PAUL W. GRIMM, District Judge.
The Estate of Ke Zhengguang ("Estate") petitions this Court to recognize and enforce a foreign arbitral award pursuant to the Convention on the Enforcement and Recognition of Foreign Arbitral Awards (the "New York Convention"), as implemented in Chapter 2 of the Federal Arbitration Act ("FAA"), codified at 9 U.S.C. §§ 201, et seq. Am. Petition, ECF No. 35. Yu Naifen Stephany ("Stephany Yu"), the respondent, is a United States citizen who resides in Maryland. Id. at ¶¶ 6, 8-9. Stephany Yu seeks to dismiss the petition to enforce the award on the following grounds: (1) enforcement should occur in China under the doctrine of forum non conveniens; (2) all necessary parties have not been joined under Federal Rule of Civil Procedure 19; (3) enforcement of the payment at issue is moot because it was already tendered in China; and (4) enforcement would be contrary to public policy. Mot. Dismiss 1, ECF No. 40. Stephany Yu also requests that if any judgment is entered, it be denominated in the official Chinese currency (the renminbi, or "RMB") and deemed satisfied. Id.
The Petitioner has provided the required documentation for recognition and enforcement of the Final Award, and the Respondent has not sought to modify, annul, or vacate the award. The award has not been set aside or suspended in the jurisdiction where it was rendered. Also, the Respondent has not asserted any of the limited, exclusive grounds on which a court may decline to recognize or enforce the foreign award under the New York Convention Article V.1, and she fails to satisfy her burden to show that enforcement of the award would violate public policy under the New York Convention Article V.2. For these reasons, discussed below, the foreign arbitral award shall be recognized, and Respondent's dismissal motion shall be denied.
In the early 2000s, Ke Zhengguang, Stephany Yu, her two sisters, Naiwen and Naijun Yu, and Xu Hongbiao entered into a complex real estate partnership to buy and develop real estate in China. Mot. Mem. 3, ECF No. 40-1. The partners formed a company, Oasis Investment Group Limited ("Oasis"), registered in the British Virgin Islands, which became the parent company of three subsidiary companies, one based in Hong Kong, the other two in China. Id.; Final Award
Agreement ¶ 4.2.
Disputes arose during the parties' attempts to implement the Agreement, and in February 2013, Xu Hongbiao and Ke Zhengguang, the Oasis Non-controlling shareholders, filed a Notice of Arbitration against Oasis and the Controlling shareholders, Stephany Yu and her sisters. Final Award ¶¶ 1, 3, 7, 13. The arbitral tribunal was officially constituted on June 4, 2013 and proceedings commenced. Id. at ¶¶ 11, 16. In December 2013, Ke Zhengguang died unexpectedly. Id. at ¶ 32. In April 2016, the arbitration panel authorized his wife and daughter to participate in the arbitration as administrators of his estate.
Final Award, Section VIII, p. 95-96.
In April 2018, the Estate submitted an application to interpret, correct, and supplement the award.
After the Clarified Award was issued, Petitioner filed the Amended Petition on March 4, 2019, seeking recognition and enforcement of the Final Award in its entirety. Am. Petition ¶¶ 3-4. The Estate seeks an Order directing Stephany Yu to comply with the specific performance orders and to pay the Estate $750,824.53
On April 8, 2019, Stephany Yu filed a Motion to Dismiss the Amended Petition to Enforce an Arbitral Award, ECF No. 40. The Estate filed a response in opposition, ECF No. 43, and Stephany Yu filed a reply, ECF No. 45, which completed the motion briefing on May 20, 2019.
A foreign arbitral award, or any award sought to be enforced in a signatory country other than the one in which the award has been made, falls under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of June 10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. 38 (commonly referred to as the "New York Convention"). The United States is a signatory to the New York Convention and has an "emphatic federal policy in favor of arbitral dispute resolution." Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 631 (1985); see also ESAB Grp., Inc. v. Zurich Ins. PLC, 685 F.3d 376, 390 (4th Cir. 2012). In the context of foreign arbitral awards, this policy includes "concerns of international comity, respect for the capacities of foreign and transnational tribunals, and sensitivity to the need of the international commercial system for predictability in the resolution of disputes . . . ." Mitsubishi Motors, 473 U.S. at 629.
