17-572-cv Trina Solar US, Inc. v. Jasmin Solar Pty Ltd
1 UNITED STATES COURT OF APPEALS 2 FOR THE SECOND CIRCUIT 3 4 August Term, 2018 5 6 (Argued: October 17, 2018 Decided: April 2, 2020) 7 8 Docket No. 17-572-cv 9 10 _____________________________________ 11 12 TRINA SOLAR US, INC., 13 14 Petitioner-Appellee, 15 16 v. 17 18 JASMIN SOLAR PTY LTD, 19 20 Respondent-Appellant, 21 22 JRC-SERVICES LLC, 23 24 Respondent. 25 26 _____________________________________ 27 28 Before: 29 30 POOLER, LOHIER, and CARNEY, Circuit Judges. 31 32 Jasmin Solar Pty Ltd (“Jasmin”) appeals from a judgment of the United 33 States District Court for the Southern District of New York (Caproni, J.) granting 34 the petition of Trina Solar US, Inc. (“Trina”) to confirm an arbitration award 35 entered in its favor and denying the motions of Jasmin and JRC-Services LLC 36 (“JRC”) to vacate the award. The commercial contract containing the arbitration
2
1 clause at issue is governed by New York law and was signed by Trina and JRC, 2 but not by Jasmin. Because we are not persuaded that JRC acted as Jasmin’s 3 agent in executing the contract or that, in the alternative, Jasmin was bound to 4 the arbitration clause under a direct benefits theory of estoppel, we REVERSE the 5 District Court’s judgment as it applies to Jasmin and REMAND the case to the 6 District Court with instructions to enter an amended judgment dismissing the 7 case as to Jasmin. 8 9 JEAN-CLAUDE MAZZOLA (Ruofei Xiang, on the brief), 10 Mazzola Lindstrom LLP, New York, NY, for Petitioner- 11 Appellee Trina Solar US, Inc. 12 13 JODY S. KRAUS, Jody S. Kraus Legal Consulting, New 14 York, NY (Jacob W. Buchdahl, Arun S. Subramanian, 15 Susman Godfrey LLP, New York, NY, on the brief), for 16 Respondent-Appellant Jasmin Solar Pty Ltd. 17
18 LOHIER, Circuit Judge: 19 Jasmin Solar Pty Ltd (“Jasmin”) appeals from a judgment of the United 20 States District Court for the Southern District of New York (Caproni, J.) granting 21 the petition of Trina Solar US, Inc. (“Trina”) to confirm an arbitration award 22 entered in its favor and denying the motions of Jasmin and JRC-Services LLC 23 (“JRC”) to vacate the award. The commercial contract containing the arbitration 24 clause at issue is governed by New York law and was signed by Trina and JRC, 25 but not by Jasmin. We have recognized various theories under which 26 nonsignatories may be bound by arbitration agreements entered into by others. 27 See Thomson-CSF, S.A. v. Am. Arbitration Ass’n, 64 F.3d 773, 776 (2d Cir. 1995).
3
1 The District Court relied on two of those theories—agency and the direct benefits 2 theory of estoppel—to find that Jasmin was bound by the arbitration clause. For 3 the reasons that follow, we reverse the judgment as it applies to Jasmin. 4 BACKGROUND 5 1. Facts 6 Jasmin, an Australian company founded in 2012, provides solar power 7 equipment and installation to Australian residents. In 2012 Jasmin sought to 8 exploit a favorable government-backed solar power rebate program in 9 Queensland, Australia that was soon set to expire. It began to negotiate a 10 contract (the “Contract”) with the United States-based division of Trina, a 11 Chinese solar panel manufacturer, to buy Trina’s solar panels. Trina demanded 12 that a United States-based company sign the Contract as counterparty and 13 submit the solar panel purchase orders, citing a need to protect the parties in the 14 event litigation ensued and a desire to secure the sales commissions for Trina’s 15 division in the United States rather than its Australian arm. Jasmin yielded to 16 Trina’s demands. In August 2012 Jasmin authorized JRC, a Nevada-based 17 company, to act as Jasmin’s agent for all business dealings between Jasmin and
4
1 Trina, although it also recognized that Trina might contract with JRC as a 2 principal in its own right rather than as an agent. 3 In November 2012 Trina and JRC signed the Contract, which was 4 governed by New York law. The Contract refers to Trina as the “Seller,” JRC as 5 the “Buyer,” and Trina and JRC—but not Jasmin—collectively as the “Parties.” 6 Appellant’s App’x 32, 33, 42. Jasmin is described only once in the Contract, as 7 JRC’s “parent company” responsible for “guarantee[ing] payment” for solar 8 panel shipments under the Contract. Appellant’s App’x 38. Importantly, for our 9 purposes, the Contract also contains an arbitration clause that provides that 10 “[a]ny dispute or controversy or difference arising out of or in connection with 11 this Contract . . . between the parties hereto . . . shall be submitted to binding 12 arbitration.” Appellant’s App’x 40. 13 Shortly after the Contract was executed, Trina made clear that it viewed 14 JRC, not Jasmin, as its client. A representative of Trina, John Dallapiazza, 15 declared to a colleague that “all of the US contracts are being processed under 16 JRC Services, LLC” and that “Jasmin Solar is no longer a client” of Trina. 17 Appellant’s App'x 264. Dallapiazza also made clear to the same colleague that 18 Trina regarded JRC as the sole counterparty to the Contract, stating that
5
