The Boeing Company et al v. KB Yuzhnoye et al, No. 2:2013cv00730 - Document 1088 (C.D. Cal. 2018)
Court Description: ORDER DENYING YUZHNOYE'S MOTION TO ALTER JUDGMENT (DKT. NO. 989 ) AND BOEING'S MOTION TO REGISTER THE JUDGMENT (DKT. NO. 971 ), AND GRANTING IN PART BOEING'S MOTION FOR COSTS AND ATTORNEYS' FEES (DKT. NO. 966 ) by Judge Andre B irotte Jr.: The Fees Motion is GRANTED as to the applicability of Swedish law, Plaintiffs The Boeing Company and Boeing Commercial Space Company's (collectively "Boeing") entitlement to fees under Swedish law, and that the total amount requested of $9,686,251.06 was reasonable under Swedish law. Boeing may submit additional briefing and/or documentation within two weeks from the receipt of this order delineating what portion of the $9,686,251.06 it still seeks from Defen dants KB Yuzhnoye and PO Yuzhnoye Mashinostroitelny Zavod (collectively "Yuzhnoye"). Yuzhnoye will then have two weeks to file any opposition. Boeing's motion to register the judgment is DENIED. Yuzhnoye's motion to amend or alter the judgment is DENIED. (gk)
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The Boeing Company et al v. KB Yuzhnoye et al Doc. 1088 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 11 12 13 BOEING COMMERCIAL SPACE 14 Case No. CV 13-00730-AB (AJWx) THE BOEING COMPANY and COMPANY, 15 ORDER DENYING YUZHNOYE’S MOTION TO ALTER JUDGMENT Plaintiffs, (DKT. NO. 989) AND BOEING’S 16 17 MOTION TO REGISTER THE vs. JUDGMENT (DKT. NO. 971), AND 18 19 KB YUZHNOYE and PO YUZHNOYE GRANTING IN PART BOEING’S 20 MASHINOSTROITELNY ZAVOD, MOTION FOR COSTS AND 21 ATTORNEYS’ FEES (DKT. NO. Defendants. 966) 22 23 24 25 26 27 28 -1- Dockets.Justia.com 1 Pending before the Court are Plaintiffs The Boeing Company and Boeing Commercial 2 Space Company’s (collectively “Boeing”) Motion for Costs and Attorneys’ Fees, Dkt. No. 966, 3 Motion to Register the Judgment, Dkt. No. 971, and Defendants KB Yuzhnoye and PO 4 Yuzhnoye Mashinostroitelny Zavod’s (collectively “Yuzhnoye”) Motion to Alter or Amend the 5 Judgment Pursuant to Federal Rule of Civil Procedure 59(e), Dkt. Nos. 989, 993. 6 I. BACKGROUND 7 The Court assumes the parties are familiar with the background of this case and 8 summarizes the facts only as necessary to understand the pending motions. The facts are drawn 9 from the Court’s prior orders and are not disputed for the purposes of these motions. Dkt. Nos. 10 650, 962. Sea Launch Co. LLC (“Sea Launch”) was a joint venture between Boeing, Old 11 Kvaerner Invest AS (“Kvaerner”), S.P. Korolev Rocket and Space Corporation, Energia D/B/A 12 Rocket and Space Corporation Energia After S.P. (“Energia”), and Yuzhnoye, a Ukrainian 13 government entity, to launch commercial satellites into space from a sea-based platform. 14 Following Sea Launch’s bankruptcy, disputes among the four entities and their affiliates 15 resulted in litigation, including the instant lawsuit. This lawsuit was brought by Boeing against 16 Energia and Yuzhnoye for the breach of two agreements, the Creation Agreement, Compl. Ex. 17 1, Dkt. No. 1–2, and the Guaranty and Security Agreement, Compl. Exs. 2, 3. Dkt. No. 1–3, 4. 18 The Creation Agreement created Sea Launch and obligated each party to pay the debts of Sea 19 Launch according to its ownership stake. During its operations Sea Launch discovered it 20 needed additional funding and sought loans from private banks. Sea Launch obtained loans 21 from private banks, but the banks required that Boeing and Kvaerner guarantee the loans. 22 Boeing and Kvaerner agreed to do so after Energia and Yuzhnoye signed the Guaranty and 23 Security Agreements. Sea Launch later went into bankruptcy and defaulted on the loans, which 24 were then repaid by Boeing pursuant to its guarantees. 