8.16 Dispute Resolution
All questions or matters in dispute under this Agreement shall be submitted first to mediation and then if no resolution to binding arbitration pursuant to the terms hereof.
(a) Any dispute shall first be submitted to a mediator, selected by the parties, by agreement at a neutral location, agreed to by the patties. All costs of the mediation shall be borne equally by the parties to the dispute.
(a) It shall be a condition precedent to the right of any party to submit any matter to arbitration pursuant to the provisions hereof, that any party intending to refer any matter to arbitration shall have given not less than 10 days’ prior notice of its intention to do so to the other party, together with the particulars of the matter in dispute. On the expiration of such 10 days, the party who gave such notice may proceed to refer the dispute to arbitration as provided in paragraph (b).
(b) The party desiring arbitration shall refer the dispute to binding arbitration in Denver, Colorado under the Rules of the American Arbitration Association ("AAA") by a single arbitrator selected by the parties. If the parties cannot agree, an arbitrator from the Denver area shall be selected by the AAA office in Denver. The arbitrator’s decision shall be final, binding and non-appealable and may be enforced in any court. The parties shall each pay a pro rata share of the arbitrator’s and AAA’s charges for the arbitration. The arbitrator may, in his or her sole discretion, award attorneys’ fees and out-of-pocket expenses to that party which the arbitrator, in its sole discretion, determines is the prevailing party.
Without waiver of any rights, arguments or defenses that they may have Respondents hereby refuse to submit to the ICDR/AAA for arbitration because, inter alia, Claimant’s alleged disputes are not subject to a valid arbitration clause, are not within the scope of a valid arbitration clause, and/or Claimant has waived any arbitration right it might have had. These issues must be determined before a valid arbitration may proceed, and they are solely the province of a state or federal court having jurisdiction over each individual Respondent.
Pleas as to Jurisdiction
1. The tribunal shall have the power to rule on its own jurisdiction, including any objections with respect to the existence, scope or validity of the arbitration agreement.
2. The tribunal shall have the power to determine the existence or validity of a contract of which an arbitration clause forms a part. Such an arbitration clause shall be treated as an agreement independent of the other terms of the contract. A decision by the tribunal that the contract is null and void shall not for that reason alone render invalid the arbitration clause.
3. A party must object to the jurisdiction of the tribunal or to the arbitrability of a claim or counterclaim no later than the filing of the statement of defense, as provided in Article 3, to the claim or counterclaim that gives rise to the objection. The tribunal may rule on such objections as a preliminary matter or as part of the final award.
These are the Rules that Respondents agreed to apply here and the Rules that the parties incorporated into the Option Agreement. Thus, the Rules are binding upon the parties.
Regarding your request of information about the press release issued by Dyna, Goldgroup answers the following:
Goldgroup has no knowledge of the actions mentioned in said press release.
Goldgroup has informed us that the complaint was never served to Goldgroup, it does not recognize any of the claims mentioned in such press release and is of its belief that such claims are without merit. The Company is reviewing its options and intends to exercise all of its legal rights in order to have the purported judgement discussed in the Release disregarded, set aside or otherwise overturned, and further will seek damages for misrepresentation against Dyna and all relevant parties.
[I]t is apparent to the Court that Goldgroup’s Amended Demand for Arbitration expressly invokes provisions of the Option Agreement and that at least some of its claims are, at least facially, based on alleged breaches of the terms of that Agreement. Although the Plaintiffs assert a litany of arguments as to why arbitration should not proceed — the Option Agreement expired by its terms, Goldgroup has waived the ability to invoke arbitration in the U.S. by agreeing to DynaMexico’s Bylaws... Mexican courts are already hearing the same matters, Goldgroup should be judicially estopped from raising these claims, the claims are meritless, etc.--nearly all of these are matters that are outside the narrow scope of this Court’s threshold arbitrability determination and are more properly addressed to the arbitrator. The Court need only consider the Plaintiffs’ contention that the "expiration" of the Option Agreement operated to extinguish any agreement by the parties to arbitrate; after all, if the Agreement has unambiguously expired, the parties’ agreement to arbitrate would no longer be valid.
The Court rejects that argument out of hand... Thus, the Court finds that the Option Agreement remains in effect in some respects, and thus, the parties’ agreement to arbitrate disputes arising under that Agreement remain operative as well.
Opinion and Order Denying Motion to Dismiss and Denying Motion for Summary Judgment, slip op. at 13-14 (September 29, 2015)(the "Opinion and Order").
I acknowledge receipt of Mr. Téllez’s email, and his comments ate noted.
All parties are invited to participate in the hearing, and will be provided a full and fair opportunity to present their respective positions. Pursuant to Article 23 of the International Dispute Resolution Procedures (June 1, 2010), however, the hearing will go forward regardless whether Respondents choose to participate. After the conclusion of the hearing, I will enter my award based on the evidence presented.