1 “currently [Trina] do[es] not have any executed contracts with Jasmin,” and that 2 Trina had “removed Jasmin Solar from the equation entirely.” Appellant’s 3 App’x 264, 268. In the meantime, Jasmin continued to communicate with Trina 4 regarding delivery schedules and credit line issues and to review purchase 5 orders prior to delivery. In addition, Jasmin confirmed that it would pay the 6 invoices for the solar panels delivered to JRC. 7 The relationship among the companies broke down in 2014 when, as JRC 8 and Jasmin allege, Trina failed to deliver the correct model of solar panels on 9 time, and JRC and Jasmin refused to pay the invoices as a result. 10 2. Procedural History 11 Relying on the Contract’s arbitration clause, Trina initiated an arbitration 12 proceeding against JRC and Jasmin. Jasmin asserted that it was not a party to the 13 Contract and moved to dismiss the arbitration for lack of jurisdiction. The 14 arbitrator denied Jasmin’s motion. To preserve its objection, Jasmin declined to 15 participate further in the arbitral proceedings, which included a trial before the 16 arbitrator between JRC and Trina. Following trial, the arbitrator issued an award 17 of $1,305,131 against JRC and Jasmin jointly and severally, even though the latter 18 had refused to participate.
6
1 Trina petitioned the District Court to confirm the arbitration award against 2 both Jasmin and JRC. Jasmin moved to vacate the award, arguing that it was not 3 a party to the Contract and could not be required to arbitrate. In its decision, the 4 District Court found that the parties had not clearly and unmistakably agreed to 5 arbitrate arbitrability and reviewed de novo the arbitrator’s decision that Jasmin 6 was bound by the arbitration agreement. See Republic of Ecuador v. Chevron 7 Corp., 638 F.3d 384, 393 (2d Cir. 2011). Upon review, and as relevant here, the 8 District Court denied Jasmin’s motion to vacate, granted the petition to confirm, 9 and denied as moot Jasmin’s request for limited discovery on the issue of 10 whether Jasmin was bound by the arbitration clause. 11 This appeal followed. 12 DISCUSSION 13 We have explained that the determination about whether parties have 14 agreed to arbitrate their disputes, and in particular whether nonsignatories to an 15 arbitration agreement may nevertheless be bound by the agreement, is “often 16 fact specific and differ[s] with the circumstances of each case.” Smith/Enron 17 Cogeneration Ltd. P’ship, Inc. v. Smith Cogeneration Int’l, Inc., 198 F.3d 88, 97 18 (2d Cir. 1999) (quotation marks omitted). With that in mind, we review the
7
1 District Court’s findings of fact relating to its confirmation of the arbitration 2 award for clear error and its resolution of questions of law de novo. See First 3 Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 947–48 (1995); Corporación 4 Mexicana De Mantenimiento Integral, S. De R.L. De C.V. v. Pemex-Exploración Y 5 Producción, 832 F.3d 92, 100 (2d Cir. 2016). 6 1. Agency Theory 7 The District Court concluded, based on an agency theory, that Jasmin was 8 bound by the terms of the Contract as a principal. To determine whether Jasmin, 9 a nonsignatory, was bound as a principal to the arbitration agreement between 10 JRC and Trina, we consider, first, whether JRC had actual authority to act on 11 Jasmin’s behalf in its business dealings with Trina, and second, whether JRC and 12 Trina, in executing the contract, intended to bind Jasmin as a disclosed principal 13 or instead intended to exclude Jasmin as a party. See Restatement (Third) Of 14 Agency (“Restatement”) § 6.01 cmt. b (Am. Law Inst. 2006) (explaining that “[a]n 15 agent who acts on behalf of a disclosed principal may enter into a contract with a 16 third party that by its terms excludes the principal as a party,” and that an
8
1 agent’s principal is not party to a contract between the agent and a third party if 2 “the third party has not manifested assent to an exchange with the principal”). 1 3 The parties agree that when the Contract was signed JRC had actual 4 authority to act on Jasmin’s behalf in its business dealings with Trina. Their 5 dispute centers on whether JRC and Trina intended JRC to act as Jasmin’s agent 6 in executing the Contract at issue here. See De Remer v. Brown, 165 N.Y. 410, 7 417 (1901) (“It is competent for an agent, although fully authorized to bind his 8 principal, to pledge his own personal responsibility instead.”); see also Fid. & 9 Deposit Co. of Md. v. Goldman & Rio, 739 N.Y.S.2d 521, 521–22 (1st Dep’t 2002), 10 aff’d as modified on other grounds, 763 N.Y.S.2d 270 (2003); Turner Press, Inc. v. 11 Gould, 429 N.Y.S.2d 239, 240 (2d Dep’t 1980). We turn to New York law, which 12 governs the Contract, to resolve that dispute. 13 New York courts have long held that “[u]nless the contract explicitly 14 excludes the principal as a party,” a court may consider extrinsic evidence to 15 identify an unnamed principal to the contract, or to determine, more specifically, 16 whether a nonsignatory is bound by the contract as a principal. Restatement
1“A principal is disclosed if, when an agent and a third party interact, the third party has notice that the agent is acting for a principal and has notice of the principal's identity.” Restatement § 1.04(2)(a).