25 Boeing initially attempted to recover the amounts it was owed from Energia and 26 Yuzhnoye (collectively “Defendants”) through arbitration in Sweden pursuant to the arbitration 27 provision in the Creation Agreement. After that arbitration was dismissed for lack of 28 jurisdiction Boeing filed this case against Energia and Yuzhnoye seeking repayment under the -2- 1 Creation Agreement and the Guaranty and Security Agreement. See Compl. The parties 2 engaged in substantial motion practice in this Court which resulted in the Court granting 3 summary judgment to Boeing on its breach of contract claims against Energia and Yuzhnoye, 4 Order Granting Pls.’ Mot. for Summary J., Dkt. No. 750, a bench trial finding Energia’s 5 subsidiaries were liable as alter ego corporations, Court’s Findings of Fact and Conclusions of 6 Law, Dkt. Nos. 961, 962, and the Judgment detailing how much Energia and Yuzhnoye each 7 owe for violating their guarantees under both the Creation Agreement and the Guaranty and 8 Security Agreement, Judgment, Dkt. No. 960. After the briefing was completed on these 9 motions Boeing settled with Energia, leaving Yuzhnoye as the only remaining defendant. Dkt. 10 No. 1059. 11 II. 12 Before the Court are three motions, Boeing’s Motion for Costs and Attorneys’ Fees, 13 Boeing’s Motion to Register the Judgment, and Yuzhnoye’s Joinder in Energia’s Motion to 14 Alter or Amend the Judgment. The Court will address each motion in turn. 15 16 DISCUSSION A. Boeing’s Motion for Costs and Attorneys’ Fees Boeing filed a Motion for Costs and Attorneys’ Fees in its breach of contract case 17 against Energia and Yuzhnoye. Pls.’ Mot. for Attorneys’ Fees, Dkt. Nos. 966, 967, 976 18 (collectively “Fees Motion”). Energia opposed, Dkt. No. 986 (“Fees Opposition”), Yuzhnoye 19 joined in opposition, Dkt. No. 987, and Boeing replied, Dkt. Nos. 1000, 1001 (“Fees Reply”). 20 Boeing asserted that it was entitled to $9,686,251.06 in attorneys’ fees for Defendants’ 21 breach of the Guaranty and Security Agreement, and the Creation Agreement. The Guaranty 22 and Security Agreement has a choice of law provision which states that it is governed by 23 English law and also contains an express attorneys’ fees clause. Compl. Ex. 2, at 2. The 24 Creation Agreement contains a choice of law provision which states that the “formation, 25 interpretation, and performance of this Agreement shall be governed by and interpreted in 26 accordance with the law of the Kingdom of Sweden.” See Compl. Ex. 1, Article 13. The 27 Creation Agreement does not contain an express attorneys’ fees clause, but the Swedish Code 28 of Judicial Procedure does require the losing party to pay the reasonable costs and attorneys’ -3- 1 fees of the prevailing party. RÄTTÅNGANGSBALKEN [RB] [CODE OF JUDICIAL 2 PROCEDURE] 18:1, 8 (Swed.) (“Swedish Code of Judicial Procedure”). 3 Defendants concede that Boeing is entitled to attorneys’ fees under the Guaranty and 4 Security Agreement, and that Boeing’s request is reasonable, but argue that Boeing is not 5 entitled to fees for their breach of the Creation Agreement because: (1) Sweden’s provision for 6 attorneys’ fees is procedural and should not be applied by this Court, (2) it would be unfair to 7 apply Sweden’s laws on attorneys’ fees given the differences in litigation between Sweden and 8 the United States, and (3) Boeing did not comply with the relevant Swedish procedures for 9 requesting attorneys’ fees. Fees Opp’n at 1. 1. 10 Legal Standard 11 Federal Rule of Civil Procedure 54(d)(2) provides that “[a] claim for attorney’s fees and 12 related nontaxable expenses must be made by motion unless the substantive law requires those 13 fees to be proved at trial as an element of damages.” Fed. R. Civ. Proc. 54 (d)(2). The motion 14 must be made within fourteen days after the entry of judgment. Id. 2. 15 16 Swedish Law Governs Boeing’s Request for Attorneys’ Fees This case is in federal court based on federal question jurisdiction under the Foreign 17 Sovereign Immunities Act (“FSIA”). While for a diversity case this Court would apply 18 California’s choice of law rules, for a case arising under the FSIA this Court must apply the 19 choice of law rules of federal common law. Schoenberg v. Exportadora de Sal, S.A. de C.V., 20 930 F.2d 777, 782 (9th Cir. 1991). The Court of Appeals for the Ninth Circuit follows the 21 Restatement (Second) of Conflict of Laws (1971) (“Restatement”) to the extent it concludes 22 that the Restatement is persuasive. In re Sterba, 852 F.3d 1175, 1179 (9th Cir. 2017), petition 23 for cert. filed (U.S. Sept. 15, 2017) (No. 17-423). Federal common law will therefore determine 24 whether this Court must apply Sweden’s provisions on attorneys’ fees. Schoenberg, 930 F.2d 25 at 782–783. 