TransAsia Lawyers v. EcoNova

Filing 35

MEMORANDUM DECISION AND ORDER granting 15 Motion for Judgment on the Pleadings; denying 21 Motion for Summary Judgment: TransAsia shall prepare and submit the form of a judgment recognizing and enforcing the Award dated 4/11/13, against Econova. Signed by Judge David Nuffer on 5/20/14 (alt)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH, NORTHERN DIVISION

TRANSASIA LAWYERS,
Plaintiff,
v.

MEMORANDUM DECISION AND
ORDER GRANTING PETITIONER'S
[15] MOTION FOR JUDGMENT ON
THE PLEADINGS AND DENYING
RESPONDENT'S [21] MOTION FOR
SUMMARY JUDGMENT

ECONOVA, INC.,
Civil No. 1:13-cv-98 DN
Respondent.
District Judge David Nuffer
Petitioner TransAsia Lawyers ("TransAsia") moves for judgment on the pleadings 1 on all
claims in its complaint. 2 Respondent EcoNova, Inc. ("EcoNova") opposes TransAsia's motion 3
and also moves for summary judgment, 4 which TransAsia opposes. 5 After careful consideration
of the pleadings, the parties' memoranda, and the relevant legal authority, TransAsia's Motion for
Judgment on the Pleadings is GRANTED and EcoNova's Motion for Summary Judgment is
DENIED.

1

Petitioner's Motion for Judgment on the Pleadings and Memorandum in Support ("Motion for Judgment on the
Pleadings"), docket no. 15, filed October 4, 2013.

2

Docket no. 2, filed July 9, 2013.

3

Defendant's Memorandum in Opposition to Petitioner's Motion for Judgment on the Pleadings ("Respondent's
Opposition"), docket no. 20, filed November 8, 2013.
4

Respondent's Motion for Summary Judgment and Supporting Memorandum ("Motion for Summary Judgment"),
docket no. 21, filed November 14, 2013.

5

Petitioner's Opposition to Respondent's Motion for Summary Judgment ("Petitioner’s Opposition"), docket no. 28,
filed December 12, 2013.

BACKGROUND ............................................................................................................................ 2
STATEMENTS OF UNDISPUTED FACT .................................................................................... 4
JUDGMENT ON THE PLEADINGS STANDARD ...................................................................... 7
DISCUSSION ................................................................................................................................. 7
I.

The Terms of Engagement Document is an Agreement to Arbitrate. ................................. 8
A. The Terms of Engagement Is Part of an Exchange of Letters. .................................... 9
B. Under Contract Principles, the Terms of Engagement Document is an Agreement to
Arbitrate..................................................................................................................... 12

II.

Subject Matter Jurisdiction is Present. .............................................................................. 14

III. The Terms of Reference Document Was Not an Agreement to Arbitrate. ........................ 15
ORDER ......................................................................................................................................... 17

BACKGROUND 6
In late 2009, EcoNova, a U.S. corporation, retained TransAsia, a law firm in the People's
Republic of China, to provide legal services on its behalf. At the outset of the parties' dealings,
TransAsia sent EcoNova a nine-page document entitled "Terms of Engagement" that detailed the
firm's billing practices and terms of service. This document included an arbitration clause under
the bold and underlined heading "Governing Law and Dispute Resolution," which stated that any
dispute between the parties would be settled by arbitration in Hong Kong. The document did not
request a signature, but did include the following provision:
If we do not hear from you within 5 business days of receipt of our Engagement
Letter, but continue to receive instructions from you or your representatives on the
matter in question, then your acceptance of the agreement set forth in the
Engagement Letter (inclusive of these Terms) shall be deemed to have been
given. 7

6

The factual summary of this case is drawn from the parties' pleadings and the facts to which they have stipulated.

