Control Screening LLC v. Technological Application & Production Co. (Tecapro), HCMC-Vietnam

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
________
No. 11-2896
_________
CONTROL SCREENING LLC
v.
TECHNOLOGICAL APPLICATION AND PRODUCTION
COMPANY (TECAPRO), HCMC-VIETNAM,
Appellant
________
On Appeal from the United States District Court
for the District of New Jersey
(D.C. No. 2-11-cv-00491)
District Judge: Honorable Faith S. Hochberg
_______
Argued May 7, 2012
Before: SLOVITER, ROTH, Circuit Judges, and POLLAK,
District Judge*
(Opinion filed: July 26, 2012)
_______
*
Honorable Louis H. Pollak, Senior Judge of the
United States District Court for the Eastern District of
Pennsylvania, sitting by designation. Judge Pollak died on
May 8, 2012; this opinion is filed by a quorum of the court.
28 U.S.C. § 46 and Third Circuit IOP 12.1(b).
Lauren E. Komsa (Argued)
Anthony J. Pruzinsky
Hill Rivkins
New York, NY 10006
Attorneys for Appellant
Donald P. Jacobs (Argued)
Budd Larner
Short Hills, NJ 07078
Attorney for Appellee
_______
OPINION OF THE COURT
_______
SLOVITER, Circuit Judge.
This dispute involves New Jersey-based Control
Screening, LLC and Vietnam-based Technological
Application and Production Company, HCMC-Vietnam
(“Tecapro”). Control Screening and Tecapro disagree about
the proper interpretation of an arbitration forum selection
clause in their contract. The District Court granted Control
Screening‟s motion and petition to compel arbitration in New
Jersey, and Tecapro appealed.
I.
Control Screening manufactures and sells X-ray and
metal detection devices for use in public facilities around the
world. Tecapro is a private, state-owned company that was
formed by the Vietnamese government for the purpose of
introducing advanced technologies into the Vietnamese
market.
In April 2010, Tecapro entered into a contract with
Control Screening for the purchase of twenty-eight
customized AutoClear X-ray machines with a total purchase
price of $1,021,156. Each party now alleges that the other
party has breached its obligations under the contract. The
contract provides that:
2
In the event all disputes are not resolved, the disputes
shall be settled at International Arbitration Center of
European countries for claim in the suing party‟s
country under the rule of the Center. Decision of
arbitration shall be final and binding [sic] both parties.
App. at 51. Tecapro initiated arbitration proceedings in
Belgium under the Belgian Judicial Code in November 2010.
In December 2010, Control Screening notified Tecapro of its
intention to commence arbitration proceedings in New Jersey.
In January 2011, Control Screening filed its petition to
compel arbitration in the United States District Court for the
District of New Jersey. The petition requested that the
District Court compel arbitration of all disputed issues in New
Jersey, appoint an arbitrator named by Control Screening,
designate arbitration rules chosen by Control Screening,
enjoin Tecapro from proceeding with arbitration in Belgium,
and award attorney‟s fees and costs to Control Screening.
Tecapro opposed the petition, arguing that the contract
provided for arbitration in Europe and that, in any event, the
District Court lacked personal jurisdiction over it.
The District Court determined that it had subject
matter jurisdiction under the United Nations Convention on
the Recognition and Enforcement of Foreign Arbitral Awards
(“New York Convention”), Sept. 30, 1970, 21 U.S.T. 2517,
and that it had personal jurisdiction over Tecapro because,
inter alia, the company had “sufficient contacts with New
Jersey that relate to and arise out of the 2010 contract.” App.
at 6 n.7.
The Court concluded that “the only reasonable
interpretation of the arbitration clause is that Tecapro could
have sought to arbitrate in Vietnam and Control Screening in
New Jersey. The latter is what happened in this case and
therefore the arbitration shall proceed in New Jersey.” App.
at 6 n.8. The District Court therefore granted Control
Screening‟s request to compel arbitration. Tecapro appeals.
II.
