CEEG (Shanghai) Solar Science v. Lumo
Filing
[10389480] Affirmed. Terminated on the merits after oral hearing. Written, signed, published. Judges Lucero (authoring judge), Gorsuch and Phillips. Mandate to issue. [15-1256]
Appellate Case: 15-1256
Document: 01019659033
Date Filed: 07/19/2016
PUBLISH
Page: 1
FILED
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
July 19, 2016
FOR THE TENTH CIRCUIT
_________________________________
Elisabeth A. Shumaker
Clerk of Court
CEEG (SHANGHAI) SOLAR SCIENCE
& TECHNOLOGY CO., LTD,
Plaintiff - Appellant,
v.
No. 15-1256
LUMOS LLC, n/k/a LUMOS SOLAR
LLC,
Defendant - Appellee.
_________________________________
Appeal from the United States District Court
for the District of Colorado
(D.C. No. 1:14-CV-03118-WYD-MEH)
_________________________________
John S. Lutz (Courtney P. Hirsekorn, with him on the briefs), Fairfield and Woods,
Denver, Colorado, for Plaintiff-Appellant.
Meghan Paulk Ingle (James R. Nelson, DLA Piper, Dallas, Texas, with her on the brief),
DLA Piper, Austin, Texas, for Defendant-Appellee.
_________________________________
Before LUCERO, GORSUCH, and PHILLIPS, Circuit Judges.
_________________________________
LUCERO, Circuit Judge.
_________________________________
CEEG (Shanghai) Solar Science & Technology Co., Ltd. (“CEEG”), a Chinese
company, agreed to sell solar energy products to LUMOS, LLC, a United States
Appellate Case: 15-1256
Document: 01019659033
Date Filed: 07/19/2016
Page: 2
company. After receiving certain shipments, LUMOS filed a warranty claim alleging
workmanship defects, and refused to remit the balance due. After two years of fitful
negotiations, CEEG filed an arbitration proceeding pursuant to the parties’ agreements.
Although the parties had communicated exclusively in English to that point, CEEG
served LUMOS with a Chinese-language notice of the proceedings, and LUMOS did not
immediately realize what the notice was. After the arbitration panel ruled in its favor,
CEEG moved for the district court to confirm the award. LUMOS filed a motion to
dismiss, arguing that the Chinese-language notice caused it to miss the deadline to
participate in appointing the arbitration panel. The district court granted the motion,
finding that the notice was not reasonably calculated to apprise LUMOS of the arbitration
proceedings. We agree. Exercising jurisdiction under 28 U.S.C. § 1291, we affirm.
I
CEEG is a solar panel manufacturer in China. LUMOS is headquartered in
Colorado and sells solar energy products to consumers. On June 29, 2009, CEEG
and LUMOS entered into a Co-Branding Agreement (the “Agreement”) under which
LUMOS agreed to order a certain minimum quantity of solar products from CEEG
over a period of three years. The Agreement set forth terms related to pricing,
payment, packaging, and delivery. It also contained a warranty provision
guaranteeing that CEEG would deliver conforming goods. Under the Agreement,
details regarding individual orders were to be set forth in subsequent purchase
contracts. The Agreement provided that “all documentation, notices, judicial
proceedings, and dispute resolution and arbitration entered into, given, instituted
2
Appellate Case: 15-1256
Document: 01019659033
Date Filed: 07/19/2016
Page: 3
pursuant to, or relating to, this Agreement be drawn up in the English language.” It
also provided that any disputes would be subject to arbitration by the China
International Economic and Trade Arbitration Commission (“CIETAC”).
On May 14, 2010, CEEG and LUMOS executed a Sales Contract (the
“Contract”), which provided that after receiving a deposit payment, CEEG would
deliver certain solar products to LUMOS. LUMOS was required to pay the
remaining balance within sixty days of shipping. As did the Agreement, the Contract
contained a provision that CIETAC would resolve any dispute. However, unlike the
Agreement, the Contract did not stipulate that arbitration proceedings would be in
English, and instead indicated only that any arbitration “shall be conducted in
accordance with [CIETAC’s] arbitration rules.” Under CIETAC’s arbitration rules, if
“the parties have agreed on the language of arbitration, their agreement shall prevail.
