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forgoing complete choice of law analysis for issue of actual authority of foreign state's agent, but explaining in the alternative that such an analysis would require a "center of gravity" or "grouping of contacts" analysis under New York law
Summary of this case from Petroleos De Venez. S.A. v. Mufg Union BankOpinion
97 Civ. 793 (BSJ)
July 1, 2002
Opinion Order
I. INTRODUCTION
Plaintiff Wasserstein Perella Emerging Markets Finance, L.P., ("WPEM") filed this action to recover commissions, fees and expenses allegedly owed by Defendant Province of Formosa ("Formosa" or the "Province") in exchange for WPEM's efforts to arrange a $40 million debt financing transaction for the Province. Following a bench trial, and for the reasons stated below, the court finds that Formosa is not liable to WPEM for payment of any fees, commissions, or expenses incurred in connection with the financing transaction.
After denying the Province's motion to dismiss and the parties' cross-motions for summary judgment, the court held a bench trial beginning on January 22, 2001. In addition to receiving documentary evidence from both parties, the court heard the testimony of Hernando Pérez Añez, the Chairman of WPEM; Fernando Gomez Luengo, Plaintiff's expert in Argentinean law; Jorge Oscar Ibañez, former Minister of Economy of Formosa; Ricardo Albert Cabrera, former Vice Minister of Economy and current Minister of Economy of Formosa; Garcia Cabello, Defendant's expert in Argentinean law; and, by deposition, Claudio Cesario, WPEM's Argentinean counsel in the loan transaction.
At trial, WPEM contended that Dr. Ibañez, the Minister of Finance and Public Works of the Province at the time of the transaction, had actual and apparent authority to bind the Province to the payment of WPEM's fees, commissions, and expenses. WPEM contended that the Province was contractually obligated to pay WPEM its fees, commissions, and expenses because WPEM enabled the financing transaction to go forward on May 28, 1996. The Province mounted several defenses. First, the Province argued that the court lacked subject matter jurisdiction. Second, the Province argued that no contract was ever formed between WPEM and the Province because the Province never accepted WPEM's offer. Defendant also argued that, under Argentinean law, Minister Ibañez did not have actual authority to bind the Province to accept the terms of the loan transaction and that the concept of apparent authority, as it is known in this country, does not exist in Argentina for governmental figures or entities. Finally, Defendant argued that, under both Argentinean law and New York law, the Province was not responsible for the fees, commissions, and expenses claimed by WPEM unless all legal requirements pertaining to the loan transaction had been satisfied and the loan actually closed; since no closing took place and the funds were never transmitted to the Province, the Province was not liable for the fees.
Following the conclusion of the bench trial in this action, and after careful, complete consideration of the testimony, of the above-listed witnesses, exhibits and stipulations submitted on behalf of both Plaintiff and Defendant, and the arguments of counsel, this court now makes the following findings of fact and conclusions of law.
II. FINDINGS OF FACT
Plaintiff WPEM is a limited partnership engaged in investment banking and organized in accordance with the laws of the Cayman Islands. (Pretrial Order § 1; Compl. ¶ 1; Trial Tr. at 8-9, 27-28.) The sole general partner of WPEM is Wasserstein Perella Emerging Markets, Inc., a Delaware corporation authorized to do business in New York State that has its principal place of business in New York City. (Id.) Wasserstein Perella Emerging Markets, Inc., is, in turn, a subsidiary of Wasserstein Perella Co. ("WPCo."), which is also a Delaware corporation with its principal place of business in New York City. (Compl. ¶ 2; Trial Tr. at 8.) Defendant Province of Formosa is a geographic and political administrative district of the Republic of Argentina. (Pretrial Order § 1; Compl. ¶ 3.)
In July of 1994, WPEM and the Province began discussions regarding a financing transaction whereby WPEM would arrange $40 million in financing for the Province through the issuance of debt securities. (Trial Tr. at 10-11.) The $40 million issue was to be sold primarily to institutional investors in the, United States. (Trial Tr. at 10.) On August 2, 1994, WPEM's Chairman Hernando Pérez Añez sent two letters to Oscar Rodriguez, then the Province's Minister of Economy. (See Pl.'s Exs. 1, 2; Def.'s Ex. A.) Those letters outlined the terms under which WPEM offered to arrange the $40 million transaction. (See Pl.'s Exs. 1, 2; Def.'s Ex. A; Trial Tr. at 11-12.) The terms of WPEM's offer included an annual interest rate of 12.125%, payable every six months, private placement of the debt securities through a Eurobond, and a guaranty of repayment by the Province through the irrevocable assignment of its federal tax co-participation funds. (Pl.'s Ex. 1; Def.'s Ex. A at 1-2; see Cesario Dep. at 16, 25.) A second letter sent from Mr. Pérez Añez to Minister Rodriguez on August 2, 1994, stated, "This placement will be predicated not only under the terms and conditions set forth in the letter that accompanies this one but also upon the following terms." (Pl.'s Ex. 2 at 1.) The letter then set forth a commission of 2% of the total amount paid at the conclusion of the transaction and payment of legal fees of up to $40,000. (Pl.'s Ex. 2 at 1.) Each letter read, "We hope to have the pleasure of receiving the signature of the Hon. Minister accepting this offer as indicated below." (Pl.'s Ex. 1 at 2; Pl.'s Ex. 2 at 1; see also Def.'s Ex. A at 2.) Under the caption, "Accepted and Agreed," Minister Rodriguez signed each letter above the designation Ministry of Economy, Public Works and Services of the Province of Formosa. (Pl.'s Ex. 1 at 2; Pl.'s Ex. 2 at 2; Def.'s Ex. A at 2.)
