Ribadeneira v. New Balance Athletics, Inc. ( 2023 )

United States Court of Appeals
For the First Circuit
No. 21-1831
RODRIGO RIBADENEIRA; SUPERDEPORTE PLUS PERU S.A.C.,
Petitioners, Appellees,
v.
NEW BALANCE ATHLETICS, INC.,
Respondent, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Allison D. Burroughs, U.S. District Judge]
Before
Kayatta, Lipez, and Howard,
Circuit Judges.
Kevin P. Martin, with whom Mark E. Tully, Kate E. MacLeman,
Gerard J. Cedrone, and Goodwin Procter LLP were on brief, for
appellant.
David M. Cooper, with whom David M. Orta, Julianne F. Jaquith,
Gregg Badichek, and Quinn Emanuel Urquhart & Sullivan, LLP were on
brief, for appellees.
April 6, 2023
LIPEZ, Circuit Judge. At the beginning of 2013,
appellant New Balance Athletics, Inc. ("New Balance") entered into
a contract (the "Distribution Agreement") with Peruvian Sporting
Goods S.A.C. ("PSG") to distribute its products in Peru. This
Distribution Agreement contained an arbitration clause, which New
Balance invoked in 2018 to initiate arbitration proceedings
against PSG. Also joined as respondents in this arbitration were
appellees Rodrigo Ribadeneira, the controlling owner of PSG, and
Superdeporte Plus Peru S.A.C. ("Superdeporte"), another business
entity owned by Ribadeneira in Peru. The arbitrator issued two
awards, which imposed liability on PSG and Superdeporte for breach
of the Distribution Agreement, and on PSG, Superdeporte, and
Ribadeneira for tortious interference. The arbitrator also
rejected three counterclaims brought against New Balance.
Ribadeneira and Superdeporte subsequently filed a motion
in the district court to vacate the arbitration awards. The awards
had to be vacated, they contended, because they were nonsignatories
of the Distribution Agreement, and hence not subject to its
arbitration clause.1 Agreeing that the arbitrator had improperly
exercised jurisdiction over Ribadeneira and Superdeporte, the
1 PSG did not join Ribadeneira and Superdeporte in filing the
motion to vacate, and indeed, appellees expressly recognize that
PSG was bound, as a signatory to the Distribution Agreement, to
abide by that agreement's arbitration clause. Consequently, PSG
is not a party to this appeal.
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district court vacated the awards. Because we conclude that
theories of assumption and equitable estoppel apply here to support
arbitral jurisdiction over appellees, we reverse the judgment of
the district court.
I.
The resolution of this appeal turns in part on the
parties' actions before and during the arbitration proceedings.
Hence, we recount the tangled history of the parties' business
relationship, the litigation in Peru arising out of the breakdown
of that relationship, and the arbitration proceedings that
resulted in the contested awards.2
A. The Original Distribution Agreement and Negotiations over a
New Agreement
On January 1, 2013, New Balance and PSG entered into the
Distribution Agreement, pursuant to which PSG would serve as the
exclusive wholesale distributor of New Balance products in Peru in
exchange for paying distribution fees to New Balance. At the time,
Ribadeneira was PSG's majority shareholder but was not himself a
party to the agreement. The agreement was set to expire after an
initial term of three years but would automatically renew for an
2As an aid to understanding the procedural history of the
Peruvian litigation, the arbitration proceedings, and the
challenge to the arbitration awards in the district court, we
include an Appendix to this opinion in the form of a chart that
summarizes the claims and counterclaims brought by the various
parties in the various forums, as well as the key rulings of the
arbitrator and the district court.
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additional year absent timely notice by either party objecting to
renewal.
Section 21 of the Distribution Agreement contained an
arbitration clause, providing that:
The parties agree that any and all disputes
(whether in contract or any other theories of
recovery) related to or arising out of this
Agreement or the relationship, its application
and/or termination (including post-
termination obligations) shall be settled by
final and binding arbitration in accordance
with the UNCITRAL Arbitration Rules.
The Distribution Agreement also included two choice-of-
law provisions. First, there is a provision in Section 20 setting
out the law governing the agreement:
This Agreement . . . shall be governed by and
construed in accordance with the laws of the
Commonwealth of Massachusetts, U.S.A. without
giving effect to principles of conflicts of
laws . . . .
Second, there is a provision in Section 21, which dealt with
arbitration, requiring that:
The arbitrator shall determine the matters in
dispute in accordance with the laws of the
Commonwealth of Massachusetts, USA.
While the Distribution Agreement was still in effect,
New Balance and PSG began negotiating a new distribution agreement.
By that time, PSG was in arrears with respect to distribution fees
it owed New Balance.3 In September 2015, the parties exchanged a
3 Although the parties disagreed below about the extent of
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draft of an "Amended and Restated Distribution Agreement" (the
"New Agreement"). While some of the terms in the putative New
Agreement differed from those in the original Distribution
Agreement, its arbitration clause remained identical. In their
negotiations, both parties understood that while the New Agreement
initially would be executed between New Balance and PSG, a new
entity -- Superdeporte -- would be incorporated and would, once
operational, replace PSG as the distributor of New Balance products
in Peru.
Meanwhile, as neither PSG nor New Balance gave notice of
an intention to let the original Distribution Agreement expire on
December 31, 2015, the agreement renewed by its terms until
December 31, 2016.
In May 2016, Superdeporte was ready to begin operations.
Believing that it had reached agreement with New Balance on the
New Agreement -- and that, accordingly, the New Agreement was
binding on both parties -- PSG informed New Balance that
Superdeporte was ready to distribute New Balance products in Peru
and sought New Balance's agreement to modify the New Agreement to
substitute Superdeporte for PSG as its Peruvian distributor.
this arrearage, that dispute is not material to this appeal, which
does not turn on the merits of the underlying claims and
counterclaims in the arbitration.
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In response, New Balance denied that it had ever
concluded the New Agreement with either PSG or Superdeporte.
Shortly thereafter, New Balance gave notice that it would not
continue the distribution relationship with either PSG or
Superdeporte beyond the Distribution Agreement's expiration on
December 31, 2016. Instead, it would be using a different Peruvian
distributor, Deportes Sparta.
B. The Assignments to Ribadeneira
In November 2016, shortly before the extended expiration
of the Distribution Agreement, PSG and Superdeporte each executed
assignment agreements with Ribadeneira that transferred to him any
legal claims they had against New Balance arising from the New
Agreement and the negotiations surrounding it. The assignment
agreements contained language stating that PSG and the principals
of Superdeporte had engaged in negotiations with New Balance
regarding a new distribution agreement, but that, "once the
contractual terms were agreed and the contract ready to be
executed," New Balance announced that it would work with another
distributor in Peru, leading to "a dispute" between New Balance,
on the one side, and PSG and Superdeporte, on the other. The
assignment agreement with each company then provided for the
transfer to Ribadeneira of "all [their] rights in attention to the
dispute . . . against [New Balance], before judicial and
administrative authorities," thus allowing Ribadeneira to bring
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legal actions against New Balance to vindicate these rights "in
Peru and anywhere else in the world."
C. Litigation in Peru
In January 2017, as PSG and Superdeporte's assignee
under the assignment agreements, Ribadeneira sued New Balance in
a Peruvian court, asserting two claims of civil liability (the
"Peru Claims"): (1) that the New Agreement was an enforceable
contract, which New Balance had breached; and (2) that, in the
alternative, even if the New Agreement was never validly executed,
New Balance had violated its precontractual duty to negotiate with
PSG and Superdeporte in good faith.
The following month, Ribadeneira moved ex parte for an
injunction restraining New Balance from using any distributor in
Peru other than Superdeporte. The Peruvian court granted this
relief ("the Peru injunction") in December 2017, thereby
compelling New Balance to suspend its distribution relationship
with Deportes Sparta. The Peru injunction was lifted by the court
in July 2018 after New Balance had an opportunity to contest it.4
D. The Arbitration Proceedings
Later in July 2018, New Balance initiated arbitration
proceedings against PSG and Ribadeneira in Boston, Massachusetts,
4The Peruvian court dissolved the injunction apparently based
on its determination that New Balance and PSG no longer had any
distribution agreement in effect.
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seeking compensation for allegedly unpaid fees under the
Distribution Agreement. In support of the tribunal's jurisdiction
over Ribadeneira, New Balance argued that, as PSG's assignee,
Ribadeneira had taken its place under the Distribution Agreement.
Responding to New Balance's notice of arbitration in
September 2018, Ribadeneira objected to the arbitrator's
jurisdiction over him because he was a nonsignatory of the
Distribution Agreement. He also argued that since PSG had only
assigned him its claims in relation to the New Agreement, his
status as assignee could not bind him to arbitrate New Balance's
claim that PSG had breached the original Distribution Agreement.
In an amended response filed the following month, PSG asserted a
counterclaim alleging that New Balance itself had breached the
Distribution Agreement by refusing to accept orders from PSG by
letters of credit.
In January 2019, New Balance moved to compel PSG and
Ribadeneira to arbitrate the Peru Claims, arguing both that the
arbitration clause in the Distribution Agreement encompassed the
Peru Claims, and that the arbitrator had jurisdiction over
Ribadeneira. PSG and Ribadeneira opposed the motion, contesting
the arbitrability of the Peru Claims and arbitral jurisdiction
over Ribadeneira.
