“A Mistakenly Designated Arbitration Forum Clause is Null And Void” (Case Watch)

Control Screening, LLC, a New Jersey-based manufacturer, and Tecapro, a Vietnam-based company, had a dispute over the proper interpretation of an arbitration forum selection clause in their contract. Tecapro entered into a contract with Control Screening for the purchase of twenty-eight customized X-ray machines with a total purchase price of over one million dollars. Each company alleged that the other company breached its obligations under the contract.
The contract provided that:

In the event all disputes are not resolved, the disputes shall be settled at International Arbitration Center of European countries for claim in the suing party’s country under the rule of the Center. Decision of arbitration shall be final and binding [sic] both parties.

Tecapro initiated arbitration proceedings in Belgium but, later, Control Screening notified Tecapro of its intention to commence arbitration proceedings in New Jersey.
The District Court concluded that the only reasonable interpretation of the arbitration clause was that Tecapro could have sought to arbitrate in Vietnam or Control Screening in New Jersey. The latter is what happened therefore the arbitration was allowed to proceed in New Jersey.
Tecapro appealed, arguing that the District Court erred by improperly exercising personal jurisdiction over it and finding that the parties had agreed to arbitrate in New Jersey rather than in Europe.
DECISION: Affirmed.
The Court of Appeals for the Third Circuit found ample evidence that Tecapro purposefully directed its activities at New Jersey, and that virtually all of those activities arose from its relationship with Control Screening. As such, the appellate court concluded that the District Court correctly determined that Tecapro’s activities in New Jersey adequately supported a finding of personal jurisdiction.
In terms of the forum selection, the central question was how to interpret the clause in order to determine the appropriate arbitration forum.
The appellate court found that the parties mistakenly provided that disputes were to be settled at “International Arbitration Center of European countries,” which is a particular place that does not exist. According to the court, since the parties mistakenly designated an arbitration forum that does not exist, the forum selection provision of the arbitration agreement was null and void. As a result, the otherwise valid arbitration agreement was treated as if it did not select a forum. Thus, the district court properly compelled arbitration in New Jersey since the arbitration agreement lacked a term specifying a location.
Citation: Control Screening LLC v. Technological Application & Prod. Co., 11-2896, 2012 WL 3037824 (3d Cir. 2012)


[Arbitration – Personal Jurisdiction – Forum Selection]




ABOUT THE AUTHOR:

Dave Dambreville is an attorney (pending bar admission) in the Greater Philadelphia Area.  He is a 2013 graduate of Pennsylvania State University, Dickinson School of Law.  He serves as the Publisher and Regular Contributor to the FPT Law Blog.

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