Balkrishna Setty and Shrinivas Sugandhalaya (BNG) LLP v. Shrinivas Sugandhalaya LLP

At a glance

Parties

Balkrishna Setty (individually and as general partner in the Shrinivas Sugandhalaya Partnership with Nagraj Setty) and Shrinivas Sugandhalaya (BNG) LLP (plaintiffs-appellees) v. Shrinivas Sugandhalaya LLP (defendant-appellant)

Case no.

U.S. Court of Appeals, Ninth Circuit, No. 18-35573 (D.C. No. 2:17-cv-01146-RAJ)

Court

U.S. Court of Appeals for the Ninth Circuit, on appeal from the U.S. District Court for the Western District of Washington

Forum and rules

Motion to compel arbitration under the New York Convention (9 U.S.C. § 201 et seq.) and the Federal Arbitration Act

Treaty

Arbitration clause in a Partnership Deed signed in Mumbai on 24 December 1999; New York Convention

Tribunal

Circuit Judges Dorothy W. Nelson (author of the 2021 opinion), Johnnie B. Rawlinson and Carlos T. Bea (dissented in 2021)

Sector

Incense manufacturing; trademarks

Outcome

The court twice affirmed the district court's refusal to compel arbitration or stay the case: in 2019 under the New York Convention, and in 2021 on remand on equitable estoppel, with Judge Bea dissenting.

The dispute

After their father's death, the brothers Balkrishna Setty and Nagraj Setty signed a Partnership Deed in Mumbai on 24 December 1999 to own his incense manufacturing business, Shrinivas Sugandhalaya, jointly. The deed sent "all disputes … arising between the partners" to arbitration. The brothers later split up. Balkrishna founded Shrinivas Sugandhalaya (BNG) LLP in Bangalore and Nagraj founded Shrinivas Sugandhalaya LLP in Mumbai; neither company signed the deed. Balkrishna and the Bangalore company sued the Mumbai company in federal court in Alabama. They alleged U.S. federal trademark violations, including fraudulent trademark registrations, and brought Alabama law claims for tortious interference and unfair competition. The case was then transferred to the Western District of Washington. The Mumbai company moved to compel arbitration under the deed and to stay the case. It argued that, although it had not signed the deed, the plaintiffs were equitably estopped from avoiding arbitration and that both companies were "assigns" of the brothers.

Key holdings

1. 2019 memorandum: a party that did not sign the arbitration agreement cannot compel arbitration under the New York Convention. SS LLP had not signed the Partnership Deed and did not exist when the deed was signed. The court relied on Yang v. Majestic Blue Fisheries. 2019 Memorandum, pp. 2–3
2. 2019 memorandum: the FAA route also failed. Under Yang, where the FAA would allow a non-signatory to arbitrate and the Convention prohibits it, the Convention controls (9 U.S.C. § 208). The court did not consider the 'assigns' argument because it had not been raised in the district court and would require fact-finding. The district court therefore did not abuse its discretion in denying a stay. 2019 Memorandum, pp. 3–4
3. 2021 opinion on remand: federal common law, not Indian law, decides whether a non-signatory can compel arbitration. Under Letizia v. Prudential Bache Securities, which the court held is still good law, federal law applies because the case involves federal claims and rests on federal question jurisdiction. The deed's arbitration clause covers only disputes between the partners and cannot settle this threshold question. 2021 Opinion, pp. 4–5
4. 2021 opinion: equitable estoppel did not apply because the plaintiffs' claims were not clearly intertwined with the Partnership Deed. The Partnership owns the marks through its prior use of them, not through any term of the deed. Any allegations of misconduct by Nagraj Setty were not clearly intertwined with the claims against SS Mumbai. The denials of the motion to compel and of the stay were affirmed. 2021 Opinion, p. 6
5. Dissent (Judge Bea): under Arthur Andersen and GE Energy, equitable estoppel claims by non-signatories under Chapter 1 of the FAA are governed by the contract law of the relevant state or country, even where the agreement falls under the New York Convention. Judge Bea would have remanded for a choice-of-law analysis and expected Indian law to apply. 2021 Opinion, Dissent, pp. 7–25

Procedural history

1. 24 December 1999Partnership Deed with the arbitration clause signed in Mumbai by Balkrishna and Nagraj Setty.
2. Plaintiffs sue in the Northern District of Alabama. The case is transferred to the Western District of Washington, which denies SS LLP's motions to compel arbitration and to stay.
3. 6 June 2019Ninth Circuit unpublished memorandum (submitted 3 June 2019) affirms the district court on the basis of Yang.
4. 8 June 2020The U.S. Supreme Court (No. 19-623) grants certiorari, vacates the judgment and remands for reconsideration in light of GE Energy Power Conversion France SAS v. Outokumpu Stainless USA, LLC.
5. 20 January 2021Published opinion on remand affirms the district court again on equitable estoppel grounds. Judge Bea dissents.

Tribunal, counsel and experts

Decided by

• Dorothy W. Nelson Judge, U.S. Court of Appeals for the Ninth Circuit (authored 2021 opinion)
• Johnnie B. Rawlinson Judge, U.S. Court of Appeals for the Ninth Circuit
• Carlos T. Bea Judge, U.S. Court of Appeals for the Ninth Circuit (dissented in 2021 opinion)

For the claimant

Maynard Cooper & Gale P.C. · Foster Pepper PLLC

For the respondent

Miller Nash Graham & Dunn LLP

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Keywords

• non-signatory
• equitable estoppel
• motion to compel arbitration
• stay pending arbitration
• New York Convention
• Federal Arbitration Act Chapter 1
• 9 U.S.C. § 208
• GE Energy v. Outokumpu
• Yang v. Majestic Blue Fisheries
• Letizia v. Prudential Bache
• Arthur Andersen v. Carlisle
• choice of law
• Indian law
• federal common law
• trademark
• incense
• partnership deed

Summary generated with AI from the published documents — refer to the award for the authoritative text.