Pineapple Peddling Dispute Reignites Federal Court Jurisdiction Debate

MIAMI (CN) – A long-running legal battle over the closeout of a $230 million pineapple distribution deal spawned debate Wednesday in the 11th Circuit on the extent of federal courts’ jurisdiction to vacate multinational arbitration awards.

At a hearing in the 11th Circuit’s Miami division, Costa Rican grower Inprotsa appeared as determined as ever to argue its way out of a massive arbitration award entered against it for allegedly breaching an agreement governing the closeout of its windfall pineapple deal with produce giant Del Monte International.

The deal, which spanned more than a decade, involved Inprotsa obtaining bulk lots of MD-2 sweet-pineapple seeds from Monaco-based Del Monte. In return, Inprotsa grew MD-2 crops and supplied the resulting fruit to Del Monte exclusively. 

Inprotsa’s revenue increased exponentially over the course of the deal, as the grower sold more than $230 million worth of product to Del Monte, according to the latter company. 

By all accounts, things became less peachy after the arrangement was terminated in 2013. Del Monte commenced arbitration, accusing Inprotsa of ditching its contractual obligation to return or destroy accumulated inventory, and to refrain from selling MD-2 pineapples to Del Monte competitors.

Inprotsa, for its part, argued in the arbitration that Del Monte had fraudulently roped it into the deal by representing that Del Monte was the exclusive producer of the MD-2 pineapple breed, when in reality internal memos dating back to 1993 acknowledged the pineapple was not proprietary.

The arbitration yielded a $29 million award against Inprotsa, which the grower tried but failed to have overturned in the Southern District of Florida. Though the arbitration was in Miami, it was covered under multinational arbitration law due to the parties being overseas entities. 

Inprotsa argued before the 11th Circuit panel Wednesday that its initial challenge to the award was improperly removed from state court to the federal court where it was struck down. 

At issue is Chapter 2 of the Federal Arbitration Act, which was added into law by Congress in 1970 when the U.S. became a party to the New York Convention on multinational arbitration. 

Inprotsa claimed that under Chapter 2 of the Act, federal courts have jurisdiction to consider international arbitration issues, but that the jurisdiction does not extend to petitions to vacate arbitration awards. 

“With respect to Chapter 2 arbitrations, Congress gave federal courts jurisdiction as to (1) an action to require arbitration and (2) an action to confirm an arbitration award. That’s all. Nothing else,” the grower’s brief to the 11th Circuit states. 

Inprotsa points out the full title of the convention was “The Convention on the Recognition and Enforcement of Foreign Arbitral Awards.” (Emphasis in original.)

The lower court in 2016 found Inprotsa’s stance to be strained.

“It seems Inprotsa is asking the Court to split hair – finding jurisdiction is only proper if asked to confirm an award, but not if there is a motion to vacate the same award,” the decision reads.

The Southern District on limited remand in 2017 confirmed the arbitration award against Inprotsa. It found that the grower was precluded from raising defenses to confirmation due to service-of-process issues with a prior pleading.  

U.S. Circuit Judge Stanley Marcus on Wednesday pressed Inprotsa’s attorney Alvin Lindsay of Hogan Lovells on why the Legislature would bifurcate federal court jurisdiction in the way Inprotsa was suggesting.

Marcus posited it would be an odd notion to “give half the loaf but not the whole loaf to the district court.” He noted elements of Inprotsa’s stance appeared at odds with precedent in the 11th Circuit and a sister court. 

Though Del Monte did file a cross-petition to confirm the award — which Inprotsa apparently concedes could be under federal jurisdiction — the grower claims the case was removed to federal court before the cross-petition’s filing, rendering the removal invalid. 

During oral arguments Wednesday, Del Monte’s attorney Brian Stack with Stack Fernandez & Harris said Inprotsa’s agents filed an appeal simply to “indulge their discomfort with defeat” in the lower court.

The appeal presents garden-variety gripes about how the arbitrators evaluated the underlying contract, and tries to stretch those grievances into an allegation that the arbitrators grossly exceeded their authority, Stack said. 

Del Monte’s 11th Circuit brief states: “Courts have firmly established that a New York Convention award is not subject to vacatur because the arbitral panel purportedly made legal or factual errors.” 

The company told the panel that even when Inprotsa argued its case on state court law, it improperly cited Florida’s domestic arbitration guidelines rather than the state’s international arbitration guidelines. 

Notably, the parties are in disagreement over the extent to which the 2014 U.S. Supreme Court decision in BG Group v. Republic of Argentina did away with relevant case precedent on Chapter 2 of the Federal Arbitration Act. 

The panel did not indicate when it will issue a decision in the case.

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