Alstom Brasil Energia E Transporte Ltda., Alstom Power, Inc. v. Mitsui Sumitomo Seguros S.A., No. 1:15-cv-08221, 2016 U.S. Dist. LEXIS 80151 (S.D.N.Y. June 20, 2016) [click for opinion]
In 2007, a Brazilian aluminum refiner, Alumina do Norte do Brasil S.A. ("Alunorte") entered into a supply contract with Connecticut-based Alstom Power, Inc. ("Alstom"). Under the contract, Alstom sold and delivered steam generation units to Alunorte for use in Alunorte's Brazil facility. In August of 2007, Alunorte was forced to shut down the facility because a component part of the Alstom-supplied steam generation units had ruptured. When Alunorte restarted the facility the following month in September 2007, debris in the steam generation system caused a fire, resulting in substantial property damage and lost profits for Alunorte. In July 2009, Alunorte and Alstom entered a compromise agreement under which each party "confirmed that the other had complied with its contractual obligations, and released the other party from all actual or potential claims through that date."
Alunorte had also made a claim against its insurer, Mitsui Sumitomo Seguros S.A. ("Mitsui"), to recover its property and lost profit losses under an insurance and indemnity contract. Mitsui paid Alunorte $24,558,073.11 in settlement of the insurance claim. In April 2014, Mitsui sued Alstom in Rio de Janeiro (the "Brazil suit") to recover the $24 million-plus indemnity payment it had made to Alunorte. Alstom then invoked the arbitration clause contained in the Alstom-Alunorte supply contract and served a Demand for Arbitration on Mitsui in December 2014 before the International Chamber of Commerce ("ICC") in New York City. Alstom moved to dismiss the Brazil suit, while Mitsui entered a special appearance in the ICC arbitration to contest the jurisdiction of the ICC arbitration tribunal. The ICC Court issued a decision pursuant to ICC Articles 6(3) and 6(4), determining that the arbitration in New York would go forward.
The arbitration proceeded over two hearings days in May 2015, ending with an Award on July 10, 2015, in which the arbitrators held that the ICC tribunal had jurisdiction over both parties. In particular, the tribunal ruled that Mitsui, as Alunorte's insurer, was bound by the arbitration agreement contained in the Alstom-Alunorte supply contract, was bound by the release that Alunorte gave to Alstom, and could not sue Alstom in the courts of Brazil. Further, the arbitrators found that Alstom, after delivering the parts of its steam generation units, was not responsible for the storage conditions, maintenance of materials, or handling of the materials in a way that could impute liability to Alstom for the incident. The tribunal also dismissed Mitsui's warranty claim against Alstom and held that each party was to bear its own costs.
Alstom then petitioned a state court in New York to confirm the Award, and Mitsui timely removed the matter to the U.S. District Court in the Southern District of New York. Mitsui moved to dismiss Alstom's confirmation petition on the grounds that Mitsui was not a party to, and thus was not bound by, the arbitration agreement in the Alstom-Alunorte supply contract. Mitsui also argued that the district court lacked personal jurisdiction over Mitsui and, independently, that the petition should be dismissed for forum non conveniens. On June 20, 2016, the district court denied each of Mitsui's arguments and granted Alstom's petition to confirm the ICC arbitral Award.
As a threshold point, the district court observed that the question of a dispute's arbitrability is customarily for the court, except if the parties have agreed to submit that question to the arbitrators. Here, the contracting parties (Alstom and Alunorte) had expressly designated the ICC's rules of arbitration to apply to any disputes arising from the contract. Articles 6(3) and 6(4) of those Rules provide that the jurisdictional issue is ordinarily for the arbitrators to decide. However, because Mitsui was a non-signatory to the arbitration agreement, it did not clearly agree to submit the question of arbitrability to arbitration, and the arbitrators' determination was thus subject to independent review by the district court.
Nonetheless, under the district court's "independent review," the result was ultimately the same. Addressing first the choice of law that would apply to such review, the district court looked to the contracting parties' intent and observed that Alunorte and Alstom "intended that any dispute would take place before the ICC in New York, and not in the Brazilian courts, or any other courts." Mitsui succeeded to those expectations, which required application of federal arbitration law.
Turning to federal law, the district court concluded that Mitsui's status as a non-signatory did not preclude arbitral jurisdiction. Citing a line of Second Circuit authority, the district court reasoned that "[u]nder clearly established principles applied in the federal courts, a party may be bound by an agreement to arbitrate even in the absence of a signature." Likewise, a "related clearly established general rule is that an insurer-subrogee stands in the shoes of the insured." As such, by pursuing Alunorte's contract claim against Alstom, Mitsui was bound by the arbitration clause that would have bound Alunorte.
Mitsui's arguments based on personal jurisdiction likewise fell short. The district court found that, just as Mitsui was bound by the arbitration provision in the supply contract, it was equally bound by the forum selection provision contained therein. The district court also squarely denied Mitsui's concomitant objection to service of process pursuant to New York state law, finding that Mitsui had effective notice of the proceedings and was not prejudiced by the type of service employed.
Finally, the district court rejected Mitsui's forum non convenienschallenge. Paying heed to the variety of factors that bears on a forum non conveniens analysis, the court pointed out that Alstom was a U.S. entity, and that the parties agreed to arbitrate in New York. The litigants could thus not persuasively argue that enforcing the arbitration award in New York imposed some unique inconvenience. The district court further acknowledged its own narrow and deferential role in confirming, or vacating, an arbitration award, and that its role implicates the federal policy embodied in the FAA towards facilitating arbitral procedures for the resolution of international commercial disputes and enforcing freely negotiated choice-of-forum clauses.
The district court denied Mitsui's motion to dismiss and granted Alstom's petition to confirm.