At some point after those letter agreements were signed, the Province informed WPEM that they wanted to complete the transaction using the provincial bank, Banco de la Provincia de Formosa ("Provincial Bank"), and WPEM agreed. (Trial Tr. at 12.) On May 8, 1995, WPCo., the New York parent of WPEM, and the Provincial Bank entered into a Financial Advisor and Placement Agent Engagement Letter ("Engagement Letter") in which the Provincial Bank retained WPEM for the debt financing arrangement. (Pl.'s Ex. 3; Trial Tr. at 12-13.) The Engagement Letter specifically provided that "[i]f appropriate in connection with performing its services for [the Provincial Bank] hereunder, WPCo. may utilize the services of one or more of its affiliates, including Wasserstein Perella Securities, Inc. and Wasserstein Perella Emerging Markets Finance, L.P., in which case references herein to WPCo. shall include such affiliates." (Pl.'s Ex. 3 at 1.)
With respect to the payment of WPEM's fees and expenses, the Engagement Letter provided:
If . . . a Financing is consummated and includes a private sale of Securities, the [Provincial Bank] will pay WPCo. upon the closing date thereof, the following private placement agency fees:
(i) 2% of the gross proceeds of any senior indebtedness issued i[n] the Financing;
(ii) with respect to any other Securities issued in the Financing, such placement fee as shall be mutually agreed by the [Provincial Bank] and WPCo.
(Pl.'s Ex. 3 at 2.) The Engagement Letter also required the Provincial Bank to "bear all legal, accounting, printing and other expenses (up to a maximum of US $40,000.00) in connection with the offering and sale of any Securities." (Pl.'s Ex. 3 at 3.) The Engagement Letter also included provisions mandating that the agreement "shall be deemed made in New York" and that all controversies "arising from or relating to performance . . . shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to such states's rules concerning conflicts of laws" and setting forth the obligations of the Provincial sank in the event of termination. (Pl.'s Ex. 3 at 4-5.) With respect to termination, the Engagement Letter provided:
This agreement and WPCo.'s engagement hereunder may be terminated at any time at will by either WPCo. or the [Provincial Bank], with or without cause, upon thirty days' prior written notice thereof to the other party; provided, however that . . . (b) any termination of WPCo's engagement hereunder shall not affect the [Provincial Bank's] obligation to pay the full fees provided for in paragraph 2 hereof and (c) any termination of WPCo's engagement hereunder shall not affect the [Provincial Bank's] obligation to reimburse the expenses accruing prior to such termination to the extent provided for herein.
(Pl.'s Ex. 3 at 4.)
Despite the inclusion of the Provincial Bank as a party to the contract, the provincial government always continued its participation in the deal. In fact, the Province itself pledged a portion of its co-participation tax receipts from the federal government of Argentina as security for the loan. (Trial Tr. at 15; Cesario Dep. at 16, 25.) Concurrently with the Engagement Letter, certain other documents were executed by the parties. These documents included an indenture dated May 28, 1995, with exhibits annexed thereto (the "Indenture"). The Indenture was signed by the Provincial Bank, the Province, and the Caledonian Bank Trust Limited.
Due in part to the collapse of the Latin American financial markets and the subsequent liquidation of the Provincial Bank, the proposed loan between WPEM and the Provincial Bank did not close. (Trial Tr. at 15-16, 39-40.) After the liquidation of the Provincial Bank, however, the Province contacted WPEM in early 1996 and told WPEM it wanted to substitute the Province as the obligor and to conclude the transaction. (Trial Tr. at 16, 40; Cesario Dep. at 33-34.) At this point, Aldo Pignanelli, an independent financial consultant, represented the Province in its negotiations with WPEM and acted as an intermediary between WPEM representative Hernando Pérez Añez and the new Minister of Economy for the Province, Jorge Oscar Ibañez. (Trial Tr. at 18, 34, 51-53, 148-51, 178-81; Cesario Dep. at 35-44.) Throughout the negotiations, the Province was aware that WPEM was an investment bank with its principal place of business in New York City and that WPEM was to raise the $40 million by sale of debt securities issued by the Province in American financial markets to institutional investors located within this country. (Trial Tr. at 13, 16-17; Pl.'s Exs. 1-5; Def.'s Exs. A, C.)
On March 19, 1996, WPEM transmitted two letters to Minister Ibañez proposing financing directly to the Province. (Def.'s Exs. C, J.) In one letter, WPEM proposed to charge a placement fee of 1%, payable one time only upon disbursement of the loan proceeds at the closing, plus 0.35% as legal expenses in addition to the 2% commission and $40,000 cap on legal expenses set in the August 4, 1994, letter and the Engagement Letter. (Def.'s Ex. G.) In the other letter, WPEM proposed to discount the net proceeds payable to a net of 94.5% of the $40 million. (Def.'s Exs. C, J.) Each of the letters contains a space for Minister Ibañez's signature confirming his approval, but he signed neither; moreover, Minister Ibañez did not respond to either letter by writing to WPEM or calling Mr. Pérez Añez. (Def.'s Exs. C, J; Trial Tr. at 43-44, 145, 152-53, 300.) After receiving the correspondence dated March 19, 1996, Minister Ibañez conferred with Vice Minister Ricardo Cabrera, one of his advisors. The court credits the testimony of both Minister Ibañez and Vice Minister Cabrera that the two men reviewed the Province's files to compare WPEM's March proposal with the offer WPEM made in August of 1994 and concluded that they would not go forward with the transaction described in the March letters because the terms of the offers had become less favorable to the Province. (See, e.g., Trial Tr. at 44-45, 145-46, 152, 210-12.)
