Tetronics (International) Limited v. BlueOak Arkansas LLC
ORDER denying 12 Defendant's motion to set aside the Clerk's entry of default, for staying this confirmation proceeding pending resolution of the French appeal, or for refusing confirmation of the arbitration award. Signed by Judge Susan Webber Wright on 9/14/2020. (ljb)
IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF ARKANSAS
BLUEOAK ARKANSAS LLC
CASE NO. 4:20CV00530 SWW
Tetronics (International) Limited (“Tetronics”), a United Kingdom limited
liability company, brings this action seeking confirmation of an arbitration award
against BlueOak Arkansas, LLC (“BlueOak”), a Delaware limited liability
company with a principal place of business in Osceola, Arkansas.
Before the Court is BlueOak’s motion [ECF No. 12], asking the Court to set
aside the Clerk’s entry of default entered on July 23, 2020 [ECF No. 11]. BlueOak
also asks the Court to stay this action pending the outcome of annulment
proceedings or, alternatively, to refuse recognition of the arbitration award.
Tetronics filed a response in opposition [ECF No. 14], BlueOak filed a reply [ECF
No.15], and Tetronics filed a sur-reply [ECF No. 16]. After careful consideration,
and for reasons that follow, BlueOak’s motions to set aside and to stay this
proceeding or refuse recognition of the arbitral award are denied.
In March 2014, Tetronics and BlueOak entered a contract (the “Contract”)
for the design, manufacture, and installation of a plasma arc furnace, by Tetronics,
for use at BlueOak’s e-waste recovery facility in Osceola, Arkansas. The Contract
contained an arbitration clause, requiring that unresolvable disputes be submitted
to arbitration under the rules of the International Chamber of Commerce (“ICC”),
with Paris, France as the seat of arbitration.
In November 2015, after the installation of a plasma arc furnace at
BlueOak’s facilities, a catastrophic event caused molten metal to escape the
system, causing substantial damage. In March 2016, the parties amended the
Contract with provisions that incorporated the original agreement and provided for
Tetronics to supply a replacement system. Disputes between the parties arose and
multiplied, and Tetronics pursued arbitration in January 2018. On April 17, 2020,
after extensive litigation that included discovery, briefing, an evidentiary hearing,
and an opportunity for posttrial briefing, the arbitrator issued a 173-page
arbitration award in Tetronic’s favor.1
ECF No. 2-1.
On May 19, 2020 Tetronics filed this action seeking confirmation of the
arbitration award. The next day, BlueOak filed a declaration of appeal with the
Paris Court of Appeal, asking the French court to vacate the arbitration agreement
on the ground that the arbitrator violated Article 1520 of the French Code of Civil
Procedure, which provides that an arbitral award may only set aside for
enumerated reasons, including where due process was violated.
On May 26, 2020, Tetronics filed a proof of service in this confirmation
proceeding, showing that on May 22, 2020, it had served the summons and
complaint on BlueOak’s agent for service in Arkansas: CT Corporation System
(“CT”).2 BlueOak did not file an answer or responsive pleading, and on June 25,
2020, Tetronics moved to amend the complaint, stating that it wished to correct a
pleading error misstating BlueOak’s place of organization.3 The Court granted the
motion, and Tetronics filed the amended complaint on July 1, 2020.4 In addition to
correcting allegations regarding BlueOak’s place of business, Tetronics’ amended
pleading included a footnote stating: “Upon information and belief, BlueOak
recently filed a certificate of dissolution as Tetronics seeks to enforce its arbitral
ECF No. 5.
ECF No. 6.
ECF Nos. 7, 8.
ECF No. 8, at 2 n.1.
Pursuant to Rule 15(a)(3) of the Federal Rules of Civil Procedure,
BlueOak’s answer to the amended complaint was due on or before July 20, 2020.
On July 22, 2020, with no answer or responsive pleading filed on behalf of
BlueOak, Tetronics moved for entry of a default judgment under Rule 55(a) of the
Federal Rules of Civil Procedure,6 and on July 23, 2020, the Clerk properly entered
default against BlueOak.7
Now before the Court is BlueOak’s motion to set aside the Clerk’s default
and to either stay this proceeding, pending the outcome of its appeal in
France, or refuse recognition of the arbitral award.8
Motion to Set Aside Clerk’s Default
Rule 55(c) of the Federal Rules of Civil Procedure provides: “The court
may set aside an entry of default for good cause, and it may set aside a default
judgment under Rule 60(b).” “When examining whether good cause exists, the
district court should weigh ‘whether the conduct of the defaulting party was
blameworthy or culpable, whether the defaulting party has a meritorious defense,
and whether the other party would be prejudiced if the default were excused.’”