The arbitrator granted New Balance's motion to compel
arbitration in March 2019, ruling that both of the Peru Claims
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were subject to arbitration, and that Ribadeneira could be
compelled to arbitrate them.
Two months later, on May 2, 2019, Ribadeneira executed
new assignment agreements with PSG and Superdeporte that assigned
back to them the rights they had previously transferred to him.
The following day, New Balance filed an amended notice
of arbitration, adding Superdeporte as a respondent in New
Balance's claim for breach of the Distribution Agreement. New
Balance also added a claim against PSG, Ribadeneira, and
Superdeporte (collectively, the "arbitration respondents")
alleging that, by obtaining the Peru injunction based on
misrepresentations, they had tortiously interfered with its
distribution agreement with Deportes Sparta.
In a response filed on May 17, 2019, Ribadeneira and
Superdeporte objected to arbitral jurisdiction over them as to New
Balance's breach of contract claim because neither of them were
signatories of the Distribution Agreement. The arbitration
respondents also denied that New Balance's tortious interference
claim was arbitrable.
On May 31, 2019, the arbitration respondents moved for
summary disposition. Ribadeneira asserted that the tribunal
lacked jurisdiction over him entirely. He argued that he was not
bound to arbitrate New Balance's breach of contract claim because
he was neither a party to the Distribution Agreement nor to the
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New Agreement. He also reiterated that he was not obligated to
arbitrate the Peru Claims, because he had transferred the rights
underlying the Peru Claims back to PSG and Superdeporte. The
arbitration respondents also challenged the arbitrability of New
Balance's tortious interference claim, insisting that any claim
for damages arising from the Peru injunction could only be
adjudicated by the Peruvian court itself.
In August 2019, the arbitrator denied the arbitration
respondents' motion for summary disposition. With respect to the
tortious interference claim, the arbitrator ruled that the
Distribution Agreement's arbitration clause was broad enough to
embrace that claim, because the Peruvian litigation underlying
that claim implicated the "relationship" between the parties -- or
more specifically the breakdown of that relationship. Moreover,
because it was Ribadeneira who had requested the Peru injunction,
arbitral jurisdiction over the tortious interference claim
entailed jurisdiction over him with respect to that claim,
notwithstanding the new assignment agreements by which he assigned
back to PSG and Superdeporte the rights they had previously
assigned to him. As for the tribunal's jurisdiction over
Ribadeneira with respect to New Balance's breach of contract claim,
the arbitrator recognized that because PSG -- but not Ribadeneira
-- was a party to the original Distribution Agreement, ordinarily
Ribadeneira would not be subject to that contract's arbitration
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clause. However, the arbitrator deferred ruling on whether summary
disposition was warranted on that issue until the close of
discovery, given that evidence could yet emerge to support piercing
the corporate veil to attribute PSG's potential liability to
Ribadeneira, which would support Ribadeneira's joinder as a
respondent.
After discovery closed on November 15, 2019, the
arbitration respondents filed a renewed motion for summary
disposition to address this deferred issue. They contended that,
because no evidence had emerged to support a veil-piercing theory
of Ribadeneira's liability for PSG's alleged breach of the
Distribution Agreement, he was not obliged to arbitrate that claim.
They further argued that because Superdeporte was not a party to
the Distribution Agreement, it was not required to arbitrate New
Balance's claim for breach of that agreement.
In December 2019, the arbitration respondents filed
another amendment to their response to assert two additional
counterclaims. These counterclaims, brought by PSG and
Superdeporte against New Balance, alleged what were, in essence,
the Peru Claims. Specifically, the first counterclaim alleged
that New Balance had breached the New Agreement -- which they
insisted was a legally binding contract between New Balance, PSG,
and Superdeporte -- by discontinuing its distribution relationship
with PSG and Superdeporte after 2016. The second counterclaim
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contended, in the alternative, that New Balance had breached its
precontractual obligation under Massachusetts law to negotiate the
New Agreement in good faith. PSG also reiterated its counterclaim
against New Balance alleging breach of the Distribution Agreement.
The arbitration respondents' second amended response
also renewed Ribadeneira's objection to the arbitrator's
jurisdiction over him, pointing to the absence of evidence to
support piercing PSG's corporate veil and the new assignment
agreements by which he had assigned back to PSG and Superdeporte
the right to pursue the Peru Claims.
Arbitration hearings were held in March and May 2020.
The arbitration respondents submitted a post-hearing brief in
which they maintained their objection to the arbitrator's
jurisdiction over Ribadeneira and Superdeporte as to New Balance's
claim for breach of the original Distribution Agreement.
E. The Arbitrator's Partial Final Award & Final Award
On August 20, 2020, the arbitrator issued a Partial Final
Award, finding for New Balance on its claim that PSG had breached
the Distribution Agreement, and -- on the theory that Superdeporte
was PSG's successor-in-interest -- holding PSG and Superdeporte
jointly liable for the $826,102.60 in damages awarded.5
Because the arbitrator declined to pierce the corporate veil
5
to hold Ribadeneira liable for PSG's conduct, he did not impose
liability on Ribadeneira for breach of the Distribution Agreement.
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The arbitrator also agreed with New Balance that
Ribadeneira had tortiously interfered with its agreement with
Deportes Sparta by seeking and obtaining the Peru injunction.
Determining that the assignment of rights from PSG and Superdeporte
to Ribadeneira "created principal-agent relationships rendering
the principals as well as the agent responsible," he imposed
liability for tortious interference not only on Ribadeneira but
also on PSG and Superdeporte, holding all three jointly liable for
$215,736.71 in damages. The arbitrator also rejected PSG's
counterclaim alleging breach by New Balance of the Distribution
Agreement, as well as the two counterclaims brought against New
Balance by PSG and Superdeporte. In rejecting PSG and
Superdeporte's counterclaim alleging that New Balance had breached
the New Agreement, the arbitrator determined that the New Agreement
never became an enforceable contract.6
Pending further proceedings, the arbitrator reserved a
further decision on the calculation of interest on the contractual
damages and the award of reasonable attorney's fees and expenses,
inviting the parties to submit briefing on these issues.
6 The arbitrator rejected PSG's counterclaim because he
concluded that New Balance did not breach the Distribution
Agreement. He rejected PSG and Superdeporte's counterclaim
alleging that New Balance had violated its obligation of good faith
in the contract negotiation process because he found no evidence
that New Balance had negotiated in bad faith.
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Following the issuance of the Partial Final Award, the
arbitration respondents filed a request under the UNCITRAL
Arbitration Rules for an explanation of the legal basis for
arbitral jurisdiction over Ribadeneira and Superdeporte, insisting
that the arbitrator lacked jurisdiction over these two respondents
to arbitrate "any claims."
In a memorandum and order issued on November 4, 2020,
the arbitrator declined to modify or expand his discussion or
conclusions in the Partial Final Award. He reiterated that
Superdeporte was subject to his jurisdiction as to New Balance's
breach of contract claim because Superdeporte was PSG's "business
successor." He also explained, restating the reasoning in the
Partial Final Award, that he had exercised jurisdiction over all
three arbitration respondents as to the tortious interference
claim because Ribadeneira had sought and obtained the underlying
injunction in Peru pursuant to assignments of rights from PSG and
Superdeporte.
The Final Award issued on February 11, 2021, awarding
contractual interest on New Balance's breach of contract claim,
and allowing New Balance to recover attorney's fees and expenses.
The arbitrator also increased the principal amount of damages on
the contract claim. A provision in the Final Award stated that
the award was made "in full settlement of all claims and
counterclaims submitted to this Arbitration."
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F. Litigation in U.S. District Court
On February 1, 2021, shortly before the issuance of the
Final Award, appellees Ribadeneira and Superdeporte filed a motion
in the U.S. District Court for the District of Massachusetts,
asking the court to vacate the Partial Final Award under Section
10(a)(4) of the Federal Arbitration Act ("FAA") because the
arbitral tribunal lacked jurisdiction over them. On February 22,
2021, following the issuance of the Final Award, appellees filed
an amended motion seeking to vacate both the Partial Final Award
and the Final Award. Appellees again contended that vacatur was
appropriate because the arbitrator had exceeded his authority in
exercising jurisdiction over them.
Opposing appellees' amended motion, New Balance filed a
motion to dismiss and a cross-motion to confirm the arbitration
awards. New Balance set forth three arguments in support of its
motions: (1) appellees' amended motion was time-barred regardless
of whether the Massachusetts Uniform Arbitration Act ("MUAA") or
the FAA applied; (2) Superdeporte had waived any argument that the
arbitrator lacked jurisdiction over it by raising its
jurisdictional objection too late; and (3) while appellees were
not parties to the Distribution Agreement, they were nevertheless
subject to the arbitrator's jurisdiction under theories of
assumption and equitable estoppel.
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The district court denied New Balance's motion to
dismiss, agreeing with the appellees that their amended motion was
not time-barred. The court first determined that the FAA's three-
month deadline for filing a motion to vacate applied, see 9 U.S.C.