On April 1, 1996, Mr. Pérez Añez again wrote to Minister Ibañez. The letter sent from WPEM on April 1, 1996, stated:
The placement of the note will require, in addition to our commission and legal expenses in Argentina set forth in our Note of August 2, 1994, a placement commission of 1.50% payable only once at disbursement, plus legal fees and other expenses incurred in the United States for the placement, which will not exceed 1% of the total of the transaction.
It is for this reason that we need your approval to proceed to the placement of the loan, for which we request that you sign such approval in the corresponding place at the foot of this Note.
(Pl.'s Ex. 4 at 1; Trial Tr. at 16.) This new offer from WPEM increased the placement fee to 1.5% and the legal fee cap was raised to 1%. (Pl.'s Ex. 4.) Taken together, the August 2, 1994; letter and the April 1, 1996, letter represented an offer that set WPEM's commissions and fees at 3.5% of the $40 million financing transaction and provided for reimbursement of expenses and legal fees not to exceed 1% of the amount to be financed. (Trial Tr. at 19; Pl.'s Exs. 2, 4; Def.'s Ex. A.) Neither Minister Ibañez nor any other official signed the April 1, 1996, letter on behalf of the Province. (Trial Tr. at 155; Pl.'s Ex. 4.)
The court credits the testimony of Minister Ibañez and Vice Minister Cabrera that, once again, they conferred and concluded that both the disbursement fee and the legal fee cap had increased as compared with the earlier figures. (Trial Tr. at 154-56, 209-12.) Instead of signing the offer proposed by WPEM, Minister Ibañez responded by sending his own letter to WPEM on April 11, 1996. (Trial Tr. at 17; Pl.'s Ex. 5.) The letter, written by Vice Minister Cabrera and signed by Minister Ibañez, stated:
I am pleased to address you in relation to your Note No. 21 dated April 1, 1996, referenced Operation 111 Provincia de Formosa on loan of US $40,000,000 — undertaken by that Bank by contract signed with date 8th of May of 1994.
In reference, I manifest that the Government of the Province of Formosa ratifies its willingness that the disbursements of said loan become effective under the conditions agreed upon, including the commissions and expenses detailed by you through note dated 2nd of August of 1994.
Awaiting your reply as soon as possible to finalize the operation, I greet you attentively.
The reference in the April 11 letter to "contract signed with date 8th of May of 1994" is an inaccurately dated reference to the Engagement Letter, which was actually dated May 8, 1995. (See Trial Tr. at 156, 170-71.)
The reference in the April 11 letter to "contract signed with date 8th of May of 1994" is an inaccurately dated reference to the Engagement Letter, which was actually dated May 8, 1995. (See Trial Tr. at 156, 170-71.)
(Pl.'s Ex. 5 at 1.) It is unclear from the text of Minister Ibañez's letter alone precisely which "conditions" were included within the phrase "under the conditions agreed upon." The court, therefore, turns to other evidence presented by the parties at trial to resolve that ambiguity and determine the intent of the parties with respect to the offer of April 1, 1996, and the Minister's letter of April 11, 1996.
The court credits the testimony of Minister Ibañez and Vice Minister Cabrera that the April 11 letter indicates the Province's intention to accept a transaction structured to include only the commissions and expenses listed in the letters of August 2, 1994, and the Engagement Letter. (Trial Tr. at 154-56, 159, 169-71, 211-13, 215-16, 218-19.) Thus, the fees and expenses to which the Province, through the April 11 letter, agreed did not include the 1.5% placement fee or the 1% cap on legal expenses discussed in the April 1 letter. The Province was willing to agree, however, to the 2% commission set forth in the August 2, 1994 letter to which the Minister's April 11, 1996, letter specifically refers. (Trial Tr. at 18-19, 48, 157, 159.) Minister Ibañez also testified that his April 11, 1996, letter accepted the provisions of the May 8, 1995, Engagement Letter; the court thus finds that the reference in the April 11 letter to "contract signed with date 8th of May of 1994" is an inaccurately dated reference to the Engagement Letter. (See Trial Tr. at 156, 170-71.)
The testimony and evidence submitted at trial make it clear that the April 11, 1996, letter was intended by the Province to represent a counteroffer proposing the same deal proposed by WPEM in August of 1994. (Trial Tr. at 157-59, 169-71, 211-12.) The court does not credit the testimony of Mr. Pérez Añez suggesting that anyone involved in the negotiations, including himself, perceived the April 11 letter as an acceptance of the transaction on the terms proposed in the April 1, 1996, letter. (See, e.g., Trial Tr. at 19, 45-49.) That testimony is inconsistent with Minister Ibañez's failure to sign the April 1 letter, his request for an agreement to the April 11 letter from WPEM, the text of the April 11 letter itself, the continued negotiations after April 11, 1996, and credible testimony by both Minister Ibañez and Vice Minister Cabrera. Subsequent to April 11, 1996, negotiations between the parties continued in an effort to reach agreement on the terms and conditions and close the transaction. (Trial Tr. at 157-59.) The court finds that the testimony by Vice Minister Cabrera describing his conversations with the representatives of WPEM is credible. (See, e.g., Trial Tr. at 218-19.) As a result of those conversations and the text of the April 11 letter itself, the court finds, that WPEM was clearly informed and aware of the Province's intent to structure the transaction as it had initially been proposed by WPEM in 1994 and that the Province had no intention of accepting the offer on the terms stated in the April 1, 1996, letter. (Trial Tr. at 156-57, 218-19.) The Province clearly remained interested in obtaining the loan, but did not agree to the increases in fees and expenses required by WPEM.
