United States Court of Appeals
Fifth Circuit
IN THE UNITED STATES COURT OF APPEALS F I L E D March 5, 2003 FOR THE FIFTH CIRCUIT
____________________ Charles R. Fulbruge III Clerk No. 02-20042 ____________________
KARAHA BODAS COMPANY, L.L.C.,
Plaintiff-Appellee,
versus
PERUSAHAAN PERAMBANGAN MINYAK DAN GAS BUMI NEGARA, ET AL., Defendants,
PERUSAHAAN PERAMBANGAN MINYAK DAN GAS BUMI NEGARA,
Defendant-Appellant.
_________________________________________________________________
Appeal from the United States District Court for the Southern District of Texas (H-01-CV-634) _________________________________________________________________
Before KING, Chief Judge, DAVIS, Circuit Judge, and ROSENTHAL*, District Judge.
PER CURIAM:**
Appellant, Perusahaan Perambangan Minyak Dan Gas Bumi Negara
(“Pertamina”) contracted with appellee, Karaha Bodas Company,
* District Judge of the Southern District of Texas, sitting by designation.
** Pursuant to 5TH CIR. R. 47.5, the Court has determined that this opinion should be published and is not precedent except under the limited circumstances set forth in 5TH CIR. R. 47.5.4. L.L.C. (“KBC”) to develop geothermal energy sources in Indonesia
for electrical power generation. The parties executed two
contracts. Both contained an arbitration clause. In 1998,
financial crises in Indonesia led to the suspension of the project.
KBC initiated arbitration proceedings, which were conducted in
Switzerland. The Tribunal entered an award in favor of KBC for
damages resulting from the cancellation of the project. KBC then
filed suit in the federal district court in the Southern District
of Texas to confirm that award. This appeal is from the district
court’s grant of summary judgment confirming the award and
rejecting Pertamina’s challenges to the arbitration procedures and
result.
Months after briefing on this appeal concluded, Pertamina
filed in the district court a motion to set aside judgment under
Rule 60(b)(2), based on newly discovered evidence that Pertamina
contended should have been disclosed during the arbitration, and
under Rule 60(b)(5), based on the decision of an Indonesian court
annulling the arbitration award. A few weeks later, Pertamina
filed in this court a motion to supplement the record and for
supplemental briefing, seeking to have this court include in the
appellate record both the recently discovered evidence and the
information as to the post-judgment decision of the Indonesian
court annulling the award. The developments in the Indonesian
court are the subject of a separate appeal now pending before a
2 different panel of this court; Pertamina urges this court to
supplement the record on this appeal with the record of the
separate pending appeal.
Pertamina urges this court to supplement the record and
consider the additional evidence without the benefit of the
district court’s ruling on the Rule 60 motion pending in that
court. KBC urges this court simply to deny the motion to
supplement the record and for supplemental briefing. The threshold
questions presented in this case are how this court should address
the request to supplement the record to add materials that the
district court did not consider, and how the district court should
treat the Rule 60(b) motion to vacate its judgment when the appeal
from the judgment is pending. Because the motion to supplement
raises the same questions that are before the district court in the
Rule 60(b) motion, the district court should consider those
questions first. The Rule 60(b) motion is still pending in the
district court, and that court has not yet indicated whether it
intends to grant or deny the motion. Accordingly, the appeal from
the grant of summary judgment will be held in abeyance to permit a
limited remand for the district court to consider the merits of the
Rule 60(b) motion.
I. Background
Petitioner-appellee KBC explores and develops geothermal
energy sources and builds electric generating stations using
3 geothermal sources. Respondent-appellant Pertamina is an oil, gas,
and geothermal energy company owned by the Government of
Indonesia.*** KBC signed two contracts to produce electricity from
geothermal sources in Indonesia in November 1994. The Joint
Operation Contact granted KBC the right to develop geothermal
energy sources in the Karaha area of Indonesia; Pertamina was to
manage the project and receive the electricity generated. (Final
Award, ¶ 4). Under the Energy Sales Contract, PLN agreed to
purchase from Pertamina the energy generated by KBC’s facilities.