In the absence of such agreement, the language of arbitration . . . shall be Chinese or
any other language designated by CIETAC having regard to the circumstances of the
case.” CIETAC Rules art. 71 § 1. The Contract also stated if its Chinese and English
versions conflicted, the English version would govern. Additionally, although the
Contract did not contain a warranty provision, it did provide that LUMOS could file a
“quality discrepancy” claim within thirty days of receiving the goods.
LUMOS made the deposit payment and CEEG delivered solar products in two
shipments. LUMOS alleged that the delivered goods were defective. LUMOS thus
filed a warranty claim with CEEG, stating that it would not pay the outstanding
balance of $1,372,445.10 until the warranty claim was addressed. A CEEG manager
3
Appellate Case: 15-1256
Document: 01019659033
Date Filed: 07/19/2016
Page: 4
advised LUMOS to replace defective panels using LUMOS’ existing inventory,
indicated “there is no problem for replacing,” and explained that “[r]eplacing panels
definitely need [sic] to be done ASAP, no matter what is the final settlement.” Based
on these comments, LUMOS used product from its inventory and requested
replacement product, but never received substitutes from CEEG.
Over the following two years, the companies exchanged numerous emails
about the allegedly defective goods. In May 2011, CEEG performed an on-site
inspection. The inspector confirmed the modules were defective, but CEEG did not
act to remedy the defects. Instead, on December 19, 2012, CEEG sent a letter
demanding payment and threatening legal action. LUMOS responded that it was
withholding payment pending resolution of the warranty claim. In a January 24,
2013 letter, CEEG stated its belief that the warranty claim arose under a different
purchase contract and could not excuse a payment obligation under the Contract. The
January 24 letter again demanded payment and asserted that failure to pay would
result in an arbitration claim filed with CIETAC. On the same day, LUMOS
responded with an email in which it again declined to pay and requested good-faith
efforts to resolve the warranty claims outside of arbitration. The email also stated
that it would “fight to protect [LUMOS’] interests . . . with the full the [sic] force of
our legal council [sic] and the resources available to us from the US Department of
Commerce and the International Trade Commission.” CEEG filed its arbitration
claim with CIETAC on March 22, 2013.
4
Appellate Case: 15-1256
Document: 01019659033
Date Filed: 07/19/2016
Page: 5
On April 4, 2013, an arbitration notice and other documents were delivered to
LUMOS. The documents were entirely in Chinese, except that the name of CEEG’s
counsel appeared in English and the numerical value of the outstanding payment
($1,372,445.10) appeared in Arabic numerals. Although the shipping label identified
CIETAC as the sender in English, LUMOS claims its executives never viewed the
label. Thus, LUMOS did not realize that the documents purported to constitute
notice of arbitration. Scott Franklin, LUMOS’ CEO, set the Chinese letter aside and
made a note to follow up with CEEG.
LUMOS had fifteen days after receiving notice to appoint an arbitrator.
CIETAC Rules art. 25. But because LUMOS did not realize the documents were a
notice of arbitration, it did not respond within that window. On May 7, 2013—after
the appointment window had closed—Franklin sent an email to CEEG offering to
settle the dispute, and attaching a copy of the Chinese documents with a note that
LUMOS could not understand the documents. CEEG’s counsel responded in an
email, stating:
the letter you received was from CIETAC, the arbitration institution to
which Lumos [sic] agreed in its sales contracts with CEEG . . . . The
contractual arbitration clause did not specify a language for the
arbitration and the CIETAC default language is Chinese. Your
company has been sued in arbitration in China. I recommend you seek
counsel and avoid the risk of an adverse award for failure to defend
your company in the arbitration.
In the email, counsel stated she would send the settlement proposal to CEEG for
consideration. On May 20, Franklin asked for a response regarding the settlement
proposal. CEEG rejected the offer.
5
Appellate Case: 15-1256
Document: 01019659033
Date Filed: 07/19/2016
Page: 6
After receiving actual notice of the arbitration, LUMOS worked diligently to
secure Chinese counsel for the arbitration proceedings. The process of securing
counsel was complicated, and took several weeks to complete. Meanwhile, on May
27, 2013, CIETAC and CEEG appointed arbitrators without input from LUMOS.