Rule 55(a) provides: “When a party against whom a judgment . . . is sought has
failed to plead or otherwise defend, and that failure is shown by affidavit or
otherwise, the clerk must enter the party’s default.” Fed. R. Civ. P. 55(a).
ECF No. 11.
ECF Nos. 12, 13.
Stephenson v. El-Batrawi, 524 F.3d 907, 912 (8th Cir. 2008)(quoting Johnson v.
Dayton Elec. Mfg. Co., 140 F.3d 781, 784 (8th Cir.1998)). In applying the good
cause standard for setting aside an entry of default, Eighth Circuit precedent
focuses heavily on the blameworthiness of the defaulting party, distinguishing
between “contumacious or intentional delay or disregard for deadlines and
procedural rules, and a ‘marginal failure’ to meet pleading or other deadlines.”
Johnson, 140 F.3d at 784. BlueOak maintains that its delayed appearance in this
case was for good cause, it has a meritorious defense to confirmation of the arbitral
award, and Tetronics will suffer no prejudice if the entry of default is set aside.
Good Cause. Attempting to show good cause, BlueOak states that it has
liquidated its assets to satisfy creditors and has vacated its place of business in
Arkansas. BlueOak surmises that its agent for service, CT, sent notice of this
lawsuit to its abandoned facility in Osceola.
By sworn declaration, Jennifer Sartorius, a Florida resident who served as
BlueOak’s director of finance and accounting, states that she “never received
forwarded service and notice from CT . . . of any complaint or amended complaint
filed in [this case].”9 Sartorius states that to her knowledge, “no other member or
officer of BlueOak has received forwarded service and notice from CT . . . about
ECF No. 13-1, ¶ 3.
this lawsuit.”10 She adds, “I only received notice of the lawsuit once my counsel
conducted an independent search of the relevant database.”11 Sartorius does not
state whether BlueOak provided CT a forwarding address or contact information,
nor does she supply the date on which she learned about this lawsuit.
Tetronics provides evidence that BlueOak had actual knowledge of the
commencement of this action before the Clerk entered default on July 23, 2020.
Correspondence from BlueOak’s counsel dated June 25, 2020 to BlueOak’s known
creditors, including Tetronics, states that BlueOak carried out wind-up efforts and
sold its assets to an unrelated company and that the proceeds were insufficient to
pay BlueOak’s creditors in full. The letter includes information about the
arbitration proceedings between Tetronics and states that BlueOak was seeking
annulment of Tetronic’s arbitration award. Finally, and most important, the June
25 letter acknowledges that Tetronics had commenced this action to confirm the
BlueOak does not dispute that Tetronics effected proper service by delivery
of the summons and complaint to CT, 12 and the Court finds that BlueOak has
Id., ¶ 4.
Id., ¶ 5.
Rule 4(h)(B) of the Federal Rules of Civil Procedure provides that service upon
a corporation, partnership, or other unincorporated association may be made
pursuant to the law of the forum state or by “delivering a copy of the summons and
complaint to an . . . agent authorized by appointment . . . to receive service of
failed to show good cause for its failure to timely answer or respond to Tetronic’s
amended complaint. BlueOak’s letter to creditors, dated June 25, 2020, shows that
its attorneys knew about this confirmation action, and the Court finds it
implausible that counsel failed to notify BlueOak’s officers and members that
Tetronics had commenced this action to confirm the arbitration award.
Meritorious Defense. Applicable in this case, Chapter 2 of the Federal
Arbitration Act (the “FAA”), 9 U.S.C. §§ 201-208, codifies the Convention on the
Recognition and Enforcement of Foreign Arbitral Awards (the “Convention”),
commonly known as the New York Convention. See New York Convention, June
10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. 38. The United States Supreme Court has
The goal of the Convention, and the principal purpose underlying
American adoption and implementation of it, was to encourage the
recognition and enforcement of commercial arbitration agreements in
international contracts and to unify the standards by which agreements
to arbitrate are observed and arbitral awards are enforced in the
Scherk v. Alberto-Culver Co., 417 U.S. 506, 520 n.15, 94 S. Ct. 2449, 2457 n.15
(1974). The FAA provides:
Within three years after an arbitral award falling under the Convention
is made, any party to the arbitration may apply to any court having
jurisdiction under this chapter for an order confirming the award as
against any other party to the arbitration. The court shall 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
9 U.S.C.A. § 207. A district court must confirm the arbitral award unless a party
“successfully assert[s] one of the seven defenses against enforcement of the award
enumerated in Article V of the New York Convention.”13 Indus. Risk Insurers v.