3
Section 16(a)(3) of the Federal Arbitration Act
(“FAA”), 9 U.S.C. § 1 et seq., provides that “[a]n appeal may
be taken from . . . a final decision with respect to an
arbitration that is subject to this title.” Where, as here, “the
District Court has ordered the parties to proceed to
arbitration, and dismissed all the claims before it, that
decision is „final‟ within the meaning of § 16(a)(3), and
therefore appealable.” Green Tree Fin. Corp.-Ala. v.
Randolph, 531 U.S. 79, 89 (2000). Accordingly, under 28
U.S.C. § 1291, this court has jurisdiction to hear Tecapro‟s
appeal.
We review a district court‟s decision with respect to
personal jurisdiction de novo but review factual findings
made in the course of determining personal jurisdiction for
clear error. See Telcordia Tech Inc. v. Telkom SA Ltd., 458
F.3d 172, 176 (3d Cir. 2006). We review questions
concerning the applicability and scope of an arbitration
agreement de novo. See Kaneff v. Del. Title Loans, Inc., 587
F.3d 616, 620 (3d Cir. 2009).
“A district court decides a motion to compel
arbitration under the same standard it applies to a motion for
summary judgment.” Id. “The party opposing arbitration is
given the benefit of all reasonable doubts and inferences that
may arise.” Id. (internal quotation marks and citation
omitted).
III.
Tecapro argues that the District Court erred by: (1)
improperly exercising personal jurisdiction over it; (2) failing
to consider Tecapro‟s facts and evidence; (3) placing the
burden of proof on Tecapro rather than Control Screening; (4)
refusing to hold an evidentiary hearing; and (5) finding that
the parties had agreed to arbitrate in New Jersey rather than in
Europe.
A. Personal Jurisdiction
Under New Jersey‟s analog to a long-arm statute, N.J.
Court Rule 4:4-4, a district court may assert personal
jurisdiction over nonresidents to the extent permitted by the
4
Due Process Clause of the Fourteenth Amendment. See
Telcordia Tech, 458 F.3d at 177. A district court may
exercise in personam jurisdiction over a nonresident so long
as the defendant has “certain minimum contacts with [the
forum] such that the maintenance of the suit does not offend
traditional notions of fair play and substantial justice.” Int’l
Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (internal
quotation marks and citation omitted). “[T]he plaintiff bears
the burden to prove, by a preponderance of the evidence, facts
sufficient to establish personal jurisdiction.” Carteret Sav.
Bank v. Shushan, 954 F.2d 141, 146 (3d Cir. 1992).
Personal jurisdiction may be either general or specific.
“Specific jurisdiction is established when a non-resident
defendant has „purposefully directed‟ his activities at a
resident of the forum and the injury arises from or is related
to those activities.”1 Gen. Elec. Co. v. Deutz AG, 270 F.3d
144, 150 (3d Cir. 2001) (quoting Burger King Corp. v.
Rudzewicz, 471 U.S. 462, 472 (1985)). In a contract case,
such as this one, Control Screening must establish that
Tecapro‟s contacts with the forum were instrumental in either
the formation or the breach of the contract. Gen. Elec. Co.,
270 F.3d at 150.
The relationship between Tecapro and Control
Screening began in 2006 when Tecapro submitted a purchase
order to Control Screening. Vu Khac Tien, then Vice
Director of Tecapro, wrote to Control Screening President
and CEO Brad Conway “that this will be the first purchase of
many . . . .” App. at 303. Vu Khac Tien continued: Tecapro
had “devoted six months of effort and expense to promoting
Control Screening and AutoClear scanners . . . helping to
establish your products in our markets.” Id. Vu Khac Tien
also noted that Tecapro had sent one of its employees to a
Control Screening factory in New Jersey for training. In
closing, Vu Khac Tien stated that Tecapro representatives
were “willing to come to New Jersey ASAP if more
discussion is needed.” App. at 307.
1
Because we find there is specific jurisdiction, we
need not discuss general jurisdiction.
5
Only a few months later, Tecapro submitted a second
purchase order to Control Screening. Then, in August 2007,
Vu Khac Tien informed Control Screening that Tecapro
intended to make yet another purchase. Tecapro also ordered
individual scanner parts and upgrades from Control Screening
in New Jersey on multiple occasions. The relationship
between Tecapro and Control Screening flourished until
Tecapro, at its request, became the exclusive distributor of
Control Screening products in Vietnam in 2009.
