz (In re Monegasque De Reassurances S.A.M.), 311 F.3d 488, 500 (2d Cir.2002). Petrobrás argues that "individuals having acquired the bonds second or third hand[] could have no reasonable expectation that disputes concerning the bonds would be resolved anywhere than the courts of Brazil."
Finally, Petrobrás argues that its inability to implead third-party defendants, namely the State of Brazil, weighs in favor of dismissal. (Def. Br. 18). According to the terms of the bonds and the law governing them, however, Brazil is already jointly liable for their nominal value as a matter of law and contract. (Petrobrás Ex. 1 (Series 1 Bearer Bond) & 3 (Series 4 Bearer Bond)); Ex. 5 (Brazil Law No. 2.004 (Oct. 3, 1953)) Thus, Brazil has explicitly assumed liability for the bearer bonds held by Plaintiffs. See Matthews v. CTI Container Transport Int'l, Inc., 871 F.2d 270, 281-82 (2d Cir.1989) (holding that foreign state entity waived its right under FSIA to a non-jury trial where it had agreed to indemnify a third party for all liability). In any event, Petrobrás could file a separate indemnification action in Brazil and thus avoid the issue altogether.
The first public interest factor— administrative difficulties associated with court congestion—favors neither forum. While "this Court can accommodate these cases on its calendar .. . there is no indication of significant court congestion in ... the Brazilian courts." In re Air Crash Near Peixoto De Azeveda, Brazil on September 29, 2006, 574 F.Supp.2d 272, 288 (E.D.N.Y.2008). Petrobrás bears the burden
The second and third public interest factors involve the unfairness of imposing jury duty on U.S. residents with no interest in Brazilian controversies, and the value in having local interests control the outcome of local controversies. See DiRienzo v. Philip Servs. Corp., 294 F.3d 21, 31 (2d Cir.2002). Petrobrás argues that Brazil's interest predominates, since the bonds "were created pursuant to Brazilian law" and were "issued by a Brazilian corporation in which the government of Brazil owns [a] majority." (Def. Br. 19, see Reply 8) "United States courts have an interest in adjudicating matters affecting [U.S.] residents," however. Wiwa v. Royal Dutch Petroleum Co., 226 F.3d 88, 107 (2d Cir.2000). Under these circumstances, the two fora have counter-balancing interests, and these factors are neutral.
The final public interest consideration—which relates to the need to resolve conflict of laws and foreign law issues—favors dismissal, because foreign state substantive law will likely control here. "New York's choice of law rules require that determination of contract disputes be governed generally by the laws of the state with the most significant contacts to the contract." Schwimmer v. Allstate Ins. Co., 176 F.3d 648, 650 (2d Cir.1999); Brink's Ltd. v. S. Afr. Airways, 93 F.3d 1022, 1030 (2d Cir.1996). "In contract cases, New York courts now apply a `center of gravity' or `grouping of contacts' approach" which considers "the place of contracting, the places of negotiation and performance, the location of the subject matter, and the domicile or place of business of the contracting parties." Brink's Ltd., 93 F.3d at 1030-31 (internal citations omitted). Given that the bonds are written in Portuguese, denominated in cruzeiros, and were originally issued to Brazilian automobile owners, it is evident that the initial place of contracting and the place of negotiation and performance is Brazil. (See Def. Br. 14). Furthermore, Petrobrás' principal place of business is in Brazil. (Id. at 17) Since neither of the Plaintiffs reside or are domiciled in New York, Brazil has a more compelling interest than New York in having its law apply.
"`[T]he need to apply foreign law is not in itself a reason to apply the doctrine of forum non conveniens' .. . and [courts] must guard against an excessive reluctance to undertake the task of deciding foreign law, a chore federal courts must often perform." Manu Intern., S.A. v. Avon Products, Inc., 641 F.2d 62, 67-68 (2d Cir.1981) (quoting Olympic Corporation v. Societe Generale, 462 F.2d 376, 379 (2d Cir.1972)).
Analysis of the private and public interest factors indicates that the great deference due Plaintiffs' choice of forum is not overcome here. Accordingly, this Court will not exercise its discretion to dismiss these actions for forum non conveniens.
Defendant also argues that this Court is required to dismiss these actions for failure to state a claim under Fed. R. Civ. P. 12(b)(6), because claims similar to those raised by Plaintiffs have been rejected in numerous Brazilian court decisions.
Furthermore, it is hardly self-evident from the language of the bonds that Plaintiffs' conversion rights are tied to the maturity dates specified for redemption. The relevant language from the bonds states:
(Hurford Decl., Ex. 1)
Defendant argues that these clauses should be read together, and that "[t]he right to convert the Petrobras Series 1, Series 3 and Series 4 bearer bonds at issue[] into preferred shares of Petrobras existed only during the applicable redemption periods." (Def. Br. 21) The plain language of the bond requires no such interpretation, however. Defendant was free to place an explicit time limit on the conversion right—as it did with the redemption right—but failed to do so. In sum, the plain language of the bonds presents no obvious bar to Plaintiffs' claims.
For the reasons stated above, Defendant's motions to dismiss (09-cv-8227, Dkt. No. 5; 09-cv-8228, Dkt. No. 7) are DENIED. The Clerk of the Court is directed to terminate these motions.
SO ORDERED.
Morris, 478 F.Supp.2d at 570-71 (emphasis in original). The facts alleged here are entirely different. The bonds at issue were purchased in the United States by United States citizens with United States currency. They were not in default at the time. Defendant has an office and a representative located in New York charged with administering the bonds. Finally, the bonds did not limit redemption or conversion to designated locations outside the United States.
Rusyniak v. Gensini, 629 F.Supp.2d 203, 232 (N.D.N.Y.2009) (quoting Bournias v. Atlantic Maritime Co., 220 F.2d 152, 154 (2d Cir. 1955)).