Case of the Day: Ingenieria, Maquinaria Y Equipos v. ATTS

The case of the day is Ingenieria, Maquinaria Y Equipos de Colombia S.A. v. ATTS Inc. (D.N.J. 2017). ATTS was the agent of ISGEC John Thompson Ltd., which sold commercial boilers. IMECOL and ATTS entered into a three-year agreement under which IMECOL would act as sub-agent and would sell IJT boilers in Colombia. The agreement had an agreement to arbitrate that provided for arbitration in Cali, Colombia. ATTS learned that IMECOL had contacted IJT and had tried to negotiate to become IJT’s agent in Latin America. ATTS then terminated the agreement with IMECOL, arguing that IMECOL had breached the agreement’s provision forbidding direct contact with IJT and had entered the agreement under false pretenses, and IMECOL initiated an arbitration.

ATTS declined to participate in the arbitration “because the Agreement was terminated and no longer in effect.” The tribunal awarded almost $300,000 to IMECOL. IMECOL sought confirmation.

ATTS argued that because IMECOL had induced it to enter into the contract by fraud, the award was not binding. Oops. This argument was plainly contrary to Prima Paint, which holds that as long as the parties made a contract that contains an arbitration clause, the validity of the contract as a whole must be decided by the arbitrator: only a challenge to the validity of the arbitration clause itself is for the court to decide. Therefore, ATTS had waived its arguments by failing to participate in the arbitration, and IMECOL was entitled to confirmation.

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