M.A.N. Gutehoffnungshutte GmbH, 141 F.3d 1434, 1441 (11th Cir. 1998).
Article V reads as follows:
1. Recognition and enforcement of the award may be refused, at the
request of the party against whom it is invoked, only if that party
furnishes to the competent authority where the recognition and
enforcement is sought, proof that:
(a) The parties to the agreement referred to in article II were, under
the law applicable to them, under some incapacity, or the said
agreement is not valid under the law to which the parties have
subjected it or, failing any indication thereon, under the law of the
country where the award was made; or
(b) The party against whom the award is invoked was not given
proper notice of the appointment of the arbitrator or of the arbitration
proceedings or was otherwise unable to present his case; or
(c) The award deals with a difference not contemplated by or not
falling within the terms of the submission to arbitration, or it contains
decisions on matters beyond the scope of the submission to
arbitration, provided that, if the decisions on matters submitted to
arbitration can be separated from those not so submitted, that part of
the award which contains decisions on matters submitted to arbitration
may be recognized and enforced; or
(d) The composition of the arbitral authority or the arbitral procedure
was not in accordance with the agreement of the parties, or, failing
such agreement, was not in accordance with the law of the country
where the arbitration took place; or
(citing 9 U.S.C. § 207; New York Convention, art. III.). “The party resisting
confirmation—in this case, [BlueOak] —bears the heavy burden of establishing
that one of the grounds for denying confirmation in Article V applies.” Gold
Reserve Inc. v. Bolivarian Republic of Venezuela, 146 F. Supp. 3d 112, 120
(D.D.C. 2015) (citing Imperial Ethiopian Gov’t v. Baruch–Foster Corp., 535 F.2d
334, 336 (5th Cir.1976); Ottley v. Schwartzberg, 819 F.2d 373, 376 (2d Cir.1987)).
Declaring that it has a meritorious defense, BlueOak invokes the defense
under Article V(1)(b) of the Convention, that “the party against whom the award is
invoked was . . . unable to present his case.” Convention Done at New York June
10, 1958;, T.I.A.S. No. 6997, art. V(1)(b) (Dec. 29, 1970). Federal courts have
held that the defense provided under Article V(1)(b) “essentially sanctions the
(e) The award has not yet become binding on the parties . . . or has
been set aside or suspended by a competent authority of the country in
which, or under the law of which, that award was made.
2. Recognition and enforcement of an arbitral award may also be
refused if the competent authority in the country where recognition
and enforcement is sought finds that:
(a) The subject matter of the difference is not capable of settlement by
arbitration under the law of that country; or
(b) The recognition or enforcement of the award would be contrary to
the public policy of that country.
Convention Done at New York June 10, 1958;, T.I.A.S. No. 6997 (Dec. 29, 1970).
application of the forum state's standards of due process,” and that due process
rights are “entitled to full force under the Convention as defenses to enforcement.”
Iran Aircraft Indus. v. Avco Corp., 980 F.2d 141, 145–46 (2d Cir. 1992) (quoting
Parsons & Whittemore Overseas Co., Inc. v. Societe Generale de L'Industrie du
Papier (RAKTA), 508 F.2d 969, 975–76 (2d Cir.1974)); see also See Generica Ltd.
v. Pharm. Basics, Inc., 125 F.3d 1123, 1129–30 (7th Cir.1997)(“[A]n arbitral
award should be denied ... if the party challenging the award proves that he was not
given a meaningful opportunity to be heard as our due process jurisprudence
defines it.”); Gold Reserve Inc. v. Bolivarian Republic of Venezuela, 146 F. Supp.
3d 112, 127 (D.D.C. 2015)(noting that under Article V(1)(b), “the due-process
standard applied in determining whether to enforce an award in a forum state—
here, the United States—is that forum state’s law”). Applying this forum’s due
process standard, BlueOak must show that it was denied “the opportunity to be
heard at a meaningful time and in a meaningful manner.” Mathews v. Eldridge,
424 U.S. 319, 333, 96 S. Ct. 893, 902, 47 L. Ed. 2d 18 (1976)(internal quotation
According to BlueOak, the arbitration award violates due process “because
[the arbitrator] rendered it, in part, on an interpretation of the contract that neither
party argued [nor] briefed.”14 A review of the arbitration award shows otherwise.
