Zhejiang Topoint Photovoltaic Co. v. G&S Solar Installers, LLC

• Decision Date: 15 May 2020
• Docket Number: Civ. No. 19-16578 (KM) (MAH)
• Parties: ZHEJIANG TOPOINT PHOTOVOLTAIC CO, LTD, Petitioner, v. G&S SOLAR INSTALLERS, LLC, Respondent.
• Court: U.S. District Court — District of New Jersey

ZHEJIANG TOPOINT PHOTOVOLTAIC CO, LTD, Petitioner, v. G&S SOLAR INSTALLERS, LLC, Respondent.

Civ. No. 19-16578 (KM) (MAH)

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY

May 15, 2020

OPINION

KEVIN MCNULTY, U.S.D.J.

:

In 2013, respondent G&S Solar Installers agreed to purchase solar panels from non-party Solergy USA. The contact required the parties to arbitrate disputes arising from the transaction. A dispute eventually arose, and Solergy sold its claim against G&S to petitioner Zhejiang Topoint Photovoltaic Co. ("Topoint"). Topoint had by that time entered bankruptcy in China and opened a corresponding Chapter 15 proceeding in the United States. In connection with the U.S. reorganization, Topoint initiated an adversary proceeding against G&S to recover on the claim that it had purchased from Solergy.

G&S then moved in the U.S. bankruptcy court for an order enforcing against Topoint the arbitration agreement for which G&S and Solergy had bargained. The bankruptcy judge granted the motion, and the adversary proceeding was referred to arbitration. The arbitrator found in favor of Topoint, as assignee of Solergy, and rendered a final award.

G&S, in a reversal of its earlier position, now argues that Chinese bankruptcy law stripped the arbitrator of his jurisdiction, because it requires all claims related to a bankruptcy estate to be heard by the domestic court overseeing the reorganization.

Now before the Court is the motion to confirm the arbitration award of Zhejiang Topoint Photovoltaic Co. (DE 22).¹ Also before the Court is G&S Solar Installer's cross-motion to vacate the award. (DE 26). For the following reasons, the motion to confirm the arbitration award is GRANTED. The cross-motion to vacate the award is DENIED.

I. BACKGROUND

A. Facts

Petitioner Zhejiang Topoint Photovoltaic Co., Ltd. ("Topoint"), is a limited-share company organized under the laws of the People's Republic of China, and it has its principal place of business in China. (DE 1 ¶ 3). Topoint manufactures and exports solar panels and other products from China. (DE 1 ¶ 3).

Respondent G&S Solar Installers LLC is a limited liability company organized under the laws of the State of New York and is registered to do business in New York. (DE 1 ¶ 4).

In September 2013, G&S contracted with non-party Solergy USA LLC to purchase Topoint-branded solar panels from Solergy. (DE 1-1 at 1). In connection with the transaction, Solergy prepared an invoice that the parties called "the Panel Quotation," which Solergy and G&S signed on September 3, 2013. (DE 1-1). The Panel Quotation bound G&S to purchase 77,832 solar panels from Solergy, at prices ranging from $135 to $140 per unit, for a total price of $10,850,920. (DE 1-1 at 1). The Panel Quotation contained an arbitration clause:

Arbitration. Except in the event of Costumer's failure to make timely payments hereunder, all disputes that may arise between the parties under or in connection with this Agreement shall be submitted (together with any counterclaims) to final and binding arbitration heard by a single arbitrator in accordance with the then-current Commercial Arbitration Rules of the American Arbitration Association ("AAA") and to be conducted in New York, New York. The prevailing party of any arbitration, action or legalproceeding shall be entitled to receive from the other party, in addition to any other relief that may be granted, its reasonable attorney's fees, costs, and expenses incurred.

(DE 1-1 at 6 ¶ 19). The Panel Quotation also contained a provision designating that New Jersey law would govern any dispute between the two sides. (DE 1-1 ¶ 20).

G&S ordered enough solar panels to fulfill its contractual obligation. G&S, citing various reasons, refused to pay for $3,268,884.30 worth of panels. (DE 27 ¶ 2).

B. Procedural History

In December 2013, Topoint was placed into restructuring proceedings in Haining, Zhejiang, China (the "Haining court"). See In re Zhejiang Topoint Photovoltaic Co., Ltd., No. 14-24549 (Bankr. D.N.J.). On July 16, 2014, Topoint filed a corresponding Chapter 15 proceeding in the Bankruptcy Court for the District of New Jersey. See id. At the time it entered bankruptcy, Topoint held an account receivable against Solergy. In satisfaction of that debt, Solergy on December 8, 2014 assigned to Topoint its contract rights against G&S. (DE 1-2). That claim became part of Topoint's bankruptcy estate.

On October 28, 2016, Topoint, standing in the shoes of Solergy as assignee, initiated in the bankruptcy court an adversary proceeding against G&S. See Zhejiang Topoint Photovoltaic Co., Ltd. v. G&S Solar Installer, LLC (In re Zhejiang Topoint Photovoltaic Co., Ltd.), Ch. 15 Case No. 14-24549, Adv. No. 16-1811 (Bank. D.N.J.). The complaint alleged that G&S agreed to purchase, but did not pay for, over $3.2 million worth of Topoint-manufactured solar panels from Solergy. See id.

