The case of the day is Nanda v. Nanda (N.D. Tex. 2012). Jay and Atul Nanda, brothers, were fighting over control of Dibon Solutions, Inc. in the Texas state courts. In 2011, they dismissed the Texas litigation and agreed to settle some of their disputes in arbitration. The arbitrator’s award, rendered only a month or so after the settlement, divided ownership in Dibon and other company, RTS. Jay accused Atul of refusing to comply with the award, and he sued Atul and Dibon Solutions in the 44th Judicial District Court of Dallas County. Atul and Dibon removed the case to the Northern District of Texas on the grounds that case related to the award and that the award fell under the New York Convention. After the judge denied Jay’s motion to remand,1 Jay amended his complaint to seek confirmation of the award.
Atul argued that he had been denied the opportunity to present his case because the arbitrator had misconstrued the evidence. He submitted an email that the arbitrator probably regrets sending:
In any event, the suggestion has been made that the evidence has been “misunderstood or ignored”, and the award contains “clearly an error of omission”.
I will always concede that evidence may have been misunderstood. I will never concede that evidence was ignored.
Is there not another possibility?
That in the parties obsessive haste, where urgency and a desire for speed rendered a desire for an orderly process moot, where the original hearing date, which all acknowledged was unreasonably hasty, was moved up by two weeks to accommodate the travel plans of family, resulted in a hearing process where the evidence was poorly, and sloppily, presented, where after the hearing, non-parties are sending ex parte communications asking for modifications to an award? I didn’t design the process. I argued against it.
The judge concluded, apparently correctly, that the email was not an admission that the arbitrator had misconstrued evidence. But it’s mysterious why the arbitrator thought it was a good idea to engage in this kind of back-and-forth with the litigants after rendering the award.
Atul made a number of other minor arguments, which the judge rejected, but his main alternate argument was that Dibon, a defendant in the action for confirmation, was not a party to the arbitration agreement. The agreement itself is a little confused. On the one hand, it does not name Dibon as a party. On the other hand, all of Dibon’s shareholders signed it, and why would they have signed if Dibon was not intending to be bound? Fortunately, there were sound reasons to hold that Dibon was bound by the agreement to arbitrate notwithstanding the agreement’s ambiguities. For one thing, Dibon ratified the arbitration agreement by performing obligations under it (e.g., dismissing its lawsuit against Jay, making payments to RTS). For another, Dibon judicially admitted that it was a party to the arbitration agreement in appellate proceedings in its lawsuit against Jay.
The oddest thing about this case is the speed with which the parties arbitrated. It seems both parties must have thought that the most important thing was a quick decision, up or down. Why, then, did Atul resist the award? When we read cases on confirmation or vacation or arbitral awards, there is always a tension between the justification for enforcing arbitral agreements—the parties’ consent—and the facts on the ground, at least in cases where the losing party isn’t able to make a credible showing that the award comes within one of the narrow exceptions to enforcement in the Convention.
- The decision on the remand is not the subject of today’s post, but it’s interesting nonetheless. Both brothers resided in Texas, but both were citizens of India. Under 9 U.S.C. [section] 202, commercial arbitral awards fall under the Convention unless it is “entirely between citizens of the United States.” Is it sensible to make citizenship rather than domicile the key here? See 3 Ved P. Nanda and David K. Pansius, Litigation of International Disputes in U.S. Courts [section] 19:9 (“Consider the reverse. Jane Doe is a citizen of India. She is domiciled in California. She has legal permanent residence status and expects to get her citizenship soon. A California company contracts with Jane for the software. Jane has all of the look, feel, and appearance of a U.S. citizen. Does the fact that she ‘only’ has a green card invoke the Convention because the dispute involves a person who is not a U.S. citizen? Would the result change if Jane were not a citizen when the legal relationship was created; but was a citizen when the dispute arose?”)