7

Terms of Engagement at 2, docket no. 2-4.
2

After receiving the Terms of Engagement, EcoNova paid TransAsia a retainer fee;
requested and received services from TransAsia; and received and paid invoices for legal
services. EcoNova did not question or dispute any of the provisions of the Terms of Engagement.
EcoNova refused to pay a portion of TransAsia's fees. TransAsia started arbitration
proceedings in Hong Kong. EcoNova opposed arbitration and requested dismissal of the
arbitration because there was no binding arbitration agreement between the parties. The arbitrator
denied EcoNova's request.
Thereafter, both parties signed a document entitled "Terms of Reference," which laid out
the issues to be determined in the arbitration and a summary of the parties' positions.8 One of the
issues to be determined by the arbitrator was whether there was a binding arbitration agreement
between the parties. EcoNova argued in the Terms of Reference that there was no binding
arbitration agreement and that the arbitrator had no jurisdiction to hear the dispute. 9
The arbitrator concluded that EcoNova was bound by the Terms of Engagement through
its conduct and awarded TransAsia its claimed fees.
TransAsia subsequently filed this case to enforce the arbitration award. EcoNova argues
that since it never signed an arbitration agreement, there was no valid agreement to arbitrate. It
further argues that (1) this court lacks subject matter jurisdiction, and (2) even if this court has
jurisdiction, the award should not be enforced absent a valid agreement to arbitrate. TransAsia
responds that there were two valid agreements to arbitrate – the Terms of Engagement and the
Terms of Reference.

8

Terms of Reference, docket no. 2-5.

9

Id. at 7 (Section 5.2.3.1).
3

STATEMENTS OF UNDISPUTED FACT
1.

TransAsia Lawyers is a law firm in the People's Republic of China and is not a

citizen of the United States. 10
2.

EcoNova is a U.S. corporation incorporated in the State of Utah. 11

3.

TransAsia sent, and EcoNova received, a document entitled "Terms of

Engagement." 12
4.

TransAsia's Terms of Engagement state that "[t]hese Terms of Engagement

(Terms) govern our standard billing practices, and address various matters relating to the
provision of our services." 13
5.

The Terms of Engagement include the following arbitration clause in article 44:

If an irreconcilable dispute arises in connection with the interpretation or
implementation of these Terms, it shall be settled under the Rules of Arbitration
of the International Chamber of Commerce by a sole arbitrator. The arbitration
shall be held in Hong Kong and conducted in the English language, and will be
final and binding on both parties. 14
6.

After receiving the Terms of Engagement, EcoNova paid "the retainer" or

"advance fee" to TransAsia, requested services from TransAsia, and paid invoices from
TransAsia. 15
7.

TransAsia provided "legal services" to EcoNova. 16

8.

EcoNova and TransAsia had a dispute over fees that TransAsia claimed were due

and owing by EcoNova, and TransAsia commenced arbitration against EcoNova. 17
10

Respondent's Opposition at ¶ 1, docket no. 20, filed November 8, 2013.

11

Id. at ¶ 2.

12

Id. at ¶ 3.

13

Id. at ¶ 4.

14

Id. at ¶ 5.

15

Id. at ¶ 6.

16

Id. at ¶ 7.
4

9.

EcoNova received notice of the arbitration and participated in the arbitration. 18

10.

In the arbitration, lawyers for both EcoNova and TransAsia signed "Terms of

Reference." 19
11.

In the Terms of Reference, EcoNova and TransAsia accepted Dr. Nils R. Eliasson

as the arbitrator (the "Arbitrator"). 20
12.

EcoNova and TransAsia agreed in the Terms of Reference that the place of

arbitration would be Hong Kong. 21
13.

EcoNova and TransAsia agreed to the procedural rules governing the

arbitration. 22
14.

EcoNova agreed that "among all possible options, the Court of Arbitration may

choose either Hong Kong law or the laws of P.R. China as the governing law for this dispute." 23
15.

EcoNova agreed to submit to the Arbitrator the question of whether it was bound

by the arbitration agreement in the Terms of Engagement. 24
16.

The Arbitrator, Nils R. Eliasson, issued a final award dated April 11, 2013. 25

17.

In the award, the Arbitrator found that Hong Kong law applied to the arbitration

agreement in the Terms of Engagement. 26

17

Id. at ¶ 8.

18

Id. at ¶ 9.

19

Id. at ¶ 10.

20

Id. at ¶ 11.

21

Id. at ¶ 12.

22

Id. at ¶ 13.

23

Id. at ¶ 15.

24

Id. at ¶ 16.

25

Id. at ¶ 17.