§ 12, despite the choice-of-law provision in the Distribution
Agreement stipulating that "[t]he arbitrator shall determine the
matters in dispute" according to Massachusetts law. Reasoning
that this choice-of-law provision only specified the law to be
applied in arbitration proceedings, rather than in court
challenges to the enforcement of arbitration awards, the district
court concluded that there was no explicit agreement to displace
the FAA in favor of state law. Accordingly, the FAA's three-month
deadline governed. The court went on to conclude that this three-
month period only began to run when the arbitrator issued the Final
Award, not the Partial Final Award, because the arbitrator did not
intend for the Partial Final Award to resolve all claims before
him. Hence, given that appellees filed their amended motion to
vacate within ninety days of the issuance of the Final Award, the
district court found that it had been timely filed.
The district court also granted the appellees' amended
motion to vacate the arbitration awards. On the waiver issue, the
court determined that Superdeporte's jurisdictional objection was
preserved because Superdeporte had objected to jurisdiction prior
to the arbitration hearing. On the merits of appellees'
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jurisdictional challenge, the court concluded that the arbitrator
lacked jurisdiction over both Ribadeneira and Superdeporte as
nonsignatories of the Distribution Agreement, and that neither
principles of assumption nor of equitable estoppel overcame their
nonsignatory status. Accordingly, the court ruled that appellees
were not obligated to arbitrate.
New Balance timely appealed.
II.
Before evaluating the merits of the district court's
decision to vacate the challenged arbitration awards for lack of
arbitral jurisdiction over appellees, we first address these
threshold issues: whether appellees' amended motion to vacate was
timely filed, and, if so, whether Superdeporte waived its
jurisdictional challenge to the arbitration awards.
A. Timeliness of Appellees' Motion to Vacate
New Balance argues that the two choice-of-law provisions
in the Distribution Agreement together demonstrate that the
parties intended for Massachusetts law -- rather than the FAA --
to govern all aspects of the arbitration process, including the
deadline for seeking judicial review of any arbitration award.
Under the MUAA, a party seeking to vacate an arbitration award
must file an application to vacate the award "within thirty days
after delivery of a copy of the award." Mass. Gen. Laws ch. 251,
§ 12(b). This period begins to run upon "the delivery of the
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arbitration award," not the issuance of the "final decision."
Maltz v. Smith Barney, Inc., 694 N.E.2d 840, 842 n.8 (Mass. 1998).
Since appellees' initial motion to vacate and amended motion were
filed on February 1, 2021, and February 22, 2021, respectively --
significantly more than thirty days after the Partial Final Award
was issued on August 20, 2020 -- New Balance contends that
appellees' amended motion is time-barred to the extent that it
seeks to vacate the liability and damages determinations made in
the Partial Final Award.
While parties to an arbitration contract "may
contemplate enforcement under state statutory or common law"
rather than the FAA, Hall St. Assocs. v. Mattel, Inc., 552 U.S.
576, 590 (2008), we have emphasized that "FAA displacement . . .
can occur 'only if the parties have so agreed explicitly.'"
Dialysis Access Ctr., LLC v. RMS Lifeline, Inc., 932 F.3d 1, 7
(1st Cir. 2019) (quoting Ortiz-Espinosa v. BBVA Secs. of P.R.,
Inc., 852 F.3d 36, 42 (1st Cir. 2017), abrogated on other grounds
by Badgerow v. Walters, 142 S. Ct. 1310 (2022)). As such, the
"mere inclusion of a generic choice-of-law clause within the
arbitration agreement is not sufficient . . . to support a finding
that contracting parties intended to opt out of the FAA's default
regime for vacatur of arbitral awards." Id. at 8 (quoting P.R.
Tel. Co. v. U.S. Phone Mfg. Corp., 427 F.3d 21, 29 (1st Cir. 2005),
abrogated on other grounds by Hall St. Assocs., 552 U.S. 576).
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To support its argument that the MUAA rather than the
FAA applies, New Balance relies on the choice-of-law provisions in
Sections 20 and 21 of the Distribution Agreement. Neither of these
provisions, however, indicates sufficiently explicit agreement to
displace the FAA's enforcement regime in favor of the MUAA.
Section 20, which provides that the Distribution
Agreement "shall be governed by and construed in accordance with"
Massachusetts law, is the kind of generic choice-of-law provision
we have previously held insufficient for FAA displacement. It
closely matches, for example, a choice-of-law provision
instructing that a contract was to "be construed in accordance
with the internal substantive laws of the Commonwealth of Puerto
Rico" that we determined to be insufficient to effectuate FAA
displacement. See Dialysis Access Ctr., 932 F.3d at 7-8.
The provision in Section 21 requiring the arbitrator to
"determine the matters in dispute" according to Massachusetts law
likewise does not demonstrate the parties' specific intention to
displace the FAA enforcement regime. As the district court
correctly observed, this provision "refers only to the law the
arbitrator will apply when deciding matters in dispute."
Ribadeneira v. New Balance Athletics, Inc., No. 21-cv-10173-ADB,
2021 WL 4419943, at *5 (D. Mass. Sept. 27, 2021). It does not
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contemplate the application of Massachusetts law to actions in a
judicial forum to enforce or vacate arbitration awards.7
We therefore conclude that the district court correctly
applied the FAA's deadline, which requires notice of a motion to
vacate an arbitration award to be filed "within three months after
the award is filed or delivered." 9 U.S.C. § 12.
New Balance contends that, even accounting for the FAA's
three-month deadline, appellees' amended motion was still untimely
because it was filed more than three months after the arbitrator
issued the Partial Final Award. To address this claim, we begin
with the principle that, in actions seeking to set aside an
arbitration award under Section 10(a)(4) of the FAA, "[i]t is
essential for the district court's jurisdiction that the
arbitrator's award was final, not interlocutory." Hart Surgical,
Inc. v. Ultracision, Inc., 244 F.3d 231, 233 (1st Cir. 2001)
(alteration in original) (quoting El Mundo Broad. Corp. v. United
Steelworkers of Am., AFL-CIO CLC, 116 F.3d 7, 9 (1st Cir. 1997)).
7 Where courts have found FAA displacement, the choice-of-law
provisions at issue have been much more explicit in requiring the
application of state law in the enforcement of arbitration awards
or in proceedings beyond the arbitration itself. See, e.g.,
Foulger-Pratt Residential Contracting, LLC v. Madrigal Condos.,
LLC, 779 F. Supp. 2d 100, 110 (D.D.C. 2011) (clause making an
arbitration agreement "specifically enforceable pursuant to . . .
the laws of the District of Columbia"); Ga. Cas. & Sur. Co. v.
Excalibur Reinsurance Corp., 4 F. Supp. 3d 1362, 1364, 1369 (N.D.
Ga. 2014) (clause providing that "all proceedings pursuant [to the
arbitration provision] shall be governed by the law of the state").
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The "familiar finality standard" is that "[n]ormally, an arbitral
award is deemed 'final' provided it evidences the arbitrators'
intention to resolve all claims submitted in the demand for
arbitration." Univ. of Notre Dame (USA) in Eng. v. TJAC Waterloo,
LLC, 861 F.3d 287, 291 (1st Cir. 2017) (quoting Hart Surgical, 244
F.3d at 233).
As an exception to this general rule, a partial award
may qualify as final "when the arbitrating parties have . . .
agreed to litigate [the issues] in separate, independent stages."
Id. This agreement to bifurcate proceedings may be "informal."
Id. (citing Providence J. Co. v. Providence Newspaper Guild, 271
F.3d 16, 19-20 (1st Cir. 2001)). Whether an agreement -- including
an agreement that was "never formally stated" -- to bifurcate
proceedings may be found depends on whether the parties "had
expressed an intent to bifurcate." Providence J., 271 F.3d at 19-
20.
Here, as the district court also concluded, there is no
evidence that the parties to the arbitration manifested any
intention to divide the proceedings into two parts. See
Ribadeneira, 2021 WL 4419943, at *6. The exception covering
bifurcated arbitration proceedings therefore does not apply.
Accordingly, the Partial Final Award qualifies as "final" for
purposes of starting the FAA's three-month clock only if it reveals
the arbitrator's intention to settle all claims before him.
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We discern no such intention. In issuing the Partial
Final Award, the arbitrator indicated that he was "retain[ing]
jurisdiction" and "re-open[ed] the hearings for written
submissions" on issues including the calculation of contractual
interest and the award of attorney's fees and expenses. The issue
of contractual interest, as the arbitrator later explained in the
Final Award, was "a subject of New Balance's contractual claim."
While the arbitrator described the awards made in the Partial Final
Award as "preliminary," he stated that the Final Award was "in
full settlement of all claims and counterclaims submitted to this
Arbitration."
We therefore conclude that only the Final Award was a
"final" arbitration award that the district court had jurisdiction
to review. Accordingly, the FAA's three-month deadline is measured
from the date that the Final Award issued, namely February 11,
2021. Since appellee's amended motion to vacate was filed on
February 22, 2021, it was timely.
B. Waiver of Superdeporte's Jurisdictional Challenge
New Balance contends that Superdeporte waived its right
to challenge the arbitrator's jurisdiction, offering two
arguments. First, New Balance maintains that Superdeporte only
raised a sufficient objection to arbitral jurisdiction after the
arbitrator had made a decision on the merits. This objection was
thus waived because it came too late. Second, New Balance urges
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that even if Superdeporte's earlier jurisdictional objections,
made in May 2019, were sufficient, it abandoned these objections
when it (along with PSG) asserted counterclaims before the
arbitrator in December 2019 without contemporaneously renewing its
jurisdictional challenge. We examine these arguments in turn.
