UNITED STATES 15 April 2021 Martin Kenney

United States District Court, Central District of California, 15 April 2021
(Martin Kenney & Co. v. Roger Corman)

15 - 04 - 2021

UNITED STATES 15 April 2021 Martin Kenney

Jurisdiction United States
Summary

Roger Corman hired Martin Kenney & Co., a BVI law firm, to render legal services in connection with Corman’s family trusts through a Letter of Engagement (LOE). The relationship was later terminated and the ensuing dispute referred to arbitration in the British Virgin Islands as provided for in the LOE. 

The District Court confirmed the arbitral award, dismissing the respondent's objections to enforcement under Article V(1)(a), (b) and (d) and Article V(2)(b) of the New York Convention. The dispute in the arbitration related to non-payment by the respondent of the petitioner's legal fees under the letter of engagement signed by the parties. The respondent did not participate in the arbitration and sought to challenge the enforcement of the award.

Invoking Articles V(1)(b) and V(2)(b) of the Convention, the respondent contended that it was precluded from presenting its case in the arbitration as the engagement letter between the parties stipulated that if either party failed to fund half the arbitration costs in a timely manner, the other party may proceed to a hearing with full evidence and the defaulting party shall be debarred from filing any evidence at the hearing. The respondent agued that such provision was also against public policy. The Court rejected the respondent's argument, finding in the facts of the case that respondent had chosen not to participate in the arbitration as opposed to being precluded from participating. The court rejected the public policy objection on the ground that the parties had mutually agreed to the cost-sharing provision of the arbitration and that costs-sharing did not imply control over the arbitration.

Invoking Articles V(1)(a) and V(2)(b) of the Convention, the respondent contended that the arbitration agreement was unconscionable. The Court rejected the respondent's objection holding that the respondent had failed to meet the test under Article V(1)(a), which required evidence that arbitration is invalid either under the law governing it, or failing such indication under the law of seat of the arbitration. The Court noted that no submissions had been made regarding the unconscionability of the arbitration agreement under the laws of the BVI (law governing the arbitration agreement). The court examined the unconscionability of the agreement under the laws of California, being the enforcement jurisdiction and found that unconscionability was not met (no evidence of unequal bargaining power or and overly harsh or one-sided outcome). For these reasons, the court also rejected the respondent's public policy objection.

The respondent invoked Article V(1)(d) of the Convention alleging that (i) the arbitrator was not a member of the BVI Bar Association as per the agreement of the parties under the arbitration agreement; and (ii) the arbitrator was appointed by the PCA Secretary General instead of the President of the BVI Bar Association as had been agreed by the parties. The Court rejected the first argument finding that the arbitrator had been a member of the BVI Bar Association in the year in which the arbitration was held. The Court further held that the method of appointment did not violate the arbitration agreement as it was in accordance with procedure under the UNCITRAL rules, which were the applicable arbitration rules in the arbitration.

The Respondent further contended that it did not received notice of the appointment of the arbitrator or the arbitration (Article V(1)(b)). The Court rejected this objection courts have found the notice provision of the New York Convention to
mean that the arbitration must comply with the U.S. standards for procedural due
process. The Court found on the facts of the case that the service on the respondent complied with the terms of the arbitration agreement and the due process rules under the UNCITRAL rules.

Related topics
506

Invalidity of the arbitration agreement: The court discusses the law applicable to the validity of the arbitration agreement at the enforcement stage.

Law applicable to the arbitration agreement
508 Ground b: Violation of due process in general
509

Due process: The court discusses what constitutes “proper notice” of the appointment of the arbitrators or of the arbitration proceedings.

"Proper notice"
510

Due process: The court discusses what are to be considered proper time limits and notice periods that fulfill the requirement that the party opposing recognition and enforcement of the arbitral award was extended due process.

Time limits and notice periods
513 Ground d: Irregularity in the composition of the arbitral tribunal or arbitral procedure
520

Public policy:The court discusses the consequences of the default of a party in the arbitration on the recognition and enforcement of an arbitral award against it.

Ground b: Public policy - Default of party
523

Public policy: The court discusses alleged violations of a fundamental rule of due process in the arbitration on the recognition and enforcement of an arbitral award, including the failure to communicate the names of the arbitrators, the failure to send copies of reports or letters filed in the arbitration, etc.

Irregularities in the arbitral procedure (see also Art. V(1)(b))
UNITED STATES 15 April 2021 Martin Kenney