The Federal Arbitration Act ("FAA"), 9 U.S.C. §§ 201-208, implements the New York Convention. The FAA provides that:
9 U.S.C. § 207 (emphasis added).
Article V of the New York Convention sets forth the limited, exclusive grounds on which a court may decline to recognize or enforce the foreign award. First, recognition and enforcement may be refused if the party against whom the award is invoked demonstrates that:
New York Convention, Art. V.1. Recognition and enforcement may also be refused if the reviewing court finds that:
Id. Art. V.2. Recognition and enforcement of an arbitral award may also be deferred if an application to set aside or suspend an arbitral award has been made to the competent authority of the country in which, or under the law of which, that award was made. Id. Art. VI. "The party opposing confirmation bears the heavy burden of proving the applicability of the Convention's enumerated defenses." AO Techsnabexport v. Globe Nuclear Services and Supply, Ltd., 656 F.Supp.2d 550, 553-54 (D. Md. 2009) (citation omitted); Three S Delaware, Inc. v. DataQuick Info. Sys., Inc., 492 F.3d 520, 527 (4th Cir. 2007); see also Telenor Mobile Commc'ns AS v. Storm LLC, 584 F.3d 396, 405 (2d Cir. 2009) ("The burden is a heavy one, as the showing required to avoid summary confirmance is high.").
United States federal courts have secondary jurisdiction over a foreign award, so they may not vacate, set aside, or modify the award, but are limited to deciding whether the award may be enforced. Fakhri v. Marriot Int'l Hotels, Inc., 201 F.Supp.3d 696, 710-11 (D. Md. 2016) (citations omitted). The Fourth Circuit stated that the scope of judicial review is "among the narrowest known at law" and indicated that "a court considering a complaint seeking confirmation of an arbitration award may determine only whether the arbitrators acted within the scope of their authority, and may not consider whether the arbitrators acted correctly or reasonably." AO Techsnabexport v. Globe Nuclear Servs. & Supply GNSS, Ltd., 404 F. App'x 793, 797 (4th Cir. 2010) (citations omitted).
Rather than asserting defenses under the New York Convention, Stephany Yu seeks to dismiss the Estate's petition on procedural grounds—forum non conveniens or for failure to join necessary parties under Federal Rule of Civil Procedure 19. Mot. Mem. 16-26. Stephany Yu also argues that the Court should refuse enforcement of Order 9 because the claim was mooted by her effort to tender payment. Id. at 26-28. She contends that the Court should accept her English translation of the Final Award Orders as being more accurate than the Petitioner's certified English translation, and she asks that if judgment is entered as to Order 9, it be entered in RMB rather than United States dollars. Id. at 34. Finally, Stephany Yu asserts a public policy defense under the New York Convention, Art. V.2(b), arguing that enforcement of Order 9 in the United States would violate the public policy of international comity. Id. at 31-33.
Stephany Yu asserts that a petition to enforce a foreign arbitral award may be dismissed on procedural grounds. Mot. Mem. 16-17 (citing Base Metal Trading, Ltd. V. OJSC "Novokuznetsky Aluminum Factory," 283 F.3d 208, 215 (4th Cir. 2002) (refusing enforcement for lack of personal jurisdiction); In re Arbitration between Monegasque De Reassurances S.A.M. v. Nak Naftogaz of Ukraine, 311 F.3d 488, 496 (2d Cir. 2002) (concluding that the doctrine of forum non conveniens was consistent with the overall intent of New York Convention cases); Intervest Int'l Equities Corp. v. Aberlich, 12 Civ. 13750, 2013 WL 1316997, at *2 (E.D. Mich. 2013) (deciding not to rule on the relative rights of the parties to the arbitration award without the presence of all parties to the arbitration)). The Estate argues that a confirmation proceeding under the New York Convention is intended to be a summary proceeding, and dismissal on procedural grounds such as forum non conveniens or Rule 19 would undermine the New York Convention, which has seven exclusive defenses enumerated under Article V. Resp. 12-17 (primarily citing Belize Soc. Dev. Ltd. v. Gov't of Belize, 5 F.Supp.3d 25, 34 (D.D.C. 2013, aff'd, 794 F.3d 99 (D.C. Cir. 2015) and BCB Holdings Ltd. v. Gov't of Belize, 650 F. App'x 17, 18 (D.C. Cir. 2016) (rejecting forum non conveniens defense in foreign arbitral award case)).