On June 20, 2013—a week prior to the scheduled arbitration—LUMOS’
counsel recommended that Franklin request a two-month extension to prepare for the
arbitration. The arbitrators granted the extension, rescheduling the hearing for
September 14, 2013. At the hearing, which was conducted in Chinese, LUMOS
argued that the defects in delivered goods relieved LUMOS of its payment obligation
under the Agreement’s warranty provision, which should be read to apply to the
Contract. However, the arbitration panel disagreed that the Agreement’s warranty
provision applied, holding that the two contracts “are not consistent in terms of such
important clauses as quantity, delivery, [and] payment of the contractual subject
matters” and thus “[i]t cannot be concluded that the Sales Contract refers to a
contract for a certain batch under the Co-Branding Agreement.” It held, “the
stipulations concerning quality assurance and warranty period under the Co-Branding
Agreement quoted by [LUMOS] have no binding force on the Sales Contract.” The
panel also observed that CIETAC had jurisdiction under the arbitration clauses in the
Contract, not the Agreement, and thus the Agreement did “not fall within the scope
of trial of this case.” Accordingly, it concluded LUMOS could not raise its warranty
defenses. On June 13, 2014, the panel determined that LUMOS had breached its
6
Appellate Case: 15-1256
Document: 01019659033
Date Filed: 07/19/2016
Page: 7
payment obligations and ordered it to pay the outstanding principal plus interest,
costs, and attorneys’ fees.
CEEG then moved for confirmation of the arbitration award under the Federal
Arbitration Act, 9 U.S.C. § 1 et seq., and the Convention on the Recognition and
Enforcement of Foreign Arbitral Awards (the “New York Convention”). See New
York Convention, art. IV, June 10, 1958, 21 U.S.T. 2517 (a party may apply “for
recognition and enforcement” of an arbitral award subject to the Convention).
LUMOS filed a motion to dismiss, arguing, inter alia, that the notice of the
arbitration proceedings was insufficient and violated the due process exception to
enforcement under the New York Convention. The district court agreed that the
Chinese-language notice was not reasonably calculated to apprise LUMOS of the
proceedings because all interactions between CEEG and LUMOS up to the point of
the arbitration notice had been in English, and both the Agreement and the Contract
reinforced that interactions between the parties were to proceed in English. The court
also observed that the Agreement’s choice of language provision should have
governed the arbitration because that document was the “master agreement” which
served as an “umbrella” setting forth the terms for LUMOS’ and CEEG’s business
relationship. Thus, the district court denied the motion to confirm the arbitration
award, and granted the motion to dismiss with prejudice. This appeal followed.
II
In reviewing a district court’s decision regarding confirmation of an arbitration
award, we review legal questions de novo and factual findings for clear error.
7
Appellate Case: 15-1256
Document: 01019659033
Date Filed: 07/19/2016
Page: 8
Dominion Video Satellite, Inc. v. Echostar Satellite L.L.C., 430 F.3d 1269, 1275
(10th Cir. 2005). An error is clear “if the district court’s findings lack factual support
in the record or if, after reviewing all the evidence, we have a definite and firm
conviction that the district court erred.” See Middleton v. Stephenson, 749 F.3d
1197, 1201 (10th Cir. 2014).
We do not owe deference to the district court’s legal conclusions, but we
afford “maximum deference” to the arbitrators’ decisions. See ARW Expl. Corp. v.
Aguirre, 45 F.3d 1455, 1462 (10th Cir. 1995). Our standard of review of arbitral
awards “is among the narrowest known to the law.” Id. (quotation omitted). We are
“not authorized to reconsider the merits of an award even though the parties may
allege that the award rests on errors of fact or on misinterpretation of the contract.”
United Paperworkers Int’l Union, AFL-CIO v. Misco, Inc., 484 U.S. 29, 36 (1987).
Thus, “[a]n arbitrator’s erroneous interpretations or applications of law are not
reversible.” ARW Expl. Corp., 45 F.3d at 1463. Although
[t]he arbitrator may not ignore the plain language of the contract . . . [,]
as long as the arbitrator is even arguably construing or applying the
contract and acting within the scope of his authority, that a court is
convinced he committed serious error does not suffice to overturn his
decision.
United Paperworkers Int’l Union, 484 U.S. at 38.
Under the New York Convention, a court must “confirm the award unless it
finds one of the grounds for refusal or deferral of recognition or enforcement of the
award specified in the said Convention.” 9 U.S.C. § 207; see also Encyclopaedia
Universalis S.A. v. Encyclopaedia Britannica, Inc., 403 F.3d 85, 90 (2d Cir. 2005).
