...if you are a company registered under the laws of the People’s Republic of China ("PRC") or Hong Kong or Macau Special Administrative Regions ("SARs"), then (i) if the Company is not registered under the laws of the People’s Republic of China (excluding the Hong Kong and Macau SARs), any dispute arising out of or relating to this PO shall be determined by arbitration in New York, New York, USA by the International Centre for Dispute Resolution (the "ICDR") in accordance with its International Arbitration Rules in force when the notice of arbitration is submitted ("ICDR Arbitration").
The arbitral tribunal shall consist of three arbitrators, and the arbitration proceedings shall be conducted in the English language. In the case of the ICDR Arbitration, (A) each party shall appoint a person to serve as an arbitrator within ten days after the commencement of arbitration, (B) the parties shall then appoint the presiding arbitrator within ten days after selection of the party appointees, (C) if any arbitrators are not selected within these time periods, the ICDR shall, at the written request of any party, complete the appointments that have not been made, and (D) such arbitrators shall be freely selected, and the parties shall not be limited in their selection to any prescribed list.
The arbitral tribunal may award injunctive relief at its discretion according to the rules of ICDR.... The arbitration award shall be final and binding on all the parties, and a party may apply to a court of competent jurisdiction for enforcement of such award. The losing party shall bear all arbitration fees and costs, and shall compensate the other party’s costs related to the arbitration, including attorneys’ fees. You waive any objection based on forum non-conveniens and any objection to venue of any action instituted hereunder, and each party disclaims the United Nations Convention on Contracts for the International Sale of Goods.
4.1 The ICDR has confirmed that the Claimant’s Notice of Arbitration and Statement of Claim were received on May 28, 2014. Pursuant to Article 2(2) of the ICDR Rules, the arbitral proceedings were deemed to commence from that date.
4.2 In accordance with Article 3(1) of the ICDR Rules, within thirty (30) days of the commencement of arbitration, the Respondent "shall submit a written statement of defense, responding to the issues raised in the notice of arbitration, to the claimant and any other parties, and to the administrator." Pursuant to Article 3(2), the Respondent may at the same time make counterclaims or assert setoffs to the Claimant’s claims. Respondent’s Statement of Defense should have been submitted by June 27, 2014.
4.3 The Respondent has not submitted any Statement of Defense. Respondent is already in default of Article 3(1).
4.4 Pursuant to Article 23, the Tribunal is empowered to proceed with the arbitration if the Respondent fails to file a Statement of Defense and may, if it further fails to proceed, make an award on the evidence before it. Article 23 reads in full:
(1) If a party fails to file a statement of defense within the times established by the tribunal without showing sufficient cause for such failure, as determined by the tribunal, the tribunal may proceed with the arbitration.
(2) If a party, duly notified under these Rules, fails to appear at a hearing without showing sufficient cause for such failure, as determined by the tribunal, the tribunal may proceed with the arbitration.
(3) If a party, duly invited to produce evidence or take any other steps in the proceedings, fails to do so within the time established by the tribunal without showing sufficient cause for such failure, as determined by the tribunal, the tribunal may make the award on the evidence before it.
4.5 Although Respondent is already in default, the Tribunal hereby directs that Respondent shall submit by no later than 30 days from the date of this Procedural Order, i.e., by January 22, 2015, its Statement of Defense.
5.1 Claimant advised at the Preliminary Hearing that it is ready to file its Statement of Case and that, if the Respondent fails to comply with its final opportunity to file a Statement of Defense as provided for in paragraph 4.5 above, the Tribunal should proceed to issue an award on the evidence before it.
5.2 The Tribunal hereby directs that, unless the Respondent files its Statement of Defense in accordance with paragraph 4.5 above, the Claimant shall submit by January 30, 2015, its Statement of Case, including its legal submissions and authorities, as well as all documentary evidence, sworn witness statements and such other evidence as it wishes to submit to the Tribunal. As part of that submission, the Claimant should also brief why it should be entitled to an award on the evidence before the Tribunal and without the need for an evidentiary hearing.