The United States Court of Appeals for the Second Circuit and the D.C. Circuit appear to have different views regarding the propriety of dismissing a foreign arbitration enforcement proceeding on procedural grounds, and the United States Supreme Court has declined to weigh in. Compare TMR Energy Ltd. v. State Property Fund of Ukraine, 411 F.3d 296 (D.C. Cir. 2005); Belize Soc. Dev. Ltd. v. Gov't of Belize, 794 F.3d 99, 105 (D.C. Cir. 2015) cert. denied, 137 S.Ct. 619 (Jan. 9, 2017); BCB Holdings Ltd. v. Gov't of Belize, 650 F. App'x 17, 19 (D.C. Cir. 2016) cert. denied, 137 S.Ct. 619; and Newco Ltd. v. Gov't of Belize, 650 F. App'x 14, 16 (D.C. Cir. 2016) cert. denied, 137 S.Ct. 619; with Figueiredo Ferraz E Engenharia de Projeto Ltda. v. Republic of Peru, 665 F.3d 384 (2d Cir. 2011), in which the majority rejected the D.C. Circuit's forum non conveniens analysis in TMR Energy.
In Figueiredo Ferraz, the Second Circuit asserted that the doctrine of forum non conveniens was a doctrine of procedure, citing American Dredging Co. v. Miller, 510 U.S. 443, 453 (1994), and could be contemplated under the New York Convention's provision that says that States shall "recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon." 665 F.3d at 392 (quoting New York Convention, Art. III); but see id. at 399, (Lynch, J., dissenting) ("the `procedure' provisions of the treaties permit variation with regard to the manner in which signatory states enforce international arbitration awards; they do not provide a means by which a state may decline to enforce such awards at all."). The only Fourth Circuit decision discussing the recognition and enforcement of an arbitral award on procedural grounds was cited by Stephany Yu as support for her position: Base Metal, 283 F.3d 208. In that 2002 decision, the Fourth Circuit affirmed the district court's refusal to recognize a foreign arbitral award based on lack of personal jurisdiction over the debtor. Id. at 213-15. Personal jurisdiction is "an essential element of district court jurisdiction, without which the court is powerless to proceed to an adjudication." Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 575 (1999) (citing Employers Reinsurance Corp. v. Bryant, 299 U.S. 374, 382 (1937)). However, in this case, Stephany Yu is a Maryland resident, and there is no dispute regarding whether this Court has personal jurisdiction over her. And there is no question whether this Court has subject matter jurisdiction, since the FAA allows for recognition and enforcement of foreign arbitral awards in district courts. See 9 U.S.C. § 203 ("An action or proceeding falling under the [New York] Convention shall be deemed to arise under the laws and treaties of the United States. The district courts of the United States . . . shall have original jurisdiction over such an action or proceeding, regardless of the amount in controversy.").
With regard to failure to join necessary parties, the FAA explicitly states that "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." 9 U.S.C. § 207. In fact, the Estate, as prevailing party, could seek to enforce the award against Stephany Yu in multiple concurrent enforcement proceedings. See, e.g., Karaha Bodas Co., L.L.C. v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, 364 F.3d 274, 281 (5th Cir. 2004) (commenting on the filing of enforcement actions in the federal district court in Texas as well as filing actions in Hong Kong and in Canada). This is not an action to adjudicate the merits of the case, but an action to enforce a final and binding award. I am constrained to determine only whether Stephany Yu, as Respondent, has a legitimate defense to the enforcement proceeding, because judgment has already been imposed by the arbitral tribunal.
The bottom line is that the New York Convention lists seven exclusive defenses to enforcement, and neither forum non conveniens nor failure to join necessary parties under Rule 19 is one of them. An enforcing court is not reviewing the merits of the case such that a discussion of the most convenient forum for resolution is needed; the merits of the dispute have already been decided in the forum chosen by the parties.
Accordingly, I will not dismiss the Petition under the procedural grounds set forth by Stephany Yu.
Stephany Yu has raised only one of the available defenses under the New York Convention Article V; she asserts that recognition and enforcement of the Final Award would be contrary to public policy. Mot. Mem. 31 (citing New York Convention, Art. V.2(b); 9 U.S.C. § 207). Stephany Yu contends that requiring her to pay the award outside China would violate China's currency control laws, which, in turn, violates the fundamental policy of international comity
The New York Convention's public policy defense is "construed extremely narrowly." BCB Holdings Limited v. Government of Belize, 110 F.Supp.3d 233, 250 (D.D.C. 2015) (citations omitted). Courts recognize the presumption that favors upholding international arbitral awards and denies enforcement only when it "would violate the forum state's most basic notions of morality and justice." Id. "Such a public policy . . . must be well defined and dominant, and is to be ascertained by reference to the laws and legal precedents and not from general considerations of supposed public interests." Id. Stephany Yu has not met this substantial burden.