8
Appellate Case: 15-1256
Document: 01019659033
Date Filed: 07/19/2016
Page: 9
The defenses specified in the New York Convention include: (1) “[t]he party against
whom the award is invoked did not receive proper notice . . . of the arbitration
proceedings”; and (2) “[t]he composition of the arbitral authority or the arbitral
procedure was not in accordance with the agreement of the parties.” New York
Convention art. V(1)(b) & (d). Courts construe these defenses “narrowly, to
encourage the recognition and enforcement of commercial arbitration agreements in
international contracts.” See Karaha Bodas Co. v. Perusahaan, 364 F.3d 274, 288
(5th Cir. 2004) (quotation omitted). As the party opposing enforcement of the
arbitral award, LUMOS bears the burden of proving that one of the defenses applies.
Id. Moreover, CEEG argues that to overcome the strong presumption in favor of
enforceability under the Convention, LUMOS must also show prejudice from any
procedural error. Accord id. at 296. The district court held that LUMOS had carried
its “heavy burden” because CEEG’s insufficient notice deprived LUMOS of the
opportunity to designate the arbitration panel, and the panel’s composition was
therefore not in accordance with the parties’ agreement. This appeal thus turns on
the first defense—adequacy of notice.
To judge compliance with the New York Convention’s “proper notice”
requirement, courts look to the forum’s standards of due process. See Iran Aircraft
Indus. v. Avco Corp., 980 F.2d 141, 145 (2d Cir. 1992). Notice must be “reasonably
calculated, under all the circumstances, to apprise interested parties of the pendency
9
Appellate Case: 15-1256
Document: 01019659033
Date Filed: 07/19/2016
Page: 10
of the action and afford them an opportunity to present their objections.” Mullane v.
Cent. Hanover Bank & Tr. Co., 339 U.S. 306, 314 (1950).1
We conclude that the Chinese-language notice was not reasonably calculated to
apprise LUMOS of the proceedings. All previous communications between CEEG and
LUMOS had been in English, the Contract reinforced that English would govern the
relationship by requiring that the English language version of the Contract would control,
and the Agreement memorialized the parties’ understanding that all interactions and
dispute resolution proceedings would be in English.2 Nearly a month after the notice had
been sent, CEEG responded to an email from LUMOS with a short English-language
explanation that the Chinese documents constituted notice. Thus, CEEG demonstrated
the ease with which it could have sent notice in a language it knew LUMOS would
understand. Simply, CEEG could not have reasonably calculated that notice in a
language it knew LUMOS’ executives would be unable to comprehend would apprise
1
Because our analysis concerns only whether notice in Chinese was
reasonably calculated to apprise LUMOS of the arbitration proceedings, we do not
consider CEEG’s arguments that LUMOS should have known that the documents
constituted notice.
2
CEEG argues that we must defer to the arbitration panel’s determination that
the Agreement does not govern the transaction memorialized in the Contract. But we
reject the contention that we “must overlook agreed-upon arbitral procedures” in
deference to the public policy in favor of international arbitration. Accord
Encyclopaedia Universalis, 403 F.3d at 91. Moreover, our holding does not rely on
the conclusion that the Contract was bound by the terms of the Agreement. Rather,
the Agreement is one piece of evidence demonstrating that the parties understood
their relationship would proceed in English, and that CEEG suddenly deviated from
that understanding and practice when providing notice.
10
Appellate Case: 15-1256
Document: 01019659033
Date Filed: 07/19/2016
Page: 11
LUMOS of the arbitration proceedings.3 On these facts, we conclude that notice in
Chinese was not reasonably calculated to apprise LUMOS of the CIETAC proceedings.
CEEG contends LUMOS must demonstrate prejudice from any deficient notice.
In support of a prejudice requirement in the context of the New York Convention, CEEG
cites several out-of-circuit cases. See Karaha Bodas Co., 364 F.3d at 296; Calbex
Mineral Ltd. v. ACC Res. Co., 90 F. Supp. 3d 442, 459 (W.D. Pa. 2015); Compagnie des
Bauxites de Guinee v. Hammermills, Inc., 1992 WL 122712, at *5 (D.D.C. May 29,
1992). LUMOS does not contest that a prejudice requirement applies. We thus assume
without deciding that a party opposing confirmation of an arbitral award under the New
York Convention must demonstrate prejudice in order for a defense to apply.