ECF No. 13, at 5.
During the arbitration proceedings, BlueOak claimed that Tetronics had breached
several promises and warranties, including those set forth under §§ 9.1(a) and 2.3
of the Contract. The Contract provided detailed terms for the warranties provided
under § 9.1(a), including notice, cure, and remedy terms.15 Among other things,
the Contract required that BlueOak provide Tetronics notice within one month
after discovering a breach and that Tetronics cure the breach “as soon as
practicable.”16 In contrast, the warranty under § 2.3 simply stated: “The Seller
warrants that the Plan shall comply with the Proposal and the Contract.” As noted
in the arbitrator’s award, the Contract provided a specific regime for § 9.1(a)
warranty claims, and § 9.1(a) contained language almost identical to § 2.3’s barebones warranty language—specifically, § 9.1(a) provided in part “the Seller
warrants that the Plant supplied by the Seller conforms to this Contract and
The arbitrator found it unreasonable to assume that the parties intended
“that, despite the carefully balanced warranty regime established under [§ 9.1(a)]
BlueOak was, in respect of precisely the same alleged material non-conformity, to
be at liberty under [§ 2.3] to immediately give notice of default and then terminate
ECF No. 2-1, at 89-90.
ECF No. 2-1, at 95.
[the Contract] in the event the default was not cured within thirty days.”18
Accordingly, the arbitrator found that a “claim under [§ 2.3] is thus subject to the
same contractual regime as a claim under the first category of warranty under
Section 2.3, standing alone, was conspicuously void of operative terms, and
before issuing his final decision and award, the arbitrator specifically requested
post-hearing briefing regarding the “text of all relevant contractual provisions”
bearing on BlueOak’s claim the Tetronics had violated the bare-bones warranty
language under § 2.3.20 To resolve the claims presented, it was obviously
necessary for the arbitrator to interpret the various warranty provisions, including
§ 2.3. The parties had ample opportunity to address proper interpretation of the
warranty clauses at issue, and the award did not go beyond the claims asserted. In
sum, the Court finds it clear that BlueOak has failed to assert a meritorious due
process defense that would permit this Court to refuse recognition of the arbitral
award under Article V of the Convention.
Prejudice. Noting BlueOak’s asserted insolvency, Tetronics maintains that
it would suffer prejudice if BlueOak’s default is excused because unnecessary
delay in confirming the award would hamper Tetronic’s ability to become a
ECF No. 2-1, at 96.
ECF No. 17-3, at 7-8.
secured creditor. Considering that BlueOak has shown neither good cause nor a
meritorious defense, the Court agrees that Tetronics would suffer undue prejudice
if the Court were to set aside the Clerk’s entry of default. Accordingly, the motion
to set aside is denied.
B. Motion to Stay or Refuse Recognition of Arbitral Award
Even if the Court were to grant BlueOak’s motion to set aside, it would deny
BlueOak’s motion to stay this confirmation proceeding or, alternatively, to refuse
recognition of the arbitral award. Under the Convention, district courts have
discretion to stay proceedings where “a parallel proceeding is ongoing in the
originating country and there is a possibility that the award will be set aside.”
Europcar Italia, S.p.A. v. Maiellano Tours, Inc., 156 F.3d 310, 317 (2d Cir.1998).
Article VI of the Convention provides:
If an application for the setting aside or suspension of the award has
been made to a competent authority referred to in article V(1)(e), the
authority before which the award is sought to be relied upon may, if it
considers it proper, adjourn the decision on the enforcement of the
award and may also, on the application of the party claiming
enforcement of the award, order the other party to give suitable security.
Convention Done at New York June 10, 1958;, T.I.A.S. No. 6997 (Dec. 29, 1970)
The Eighth Circuit has yet to address the issue, but the Second Circuit has
advised, “A stay of confirmation should not be lightly granted lest it encourage
abusive tactics by the party that lost in arbitration.” Europcar Italia, S.p.A. v.
