Jolen, Inc. v. Kundan Rice Mills, Ltd., No. 19-cv-01296 (S.D.N.Y. July 9, 2019) [click for opinion]

In November 2004, the parties executed an Exclusive Trademark License Agreement (the “Agreement”), which included an arbitration clause governing any dispute related to the Agreement. In April 2016, Claimant Jolen, Inc. (“Jolen”) initiated arbitration proceedings against Respondent Kundan Rice Mills, Ltd. (“Kundan”) under the auspices of the International Chamber of Commerce (“ICC”). Jolen alleged that Kundan had breached the Agreement by failing to report monthly sales figures and failing to make required royalty payments.

One month after Jolen initiated the arbitration, Kundan sought ex parte declaratory and injunctive relief in the courts in India to preclude Jolen from proceeding with the arbitration, but withdrew the action before judgment was rendered. The arbitral tribunal later found that Kundan had breached the Agreement, and issued a “Partial Award” to Jolen.

In September 2018, Kundan again sued Jolen in India, this time attempting to vacate the Partial Award. Kundan argued that the Partial Award was “arbitrary, unfair, unreasonable, patently illegal, and contrary to the Agreement, Fundamental Law of India, and the Public Policy of India.” Jolen subsequently sought an anti-suit injunction against Kundan, and petitioned the federal district court in New York to confirm the Partial Award. The court granted Jolen’s injunction, confirmed the Partial Award, and prohibited Kundan from “instituting or participating in any proceedings the object of which, in whole or in part, is to stay, modify, vacate, set aside or render null, void, not binding or nonenforceable any portion of the Partial Award.”

Nevertheless, Kundan continued its action against Jolen in India. In response, Jolen petitioned the district court to issue sanctions and hold Kundan in civil contempt for violating the injunction.

The district court granted Jolen’s motion, ruling that coercive sanctions were warranted given Kundan’s continued noncompliance, which exposed Jolen to “unnecessary cost and expense through a vexatious action in a foreign forum.” Noting that “[m]onetary sanctions are an efficacious means of enforcing” arbitration awards, the district court ordered Kundan to pay a $3,000 fine to Jolen within fourteen days. Further, for every seven days thereafter that Kundan remained in noncompliance with the injunction, the $3,000 would double until Kundan fully complied with the injunction.

A version of this post originally appeared in the August 2019 edition of Baker McKenzie’s International Litigation & Arbitration Newsletter, which is edited by David Zaslowsky and Grant Hanessian.