Northrop Grumman v. Ministry of Defense

CourtDistrict Court, S.D. Mississippi
DecidedMarch 31, 2020
Docket1:02-cv-00785
StatusUnknown

This text of Northrop Grumman v. Ministry of Defense (Northrop Grumman v. Ministry of Defense) is published on Counsel Stack Legal Research, covering District Court, S.D. Mississippi primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Northrop Grumman v. Ministry of Defense, (S.D. Miss. 2020).

Opinion

IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF MISSISSIPPI SOUTHERN DIVISION

NORTHROP GRUMMAN SHIP PLAINTIFF SYSTEMS, INC., formerly known as Ingalls Shipbuilding, Inc.

SIDNEY A. BACKSTROM, SCRUGGS LAW FIRM, P.A., RICHARD F. SCRUGGS, ZACH SCRUGGS, PODHURST ORSECK, P.A., ATTORNEY GEORGE SHADDOCK INTERVENOR PLAINTIFFS

v. Civil No. 1:02cv785-HSO-RHW

THE MINISTRY OF DEFENSE OF THE REPUBLIC OF VENEZUELA DEFENDANT

THE MINISTRY OF DEFENSE OF THE REPUBLIC OF VENEZUELA COUNTER-CLAIMANT

v.

NORTHROP GRUMMAN SHIP SYSTEMS, INC. COUNTER-DEFENDANT

MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF NORTHROP GRUMMAN SHIP SYSTEMS, INC.’S MOTION [391] FOR RECOGNITION AND EXECUTION OF ARBITRATION AWARD

BEFORE THE COURT is Plaintiff Northrop Grumman Ship Systems, Inc.’s, formerly known as Ingalls Shipbuilding, Inc., Motion [391] for Recognition and Execution of Arbitration Award. Defendant The Ministry of Defense of the Republic of Venezuela has filed a Response [400], to which Plaintiff has replied. Because the Court finds that no grounds exist for refusing or deferring recognition of the arbitration award, Plaintiff Northrop Grumman Ship Systems, Inc.’s Motion [391] for Recognition and Execution of Arbitration Award should be granted, and the award should be enforced. I. BACKGROUND

A. The parties’ contract On or about December 18, 1997, Plaintiff Northrop Grumman Ship Systems, Inc., f/k/a Ingalls Shipbuilding, Inc., now known as Huntington Ingalls Incorporated (“Plaintiff” or “Huntington Ingalls”), entered into a contract with The Ministry of Defense of the Republic of Venezuela (“Defendant” or “Ministry”) for the refurbishment of two frigates for the Venezuelan Navy (the “Contract”).

Huntington Ingalls Ex. 4, Contract [391-4] at 3. The Contract was worth $315,000,000.00, id. at 11, and contained an arbitration clause which provided in relevant part that: Should a dispute or breach or interpretation issue arise in connection with this Contract, “THE CONTRACTOR” and “THE MINISTRY” shall get together and negotiate in good faith [to] resolve the matter in a friendly manner. Should the parties fail to resolve the matter within thirty (30) calendar days of the emergence of the dispute, then at the request of either party, the matter shall be submitted for arbitration according to this Clause. Should the matter still not be resolved through arbitration, the parties shall be entitled to resort to the competent Courts of the Republic of Venezuela. 1

Id. at 80-81. The arbitration clause further stated that “[a]ny arbitration under this Contract shall take place in Caracas, Venezuela. The parties agree that in the case of

1 The Contract’s official language was Spanish. See generally Huntington Ingalls Ex. 3, Contract [391-3]. English quotations are taken from a translation of the Contract. Huntington Ingalls Ex. 1, Yanos Decl. [391-1] at 2; see generally Huntington Ingalls Ex. 4, Translation of Contract [391-4]. arbitration, they will abide by the rules contained in the Civil Procedure Code of Venezuela.” Id. at 81. Finally, “[n]o amendment to this Contract shall be valid, unless made through written documents signed by the contracting parties with the

approval of the General Controller’s Office of the National Armed Forces. Such modifications shall be an integral part of the contractual instrument.” Id. at 84. At some point after signing the Contract, Huntington Ingalls asserts that a dispute arose between the parties relating to payment for additional work on the frigates which they were unable to resolve amicably. Mem. in Supp. [392] at 2. B. Procedural history