In May of 1996, WPEM continued discussions with Minister Ibañez, Vice Minister Cabrera, and Mr. Pignanelli. (See, e.g., Trial Tr. at 20.) After a series of conversations, communications, and meetings that May, the parties remained unable to agree as to certain terms and conditions of the transaction. (Trial Tr. at 216, 218-22.) Claudio Cesario, a lawyer representing WPEM in Argentina, requested documents from the Province necessary to effectuate a closing in correspondence dated May 14, 1996, and May 16, 1996. (Trial Tr. at 5, 55-56, 220-22; Def.'s Exs. D, E.) WPEM also provided the Province with drafts of the loan documents that were necessary to effectuate the closing of the proposed transaction. (Def.'s Exs. F, F-1.) The Province never provided any of the requested documentation, nor did it sign, or indicate a willingness to sign, the underlying loan documents. (Trial Tr. at 220-22, 227; Cesario Dep. at 111-13.)
Although WPEM claims that a loan closing was agreed upon and that representatives of the Province failed to attend, the court does not credit the testimony to that effect. Mr. Pérez Añez himself was unable to remember the details concerning the first alleged closing date. (Trial Tr. at 58-62.) The court credits, instead, the testimony of Vice Minister Cabrera that he traveled to Buenos Aires to attend a meeting on May 20, 1996, to continue negotiations and work towards closing the transaction. (Trial Tr. at 212-13.) The court credits the testimony of Minister Ibañez and Vice Minister Cabrera that they informed both Aldo Pignanelli, who was negotiating with Mr. Pérez Añez, and WPEM's Argentinean counsel Claudio Cesario that, consistent with the Minister's letter of April 11, the Province was only willing to proceed if the terms of the August 2, 1994, letters were met. (Trial Tr. at 154-57, 216-20, 227.) No agreement was ever reached concerning WPEM's proposals. (Trial Tr. at 164, 191, 227.) On May 28, 1996, at the time and place WPEM contends had been designated for another attempted closing, no authorized representative of the Province appeared, and the necessary documents for the closing of the financing transaction were never signed. (Trial Tr. at 23-24.)
Still attempting to reach an agreement with the Province, WPEM approached the Province with yet another proposal on August 5, 1996, that included different terms from those previously discussed. (Trial Tr. at 63-64; Def.'s Ex. G.) The August 1996 letter clearly demonstrates that the parties were still in negotiations and had not agreed to the essential terms and conditions of the deal. (Trial Tr. at 63-64, 163-64; Def.'s Ex. G.) For example, the amount of the loan offered was reduced by WPEM to $20 million. (Def.'s Ex. G at 1.) Although the letter included a signature line for a provincial representative and requested the Province's "approval to proceed immediately," no representative of the Province ever signed the letter and the $20 million offer was never accepted by the Province. (Trial Tr. at 163-64; Def.'s Ex. G.)
The Province subsequently consummated a debt restructuring transaction for a longer term and with more favorable interest rates with Banco Galicia de Buenos Aires. (Trial Tr. at 191-92, 200-01, 217-21.) The Province never paid WPEM's commission, placement fee, or expenses incurred in the failed transaction. (Trial Tr. at 24.) WPEM incurred legal expenses, totaling $58,969.40 in connection with the financing transaction, (Trial Tr. at 24-26; Pl.'s Ex. 9), and lost $86,986.30 in interest by transferring a $25,000,000 tranche into its Euroclear account, (Trial Tr. at 26-27).
III. JURISDICTION
When this action was filed in February of 1997, WPEM premised subject matter jurisdiction on diversity of citizenship. The Province moved to dismiss, and the parties submitted cross-motions for summary judgment, but neither party addressed the Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. § 1330, 1602, et seq. A political subdivision, like the Province, is a foreign state for purposes of the FSIA. See 28 U.S.C. § 1603 (a). The FSIA provides the sole basis for obtaining subject matter jurisdiction over suits against foreign sovereigns, like the Province, brought in the United States. See Republic of Argentina v. Weltover, Inc., 504 U.S. 607, 610-11 (1992); see also 28 U.S.C. § 1330, 1604. "Under the [FSIA], a foreign state is presumptively immune from the jurisdiction of United States courts; unless a specified exception applies, a federal court lacks subject matter jurisdiction over a claim against a foreign state." Saudi Arabia v. Nelson, 507 U.S. 349, 355 (1993). A district court has personal jurisdiction over a foreign state pursuant to the FSIA provided: (1) it has subject matter jurisdiction, and (2) service has been effected in accordance with the FSIA. See Seetransport Wiking Trader Schiffarhtsgesellschaft MBH Co., Kommanditgesellschaft v. Navimpex Centrala Navala, 989 F.2d 572, 579 (2d Cir. 1993). Thus, the court's determinations of both subject matter and personal jurisdiction turn on whether the foreign state is entitled to immunity. If none of the FSIA's exceptions to sovereign immunity applies, the court lacks both subject matter and personal jurisdiction. See Cargill Int'l S.A. v. M/T Pavel Dybenko, 991 F.2d 1012, 1016 (2d Cir. 1993). Finally, even if the court does have personal jurisdiction under the FSIA, constitutional constraints on the court's assertion of personal jurisdiction still remain. See Seetransport, 989 F.2d at 580. Under the FSIA, the geographic area relevant to a determination of minimum contacts for purposes of personal jurisdiction is the entire United States, not merely the forum state. See Weltover, 504 U.S. at 619-20; Texas Trading, Texas Trading Milling Corp. v. Federal Rep. of Nig., 647 F.2d 300, 314 (2d Cir. 1981), cert. denied, 454 U.S. 1148 (1982). That is, there must be sufficient "minimum contacts" between Formosa and the United States "such that maintenance of the suit does not offend `traditional notions of fair play and substantial justice.'" International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940)).