26

Id. at ¶ 18.
5

18.

The Arbitrator explained in the award that under Hong Kong law, an arbitration

agreement may be established either orally or by conduct, and that an arbitration agreement does
not need to be signed to be valid. 27
19.

The Arbitrator also found that EcoNova accepted the arbitration agreement

written in the Terms of Engagement by its conduct. Paragraphs 99, 100, and 101 of the award
state:
Respondent does not dispute that it received the 18 December 2009 email, to
which the TOE [Terms of Engagement] was attached. Moreover, on 6 January
2010, Respondent paid the advance fee deposit requested by Claimant in the 18
December 2009 email, and continued to instruct Claimant to assist Respondent in
relation to the Joint Venture Project. As testified by Mr[.] Chang and Ms[.]
Zhang, Claimant provided legal services to Respondent in relation to the Joint
Venture Project from December 2009 to July 2010. Respondent further
recognizes that there existed a client-attorney relationship between Respondent
and Claimant and that Respondent received the legal services provided by
Claimant. On 22 February 2010, Respondent also paid Claimant's first invoice.
It should also be noted that there is no evidence on record in this case indicating
that Respondent, at any time prior to commencement of this arbitration, raised any
concern with respect to the TOE or any term therein. Respondent's contention that
its representatives did not understand the TOE lacks credibility in light of the
nature of the business ventures in which Respondent otherwise was engaged.
Respondent has furthermore not offered any evidence in support of such
contention.
On the basis of the facts and circumstances set out above, and based on the
evidence on record in this case, the Sole Arbitrator finds that Respondent by
seeking the services of Claimant – after having first been informed of the terms
governing Claimant's offer to provide such services – must be deemed to have
accepted such terms. The Sole Arbitrator, therefore, concludes that Respondent
through its conduct accepted to be bound by the TOE, including the arbitration
clause in Article 44. 28

27

Id. at ¶ 19.

28

Id. at ¶ 20.
6

20.

In the award, the Arbitrator found EcoNova liable to TransAsia for a total amount

of $117,967.30 and ordered EcoNova to pay this amount to TransAsia. 29
21.

EcoNova has not paid TransAsia any portion of the amount awarded to

TransAsia. 30
JUDGMENT ON THE PLEADINGS STANDARD
A motion for judgment on the pleadings applies the same standard as a 12(b)(6) motion to
dismiss.31 "[T]he [c]ourt should accept all facts pleaded by the non-moving party as true and
grant all reasonable inferences from the pleadings in the favor of the same." 32 "Judgment on the
pleadings should not be granted unless the moving party has clearly established that no material
issue of fact remains to be resolved and the party is entitled to judgment as a matter of law." 33
DISCUSSION
Neither party contends that there are any issues of material fact to resolve. Rather, both
parties claim in their respective motions that judgment should be granted in their favor as a
matter of law. TransAsia argues that this court should enforce the arbitration award. Econova
argues that absent a valid, signed agreement to arbitrate, this court lacks subject matter
jurisdiction and cannot enforce the arbitration award. 34 The question of whether there was a valid
arbitration agreement is therefore central. For the reasons discussed below, there is a valid and
enforceable agreement to arbitrate.

29

Id. at ¶ 21.

30

Id. at ¶ 22.

31

Jacobsen v. Deseret Book Co., 287 F.3d 936, 941 n. 2 (10th Cir. 2002).

32

Mejia v. Univ. of Utah, 2007 WL 391586, at *1 (D. Utah Feb. 1, 2007).

33

Henshaw v. Wayne Cnty., 2009 WL 3226503, at *2 (D. Utah Oct. 1, 2009) (quotations and citations omitted).