1. Timing of Initial Objection
Because "[f]ederal courts encourage participation in
arbitration,"8 Kaplan v. First Options of Chi., Inc., 19 F.3d 1503,
1510 (3d Cir. 1994), aff'd, 514 U.S. 938 (1995), "[a] party does
not have to try to enjoin or stay an arbitration proceeding in
order to preserve its objection to jurisdiction." China Minmetals
Materials Imp. & Exp. Co. v. Chi Mei Corp., 334 F.3d 274, 290 (3d
Cir. 2003) (quoting Kaplan, 19 F.3d at 1510). Provided "a party
clearly and explicitly reserves the right to object to
arbitrability, his participation in the arbitration does not
preclude him from challenging the arbitrator's authority in
court." Env't Barrier Co. v. Slurry Sys., Inc., 540 F.3d 598, 606
(7th Cir. 2008) (quoting AGCO Corp. v. Anglin, 216 F.3d 589, 593
This encouragement flows from the "liberal federal policy
8
favoring arbitration agreements" established by the FAA itself.
See Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612, 1621 (2018) (quoting
Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24
(1983)). In light of this policy, "as a matter of federal law,
any doubts concerning the scope of arbitrable issues should be
resolved in favor of arbitration," including when the doubt
concerns "an allegation of waiver." Moses H. Cone, 460 U.S. at
24-25.
- 23 -
(7th Cir. 2000)). Nevertheless, such an objection to the
arbitrator's jurisdiction "must be made on a timely basis, or it
is waived." ConnTech Dev. Co. v. Univ. of Conn. Educ. Props.,
Inc., 102 F.3d 677, 685 (2d Cir. 1996); see also Opals on Ice
Lingerie v. Bodylines Inc., 320 F.3d 362, 368 (2d Cir. 2003).
There is broad agreement among the federal courts of
appeal that a jurisdictional objection comes too late if it is
only raised after the arbitrator has ruled on the merits. See,
e.g., OJSC Ukrnafta v. Carpatsky Petrol. Corp., 957 F.3d 487, 498
(5th Cir. 2020); Env't Barrier, 540 F.3d at 607; Pa. Power Co. v.
Loc. Union No. 272 of the Int'l Bhd. of Elec. Workers, 886 F.2d
46, 50 (3d Cir. 1989); Fortune, Alsweet & Eldridge, Inc. v. Daniel,
724 F.2d 1355, 1357 (9th Cir. 1983). As the Fifth Circuit
explained, "[t]his waiver rule prevents inefficiency and . . .
gamesmanship." Ukrnafta, 957 F.3d at 498. Allowing a party to
challenge arbitral jurisdiction in the courts after the
arbitrator's merits decision would encourage gamesmanship because
"a party could wait to see how the arbitration tribunal ruled
before deciding whether to challenge its jurisdiction." Id.; see
also, e.g., Env't Barrier, 540 F.3d at 606 (noting that such a
"wait-and-see approach" is "not a tactic [the court] can accept,
for sound policy reasons"); Daniel, 724 F.2d at 1357 (similar);
Ficek v. S. Pac. Co., 338 F.2d 655, 657 (9th Cir. 1964) (similar).
It would also be inefficient to allow such a late jurisdictional
- 24 -
objection because vacating an arbitrator's decision for lack of
jurisdiction after the pursuit of discovery, the submission of
briefs, and the holding of hearings would be "terribly wasteful of
the arbitrator's time, the parties' time, and the court's time."
Env't Barrier, 540 F.3d at 606. It would likewise be unfair to
the other parties to the arbitration who had shouldered the effort
and expense of the arbitration proceedings until their conclusion,
only to find that they still face the risk of having to relitigate
the same issues in a judicial forum.
These considerations of gamesmanship, inefficiency, and
fairness do not apply exclusively to circumstances where a party
fails to object to arbitrability until after the arbitrator has
decided the merits. Thus, where a party objected to arbitrability
"shortly before the arbitrator announced her decision," after that
party had voluntarily participated in arbitration proceedings
"over a period of several months," the Ninth Circuit deemed the
objection waived. Daniel, 724 F.2d at 1357; accord Upshur Coals
Corp. v. United Mine Workers of Am., Dist. 31, 933 F.2d 225, 228
(4th Cir. 1991) (disapproving rule allowing a "party that suspects
it will lose in arbitration to withdraw consent to arbitrate
shortly before a decision is handed down"). By contrast, courts
have declined to find waiver where the objecting party did not
participate "extensively" in the arbitration proceedings on the
merits of the dispute before challenging the arbitrator's
- 25 -
jurisdiction.9 Nagrampa v. MailCoups, Inc., 469 F.3d 1257, 1279
(9th Cir. 2006) (discussing Textile Unlimited, Inc. v. A..BMH &
Co., 240 F.3d 781, 788 (9th Cir. 2001)); see also Opals on Ice,
320 F.3d at 366, 368 (declining to find waiver where the party
challenging waiver first raised its objection one month after the
commencement of arbitration proceedings but thereafter raised its
challenge "continuously").
We decline to articulate any bright-line rule as to when
a party's participation in arbitration proceedings becomes so
extensive as to preclude a challenge to arbitral jurisdiction,
engaging instead in a fact-specific inquiry. We observe that after
New Balance added Superdeporte as a respondent in its amended
notice of arbitration, all three arbitration respondents filed a
response a mere two weeks later, May 17, 2019, in which they
asserted that the arbitral tribunal "does not have jurisdiction
over . . . Superdeporte" as to New Balance's claim for breach of
the Distribution Agreement because Superdeporte was "never part of
the Distribution Agreement." The arbitration respondents also
9 Similarly, another court found waiver where the objection
to arbitrability was raised "more than 43 months . . . since the
parties first exchanged default notices, more than 41 months . . .
since service of the arbitration demand, and more than 15
months . . . since the first witness was sworn in the arbitration,"
and after the arbitrators "had conducted an extensive examination
of the relevant evidence, including 45 days of hearings . . ., 409
documentary exhibits, the testimony of 14 witnesses, and a tour of
the development site." ConnTech Dev., 102 F.3d at 685.
- 26 -
denied that New Balance's tortious interference claim was
arbitrable. In a motion for summary disposition filed on May 31,
2019, the arbitration respondents reiterated their objection to
arbitral jurisdiction over all three of them -- including
Superdeporte -- as to the tortious interference claim.
Hence, contrary to New Balance's claim, Superdeporte
sufficiently challenged its obligation to arbitrate New Balance's
breach of contract claim and the tortious interference claim well
before the arbitrator made any decision on the merits. Indeed,
Superdeporte objected to the arbitrator's jurisdiction soon after
it was added as a respondent, before the close of discovery and
before any hearings on the merits.10 On these facts, we conclude
that Superdeporte did not waive its jurisdictional challenge by
raising its initial objection unreasonably late.
2. Effect of the Counterclaims
Having determined that Superdeporte raised a sufficient
jurisdictional objection in May 2019 to avoid any waiver argument
10The district court stated that Superdeporte first objected
to arbitrating claims arising from the Distribution Agreement, in
particular New Balance's breach of contract claim, "after the close
of discovery but before the hearing." Ribadeneira, 2021 WL
4419943, at *8 n.2. The court presumably was referring to the
jurisdictional objections raised in the arbitration respondents'
renewed motion for summary disposition. However, the arbitration
respondents' May 17, 2019, response expressly challenged arbitral
jurisdiction over Superdeporte as to New Balance's claim for breach
of the Distribution Agreement. This initial jurisdictional
objection was therefore raised before discovery concluded in
November 2019.
- 27 -
premised on the timing of the objection, we now consider the
significance for the waiver analysis of Superdeporte's December
2019 assertion, with PSG, of two counterclaims alleging that New
Balance breached the New Agreement and, alternatively, that New
Balance acted in bad faith during contract negotiations.
Specifically, we consider whether, by filing these counterclaims
without specifically renewing its jurisdictional objection,
Superdeporte abandoned the earlier objection and thereby waived
its right to challenge the arbitrator's jurisdiction before a
judicial forum.
"A jurisdictional objection, once stated, remains
preserved for judicial review absent a clear and unequivocal
waiver." Kaplan, 19 F.3d at 1510; see also Nat'l Ass'n of Broad.
Emps. & Technicians v. Am. Broad. Co., 140 F.3d 459, 462 (2d Cir.
1998). An objection to the arbitral forum therefore will not be
deemed abandoned unless and until the party making the objection
"clearly indicate[s] [its] willingness to forego judicial review."
Kaplan, 19 F.3d at 1510 (quoting Pa. Power, 886 F.2d at 50).
Accordingly, Superdeporte would only have abandoned its earlier
jurisdictional objection by asserting the counterclaims if
bringing those counterclaims was a clear signal of its willingness
to withdraw its challenge to arbitral jurisdiction.