The court entered an Interim Order on June 16, 1998, noting that the FSIA provides the sole basis for obtaining subject matter and personal jurisdiction over the Province and this lawsuit. Directing the parties' attention to the waiver, 28 U.S.C. § 1605 (a)(1), and commercial activity, 28 U.S.C. § 1605 (a)(2), exceptions to the FSIA, with a particular focus on the "direct effect" requirement of section 1605(a) (2)(C), the court ordered the parties. to submit additional briefing on the jurisdictional issues in the case. On May 9, 2000, the court denied the Province's resubmitted motion to dismiss. The court found that even though the Province had not waived its immunity, the commercial activity exception to the FSIA applied and the Province and this suit were subject to this court's jurisdiction. (Mem. Op. Order of 5/9/00, at 19-21.) The court also found, consistent with the requirements of due process, that the maintenance of jurisdiction over the case did not offend "traditional notions of fair play and substantial justice." (Id. at 24 (quoting International Shoe, 326 U.S. at 316).)
After discovery, a bench trial commenced on January 22, 2001. The Province again contested the court's jurisdiction. "Once the defendant presents a prima facie case that it is a foreign sovereign, the plaintiff has the burden of going forward with evidence showing that, under exceptions to the FSIA, immunity should not be granted . . . although the ultimate burden of persuasion remains with the alleged foreign sovereign." Cargill, 991 F.2d at 1016 (citations omitted).
The exception at issue in this case is section 1605(a)(2), which provides:
A foreign state shall not be immune from the jurisdiction of courts of the United States or of the States in any case —
. . . .
(2) in which the action is based upon . . . an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States . . . .
Section 1603(d) defines "commercial activity" to mean "either a regular course of commercial conduct or a particular commercial transaction or act. The commercial character of an activity shall be determined by reference to the nature of the course of conduct or particular transaction or act, rather than by reference to its purpose." 28 U.S.C. § 1603 (d). The Supreme Court has specified that "a state engages in commercial activity [within the meaning of § 1605(a)(2)] where it exercises only those powers that can also be exercised by private citizens, as distinct from those powers peculiar to sovereigns." Nelson, 507 U.S. at 360 (internal quotation marks and citations omitted).
After trial, and on the basis of the findings of fact included in this Opinion and Order, the court finds that the court has subject matter jurisdiction over this case because the commercial activity exception of the FSIA is applicable. The court also finds that the court has personal jurisdiction over the Province and that the requirements of due process have been met.
A. Commercial Activity Exception
All the requirements for the commercial activity exception enunciated in the third clause of § 1605(a)(2) are present in this case: (1) an act that occurs outside the United States; (2) taken "in connection with a commercial activity"; (3) that causes a "direct effect" in the United States. See Hanil Bank v. PT. Bank Negara Indonesia, (Persero), 148 F.3d 127, 131 (2d Cir. 1998). First, many of the acts at issue in this case occurred outside the United States. The Province itself conceded that the negotiation of the Engagement Letter took place in Argentina. (See Def.'s Mem. of Law in Supp. of Mot. to Dismiss at 11.)
Second, the Province's actions were clearly undertaken in connection with a commercial activity. Acts are in connection with a commercial activity so long as there is a substantive connection or causal link between them and the commercial activity. There can be no doubt that the Province's attempts to retain an investment bank to arrange a $40 million loan are commercial activity. Retaining a private investment bank to raise money for a loan, like borrowing money and issuing debt instruments, is an inherently commercial transaction. See Weltover, 504 U.S. at 609, 612-20. Private parties regularly hire investment banks to raise money in the ordinary trade and traffic in commerce. It is not the type of activity exclusively reserved to sovereign states and their political subdivisions. Cf. Nelson, 507 U.S. at 360.
Third, the actions taken had a direct effect in the United States. In Weltover, the Supreme Court stated that "an effect is direct if it follows as an immediate consequence of the defendant's . . . activity." Weltover, 504 U.S. at 618 (internal quotation marks and citations omitted). The Supreme Court further observed that the effect need not be substantial or foreseeable in order to be direct. See id. The Province attempted to hire a New York-based investment bank to arrange a $40 million loan, using American banks, like the Bank of New York, and American securities markets to raise money. Mr. Pérez Añez and his activities on behalf of WPEM were based in New York City, (Trial Tr. at 21), and the Province was aware of that fact. Correspondence originating in Mr. Pérez Añez's office and sent to the Province indicated that it was sent from New York, (see, e.g., Pl.'s Exs. 3, 4; Def.'s Exs. C, G, J), and correspondence sent to WPEM from the Provincial Bank and the Province included the New York address of WPCo., (see, e.g., Def.'s Ex. B). Moreover, correspondence from Minister Ibañez indicates that he was aware that WPEM's general partner was Wasserstein Perella Emerging Markets, Inc., a Delaware corporation with its principal place of business in New York. (See Pl.'s Ex. 5; see also Pretrial Order § 1; Compl. ¶¶ 1-2; Trial Tr. at 8-9.) Wasserstein Perella Emerging Markets, Inc., is in turn a subsidiary of WPCo., another Delaware corporation with its principal place of business in New York. (Id.) Under the terms of the deal included in the Engagement Letter, WPCo. was to serve as the actual party engaged as financial advisor to and placement agent for the Province. (Trial Tr. at 14-15; Pl.'s Ex. 3 at 1.) Moreover, under the terms of the Engagement Letter, by which the Province was willing to be bound, WPEM, its general partner, and WPCo., were all to provide services to the Province interchangeably. (See id.)