Stephany Yu argues that Victrix S.S. Co., S.A. v. Salen Dry Cargo A.B., 825 F.2d 709, 715-16 (2d Cir. 1987) provides authority for this Court to refuse enforcement. Mot. Mem. 32. However, Vitrix does not stand for the proposition that she asserts. In Vitrix, the respondent, Salen, had entered into bankruptcy in Sweden. 825 F.2d at 711. Vitrix filed a claim in the foreign bankruptcy proceeding, and simultaneously obtained an arbitration award in London and a money judgment. Id. Vitrix then sought to attach property in New York, seeking to enforce both a foreign judgment and the arbitral award, thus undertaking two methods of securing a remedy at the same time in different jurisdictions. Id. In the bankruptcy context, "American courts have long recognized the need to extend comity to foreign bankruptcy proceedings," because "[t]he equitable and orderly distribution of a debtor's property requires assembling all claims against the limited assets in a single proceeding; if all creditors could not be bound, a plan of reorganization would fail." Id. at 713-14. "U.S. courts should ordinarily decline to adjudicate creditor claims that are the subject of a foreign bankruptcy proceeding." JP Morgan Chase Bank v. Altos Hornos de Mexico, S.A. de C.V., 412 F.3d 418, 424 (2d Cir. 2005). This case presents no similar circumstances. Rather, Stephany Yu simply asserts, without citing any authority, that she might be placed at legal risk for potentially violating China's currency control laws if the Court were to require her to pay the Final Award from China to a bank account outside of China. This Court is not being asked to enforce a judgment in China, but rather, in the United States, so any decision in this case would not undermine the interests of China in enforcing its own currency control laws.
Therefore, Stephany Yu has not met the high bar of showing that the Final Award, nor my confirmation of it, would violate the "basic notions of morality and justice," and I shall not dismiss the Petition under the asserted public policy consideration. See BCB Holdings, 110 F. Supp. 3d at 250.
Stephany Yu contends that she has already tendered the funds for payment under Order 9, mooting the relief sought by the Estate. Mot. Mem. 26. She also argues that any judgment as to Order 9 should be entered in RMB, not U.S. dollars. Id. at 33 (citing cases in which federal courts entered judgments in the currency of the parties' transactions rather than in U.S. dollars). The Estate notes that payment currency is not an appropriate dismissal argument but asks that I direct Stephany Yu to pay Order 9 in either United States dollars or in RMB that can be accepted by the Estate's Hong Kong bank. Resp. 21. It adds that Stephany Yu's attempts at payment in a form that the Estate cannot accept does not make the issue moot. Id. at 22.
Of the multiple cases cited by Stephany Yu in support of her argument that the judgment should be entered in RMB, two of the discussions were in the context of enforcing a foreign arbitral award—Mitsui & Co., Ltd. v. Oceantrawl Corp., 906 F.Supp. 202, 203 (S.D.N.Y. 1995) and Leidos, Inc. v. Hellenic Republic, 881 F.3d 213 (D.C. Cir. 2018). The Mitsui court discussed the earlier policy of American courts entering money judgments in American currency but noted that there was no longer a bar to judgment in foreign currencies and observed that "courts should enter judgment in the currency in which the parties conducted their transactions." 906 F. Supp. at 203 (citing In re Oil Spill by the Amoco Cadiz, 954 F.2d 1279 (7th Cir. 1992) (per curiam)). The court also cited the Restatement (Third) of the Foreign Relations Law of the United States § 823(1) (1986), which "states that American courts `are not precluded from' entering judgment in the foreign currency of an underlying obligation." Id. at 204 (noting that comment b counsels that "a judgment in a foreign currency should be issued only when requested by the judgment creditor, and only when it would best accomplish the objective [of making the injured party whole and avoiding rewarding a debtor who has delayed in carrying out the obligation]."). In the Mitsui case, the parties had conducted all their transactions in yen and agreed that judgment should be entered in yen, so the court entered the judgment in yen. Id.
In Leidos, the D.C. Circuit reversed the district court's grant of a motion to convert the original judgment's award in euros into United States dollars.