Maiellano Tours, Inc., 156 F.3d 310, 317 (2d Cir. 1998)(citations omitted); see
also Four Seasons Hotels & Resorts, B.V. v. Consorcio Barr S.A., 377 F.3d 1164,
1172 (11th Cir. 2004)(“The court should balance the Convention's policy favoring
confirmation of arbitral awards against the principle of international comity
embraced by the Convention.”). The Second Circuit has also proposed the
following list of non-exclusive factors that merit consideration when faced with a
motion to stay under Article VI:
(1) the general objectives of arbitration—the expeditious resolution of
disputes and the avoidance of protracted and expensive litigation;
(2) the status of the foreign proceedings and the estimated time for those
proceedings to be resolved;
(3) whether the award sought to be enforced will receive greater scrutiny in
the foreign proceedings under a less deferential standard of review;
(4) the characteristics of the foreign proceedings including (i) whether they
were brought to enforce an award (which would tend to weigh in favor of a
stay) or to set the award aside (which would tend to weigh in favor of
enforcement); (ii) whether they were initiated before the underlying
enforcement proceeding so as to raise concerns of international comity; (iii)
whether they were initiated by the party now seeking to enforce the award in
federal court; and (iv) whether they were initiated under circumstances
indicating an intent to hinder or delay resolution of the dispute;
(5) a balance of the possible hardships to each of the parties, keeping in
mind that if enforcement is postponed under Article VI of the Convention,
the party seeking enforcement may receive “suitable security” and that,
under Article V of the Convention, an award should not be enforced if it is
set aside or suspended in the originating country, and
(6) any other circumstances that could tend to shift the balance in favor of or
Europcar Italia, S.p.A. v. Maiellano Tours, Inc., 156 F.3d 310, 317–18 (2d Cir.
1998) (internal citation omitted).
After careful consideration of these factors, the Court finds that a stay is not
warranted. Considering the first and second factors, BlueOak estimates that the
its appeal in France will consume twelve to eighteen months.21 Tetronics
commenced the arbitration proceeding in January 2018, and after the parties
conducted discovery and received a full hearing on all issues raised in the
arbitration proceeding, the arbitrator issued a detailed, 173-page award on April
17, 2020. The Court finds it clear that in this case, confirmation of the award will
advance the general objective of “expeditious resolution of disputes and the
avoidance of protracted and expensive litigation.”
Regarding the third factor, whether the award sought to be enforced will
receive greater scrutiny in the foreign proceedings under a less deferential standard
BlueOak submits a sworn declaration by Alexander Blumrosen, an American
attorney admitted to the bar in Paris, France [ECF. No. 13-2]. Blumrosen states
that he represents BlueOak in the appeal seeking to annul the arbitration award that
Tetronics seeks to have confirmed in this case. He reports that on May 20, 2020,
the day after Tetronics commenced this action, BlueOak filed a declaration of
appeal with the Paris Court of Appeals, seeking to vacate the arbitration award.
Blumrosen submits documents showing that Tetronics was served notice of the
appeal on or about June 15, 2020 and that on July 2, 2020, Tetronics counsel filed
an appearance in the appeal. The documents also show that an initial hearing in
the appeal is scheduled for September 22, 2020. Blumrosen anticipates that the
French appeal/annulment proceeding will be complete within twelve to eighteen
of review, BlueOak states that “French law forbids arbitrators from basing their
award, even in part, on issues and arguments that were not pled or argued by the
parties (even if this does not constitute an unexpected or unforeseeable
development of the case) because it constitutes a violation of due process.”22 On
the other hand, BlueOak’s French attorney, Alexander Blumrosen, testifies that
BlueOak’s grounds for annulment in France comport with the grounds for vacatur
raised in Article V of the New York Convention.”23 BlueOak provides no
authority that the award will receive greater scrutiny under French law.
Furthermore, BlueOak has failed to make a prima facie showing that the arbitrator
denied it an opportunity to be heard at a meaningful time in a meaningful manner
or that he violated any fundamental principle of due process.
As for the fourth factor, BlueOak commenced the French proceeding to
annul the award one day after Tetronics filed this confirmation action, which
weighs in favor of enforcement. Finally, considering BlueOak’s apparent
insolvency, further delay in confirmation weighs in favor of denying a stay.
ECF No. 15. at 5.
ECF No. 15-1, ¶ 4.
For the reasons stated, the Court finds no grounds for setting aside the
Clerk’s entry of default, for staying this confirmation proceeding pending
resolution of the French appeal, or for refusing confirmation of the arbitration
award. IT IS THEREFORE ORDERED the Defendant’s motion [ECF No. 12] is
IT IS SO ORDERED THIS 14TH DAY OF SEPTEMBER, 2020.
/s/Susan Webber Wright
UNITED STATES DISTRICT JUDGE
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