Phoenix Aktiengesellschaft v. Ecoplas, Inc.

• Decision Date: 10 December 2004
• Docket Number: No. 03-9000.,03-9000.
• Citation: 391 F.3d 433
• Parties: PHOENIX AKTIENGESELLSCHAFT, Petitioner-Appellee, v. ECOPLAS, INC. (formerly known as Plastek Corporation, formerly known as Plaslok Corporation), Respondent-Appellant.
• Court: U.S. Court of Appeals — Second Circuit

Page 433

391 F.3d 433

PHOENIX AKTIENGESELLSCHAFT, Petitioner-Appellee, v. ECOPLAS, INC. (formerly known as Plastek Corporation, formerly known as Plaslok Corporation), Respondent-Appellant.

No. 03-9000.

United States Court of Appeals, Second Circuit.

Argued: May 28, 2004.

Decided: December 10, 2004.

Alan J. Bozer, Phillips Lytle, LLP, Buffalo, New York, for Respondent-Appellant.

Kevin D. Szczepanski, Hodgson Russ LLP, Buffalo, New York, for Petitioner-Appellee.

Before: NEWMAN, CALABRESI and SOTOMAYOR, Circuit Judges.

SOTOMAYOR, Circuit Judge.

Ecoplas, Inc. ("Ecoplas") appeals from a judgment entered in the United States District Court for the Western District of New York (Arcara, J.) granting a motion by Phoenix Aktiengesellschaft ("Phoenix") to confirm an arbitration award. Because 9 U.S.C. § 207 preempts the consent-to-confirmation requirement of 9 U.S.C. § 9 in cases brought pursuant to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958, 21 U.S.T. 2517, T.I.A.S. No. 6997 (the "Convention"), we reject Ecoplas's contention that the lack of consent to confirmation in the arbitration agreement provides a ground for reversal. We also reject Ecoplas's claim under Article V(1)(b) of the Convention that it was unable to present its case in arbitration and that the award therefore should not be enforced. Accordingly, we affirm the judgment of the district court.

BACKGROUND

The parties entered into a licensing agreement in December 1993 under which Phoenix, a German corporation, granted Ecoplas, an American corporation, an exclusive license to produce and sell "Phoenix polyester-(UP)-moulding compounds." Phoenix further agreed to provide Ecoplas with "secret technical knowledge as well as technical know-how relative to the manufacture" of those compounds. In exchange Ecoplas agreed to pay Phoenix royalties and an annual licensing fee.

The licensing agreement contained an arbitration clause, which provided in relevant part:

The parties shall make a diligent effort to settle amicably all disagreements in conjunction with this contract. If an amicable agreement is not reached then the arbitration court of the International Chamber of Commerce in Zurich shall have jurisdiction at the exclusion of regular courts. This agreement is subject to Swiss law.

In August 1997, Phoenix informed Ecoplas that it had sold a business portfolio to Bakelite AG, a German company, and requested that Ecoplas agree to a transfer of the licensing contract to Bakelite AG as well. Ecoplas, in response, informed Phoenix that it would "not be continuing the license agreement with Bakelite AG, and it is being considered terminated." A dispute then arose over whether Ecoplas had terminated the agreement prematurely. Phoenix claimed that because Ecoplas refused to allow the license transfer, the original contract obligations between Phoenix and Ecoplas remained in place. Ecoplas maintained that the contract had been terminated in 1997 by mutual agreement. Ecoplas did not pay the license fees for 1997 and 1998.

On April 7, 1999, Phoenix filed a complaint with the International Court of Arbitration of the International Chamber of Commerce ("ICC"). Defending its failure to pay the fees, Ecoplas argued that Phoenix's sale of its business portfolio to Bakelite AG had dissolved the licensing agreement between Phoenix and Ecoplas, and that, in any event, Phoenix had failed to provide usable technical advice as required by the agreement.

The arbitrator rejected Ecoplas's contentions and rendered a decision in favor of Phoenix on December 15, 2000. He found that the sale of assets to Bakelite AG did not void the contractual relationship between Phoenix and Ecoplas, and that the licensing agreement did not require Phoenix to provide Ecoplas with more technical assistance than had already been provided. The arbitrator awarded Phoenix approximately $100,000, plus $5751 in arbitration costs and 40,000 Swiss Francs in legal fees.

Because Ecoplas failed to pay the arbitration award, Phoenix commenced an action seeking confirmation of the award in the Western District of New York pursuant to the Convention. In response, Ecoplas claimed that the federal district court lacked jurisdiction over Phoenix's action because the arbitration agreement did not reflect the parties' intent to consent to judicial confirmation of the arbitration award, as required by § 9 of the Federal Arbitration Act ("FAA"), 9 U.S.C. §§ 1-16, 201-08, 301-07 (2000). Citing Article (V)(1)(b) of the Convention, Ecoplas further argued that the district court should not honor the arbitration award because the arbitrator had refused to hear certain evidence regarding the competency of the technical advice provided by Phoenix.