5.3 Upon receipt of the Claimant’s Statement of Case and application for an award without an evidentiary hearing, the Tribunal will consider and make an order on next steps.
a. Affidavit of Stacey Moore (Vice President of Legal Affairs, Global Supply Chain and Commercial Products for Newell Rubbermaid Inc.) ("Moore Affidavit");
b. Affidavit of ZHU Kun (a/k/a Jason Zhu) (Supervisor in charge of enterprise purchasing for Newell Rubbermaid Inc.) ("Zhu Affidavit");
c. Affidavit of FU Shitan (a/k/a Tomas Fu) (Project Manager in charge of enterprise purchasing in Asia for Newell Rubbermaid Inc.) ("Fu Affidavit II");
d. Affidavit of Troy Bohana (SAP Business Technical Director for Newell Rubbermaid Inc.) ("Bohana Affidavit");
e. Affidavit of Jeff Dugger (Senior Manager for Product Planning for Rubbermaid Commercial Products LLC) ("Dugger Affidavit"); and
f. Affidavit of Lynn R. Larsen (counsel to Claimant) ("Larsen Affidavit").
3.1 As noted above, Article 23 of the ICDR Rules permits the Tribunal to proceed to issue an award where Respondent has failed to file a Statement of Defense and, further, the ICDR Rules permit the Tribunal to issue an award without the need for an evidentiary hearing where the Tribunal is satisfied Claimant has made out its case on the evidence before it. The Tribunal has further considered the Delaware authorities on this issue cited in the Statement of Case which support this conclusion.
3.2 The Tribunal also notes that this conclusion is consistent with international arbitration practice and procedure. See e.g. Gary B. Born, International Commercial Arbitration (2d ed, Kluwer) at 2298 ("If a party defaults, the tribunal should proceed with the arbitration on an ex parte basis, first attempting to obtain the defaulting party’s participation and thereafter ensuring at every step that the defaulting party receives notice of the ongoing proceedings.") The Tribunal still must analyze the legal submissions and evidence placed before it by the non-defaulting party before rendering its award. See e.g. Born, ibid at 2299 ("The tribunal should, without substituting itself for the defaulting party, satisfy itself that the claimant ’s claims are well-founded in law and fact (or not). This procedure culminates in a reasoned award, setting forth the facts and the basis for decision in the same manner that an award in a contested proceeding would be rendered.")
3.3 Accordingly, having carefully reviewed the Statement of Case and evidence submitted with it, the Tribunal has determined that, subject to the following, it is willing to proceed to issue a final award without the need for an evidentiary hearing. However, the Tribunal directs that Claimant respond to the following requests for additional information:
(a) Claimant submits that the Tribunal is empowered to render an award despite the Respondent’s failure to appear and without the need for an evidentiary hearing. Statement of Case at Section V.A. Please address how this issue is handled as a matter of New York law (New York being the seat of arbitration).
(b) Please advise what Claimant understands to be Ms. Ella Zhang’s position at Respondent.
(c) Claimant advises that it gave notice of an intention to terminate Respondent in "the autumn of 2013." Notarial Certificate of Mr. Zhu at 3. Please advise when exactly Claimant gave its notice of termination and, if in writing, provide a copy of such notification. Further, was this a termination for cause or convenience pursuant to Section 2 of the Purchase Orders? Further, did Respondent at any time make a claim for "payment of the termination charge" as provided for in Section 2 of the Purchase Orders?
(d) Given that Claimant advised Respondent of its intention to terminate the agreement in "the autumn of 2013," it must have been obvious that Claimant would need a new manufacturer in place to ensure Goods were available without interruption. Please respond to the following:
(i) Why is it that Taizhou Lifeng Manufacturing Corp. ("Lifeng") was only retained as Respondent’s replacement in January 2014?
(ii) Why did Lifeng only agree to "meet supply requirements starting in July 2014"? Affidavit of Jeff Dugger at ¶16.
(iii) Claimant’s position is that "Lifeng could not meet the same delivery deadlines that Yinshan had failed to meet or maintain [Claimant’s] inventory levels without interruption." Statement of Case at 10. This is apparently because Lifeng "did not have the molds and tooling necessary to manufacture the goods and could not immediately commence manufacture." Affidavit of Jeff Dugger at ¶7. Mr. Zhu advises that Lifeng is having to manufacture new Molds and Tools. Notarial Cerificate of Mr. Zhu at 6. When did Claimant provide the specifications for Lifeng to commence manufacturing new Molds and Tools and what is a reasonable time for that process to be completed and Lifeng to be ready to supply the Goods?
