Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_10-cv-00793/USCOURTS-cand-3_10-cv-00793-2/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 09:201 Petition for Enforcement of Foreign Arbitration Award

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United States District Court

For the Northern District of California

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United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

HYOSUNG (AMERICA) INC and

NAUTILUS HYOSUNG INC

Petitioners,

v

TRANAX TECHNOLOGIES INC,

Respondent. /

No C 10-0793 VRW

ORDER

Petitioners Hyosung (America) Inc and Nautilus Hyosung

Inc (collectively “Hyosung”) seek confirmation of the February 9,

2010 arbitration award and entry of judgment. Doc #1. For the

reasons explained below, Hyosung’s petition to confirm the

arbitration award is GRANTED.

I

Petitioner Nautilus Hyosung Inc, a Korean manufacturer of

automated teller machines (“ATMs”), entered an exclusive

distribution agreement in 1998 with Respondent Tranax Technologies,

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Inc (“Tranax”) to distribute ATMs in the United States and Canada. 

Doc #1 ¶10. In 2005 the parties entered a new distribution

agreement which contained an arbitration clause. Id ¶¶10, 11. The

arbitration clause states in relevant part:

Any dispute arising under or in connection with

this Agreement shall be resolved * * * by final and

binding arbitration administered by American

Arbitration Association in accordance with its

International Arbitration Rules if brought by

Hyosung. The award of the arbitral tribunal shall

be final and binding. Judgment on the award of the

arbitral tribunal may be entered and enforced by

any court of competent jurisdiction.

Doc #7 (Kim Decl) Ex B (2005 Distributorship Agreement) § 14.8.

In 2006 a dispute arose between the parties involving the

distribution agreement and trademark infringement. Doc #1 ¶13.

Hyosung filed an arbitration with the International Centre for

Dispute Resolution of the American Arbitration Association (“ICDR”)

in August 2007. Id ¶14. 

The arbitration took place before a sole arbitrator in

South Korea. Id ¶15. After considering the parties’ briefs on

Hyosung’s application to bifurcate the damages claims, the

arbitrator decided to bifurcate the proceedings into Phase I

(liability) and Phase II (damages) in order to “make for a more

efficient hearing.” Doc #39 Ex A (Amended Procedural Order) § 1.4. 

The arbitrator directed that the amount of damages would be tried

in Phase II only if applicable after the determination of issues of

liability in Phase I. Id § 1.7. The arbitrator decided however to

adjudicate the amount of liability on Hyosung’s claim for unpaid

invoices during Phase I because it involved “agreed sums and not a

claim for damages,” unless he were to find that Tranax had

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established a set-off defense and defer the award of liability

until he determined the amount of the set-off. Id § 1.5.

The arbitrator issued a Partial Award on Liability

resolving the Phase I issues on February 9, 2010. Doc #7 Ex A

(“AA”). The Phase I award found Tranax liable for breach of

contract, found Hyosung not liable for breach of contract and found

that Tranax was not entitled to a set-off. AA §§ 11.1.3-6. The

award found both Tranax and Hyosung liable on some but not all

trademark claims. AA §§ 11.1.8-13. Having determined liability

for all claims and counterclaims, the award found that Hyosung

succeeded on its claim for damages on Tranax’s unpaid bills in the

amount of $3,180,090.00 plus interest. AA § 10.1.37(a). The award

found Hyosung entitled to “[a]n order requiring [Tranax] to make

immediate payment of the principal amount of US$3,180,090.00 to

Hyosung America.” Id. The assessment of other damages was

reserved for determination during the Phase II proceedings. Id

§ 11.5.

On February 24, 2010 Hyosung filed the instant petition

to confirm the partial award. Hyosung also filed motions for

expedited discovery and for a writ of attachment to ensure that

Tranax will have the assets to pay the award if confirmed. 

Following a hearing on March 25, 2010, the court issued an order

granting Hyosung’s motions on March 31, 2010.

Hyosung now asks the court to confirm the Phase I partial

award and enter judgment accordingly. Tranax opposes confirmation

of the Phase I award on the ground that it is not a final award,

and asks the court to vacate its earlier order issuing the writ of

attachment and granting expedited discovery. The court determines

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that a hearing is not necessary. Having considered the papers and

the relevant legal authority, the court GRANTS Hyosung’s petition

to confirm the arbitration award. Accordingly, the court denies

Tranax’s request to vacate the March 31, 2010 order.