In April 2010, Tecapro and Control Screening entered
into the contract at issue here. The contract was signed by
Conway in New Jersey. Tecapro‟s application for an
irrevocable letter of credit in connection with the April 2010
contract named as payment beneficiary “Control Screening
LLC, 2 Gardner Road Fairfield, New Jersey.” App. at 335.
Additionally, several of the X-ray scanner components were
shipped from Control Screening‟s products department in
New Jersey. Finally, Vu Khac Tien sent at least eleven e-
mails regarding the April 2010 contract to Conway or Control
Screening Vice President Ken Voigtland, both of whose
offices were located in New Jersey.2
Tecapro relies on this court‟s decision in Vetrotex
Certainteed Corp. v. Consolidated Fiber Glass Products Co.,
75 F.3d 147 (3d Cir. 1995), to argue that “specific jurisdiction
cannot be asserted over a commercial buyer that has only
tangential contact with the seller in the seller‟s state.”
Appellant‟s Br. at 18. In Vetrotex, however, the only contacts
between the defendant and the forum state were “some
telephone calls and letters.” 75 F.3d at 152. Furthermore, the
court in Vetrotex did not consider the parties‟ prior dealings
in its specific jurisdiction analysis because thirteen months
had passed between the termination of the parties‟ previous
business relationship and the beginning of the new
2
The District Court found that in 2010 there were “at
least 50 emails sent back and forth between Tecapro and
Control Screening in New Jersey.” App. at 6 n.7. We focus
here on the eleven of those fifty e-mails sent directly from
Tecapro‟s Vice Director Vu Khac Tien to two of Control
Screening‟s New Jersey-based executives, Conway and
Voigtland.
6
relationship at issue in that case, and because that previous
relationship had been expressly terminated. Id. at 153.
Here, by contrast, Tecapro‟s contacts with New Jersey
were not limited to communications such as “emails, fax and
skype,” App. at 6 n.7, but included the manufacture and
assembly of major scanner components as well as the design
of scanner software, all in New Jersey. See App. at 317.
Additionally, the April 2010 contract marked the continuation
of an uninterrupted four year business relationship between
Tecapro and Control Screening, culminating in Tecapro
becoming the exclusive distributor of Control Screening
products in Vietnam. “It is these factors – prior negotiations
and contemplated future consequences, along with the terms
of the contract and the parties‟ actual course of dealing – that
must be evaluated in determining whether the defendant
purposefully established minimum contacts within the
forum.” Burger King Corp., 471 U.S. at 479.
There is ample evidence in this record that Tecapro
purposefully directed its activities at New Jersey, and that
virtually all of those activities arose from or related to the
contract between the parties. Moreover, the exercise of
personal jurisdiction over Tecapro is neither unfair nor
unjust.3 Thus, we conclude that the District Court correctly
determined that Tecapro‟s activities in New Jersey adequately
supported a finding of specific jurisdiction.4 See World-Wide
Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980).
3
Tecapro argues that the “District Court abused its
discretion in refusing to hold an evidentiary hearing.”
Appellant‟s Br. at 31 (emphasis removed). Tecapro,
however, cites no authority that would have required the
District Court to hold an evidentiary hearing before ruling on
the petition nor did Tecapro even request a hearing. The
District Court cannot have abused its discretion for “refusing”
to do something that it was not required to do and that
Tecapro never requested.
4
The District Court did not specify the burden of proof
employed in its personal jurisdiction analysis. In a case such
as this one, where the defendant has raised the issue of
personal jurisdiction, the plaintiff must prove, by a
7
B. Arbitration Forum
The parties agree that their contract dispute should be
arbitrated but do not agree on where arbitration should take
place. The arbitration clause at issue provides in relevant part
that “disputes shall be settled at International Arbitration
Center of European countries for claim in the suing party‟s
country under the rule of the Center.” App. at 51. The
“International Arbitration Center of European countries” does
not exist. The central question in this case, therefore, is how
to interpret this clause in order to determine the appropriate
arbitration forum.