(Id. at ¶ 5). Both contracts contained arbitration clauses,
calling for the application of the Arbitral Rules of the United
Nations Commission on International Trade Law (“UNCITRAL”) and
specifying Geneva, Switzerland as the place of any arbitration. On
September 20, 1997, the Indonesian government suspended the project
because of the government’s financial crisis. The project was
indefinitely suspended on January 10, 1998. On February 10, 1998,
KBC notified Pertamina and PLN that the government’s suspension
constituted an event of force majeure under the contracts.
KBC initiated arbitration proceedings on April 30, 1998.
Pertamina disputes the procedures used in the appointment of the
arbitrators and the consolidation of the arbitrations under the two
contracts. In its Preliminary Award, the Tribunal held that the
*** PLN, an electric utility owned by the Government of Indonesia, was a party to the arbitration but was dismissed from the district court action.
4 Tribunal was properly constituted, that consolidation was proper,
and that the Government of Indonesia was not a proper party. KBC
filed its Revised Statement of Claim on November 24, 1999.
Pertamina received a number of extensions before it filed its reply
brief on April 7, 2000, and KBC filed its rebuttal on May 8, 2000.
In response to the rebuttal, Pertamina sought additional discovery
and a continuance of the proceedings, scheduled to begin on June
19, 2000, claiming that KBC had raised new assertions and new
elements of its case-in-chief not contained in the Revised
Statement of Claims. The parties had vigorously disputed whether
KBC could have obtained financing to build the project if the
government had not issued the suspension decree. Pertamina
asserted that KBC’s rebuttal introduced a new theory as to how it
would have obtained financing, claiming that one of KBC’s direct
investors, FPL Energy (“FPL”), would have provided project
financing if no other source was available. Pertamina sought
discovery of FPL documents relating to the claim that FPL was
prepared to finance the KBC project. The Tribunal denied
Pertamina’s requests for this discovery and for a continuance. The
hearing on the merits was held in June 2000. The Tribunal stated
in the final award that all parties had “waived their respective
requests for discovery” at the conclusion of the hearing. (Final
Award, ¶ 32). Pertamina disputes any waiver.
5 In the Final Award, issued in December 2000, the Tribunal
found that Pertamina was liable for nonperformance of the
contracts. The Tribunal interpreted the contractual provisions as
“putting the consequences of a Governmental decision which prevents
the performance of the contract at Pertamina’s . . . sole risk.”
(Final Award, ¶ 57). The Tribunal awarded KBC $111.1 million to
recoup its expenditures and $150 million in lost profits.
KBC brought an action in the district court to enforce the
arbitral award. Under the Convention on the Recognition and
Enforcement of Foreign Tribunal Awards (the “New York Convention”),
9 U.S.C. § 201, et seq., a district court must confirm an
arbitration award unless it finds one of seven grounds specified by
the New York Convention for refusal or deferral of the award. 9
U.S.C. § 207; Yusuf Ahmed Alghanim & Sons v. Toys “R” Us, 126 F.3d
15, 23 (2d Cir. 1997). Pertamina challenged the award on three
grounds under the New York Convention: the composition of the
arbitral authority or the arbitral procedure was not in accordance
with the agreement of the parties; Pertamina was “unable to present
its case” to the Tribunal; and enforcement of the award would
violate public policy of the United States, the country where
enforcement of the award was sought. As to the first ground,
Pertamina contended that the decision to consolidate the
arbitrations under the two contracts was procedurally improper and
that KBC’s unilateral appointment of an arbitrator violated the
6 rules specified in one of the contractual arbitration provisions.
