CEEG (Shanghai) Solar Sci. & Tech. Co. v. LUMOS LLC, n/k/a LUMOS Solar LLC, No. 15-1256 (10th Cir. July 19, 2016) [click for opinion]

Plaintiff, a Chinese based producer of solar energy products, contracted with Defendant, a Colorado based solar architecture firm, for the sale of solar energy products. After receiving certain shipments, Defendant filed a warranty claim alleging defects in the products and refused to pay for those defective products. Despite about two years of negotiations, the parties were never able to settle the dispute. Throughout the negotiations, the parties had communicated exclusively in English. Nevertheless, Plaintiff served Defendant with notice of arbitration proceedings in Chinese.

Consequently, Defendant did not immediately realize what the notice was and only discovered through later communications with Plaintiff in English that arbitration proceedings were pending before the China International Economic and Trade Arbitration Commission ("CIETAC"), pursuant to the parties' contractual agreement. This delay resulted in Defendant's not participating in the panel-selection process. Ultimately, the CIETAC panel entered an award in favor of Plaintiff and ordered Defendant to pay the outstanding balance for the allegedly defective products, as well as interest, costs, and attorneys' fees.

Plaintiff then moved for confirmation of the award in the U.S. District Court for the District of Colorado pursuant to the Federal Arbitration Act (the "FAA") and the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the "New York Convention"). In response, Defendant moved to dismiss the enforcement action, arguing that the notice of the arbitration proceedings was insufficient and violated the due process exception to enforcement under the New York Convention. The district court agreed, finding that the Chinese-language notice was not reasonably calculated to apprise Defendant of the arbitration proceedings. The court based its ruling on the fact that all interactions between the parties prior to the issuance of the notice were in English, the English-language version of both relevant contracts at issue were controlling, and the master agreement's choice of language provision in favor of English governed the arbitration. Thus, the district court dismissed the enforcement action.

Plaintiff appealed that decision to the Tenth Circuit Court of Appeals, claiming that the notice was, in fact, adequate and that Defendant failed to meet its "heavy burden" of proving that one of the defenses specified in the New York Convention applied. Noting that the appeal turned on the issue of adequacy of notice, the appellate court emphasized that "[n]otice must be 'reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.'"

Agreeing with the lower court's rationale and ruling, the appellate court also found that the Chinese-language notice was not reasonably calculated to apprise Defendant of the proceedings. The appellate court further stressed that hindering the right to participate in the panel-selection process is not a minor procedural misstep, but is itself evidence of substantial prejudice. Accordingly, the Tenth Circuit affirmed the district court's dismissal, stating that Defendant "met its heavy burden of demonstrating that insufficient notice caused prejudice by rendering [Defendant] unable to participate in appointing the arbitration panel, rendering the remaining proceedings invalid under the New York Convention."