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Citigroup, Inc. v. Abu Dhabi Investment Authority

United States Court of Appeals, Second Circuit

January 14, 2015

CITIGROUP, INC., Plaintiff-Appellant,
v.
ABU DHABI INVESTMENT AUTHORITY, Defendant-Appellee

Submitted: December 9, 2014.

Appeal from the district court's judgment dismissing the complaint of Citigroup, Inc. and compelling arbitration pursuant to an arbitration clause contained in the parties' contract. We hold that the " extraordinary remedies" authorized by the All Writs Act, 28 U.S.C. § 1651, do not permit a district court to enjoin an arbitration based on whatever claim-preclusive effect may result from the court's prior judgment when that judgment merely confirmed the result of the parties' earlier arbitration without considering the merits of the underlying claims at issue in that arbitration.

LESLIE GORDON FAGEN (Brad S. Karp and Gregory F. Laufer, on the brief), Paul, Weiss, Rifkind, Wharton & Garrison LLP, New York, NY, for Plaintiff-Appellant Citigroup, Inc.

SANFORD I. WEISBURST (Peter E. Calamari and Tai-Heng Cheng, on the brief), Quinn Emanuel Urquhart & Sullivan, LLP, New York, NY, for Defendant-Appellee Abu Dhabi Investment Authority.

Before: WESLEY, HALL, and LYNCH, Circuit Judges.

OPINION

Page 127

Hall, Circuit Judge :

This case presents the question of whether the All Writs Act, 28 U.S.C. § 1651(a), permits a federal district court to enjoin a second arbitration between parties to a contractual arbitration agreement based on what one party asserts is the claim-preclusive effect of a prior federal judgment confirming the result of the parties' earlier arbitration. We hold that the " extraordinary remedies" authorized by the All Writs Act cannot be used to enjoin an arbitration based on whatever claim-preclusive effect may result from the district court's prior judgment when that judgment merely confirmed the result of the parties' earlier arbitration without considering the merits of the underlying claims at issue in that arbitration. We concur with the district court that Appellant Citigroup, Inc. has not demonstrated an adequate basis for an extraordinary injunction pursuant to the All Writs Act and affirm the judgment dismissing Citigroup's complaint and compelling arbitration.

BACKGROUND

The facts are straightforward. Citigroup, Inc. and the Abu Dhabi Investment Authority (" ADIA" ) were parties to an Investment Agreement under which ADIA invested billions of dollars in Citigroup. The Agreement contained an arbitration clause providing that " any dispute that arises out of or relates to the [Agreement], or the breach thereof, . . . will be decided through arbitration administered by the American Arbitration Association." J.A. 163. In 2009, ADIA commenced arbitration proceedings pursuant to this clause, alleging that Citigroup had diluted the value of its investment by issuing preferred shares to other investors. See Abu Dhabi Inv. Auth. v. Citigroup, Inc., No. 12-cv-283, 2013 WL 789642, at *1 (S.D.N.Y. Mar. 4, 2013). It asserted claims of fraud, securities fraud, negligent misrepresentation, breach of fiduciary duty, breach of contract, and breach of the implied covenant of good faith and fair dealing. Id. The arbitrators rejected ADIA's claims and returned an award in favor of Citigroup after a lengthy and hard-fought proceeding that included extensive discovery and a multi-day hearing. Id. Citigroup moved in the United States District Court for the Southern District of New York for entry of an order confirming the award. The district court (Daniels, J.) granted Citigroup's motion, rejecting ADIA's arguments that the award should be vacated on the grounds that the arbitrators' choice-oflaw ruling and two evidentiary rulings were made in manifest disregard of the law and prevented ADIA from presenting its case. See Id. at *1, 9. ADIA appealed, and this Court affirmed, holding that the arbitrators did not act in manifest disregard of the law or exceed their authority. Abu Dhabi Inv. Auth. v. Citigroup, Inc., 557 F.App'x 66, 67-68 (2d Cir. Feb. 19, 2014).

In August 2013, while the district court's confirmation judgment remained pending before this Court on appeal, ADIA served Citigroup with a new notice of arbitration pursuant to the Investment Agreement, again asserting claims of breach of contract and breach of the implied covenant of good faith and fair dealing. Shortly thereafter, Citigroup instituted this action pursuant to the Declaratory Judgment Act, the All Writs Act, the Federal Arbitration Act (" FAA" ), 9 U.S.C. § 1, et seq., and the

Page 128

district court's " inherent authority to protect its proceedings and judgments." By way of relief, Citigroup sought to enjoin the second arbitration on the ground that ADIA's new claims were barred by the doctrine of claim preclusion, or res judicata, because they were or could have been raised in the first arbitration.[1] Citigroup maintained that the second arbitration constituted an " assault" on the district court's March 2013 judgment confirming the first award, and that applying the All Writs Act to enjoin the second arbitration was necessary to protect the integrity of that judgment. ADIA moved to dismiss Citigroup's complaint and to compel arbitration.

The district court (Castel, J.) granted ADIA's motions. After first flagging the strong federal policy favoring arbitration, the district court then pointed to our decision in National Union Fire Insurance Co. of Pittsburgh, PA v. Belco Petroleum Corp. (" Belco " ), 88 F.3d 129 (2d Cir. 1996), in which we held that the preclusive effect of a prior arbitration that had been confirmed by a state court was to be decided by the arbitrators, not the court. Given our holding in Belco, other similar decisions, and the parties' " broad arbitration clause" governing " any dispute that arises out of the" Investment Agreement, the district court held that Citigroup's preclusion defense was ...


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