As to the second ground, Pertamina argued that the Tribunal
improperly reversed its finding in the Preliminary Award that
Pertamina did not breach the contracts when it held Pertamina
liable for nonperformance in the Final Award; that the Tribunal’s
denial of Pertamina’s request for discovery of FPL’s records
prevented Pertamina from fully presenting its case; and that the
Tribunal’s denial of a continuance after KBC’s rebuttal prevented
Pertamina from fully preparing its response. As to the third
ground, Pertamina argued that the award violated the international
“abuse of rights” doctrine and punished Pertamina for obeying the
Indonesian government’s decree. In the district court, Pertamina
requested a delay in responding to the summary judgment motion
under Federal Rule of Civil Procedure 56(f), seeking discovery of
the same FPL records it had unsuccessfully sought in the
arbitration.
The district court confirmed the award, rejecting each of
Pertamina’s grounds for refusal. In so doing, the district court
carefully considered the record relating to Pertamina’s ability in
the arbitration proceeding to challenge KBC’s claim that it could
have obtained project financing from its investor, FPL. The
district court denied Pertamina’s Rule 56(f) request for additional
discovery to obtain records. The notice of appeal from the
district court judgment was filed on January 2, 2002.
7 In August 2002, an Indonesian court set aside the arbitral
award. KBC contends that this order is void because the district
court had issued an injunction ordering Pertamina to “take no
action . . . to prosecute the action it filed against KBC in the
District Court of Central Jakarta.” Pertamina has another appeal,
pending before another panel of this court, challenging that
injunction. Karaha Bodas Co. LLC v. Perusahaan, Etc., Case No. 02-
20550.
KBC had also filed suit in Canada to confirm the arbitral
award. In October 2002, after Pertamina perfected its appeal to
this court, Pertamina discovered in the Canadian proceeding that
FPL and one other KBC investor, Caithness, held political risk
insurance covering the KBC project through Lloyd’s of London.
Pertamina also learned that Lloyds had paid $75 million under that
insurance policy to FPL and Caithness.
In December 2002, Pertamina filed a motion in the district
court to vacate the judgment under Rule 60(b), and, in this court,
a motion to supplement the record and briefing. In both motions,
Pertamina argues that the existence of the political risk insurance
coverage in favor of FPL undermines KBC’s claims, and the
Tribunal’s finding, that the contracts allocated political risks
entirely to Pertamina. Pertamina also argues that the existence of
the insurance coverage undermines KBC’s arguments that FPL would
have financed the project in order to avoid losing an earlier
8 investment which was significantly less than the amount of the
insurance proceeds FPL received. Pertamina argues that the payment
of the insurance proceeds undermines the Tribunal’s determination
of damages. Pertamina urges that KBC’s failure to disclose the
policy during the arbitration provides a basis for refusing to
enforce the award, making the district court’s summary judgment
improper. As part of the motion to supplement in this court,
Pertamina presents a report by an expert on arbitration proceedings
and legal ethics, providing an opinion as to the legal significance
of KBC’s failure to disclose the political risk insurance policy
during the arbitration proceedings. KBC has opposed both the
motion to supplement the record in this court and the motion to
vacate the judgment filed in the district court.
II. Analysis
A. The Motion to Supplement
Federal Rule of Appellate Procedure 10(e), providing for
correction or modification of the appellate record, does not
generally permit an appellate court to add to the record materials
that were not before the district court. See Morrison v. Hall, 261
F.3d 896 n.4 (9th Cir. 2001)(“Rule 10(e) cannot be used to add to
or enlarge the record on appeal to include material which was not
before the district court”)(citations omitted); In re Capital
Cities/ABC, 913 F.2d 89, 97 (3d Cir. 1990); Ross v. Kemp, 785 F.2d
1467, 1474 (11th Cir. 1986); U.S. v. Hillsberg, 812 F.2d 328, 336
9 (7th Cir. 1987)(“Rule 10(e) does not give this court authority to
admit on appeal any document which was not made a part of the
record in the district court); Kemlon Prod. and Dev. Co. v. U.S.,
646 F.2d 223, 224 (5th Cir. 1981)(“A court of appeals will not
ordinarily enlarge the record on appeal to include material not
before the district court”); U.S. v. Page, 661 F.2d 1080, 1082 (5th
Cir. 1980)(“Rule 10(e) exists to allow the district court to
conform the record to what happened, not what did not.”)(citations
omitted). The Fifth Circuit has ordinarily refused to supplement
an appellate record with materials contained in the record of
related pending cases. See U.S. v. Flores, 887 F.2d 543, 546 (5th
Cir. 1989); Kemlon, 646 F.2d at 224. Pertamina does not allege
that the information it seeks to add to the record was omitted by
error or accident. It considers the information “newly discovered
evidence.” Although appellate courts have an inherent equitable
power to supplement the record on appeal to include information not
presented to the district court, it is limited to circumstances not
present here. See Dakota Indus., Inc. v. Dakota Sportswear, Inc.,
988 F.2d 61, 63 (8th Cir. 1993); Ross v. Kemp, 785 F.2d 1467, 1474-
75 (11th Cir. 1986); Gibson v. Blackburn, 744 F.2d 403, n.3 (5th
Cir. 1984); Dickerson v. Alabama, 667 F.2d 1364, 1367 (11th Cir.
