Jiangsu Beier Decoration Materials Co. v. Angle World LLC

52 F.4th 554

JIANGSU BEIER DECORATION MATERIALS CO., LTD., Appellant

v.ANGLE WORLD LLC

No. 21-3143

United States Court of Appeals, Third Circuit.

Submitted Pursuant to Third Circuit L.A.R. 34.1a On September 21, 2022

Filed: November 3, 2022

Richard A. Kaye, Barnes & Thornburg, LLP, 3475 Piedmont Road, N.E., Suite 1700, Atlanta, Georgia 30305, William J. Burton, Barnes & Thornburg, LLP, 1000 N. West Street, Suite 1500, Wilmington, DE 19801, Counsel for Appellant Jiangsu Beier Decoration Materials Co., Ltd.

Stephen M. Packman, Archer & Greiner, P.C., Three Logan Square, 1717 Arch Street, Suite 3500, Philadelphia, PA 19103, Brian M. Gargano, Jiangang Ou, Archer & Greiner, P.C., 3040 Post Oak Blvd, Suite 1800, Houston, TX 77056, Counsel for Appellee Angle World LLC

Before: AMBRO, RESTREPO, and FUENTES, Circuit Judges

OPINION OF THE COURT

FUENTES, Circuit Judge.

Appellant Jiangsu Beier Decoration Materials Co., Ltd. ("Jiangsu"), a China-based manufacturer, obtained an arbitration award in China against Appellee Angle World LLC ("Angle World"), a Pennsylvania-based distributor. Jiangsu seeks to enforce its foreign arbitration award in the United States, but Angle World claims that it never agreed to arbitrate. This case requires us to examine the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the "New York Convention"), an international treaty that permits the recipient of a foreign award to petition a United States district court for confirmation.¹

The District Court dismissed Jiangsu's confirmation petition after determining that Jiangsu failed to prove that Angle World agreed to arbitrate the parties' underlying dispute. For the reasons set forth herein, we will vacate the District Court's order of dismissal and remand this case for further proceedings. We take no position on the ultimate question of arbitrability.

I. Factual Background

A. The Underlying Dispute

Jiangsu is a manufacturer of flooring products based in China. Angle World is a distributor based in Pennsylvania. In 2016, Jiangsu and Angle World agreed that Angle World would serve as Jiangsu's exclusive distribution agent in the United States. Jiangsu claims that, as of June 2018, Angle World owed it over $1.3 million under the distribution agreement. Angle World disputed Jiangsu's claim, and the parties attempted to negotiate a settlement.

On June 28, 2018, the parties agreed to a written and signed memorandum of understanding, under which Angle World agreed to pay Jiangsu $528,227.59 within six months (the "June MOU").² The June MOU did not contain an arbitration clause. On July 10, 2018, a representative from Jiangsu sent Angle World a revised agreement via email (the "July MOU"). Unlike its predecessor, the July MOU included an arbitration clause, providing as follows:

Any dispute arising from this Memorandum of Understanding shall be settled by and between the two Parties through friendly negotiation. If the dispute cannot be settled through negotiation, the two Parties shall submit the dispute to the China International Economic and Trade Arbitration Commission Shanghai Sub-Commission for arbitration according to the arbitration rules of the Sub-Commission. The place of arbitration shall be Shanghai. The arbitration ruling shall be final and binding on the two Parties, and the losing Party shall compensate the winning Party for the arbitration cost and attorney's fee.³

After Jiangsu sent a draft of the July MOU to Angle World, the parties allegedly met in person in China to continue negotiations. On July 19, 2018, Jiangsu emailed Angle World an amended version of the July MOU with a revised payment schedule. Angle World's president, Biao Wang ("Wang"), responded with the following email:

It has not been written in accordance with our negotiation.

It has exceeded the scope of my capacity in terms of negotiating with both parties.

Following the legal procedure, once Jason⁴ has provided a final response, we will not make further changes or accept any amendment suggestions.⁵

What happened next is not entirely clear. A Jiangsu representative initially attested that the parties held another in-person meeting, that Wang signed a copy of the July MOU, and that Jiangsu then sent a copy of the signed agreement to Angle World via courier service. However, Jiangsu has since conceded before the District Court and on appeal that Angle World never signed the July MOU. The parties exchanged emails on July 26 and 27, 2018 indicating that they had agreed to a payment schedule. Yet, these emails do not reference the July MOU or any other prior agreement. In subsequent emails between the parties in August and September 2018, Jiangsu repeatedly asked Angle World to forward the "signed agreement." Angle World never acknowledged these requests.