If the Province had taken the $40 million loan, transferable securities in the form of promissory notes would have been offered for sale in the United States. Those notes would have been sold primarily to institutional investors in the United States. (Trial Tr. at 10-11.) Under the proposed deal, the Bank of New York was to serve as the final trustee and paying agent in New York. (Trial Tr. at 69, 74-75, 192; see also Def.'s Ex. F-1.) The Province's attempts to retain WPCo. and its affiliates to arrange a $40 million loan by selling the Province's debt securities in American capital markets to American institutional investors is a commercial activity having direct effects in the United States. See Weltover, 504 U.S. 607 (1992); Shapiro v. Republic of Bolivia, 930 F.2d 1013, 1018-20 (2d Cir. 1991); Walpex Trading Co. v. Yacimientos Petroliferos Fiscales Bolivianos, 712 F. Supp. 383, 388-90 (S.D.N.Y. 1989). It is clear that, if there was a contractual obligation to pay WPCo., WPEM, or their affiliates for financing services, the failure to make that payment would be a direct financial injury to WPCo, an American corporation with its principal place of business in New York City. Clearly, under this standard, the claimed injury to the Plaintiff corporation would be a sufficiently direct effect in the United States to justify this court's exercise of subject matter jurisdiction. See Walpex, 712 F. Supp. at 389.
B. Personal Jurisdiction 1. FSIA Requirements
Pursuant to 28 U.S.C. § 1608 (a)(2), service of process may be effected "by delivery of a copy of the summons and complaint in accordance with an applicable international convention on service of judicial documents." The Inter-American Convention on Letters Rogatory, signed by the United States and Argentina, allows WPEM to serve the Province by serving three English and three Spanish copies of letters rogatory, together with the summons and complaint, on the United States Office of International Judicial Assistance. This court has previously found that WPEM effected service in accordance with those requirements. (See Mem. Op. Order of 5/9/00, at 24-25 (citing Lopez Aff., Ex. 13).) Since the court has subject matter jurisdiction and service was effected in accordance with the FSIA, the court has personal jurisdiction over the Province.
2. Due Process Requirements
In Texas Trading, the Second Circuit held that the exercise of jurisdiction over foreign states sued under the FSIA is subject to the same constitutional constraints that "otherwise regulate every exercise of personal jurisdiction." 647 F.2d at 313 (holding that a foreign state is a "person" within the meaning of the Due Process Clause). However, after the Supreme Court decided Weltover, the Court of Appeals expressed uncertainty as to whether its holding in Texas Trading remains good law. See Hanil Bank, 148 F.3d at 134. Like the Second Circuit in Hanil Bank, this court need not resolve the exact status of a foreign sovereign for due process analysis because, in any event, the due process requirements have been met here.
Congress enacted the FSIA specifically to provide access to the courts. See Texas Trading, 647 F.2d at 315 (quoting H.R. Rep. No. 94-1487, at 6-7 (1976), reprinted in 1976 U.S.C.C.A.N. 6604, 6605). Given that purpose, the Province should reasonably have expected to be sued in the United States were it to fail to abide by the terms of the Engagement Letter, or any other retention agreement, with WPEM and WPCo. or their other affiliates. The Province sought the services of one foreign and two American corporations, whose operations were based in New York. (Pretrial Order § 1; Compl. ¶¶ 1-2; Trial Tr. at 8-9; Pl.'s Ex. 3 at 1.) New York law had been designated to govern disputes arising out of the Engagement Letter, and the agreement specified New York as the venue for such disputes. (See Pl.'s Ex. 3 at 4-5.) Since Defendant could reasonably anticipate being haled into this court with respect to issues related to this failed financing transaction, the maintenance of jurisdiction over the Province for the purposes of this FSIA action does not "offend `traditional notions of fair play and substantial justice.'" International Shoe, 326 U.S. at 316 (quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940)).
IV. CONCLUSIONS OF LAW
The following represents the court's conclusions of law, based upon the facts found after the bench trial.
A. Choice of Law
Under the FSIA, the Province is liable to WPEM "in the same manner and to the same extent as a private individual under like circumstances." 28 U.S.C. § 1606. Thus, where state law provides a rule of liability governing private individuals, the FSIA requires the application of that rule to the Province. First Nat'l City Bank v. Banco Para el Comercio Exterior de Cuba, 462 U.S. 611, 622 n. 11 (1983); First Fid. Bank v. Government of Antigua Barbuda, 877 F.2d 189, 193-94 (2d Cir. 1989). Holding that the choice of law rules of the forum state apply in actions brought under the FSIA, the Second Circuit has noted that "[t]he goal of applying identical substantive laws to foreign states and private individuals . . . cannot be achieved unless a federal court utilizes the same choice of law analysis in FSIA cases as it would apply if all the parties to the action were private." Barkanic v. General Admin. of Civil Aviation of the P.R.C., 923 F.2d 957, 959-61 (2d Cir. 1991). The FSIA cannot operate as a "pass-through" to state law principles as required by § 1606 unless the court applies the forum state's choice of law rules. See Pescatore v. Pan Am. World Airways, Inc., 97 F.3d 1, 12 (2d Cir. 1996); Barkanic, 923 F.2d at 961. This court must, therefore, apply New York's choice of law rules to decide which body of law governs this dispute.