1982). Pertamina cannot add the newly discovered evidence to the
record under appellate Rule 10(e). Pertamina’s Rule 60(b) motion
10 in the district court is based on this newly discovered evidence.
Pertamina’s motion to supplement the appellate record is
denied.****
B. The Rule 60(b) Motion
The Fifth Circuit, with other appellate courts, has addressed
how to treat a Rule 60(b) motion for relief from a judgment filed
while that judgment is on appeal. Winchester v. U.S. Attorney for
the Southern District of Texas, 68 F.3d 947, 949 (5th Cir. 1995).
The procedure adopted recognizes the “primacy of a district court’s
authority over motions for relief from its own judgments and the
prohibition against two courts simultaneously exercising
jurisdiction over a case.” Fobian v. Storage Technology Corp., 164
F.3d 887, 889 (4th Cir. 1999). Under this procedure, a notice of
appeal divests the district court of jurisdiction “except to take
action in aid of the appeal until the case is remanded to it by the
appellate court, or to correct clerical errors under Rule 60(a).”
Winchester, 68 F.3d at 949 (quoting Travelers Ins. Co. v. Liljeberg
Enters., 38 F.3d 1404, 1407 n.3 (5th Cir. 1994)). The district
court has the power to consider and deny a Rule 60(b) motion filed
after a notice of appeal, because the denial of the Rule 60(b)
**** This court can take judicial notice of another court’s judicial action. See Maher v. Hyde, 272 F.3d 83, n.3 (1st Cir. 2001); Najjar v. Ashcroft, 257 F.3d 1262, 1283 (11th Cir. 2001); U.S. v. Jones, 29 F.3d 1549, 1553-54 (11th Cir. 1994)(an appellate court may take judicial “notice of another court’s ruling . . . for the limited purpose of recognizing the ‘judicial act’ that the order represents or the subject matter of the litigation and related filings.”)
11 motion is in furtherance of the appeal. Winchester, 68 F.3d at
949. However, a district court may not grant a Rule 60(b) motion
filed after a notice of appeal, without leave from the appellate
court. “When the district court is inclined to grant the 60(b)
motion, . . . then it is necessary to obtain the leave of the court
of appeals. Without obtaining leave, the district court is without
jurisdiction, and cannot grant the motion.” Id.; Ferrell v.
Trailmobile, Inc., 223 F.2d 697, 698-699 (5th Cir. 1955).
Under the Fifth Circuit’s procedure, the appellate court asks
the district court to indicate, in writing, its inclination to
grant or deny the Rule 60(b) motion. If the district court
determines that the motion is meritless, the appeal from the denial
is consolidated with the appeal from the underlying order. If the
district court is inclined to grant the motion, it should issue a
short memorandum so stating. Appellant may then move this court
for a limited remand so that the district court can grant the Rule
60(b) relief. After the Rule 60(b) motion is granted and the
record reopened, the parties may then appeal to this court from any
subsequent final order. See Fobian, 164 F.3d at 890-91;
Winchester, 68 F.3d at 949; Tolliver v. County of Sullivan, 957
F.2d 47, 49 (2d Cir. 1992); Summers v. Utah, 927 F.2d 1165, 1168-69
(10th Cir. 1991); Com. of Puerto Rico v. SS Zoe Colcotrone, 601
F.2d 39, 41-42 (1st Cir. 1979); First Nat’l Bank of Salem, Ohio v.
