Tag Archives: FAA

Case of the Day: Latin American Theatrical Group v. Swen International Holding

The case of the day is Latin American Theatrical Group, LLC v. Swen International Holding (C.D. Cal. 2013). Latin American filed a petition to confirm an arbitral award against Swen, a foreign corporation that had its offices in Panama. Latin American served process on Swen in Panama by mail. Panama is a party to the Inter-American Convention on Letters Rogatory and the Additional Protocol, but not to the Hague Service Convention. Swen moved to dismiss for insufficient service of process.

The judge noted that under Ninth Circuit precedent, service by mail under FRCP 4(f)(2)(C)(ii) was permissible only if the mail is sent by the clerk. The issue about whether the Hague Service Convention affirmatively authorizes service by mail without regard to FRCP 4(f)(2)(C)(ii) was irrelevant here given that Panama is not a party to the Convention. Swen argued that the service was permissible under FRCP 4(e) because that rule incorporates state law, and California law permits service by mail even if not sent by the clerk, but the judge properly rejected this argument on the grounds that FRCP 4(e) applies only to service within the United States.

The interesting point in the case came in a footnote. The court noted that § 9 of the FAA provides: “If the adverse party shall be a nonresident, then the notice of the application shall be served by the marshal of any district within which the adverse party may be found in like manner as other process of the court.” According to the judge:

Courts have questioned the continuing validity of these rules—particularly where the respondent is located outside the United States—and have instead applied the Federal Rules of Civil Procedure to determine whether a petition to confirm arbitration has been properly served.

Okay, but the statute says what it says. I understand why courts would want to escape from the statute, particularly in light of the policy of the Federal Rules of Civil Procedure to relieve the Marshal of responsibility for service of process. But plaintiffs in confirmation cases who want to be super-careful and are not in a jurisdiction with an appellate case on point will consider serving process in accordance with the statute. See, e.g., Logan & Kanawha Coal Co., LLC v. Detherage Coal Sales, LLC, 789 F.Supp.2d 716 (S.D. W. Va. 2011) (requiring service by marshal).

Case of the Day: Daebo International Shipping Co. v. Americas Bulk Transport (BVI) Ltd.

The case of the day is Daebo International Shipping Co. v. Americas Bulk Transport (BVI) Ltd. (S.D.N.Y. 2013). Daebo Shipping, a Korean company, chartered the M/V Nicole to ABT, which, despite its name, was, according to the judge, a Liberian company. After a dispute arose, Daebo Shipping asserted a claim for more than $300,000 against ABT, and ABT asserted a counterclaim for nearly $730,000. As provided in the charterparty, the parties submitted the dispute to arbitration in London. In 2012, the tribunal awarded Daebo Shipping the full amount of its claim plus interest and costs, and it rejected ABT’s counterclaim.

After the arbitration had begun, but before the award, Daebo Shipping merged with Daebo International. Under Korean law, Daebo Shipping thereafter ceased to exist as a separate entity. Daebo International never notified the tribunal of the merger until after the merger, when it requested the tribunal to correct the award or to issue a supplementary award stating that the award was enforceable by Daebo International. The tribunal refused on the grounds that it lacked power to correct the award or to issue a supplementary award.

Daebo International then sought confirmation of the award in New York. At a very early stage in the proceedings, Daebo Shipping (not Daebo International) filed an amended petition seeking confirmation. ABT moved to dismiss, and the judge held that Daebo Shipping was an improper plaintiff, dismissing the petition but giving leave for an amendment to name Daebo International as the proper plaintiff. After the amendment, the parties filed cross-motions for summary judgment.

The judge granted ABT’s motion. Section 207 of the FAA provides that “any party to the arbitration” may apply for confirmation of an award. On the one hand, it seemed clear that Daebo International was the successor in interest to Daebo Shipping, and in Productos Mercantiles e Industriales, S.A. v. Faberge USA, Inc., 23 F.3d 41 (2d Cir. 1994), the court held that “a straightforward decision regarding successor liability” can permit the district court to confirm an award on a petition brought by a clear successor in interest. But the judge distinguished Productos Mercantiles on the grounds that the arbitration agreement in that case provided that the award would inure to the parties’ successors and assigns; there was no such clause here. The judge also emphasized the fact that Daebo International was asking the court for relief that it had previously and unsuccessfully sought from the tribunal. It was, in effect, seeking a modification of the tribunal’s orders, not simple confirmation of the award. Under Article V of the New York Convention, reasoned the judge, the enforcing court lacks the power to modify the award; requests for modification of the award had to be made to the courts at the seat of the arbitration.

Daebo seems to have made a tactical decision to proceed in New York rather than in London: it claimed it did not appeal the award because “the costs of appealing what was essentiall an arbitrators’ jurisdiction point could not be justified when weighed against the possibility of any such appeal succeeding.” It seems that Daebo chose poorly. Penny wise, pound foolish.

Case of the Day: Marker Völkl (International) GmbH v. Epic Sports International, Inc.

The case of the day is Marker Völkl (International) GmbH v. Epic Sports International, Inc. (S.D.N.Y. 2013). Marker Völkl, a Swiss corporation, had a license agreement with Epic, a Nevada corporation, under which Epic distributed Marker Völkl’s tennis equipment. In a separate agreement, Capstone Business Credit, LLC, a New York company, guaranteed Epic’s performance of its financial obligations to Marker Völkl. Both agreements had an arbitration agreement providing for arbitration under the Swiss Rules of International Arbitration.

In 2011, Marker Völkl terminated the license agreement and demanded payment of unpaid royalties. Epic and Capstone refused to pay, and Marker Völkl initiated an arbitration in Switzerland. Epic counterclaimed in the arbitration and filed an action in the New York Supreme Court, alleging that after Marker Völkl terminated the agreement, it misappropriated Epic’s intellectual property by continuing to sell tennis racquets manufactured from molds created by Epic. Epic later withdrew its counterclaims in the arbitration.

The arbitrator found in favor of Marker Völkl and awarded € 300,000 in damages. The New York court dismissed Epic’s action for lack of personal jurisdiction and insufficient service of process. Marker Völkl then petitioned for confirmation of the award. Epic reasserted its counterclaims and sought to stay confirmation pending resolution of the counterclaims. The court confirmed the award. Epic had not shown any of the exceptions to confirmation permitted by Article V of the New York Convention. The counterclaims were not related to any of the NYC exceptions and were irrelevant.

The decision is straightforward and seems plainly correct. Easy case.