Petitioner, Trina Solar US, Inc. (“Trina”), is a California company that manufactures and sells solar panels. In 2012, Trina began negotiations with Respondents, Australia-based Jasmin Solar Pty Ltd. (“Jasmin”) and Nevada-based JRC-Services LLC (“JRC”), for the sale of such solar panels. JRC acted in tandem with Jasmin in negotiating the purchase of solar panels from Trina.
In November 2012, JRC executed a written sales contract (“Contract”) with Trina to purchase the solar panels. Jasmin was not a signatory to the contract. Nonetheless, as the Contract’s performance period began, Jasmin acted as though it was a party to the Contract: purchase orders and sales invoices included Jasmin’s address; Jasmin executives signed various purchase orders; and Jasmin received the solar panels directly from Trina in Australia.
On May 16, 2014, Trina initiated arbitration against both JRC and Jasmin for failure to pay the invoices reflecting the sale of solar panels. Jasmin moved to dismiss for lack of jurisdiction on the ground it was not a signatory to the Contract. The arbitral tribunal denied Jasmin’s motion, but Jasmin maintained its objection by not participating in the arbitration.
After a hearing, the tribunal found JRC and Jasmin jointly and severally liable for $1,305,131 plus post-judgment interest. JRC and Jasmin subsequently each filed separate motions with the United States District Court for the Southern District of New York (the “Southern District”) to vacate the award, while Trina filed a motion with the same court seeking the award’s confirmation. The Southern District confirmed the award against both Respondents.
In its motion to vacate, Jasmin argued, pursuant to section 10(a)(4) of the Federal Arbitration Act (the “FAA”) that the tribunal had exceeded its authority by exercising jurisdiction over a non-signatory to the Contract. The Southern District rejected this argument, recognizing that a non-signatory may be bound to arbitrate pursuant to several different common law principles arising under contract and agency law, including agency and estoppel.
In applying this principle, the court first found that an agency relationship existed between Jasmin and JRC. JRC had actual authority to bind Jasmin, as evidenced by the parties’ conduct during negotiations, and following execution of the Contract. JRC also had apparent authority to bind Jasmin, as Jasmin’s conduct and statements reasonably interpreted would lead a third party in Trina’s position to believe that Jasmin had consented to JRC executing the Contract on its behalf.
The court also found that estoppel would apply. The court explained that a non-signatory can be bound to arbitrate where it “knowingly accepted the benefits of an agreement with an arbitration clause, even without signing the agreement.” Here, Jasmin benefited directly from the Contract: the Contract was one for the sale of goods, and those goods were purchased in accordance with Jasmin’s specifications and delivered directly to Jasmin. For this reason, and the reasons of agency described above, the Southern District denied Jasmin’s motion to vacate the arbitration award.
The Southern District likewise denied JRC’s motion to vacate the arbitration. JRC based its vacatur motion on section 10(a)(3) of the FAA, claiming that the proceeding was fundamentally unfair because the Tribunal allegedly permitted Trina to submit “asymmetrically” shorter witness statements in advance of the hearing, notwithstanding an order requiring detail in the statements. The court rejected this argument, finding that the tribunal did not restrict JRC’s case-in-chief or its cross-examination, and that allowing the shorter witness statements did not result in a fundamentally unfair arbitration proceeding.
Finally, the Southern District rejected JRC’s argument that the Tribunal’s unreasoned arbitration award was “indefinite, incomplete and ambiguous.” The court noted that the parties had agreed to an unreasoned award, and that the award here—requiring payment of $1,305,131 by JRC and Jasmin to Trina for solar panels delivered pursuant to the Contract—was unambiguous. Thus, while JRC argued that more detail may allow it to claim a refund by identifying allegedly defective solar panels, the court held that this was not grounds for a remand.
Having addressed and denied each Respondents’ motion to vacate, the Southern District confirmed the arbitration award in full and directed the Clerk of the Court to terminate the case.
Trina Solar US, Inc. v. JRC-Services LLC and Jasmin Solar Pty Ltd., No. 16-cv-2869, 2017 U.S. Dist. LEXIS 6134 (S.D.N.Y. Jan. 17, 2017) [click for opinion]
A version of this post originally appeared in the March 2017 edition of Baker McKenzie’s International Litigation & Arbitration Newsletter, which is edited by David Zaslowsky and Grant Hanessian.