12 Hirsch, 535 F.2d 343, 345-46 (6th Cir. 1976) (quoting Smith v.
Pollin, 194 F.2d 349, 350 (D.C. Cir. 1952)).
This procedure balances efficiency considerations with the
prohibition against dual exercise of jurisdiction by a district
court and an appellate court. “It would be both inefficient and
unfortunate to require the district court to wait until the
underlying appeal is completed before giving any indication of its
desire to grant a pending Rule 60(b) motion. Such a prohibition
would likely render the initial appeal pointless in cases where the
district court ultimately grants the motion following appeal.”
Fobian, 164 F.3d at 890. However, if the district court were to
grant the Rule 60(b) motion and reopen the record while the appeal
was still pending, this court and the appellate court would be
impermissibly exercising jurisdiction over the same case. These
conflicting concerns are resolved by having the district court
deny, or indicate its intention to grant, the Rule 60(b) motion
before this court proceeds with the appeal.
In this case, “the trial court is in a much better position to
pass upon the issues presented in a motion pursuant to Rule 60(b).”
Standard Oil Co. of Ca. v. U.S., 429 U.S. 17, 19, 97 S. Ct. 31, 50
L.Ed.2d 21 (1976). The district court’s familiarity with the
record makes it far better situated than this appellate court to
determine quickly and easily whether the Rule 60(b) motion has
merit. The district court is better situated than this court
13 initially to determine the impact of Pertamina’s newly-discovered
evidence of the existence of political risk insurance coverage on
the judgment confirming the arbitration award. That determination
will require an examination of the relationship between that
evidence and the existing record. Pertamina asserts that the
evidence of the insurance calls into question the Tribunal’s
decisions on discovery in the arbitration process; the Tribunal’s
decision that the contracts allocated political risks entirely to
Pertamina; KBC’s contention in the arbitration that FPL was willing
to provide financing to protect its earlier investment; and the
Tribunal’s calculation of damages suffered by KBC. Pertamina
asserts that KBC perpetrated fraud on the Tribunal by failing to
disclose the insurance; KBC asserts that Pertamina failed to
exercise due diligence that would have revealed the insurance
coverage during the arbitration proceeding. The district court’s
familiarity with the record puts it in a better position initially
to rule on these contentions.
If the district court decides that the Rule 60(b) motion
should be denied, the district court can do so without disturbing
appellate jurisdiction over the underlying judgment, permitting the
appeal from the denial of the Rule 60(b) motion to be consolidated
with the underlying appeal. If the district court decides to grant
the Rule 60(b) motion, it must necessarily vacate the underlying
judgment and reopen the record. The reopening of the record is
14 precisely the result Pertamina seeks in this court by its motion to
supplement, based on the same arguments the district court must
consider in determining whether to grant or deny the motion to
vacate.
This court remands for the limited purpose of asking the
district court to consider the merits of the Rule 60(b) motion.
This court does so without expressing any opinion on the merits of
that motion and without ruling at this time on the appeal from the
grant of summary judgment. The appeal is in abeyance pending the
resolution of the Rule 60(b) motion. If the district court finds
the Rule 60(b) motion meritless, the appeal from that denial can be
consolidated with this appeal. If the district court determines
that it is inclined to grant the Rule 60(b) motion, it should issue
a short memorandum so stating. Pertamina can then move this court
for a limited remand so that the district court can grant the Rule
60(b) relief, vacating the judgment and reopening the record. Once
that has been accomplished, the parties can appeal to this court
from any final order.
This court retains jurisdiction over the cause appealed except
for the limited REMAND to permit the district court to state, in
writing, whether it is inclined to deny or grant the Rule 60(b)
motion.