Supreme Court Won’t Look at $3.89 Billion Puerto Rican Suit

A suit involving $3.89 billion in oil payments the Puerto Rico Electric Power Authority wants to void was denied review by the U.S. Supreme Court today.

After PREPA bought the oil from Vitol SA, it learned Vitol pled guilty to a fraud crime in New York. Citing Puerto Rican law, PREPA sued in a Puerto Rican court to void its payments. Vitol removed the suit to federal court.

But forum selection clauses in the agreements between PREPA and Vitol stipulated that Puerto Rican law applied and only Puerto Rican courts could hear disputes between the two. The district court said the clauses were enforceable and ordered remand. The U.S. Court of Appeals for the First Circuit affirmed.

Under Supreme Court precedent, federal courts can’t rule on the merits of a dispute without first determining whether they have jurisdiction over it, Vitol said. But the appeals court said complex jurisdictional issues may be avoided when the merits can easily be resolved in favor of the party challenging jurisdiction.

The court therefore bypassed the jurisdiction issues presented by the case and said the forum selection clause clearly applies.

Vitol argued the First Circuit added to a circuit split over when federal courts can address the merits of a case without first deciding whether they have jurisdiction.

The case is Vitol SA v. Autoridad de Energia Electrica de Puerto Rico, U.S., No. 17-951, review denied 6/4/18.

To contact the reporter on this story: Bernie Pazanowski in Washington at bpazanowski@bloomberglaw.com

To contact the editor responsible for this story: Jessie Kokrda Kamens at jkamens@bloomberglaw.com