26 The Ninth Circuit’s rulings in Flores v. Am. Seafoods Co., 335 F.3d 904, 916 (9th Cir. 27 2003) (“Flores”), and APL Co. Pte. v. UK Aerosols Ltd., 582 F.3d 947, 951 (9th Cir. 2009) 28 (“APL”), are instructive. In both Flores and APL the Ninth Circuit reversed the district court -4- 1 and instead applied the attorneys’ fees rule of the jurisdiction chosen by the parties in their 2 contract. Importantly, the Ninth Circuit never considered whether the chosen rule is 3 substantive, procedural, mandatory, or optional. Such questions may be relevant in other 4 circumstances. E.g., Alaska Rent-A-Car, Inc. v. Avis Budget Grp., Inc., 738 F.3d 960, 974 (9th 5 Cir. 2013) (applying Alaska’s general attorneys’ fees provision in a diversity case after 6 determining it is procedural for choice of law purposes). However, if the dispute arises out of a 7 contract with a valid choice of law provision then such distinctions are irrelevant to determining 8 what law the Court will apply. Chuidian v. Philippine Nat. Bank, 976 F.2d 561, 564 (9th Cir. 9 1992) (“[Restatement] Section 187 sets out the rule when the parties to a contract have 10 designated the law to govern their relationship.”). 1 11 Flores concerned an employment contract that contained an express choice of law 12 provision selecting federal maritime law. 335 F.3d at 916. Federal maritime law does not 13 generally provide for attorneys’ fees in maritime employment contracts. However, the district 14 court sitting in Washington applied that state’s rule providing for attorneys’ fees in employment 15 contracts because the state had a strong public interest in providing for attorneys’ fees in 16 employment disputes. Id. at 917. Reversing the district court, the Ninth Circuit began its 17 analysis with Restatement §187. Id. at 917–18. The Ninth Circuit found that §187(2) applied 18 instead of §187(1) because the contract’s choice of law provision did not specifically speak to 19 attorneys’ fees. Id. The Ninth Circuit held that §187(2)(a) was satisfied because the United 20 States had a substantial relationship to the subject matter, and §187(2)(b) was satisfied because 21 there was no evidence that Washington’s interest was materially greater than that of the United 22 States. Id. Because federal common law provided no reason to disturb the parties’ choice of 23 1 24 25 26 27 28 Restatement §187 states: (1) The law of the state chosen by the parties to govern their contractual rights and duties will be applied if the particular issue is one which the parties could have resolved by an explicit provision in their agreement directed to that issue. (2) The law of the state chosen by the parties to govern their contractual rights and duties will be applied, even if the particular issue is one which the parties could not have resolved by an explicit provision in their agreement directed to that issue, unless either (a) the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties' choice, or (b) application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue and which, under the rule of § 188, would be the state of the applicable law in the absence of an effective choice of law by the parties. -5- 1 federal maritime law, and because federal maritime law did not provide for attorneys’ fees for 2 the prevailing party, the Ninth Circuit reversed the district court’s grant of attorneys’ fees. 3 Similarly, in APL the Ninth Circuit had to determine whether a bill of lading that 4 incorporated Singaporean law for issues not otherwise “dealt with” allowed for attorneys’ fees 5 under Singaporean law when the substantive law governing the dispute was provided by a 6 federal statute. APL, 