United States Court of Appeals, Seventh Circuit affirms United States District Court for the Northern District of Indiana, South Bend Division denying antisuit injunctive relief

In 2009, Joaquim Salles Leite Neto entered into a trust agreement with Wells Fargo Bank to purchase an airplane for use in his business. Wells Fargo borrowed $6 million from 1st Source and pledged the aircraft as collateral. In January 2011, Neto signed a guarantee for that loan. § 3.02 of the Guarantee dealt with governing law and disputed choice-of-law and venue provisions. In June 2012, the Brazilian government seized the airplane. For several years, Neto continued to pay 1st Source for his debt on the plane, making almost $3 million in payments. Neto stopped making payments in December 2014. In June 2015, 1st Source sued Neto in the Northern District of Indiana to collect the remainder of the debt. In July 2016, 1st Source filed a substantively similar complaint against Neto in São Paolo, Brazil, seeking to recoup the remainder of the debt from the airplane transaction. At the time that 1st Source filed the Brazil lawsuit, Neto maintained certain assets, including the airplane at issue, in Brazil. In October, Neto sought antisuit injunctive relief in Indiana district court in an effort to prevent 1st Source from proceeding with the parallel action in Brazil. He argued that § 3.02 of the loan guarantee prohibited 1st Source from bringing suit in Brazil, and that the Brazil litigation was vexatious and duplicative. The district court denied Neto’s motion, concluding that § 3.02 allowed for the parallel litigation, and that Neto had not met his burden for showing that the Brazil litigation was vexatious. The appeal followed. *610

On appeal from decisions on injunctive relief, the Court of Appeals will review legal conclusions de novo, findings of fact for clear error, and equitable balancing for abuse of discretion.” Korte v. Sebelius, 735 F.3d 654, 665 (7th Cir. 2013).

Neto first argued that § 3.02 forbids 1st Source from filing suit in Brazil because giving effect to § 3.02’s second clause rendered the first clause—which, in Neto’s view, limited the venue to Indiana—meaningless. This reading of the loan guarantee was incorrect for two reasons. First, the language of the first clause only applied to Neto, not to 1st Source. § 3.02 contained no complementary promise on the part of 1st Source to agree to bring “all legal proceedings” in Indiana. Second, § 3.02’s first clause was not rendered meaningless by the second clause, as Neto argued. The first clause granted 1st Source the ability to pursue claims against Neto in Indiana, regardless of where Neto kept his assets. The second clause allowed 1st Source to initiate legal proceedings against Neto wherever his airplane or other assets were located. *611

Next, Neto argued that § 3.02 may permit a lawsuit in either Brazil or Indiana, but not simultaneously in both venues. However, the language of the second clause speaks of “legal proceedings” in the plural, that can be taken “in addition to” legal proceedings in Indiana. *611

Neto also contended that 1st Source was judicially estopped from arguing that it was permitted to sue in Brazil under § 3.02. Whether a party was judicially estopped from making an argument was a question of law subject to de novo review. United States v. Hook, 195 F.3d 299, 305 (7th Cir. 1999) (citation omitted). As a preliminary matter, Neto forfeited this judicial-estoppel theory by failing to raise it before the district court. See Econ. Folding Box Corp. v. Anchor Frozen Foods Corp., 515 F.3d 718, 720 (7th Cir. 2008). There are “certain clear prerequisites” that must obtain before judicial estoppel applies: “(1) the later position must be clearly inconsistent with the earlier position; (2) the facts at issue should be the same in both cases; and (3) the party to be estopped must have convinced the first court to adopt its position.” Hook, 195 F.3d at 306 (quoting Levinson v. United States, 969 F.2d 260, 264-65 (7th Cir. 1992)) (internal quotation marks omitted); see also New Hampshire v. Maine, 532 U.S. 742, 749-50, 121 S.Ct. 1808, 149 L.Ed.2d 968 (2001) (citations omitted). Aside from 1st Source’s amended complaint, Neto pointed to no other instance in which 1st Source argued that venue was only proper in Indiana. The first time the venue issue arose—in briefing on Neto’s motion for antisuit injunctive relief—1st Source took the position it maintained on appeal: Venue was proper in Indiana, Brazil, or both under § 3.02. Thus, a sua sponte finding of judicial estoppel was inappropriate in this case.

