Denver Global Products, Inc. v. Roger Leon, Jeanne Hendrix, Keith Piercy et al.

At a glance

Parties

Denver Global Products, Inc. v. Roger Leon, Jeanne Hendrix, Keith Piercy; third-party defendants Chongqing Rato Power Co., Ltd. and affiliates

Case no.

U.S. Court of Appeals, Fourth Circuit, No. 18-1853 (appeal from W.D.N.C. No. 5:17-cv-00102-MOC-DSC)

Court

U.S. District Court, Western District of North Carolina (Max O. Cogburn, Jr., District Judge); U.S. Court of Appeals, Fourth Circuit (Judges Motz, Harris, Quattlebaum)

Forum and rules

Enforcement under the New York Convention and 9 U.S.C. §§ 201–208

Underlying award(s)

Chongqing Arbitration Commission awards of November 2016 under the Equity Agreement and the Joint Venture Agreement

Sector

Engines and outdoor power products distribution

Outcome

The Fourth Circuit affirmed the District Court's order compelling arbitration and confirming the Chinese awards (8 June 2020).

Amount

The awards ordered Leon to reimburse Rato's attorney fees and arbitration fees; the amounts are not stated in the published documents.

The dispute

Roger Leon and Larry Wang formed Denver Global Products, Inc., a North Carolina company, to distribute in the United States the products of Chongqing Rato Power Co., Ltd. (Rato), a Chinese manufacturer. Rato later acquired Denver Global through an Initial Agreement, which was replaced by three Substitute Agreements (Framework, Equity and Joint Venture Agreements). These were signed in Chongqing and each provided for arbitration in China. In 2015 Denver Global sued Leon in North Carolina state court for business torts. Leon filed counterclaims and third-party claims against Rato. Rato moved to compel arbitration and, while that motion was pending, started arbitration before the Chongqing Arbitration Commission. Leon did not appear, the Commission ruled for Rato in November 2016, and Rato sought confirmation under the New York Convention. Leon argued that he never truly agreed to arbitrate, because he lacked Chinese counsel and an honest interpreter. He also argued that he was unable to present his case because of illness and lack of money, and that Rato should not have started arbitration while its motion to compel was still pending.

Key holdings

1. The District Court found no genuine dispute of material fact on Leon's assent to the Substitute Agreements. The record showed that Leon had hired Chinese counsel who relied on the agreements, and that an interpreter had explained the agreements to him. District Court Order, pp. 3–4
2. The District Court held that Leon's illness and lack of funds did not make him 'unable to present' his case. He could have hired Chinese counsel or asked to take part remotely. He also gave no individualized evidence of prohibitive costs. District Court Order, pp. 4–6
3. The Fourth Circuit held that, even if Leon's contentions were disputed, they were not material. Under North Carolina law, a sophisticated businessman who signs a contract is charged with knowing its contents. His own decision not to hire Chinese counsel or an independent interpreter is no defense. The order compelling arbitration was affirmed. Fourth Circuit, pp. 8–9
4. Nothing in Section 4 of the FAA, or any other FAA provision, requires a court order on a motion to compel before a party may start arbitration. Rato's start of the Chinese arbitration while its motion was pending was therefore no bar to confirmation. Fourth Circuit, pp. 10–11
5. The defenses under Article V(1)(a) (no valid agreement) and Article V(1)(b) (unable to present his case) failed. Leon had assented to arbitration. Despite many filings, he never asked to participate remotely or for a delay, and he gave no specific forecast of his costs before the arbitration began. Fourth Circuit, pp. 12–13
6. The public policy defense under Article V(2)(b) was raised for the first time on appeal, so the court declined to consider it. The court noted that the defense is construed narrowly and that Leon had shown no compelling grounds for it. Fourth Circuit, p. 13 n. 8

Procedural history

1. 2015Denver Global sued Leon in North Carolina state court. Leon filed counterclaims and third-party claims against Rato, and Rato moved to compel arbitration.
2. August 2016Leon was served with Rato's arbitration demands before the Chongqing Arbitration Commission.
3. October 2016Arbitration hearing in China; Leon did not appear.
4. November 2016The Commission issued awards for Rato, finding the Equity and Joint Venture Agreements valid and ordering Leon to pay Rato's attorney fees and the arbitration fees.
5. Rato moved in state court to confirm the awards. Leon removed the case to federal court under 9 U.S.C. § 205, and a magistrate judge recommended granting both of Rato's motions.
6. 16 July 2018The District Court affirmed the Memorandum and Recommendation, compelled arbitration and confirmed the award. It declined supplemental jurisdiction over the remaining claims and remanded them to the North Carolina Business Court.
7. 8 June 2020The Fourth Circuit affirmed in an unpublished opinion.

Tribunal, counsel and experts

Decided by

• Jr. Max O. Cogburn Judge, U.S. District Court, Western District of North Carolina
• Pamela Harris Judge, U.S. Court of Appeals, Fourth Circuit (wrote the opinion)

For the claimant

Robinson, Bradshaw & Hinson, P.A.

For the respondent

Terpening Law PLLC

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Keywords

• New York Convention
• recognition and enforcement
• Article V(1)(a)
• Article V(1)(b)
• unable to present case
• public policy
• motion to compel arbitration
• Chongqing Arbitration Commission
• Rato
• China
• assent to arbitration
• interpreter
• duty to read
• cost of arbitration
• 9 U.S.C. § 207
• FAA Section 4
• issue raised first time on appeal

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