34

Respondent’s Opposition at 1–2, 10–16, docket no. 20.
7

The enforcement of foreign arbitration awards is governed under Article 2 of the Federal
Arbitration Act ("FAA") pursuant to the Convention on the Recognition and Enforcement of
Foreign Arbitral Awards of 1958 (the "Convention"). 35 Article IV, § 1, of the Convention
provides:
To obtain the recognition and enforcement mentioned in the preceding article, the
party applying for recognition and enforcement shall, at the time of the
application, supply:
(a) The duly authenticated original award or a certified copy thereof;
(b) The original agreement referred to in Article II or a duly certified copy
thereof.
Article II of the Convention requires that an arbitration agreement must be "in writing," and
specifies that such an agreement "shall include an arbitral clause in a contract or an arbitration
agreement, signed by the parties or contained in an exchange of letters or telegrams." 36
EcoNova argues that TransAsia cannot satisfy the Convention because it has no
agreement in writing either signed by the parties or contained in an exchange of letters.
TransAsia responds that it has provided two valid agreements to arbitrate – the Terms of
Engagement and the Terms of Reference.
I.

The Terms of Engagement Document is an Agreement to Arbitrate.

EcoNova claims that because it never signed the Terms of Engagement, the Terms of
Engagement was not a valid agreement to arbitrate. But despite being unsigned, The Terms of
Engagement is enforceable because (1) it was an “exchange of letters,” and (2) contract
principles validate the agreement.

35

9 U.S.C. § 201.

36

Convention, Art. II, §§ 1–2 (emphasis added).
8

A. The Terms of Engagement Is Part of an Exchange of Letters.
The requirement to show an agreement in writing created by an exchange of letters
“erects an only minimal burden.” 37 In considering whether such an agreement was reached,
courts look for some degree of back-and-forth between the parties evidencing acceptance of an
agreement.
Various factors may be considered, including: (i) whether the document exchanged by the
parties is sufficiently clear as to draw the arbitration provision to the attention of the parties; 38 (ii)
whether the document containing the arbitration clause was unilaterally supplied by one party
after the parties had already formed an agreement; 39 (iii) whether the party was "mute" in
response to receiving the document; 40 (iv) whether the party "manifested . . . its assent to be
bound by the contract containing the arbitration clause;" 41 and (v) whether the parties specifically
communicated about the document containing the clause. 42
Glencore Ltd. v. Degussa Engineered Carbons L.P., found an agreement to arbitrate by
exchange of letters. 43 Glencore considered a motion to compel arbitration of a dispute over fuel
shipments from Degussa to Glencore. The parties never signed an agreement, but a written sales

37

Czarina, L.L.C. ex rel. Halvanon Ins. Co. v. W.F. Poe Syndicate, 254 F. Supp. 2d 1229, 1237 n.17 (M.D. Fla.
2002) aff'd sub nom. Czarina, L.L.C. v. W.F. Poe Syndicate, 358 F.3d 1286 (11th Cir. 2004).
38

See, e.g., Bothell v. Hitachi Zosen Corp., 97 F. Supp. 2d 1048, 1053 (W.D. Wash. 2000) ("[W]here the words
used to refer to a proposed arbitration agreement are so vague as to be meaningless and no further explanation is
provided, either by attachment, discussion or otherwise, the totality of the documents exchanged between the parties
does not constitute a valid 'arbitration agreement' under the Convention.").
39

See AGP Indus. SA v. JPS Elastromerics Corp., 511 F. Supp. 2d 212, 215 (D. Mass. 2007) (no "agreement in
writing" where buyer’s purchase orders said nothing about arbitration and reverse side of seller’s invoice contained
arbitration clause to which buyer did not respond).

40

Glencore Ltd. v. Degussa Engineered Carbons L.P., 848 F. Supp. 2d 410, 437 (S.D.N.Y. 2012).

41

Id.

42

Id.

43

Id. at 435–37.
9

contract was exchanged, as was a series of emails and communications. The court concluded that
“the parties’ written communications comfortably satisfy the standard set by the convention. 44
The court listed four reasons why the standard was met. First, this was not a case where
one party sought to unilaterally impose an arbitration term after an agreement was already in
place. 45 The arbitration clause was unambiguously incorporated by reference in a written
agreement that was supplied to the contesting party at the outset. 46 Second, the contesting party
was not mute in response to receiving the agreement, but sent emails proposing changes and
referring to provisions of the sales contract. 47 Third, the contesting party “manifested in various
ways its assent to be bound” by the sales agreement. 48 And, fourth, the parties specifically
communicated about the sales contract which contained the arbitration clause. 49
Standard Bent Glass Corp. v. Glassrobots Oy 50 reached a similar conclusion. Glassrobots
Oy sought to compel arbitration with Standard which claimed goods Standard purchased were
defective. 51 As in Glencore, the parties never signed an agreement, but instead made their deal
through a back-and-forth series of letters and documents. Glassrobots Oy sent Standard a sales
agreement that incorporated an arbitration clause by reference. 52 Without any reference to the
arbitration clause, Standard sent a letter requesting several changes to the sales agreement, and
closing with the statement, “Please call me if the above is not agreeable. If it is we will start the

44

Id. at 436 (emphasis added).