In considering the clarity of the signal, it is crucial
to understand the background to the decision by PSG and
- 28 -
Superdeporte to arbitrate the Peru Claims as counterclaims. Before
Superdeporte was added as a respondent in the arbitration, New
Balance had sought to compel PSG and Ribadeneira to arbitrate the
Peru Claims. The response opposing New Balance's motion urged not
only that the Peruvian court had exclusive jurisdiction over the
Peru Claims but also specifically denied that Superdeporte was
obligated to arbitrate the Peru Claims because it was not a
signatory to the New Agreement and hence was not bound by its
arbitration clause. Over this opposition, the arbitrator allowed
New Balance's motion to compel arbitration.
This background suggests that Superdeporte may have
filed the two counterclaims only reluctantly and protectively, in
light of the arbitrator's ruling that the Peru Claims were
arbitrable. As such, the decision to file the counterclaims does
not clearly signal an intention to submit to the arbitrator's
jurisdiction and abandon its earlier objection.11 Superdeporte did
not, therefore, waive its right to judicial review of its challenge
to arbitral jurisdiction by abandoning the jurisdictional
objection that it first pressed in May 2019.
11 We have similarly recognized, outside the arbitration
context, that where a party with a preserved jurisdictional defense
puts forward a counterclaim only "as a conditional position" that
"will not be independently pressed if the primary action is
dismissed for lack of . . . jurisdiction," this alternatively
pleaded counterclaim does not undercut the jurisdictional defense.
See Gen. Contracting & Trading Co. v. Interpole, Inc., 940 F.2d
20, 25 (1st Cir. 1991).
- 29 -
III.
We turn now to the substance of appellees'
jurisdictional challenge to the arbitrator's awards. Appellees
sought vacatur under Section 10(a)(4) of the FAA, which authorizes
a court to vacate an arbitration award "where the arbitrators
exceeded their powers." 9 U.S.C. § 10(a)(4). They contended, and
the district court agreed, that the arbitrator exceeded his
authority by exercising jurisdiction over them.
A. Standard of Review
When considering a district court's decision to confirm
or vacate an arbitration award, "we review questions of law de
novo and questions of fact for clear error." In re Vital Basics
Inc., 472 F.3d 12, 16 (1st Cir. 2006). But to the extent that the
district court "neither conducted an evidentiary hearing nor made
findings of fact, our review is de novo." First State Ins. Co. v.
Nat'l Cas. Co., 781 F.3d 7, 11 (1st Cir. 2015); see also Coady v.
Ashcraft & Gerel, 223 F.3d 1, 10 (1st Cir. 2000). Because here
the district court relied on facts "taken from the parties'
submissions and the documents cited therein," Ribadeneira, 2021 WL
4419943, at *1, we apply de novo review.12
This approach comports with the rationale the Supreme Court
12
cited for its holding that "courts of appeals should apply
ordinary, not special, standards when reviewing district court
decisions upholding arbitration awards," First Options of Chi.,
Inc. v. Kaplan, 514 U.S. 938, 948 (1995), namely that "the
reviewing attitude that a court of appeals takes toward a district
- 30 -
Where a party challenges an arbitration award based on
the arbitrator's resolution of the merits of the underlying
dispute, we conduct our de novo review of the district court's
decision "with great circumspection," Hoolahan v. IBC Advanced
Alloys Corp., 947 F.3d 101, 111 (1st Cir. 2020), "mindful that the
district court's review of arbitral awards must be 'extremely
narrow and exceedingly deferential,'" Bull HN Info. Sys. v. Hutson,
229 F.3d 321, 330 (1st Cir. 2000) (quoting Wheelabrator Envirotech
Operating Servs. Inc. v. Mass. Laborers Dist. Council Loc. 1144,
88 F.3d 40, 43 (1st Cir. 1996)). In these circumstances, a federal
court "do[es] not sit as a court of appeal to hear claims of
factual or legal error by an arbitrator or to consider the merits
of the award." Hoolahan, 947 F.3d at 111 (quoting Asociación de
Empleados del E.L.A. v. Unión Internacional de Trabajadores de la
Industria de Automóviles, 559 F.3d 44, 47 (1st Cir. 2009)). By
agreeing to have their disputes settled by an arbitrator, the
parties to a contract with an arbitration clause agree to accept
"the arbitrator's view of the facts and of the meaning of the
contract." Hutson, 229 F.3d at 330 (quoting United Paperworkers
Int'l Union v. Misco, Inc., 484 U.S. 29, 37-38 (1987)).
court decision should depend upon 'the respective institutional
advantages of trial and appellate courts,'" id. (quoting Salve
Regina Coll. v. Russell, 499 U.S. 225, 233 (1991)). In deriving
the factual background to its rulings from the parties' submissions
and the arbitration record, the district court had no special
institutional advantage with respect to establishing the facts.
- 31 -
By contrast, where a party challenges an arbitration
award by attacking the arbitrator's jurisdiction, the "question[s]
of arbitrability" at issue "are presumptively for courts to
decide." Oxford Health Plans LLC v. Sutter, 569 U.S. 564, 569 n.2
(2013). This presumption is overcome only if the parties agreed
"by 'clear and unmistakable' evidence" to have an arbitrator decide
questions of arbitrability in addition to the merits of their
disputes. Henry Schein, Inc. v. Archer & White Sales, Inc., 139
S. Ct. 524, 530 (2019) (quoting First Options of Chi., Inc. v.
Kaplan, 514 U.S. 938, 944 (1995)). Here, the district court
concluded -- a conclusion New Balance does not challenge on appeal
-- that Ribadeneira and Superdeporte "did not clearly and
unmistakably agree to arbitrate arbitrability." Ribadeneira, 2021
WL 4419943, at *10. The district court accordingly reviewed the
arbitrator's determinations regarding his own jurisdiction de
novo. See Sutter, 569 U.S. at 569 n.2. We likewise determine the
scope of the arbitrator's jurisdiction "independently," First
Options, 514 U.S. at 943, even as our analysis is "informed" by
the arbitrator's determinations in his own analysis of his
jurisdiction, Solvay Pharms., Inc. v. Duramed Pharms., Inc., 442
F.3d 471, 477 (6th Cir. 2006) (citing Mobil Oil Corp. v. Loc. 8-
766, 600 F.2d 322, 325 (1st Cir. 1979)).
- 32 -
B. Legal Principles
As the parties agree, Massachusetts law governs the
question whether the arbitrator properly exercised jurisdiction
over appellees.13 In general, Massachusetts law recognizes that
"arbitration is a matter of contract and a party cannot be required
to submit to arbitration any dispute which he has not agreed so to
submit." Loc. Union No. 1710, Int'l Ass'n of Fire Fighters v.
City of Chicopee, 721 N.E.2d 378, 381 (Mass. 1999), abrogated on
other grounds by Mass. Highway Dep't v. Perini Corp., 828 N.E.2d
34 (Mass. 2005) (quoting AT&T Techs., Inc. v. Commc'ns Workers,
475 U.S. 643, 648 (1986)). Nevertheless, arbitral jurisdiction is
"not limited to those who have signed an arbitration agreement."
Walker v. Collyer, 9 N.E.3d 854, 861 (Mass. App. Ct. 2014) (citing
Thomson-CSF, S.A., v. Am. Arb. Ass'n, 64 F.3d 773, 776 (2d Cir.
1995)). Following case law developed in the federal courts,
Massachusetts courts have identified six theories under which
nonsignatories may be bound by the arbitration agreements of
13 We held supra that, despite the choice-of-law provisions
in Sections 20 and 21 of the Distribution Agreement specifying the
applicability of Massachusetts law, federal law rather than
Massachusetts law governs procedural issues in the judicial review
of the arbitrator's awards because those provisions were
insufficient to displace the default FAA regime for enforcement of
arbitration awards. Here, by contrast, the question is what law
applies to determine whether the arbitrator properly exercised
jurisdiction; that question was a "matter[] in dispute" before the
arbitrator that, according to Section 21, must be decided "in
accordance with the laws of the Commonwealth of Massachusetts."
- 33 -
others: "(1) incorporation by reference; (2) assumption; (3)
agency; (4) veil-piercing/alter ego; (5) equitable estoppel, and
(6) third-party beneficiary." Machado v. System4 LLC, 28 N.E.3d
401, 408 (Mass. 2015) (footnotes and citations omitted); see also
Walker, 9 N.E.3d at 861 (citations omitted).
New Balance argues that the arbitrator's exercise of
jurisdiction over appellees was supportable under theories of
assumption and equitable estoppel. We explain these theories
before turning to examine how they apply in the instant case.
1. Assumption
In Machado, the Massachusetts Supreme Judicial Court
("SJC") recognized that "'a party may be bound by an arbitration
clause if its subsequent conduct indicates that it is assuming the
obligation to arbitrate,' despite being a non-signatory." 28
N.E.3d at 408 n.10 (quoting Thomson-CSF, 64 F.3d at 777). Apart
from acknowledging assumption as one potential source of arbitral
jurisdiction over a nonsignatory of an arbitration agreement,
however, the SJC and Massachusetts courts more generally have not
addressed the theory in great depth. Mindful that Massachusetts
courts have considered it "appropriate to give strong weight to
decisions in other jurisdictions" in examining when a signatory to
an arbitration agreement can compel a nonsignatory to arbitrate,
Walker, 9 N.E.3d at 859 (quoting O'Brien v. Hanover Ins. Co., 692
- 34 -
N.E.2d 39, 44 (Mass. 1998)), we look beyond Massachusetts case law
for guidance.