A recent unpublished decision from the D.C. district court is also instructive. In LLC Komstroy v. Republic of Moldova, Case No. 14-cv-01921 (CRC), 2019 WL 3997385, at *1 (D.D.C., Aug. 23, 2019), the court was petitioned to confirm an arbitral award in one of multiple jurisdictions. After summarily dismissing the respondent's forum non conveniens argument
On a claim for recognition of a foreign judgment, the Restatement suggests that courts consider equitable reasons, with an intent "to make the creditor whole and to avoid rewarding a debtor who has delayed in carrying out the obligation." Id. (citing Restatement § 823 cmts. c & d). Thus, a court should apply the "breach day" rule if the currency in which the foreign judgment is denominated has depreciated in value, "[u]nless the interests of justice require otherwise." Id.
Here, the Petitioner requests the award in a specific amount of United States dollars, but it is not clear how the Estate calculated the exchange rate. Am. Petition 10, (c). Based on the Estate's original petition, the request was for an award in United States dollars "at the exchange rate effective on the date of issuance of such judgment, or upon the date of issuance of the Final Award, whichever is greater." Petition 7, (a). Stephany Yu suggests that the exchange should be based on the judgment day rule, based on the claim arising under foreign law. Mot. Mem. 35 n.6 (citing Vlachos v. M/V/ Proso, 637 F.Supp. 1354, 1376 (D. Md. 1986), applying the judgment day rule in an admiralty case based on governing foreign law). However, as discussed, the cause of action here arises under the FAA.
I do not agree that Stephany Yu's efforts to tender payment from her China-based company in a form that was unacceptable to the Estate constitutes an unconditional tender that moots this case. See Mot. Mem. 26. Even if the Estate had accepted the payment, it is still entitled to an order recognizing the Final Award and the ability to pursue pre- and post-judgment interest. See Zeiler v. Deitsch, 500 F.3d 157, 169 (2d Cir. 2007) (holding that whether the award at issue had been satisfied was not relevant to whether the court should confirm the award); Southside Hosp. v. New York State Nurses Assoc., CV 15-2282 (JS) (GRB), 2017 WL 9485721, at *5 (E.D.N.Y. Jan. 26, 2017) ("A court may confirm an arbitration award even when the party has fully complied with that award."). The Estate indicated it was willing to accept payment in RMB, but it required a negotiable instrument capable of being deposited into its Hong Kong bank account. Am. Petition ¶ 25. Stephany Yu did not provide a payment that could be accepted by the Estate's Hong Kong bank account as requested. Id. at ¶ 25-26.
The Estate has also requested pre-judgment and post-judgment interest at the statutory rate. Am. Petition 10(d), (e).
The Fourth Circuit has stated that "awarding post-judgment interest on the entire [damages] amount . . . including pre-judgment interest, most closely comports with the purpose of post-judgment interest articulated by the Supreme Court." Quesinberry v. Life Ins. Co. of N. Am., 987 F.2d 1017, 1031 (4th Cir. 1993) (citing Kaiser Aluminum & Chemical Corp. v. Bonjorno, 494 U.S. 827, 835 (1990)).
The parties did not discuss either pre- or post-judgment interest in their briefs. Therefore, if the parties do not agree on the propriety or form of interest due to the Petitioner, I shall require them to provide me with letter briefs not to exceed three pages, single space (as described below), detailing their positions on the matter before I make a decision.
Accordingly, I direct the parties to submit a proposed judgment with all conversions consistent with this opinion and agreed interest calculations. If the parties cannot agree, they shall each provide a proposed judgment together with a letter (not to exceed three pages, single spaced) containing a concise summary of their position and the legal support for it.
In sum, the Petitioner has provided the required documentation for recognition and enforcement of the Final Award. The Respondent has not sought to modify or annul or vacate the award, and the award has not been set aside or suspended in Hong Kong, where it was rendered. The Respondent asserted only one defense under the New York Convention—enforcement would violate public policy—but she did not satisfy the substantial burden to overcome the presumption favoring enforcement. Therefore, I shall GRANT Petitioner's request to recognize and enforce the Final Award. Respondent's dismissal motion shall be DENIED.
Judgement shall be entered by separate Order. There remain outstanding questions related to the exchange rate to be applied as well as the parties' positions on pre- and post-judgment interest. Accordingly, the parties shall provide an agreed proposed judgment order, consistent with the Final Award and this opinion, no later than Friday, March 13, 2020. If the parties cannot agree on a proposed judgment order, on or before Friday, March 13, 2020, each shall provide their proposed order together with a letter (not to exceed three pages, single spaced) containing a concise summary of their position with respect to the exchange rate and pre- and post-judgment interest, and the legal support for it.