582 F.3d at 956–58. The district court held that the plaintiff was not 7 entitled to attorneys’ fees because federal law governed the substantive dispute and did not 8 provide for attorneys’ fees under the general American rule. Id. at 957. Finding that the issue of 9 attorneys’ fees was not specifically addressed in the bill of lading or the substantive federal law, 10 the Ninth Circuit reversed the district court and applied Singapore’s provision on attorneys’ 11 fees because the parties had agreed that issues not otherwise dealt with would be governed by 12 Singaporean law. Id. Because Singaporean law generally followed the English rule and 13 provided fees for the prevailing party, it was therefore an error for the district court to apply the 14 general American rule merely because a federal statute provided the substantive law. Id. 15 Following Flores and APL, the Court must apply Sweden’s provision on attorneys’ fees 16 unless both of the factors in Restatement §187(2) are met. Flores, 335 F.3d at 918 (“To be 17 effective, ASC's choice of federal maritime law needs to satisfy only one of the two alternative 18 requirements under section 187(2)”). The Court finds that neither factor in Restatement §187(2) 19 is met in this case. The choice of Swedish law was reasonable under Restatement §187(2)(a) 20 because the Creation Agreement also contained a provision for arbitration in Sweden. Compl. 21 Ex. 1, Article 13. In addition, the Court cannot say that the choice of Swedish law was 22 unreasonable for a contract involving entities from the United States, Norway, Ukraine, and 23 Russia. The parties’ choice of law is particularly reasonable because the parties reasonably 24 anticipated that they would need waivers of sovereign immunity because at least one defendant 25 is owned by a foreign government. Restatement §187(2)(b) is similarly not implicated in this 26 case because the Court is not aware of any jurisdiction relevant to this case that has a 27 fundamental policy of prohibiting prevailing parties in a breach of contract dispute from 28 recovering their attorneys’ fees. -6- 1 2 3 In conclusion, federal common law requires the Court to enforce the parties’ choice of Swedish law to govern their dispute, including its provisions on attorneys’ fees. 3. Reasonableness of Boeing’s Fee Request Under Swedish Law 4 The Court finds that the total amount of fees requested is reasonable under Swedish law. 5 The Swedish Code of Judicial Procedure provides that “[c]ompensation for litigation costs shall 6 fully cover the costs of preparation for trial and presentation of the action including fees for 7 representation and counsel, to the extent that the costs were reasonably incurred to safeguard 8 the party’s interests.” Swedish Code of Judicial Procedure 18:8. Defendants argued that the 9 Court should deny the Fees Motion because of differences in litigation between the United 10 States and Sweden, and because Boeing failed to comply with the timing requirements for 11 requesting attorneys’ fees under the Swedish Code of Judicial Procedure. 12 Defendants’ Swedish law expert Maria Tufvesson Shuck argued that differences in 13 discovery, pleading, and the rates attorneys charge make it unreasonable to apply Sweden’s 14 provisions for attorneys’ fees in this case. Shuck Decl. ¶¶ 12–14, Dkt. No. 986-1. However, 15 Defendants have provided no evidence that these differences were relevant to the fees actually 16 incurred, or that the total amount of fees would have been smaller had this case been litigated in 17 Sweden. Shuck also noted in general terms that attorneys’ fees awarded by Swedish courts tend 18 to be moderate when compared to U.S. cases, and that she was not aware of any Swedish court 19 case where a party was awarded attorneys’ fees of this magnitude. Shuck Decl. ¶ 19. This leads 20 to her conclusion that a Swedish court would be reluctant to grant this request. Id. However, her 21 evidence is less useful because she only speaks in general terms, does not appear to have 22 actually examined the details