We note that federal courts have applied the assumption
theory in at least two sets of circumstances. First, where a
nonsignatory to a contract with an arbitration clause is the
successor-in-interest to an entity that was a party, the
nonsignatory assumes its predecessor's obligation to arbitrate.
For example, where a nonsignatory to a licensing agreement
containing an arbitration clause merged with, and then dissolved,
a licensee, the nonsignatory was deemed to have "voluntarily
assumed" the obligations of the agreement as the signatory
licensee's "successor," including the obligation to arbitrate.
Fyrnetics (H.K.) Ltd. v. Quantum Grp., Inc., 293 F.3d 1023, 1029
(7th Cir. 2002). The court insisted that the nonsignatory
successor entity could not "escape application of the license
agreement's arbitration agreement by effectively legislating [the
licensee] out of existence." Id. Similarly, where one broker-
dealer acquired from another broker-dealer customer accounts
governed by client agreements containing arbitration clauses, the
court explained that the acquiring broker-dealer "can be held to
have assumed the predecessor's liabilities" -- including the
obligation to arbitrate as a nonsignatory of the client agreements
-- if there was a "'de facto merger' of the two entities" or "a
'mere continuance' of the predecessor by the successor," such that
- 35 -
the acquiring broker-dealer was the "successor-in-interest" to the
predecessor broker-dealer. Ryan, Beck & Co. v. Fakih, 268 F. Supp.
2d 210, 229-30 (E.D.N.Y. 2003).14
Second, where a nonsignatory is assigned rights under a
contract containing an arbitration clause, the assignee assumes
the obligation to arbitrate under that clause. See Fisser v. Int'l
Bank, 282 F.2d 231, 233 n.6 (2d. Cir. 1960) ("[A]ssignees of
contracts containing arbitration provisions may become parties to
such provisions." (citations omitted)); cf. GMAC Com. Credit LLC
v. Springs Indus., Inc., 171 F. Supp. 2d 209, 214 (S.D.N.Y. 2001)
14 The court in Ryan, Beck seemed to treat the theory that a
successor-in-interest assumes the predecessor entity's obligation
to arbitrate as distinct from the traditional assumption theory,
describing that theory as a principle that it was recognizing "[i]n
addition" to the assumption and estoppel theories. 268 F. Supp.
2d at 229. Here, by contrast, we treat the successor-in-interest
theory as a form of assumption, rather than as an additional
exception to the rule that nonsignatories are not bound to
arbitrate. But even if we were to classify the successor-in-
interest theory as distinct from the assumption theory, we think
Massachusetts courts would not hesitate to treat successor
liability as a basis for binding nonsignatories to an arbitration
agreement. While Massachusetts courts have expressly recognized
six traditional theories for binding nonsignatories to arbitration
agreements, they have not treated this as an exhaustive list. See
Machado, 28 N.E.3d at 408; Walker, 9 N.E.3d at 861. Moreover, the
federal cases cited by the Machado and Walker courts expressly
indicate that the various theories for binding nonsignatories to
arbitration reflect traditional principles of contract and agency
law. See, e.g., E.I. DuPont de Nemours & Co. v. Rhone Poulenc
Fiber & Resin Intermediates, S.A.S., 269 F.3d 187, 195 (3d Cir.
2001); Thomson-CSF, 64 F.3d at 776; Bridas S.A.P.I.C. v. Gov't of
Turkmenistan, 345 F.3d 347, 356 (5th Cir. 2003). The principle
that a successor-in-interest is liable for the obligations of its
predecessor is such a traditional principle of agency and corporate
law. Ryan, Beck, 268 F. Supp. 2d at 229.
- 36 -
(holding that, under the Uniform Commercial Code, where an assignee
is assigned rights under a contract, the "assignee suing on an
assigned contract is bound by that contract's arbitration clause
unless it secured a waiver"). This rule follows from "the basic
principle that an assignee . . . whose rights are premised on a
contract is bound by the remedial provisions bargained for between
the original parties to the contract." Banque de Paris et des
Pays-Bas v. Amoco Oil Co., 573 F. Supp. 1464, 1469 (S.D.N.Y. 1983).
Otherwise, an arbitration clause "would be of no value," since "a
party 'could escape the effect of such a clause by assigning a
claim subject to arbitration between the original parties to a
third party.'" Id. at 1470 (quoting Hosiery Mfrs.' Corp. v.
Goldston, 143 N.E. 779, 780 (N.Y. 1924)).
2. Equitable Estoppel
Drawing on the Second Circuit's articulation of the
"direct benefits estoppel" theory, the Massachusetts Appeals Court
recognized that a signatory may estop a nonsignatory from avoiding
arbitration where the nonsignatory has "knowingly exploit[ed] an
agreement with an arbitration clause," such as by "'knowingly
accept[ing] the benefits' of such an agreement," provided the
benefits at issue were "direct." Walker, 9 N.E.3d at 861-62
(quoting MAG Portfolio Consult, GMBH v. Merlin Biomed Grp. LLC,
268 F.3d 58, 61 (2d Cir. 2001)). Benefits are "direct" when they
"flow[] directly from the agreement," while "indirect" benefits
- 37 -
arise from "exploit[ing] the contractual relation of parties to an
agreement" but not "the agreement itself." Id. at 862 (quoting
MAG Portfolio, 268 F.3d at 61).
Federal courts in a number of other circuits, applying
federal common law, have endorsed and further expounded on the
direct benefits theory of equitable estoppel. For example, the
Third Circuit held that nonsignatories who, "during the life of [a
contract containing an arbitration clause], have embraced the
contract despite their non-signatory status but then, during
litigation, attempt to repudiate the arbitration clause in the
contract," may be estopped from avoiding the obligation to
arbitrate under that clause. E.I. DuPont de Nemours & Co. v. Rhone
Poulenc Fiber & Resin Intermediates, S.A.S., 269 F.3d 187, 200 (3d
Cir. 2001), quoted with approval in InterGen N.V. v. Grina, 344
F.3d 134, 146 (1st Cir. 2003). See also Noble Drilling Servs.,
Inc. v. Certex USA, Inc., 620 F.3d 469, 473-74 (5th Cir. 2010);
Hellenic Inv. Fund, Inc. v. Det Norske Veritas, 464 F.3d 514, 517-
18 (5th Cir. 2006).
Applying the direct benefits theory of equitable
estoppel, these courts have recognized specifically that a
nonsignatory is estopped from avoiding the obligation to arbitrate
under a contract's arbitration clause when the nonsignatory brings
a claim under the contract. See, e.g., Noble Drilling, 620 F.3d
at 473 (explaining that direct benefit estoppel applies when a
- 38 -
nonsignatory to a contract with an arbitration clause "seek[s] to
enforce the terms of that contract or assert[s] claims that must
be determined by reference to that contract"); Int'l Paper Co. v.
Schwabedissen Maschinen & Anlagen GMBH, 206 F.3d 411, 418 (4th
Cir. 2000) ("In the arbitration context, . . . a party may be
estopped from asserting that the lack of his signature on a written
contract precludes enforcement of the contract's arbitration
clause when he has consistently maintained that other provisions
of the same contract should be enforced to benefit him.").
C. Application
The district court concluded that the assumption and
equitable estoppel theories provide no basis for arbitral
jurisdiction over Superdeporte and Ribadeneira. On de novo review,
we reach a different conclusion.
1. Jurisdiction over Superdeporte
New Balance relies on both an assumption theory and an
equitable estoppel theory to argue that the arbitrator properly
exercised jurisdiction over Superdeporte as to New Balance's
claims for breach of the Distribution Agreement and for tortious
interference, and as to Superdeporte's own counterclaims. Because
we conclude that the assumption theory, standing alone, provides
sufficient support for the arbitrator's exercise of jurisdiction
over Superdeporte, we do not address the applicability of the
direct benefits estoppel theory.
- 39 -
(a) Assumption
New Balance argues that Superdeporte was subject to the
arbitrator's jurisdiction because, as PSG's successor-in-interest,
it assumed an obligation to arbitrate under the arbitration clause
contained in the original Distribution Agreement.
Relying on Thomson-CSF, the district court rejected New
Balance's argument. In Thomson-CSF, 64 F.3d at 777, the Second
Circuit remarked that where a nonsignatory "explicitly disavowed
any obligations arising out of" a contract with an arbitration
clause, it cannot be held to have assumed the obligation to
arbitrate under that clause. Noting Superdeporte's repeated
objections to arbitral jurisdiction, the district court determined
that Superdeporte had not assumed any duty to arbitrate, regardless
of whether it was PSG's successor-in-interest.
We cannot agree with the district court's interpretation
of Thomson-CSF. To be sure, in determining whether a nonsignatory
corporate parent had assumed the obligation to arbitrate with a
supplier under a contract concluded between its subsidiary and the
supplier, the Thomson-CSF court looked to whether the nonsignatory
corporate parent's conduct "manifest[ed] an intention to be bound"
by the contract. Id. However, the court's inquiry was into the
nonsignatory's entire course of conduct relating to the contract
at issue, including its conduct before arbitration proceedings
commenced. The Thomson-CSF court highlighted the fact that, even
- 40 -
before the nonsignatory corporate parent acquired the signatory
subsidiary, the corporate parent had "explicitly informed" the
supplier that it was "not adopting the [contract]" and "did not
consider itself bound" by it. Id. at 775. Thomson-CSF therefore
does not support the district court's view that Superdeporte's
post hoc objections to jurisdiction, made during arbitration and
litigation, were sufficient to definitively negate New Balance's
contention that Superdeporte had assumed an obligation to
arbitrate under the Distribution Agreement as PSG's successor-in-
interest.