II

A

The parties do not dispute that the Phase I award is

subject to the United Nations Convention on the Recognition and

Enforcement of Foreign Arbitral Awards, June 10, 1958, 330 UNTS 38

(“New York Convention”). The Federal Arbitration Act provides that

within three years after an arbitration award falling under the New

York Convention is made, any party to the arbitration may apply for

an order confirming the award as against any other party to the

arbitration. 9 USC § 207. The Federal Arbitration Act requires

that “[t]he court shall confirm the award unless it finds one of

the grounds for refusal or deferral of recognition or enforcement

of the award specified in the said Convention.” Id. 

Tranax bases its opposition to the petition to confirm

award on Article V § 1(e) of the New York Convention, which allows

the court to refuse recognition and enforcement upon proof that

“[t]he award has not yet become binding on the parties.” Doc #7 Ex

D. Tranax contends that the Phase I award decided “only questions

of liability,” and that the undecided issues such as damages

preclude a finding that the award is final. Doc #40 at 3. 

In the March 31, 2010 order issuing a writ of attachment

and granting Hyosung’s discovery motion, the court found that “the

Ninth Circuit authority presented by Tranax does not resolve the

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question whether the court has jurisdiction to confirm a partial

international arbitration award under 9 USC § 207.” Doc #33 at 5. 

The court therefore turned to the reasoning of the Second Circuit

in Metallgesellschaft AG v M/V Capitan Constante, 790 F2d 280, 283

(2d Cir 1986), which held that the court has jurisdiction to

confirm a partial international arbitration award where the award

“finally and conclusively dispose[s] of a separate and independent

claim and [is] subject to neither abatement nor set-off.” Adopting

the reasoning of Metallgesellschaft, the court determined that it

may confirm a partial arbitration award that conclusively disposes

of a claim if no possibility for set-off or abatement remains, as

confirmation of the partial award will not affect any further

proceedings before the arbitrator. Doc #33 at 6. The court found

that “[t]he Phase I award determines liability and the amount

Tranax owes Hyosung because of Tranax’s unpaid invoices. Although

further proceedings are scheduled to occur before the arbitrator,

the arbitrator’s resolution of the unpaid invoices is not subject

to change.” Doc #33 at 5. Thus, for the purposes of weighing the

probable validity of Hyosung’s claim upon issuance of a writ of

attachment, the court found that the Phase I award “finally and

conclusively determines liability and damages arising from the

parties’ dispute over unpaid invoices. Accordingly, the court

concludes that the Phase I award is the proper subject of a

petition to confirm under 9 USC § 207.” Id at 6. 

In opposition to the petition to confirm award, Tranax

has not provided authority to persuade the court that the Phase I

award is not binding under the New York Convention and therefore

not enforceable. Even after the court issued guidance in its March

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31, 2010 ruling, Tranax relies on several authorities governing the

finality of domestic arbitration awards under the Federal

Arbitration Act, but does not shed much more light on the

applicable standards for confirming partial foreign arbitration

awards under the New York Convention. Doc #40 at 3 (citing

Kerr-McGee Refining Corp v M/T Triumph, 924 F2d 467, 471 (2d Cir

1991) (determining finality of award under Federal Arbitration Act)

and Michaels v Mariforum Shipping, SA, 624 F2d 411, 414 (2d Cir

1980) (judicial review of arbitrators’ interim ruling that does not

resolve finally the issues is unavailable under the Federal

Arbitration Act)). 

Tranax cites Hall Steel Co v Metalloyd Ltd, 492 F Supp 2d

715 (ED Mich 2007), for the proposition that Hyosung must establish

either an immediate need for relief or an intent of the parties to

have the arbitrator issue an interim arbitration award that is

subject to confirmation. Doc #40 at 4. The court does not find

Hyosung’s arguments in support of either requirement to be

persuasive. 

1

Tranax suggests that the court should follow the

reasoning of Hall Steel to adopt a condition of “immediate need for

relief” in order to confirm a partial award under the New York

Convention. Hall Steel cites circuit court decisions addressing

interim arbitration rulings where a party to the arbitration

presented some urgency and sought immediate relief from the

arbitrators, 492 F Supp 2d at 719, but none of those circuit court

decisions required an urgent need to confirm the interim

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arbitration decisions; rather the circuit courts considered whether

the interim order finally disposed of a discrete or severable

issue. 

Hall Steel relies on Island Creek Coal Sales Co v City of

Gainesville, 729 F2d 1046, 1047-48 (6th Cir 1984), abrogated on

other grounds by Cortez Byrd Chips, Inc v Bill Harbert Const Co,

529 US 193 (2000), in which the Sixth Circuit upheld the district

court’s confirmation of an interim arbitration order granting

injunctive relief to preserve the status quo on shipments of coal. 