"In New York, the forum state in this case, the first question to resolve in determining whether to undertake a choice of law analysis is whether there is an actual conflict of laws." Curley v. AMR Corp., 153 F.3d 5, 12 (2d Cir. 1998) (citing Matter of Allstate Ins. Co. Stolarz, 81 N.Y.2d 219, 223 (N.Y. 1993)). Where there is no actual conflict between the potentially applicable bodies of law, the court may dispense with the choice of law analysis and apply the law of the forum. See id.
Most important to the court's decision to apply New York law to this contractual dispute is the fact that Defendant has argued that Argentinean law should apply only with respect to one issue in this case — the actual and apparent authority of Minister Ibañez to bind the Province in a contract with WPEM. Indeed, the parties' arguments and "briefs assume that New York law controls, and such implied consent . . . is sufficient to establish choice of law." Krumme v. WestPoint Stevens Inc., 238 F.3d 133, 138 (2d Cir. 2000) (internal quotation marks omitted). (See Oral Arg. Tr. at 6/28/01, at 14.) Defendant presented no argument or evidence of Argentinean law with respect to any issue other than actual and apparent authority; therefore, the court finds that New York law properly governs all other issues pertinent to this dispute. See Loebig v. Larucci, 572 F.2d 81, 85 (2d Cir. 1978) ("When there is no presumption that New York law is the same as foreign law and no evidence has been presented as to foreign law, New York courts have decided the cases in accordance with New York law."); Dornberger v. Metropolitan Life Ins. Co., 961 F. Supp. 506, 531 (S.D.N.Y. 1997). Since the court need not reach the Province's unenforceability defense based on lack of actual and apparent authority, and the court has not been alerted to any other differences between the law of New York and the law of Argentina for the purposes of this case, the court applies the law of New York to this contractual dispute.
Even if the court were to engage in a complete choice of law analysis, the result would be the same. Applying New York law, the court must determine the "center of gravity" or "grouping of contacts" to establish whether New York or Argentina has "the most significant relationship to the transaction and the parties." Zurich Ins. Co. v. Shearson Lehman Hutton, Inc., 84 N.Y.2d 309, 317-18 (N.Y. 1994). In addition to the place of contracting, the place of negotiation, place of performance, location of the subject matter of the contract, and the place of business or domicile of the contracting parties are factors to be considered in the analysis. Fieger v. Pitney Bowes Credit Corp., 251 F.3d 386, 394 (2d Cir. 2001). "Additionally, with regard to the law governing financial transactions arranged in New York, New York has emphasized the state's role as an international financial center, see Intercontinental Planning, Ltd. v. Daystrom, Inc., 24 N.Y.2d 372, 200 N.Y.S.2d 817, 826-27, 248 N.E.2d 576 (1969), and considered the state's need to ensure that its licensed professionals are paid for services provided within the state, see Rosenberg Rosenberg, P.C. v. Hoffman, 195 A.D.2d 343, 600 N.Y.S.2d 228, 229 (App.Div. 1st Dep't 1993) . . . ." Fieger, 251 F.3d at 394.
Numerous factors counsel in favor of application of New York law to the disputed contract issues in this case. First, the Engagement Letter contains a choice of law provision to govern the contract that selects New York as the proper forum for disputes and indicates that New York law applies regardless of choice of law rules. See Terwilliger v. Terwilliger, 206 F.3d 240, 245 (2d Cir. 2000) ("As a general rule, choice of law provisions . . . are valid and enforceable in [New York].") (quoting Marine Midland Bank, N.A. v. United Missouri Bank, N.A., 643 N.Y.S.2d 528, 530 (N.Y.App.Div. 1996)). Second, the fact that many of the relevant contacts are with New York "coupled with New York's policy interests in recognizing the importance of the state's professional brokers in arranging complex international financing transactions" leads the court to find that New York has the more significant interest in the contractual relationship between WPEM and the Province. Fieger, 251 F.3d at 397. Mr. Pérez Añez, as a part of WPEM, was a New York-based broker. (See, e.g., Trial Tr. at 21.) The status of WPEM and Mr. Pérez Añez as New York-based finders for the loan transaction invokes New York's strong interest, expressed unequivocally in the enactment and implementation of Section 5-701(a) (10) of the General Obligations Law, in regulating brokers to protect New York's reputation as "an international clearing house and market place" for loan transactions like the one at issue and to "encourage the use of New York brokers and finders by foreign principals." Daystrom, 24 N.Y.2d at 383-84; see Warshay v. Guinness PLC, 750 F. Supp. 628, 634 (S.D.N.Y. 1990). Moreover, numerous contacts in setting up the transaction originated from New York, and the services that the Province contemplated WPEM would perform would have been — and were to a limited extent — performed primarily in New York. (See, e.g., Pl.'s Exs. 3, 4; Def.'s Exs. C, G, J.) It is true that some of the events underlying this contractual dispute occurred in Argentina. However, the court finds that New York had sufficient contacts with the dispute that application of New York's law is not fundamentally unfair. See Fort Howard Paper Co. v. William D. Witter, Inc., 787 F.2d 784, 790-92 (2d Cir. 1986).