G&S moved to enforce the arbitration agreement contained in the Panel Quotation. Topoint opposed the motion, arguing that the dispute was outside the scope of the parties' agreement. On December 19, 2017, the Hon. Jerrold Poslusny, the bankruptcy court judge overseeing the case, granted the motion and referred the matter to arbitration:

Here, the arbitration provision is entirely susceptible of an interpretation covering this dispute[.] Topoint argues that the factual underpinnings of their claim arise out of [G&S's] failure to make payments under the terms of the agreement. While [G&S] may not have made timely payments, the one exception to the agreement to arbitrate, that is not the only dispute between the parties. [G&S] asserts that the quality and quantity of the solar panels were not what they were represented to be and that Solergy made representations regarding warranty and suitability of warranty insurance in connection with negotiating the contract that turned out to be untrue. In addition, [G&S] claims that Solergy failed to deliver all of the promised solar panels and were "shorted" by 7,420 panels, which [G&S] had to replace from other sources at higher cost. These initial disputes led to [G&S's] failure to make payment.

Since the crux of the dispute between Solergy and [G&S] is not just failure to make timely payments, it falls within the scope of the parties' agreement to arbitrate in the Panel Quotation/Invoice. Therefore, all of the claims between the parties are subject to arbitration. . . . Therefore, the Motion to Dismiss is granted to allow Topoint to pursue arbitration.

Zhejiang Topoint Photovoltaic Co., Ltd. v. G&S Solar Installer, LLC (In re Zhejiang Topoint Photovoltaic Co., Ltd.), Ch. 15 Case No. 14-24549, Adv. Pro. No. 16-01811, 2017 WL 6513433 at *4-5 (Bankr. D.N.J. Dec. 19, 2017).²

The parties proceeded to arbitration before Richard L. Mattiaccio, the arbitrator appointed for that purpose by the International Center for Dispute Resolution of the American Arbitration Association. At a preliminary hearing on June 15, 2018, the parties agreed that the "'Panel had jurisdiction to decide all claims and defenses asserted in this arbitration,' and that '[G&S and Topoint were] proper parties and that no other parties need[ed to] be joined to this arbitration.'" (DE 1-4 at 1-2). The then-current commercial arbitration rules of the American Arbitration Association, incorporated into the Panel Quotation, vested in the arbitrator the power to determine the arbitrability of a dispute:

(a) The arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope, or validity of the arbitration agreement or to the arbitrability of any claim or counterclaim.

(b) The arbitrator shall have the power to determine the existence or validity of a contract of which an arbitration clause forms a part. Such an arbitration clause shall be treated as an agreement independent of the other terms of the contract. A decision by the arbitrator that the contract is null and void shall not for that reason alone render invalid the arbitration clause.

(DE 27-2 R-7 at 13).

On October 10, 2018, G&S sought from the arbitrator an order dismissing its own arbitration demand, arguing that based on the Chinese bankruptcy proceeding, Topoint lacked standing because it was not the assignee of Solergy and, therefore, did not have the right to collect assets on Solergy's behalf. (DE 1-4 at 2). G&S sought to introduce the expert testimony of Melody Wang, a Beijing-based law firm partner, that the bankruptcy court had lacked jurisdiction to hear the dispute. (DE 1-4 at 3). It was through Wang's testimony that G&S, for the first time, cited Article 21 of the Enterprise Bankruptcy Law of China:

After the people's court accepts an application for bankruptcy, a civil action against the debtor can only be filed with the said people's court.

Enterprise Bankruptcy Law of the People's Republic of China (promulgated by the Standing Comm., Tenth Nat'l People's Cong., Aug. 27, 2006, eff. June 1, 2007), ch. II, § 2, art. 21, translated at http://www.china.org.cn/china/LegislationsForm2001-2010/2011-02/11/content_21898381.htm.

Topoint chose not to rebut Wang's testimony; according to the company, Wang's testimony addressed issues for which an expert opinion was unnecessary and which could be decided on the evidence already in the record. (DE 1-4 at 3). At the evidentiary hearing, G&S renewed its challenge to the arbitrator's jurisdiction, which, G&S contended, was governed by Chinese law. (DE 1-4 at 3).

On April 2, 2019, Topoint notified the arbitrator of a decision issued by Judge Poslusny in a different adversary proceeding in its Chapter 15 case, Zhejiang Topoint Photovoltaic Co. Ltd. v. Chen (In re Zhejiang Topoint Photovoltaic Co., Ltd.), Ch. 15 Case No. 14-24549, Adv. Pro. No. 16-01873, 600 B.R. 312 (Bankr. D.N.J. 2019) ["Chen"]. (DE 1-4 at 4-5). In the Chen case, the defendants had presented a similar argument to the one here, namely that Chinese law requires civil actions...