We therefore consider whether Superdeporte was liable
for PSG's obligations under the Distribution Agreement as its
successor-in-interest and thereby became bound by the agreement's
arbitration clause.
As a general rule, Massachusetts law counsels against
imposing the liabilities of a corporation on its successor. See
Smith v. Kelley, 139 N.E.3d 314, 322 (Mass. 2020). However, where
there is a "reorganization transforming a single company from one
corporate entity into another," Milliken & Co. v. Duro Textiles,
LLC, 887 N.E.2d 244, 255 (Mass. 2008) (quoting McCarthy v. Litton
Indus., Inc., 570 N.E.2d 1008, 1012 (Mass. 1991)), successor
liability may be imposed if "the entity remains essentially the
same, despite a formalistic change of name or of corporate form,"
such that the successor entity is a "mere continuation of its
- 41 -
predecessor," Kelley, 139 N.E.3d at 323. To determine whether an
entity is such a "mere continuation," Massachusetts courts examine
"the continuity or discontinuity of the ownership, officers,
directors, stockholders, management, personnel, assets, and
operations of the two entities." Id. They also look to whether,
after the reorganization, only one entity continues to exist. See
Milliken, 887 N.E.2d at 255. In this "mere continuation" analysis,
"no single factor is dispositive." Kelley, 139 N.E.3d at 323
(quoting Milliken, 887 N.E.2d at 255-56).
Here, almost all of these factors support the conclusion
that Superdeporte was a "mere continuation" of PSG. The continuity
of operations between PSG and Superdeporte is perhaps the most
striking factor. It is undisputed that Superdeporte was created
to take over PSG's role as New Balance's distributor in Peru. The
arbitrator found, and the arbitration record confirms, that New
Balance dealt with Superdeporte as its Peruvian distributor from
May 2016, when Superdeporte became ready to begin operations.
This continuity of operations was matched by a
substantial continuity of assets. The arbitration record
discloses that PSG sold its entire inventory of New Balance
products to Superdeporte, and that Superdeporte acquired PSG's
intercompany debt as well as the right to use office premises
- 42 -
previously occupied by PSG.15 Moreover, while PSG was not
dissolved, it is undisputed that it ceased distribution operations
after selling its assets to Superdeporte.16
There was, in addition, substantial continuity of
personnel and ownership between PSG and Superdeporte. Ribadeneira
himself testified during arbitration proceedings that he was the
"ultimate owner" behind both entities. As the arbitrator found,
and appellees do not contest, Superdeporte also hired former PSG
employees, and Ribadeneira exercised effective control of
Superdeporte as he had done with PSG.
Of all these factors, it is mainly PSG's continued
existence as a separate entity that weighs against a conclusion
that Superdeporte was a "mere continuation" of PSG. When taken
together, however, the balance of the factors strongly supports
the conclusion that Superdeporte was PSG's successor-in-interest.
Consequently, we deem Superdeporte to have assumed PSG's
15 Contrary to appellees' assertion, this sale of assets
satisfied the "prerequisite to successor liability," that there be
"a transfer of all, or substantially all, assets from predecessor
to successor." Premier Cap., LLC v. KMZ, Inc., 984 N.E.2d 286,
292 (Mass. 2013) (emphasis added) (first quoting Carreiro v. Rhodes
Gill & Co., 68 F.3d 1443, 1448 (1st Cir. 1995), then quoting Nat'l
Soffit & Escutcheons, Inc. v. Superior Sys., Inc., 98 F.3d 262,
266 (7th Cir. 1996)).
16 Evidence in the arbitration record reveals that, having
been stripped of its assets, PSG was then transferred to a new
owner outside the retail group owned by Ribadeneira.
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obligation to arbitrate under the arbitration clause in the
Distribution Agreement.
(b) Scope of the Distribution Agreement's Arbitration
Clause
Having concluded that, as a "mere continuation" of PSG
and hence its successor-in-interest, Superdeporte assumed the
obligation to arbitrate under the Distribution Agreement's
arbitration clause, we now examine what claims are arbitrable under
that clause, which encompasses "any and all disputes (whether in
contract or any other theories of recovery) related to or arising
out of" the Distribution Agreement, or that are related to or arise
out of "the relationship" between the parties to that contract,
namely New Balance and PSG. We specifically seek to determine, as
an exercise in contract interpretation, whether the arbitration
clause covers those claims and counterclaims resolved by the
arbitrator in which Superdeporte either was found liable or had
itself sought relief: New Balance's breach of contract claim and
tortious interference claim, and the two counterclaims that
Superdeporte, joining with PSG, filed.
We begin by considering the claim brought by New Balance
alleging breach of the Distribution Agreement, for which the
arbitrator held Superdeporte jointly liable. The Distribution
Agreement's arbitration clause binds to arbitration all disputes
"related to or arising out of" the contract. Since a claim for
breach of the Distribution Agreement is undoubtedly a dispute
- 44 -
arising out of that agreement, New Balance's claim is clearly
arbitrable under the Distribution Agreement's arbitration clause.
Having assumed PSG's obligation to arbitrate under that clause,
Superdeporte was required to arbitrate the claim.
We consider next whether Superdeporte's two
counterclaims are encompassed by the Distribution Agreement's
arbitration clause. The first counterclaim alleged that New
Balance had breached the New Agreement -- an agreement designed to
continue, albeit in a different form, the business relationship
between PSG and New Balance in Peru. As such, it is a dispute
"related to or arising out of" the "relationship" between New
Balance and PSG. The second counterclaim alleged that New Balance
had acted in bad faith during the negotiations seeking to extend
the relationship between PSG and New Balance. Disputes related to
or arising out of the breakdown of the relationship between New
Balance and PSG are disputes "related to or arising out of" their
"relationship." See Next Step Med. Co. v. Johnson & Johnson Int'l,
619 F.3d 67, 72 (1st Cir. 2010) (holding that an arbitration clause
covering disputes "arising out of or relating in any way to" the
"business relationship" between the parties encompassed a tort
claim relating to the "breakdown" of that relationship). Since
both of Superdeporte's counterclaims related to or arose out of
the relationship -- and its breakdown -- between PSG and New
Balance, they come within the scope of the Distribution Agreement's
- 45 -
arbitration clause. Given that Superdeporte assumed the
obligation to arbitrate under that clause as PSG's successor-in-
interest, the arbitrator's exercise of jurisdiction to rule on
Superdeporte's counterclaims was therefore proper.
We turn next to New Balance's tortious interference
claim as against Superdeporte, for which the arbitrator held
Superdeporte (and PSG) jointly liable with Ribadeneira due to the
assignment by Superdeporte (and PSG) of the Peru Claims to
Ribadeneira. But it is not the question of Superdeporte's
liability on the tortious interference claim that is before us.17
Our inquiry is into whether Superdeporte was required to submit to
the arbitrator's resolution of that claim. Specifically, we ask
whether the tortious interference claim is encompassed by the
Distribution Agreement's arbitration clause, to which Superdeporte
is bound as PSG's successor-in-interest.
In answering that question of arbitrability, we note at
the outset that the broad language of the Distribution Agreement's
arbitration clause, covering "any and all" disputes "whether in
contract or any other theories of recovery," embraces not only
17In seeking vacatur of the arbitrator's awards, Superdeporte
has not challenged the arbitrator's determination of liability on
the merits of the tortious interference claim -- or any other claim
-- but only the arbitrator's jurisdiction.
- 46 -
contract-based claims but also tort claims such as a tortious
interference claim.
Here, the tortious interference alleged was
Ribadeneira's pursuit of the Peru injunction by improper means.
This injunction was granted by the Peruvian court as relief for
the Peru Claims. As we explained in discussing the arbitrability
of Superdeporte's counterclaims, which asserted what were
essentially the Peru Claims in the arbitration, these claims are
disputes "related to or arising out of" the "relationship" between
the parties to the Distribution Agreement. The first claim,
alleging that New Balance breached the New Agreement, was a claim
"arising out of" a contract that would have formalized the
continuation of New Balance and PSG's distribution "relationship"
in Peru. The second claim, alleging bad faith by New Balance in
contract negotiations, "related to" the breakdown of the
"relationship" between New Balance and PSG.
Since the Peru Claims were disputes "related to or
arising out of" the "relationship" between New Balance and PSG,
the tortious interference claim alleging that Ribadeneira
improperly obtained the Peru injunction as relief for those same
Peru Claims is also fairly describable as a dispute "related to or
arising out of" the "relationship" between New Balance and PSG.
The tortious interference claim is therefore encompassed by the
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Distribution Agreement's arbitration clause.18 As PSG's successor-
in-interest, Superdeporte assumed the obligation to arbitrate
under that clause and, accordingly, it was bound to arbitrate the
tortious interference claim.