(e) Claimant requests a declaration that "the Molds and Tools are the property of Rubbermaid Commercial Products LLC and that Yinshan is compelled to immediately deliver such Molds and Tools and to not use them for any purpose." Statement of Case at 20. The Tribunal understands that the basis for this request is Section 6 of the Purchase Orders. Has Respondent at any time asserted any basis for refusing to deliver up the Molds and Tools other than the request for payment of outstanding invoices? Please also state the legal basis on which the Tribunal should rely in ordering specific performance of the obligation in Section 6 of the Purchase Orders to return the Molds and Tools (as opposed to granting money damages) and also in ordering Respondent not to use the Molds and Tools for any other purpose.
(f) Claimant submits that with respect to its request for pre- and post-judgment interest, "[t]he applicable law is the substantive law in the State of Delaware." Statement of Case at 19. Please address whether the Tribunal should also consider New York law (New York being the seat of arbitration) and, if so, what New York law provides.
(g) With respect to Claimant’s calculation of lost profits on the Goods, please confirm that the calculation of the "cost" of Goods - i.e. the "price...[Claimant] would have had to pay [Respondent], or a replacement vendor, for the products if they had been delivered as expected" - is inclusive of all costs that Claimant would have had to bear (e.g. including shipping, packaging, duties, taxes, etc. as identified in Section 3 of the Purchase Orders).
3.4 Claimant may respond to the above questions by way of an additional brief and/or sworn evidence as it considers necessary. Claimant should file its response no later than 21 days from the date of this order, i.e. by June 18, 2015. Upon review of that supplemental filing, the Tribunal will decide what, if any, further steps are required prior to proceeding to an award.
The Tribunal further notes that as ordered by the Tribunal in Procedural Order No. 1, on January 27, 2015, Claimant filed a sworn affidavit attesting to the steps it has taken to notify Respondent of the Arbitration. Having reviewed that affidavit and the evidence subsequently provided by Claimant and the ICDR, the Tribunal is satisfied that all reasonable steps have been taken to notify Respondent of the Arbitration. Claimant and the ICDR are directed to continue to use this same method of notification for delivery of this Procedural Order No. 2 and any subsequent orders of the Tribunal.
When Rubbermaid Commercial products insisted that such Goods, Molds and Tools be delivered, Yinshan stated that it believed some invoices issued 10 years prior were still owed and refused to honor its promises. (Fu Supp. Aff. at p. 4.) This claim for additional amounts owed was completely inconsistent with the accounting both parties had signed off on over the several weeks of discussions prior to the wire transfer...Such a claim for additional amounts owed was also not supported by Rubbermaid Commercial Products’ accounting records and is believed to be a false assertion made purely for the purpose of withholding the Molds and Tools. Rubbermaid Commercial Products requested that Yilshan [sic] provide invoices or an accounting to support its demand for additional funds, and Yinshan refused to do so. (Fu Supp. Aff. at pp. 4-5)
You shall consider all commercial, financial or technical information and documents (including any drawings, specifications or other documents) furnished by us or that you prepared based upon information we provided to you to be confidential, in perpetuity, and you shall not disclose any such information or documents to any other person or use such information or documents for any purpose other than performing this PO. No confidential information disclosed in any manner or at any time by you to us shall be deemed secret or confidential, and you shall have no rights against us with respect thereto. All tools, dies, specifications, drawings, designs or other property furnished or paid for by us in connection with this Order ("Company Property") will (i) be and remain the tangible and intellectual property of the Company and be marked as such; (ii) be used only by you and only in performance of this PO; (iii) not be moved from your premises without our written consent; (iv) be kept free of all liens, claims, and encumbrances; (v) not be modified; and (vi) be maintained in good working order. You will bear all risk of loss or damage to Company Property until it is returned to us. Upon request you will deliver all Company Property in good condition, ordinary wear and tear expected, to any location designated by us. You hereby assign to us, as a work-for-hire or otherwise, all rights, title and interest in any and all intellectual property rights with respect to any drawings, information, ideas, or expressions of information that you create in performing under this PO.