The district court found that the Chinese-language notice caused LUMOS to
remain unaware that arbitration proceedings had commenced, thereby depriving it of the
opportunity to participate in selecting arbitrators. But CEEG contends that CIETAC’s
appointed arbitrators were “neutral,” and thus the proceedings did not prejudice LUMOS.
This argument is unconvincing. The New York Convention itself provides improper
composition of the arbitral tribunal as a defense to confirmation of an arbitration award.
New York Convention art. V; see also Encyclopaedia Universalis S.A., 403 F.3d at 91-92
3
CEEG argues that CIETAC, and not CEEG, sent the arbitration notice. This
argument is undermined by the fact that the notice letter appears to have been signed
by CEEG’s counsel. Regardless, CIETAC’s rules plainly state that absent agreement
between the parties, arbitration proceedings will be held in “Chinese or any other
language designated by CIETAC having regard to the circumstances of the case.”
CIETAC Rules art. 71 § 1 (emphasis added). Thus, CEEG could have moved for
CIETAC to proceed in English. CEEG cannot avoid responsibility for insufficient
notice by arguing that it assigned to a third party the duty to ensure that the notice
was reasonably calculated to apprise LUMOS of the proceedings.
11
Appellate Case: 15-1256
Document: 01019659033
Date Filed: 07/19/2016
Page: 12
(affirming refusal to confirm arbitral award because the “composition of the arbitral
authority was not in accordance with the parties’ agreement”). Hindering the right to
participate in the panel-selection process is not a minor procedural misstep. The arbitral
tribunal determines the parties’ rights with virtually no possibility of appeal or review.
See ARW Expl. Corp., 45 F.3d at 1462 (our standard of review of arbitral awards “is
among the narrowest known to the law” (quotation omitted)). We agree with the district
court that depriving LUMOS of the right to participate in appointing the arbitral tribunal
itself evidences substantial prejudice.
CEEG further argues that LUMOS was not prejudiced because LUMOS received
actual notice in the May 7, 2013 email, but CIETAC did not “officially appoint” the
three-person arbitral tribunal until twenty days later. During that period, LUMOS did not
enter an appearance in the arbitration, and specifically did not request that the
appointment deadline be extended. CEEG argues that LUMOS has not provided a
reasonable explanation for its failure to appear in the proceedings until June 20, 2013.
CEEG contends that LUMOS’ unreasonable inattentiveness—and not insufficient
notice—caused any inability to select an arbitrator.
This argument suffers two fatal flaws. CEEG did not argue that LUMOS failed to
diligently pursue its rights until its reply brief. The argument is therefore waived. Adler
v. Wal-Mart Stores, Inc., 144 F.3d 664, 679 (10th Cir. 1998) (“Arguments inadequately
briefed in the opening brief are waived.”). Even were the argument not waived, we
review the district court’s factual findings for clear error. Dominion Video Satellite, Inc.,
430 F.3d at 1275. The district court found that LUMOS diligently engaged the services
12
Appellate Case: 15-1256
Document: 01019659033
Date Filed: 07/19/2016
Page: 13
of a translator to translate the Chinese-language notice to English. However, because the
process of retaining Chinese counsel to represent LUMOS in the arbitration was
“surprisingly” complicated, the court found credible Franklin’s testimony that it took
“weeks” to secure representation. Rather than offering evidence to refute the district
court’s conclusions, CEEG relies on a conclusory argument that LUMOS should bear the
burden of providing additional support for the district court’s findings. We reject this
argument. Record evidence supports, rather than refutes, the district court’s factual
findings, and we are not left with “a definite and firm conviction that the district court
erred.” See Middleton, 749 F.3d at 1201.4 On these facts, we agree with the district
court that LUMOS met its heavy burden of demonstrating that insufficient notice caused
prejudice by rendering LUMOS unable to participate in appointing the arbitration panel,
rendering the remaining proceedings invalid under the New York Convention.
III
The district court’s dismissal with prejudice is AFFIRMED.
4
Similarly, CEEG’s argument that LUMOS did not preserve any objection to
the panel’s composition was also raised for the first time in reply. Moreover, based
on Franklin’s testimony, the district court found that LUMOS preserved its objection
to the panel composition by raising it in the arbitration proceedings. On appeal,
CEEG does not present any evidence to contradict this finding.
13
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?