In 1958, the United Nations Economic and Social
Council adopted the New York Convention. In 1970, the
United States acceded to the treaty, and Congress passed
Chapter 2 of the FAA, 9 U.S.C. § 201-208, implementing the
Convention. The Convention requires contracting states to
recognize written arbitration agreements concerning subject
matter capable of arbitration. See Art. II(1). The United
States, where Control Screening is a citizen, is a signatory to
the Convention as is Vietnam, where Tecapro is a citizen.
Section 201 of the FAA provides that the Convention
shall be enforced in United States courts. See 9 U.S.C. § 201.
Chapter 2 of the FAA creates two causes of action in federal
court: (1) an action to compel arbitration in accord with the
terms of the arbitration agreement, see 9 U.S.C. § 206, and
(2) an action to confirm an arbitral award made pursuant to an
arbitration agreement, see 9 U.S.C. § 207. Article II(3) of the
New York Convention contains the “null and void” defense
which is available in actions to “refer the parties to
arbitration”:
preponderance of the evidence, that the district court has the
authority to exercise personal jurisdiction over the defendant.
See Carteret Sav. Bank, 954 F.2d at 146. This court will
affirm the District Court‟s personal jurisdiction determination
because Control Screening‟s evidence is sufficient to
establish, by a preponderance of the evidence, that the District
Court properly exercised personal jurisdiction over Tecapro.
8
The court of a Contracting State, when seized of an
action in a matter in respect of which the parties have
made an agreement within the meaning of this article,
shall, at the request of one of the parties, refer the
parties to arbitration, unless it finds that the said
agreement is null and void, inoperative or incapable of
being performed.
Art. II(3).
“[A]n agreement to arbitrate is „null and void‟ only (1)
when it is subject to an internationally recognized defense
such as duress, mistake, fraud, or waiver, or (2) when it
contravenes fundamental policies of the forum state.” Rhone
Mediterranee Compagnia Francese di Assicurazioni E
Riassicurazoni v. Lauro, 712 F.2d 50, 53 (3d Cir. 1983)
(citation omitted) (interpreting Article II(3) of the New York
Convention). However, “[t]he „null and void‟ language must
be read narrowly, for the signatory nations have jointly
declared a general policy of enforceability of agreements to
arbitrate.” Id.In this case, the parties mistakenly provided that
disputes were to be settled at “International Arbitration
Center of European countries,” which is non-existent. “At” is
a preposition defined, in part, as “presence or occurrence in a
particular place.” See Webster‟s Third New International
Dictionary Unabridged 136 (1993). Thus, the parties agreed
to arbitrate in a particular place – namely the “International
Arbitration Center of European countries” – that does not
exist; a result that could have come about only through
mistake.5
5
Both the District Court and Control Screening
conclude that the phrase “for claim in the suing party‟s
country” can only reasonably be interpreted as authorizing
arbitration in the suing party‟s country. When read in
isolation, that language is susceptible to such an
interpretation. However, when read in the context of the
arbitration clause as a whole, the District Court‟s
interpretation is in direct conflict with the preceding language
– “the disputes shall be settled at International Arbitration
Center of European countries.” Furthermore, the record
9
Since the parties mistakenly designated an arbitration
forum that does not exist, the forum selection provision of the
arbitration agreement is “null and void” under Article II(3).
See Rosgoscirc v. Circus Show Corp., No. 92-Civ.-8498,
1993 WL 277333, at *4 (S.D.N.Y. July 16, 1993)
(invalidating an arbitration forum selection provision as “null
and void” under Article II(3) of the New York Convention
where the parties agreed to arbitrate at “the International
Arbitration in the Hague (the Netherlands),” a non-existent
entity). Even though the forum selection portion of the
arbitration clause is “null and void,” there is sufficient
indication elsewhere in the contract of the parties‟ intent to
arbitrate, meaning that the parties‟ agreement to arbitrate
remains in force. See, e.g., Great Earth Cos., Inc. v. Simons,
288 F.3d 878, 890 (6th Cir. 2002) (“The validity of the
arbitration agreement, therefore, turns on whether the
agreement to arbitrate all disputes was separate and severable
from the [invalid] forum selection clause.”). Section 11.0 of
the contract is entitled “ARBITRATION.” App. at 50. The
second sentence of Section 11.2 of the contract states that:
“Decision of arbitration shall be final and binding [sic] both
parties.” App. at 51. Finally, Section 11.3 of the contract
provides that the losing party shall bear “[a]ll expenses in
connection with the arbitration.” Id. Furthermore, both
parties have expressed a willingness to arbitrate their dispute
notwithstanding the uncertain meaning of the forum selection
provision. Thus, we find that the invalid forum selection
provision is severable from the rest of the arbitration
agreement.
