Tag Archives: FAA

Case of the Day: Clientron Corp. v. Devon IT, Inc.

The case of the day, Clientron Corp. v. Devon IT, Inc. (E.D. Pa. 2014), seems flagrantly wrong. The facts were simple enough. Clientron was a Taiwan corporation. It had a contract with Devon, a Pennsylvania corporation, for the manufacture and delivery of computer components. The contract had an arbitration agreement. A dispute arose, and Clientron commenced an arbitration before the Chinese Arbitration Association in Taiwan. Although Devon argued that the dispute was not arbitrable, the tribunal determined that it had jurisdiction and entered an award for $6.5 million in favor of Clientron. Clientron obtained a judgment in Taiwan enforcing the arbitral award. There had been no decision in a revocation proceeding Devon had brought in Taiwan.
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TBS Middle East Carriers v. United Quarries

The case of the day is TBS Middle East Carriers v. United Quarries (S.D.N.Y. 2014). United Quarries charted vessels owned by TBS to carry crushed gabbro aggregate from Fujairah, in the UAE, to Mesaieed, Qatar. Under their contract, 134 shipments were completed. TBS charged United Quarries approximately $30.2 million for freight and $18.2 million for demurrage. There was no dispute about those charges. There was, however, a dispute about much smaller costs: $122,753 for “account reconciliation,” $25,696.78 for “reimbursement of shifting expenses,” $138,162.15 for additional war risk premiums, and $1.36 million for bunker escalations. United Quarries counterclaimed for $605,835.57, or 1.25% on the gross freight and demurrage earned by TBS.
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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).