Court Compels Plaintiff to International Arbitration with Nonsignatories

HIGHLIGHTS:

• In Caporicci U.S.A. Corp. v. Prada S.p.A., a U.S. District Court for the Southern District of Florida judge granted a motion to compel plaintiff and defendants, and certain service providers, to arbitrate in Milan, on the basis of an arbitration clause included in an agreement between Prada and Caporicci "for the purchase of alligator hatchlings and eggs."
• The court held that the arbitration clause met the requirements set forth in the United Nations Convention on Recognition and Enforcement of Foreign Arbitral Awards (New York Convention).
• The decision issued is consistent with Florida's policy in favor of arbitration, which is leading parties to increasingly choose Miami as a seat for international arbitrations.

On May, 7, 2018, Federal Judge Cecilia M. Altonaga of the U.S. District Court for the Southern District of Florida, granted a motion to compel plaintiff Caporicci U.S.A. and defendants Prada S.p.A., and certain service providers, to arbitrate in Milan, on the basis of an arbitration clause included in an agreement between Prada and Caporicci "for the purchase of alligator hatchlings and eggs." Caporicci U.S.A. Corp. v. Prada S.p.A., No. 1:18-cv-20859-CMA, at *4 (S.D. Fla. May 7, 2018).

The court held that the arbitration clause met the requirements set forth in the United Nations Convention on Recognition and Enforcement of Foreign Arbitral Awards (New York Convention). An issue of significance was whether parties to the U.S. litigation – the service providers, nonsignatories to the arbitration agreement – could be compelled to arbitrate. The court found this was not an impediment to send the dispute to arbitration in Milan "because 'each of these defendants – whether or not a signatory to the [] agreement – can invoke the arbitration clause in [] light of their close relationship to the parties to the agreement.'" Id. (quoting Olsher Metals Corp. v. Olsher, No. 03-12184, 2004 WL 5394012, at *3 (11th Cir. Jan. 26, 2004)).

In addition, the plaintiff's claims "related to agreements it entered to fulfill its contract with Prada, as well as its agreement with Prada itself." Id. The court found "Plaintiff's claims against each Defendant clearly relate to its agreement with Prada and thus fall under the Convention." Id. (quoting Martinez v. Carnival Corp., 744 F.3d 1240, 1246 (11th Cir. 2014)).

The decision issued on Monday is consistent with Florida's policy in favor of arbitration, which is leading parties to increasingly choose Miami as a seat for international arbitrations. Federal courts within Florida, and the Eleventh Circuit more broadly, are "mindful that the Convention . . . generally established a strong presumption in favor of arbitration of international commercial disputes." Escobar v. Celebration Cruise Operator, Inc., 805 F.3d 1279, 1286 (11th Cir. 2015) (internal quotation marks omitted). The Eleventh Circuit has held that a court ruling upon a motion to compel arbitration under the New York Convention conducts "a very limited inquiry." See, e.g.,Escobar,805 F.3d at 1285. A court must enforce an international agreement to arbitrate and order arbitration unless 1) one of the four jurisdictional prerequisites under the New York Convention is not met; or 2) one of the defenses available under the New York Convention applies. Bautista v. Star Cruises, 396 F.3d 1289, 1294–95 (11th Cir. 2005).

With regard to the four jurisdictional prerequisites, these are: "(1) there is an agreement in writing within the meaning of the Convention; (2) the agreement provides for arbitration in the territory of a signatory of the Convention; (3) the agreement arises out of a legal relationship, whether contractual or not, which is considered commercial; and (4) a party to the agreement is not an American citizen, or that the commercial relationship has some reasonable relation with one or more foreign states." Id. at 1295 n.7; see also Escobar, 805 F.3d at 1285.

With regard to the defenses available under the New York Convention (Article II(3)) to prevent enforcement of an arbitration clause, these defenses include whether the agreement is: "null and void, inoperative or incapable of being performed." Bautista, 396 F.3d at 1302. The Eleventh Circuit has held that the language of the New York Convention limits the grounds for challenging an international arbitration agreement. See Id. "Only . . . situations – such as fraud, mistake, duress, and waiver" are encompassed in the "limited scope of the Convention's null and void clause." Id. In Bautista, the Eleventh Circuit found that unconscionability is not a defense available under the New York Convention, and thus cannot be the basis to deny enforcement of an international agreement to arbitrate. Consistent with the above-described liberal policy favoring arbitration in international disputes, in the Eleventh Circuit "[d]omestic defenses to arbitration are transferrable to a Convention Act case only if they fit within the limited scope of defenses" under Article II(3) of the Convention. Id.

Given this policy strongly favoring the enforcement of international arbitration agreements, Miami should continue to attract international arbitrations.

Clients with questions regarding this ruling or enforcement of international arbitration agreements may contact the authors. 

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