Finally, [Claimant] seeks a declaration that the Molds and Tools are the property of Rubbermaid Commercial Products LLC and that Yinshan is compelled to immediately deliver such Molds and Tools and to not use them for any purpose.
is entitled to damages and declaratory and injunctive relief to provide a full remedy for [Respondent’s] breach. A damages award can redress the past harm suffered by [Claimant] when it had to purchase new molds and tools to enable manufacture of its products going forward and when it went out of inventory on certain products due to [Respondent’s] failure to deliver the Molds and Tools (or the Goods). The damage is ongoing, however, as long as [Respondent] wrongfully withholds the Molds and Tools which are proprietary.
has authority under the parties’ contracts to compel [Respondent] to surrender the Molds and Tools and to award damages for injuries proximately caused by [Respondent’s] refusal to do so in January, 2014, as required and promised. Simply awarding injunctive relief or damages, without the other, fails to provide [Claimant] with a full remedy. Accordingly, both legal and injunctive relief are proper under the circumstances of this case.
a. That the Molds and Tools shall "be and remain the tangible and intellectual property of [Claimant] and be marked as such" is set out in Purchase Orders, Section 6, third sentence, clause (i);
b. That the Molds and Tools shall "upon request" be deliver[ed]...to any location designated" by the Claimant is set out in Purchase Orders, Section 6, fourth sentence; and
c. That the Molds and Tools are to "be used only by [Respondent] and only in performance of’ each of the Purchase Orders is set out in Purchase Orders, Section 6, third sentence, clause (ii).
Where the seller fails to make delivery... then with respect to any goods involved, the buyer may cancel and whether or not he or she has done so may in addition to recovering so much of the price as has been paid (a) "cover" and have damages under the next section as to all the goods affected...; or (b) recover damages for non-delivery as provided in this Article (Section 2-713).
(a) Respondent Taizhou Yinshan Manufacturing Brushes Co., Ltd. ("Respondent") breached its obligations to Claimant Rubbermaid Commercial Products, LLC ("Claimant") with respect to:
(i) Failing to deliver to Claimant certain Goods (as defined herein), as required by the Purchase Orders and as confirmed by Respondent in writing, by January 17, 2013 at the latest; and
(ii) Failing to deliver up to Claimant certain Molds and Tools (as defined herein), ownership of which has always been and remains with Claimant, such delivery to have been made no later than January 17, 2013.
(b) In the alternative to (a)(ii) above, from January 17, 2013, Respondent converted certain Molds and Tools (as defined herein) for its own use by refusing to return such Molds and Tools to Claimant as their rightful owner.
(c) Respondent is liable to pay to Claimant the following amounts by way of damages for the breaches described above:
(i) in relation to (a)(i) above, the sum of US$186,871.42 ;
(ii) in relation to (a)(ii) above, the sum of US$80,730.00 ; and
(iii) in relation to each of the above breaches, by way of incidental and consequential damages, the sum of US$490,212.00.
Such damages, in the aggregate, total US$757,813.42. ("Damages")
(d) Respondent will pay Claimant pre-Award interest on the Damages at 9% (nine percent) per annum, calculated from January 17, 2014, the date the causes of action leading to the Damages accrued, until the date of this Award.
(e) The administrative fees and expenses of the International Centre for Dispute Resolution ("ICDR") totaling US$6,200.00, and the compensation and expenses of the Arbitrators totaling US$44,593.25, shall be borne entirely by Respondent. Therefore, Respondent shall reimburse Claimant the sum of US$50,793.25, representing said fees, expenses, and compensation previously incurred by Claimant, upon demonstration by Claimant that these incurred costs have been paid in full.
(f) Respondent will further reimburse Claimant for attorneys’ fees and expenses in the amount of US$45,079.78.
(g) Respondent will pay Claimant post-Award interest on all sums awarded to Claimant in this Award (i.e. the sum of (c), (d) and (e) above) at 9% (nine percent) per annum, calculated from the date of the Award until the date of payment.
(h) Claimant is entitled to a declaration in the following terms:
(i) The Molds and Tools (as defined above) have always been, and remain, the property of Claimant;
(ii) Respondent is to deliver the Molds and Tools to Claimant at a location designated by Claimant within seven (7) days of any demand by Claimant; and
(iii) Respondent is enjoined from using the Molds and Tools for any purpose whatsoever (the Purchase Orders now having been satisfied (or to the extent unsatisfied, having been the subject of an award of damages)).
(i) All other claims and requests for relief are dismissed.
(j) This Final Award may be executed in counterparts, each of which shall be deemed an original, and all of which shall constitute together one and the same instrument.