indicates that both parties understood that arbitration would
take place in Europe. For instance, in an email to Vu Khac
Tien, Control Screening President and CEO Brad Conway
stated: “We remain patient as always, and awaiting your
choice from among the above not-so-bad alternatives to get
this long delayed and thin-margin deal completed, or to move
on we suppose to elaborate, costly and unfortunate dispute
resolution ultimately in Western Europe.” App. at 720.
Though the parties apparently intended to arbitrate in Europe,
those intentions were nullified by virtue of their mutual
mistake in selecting a non-existent arbitration forum.
10
Because the forum selection provision is “null and
void,” the otherwise valid arbitration agreement is treated as
if it does not select a forum. Under Section 206 of the FAA,
a district court is empowered to “direct that arbitration be
held in accordance with the agreement at any place therein
provided for, whether that place is within or without the
United States.” 9 U.S.C. § 206. To the extent that it does not
conflict with Chapter 2, Chapter 1 of the FAA applies to
international arbitration agreements. See 9 U.S.C. § 208.
Section 4 of Chapter 1 provides that the arbitration hearings
and proceedings “shall be within the district in which the
petition for an order directing such arbitration is filed.”6 9
U.S.C. § 4; see also Econo-Car Int’l, Inc. v. Antilles Car
Rentals, Inc., 499 F.2d 1391, 1394 (3d Cir. 1974) (Section 4‟s
“requirement that arbitration take place in the district court
where the petition is filed is clear and unequivocal”).
Thus, when an arbitration agreement lacks a term
specifying location, a district court may compel arbitration
only within its district. See Jain, 51 F.3d at 690-91 (holding
that a district court has the power to compel arbitration in the
6
In PaineWebber Inc. v. Faragalli, this court held that
an action to compel arbitration under Section 4 of the FAA
“accrues only when the respondent unequivocally refuses to
arbitrate.” 61 F.3d 1063, 1066 (3d Cir. 1995) (interpreting
Section 4‟s language that “[a] party aggrieved by the alleged
failure, neglect, or refusal of another to arbitrate under a
written agreement for arbitration may petition any United
States district court . . . for an order directing that such
arbitration proceed in the manner provided for in such
agreement”). That threshold requirement, however, has only
been applied by this court, and by other courts of appeal
applying similar requirements, to domestic arbitration
agreements. A district court‟s primary authority to compel
arbitration in the international context comes from 9 U.S.C. §
206, rather than from 9 U.S.C. § 4. PaineWebber‟s threshold
requirement, therefore, does not apply to international
arbitration agreements governed by the New York
Convention. Cf. Jain v. de Méré,, 51 F.3d 686, 691 (7th Cir.
1995) (“[W]hile the provision of § 4 allowing a court to order
arbitration in its own district should apply to an action under
chapter 2 [of the FAA], its jurisdictional limits should not.”).
11
district where suit was brought where the international
agreement failed to specify an arbitration forum); see also
Bauhinia Corp. v. China Nat’l Mach. & Equip. Imp. & Exp.
Corp., 819 F.2d 247, 249-50 (9th Cir. 1987) (same). Because
the District Court here compelled arbitration within its own
district (even though it based its decision on other grounds),
this court will affirm the District Court‟s Order. See Nicini v.
Morra, 212 F.3d 798, 805 (3d Cir. 2000) (“We may affirm
the District Court on any grounds supported by the record.”).
IV.
Accordingly, we will affirm the judgment of the
District Court compelling arbitration to proceed in New
Jersey.
12