9
1 § 6.01 cmt. c; see also B&H Assocs. of NY, LLC v. Fairley, 50 N.Y.S.3d 495, 496–97 2 (2d Dep’t 2017); Greenfield v. Philles Records, Inc., 98 N.Y.2d 562, 569–70 (2002). 3 A primary question for us, then, is whether the Contract “explicitly excludes” 4 Jasmin as a party. We conclude that it does. 5 As an initial matter, a contract can explicitly exclude a principal as a party 6 in a number of ways. We have found no New York law, and the parties do not 7 point to any, that requires specific contractual language or mandates a one-size- 8 fits-all approach to do so. For example, we are aware of no requirement that a 9 contract state that “the principal is not a party to the contract,” even though that 10 language would surely qualify to explicitly exclude the principal. The fact that 11 no single provision of the Contract states in so many words that Jasmin is 12 excluded as a principal from its terms is therefore not dispositive. Instead, to 13 determine whether Jasmin is explicitly excluded, we consider the language and 14 structure of the Contract as a whole, without resorting to any extrinsic evidence 15 of the parties’ intentions. 16 Here, several features of the Contract persuade us that Jasmin is explicitly 17 excluded as a principal and that the Contract does not contemplate Jasmin as a 18 party.
10
1 To begin with, the first page of the Contract explicitly lists Trina as the 2 only “Seller” and JRC as the only “Buyer.” Appellant’s App’x 32. The first full 3 clause on the subsequent page then provides: “Seller [Trina] agrees to sell to 4 Buyer [JRC], and Buyer agrees to purchase from Seller the Goods upon the price, 5 terms and conditions herein set forth (Seller and Buyer each referred to herein as 6 a ‘Party’ and collectively, the ‘Parties’).” Appellant’s App’x 33. Jasmin is 7 mentioned in the Contract only once, several pages later, when it is described as 8 JRC’s “parent company” responsible for “guarantee[ing] payment” for solar 9 panel shipments under the Contract. Appellant’s App’x 38. And the arbitration 10 clause itself is expressly limited to “dispute[s] . . . between the parties.” 11 Appellant’s App’x 40. Taken together, these clauses strongly support Jasmin’s 12 argument that it is not bound as a principal by the Contract generally or by the 13 Contract’s arbitration clause specifically. 14 Second, interpreting the Contract as a three-way agreement, with Trina as 15 seller and both Jasmin and JRC as buyers, would certainly expose Jasmin to 16 liability as a principal but also deprive several of the Contract’s provisions of 17 coherence. Take the guarantor clause (Section 5.51) mentioned above, for 18 example. That clause provides, in relevant part: “Buyer’s parent company
11
1 (Jasmin Solar Pty Ltd.) shall guarantee payment.” Appellant’s App’x 38. 2 Although nothing in the abstract forecloses Jasmin from serving as both principal 3 and guarantor, merging the two roles here would require that we read this clause 4 in a practically unworkable way: “Jasmin’s parent company (Jasmin) shall 5 guarantee payment [for Jasmin].” Or take, as another example, the contractual 6 provision that permits termination “in writing by one Party to the other Party.” 7 Appellant’s App’x 33. If we construed the Contract as a three-party contract that 8 included Jasmin as a party, this clause would appear to permit termination of the 9 Contract through a writing sent between JRC and Jasmin, meaning that could not 10 have been intended. The Contract’s repeated references to “either” or “neither” 11 party rather than “any party” or “none of the parties” only further reinforces our 12 conclusion that the Contract is bilateral, not trilateral, in nature, binding Trina 13 and JRC while excluding Jasmin from its terms. See, e.g., Appellant’s App’x 34 14 (Section 3.1), 39 (Section 9). 15 It is true that the Contract mentions Jasmin’s Managing Director, Matthew 16 Starr. But in doing so, it merely describes Starr as the “Australia Contact” for 17 JRC, without referring to Starr’s affiliation with Jasmin. Appellant’s App’x 32.