45

Id. at 437.

46

Id. at 415–16, 437.

47

Id. at 437.

48

Id.

49

Id.

50

333 F.3d 440 (3d Cir. 2003).

51

Id. at 442–43.

52

Id. at 450.
10

wire today.” 53 Two days later, Standard sent payment for the goods, which Glassrobots Oy later
delivered. 54
The court held that despite the arbitration clause merely being incorporated by reference,
the exchange between the parties was nevertheless sufficient to satisfy the standard under the
Convention. 55 In so holding, the court noted the “strong federal policy in favor of arbitration over
litigation,” which “applies with special force in the field of international commerce.” 56
In contrast to Glencore and Standard Bent, several courts have held that the Convention’s
standard for an agreement by exchange of letters was not met. Bothell v. Hitachi Zosen Corp.
held that there was no agreement to arbitrate because of the absence of any “reference, explicit or
implied, to arbitration or dispute resolution on the face of the[] documents.” 57 AGP Industries SA
v. JPS Elastromerics Corp. held that the “mere exchange of forms” between the parties was
insufficient to meet the standard. 58 The buyer had sent the seller purchase orders that did not
contain an arbitration clause, and the seller later sent invoices to the buyer that contained an
arbitration clause on the back of the form. 59 The seller had therefore attempted to unilaterally
impose the arbitration term on the other party after an agreement was already in place. And in
Czarina, L.L.C. ex rel. Halvanon Ins. Co. v. W.F. Poe Syndicate, the standard was not met

53

Id. at 442.

54

Id.

55

Id. at 450.

56

Id. (quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 631 (1985)) (internal
quotations omitted).
57

97 F. Supp. 2d 1048, 1053 (W.D. Wash. 2000).

58

511 F. Supp. 2d 212, 215 (D. Mass. 2007).

59

Id. at 213–14.
11

because the arbitration clause was contained in a “sample wording” which was never shown to
have been signed or otherwise adopted. 60
Transasia and EcoNova reached agreement through their "exchange of letters." EcoNova
admits that it received the Terms of Engagement and does not argue that the document was not
clear to draw the arbitration provision to EcoNova’s attention. Indeed, the Terms of Engagement
is only nine pages long, and the arbitration clause appears under the bold and underlined heading
"Governing Law and Dispute Resolution." 61 The document was sent to EcoNova at the outset of
the parties' commercial relationship and there is no evidence that the parties had already made an
agreement.
Further, EcoNova was not mute after receiving the Terms of Engagement, but instead
paid the retainer fee and continued to communicate with TransAsia by requesting legal services,
which TransAsia provided. In these communications, EcoNova did not object to the arbitration
provision or to any other provisions of the Terms of Engagement. By continuing to direct
TransAsia in its legal representation, EcoNova manifested its assent to be bound by the contract
containing the arbitration clause.
Although it appears that the parties never directly discussed or negotiated the Terms of
Engagement, or the arbitration clause itself, on the whole, the back-and-forth communications
between the parties are sufficient to constitute an "exchange of letters."
B. Under Contract Principles, the Terms of Engagement Document is an
Agreement to Arbitrate.
Second, even if the Terms of Engagement does not qualify as an exchange of letters, the
agreement to arbitrate is enforceable under general contract principles. Although Article II,
60

254 F. Supp. 2d 1229, 1237 (M.D. Fla. 2002) aff'd sub nom. Czarina, L.L.C. v. W.F. Poe Syndicate, 358 F.3d
1286 (11th Cir. 2004).
61