The Sixth Circuit held that under 9 USC § 10, the interim award

disposed of a self-contained issue (whether the city was required

to perform the contract during the pendency of arbitration

proceedings) and could be confirmed “notwithstanding the absence of

an award that finally disposes of all the claims that were

submitted to arbitration.” 729 F2d at 1049 (citations omitted). 

The circuit court did not rely on the urgency of the situation to

determine the finality of the award.

To support a condition of “immediate need” to confirm an

interim award, Hall Steel also cites Publicis Communication v True

North Communications, Inc, 206 F3d 725 (7th Cir 2000), in which a

party to the arbitration, True North, claimed an urgent need for

its opponent’s tax records, and the arbitration tribunal ordered

the production of those tax records. The Seventh Circuit affirmed

the district court’s confirmation of the arbitration decision under

the New York Convention, noting the exception under Article V §

(1)(e) to judicial enforcement for awards that have not yet become

binding on the parties. 206 F3d at 728. The Seventh Circuit

rejected the producing party’s formalistic argument that the

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tribunal’s decision was not final because it did not bear the word

“award,” and rather considered the decision’s “substance and

effect” to determine whether the tribunal’s order to turn over the

tax records was final and subject to confirmation. Id at 730. The

circuit court reasoned that “[a] ruling on a discrete, timesensitive issue may be final and ripe for confirmation even though

other claims remain to be addressed by arbitrators.” 206 F3d at

729. 

Although the Seventh Circuit noted that the tribunal had

determined that True North’s need for tax records was urgent at the

time that the award was issued, the urgency was not determinative

of the finality of the award for purposes of confirmation. On the

contrary, True North’s need for tax records was no longer urgent

when the circuit court reviewed the district court’s confirmation

of the arbitration decision. The circuit court noted that the

dispute over the tax records had been rendered moot because True

North had received all the documents that it wanted, but the court

decided to proceed with the merits of the dispute over confirmation

of the award. 206 F3d at 727-28. The Seventh Circuit considered

the intent of the arbitrators in issuing their interim decision,

noting that the arbitration decision stated that “the delivery of

the documents should not await final confirmation in the Final

Award.” Id at 729.

Hall Steel also cites Pacific Reinsurance v Ohio

Reinsurance, 935 F2d 1019, 1022 (9th Cir 1991), on which Tranax

relies in its opposition to the petition to confirm award. As the

court noted in the March 31, 2010 order granting Hyosung’s motions

for expedited discovery and issuance of writ of attachment, Pacific

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Reinsurance held that the district court has jurisdiction under the

Federal Arbitration Act to review and confirm temporary equitable

awards. Doc #33 at 5. There, the Ninth Circuit held that

temporary equitable relief such as setting up an escrow account

pending the arbitrators’ decision could be important to preserve

assets or performance needed to make a potential final award

meaningful and must be enforceable at the time it is granted, not

after an arbitrator’s final decision on the merits. 935 F2d at

1023. Although Pacific Reinsurance recognizes the finality of such

a temporary equitable order under the Federal Arbitration Act, the

Ninth Circuit did not require “immediate need” as a requisite

condition to confirm an interim award, as Tranax suggests.

Because the court does not adopt a requirement that the

party seeking to confirm a partial foreign arbitration award must

present an “immediate need for relief” as proposed by Tranax, the

court holds that the Phase I award is binding on the parties

because it finally and conclusively disposes of Hyosung’s separate

and independent claim of damages arising from the parties’ dispute

over unpaid invoices and is not subject to abatement nor set-off. 

Metallgesellschaft, 790 F2d at 283. The arbitrator’s intent to

make this award binding is demonstrated by his finding that Hyosung

is entitled to “immediate payment of the principal amount of

US$3,180,090.00” and his finding that Tranax was not entitled to

set-off. AA §§ 10.1.37(a) and 11.1.6. In advance of the hearing,

the arbitrator issued a procedural order indicating that he would

defer the award on liability for the unpaid invoices if he found

that Tranax established any defense of set-off. Doc #39 Ex A

§ 1.5. Having decided that Tranax was not entitled to set-off, the

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arbitrator proceeded to award the unpaid invoices, which differed

from the other claims for damages because it involved an agreed

sum. Id. In light of the arbitrator’s stated intent to conduct an

efficient hearing by bifurcating the issues of liability and

quantum of damages other than unpaid invoices, id § 1.4, the court

finds that the Phase I award disposes of the liability issues and

amount of damages for the separate, independent claim over unpaid

invoices. See Publicis Communication, 206 F3d at 730-31 (“If the

tribunal’s decision wasn’t final, if the tribunal really didn’t

intend to finalize it until eons later * * * then the [arbitral]

decision was a meaningless waste of time.”)