I look forward to seeing counsel for both parties and their witnesses in Denver at 9:00 a.m. on Monday.
Respondents did not reply.
a. Article 7.3, "DynaMexico’s Board of Directors," states that upon execution of the Option Agreement, DynaMexico’s board was to consist of three directors, with two directors appointed by Goldgroup and one by DynaUSA. Upon Goldgroup’s completion of the share purchase, the board was to have five directors, with two directors appointed by Goldgroup and two by DynaUSA, with the fifth director to be appointed jointly.9
b. Articles 7.4 and 7.5 provide procedures concerning director removals and resignations and filling director vacancies. Article 7.6 addresses the competence of directors appointed.10
c. Article 7.7 prohibits the parties from. engaging in certain actions that would conflict with the exploration and development of the SJG Property.11
d. Article 7.9 establishes a Management Committee, which is to oversee "Expenditures," as defined in Article 1.4 of the Option Agreement.
A committee (the "Management Committee") shall oversee the Expenditures and shall be comprised of 3 persons, one designated by DynaUSA and two designated by Goldgroup. The Board of DynaMexico shall oversee the keeping of DynaMexico in good standing and proper working order, and the Management Committee shall oversee the Expenditures and matters not related to keeping DynaMexico in good standing and proper working order. All Expenditures shall be expended in accordance with a budget approved by the Management Committee prior to such expenditure. The Management Committee shall be responsible for delivering quarterly reports to the Board of Directors of DynaMexico.12
Article 1.4 defines "Expenditures" as follows:
"Expenditures" means the sum of all costs of maintenance and operation of the SJG Property (including without limitation all maintenance of concessions and rights/interests in the SJG Property), all expenditures on the exploration and development of the SJG Property, and all other costs and expenses of whatsoever kind or nature, including without limitation the Ejido agreement, those of a capital nature, incurred or chargeable with respect to the exploration of the SJG Property, and the placing of the SJG Property into commercial production.
e. Article 7.10 provides a right of first refusal in the event that either Goldgroup or DynaUSA sought to sell its shares in DynaMexico to a third party.13
a. As acknowledged in its Opening Memorial, Goldgroup is not pursuing the conversion and unjust enrichment stated in the Second Amended Demand.38 Thus, I need not consider these claims further. Further, although the Second Amended Demand (¶¶ 12-13) includes a claim for "declaratory judgment," Goldgroup is no longer pursuing this claim separately, but only as part of the relief sought under its breach of contract and breach of good faith claims.39 Similarly, at the hearing, Goldgroup argued it is no longer separately pursuing a claim for an accounting, but wants an accounting as part of the relief under its breach of contract and breach of good faith claims.40
b. At the hearing, Goldgroup conceded that Mexican law does not permit a claim for civil conspiracy but only for criminal conspiracy, and acknowledged that its civil conspiracy claim is really only a reiteration of its breach of contract and breach of good faith claims.41 Thus, I need not consider a separate civil conspiracy claim further.
c. Finally, at the hearing, Goldgroup reaffirmed that it is not seeking to recover any damages from DynaMexico, but only from DynaUSA.42
The Option Agreement contains no express provision setting a date by which it would terminate. Moreover, although certain obligations of the parties under the Option Agreement could be fully completed at some point in time (e.g Goldgroup completed its capital contributions according to the stated schedule and Dyna Mexico completed its obligation of allowing Goldgroup to appoint two Board members), the Option Agreement contains other provisions that impose obligations on the parties that seemingly continue indefinitely or which have yet to be completed. For example, nothing in Article 7.9 of the Option Agreement suggests that the Management Committee’s oversight over expenditures would expire at any point in time, and thus, the Option Agreement remains in force and effect as to that matter. Similarly, Article 7.3 calls for the selection of a fifth Director, an event which Goldgroup alleges has yet to occur. Once again, at least as it relates to that provision, the Option Agreement has yet to be completed.
Opinion and Order at 14. I agree with this analysis.
a. Although Respondents argued that Goldgroup’s claims were not cognizable under Mexican law, Respondents are wrong, for the reasons demonstrated above.
b. Contrary to Respondents’ submissions, Goldgroup does have "standing" to bring its claims for breach of the Option Agreement, including the obligation of good faith thereunder.
c. Goldgroup has withdrawn its breach of fiduciary duty claim, and so I need not further address Respondents’ defenses to this claim.
d. Goldgroup is not seeking an order amending or modifying the June 2000 Powers of Attorney, and I am not granting such an order.
e. Respondents have failed to present any evidence of Goldgroup’s unclean hands, wrongful conduct, comparative and contributory fault, or breaches of duties to Respondents, and thus all of these defenses fail. The same is true of the defense of "account stated" and "failure to mitigate damages."
f. Respondents’ business judgment rule defense also fails for lack of legal and evidentiary support.