This dispute has a lengthy procedural history, beginning when Huntington Ingalls filed a Complaint in this Court on October 24, 2002, Compl. [1], and moved to compel arbitration, Mot. to Compel [29]. On April 16, 2003, this Court granted Huntington Ingalls’ Motion to Compel Arbitration and stated that it “will retain jurisdiction . . . to resolve disputes relating to this Order and to enforce any arbitral award.” Order [43]. The Court appointed an arbitrator on behalf of the Ministry, see id. at 3, and ordered that the arbitration proceed in Mississippi or at another

location in the United States of America due to the political situation in Venezuela, see id. at 2. The Parties agree that the initial arbitral tribunal was ultimately formed in Mexico City under the Inter-American Commercial Arbitration Commission Rules (“Mexico City Arbitration”). Mem. in Supp. [392] at 3; Mem. in Opp’n [400] at 3. On January 30, 2004, the Ministry formally appeared in this Court for the first time and moved to vacate the Order [43] Compelling Arbitration and to dismiss Huntington Ingalls’ Complaint for lack of subject-matter jurisdiction. Mot. to Vacate & Dismiss [45] at 3. It also objected to any arbitration occurring outside of

Caracas, Venezuela, and sought a suspension of the Mexico City Arbitration. Id. at 4 On March 31, 2005, this Court stayed the Mexico City Arbitration while it considered the Ministry’s Motion2. Order Staying Arbitration [60]. On October 5, 2005, the Court entered an Order [65] of Dismissal, Order [65], followed by an Amended Order [66] of Dismissal on October 11, 2005, based upon the parties’

representations that they had settled the case, Am. Order [66]. The Court retained jurisdiction to enforce the settlement, id., and on October 19, 2005, the Ministry contested that a settlement existed and requested that the Amended Order [66] of Dismissal be vacated, Mot. to Vacate [68] at 1. On September 24, 2007, the Court denied the Ministry’s Motion to Dismiss, Mem. & Opinion [116] at 5, and upheld the settlement agreement, id. at 10. The Ministry then appealed to the United States Court of Appeals for the Fifth Circuit. Notice of Appeal [127].

On July 9, 2009, the Fifth Circuit vacated the judgment enforcing the settlement agreement and ruled that the termination of the Mexico City Arbitration had mooted the original order compelling arbitration. Northrop Grumman Ship Systems, Inc., et al. v. The Ministry of Defense of the Republic of Venezuela, 575 F.3d

2 The Mexico City Arbitration discontinued its proceedings on November 27, 2008, because it had been suspended for more than three years and eight months and lifting of the suspension was “not foreseen in the near future.” Huntington Ingalls Ex. 5, Arbitral Tribunal Termination Order [391-5] at 3. 491, 502 (5th Cir. 2009). The Court of Appeals remanded the case to this Court to determine whether to compel arbitration a second time. Id. at 503. On remand, the parties each sought to compel arbitration in a different

forum. The Ministry demanded arbitration in Venezuela, Ministry’s Mot. to Compel [157], while Huntington Ingalls sought to compel arbitration in Mississippi, Huntington Ingalls’ Cross Mot. to Compel [160]. On December 4, 2010, the Court issued an Order compelling arbitration, but found that the contractual forum selection clause specifying arbitration in Venezuela should not be enforced because the political situation at the time was such that Huntington Ingalls would

essentially be deprived its day in court if forced to arbitrate there. Order [227] at 9. The Court directed the parties to jointly agree upon an alternate location to conduct the arbitration and advised that it would “retain jurisdiction in order to bring this matter to conclusion after arbitration.” Id. The Ministry appealed this Order, Notice of Appeal [230], but the Fifth Circuit dismissed the appeal for lack of jurisdiction on March 23, 2011, see Northrop Grumman Ship Sys., Inc. v. Ministry of Def. of the Republic of Venezuela, No. 11-

60001, 2011 U.S. App. LEXIS 26921 (5th Cir. Mar. 23, 2011) (granting appellee’s motion to dismiss appeal), reh’g denied (5th Cir. May 9, 2011) (per curiam).

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