B. Contract Formation
The elements of a cause of action for breach of contract are (1) formation of a contract between plaintiff and defendant, (2) performance by plaintiff, and (3) defendant's failure to perform, which failure (4) results in damage to plaintiff. Furia v. Furia 116 A.D.2d 694, 695 (N.Y.App.Div. 1986). Formation of a contract requires (1) at least two parties with legal capacity to contract, (2) mutual assent to the terms of the contract, and (3) consideration. See generally, Restatement (Second) of Contracts §§ 9, 12, 17; 22 N.Y. Jur.2d Contracts §§ 9, 14. Under New York law, an acceptance "must comply with the terms of the offer and be clear, unambiguous and unequivocal." King v. King, 208 A.D.2d 1143, 1143-44 (N.Y.App.Div. 1994) (citations omitted). To determine whether an agreement that constitutes a legally binding contract was formed, "the intent of the parties is of central importance." Precision Testing Labs., Ltd. v. Kenyon Corp. of Am., 644 F. Supp. 1327, 1343 (S.D.N.Y. 1986). Intention to contract is determined objectively; the manifestation of a party's intention rather than his or her actual, real or secret intent is controlling. Brown Bros. Elec. Contractors, Inc. v. Beam Const. Corp., 41 N.Y.2d 397, 399-400 (N.Y. 1977). "In determining whether the parties entered into a contractual agreement and what were its terms, it is necessary to look . . . to the objective manifestations of the intent of the parties as gathered by their expressed words and deeds." Brown Bros., 41 N.Y.2d at 399. To help determine the intent of the parties, the court may consider "oral testimony, the parties' correspondence, or other preliminary or partially complete writings." Braun v. CMGI, Inc., No. 99 Civ. 12328 (WHP), 2001 WL 921170, at *7 (S.D.N.Y. Aug. 14, 2001) (citing cases).
The court finds that the April 1, 1996, letter from WPEM to the Province constituted an offer. The offer required that the Province agree to pay a placement fee set at 1.5% and legal expenses capped at 1% of the gross proceeds of the transaction. (Pl.'s Ex. 4.) The offer also included by reference the terms of the August 2, 1994, letter, which required that the Province agree to pay a commission of 2% of the gross proceeds to WPEM. (Pl.'s Ex. 4 at 1; see Pl.'s Ex. 2.) Based upon the credible testimony of Minister Ibañez and Vice Minister Cabrera, as well as the text of the relevant documents, the court finds that the language of the April 11, 1996, letter mentioning "the conditions agreed upon" references the initial deal worked out in 1994 and 1995 between WPEM and the Provincial Bank. Thus, the April 11, 1996, letter signed by Minister Ibañez manifested the Province's limited assent to the terms of the Engagement Letter and the two letters of August 2, 1994. The court finds that the April 11 letter does not demonstrate consent to the additional fees that were included in WPEM's new offer of April 1, 1996. The Province intended to contract for WPEM's services with fees and commissions limited to a 2% commission and legal expenses capped at $40,000. Since the April 11, 1996, letter did not agree to all of the terms of the offer extended to the Province by WPEM, it constitutes a rejection of that offer and a counteroffer on the part of the Province. See Poel v. Brunswick-Balke-Collender Co. of New York, 216 N.Y. 310, 319 (1915) ("A proposal to accept the offer if modified or an acceptance subject to other terms and conditions [is] equivalent to an absolute rejection of the offer."). Based on the facts found following the bench trial, the court finds that Minister Ibañez's letter dated April 11, 1996, did not bind the parties to a contract because it was not an acceptance of the April 1 offer. There was no meeting of the minds between the parties with respect to the fees, commissions, and expenses for which the Province would be liable under the contract; therefore, no contract was ever formed between WPEM and the Province.
Further support for this conclusion is found in the fact that the parties continued discussions and negotiations after April 11, 1996, about the fees, commissions, expenses, interest rate, and disbursement percentage. See Braun, at *9; Mellencamp v. Riva Music Ltd., 698 F. Supp. 1154, 1164 (S.D.N.Y. 1988). Minister Ibañez never signed the April 1, 1996, letter from Mr. Pérez Añez; instead, the Minister sent his own letter incorporating different terms. Thus, the Minister rejected the offer from WPEM and made his own counteroffer. See Krumme v. Westpoint Stevens, Inc., 143 F.3d 71, 83-84 (2d Cir. 1998) (citations omitted). In light of the history of the parties' negotiations and the court's comparison of the terms incorporated into the April 1 and April 11 letters, the court finds that the communications between the parties never indicated mutual assent sufficient to give rise to a binding contract. Once the April 11 letter was sent rejecting WPEM's offer, Minister Ibañez had extinguished his power to accept the offer stated in the April 1 letter, Braun, at *9, and the Province never accepted any of WPEM's later offers.
V. CONCLUSION
In accordance with the foregoing findings of fact and conclusions of law, the court finds that no binding, enforceable contract was formed between WPEM and the Province. Plaintiff's claims for damages stemming from the Province's alleged breach of contract are, therefore, dismissed. Because the court finds that no contract was ever formed, the court need not address the other arguments raised by Defendant, including the Minister's actual and apparent authority to contract, and the alleged failure to complete performance by WPEM. The Clerk of the Court is directed enter judgment for Defendant and to close the case.