The district court adopted a recommendation from Magistrate Judge Hugh B. Scott that the court confirm the award. In doing so, the court observed that it remained an open question whether the consent-to-confirmation provision of § 9 had been preempted by § 207 for cases arising under the Convention. The court held, however, that even if the requirements of § 9 did apply, the licensing agreement complied with those requirements. The agreement, Judge Arcara wrote, "sufficiently demonstrates the parties' intent that the result of the ICC arbitration be final and binding, such that the claims would not be heard de novo in any court." By adopting the reasoning of Magistrate Judge Scott, Judge Arcara also implicitly rejected Ecoplas's Article V(1)(b) claim. Ecoplas appeals.

DISCUSSION

This case presents an unresolved question related to the FAA. This statute, enacted originally in 1925,¹ aimed to "'reverse the longstanding judicial hostility to arbitration agreements that had existed at English common law and had been adopted by American courts.'" Ermenegildo Zegna Corp. v. Zegna, 133 F.3d 177, 180 (2d Cir.1998) (quoting Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991)). To that end, the FAA's provisions "`manifest[ed] a liberal federal policy favoring arbitration agreements.'" Id. (quoting Gilmer, 500 U.S. at 25, 111 S.Ct. 1647) (further internal quotation marks and citation omitted). In 1958, twenty-six of the forty-five nations participating in the United Nations Conference on Commercial Arbitration adopted the Convention To Recognize and Enforce Foreign Arbitration Awards. See Parsons & Whittemore Overseas Co. v. Societe Generale de L'Industrie du Papier (RAKTA), 508 F.2d 969, 973 (2d Cir.1974). Though the United States did not accede to the Convention in 1958, Congress implemented the Convention twelve years later by enacting Chapter 2 of the FAA, now codified at 9 U.S.C. §§ 201-208. See Motorola Credit Corp. v. Uzan, 388 F.3d 39, 49 (2d Cir.2004); Parsons & Whittemore, 508 F.2d at 973. The Convention's purpose was to "encourage the recognition and enforcement of commercial arbitration agreements in international contracts and to unify the standards by which agreements to arbitrate are observed and arbitral awards are enforced in the signatory countries." Scherk v. Alberto-Culver Co., 417 U.S. 506, 520 n. 15, 94 S.Ct. 2449, 41 L.Ed.2d 270 (1974); see also Compagnie Noga D'Importation et D'Exportation S.A. v. Russian Fed., 361 F.3d 676, 691 (2d Cir.2004) (Jacobs, J., concurring). Pursuant to 9 U.S.C. § 208, the pre-Convention provisions of the FAA — that is, the provisions of Chapter 1, 9 U.S.C. §§ 1-16 — continue to apply to the enforcement of foreign arbitral awards except to the extent that Chapter 1 conflicts with the Convention or Chapter 2. See Parsons & Whittemore, 508 F.2d at 973.

The FAA provisions at issue here are those that grant federal courts the authority to confirm an arbitration award. See 9 U.S.C. §§ 9, 207. Chapter 2 of the FAA provides that "[w]ithin three years after an arbitral award falling under the Convention is made, any party to the arbitration may apply to any court having jurisdiction under this chapter for an order confirming the award as against any other party to the arbitration." 9 U.S.C. § 207. The award confirmation provision in Chapter 1 of the FAA is more restrictive in that it requires prior consent to confirmation by both parties. Specifically, it provides:

If the parties in their agreement have agreed that a judgment of the court shall be entered upon the award made pursuant to the arbitration, and shall specify the court, then at any time within one year after the award is made any party to the arbitration may apply to the court so specified for an order confirming the award....

9 U.S.C. § 9 (emphasis added). By including a consent-to-confirmation requirement, Congress aimed "to ensure that the parties have affirmatively agreed to the application of the federal substantive law contemplated by the [Federal Arbitration] Act to the interpretation of the arbitration agreement into which they have entered." I/S Stavborg v. Nat'l Metal Converters, Inc., 500 F.2d 424, 426 (2d Cir.1974).

We review de novo legal issues in a district court's confirmation of an arbitral award. See Pike v. Freeman, 266 F.3d 78, 86 (2d Cir.2001) (citing DiRussa v. Dean Witter Reynolds Inc., 121 F.3d 818, 821 (2d Cir.1997)). Ecoplas urges us to reverse the district court on the ground that the arbitration agreement fails to conform to § 9's consent-to-confirmation requirement. As noted above, however, and as both parties acknowledge, conformity with that requirement is necessary only if § 9 is consistent with § 207. If the two provisions conflict, the latter provision preempts the former, see 9 U.S.C. § 208, and consent is unnecessary for confirmation.

Section 207 does not in any way condition confirmation on express or implicit consent. Because the plain language of § 207 authorizes confirmation of arbitration awards in cases where § 9's consent requirement expressly forbids such confirmation, we hold that the two provisions conflict. Accordingly, we hold...