STM Atlantic N.V. et al. v. Dong Yin Development Holdings Limited et al.

At a glance

Parties

STM Atlantic N.V. and other plaintiffs v. Dong Yin Development (Holdings) Limited and other defendants

Case no.

No. 2:18-cv-01269-JLS-JCG

Court

U.S. District Court, Central District of California

Forum and rules

Court proceeding under Section 3 of the Federal Arbitration Act (9 U.S.C. § 3); the arbitration agreement is in the Shareholder Agreement (SHA § 13.2)

Treaty

None. The New York Convention is discussed in relation to Yang v. Majestic Blue Fisheries

Court (judge)

Judge Josephine L. Staton

Sector

Satellite communications

Outcome

The Court granted Dong Yin's motion and stayed the action pending the arbitration between the plaintiffs and Bronzelink (15 February 2019).

Amount

COSEIG's planned investment in GIP-Cayman under the Joint Venture Agreement was $175 million. The order states no damages figure.

The dispute

The plaintiffs were individuals and their closely held companies. They set up Global-IP Cayman (GIP-Cayman) to build and launch a communications satellite that would bring internet access to Africa. In May 2016 they signed a Share Purchase Agreement and a Shareholder Agreement (SHA) with Bronzelink. These gave Bronzelink 75% of GIP-Cayman and the right to fill six of its nine board seats. The plaintiffs allege that Dong Yin, said to be controlled by the People's Republic of China, secretly controlled Bronzelink and the earlier investor COSEIG. They say Dong Yin gave false assurances of independence, took control of GIP-Cayman in breach of export control laws and forced them out. They sued Dong Yin and others for conspiracy, fraud, civil theft, RICO violations, interference with prospective economic advantage, unfair competition and unjust enrichment. Dong Yin did not sign the SHA but moved to stay the action under 9 U.S.C. § 3 on the basis of the SHA's arbitration clause.

Key holdings

1. Under Arthur Andersen v. Carlisle, a party that did not sign the arbitration agreement may obtain a § 3 stay if state contract law lets it enforce the agreement. The Court applied California law despite the SHA's English choice-of-law clause, because neither party showed that the foreign law should apply. pp. 5–6 and n. 2
2. The first Goldman ground for equitable estoppel (reliance) applies. Every claim depends on the SHA. The plaintiffs' loss of control could only have come about through the SHA's terms, and they plead that they signed it in reliance on Dong Yin's misrepresentations. The Court found the case closer to Crawford than to Murphy or Henson. pp. 8–9
3. The second Goldman ground (substantially interdependent misconduct) also applies. The plaintiffs allege a single scheme by Dong Yin and Bronzelink, which did sign the SHA, put into effect through the SHA. The claims against Dong Yin are therefore inherently inseparable from the arbitrable claims against Bronzelink. pp. 9–10
4. Yang v. Majestic Blue Fisheries holds that, under the New York Convention, a non-signatory cannot compel arbitration. It does not bar a § 3 stay requested by a non-signatory where the arbitration agreement falls under the Convention. pp. 10–11
5. The plaintiffs argued that the Bronzelink arbitration concerns a separate breach of contract, with a remedy limited to a share transfer. The Court rejected this: the plaintiffs' injuries flow from the SHA, so there is one dispute (citing Waste Management). p. 11 and n. 3
6. The action is stayed until the arbitration between the plaintiffs and Bronzelink ends. The plaintiffs must file a status report within six months or within ten days after the arbitration ends, whichever comes first. p. 12

Procedural history

1. May 2016The plaintiffs, Bronzelink and GIP-Cayman sign the Share Purchase Agreement and the Shareholder Agreement.
2. 30 July 2018Order compelling arbitration in the related case, Youssefzadeh v. Global IP Cayman.
3. 21 September 2018Dong Yin files its motion to stay the action under 9 U.S.C. § 3.
4. 6 November 2018Bronzelink files an arbitration demand against the plaintiffs under the SHA.
5. 18 January 2019Hearing on the motion.
6. 15 February 2019The Court grants the stay pending arbitration and grants the plaintiffs leave to file a sur reply.

Tribunal, counsel and experts

Decided by

• Josephine L. Staton Judge, U.S. District Court, Central District of California

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Keywords

• stay pending arbitration
• 9 U.S.C. § 3
• Federal Arbitration Act
• non-signatory
• equitable estoppel
• Goldman v. KPMG
• Arthur Andersen v. Carlisle
• Yang v. Majestic Blue Fisheries
• New York Convention
• Bronzelink
• GIP-Cayman
• satellite project
• export control
• shareholder agreement
• RICO
• fraudulent inducement
• China Orient Asset Management

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