of the fee request, nor does she actually conclude whether or not 23 the fee request is reasonable. In addition, her points on Swedish law were persuasively refuted 24 by Boeing’s Swedish law expert Fredrik Forssman. He stated that while Sweden does not have 25 the same manner of discovery known to U.S. practitioners, the Swedish Code of Judicial 26 Procedure does permit the Court to issue evidentiary orders to opposing or third parties to 27 produce evidence which can be quite large. Forssman Decl. ¶ 12, Dkt. No. 1001. He 28 specifically noted that in a case such as this evidentiary requests would be filed and granted and -7- 1 would lead to “a great deal of documentary evidence provided to either side . . . .” Id. He also 2 stated in his declaration that “in comprehensive and complex cases with substantial monetary 3 claims, it is not in any respect unusual that attorneys’ fees amount to several million USD.” Id. 4 ¶ 13. Forssman also disagreed with Shuck’s assertion that Swedish Courts often reject or adjust 5 requests for attorneys’ fees. Id. ¶ 14. He stated that to his knowledge a Swedish court has never 6 rejected a prevailing party’s request for attorneys’ fees, and that even in the rare cases that a 7 Swedish court would adjust the amount granted, it would only be for a specific reason outlined 8 in the Swedish Code of Judicial Procedure. Id. Boeing pointed out that Defendants were 9 awarded over $1.5 million in attorneys’ fees under the same provision of the Swedish Code of 10 Judicial Procedure for the parties’ Swedish arbitration that had one short hearing and did not 11 lead to a verdict. Fees Reply at 7. Based on the parties own history in Sweden, the more 12 specific and detailed nature of Forssman’s declaration, and the extensive litigation costs 13 specifically because of Defendants’ actions, the Court finds that the request for $9,686,251.06 14 is reasonable and in line with what a Swedish court would grant in this case. 15 The only ground identified by Defendants to deny the fee request in Swedish law is that 16 Boeing did not comply with the timing requirements under the Swedish Code of Judicial 17 Procedures. Fees Opp’n at 1. Swedish law requires that a request for attorneys’ fees be 18 presented before the termination of the lawsuit. Shuck Decl. ¶ 16 (citing Swedish Code of 19 Judicial Procedure 18:14). By contrast, Rule 54 requires a party to file a motion seeking 20 attorneys’ fees within 14 days of the judgment. The Court is uncertain how the timing 21 requirement of the Swedish Code of Judicial Procedure would apply to the current procedural 22 posture of this case, but it is irrelevant because the procedures for requesting attorneys’ fees in 23 a Swedish court are not applicable to the Fees Motion. Even in a diversity case where the 24 district court applies the fee-shifting laws of the state where it is located, “the procedure for 25 requesting an award of attorney fees is governed by federal law.” Carnes v. Zamani, 488 F.3d 26 1057, 1059 (9th Cir. 2007). This rule must apply equally to federal question cases, particularly 27 when there is a Federal Rule of Civil Procedure that is directly on point. It also comports with 28 how the Restatement applies procedural rules. Restatement §122 (“A court usually applies its -8- 1 own local law rules prescribing how litigation shall be conducted even when it applies the local 2 law rules of another state to resolve other issues in the case.”). Boeing’s failure to follow the 3 timing requirements of the Swedish Code of Judicial Procedure that contradict the Federal 4 Rules of Civil Procedure is thus irrelevant. 5 Although not addressed by any party, subsequent to the filing of the Fees Motion 6 Energia settled with Boeing, leaving Yuzhnoye as the only remaining defendant. Boeing must 7 therefore submit additional briefing and/or documentation to clarify what portion of the 8 $9,686,251.06 it seeks solely from Yuzhnoye. B. Boeing’s Motion to Register the Judgment 9 Boeing asks the Court for permission to register the judgment under 28 U.S.C. § 1963. 