LaRubInt Corp. v. Joint Stock Company Studio Soyuzmultfilm, No. 22-cv-4461 (HG) (E.D.N.Y. Apr. 20, 2023)
In August and September 2016, LaRubInt Corp., a U.S. media marketing company, entered into three licensing agreements with Joint Stock Company Studio Soyuzmultfilm (“Studio Soyuzmultfilm”), a Russian film studio. These licensing agreements provided LaRubInt with the exclusive right, in the territories of East and Southeast Asia, India, the Unites States, and Canada, to use and market images, goods, and services related to animated characters from Studio Soyuzmultfilm’s animated series.
The agreements were structured as side-by-side Russian and English versions and the parties agreed that each version had equal force. Each agreement contained a dispute resolution provision in both languages. The Russian version stated that the parties agreed to resolve their disputes before the “arbitrazh” court of New York, whereas the English version stated that disputes would be referred “to the arbitration court of New York.”
In 2022, LaRubInt sued Studio Soyuzmultfilm, asserting claims for breach of contract and unjust enrichment after Studio Soyuzmultfilm allowed a prior licensee in Japan to use and market the same animated characters. Studio Soyuzmultfilm moved to compel arbitration and dismiss or stay the action, arguing that the licensing agreements contained arbitration clauses requiring the parties to arbitrate all disputes.
Studio Soyuzmultfilm contended that, although the wording of the English version was “awkward,” referring to “the arbitration court of New York,” it required the parties to arbitrate. Studio Soyuzmultfilm further argued that the English version of the contract should control because it claimed that the agreements had been prepared by LaRubInt in English and had then been translated into Russian.
LaRubInt argued that, in Russian, “arbitrazh” was a term of art that did not mean arbitration. Instead, the “arbitrazh” courts in Russia are the civil law courts with jurisdiction over commercial matters, similar to federal or state courts in the United States. Thus, LaRubInt argued, the parties had agreed to litigate their disputes in court rather than arbitrate. LaRubInt maintained that all negotiations had taken place in Russian and that Studio Soyuzmultfilm’s representatives had prepared the agreements.
The court looked to the language of the agreements, as well as the facts surrounding the negotiation and execution of the agreements, in order to determine whether a valid arbitration agreement existed. The court found that Studio Soyuzmultfilm failed to meet its burden of showing that such an agreement existed because numerous facts in the record evidenced that the dispute resolution provision was not an arbitration clause.
First, the evidence suggested that the agreements were approved in Russian and that the Russian meaning of “arbitrazh” should govern. Studio Soyuzmultfilm was a Russian entity with a Russian-speaking acting director, both parties were native Russian speakers, Studio Soyuzmultfilm’s acting director submitted a Russian affidavit in support of the motion, and Studio Soyuzmultfilm conceded that the English version of the dispute resolution provision was “awkward” as a result of the translation. Further, Studio Soyuzmultfilm’s acting director averred that he had executed the agreements and is a Russian speaker.
Second, the parties agreed that both language versions had equal force and the Russian version was unequivocal compared to the English version, which was imprecise. There was no doubt that “arbitrazh” was a term of art that meant the equivalent of “commercial courts” in New York, not an arbitral tribunal. The English version, on the other hand, referred to a court that did not exist: “the arbitration court of New York (USA).” Moreover, were the court to enforce the provision as an arbitration provision, the court would have had to speculate about various terms, including the tribunal and the governing rules, which is impermissible under New York law.
Ultimately, the district court determined that Studio Soyuzmultfilm failed to meet its burden of establishing.
This Article was originally published in the North America Newsletter.