Terms of Engagement at 8, docket no. 2-4.
12

paragraph 2 of the Convention states that the agreement should be signed or contained in an
exchange of letters, courts have repeatedly held that non-signatories to an arbitration agreement
"may nevertheless be bound according to ordinary principles of contract and agency." 62 For
example, courts have held that a non-signatory may be bound where it receives a direct benefit
from a contract containing an arbitration clause. 63 Additionally, the United Nations Commission
on International Trade Law ("UNCITRAL") has recommended that "[A]rticle II, paragraph 2, of
the [New York Convention] be applied recognizing that the circumstances described therein are
not exhaustive." 64
While EcoNova claims that an arbitration agreement must be signed, 65 it fails to cite any
case law holding an arbitration agreement invalid merely for lack of signature. For example, in
Czarina, on which EcoNova relies, the arbitration agreement was invalid not merely because it
was unsigned, but because it was only a sample wording that was not shown to have been
adopted by the contesting party. 66 Additionally, in Lo v. Aetna Intern, Inc., also cited by
EcoNova, the court considered not only whether the contract was signed, but also whether the
parties were bound under contract principles. 67

62

Smith/Enron Cogeneration Ltd. P'ship, Inc. v. Smith Cogeneration Int'l, Inc., 198 F.3d 88, 97 (2d Cir. 1999)
(quotations omitted); see also Dynamo v. Ovechkin, 412 F. Supp. 2d 24, 27–28 (D.C. Cir. 2006) (holding that "when
contract law principles demonstrate the existence of an arbitration agreement between the parties, courts will find
that Article II is satisfied") (citing Standard Bent Glass Corp. v. Glassrobots Oy, 333 F.3d 440 (3d Cir. 2003)).
63

See International Paper Co. v. Schwabedissen, 206 F.3d 411, 416, 418 (4th Cir. 2000) (holding that "a party can
agree to submit to arbitration by means other than personally signing a contract containing an arbitration clause,"
and that a nonsignatory who receives a direct benefit from a contract containing an arbitration clause is estopped
from refusing to comply with it).
64

UNCITRAL, Recommendation Regarding the Interpretation of Article II, Paragraph 2, and Article VII, Paragraph
1, of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, U.N. Doc. A/6/17 (July 7,
2006).
65

EcoNova Reply at 11–14.

66

254 F. Supp. 2d at 1237.

67

2000 WL 565465 at *4 (D. Conn. Mar. 29, 2000).
13

EcoNova's approach is too narrow. General contract principles can validate an unsigned
agreement to arbitrate. For example, in Deloitte v. Deloitte, the Second Circuit held that a party
who received an agreement containing an arbitration clause, made no objection to its terms, and
proceeded to utilize the agreement to its benefit, had knowingly accepted the benefits of the
agreement and was estopped from avoiding arbitration despite never having signed the
agreement. 68
As in Deloitte, here EcoNova admittedly received the document containing the arbitration
clause, did not object to its terms, and continued to utilize the legal services of TransAsia.
EcoNova is estopped from arguing that the arbitration clause was invalid for lack of signature.
Further, binding EcoNova to the Terms of Engagement is appropriate considering the
provision on the first page of the document that provides:
If we do not hear from you within 5 business days of receipt of our Engagement
Letter, but continue to receive instructions from you or your representatives on the
matter in question, then your acceptance of the agreement set forth in the
Engagement Letter (inclusive of these Terms) shall be deemed to have been
given. 69
According to this provision, EcoNova’s failure to contest the arbitration clause combined with its
subsequent instructions to TransAsia to provide legal services rendered the agreement
enforceable.
II.

Subject Matter Jurisdiction is Present.

EcoNova also contends that this court lacks subject matter jurisdiction under an Eleventh
Circuit case, Czarina, LLC v. W.F. Poe Syndicate, which concluded that a valid arbitration
agreement was necessary for subject matter jurisdiction. 70 However, other courts have disagreed
68

Deloitte v. Deloitte, 9 F.3d 1060, 1064 (2d Cir. 1993).

69

Terms of Engagement at 2, docket no. 2-4.