2

Tranax cites Hall Steel for the alternative proposition

that an interim or partial award should be confirmed only where the

parties have evidenced such an intent. Doc #40 at 5-6. Tranax’s

reliance on Hall Steel for this proposition is misplaced. Hall

Steel did not apply this reasoning in its decision and noted that

there was no indication that the arbitrator believed he was acting

in accordance with the parties’ shared intent to decide liability

for costs incurred in litigating the threshold issue of proper

forum. 492 F Supp 2d at 720 n1. In fact, the arbitrator in Hall

Steel acknowledged the plaintiff’s objection to handling the

determination of costs first, but decided nevertheless to proceed. 

Id. Similarly, Tranax objected to bifurcation of the arbitration

proceedings, but the arbitrator determined that bifurcation would

make for a more efficient hearing. AA § 5.5.2. 

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Any doubt about Tranax’s intent to submit to a binding

arbitration decision is resolved by the arbitration clause in the

2005 Distributorship Agreement. Tranax’s argument that the

arbitration clause contemplates a single arbitration award because

it states that “the award of the arbitral tribunal shall be final

and binding” is not supported by any language in the arbitration

clause to indicate such an intent and epitomizes the kind of

“superficial technicalities” decried by the Seventh Circuit in

Publicis Communication, 206 F3d at 730. 

B

Tranax further challenges confirmation of the Phase I

award on the grounds of public policy and the unresolved issue of

attorney fees and costs. Neither argument has merit. First,

Tranax does not appear to rely on the public policy defense under

Article V section 2(b) of the New York Convention, but only

suggests that confirmation of the Phase I award now would offend

public policies that discourage a multiplicity of proceedings and

court interference in arbitration proceedings. Here, the fear of

multiple proceedings evaporates in light of the arbitrator’s

decision to make the arbitration more efficient by bifurcation. 

Furthermore, courts have recognized that the New York Convention

and the mandatory language in its implementing legislation have “a

pro-enforcement bias,” leaving little discretion to the district

courts. Glencore Grain Rotterdam BV v Shivnath Rai Harnarain Co,

284 F3d 1114, 1120 (9th Cir 2002) (citations omitted). In contrast

to the rules governing federal civil litigation, the provisions of

the Federal Arbitration Act implementing the New York Convention do

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not impose strict gate-keeping procedures on the district courts to

fulfill their mandate to confirm international arbitration awards.

Second, Tranax contends that the Phase I award is not

final and may not be confirmed because the award leaves open the

issue of attorney fees and costs. AA § 10.9.2. The issue of

attorney fees does not bear on Tranax’s liability for the amount

due on the unpaid invoices. Based on the experience of the

district courts in determining attorney fees and costs following

entry of judgment on the merits, the court concludes that the

arbitrator’s determination of attorney fees is easily severable and

distinct from the award of damages for unpaid bills plus interest,

which was the subject of the award. 

C

The amount awarded to Hyosung in the Phase I arbitration

award, as hereby confirmed, is summarized below:

Description Amount

Principal sum due on unpaid

bills (AA § 11.3.1(a))

$3,180,090.00

Simple interest at 6% per annum

accrued from the due date of

each invoice to the filing of

arbitration on August 24, 2007

(AA § 11.3.1(b))

$120,637.01

Simple interest at 20% per annum

accrued from August 25, 2007 to

August 24, 2009 (AA § 11.3.1(c))

$1,272,036.00

Simple interest at $1,742.52 per

day from August 25, 2009 to May

6, 2010 (254 days) (Id)

$442,600.08

TOTAL AWARD as of May 6, 2010 $5,015,363.09

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Thus calculated, the award to Hyosung totals $5,015,363.09 as of

May 6, 2010 plus daily interest of $1,742.52 per day thereafter

until the date of payment. 

 III

For the reasons explained above, the court GRANTS

Hyosung’s petition to confirm the arbitration award. Doc #1. 

Accordingly, the court orders as follows:

(1) Pursuant to 9 USC § 201 et seq, the Partial Award

entered on February 9, 2010 in Nautilus Hyosung Inc

et al v Tranax Technologies, Inc, ICDR Case No 50

155 T 00328 07, is hereby CONFIRMED;

(2) the clerk is directed to enter judgment in favor of

Petitioners Hyosung (America) Inc and Nautilus

Hyosung Inc, and against Respondent Tranax

Technologies, Inc, for the amount of $5,015,363.09,

plus daily interest of $1,742.52 each day after May

6, 2010 until the date of payment, in conformity

with this Order confirming the Partial Award; and

(3) the clerk is directed to terminate all pending

motions and close the file.

 

IT IS SO ORDERED.

 

VAUGHN R WALKER

United States District Chief Judge

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