Finally, Neto argued that if § 3.02 does authorize suit in Brazil, then the provision is unenforceable as a matter of public policy. However, international forum-selection clauses are prima facie valid, especially when freely negotiated between private parties. M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972). Neto did not mention fraud or undue influence, claiming that litigating in Brazil would deprive him of his day in court, or cite to any “statute or judicial decision,” id., declaring Indiana’s public policy on this issue. Rather, Neto asserted that the clause was unreasonable because it “would permit remote courts around the world to apply differing procedural laws to this case, although the matter involves an Indiana bank and an Indiana Guarantee governed by Indiana law,” and would risk piecemeal or inconsistent litigation. *612

Even construing this assertion as a public-policy argument, it was misleading in several ways. First, § 3.02 did not authorize global jurisdiction over Neto. Rather, the second clause authorized suit in “in any jurisdiction where the aircraft may be located” and “in any jurisdiction where [Neto] maintains, temporarily or permanently, any asset.” Second, while it was true that the case involved an Indiana bank and loan guarantee, it also involved a Brazilian defendant, collateral and other assets located in Brazil, and, insofar as the Court was aware, no attachable assets inside Indiana. It was not unreasonable for a creditor in such a situation to seek to protect its interests by asking loan guarantors to agree to suit in jurisdictions where they hold assets that could be used to satisfy the loan obligations. Regardless, in the absence of a “statute or judicial decision” embodying a “strong public policy” that would be undermined by enforcing § 3.02, id., the parties’ otherwise-valid forum-selection clause “should be given full effect.” M/S Bremen, 407 U.S. at 10, 92 S.Ct. 1907. *613

Neto next argued that, even if § 3.02 authorized the Brazil lawsuit, an antisuit injunction was nevertheless appropriate because the Brazil suit was vexatious and duplicative of the Indiana action. Factors specific to the propriety of antisuit injunctive relief included, “whether or not the parties and the issues are the same, and whether or not the first action is dispositive of the action to be enjoined.” Id. (citation omitted). If both factors are met, the district court must then ask whether “letting the two suits proceed would be gratuitously duplicative, or as the cases sometimes say ‘vexatious and oppressive.’” Allendale Mut. Ins. Co. v. Bull Data Sys., Inc., 10 F.3d 425, 431 (7th Cir. 1993) (citation omitted).

Finally, because an “antisuit injunction operates to restrict the foreign court’s ability to exercise its jurisdiction as effectively as if it were addressed to the foreign court itself,” Kaepa, Inc. v. Achilles Corp., 76 F.3d 624, 630 (5th Cir. 1996) (citation omitted), a district court should issue an international antisuit injunction only when the interest in avoiding vexatious litigation outweighs the international-comity concerns inherent in enjoining a party from pursuing claims in a foreign court. See Rosenbloom v. Barclays Bank PLC, No. 13-CV-04087, 2014 WL 2726136, at *2 (N.D. Ill. June 16, 2014). *613

With respect to vexatiousness, the district court reviewed the two actions and concluded, "1st Source’s conduct in filing suit in Brazil could at worst be characterized as heavy handed. Neto presented nothing to establish that 1st Source’s conduct rose to the level of vexatiousness or oppressiveness. Given the minimally burdensome discovery proceedings in Indiana before filing the lawsuit in Brazil, the district court did not abuse its discretion in concluding that Neto had failed to demonstrate that 1st Source’s actions were either vexatious or oppressive. *614

On appeal, Neto did not present anything more than what he presented to the district court. 1st Source’s exercise of its contractual rights to protect its interests was a non-vexatious reason for pursuing parallel litigation in Brazil, so antisuit injunctive relief was not appropriate. The judgment of the district court was affirmed. *615

CITATION: 1st Source Bank v. Neto, 861 F. 3d 607—Court of Appeals, 7th Circuit 2017.

**** Mike Meier is an experienced business consultant. Fluent in German and Spanish, French and Japanese. Juris Doctor (1993) & Master of Laws with distinction (1997), Georgetown University; Master's Degree in Political Science (1988), University of Berlin (Germany), Yale Law School. - Attorney Website at https://mikemeierattorney.com/ - Attorney Profile at: https://solomonlawguild.com/mike-meier# - Attorney News at: https://attorneygazette.com/mike-meier%2C-consultant#