Angle World states that from July to September 2018, it understood that the June MOU remained in effect, as modified by the later agreed-upon payment schedule. Nonetheless, Angle World ultimately made only two of the six scheduled payments to Jiangsu.⁶

B. The Chinese Arbitration

In May 2019, Jiangsu initiated arbitration against Angle World before the China International Economic and Trade Arbitration Commission ("CIETAC"). Angle World objected to CIETAC's jurisdiction over the dispute, and the matter was referred to the Beijing Fourth Intermediate People's Court (the "Chinese Court") to determine arbitrability. The Chinese Court found that the July MOU, and the arbitration clause contained therein, were enforceable under Chinese law because, among other things, "the parties entered into or modified the contracts by email during the course of long-term business," and "the [July MOU] was an adjustment and supplement to the [June MOU]."⁷

The CIETAC arbitration panel adopted the Chinese Court's decision and also independently determined that the July MOU was enforceable under both the United Nations Convention on the International Sale of Goods ("CISG")⁸ and Chinese law. On March 11, 2021, the panel ruled in favor of Jiangsu on the merits of the dispute, finding that Angle World had breached the July MOU by failing to make all payments required thereunder. The panel ordered Angle World to pay $624,227.59 for the breach, plus attorney fees (the "Foreign Award").⁹

II. Procedural History

Jiangsu filed the petition before us in the United States District Court for the Eastern District of Pennsylvania on June 25, 2021, seeking confirmation of the Foreign Award pursuant to the New York Convention (the "Petition"). The Petition alleged that "[o]n or about July 10, 2018, after various drafts and negotiations," Angle World and Jiangsu agreed to an MOU in which they "agreed to settlement of trade transaction disputes between them."¹⁰ The Petition attached copies of the Foreign Award and the unsigned July MOU. It did not reference any of the emails exchanged between the parties from July to September 2018.

Angle World then moved to dismiss the Petition under Federal Rule of Civil Procedure 12(b)(6). Angle World argued that Jiangsu did not demonstrate the existence of an arbitration agreement enforceable under the New York Convention and that, consequently, the District Court could not enforce the Foreign Award. Jiangsu argued in opposition, among other things, that the District Court should defer to the Chinese Court's finding of arbitrability and that the parties' email correspondence created an enforceable arbitration agreement. The parties submitted several exhibits in connection with their briefing on the motion to dismiss, including the July-September 2018 email exchanges discussing the MOUs and payment schedules.

The District Court granted Angle World's motion and dismissed the Petition. In an opinion dated October 28, 2021, the Court found that Jiangsu failed to produce an arbitration agreement enforceable under the New York Convention because Angle World never signed the July MOU and Jiangsu did not otherwise prove Angle World's agreement to arbitrate. The Court further held that it was not bound by the prior rulings of the Chinese Court or CIETAC because (1) neither Chinese tribunal determined whether the July MOU was enforceable under the New York Convention; and (2) under Third Circuit law, the Court had an independent duty to assess whether there was an enforceable agreement to arbitrate before confirming the Foreign Award. Jiangsu timely appealed.

III. Jurisdiction and Standard of Review

The District Court had jurisdiction under 28 U.S.C. § 1331 and 9 U.S.C § 203. This Court has jurisdiction under 28 U.S.C. § 1291. On review of a petition to confirm an arbitration award, this Court reviews a district court's factual findings for clear error and its legal conclusions de novo .¹¹ We review de novo a district court's interpretation of the New York Convention.¹²

IV. Discussion

The New York Convention, as implemented by Chapter 2 of the Federal Arbitration Act ("FAA"),¹³ permits the recipient of a foreign arbitration award to petition a district court to enforce it.¹⁴ Before confirming a foreign award, however, a district court must independently assure itself that the parties consented to arbitrate the merits of their underlying dispute.¹⁵ The District Court performed this inquiry and found consent lacking with respect to the July MOU—the only document in the record containing an arbitration provision.

Jiangsu argues on appeal that the District Court erred in reaching this conclusion for two reasons. First, it argues that even though Angle World never signed the July MOU, the record before the District Court—specifically, an email exchange between the parties—shows that Angle World nonetheless consented to arbitrate. Second, Jiangsu contends that the District Court should have deferred to the conclusions of Chinese tribunals that the July MOU was enforceable. We will address each argument in turn and, ultimately, remand for further proceedings to assess whether the parties' email correspondence created a valid arbitration...