10 11 Pls.’ Mot. to Register the J., Dkt. No. 971. Energia opposed, Dkt. No. 984, Yuzhnoye joined in 12 opposition, Dkt. No. 985, and Boeing replied, Dkt. No. 1002. 28 U.S.C. § 1963 permits a party 13 to register a judgment when it has become final or “when ordered by the court that entered the 14 judgment for good cause shown.” “Good cause” is not a term defined by statute, and the Ninth 15 Circuit has observed that “there is no Ninth Circuit law defining ‘good cause.’” Columbia 16 Pictures Television, Inc. v. Krypton Broad. of Birmingham, Inc., 259 F.3d 1186, 1197 (9th Cir. 17 2001). While Boeing did identify assets of Energia in this district, it conceded that it has “not 18 yet located any assets of Yuzhnoye in California.” McKeever Decl. ¶¶ 2–4, Dkt. No. 972. In 19 this Motion Boeing has not identified any facts or reasons related to Yuzhnoye that would 20 constitute good cause to register the judgment. 21 Boeing’s Motion to Register the Judgment is therefore DENIED. 22 C. Yuzhnoye’s Motion to Amend or Alter the Judgment Energia filed a motion to alter or amend the judgment under Rule 59. Defs.’ Mot. to 23 24 Alter or Amend the J. Pursuant to Federal Rule of Civil Procedure 59(e), Dkt. Nos. 989, 999 25 (“Motion to Amend”). Boeing opposed the motion, Dkt. Nos. 1010, 1011, and Energia replied, 26 Dkt. Nos. 1012, 1025. Energia filed two requests for judicial notice.2 Dkt. Nos. 990, 1013. 27 28 2 Defendants’ Requests for Judicial Notice are GRANTED. -9- 1 Yuzhnoye joined Energia’s motion, Dkt. No. 993, reply, Dkt. No. 1016, and requests for 2 judicial notice, Dkt. Nos. 994, 1017. 3 Briefly, Energia brought the Motion Amend because it believed that the Court’s 4 summary judgment opinion ignored the impact of Kvaerner, a former party to this litigation, 5 and its separate settlements with both Energia and Boeing. Energia argued that the amount it 6 owed to Boeing must be reduced by the amount that Kvaerner paid Boeing, because that 7 payment was made on behalf of Energia. See Dkt. No. 989–1. 8 9 Regardless of whether or not Energia is correct, is has since settled with Boeing and is no longer a party in this case. The Court also found Energia and Yuzhnoye were separately 10 liable for specific amounts. Amending the Court’s previous judgment to reduce the liability of 11 Energia will therefore not impact the liability of Yuzhnoye. This is further shown in the motion 12 itself which specifically cites paragraph 1-a of the Court’s Judgment, a paragraph which 13 expressly applies to Energia and not Yuzhnoye. Mot. to Amend at 3 (citing Dkt. No. 960 at ¶ 1- 14 a). A motion to alter or amend a judgment under Rule 59 is properly denied when its resolution 15 could not impact the rights or liabilities of any party. Cf. Coastal Transfer Co. v. Toyota Motor 16 Sales, U.S.A., 833 F.2d 208, 211 (9th Cir. 1987) (noting that a court should deny a motion 17 under Rule 59 unless the new evidence was “of such magnitude that production of it earlier 18 would have been likely to change the disposition of the case.”). Yuzhnoye has not provided any 19 argument for how it could benefit from this Motion. 20 Because the motion will not impact Yuzhnoye, its Motion to Amend is DENIED. 21 // 22 // 23 // 24 // 25 // 26 // 27 // 28 // -10- 1 IV. CONCLUSION 2 The Fees Motion is GRANTED as to the applicability of Swedish law, Boeing’s 3 entitlement to fees under Swedish law, and that the total amount requested of $9,686,251.06 4 was reasonable under Swedish law. Boeing may submit additional briefing and/or 5 documentation within two weeks from the receipt of this order delineating what portion of the 6 $9,686,251.06 it still seeks from Yuzhnoye. Yuzhnoye will then have two weeks to file any 7 opposition. 8 Boeing’s motion to register the judgment is DENIED. 9 Yuzhnoye’s motion to amend or alter the judgment is DENIED. 10 11 IT IS SO ORDERED. 12 13 DATED: February 6, 2018 14 15 16 HONORABLE ANDRÉ BIROTTE JR. UNITED STATES DISTRICT JUDGE 17 18 19 20 21 22 23 24 25 26 27 28 -11-
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