Cardno Says Ecuadorian Gov't Can't Exit Bribery Plot Suit

Cardno asked U.S. District Judge Robert N. Scola Jr. not to "reward the gamesmanship" of defendants nor their efforts to "thwart Cardno

Law360 - Hannah Albarazi 28/06/2019

Australian infrastructure firm Cardno International Pty Ltd. urged a Florida federal judge Wednesday to bar an Ecuadorian government agency from exiting a lawsuit over a $14.8 million arbitral award stemming from allegations that owners of Ecuadorian engineering firm Caminosca SA hid their involvement in a government bribery scheme before Cardno acquired it.

Cardno asked U.S. District Judge Robert N. Scola Jr. not to "reward the gamesmanship" of defendants nor their efforts to "thwart Cardno's well-earned recovery by resort[ing] to inapplicable Ecuadorian law."

Florida law, not Ecuadorian law, governed the International Centre for Dispute Resolution proceedings, Cardno told the judge.

Cardno says it finds itself in this position only after opposing counsel failed to notify it or the arbitral tribunal of the 2017 death of one of the Caminosca owners, Rafael Alberto Jácome Varela, prior to the issuance of the final arbitral award.

Cardno says Varela's arbitration counsel and his heirs have refused to accept service on behalf of his estate, and it claims the defendants have used "obstructionist tactics" to delay conclusion of the arbitration.

The Australian company says the heirs invoked "peculiar Ecuadorian laws to 'repudiate' their interests in the estate." Ecuador's public sector real estate management arm, Servicio de Gestion Inmobiliaria del Sector Publico, which is known as Inmobiliar, is "the de facto administrator of intestate estates under Ecuadorian law" and that it should not be allowed to exit the suit.

The dispute stems from allegations that the owners of Ecuadorian engineering firm Caminosca, which Cardno purchased in late 2012, hid its embroilment in a scheme to bribe officials to win government contracts, according to previous filings.

An ICDR tribunal ordered the four Caminosca owners to pay Cardno more than $14.8 million and return nearly 900,000 Cardno shares. The tribunal also allowed the acquisition to be rescinded.

Judge Scola confirmed the award last year against three of Caminosca's four owners and dismissed the fourth owner, Varela, who died in 2017. Cardno has since attempted to substitute Inmobiliar for Varela. He granted Cardno's motion for substitution in August 2018, ruling that the company could substitute Varela's "estate, or estate administrator, as a party in this case." Cardno then sued Inmobiliar in February.

Inmobiliar has asked Judge Scola in May to dismiss it from the lawsuit filed by Cardno over the arbitral award, arguing that it is immune from the court's jurisdiction under the Foreign Sovereign Immunities Act. In addition, Inmobiliar told the court that it didn't have any involvement in the dispute underlying the award and that it isn't the proper party for such a substitution.

Cardno, insisting that Inmobiliar is the appropriate substitute for the deceased defendant, told the judge that it is in no way trying to place liability on Inmobiliar in a way that the FSIA would apply. It urged Judge Scola to ensure that the arbitration award he confirmed last year under the Panama Convention is not rendered ineffectual.