Interasco and Otan entered into a contract that required disputes to be resolved by arbitration. Otan, a limited liability company, filed a certificate of cancellation/withdrawal in 2006. Nearly two years later, a new filing created a limited liability company under the Otan name. Whether the arbitration clause can be enforced depends upon whether the contract binds Interasco and the second limited liability company. This is a question of arbitrability reserved for the courts to determine. We affirm the stay of arbitration and remand for further proceedings.
In June 2006, Interasco (Geneva) S.A., Inc., formerly known as Interwood SA, Inc.,
On August 18, 2008, Interasco filed a request for arbitration in the International Court of Arbitration, a division of the International Chamber of Commerce (ICC).
At the time the parties entered into the contract, Otan, was registered in Washington state, with unified business identifier (UBI) account number 602425940, and had been formed on September 2, 2004 (hereinafter Otan I). However, on November 13, 2006, Otan I filed a certificate of cancellation/withdrawal. Shortly after Interasco had filed its request for arbitration (August 18, 2008), Otan reformed
On November 7, 2008, Interasco withdrew its request for arbitration, having learned of Otan I's cancellation. Interasco represented to the ICC that Otan I had dissolved, and so it saw "no purpose in proceeding against a dissolved entity given the unlikelihood of enforcement of any award."
Interasco, on December 16, 2008, dissatisfied with the information it had about Otan II's legal status (the record contains a copy of Otan I's certification of cancellation, but not any information about Otan II's relationship with Otan I), wrote to the ICC explaining that, although it had discovered that Otan I might have been "resurrected," it was concerned about whether Otan II could pursue its counterclaims.
On January 13, 2009, Otan II replied that it would nevertheless proceed with its counterclaims. Interasco responded on January 16, 2009, arguing that Otan II had no "locus standi" to bring claims. The ICC invited Otan II to respond to what the ICC characterized as Interasco's "jurisdictional objections pursuant to Article 6(2) of the ICC Rules [of arbitration]." Otan II, in a document entitled "Respondent's Response to Claimant's Inquiries Regarding Standing," asserted that Interasco's concerns were not jurisdictional, as Interasco had already acknowledged the ICC's jurisdiction to hear the case by filing its request for arbitration. Rather, Otan II characterized the dispute as one concerning its standing to bring claims against Interasco, when "Otan Investments, LLC has the legal authority to pursue legal claims under the contract that bears Otan's name."
On May 7, 2009, the ICC ordered arbitration to proceed in accordance with article 6(2) of the ICC rules of arbitration (RA). A few days later, Interasco filed a complaint for injunctive relief and declaratory judgment in King County Superior Court. On June 4, 2009, Interasco moved to stay the ICC arbitration proceedings. The court granted the stay to resolve what it characterized as the issue of arbitrability of any claims between Otan II and Interasco. Otan II appeals the grant of the stay.
Because this is an international dispute, the Federal Arbitration Act (FAA) applies.
Otan II contends that the court erred by concluding that the threshold issue presented by the parties was one of arbitrability. Otan II maintains that Interasco challenged Otan II's standing to pursue its counterclaims, which is a procedural defense. Interasco responds that Otan II is a nonsignatory to the contract, presenting the court with a basic issue of arbitrability.
Under the FAA, the general rule is that whether and what the parties have agreed to arbitrate is an issue for the courts to decide unless otherwise stipulated by the parties.
Under the FAA, whether an arbitration agreement binds a nonsignator is a gateway dispute that is an issue for judicial determination unless the parties clearly and unmistakably provide otherwise.
The record contains a certificate of cancellation showing that Otan I ceased to exist as an LLC on November 13, 2006. RCW 25.15.070(2)(c) ("A limited liability company formed under this chapter shall be a separate legal entity, the existence of which as a separate legal entity shall continue until cancellation of the limited liability company's certificate of formation.");
The contract itself provides that "[n]either of the Parties to the present Contract has the right to assign by either of the ways its rights and obligations according to the present Contract to the third persons without prior written consent of the other Party." The only other evidence in the record regarding assignment of rights and obligations is the declaration of Interasco's president, stating Interasco had not agreed to allow Otan I to assign its rights and obligations to another entity.
Otan I ceased to exist. To defeat the stay and obtain enforcement of the arbitration clause, Otan II has to establish either that, as a matter of law, it is the same entity as Otan I, or that it legally stands in the shoes of Otan I. The evidence in the record is not sufficient to establish that Otan II is legally bound by the contract and entitled to enforce the arbitration clause entered into by Otan I. The purpose of the discovery and summary judgment schedule ordered by the trial court is to determine this question. The trial court did not err in staying arbitration to determine the nature of the relationship between Otan I and Otan II, and, based on that information, whether Otan II can enforce the original contract.
Otan also argues that Interasco's choice to initiate arbitration proceedings against Otan in the ICC, wherein it claimed that Otan could not bring counterclaims, effectively waives Interasco's ability to argue the issue of Otan's status as one of arbitrability. The right to a judicial determination of arbitrability is not absolute; like many rights, it can be waived.
The facts are distinct here. Interasco requested arbitration and submitted itself to the ICC's jurisdiction by doing so. The next communication Interasco had with Otan and the ICC after its initial arbitration request was to explain its confusion about Otan's legal status. Interasco stated it had not received notice of Otan's dissolution prior to seeking arbitration.
Interasco, like SSI, did question Otan II's standing to assert counterclaims, arguing that Otan II had no "locus standi" to bring claims. However, unlike in
We hold the issue of arbitrability is not waived.
III. Motion to Strike
Interasco moved the court to strike pages 13—18 of Otan II's brief. In this portion of the opening brief, Otan argued the language in the contract, "[N]o recourse to law courts being permitted," required arbitration of even issues of arbitrability, which are generally reserved for a court's consideration. We decline to grant the motion to strike.
We affirm and remand for further proceedings.
COX and SCHINDLER, JJ., concur.
The contract at issue here provides that "[a]ll disputes . . . shall be finally settled, by the International Court of Arbitration, United States of America or Switzerland . . . . Arbitration procedure is to be in accordance with regulations of this Court applying the current International Laws." In the briefs to this court, the parties cite and apply both the FAA and Washington's codification of the Uniform Arbitration Act, chapter 7.04A RCW, as well as common law applying both statutory schemes.