g. Respondents’ defense based on the assertion that a Mexican court has assumed jurisdiction over the additional shares of DynaMexico stock issued to DynaUSA also fails. As explained above, the claims in this arbitration are not in conflict with the non-arbitrable claims that Goldgroup has asserted in the Mazatlan Litigation for breach of DynaMexico’s bylaws and provisions of Mexican corporate law related to shareholders’ meetings.
a. The Option Agreement remains in full force and effect, and is enforceable, in accordance with its terms. This includes (without limitation) the arbitration clause in Article 8.16.
b. Respondents have breached their obligations to Goldgroup under the Option Agreement, as detailed above. Each breach of the Option Agreement is also a breach of Respondents’ obligations of good faith, which arise under the Option Agreement, pursuant to Mexican law.
c. As provided in Article 7.3 of the Option Agreement, each of Goldgroup and DynaUSA are entitled to appoint two directors to the board of directors of DynaMexico, and the board of directors shall consist of five total members. Within no later than 30 calendar days from the date of this Award, Goldgroup and DynaUSA shall hold a meeting of the Shareholders of DynaMexico for the purpose of appointing the fifth member of DynaMexico’s Board of Directors, as required under Article 7.3 of the Option Agreement. Each of Goldgroup and Respondents shall act in good faith with respect to this appointment. The parties shall exchange, in writing, the names of potential candidates for the fifth director by no later than 10 calendar days from the date of this Final Award.
i. As provided in Article 7.9 of the Option Agreement, the Management Committee continues to exist, and shall continue to exist unless and until the parties agree otherwise in writing. The Management Committee has all of the authority and responsibilities described in the Option Agreement. Thus, as provided in Article 7.9, the Management Committee has the authority to approve a budget for any "Expenditures" within the meaning of Article 1.4 of the Option Agreement. Any "Expenditures" that are not included in a budget approved by the Management Committee ate improper and unauthorized. The powers of attorney granted to Mr. Diepholz before the date of the Option Agreement cannot be construed to authorize Mr. Diepholz to circumvent the Management Committee’s power to approve and oversee Expenditures. Therefore, unless the parties agree otherwise in writing, neither he nor anyone else has any authority to cause DynaMexico to incur Expenditures that are not included in a budget approved by the Management Committee and overseen by the Management Committee.
ii. By no later than 20 calendar days from the date of this Award, Respondents must account to Goldgroup, in writing and with particularity and in detail, for any and all Expenditures that DynaMexico has incurred since June 2011. Further, any Expenditures that have been incurred since June 2011 that were not included in a budget approved by the Management Committee were improper, and must be refunded to DynaMexico by no later than 45 days from the date of this Award. To the extent that Mr. Diepholz caused DynaMexico to incur Expenditures that were not authorized by the Management Committee, I find that he (as DynaUSA’s Chairman and CEO) was acting on DynaUSA’s behalf. Thus, as a shareholder in DynaMexico, DynaUSA must pay to DynaMexico the full amount of unauthorized Expenditures that it (through Mr. Diepholz or otherwise) caused DynaMexico to incur from June 2011 through and including the date of this Award. The amounts that DynaUSA must pay to DynaMexico include, without limitation, the amount of USD$1,044,952.46 (detailed in Claimant’s Exhibit C-3) for various legal and other expenses that DynaUSA originally paid.
e. By causing DynaMexico to issue new shares and thus dilute Goldgroup’s 50% equity interest in DynaMexico, Respondents breached their obligations of good faith under the Option Agreement and otherwise acted in violation of Goldgroup’s rights under the Option Agreement.
f. For the reasons explained above, Respondent DynaUSA must pay Goldgroup a total of USD$403,913.92 including (i) USD$325,000.00 for attorneys’ fees and costs attributable to Holland & Hart; (ii) USD$2,795.00 for the cost of the hearing transcript; and (iii) USD$76,118.92 for attorneys’ fees and costs attributable to Loperena, Lerch y Martin Del Campo.
g. The administrative fees and expenses of the ICDR, totaling USD$20,800.00, and the compensation and expenses of the arbitrator, totaling USD$64,813.00, shall be borne entirely by Respondents DynaUSA and DynaMexico, jointly and severally. Therefore, Respondent DynaUSA and DynaMexico, shall reimburse Goldgroup the sum of USD$85,613.00, representing that portion of said fees and expenses in excess of the apportioned costs previously incurred by Goldgroup, upon demonstration by Goldgroup that these incurred costs have been paid.
h. By seeking to enjoin this arbitration in the Mexico City litigation, Respondents flagrantly and in bad faith breached their obligations under Article 8.16 of the Option Agreement and thus have caused harm to Goldgroup. Respondent DynaUSA must promptly reimburse Goldgroup for all amounts that Goldgroup incurs to challenge the order of the court in the Mexico City litigation concerning arbitrability.
i. To the full extent permitted by law, all relief granted to Goldgroup herein (whether declaratory, monetary or otherwise) is intended to be specifically enforceable.