2. Jurisdiction over Ribadeneira
New Balance's arguments that Ribadeneira was bound to
arbitrate its tortious interference claim rely again on the
assumption and equitable estoppel theories. New Balance invoked
an assumption theory in contending that when Ribadeneira was
assigned PSG and Superderporte's claims arising from the New
Agreement and the negotiations surrounding it, he assumed the
obligation to arbitrate under both the New Agreement and the
original Distribution Agreement. New Balance invoked an equitable
estoppel theory in arguing that, because Ribadeneira brought suit
in Peru alleging claims relating to the Distribution Agreement and
New Agreement, he is estopped from escaping the obligation to
arbitrate under the arbitration clauses of both contracts.19
18 Our conclusion is strengthened by the presumption under
Massachusetts law in favor of arbitrability where, as here, the
arbitration clause is broadly worded. See Carpenter v. Pomerantz,
634 N.E.2d 587, 589 (Mass. App. Ct. 1994) (holding that the broad
language of an arbitration clause encompassing "[a]ny dispute
arising out of or relating to this Agreement or the breach thereof"
created a "strong presumption of arbitrability"); cf. Commonwealth
v. Philip Morris Inc., 864 N.E.2d 505, 511 (Mass. 2007) ("[W]hen
considering a broadly worded arbitration clause, there is a
presumption that a contract dispute is encompassed by the clause
unless it is clear that the dispute is excluded.").
19 We understand New Balance to have invoked the equitable
- 48 -
The district court concluded that jurisdiction over
Ribadeneira was unsupportable on these theories, for reasons that
appellees echo on appeal. The court determined that the assumption
theory could not justify arbitral jurisdiction over Ribadeneira
because it interpreted the assignment agreements to have
transferred only claims relating to the putative New Agreement,
not the original Distribution Agreement. As such, any obligation
to arbitrate that Ribadeneira assumed by the assignment agreements
could only have been under the New Agreement, not the Distribution
Agreement. But since the arbitrator found that the New Agreement
never became an enforceable contract, Ribadeneira could not have
assumed a binding obligation to arbitrate.
The district court also relied on its interpretation of
the assignment agreements as transferring only rights under the
New Agreement to conclude that the direct benefits estoppel theory
failed to establish arbitral jurisdiction over Ribadeneira.
Because Ribadeneira's lawsuit in the Peruvian courts asserted
claims under the New Agreement only, the court reasoned,
Ribadeneira only received a direct benefit from the New Agreement.
He would therefore only be estopped from avoiding the New
estoppel theory for jurisdiction over Ribadeneira when it observed
that "Ribadeneira . . . invoke[d] the Distribution Agreement and
the putative [New Agreement] while trying to escape the arbitration
clause," and then urged that Ribadeneira's "pick-and-choose
strategy is unavailing."
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Agreement's arbitration clause. But because the New Agreement is
unenforceable, Ribadeneira could not have acquired an effective
obligation to arbitrate by being estopped from avoiding the New
Agreement's arbitration clause.
We disagree with the district court and appellees that
equitable estoppel is powerless to impose an effective obligation
on Ribadeneira to arbitrate under the New Agreement's arbitration
clause. Because we conclude that principles of equitable estoppel
are sufficient to bind Ribadeneira to arbitration under the New
Agreement's arbitration clause, we do not consider the assumption
theory that New Balance also presses.
(a) Equitable Estoppel
It is undisputed that Ribadeneira filed suit in Peru
alleging that New Balance had breached the New Agreement. He
thereby obtained an injunction against New Balance that lasted
from December 2017 to July 2018. In this way, Ribadeneira sought
to legally enforce -- and for well over half a year, succeeded in
enforcing -- a claim under that contract. Because he sought to
enforce the terms of the New Agreement, thereby knowingly receiving
a direct benefit from that contract, we conclude that Ribadeneira
was estopped from avoiding that putative contract's arbitration
clause, despite his nonsignatory status. See Noble Drilling, 620
F.3d at 473; Int'l Paper, 206 F.3d at 418; Walker, 9 N.E.3d at
861-62.
- 50 -
To be sure, as emphasized by the district court and
appellees, the arbitrator ruled that the New Agreement never became
an enforceable contract. If so, then the New Agreement and its
arbitration clause do not impose valid contractual obligations.
But the unenforceability of the New Agreement as a matter of
contract law does not preclude compelling Ribadeneira to abide by
that agreement's arbitration clause by the application of
equitable estoppel. After all, "[e]very modern instance of
estoppel . . . is an illustration of equity's refusal to accept a
legal outcome and of its power to change it." Andrew Kull,
Equity's Atrophy, 97 Notre Dame L. Rev. 1801, 1803 (2022). Perhaps
the clearest example of the equitable power of courts to impose an
obligation in the absence of any contractual basis for that
obligation is provided by the doctrine of promissory estoppel,
where detrimental reliance -- without the consideration necessary
for the formation of a valid contract -- can give rise to binding
obligations.20
As Massachusetts courts have recognized, in the absence of
20
an enforceable contract, "promissory estoppel implies a
contract . . . where there is proof of an unambiguous promise
coupled with detrimental reliance by the promisee." Malden Police
Patrolman's Ass'n v. Malden, 82 N.E.3d 1055, 1064 (Mass. App. Ct.
2017) (citing R.I. Hosp. Trust Nat'l Bank v. Varadian, 647 N.E.2d
1174, 1178 (Mass. 1995)). Notably, promissory estoppel does not
apply where there is an enforceable contract. See id. at 1064("Where an enforceable contract exists, . . . a claim for
promissory estoppel will not lie.").
- 51 -
In the arbitration context, equitable estoppel applies
to prevent a nonsignatory from opportunistically adopting
inconsistent stances toward a contract according to what would
suit its advantage: a nonsignatory will be estopped from "embracing
a contract, and then turning its back on the portions of the
contract, such as an arbitration clause, that it finds
distasteful." DuPont, 269 F.3d at 200. Here, Ribadeneira obtained
the Peru injunction in his favor predicated on his claim that the
New Agreement was a binding contract. We are persuaded that
equitable estoppel applies here to prevent him, when challenging
the arbitrator's jurisdiction, from maintaining that the contract
was never executed, in direct contradiction to his earlier stance.
See 18B Charles A. Wright and Arthur R. Miller, Federal Practice
and Procedure § 4477 (3d ed. 1998) ("Absent any good explanation,
a party shall not be allowed to gain an advantage by litigating on
one theory, and then seek an inconsistent advantage by pursuing an
incompatible theory."); see generally In re Buscone, 61 F.4th 10(1st Cir. 2023). Ribadeneira is estopped from denying that the
New Agreement's arbitration clause is enforceable, just as he is
estopped from asserting his nonsignatory status to avoid the
obligation to arbitrate under that clause. Accordingly, he is
obliged to abide by the New Agreement's arbitration clause, even
if that putative contract was never executed.
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(b) Scope of the New Agreement's Arbitration Clause
Having concluded that Ribadeneira is bound by the New
Agreement's arbitration clause, we now examine whether that clause
embraces the one claim as to which the arbitrator found him liable,
namely New Balance's tortious interference claim. As we explained
supra, the language in the New Agreement's arbitration clause is
identical to that of the Distribution Agreement's arbitration
clause. The New Agreement's arbitration clause therefore binds to
arbitration "any and all disputes (whether in contract or any other
theories of recovery) related to or arising out of" that putative
contract or "the relationship" between the alleged parties to the
agreement.
The misconduct underlying the tortious interference
claim was Ribadeneira's seeking and obtaining of the Peru
injunction based on misrepresentations. The Peruvian court
granted the Peru injunction as relief for the Peru Claims, one of
which alleged that New Balance had failed to perform its
obligations under the New Agreement. The tortious interference
claim is, for that reason, a dispute "related to or arising out
of" the New Agreement. Accordingly, the claim was arbitrable under
the New Agreement's arbitration clause. Being bound by equitable
estoppel to abide by that clause, Ribadeneira was subject to the
arbitrator's resolution of the tortious interference claim.
- 53 -
IV.
We have concluded that the arbitrator properly exercised
jurisdiction over both Ribadeneira and Superdeporte as to the
various claims and counterclaims on which he ruled. The order of
the district court vacating the arbitration awards for lack of
arbitral jurisdiction is therefore reversed. We remand the case
to the district court with instructions to grant New Balance's
cross-motion to confirm the arbitrator's awards.
So ordered. Costs to appellant.
- 54 -
APPENDIX
PERUVIAN LITIGATION ARBITRATION DISTRICT COURT
CLAIM /
Brought by Against Brought by Against RULINGS RULINGS
COUNTERCLAIM
PSG,
Breach of PSG and No arbitral
Superdeporte,
Distribution New Balance Superdeporte jurisdiction over
and
Agreement liable Superdeporte
Ribadeneira
PSG,
PSG, No arbitral
Superdeporte,
Tortious Superdeporte, jurisdiction over
New Balance and
interference and Superdeporte and
Ribadeneira
Ribadeneira Ribadeneira
liable
Ribadeneira, PSG and
Breach of No arbitral
as assignee New Superdeporte New Balance
New New Balance jurisdiction over
of PSG and Balance (counter- not liable
Agreement Superdeporte
Superdeporte claimants)
Ribadeneira, PSG and
Bad faith in No arbitral
as assignee New Superdeporte New Balance
contract New Balance jurisdiction over
of PSG and Balance (counter- not liable
negotiations Superdeporte
Superdeporte claimants)
- 55 -