12
1 Listing Starr as a contact for JRC, not Jasmin, suggests that Starr is JRC’s agent, 2 not that JRC is Jasmin’s agent or that Jasmin is a principal under the Contract. 3 Finally, the Contract’s third-party beneficiary clause, which provides that 4 “[n]othing in this Contract is intended to confer on any person who is not a party 5 hereto any right to enforce any term of this Contract,” clearly supports our 6 conclusion. Appellant’s App’x 41 (Section 14.4). Under the clause, it is apparent 7 that no one—other than the two entities that are designated “Parties” in the first 8 clause of the Contract, namely Trina and JRC—has any rights whatsoever under 9 the Contract. It would be odd to conclude that the Contract nevertheless 10 burdens some additional, unnamed entity with obligations as a silent principal 11 rather than, for example, a guarantor for one of the parties, as explicitly provided 12 for here. 13 For these reasons, we conclude that the District Court erred when it 14 determined that Jasmin was bound as a principal to the Contract under an 15 agency theory. 16 2. Direct Benefits Theory of Estoppel 17 The District Court separately held that Jasmin was bound by the Contract’s 18 arbitration provision under the direct benefits theory of estoppel. See MAG
13
1 Portfolio Consult, GMBH v. Merlin Biomed Grp. LLC, 268 F.3d 58, 61–63 (2d Cir. 2 2001). Under that theory, we have explained, “a company knowingly exploiting 3 an agreement with an arbitration clause can be estopped from avoiding 4 arbitration despite having never signed the agreement.” Id. at 61 (quotation 5 marks omitted). The benefits of exploiting the agreement, however, must “flow[] 6 directly from the agreement,” rather than indirectly from “the contractual 7 relation of [the] parties to [the] agreement.” Id. (emphasis added). 8 Under New York law, the “guiding principle” of the theory “is whether 9 the benefit gained by the nonsignatory is one that can be traced directly to the 10 agreement containing the arbitration clause.” Belzberg v. Verus Invs. Holdings 11 Inc., 21 N.Y.3d 626, 633 (2013). It is not enough for the nonsignatory to rely on an 12 independent business relationship rather than the agreement itself to obtain the 13 benefit. See Thomson-CSF, S.A., 64 F.3d at 778–79. The nonsignatory beneficiary 14 must actually invoke the contract to obtain its benefit, or the contract must 15 expressly provide the beneficiary with a benefit. See Am. Bureau of Shipping v. 16 Tencara Shipyard S.P.A., 170 F.3d 349, 353 (2d Cir. 1999); Deloitte Noraudit A/S 17 v. Deloitte Haskins & Sells, U.S., 9 F.3d 1060, 1064 (2d Cir. 1993).
14
1 Here, Jasmin surely benefited from the contractual relationship between 2 Trina and JRC, as it ultimately received solar panels sold by Trina to JRC. But 3 there is no record evidence that Jasmin ever invoked the Contract to demand 4 delivery of the solar panels, and the Contract itself does not provide Jasmin any 5 direct benefit. Nor did Jasmin, on this record, ever invoke Trina’s duties under 6 the Contract to seek or obtain a benefit. To the contrary, as we have noted, the 7 Contract explicitly provides that “[n]othing in th[e] Contract is intended to 8 confer on any person who is not a party hereto any right to enforce any term of 9 this Contract.” Appellant’s App’x 41. Because Jasmin was not a party to the 10 Contract, as explained above, it could not enforce any rights or duties under the 11 Contract. For these reasons, we conclude, the District Court erred when it 12 determined that Jasmin was estopped from avoiding the Contract’s arbitration 13 clause. 14 CONCLUSION 15 For the foregoing reasons, because we are not persuaded that JRC acted as 16 Jasmin’s agent in executing the Contract or that, in the alternative, Jasmin was 17 bound to the arbitration clause under a direct benefits theory of estoppel, we 18 REVERSE the District Court’s judgment granting Trina’s motion to confirm the
15
1 arbitration award as to Jasmin and denying Jasmin’s motion to vacate the 2 arbitration award and REMAND the case to the District Court with instructions 3 to enter an amended judgment dismissing the case as to Jasmin.