70

358 F.3d 1286, 1291–92 (11th Cir. 2004).
14

with Czarina. For example, in Sarhawk Group v. Oracle Group, the Second Circuit held that
objections to the validity of arbitration agreements "are merits questions, not subject matter
jurisdiction questions." 71
The Tenth Circuit has yet to rule on this issue, and it need not be decided here because
even if subject matter jurisdiction were dependent on the validity of the arbitration agreement, as
established above, the Terms of Engagement constitutes a valid agreement.
III.

The Terms of Reference Document Was Not an Agreement to Arbitrate.

The parties also dispute whether the Terms of Reference document constitutes an
enforceable agreement to arbitrate under the Convention. TransAsia claims that the Terms of
Reference was a signed agreement to arbitrate, whereas EcoNova contends that it was merely a
summary of the parties’ positions in the arbitration that reflected EcoNova’s stance that
arbitration was improper for lack of an agreement to arbitrate.
Courts have discussed whether a party waives its right to object to the arbitrator’s
jurisdiction by participating in the arbitration. In Kaplan v. First Options of Chicago, Inc., the
Third Circuit held that “where a party objects to arbitrability but nevertheless participates in the
arbitration proceedings, waiver of the challenge to arbitral jurisdiction will not be inferred.” 72 In
that case, the party participated in the arbitration by filing a written memorandum objecting to
jurisdiction, filing counterclaims, and taking part in a discovery conference. 73 In affirming that
decision on appeal, the United States Supreme Court held that since the party had "forcefully

71

404 F.3d 657, 660 (2d Cir. 2005); see also Bell v. Hood, 327 U.S. 678, 681–82 (1946) ("Jurisdiction . . . is not
defeated . . . by the possibility that the averments might fail to state a cause of action on which petitioners could
actually recover. For it is well settled that the failure to state a proper cause of action calls for a judgment on the
merits and not for a dismissal for want of jurisdiction.").
72

19 F.3d 1503, 1510 (3d Cir.1994), aff'd, 514 U.S. 938 (1995); see also China Minmetals Materials Imp. & Exp.
Co., Ltd. v. Chi Mei Corp., 334 F.3d 274, 290 (3d Cir. 2003).
73

Id.at 1508.
15

object[ed] to the arbitrators deciding their dispute," it had not clearly agreed to submit the issue
of arbitrability to arbitration. 74
Likewise, in China Minmetals Materials Import and Export Co., Ltd., although a party
participated in arbitration, even presenting an argument on the merits, the court held that it had
not waived its objection to the arbitrator’s jurisdiction because it had “consistently objected to
[the arbitrator’s] jurisdiction throughout the proceeding.” 75
Although EcoNova signed the Terms of Reference, the document recites EcoNova’s
claim that "[t]here is no binding arbitration agreement between the Parties and the Tribunal has
no jurisdiction to hear this dispute." 76 Additionally, prior to signing the Terms of Reference,
EcoNova submitted a request to dismiss TransAsia's arbitration claim because the parties did not
have a binding arbitration agreement. 77
Thus, like the objecting parties in First Options and China Minmetals, EcoNova objected
forcefully to the jurisdiction of the arbitrator. It therefore did not waive its objection to the
arbitrator’s jurisdiction, and the Terms of Reference is not separately an enforceable agreement
to arbitrate under the Convention. However, this is not relevant to the outcome of this motion
because the Terms of Engagement do constitute a binding agreement to arbitrate.

74

First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 946 (1995).

75

334 F.3d at 291–92.

76

Terms of Reference at Section 5.2.3.1, docket no. 2-5.

77

Id. at ¶ 21, docket no. 2-5.
16

ORDER
IT IS HEREBY ORDERED that TransAsia's Motion for Judgment on the Pleadings 78 is
GRANTED.
IT IS FURTHER ORDERED that EcoNova's Motion for Summary Judgment 79 is
DENIED.
IT IS FURTHER ORDERED that TransAsia shall prepare and submit the form of a
judgment recognizing and enforcing the Award dated April 11, 2013, against Respondent
Econova, Inc. including judgment in favor of Petitioner against Respondent in the full
$117,967.34 amount of the Award.
Dated May 20, 2014.
BY THE COURT:
____________________________
David Nuffer
United States District Judge

78

Docket no. 15, filed October 4, 2013.

79

Docket no. 21, filed November 14, 2013.
17