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Shany Co., Ltd., A Korean Corporation v. Crain Walnut Shelling

May 31, 2012



Shany Co. Ltd., has filed a complaint for declaratory and injunctive relief, seeking a determination whether it ever agreed to arbitrate any disputes with defendant Crain Walnut Shelling, Inc. It has filed a motion for preliminary injunctive relief, seeking narrower relief at this stage of the action: an order restraining defendant from proceeding with an arbitration with the International Chamber of Commerce (ICC), which Crain claims is authorized by an arbitration provision in a contract between plaintiff and defendant. Shany claims in particular that it is entitled to a judicial determination of arbitrability. Crain has opposed the motion. Oral argument was heard on August 31, 2011, with Christopher Kim appearing for plaintiff and Paul Warner appearing for defendant. The motion was submitted following argument. As discussed below, plaintiff's motion is denied.


In January 2010, Shany's Purchasing Manager Daniel Kim contacted Crain to arrange a direct purchase of walnuts; before that time, Shany had purchased Crain's walnuts through other distributors. Declaration of Victoria Lapera, submitted in ICC proceedings (Lapera ICC Decl.) ¶¶ 5-6. On February 2, 2010, Lapera sent an email to Kim, nominating Yoo Jong Woo to act as Crain's sales representative, but explaining that all offers, sales and documents would come directly from Crain. Id. ¶ 7 & Ex. 1.

Lapera notified Kim that by February 5, 2010, Crain would confirm the available volume for the rest of the 2009 crop year along with pricing for March shipping. Id. She included a proforma invoice for the first shipment of walnuts; this invoice does not include any contract terms. Declaration of Kyung Up Choi (Choi Decl.) ¶ 4 & Ex. A.*fn2 Shany paid for this shipment by wire transfer on March 8, 2010. Id. ¶ 4.

On March 4, 2010, Lapera emailed Kim with information about the different categories of walnut products available. Lapera ICC Decl. ¶ 10 & Ex. 3. She followed up on March 19, 2010 with an emailed offer, with firm pricing for the contemplated shipments. Id. ¶ 11 & Ex. 4. The offer was due to expire on March 23, 2010 and "subject to standard terms and conditions of CWS [Crain Walnut Shelling] confirmation of sale and purchase agreement." Id.

On March 26, Kim emailed a confirmation of the second shipment with a "'stamped annual volume document,'" noting that the stamp on the document "confirm[s] you that we have the business." This document committed Shany to purchase 707,425 pounds of walnuts with a purchase price of $3,301,050.50. Lapera ICC Decl. ¶ 12 & Ex. 5. The returned document bears a stamp that appears to include the letters "SPC" in addition to some Korean characters. Id. Choi does not appear to dispute that Kim responded to Lapera on March 26 or even that the stamp on the "annual volume document" is Shany's, but does aver that "Shany's files contain no record of receiving an email response from Crain in response to Mr. Kim's March 26, 2010 email." Id.

On April 5, 2010, Kim emailed Crain, saying that Shany had cleared the first shipment of walnuts and was "ready to make next purchase," and listed what Shany wanted from the first annual volume. He continued, "Please make Proforma Invoice and sent it to us. I will get approval and send it back to you. [¶] We will do exactly like last time." (Reproduced as in original.) Choi Decl. ¶ 6 & Ex. B.

On April 6, 2010, Lapera emailed Kim and attached a one page, two sided Standard Confirmation, which included the terms of the contract for purchase. Below the signature lines are the words, "FAILURE TO SIGN AND RETURN THIS CONTRACT WITHIN SEVEN (7) DAYS, AND/OR DELIVERY OF WALNUTS CONSTITUTES BUYER'S ACCEPTANCE OF THE TERMS AND CONDITIONS SET FORTH ON THE REVERSE SIDE OF THIS CONFIRMATION OF SALE AND PURCHASE AGREEMENT ('CONTRACT')." The bottom of the form includes the phrase "ADDITIONAL TERMS AND CONDITIONS ON REVERSE SIDE." The arbitration clause was among the terms on the reverse side: "All disputes arising out of or in connection with the Contract shall be finally settled in Los Molinos California under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules." Lapera ICC Decl., Ex. 6.*fn3 Another term provided that the contract "shall be governed by the laws of the State of California including the Uniform Commercial Code as enacted in California." Id. The confirmation document is signed by Crain's representative, but not by any representative of Shany's. Id. Choi avers no one from Shany signed this document or any other document on behalf of Shany and that Kim was not authorized to sign it. Choi Decl. ¶ 6. Choi does acknowledge, however, that Kim "reported to [him]" about the Confirmation of Sale and Purchase Agreement, which "included a page entitled 'Terms and Conditions. . . .'" Id. He denies that Shany's files contain a document entitled "'Confirmation of Sale and Purchase Agreement'" or 'Terms and Conditions' which contained an arbitration agreement from Crain." Id. ¶ 5.

On April 22, Lapera emailed Kim with information about rebates for upcoming shipments and asked about arranging a meeting between Kim and Crain during Crain's trip to Korea. Lapera ICC Decl. ¶ 14. Kim replied with details for meeting Crain, said he would discuss the incentive program with his senior management and concluded with, "I will make our business firm and strong." Id., Ex. 7.

On May 7, 2010 Lapera emailed Kim about a schedule for shipping the "remaining contract balance and the best way of facilitating purchases." Id. ¶ 15 & Ex. 8.

During the week of May 17, 2010, Crain visited Shany's restaurants and bakeries in Korea and met with Kim and Choi to discuss purchase and shipping arrangements. Id. ¶ 16.

On May 24, 2010, Lapera emailed Kim that she would continue to communicate with him about "contract management," among other things. Id. ¶ 17 & Ex. 9. She sent additional emails on May 26 and June 7, 2010, asking Kim to provide shipping information. Id.

¶¶ 18-19 & Exs. 10 & 11. Kim responded on June 8, 2010, expressing concern about the rising exchange rate and explaining that this was the reason he had not arranged the shipment. Id. ¶ 20 & Ex. 12.

On June 16, 2010, Lapera emailed Kim that Crain would work with Shany, but expected performance on the contract. Id. ¶ 21 & Ex. 13.

In August 2010, Kim visited Crain's headquarters and said he would be talking to his supervisors about a contract extension. Id. ¶ 26. He mentioned that Shany had purchased walnuts from other sources. Id. ¶ 27.

Crain wrote to Kim on September 16, 2010, summarizing the meeting and offering to work with Shany to minimize the impact of the rising exchange rate. Id. ¶ 28 & Ex. 18. Kim confirmed he had received the letter and said he would present the letter to his director. Id. ¶ 29 & Ex. 19.

Despite a meeting on October 25, 2010 with Crain and Kim and another member of Shany, and a further exchange of emails, Shany did not arrange for shipment of the walnuts and Crain sold them at a loss to Costco. Id. ¶¶ 33-35 & Exs. 22-25.

On February 1, 2011, Crain filed a Request for Arbitration with the ICC. Declaration of Gabriel Reynoso (Reynoso Decl.) ¶ 3 & Ex. A. In its opposition, Shany challenged the arbitrator's authority to determine the arbitrability of the claims and alleged it never entered into an arbitration agreement. Reynoso Decl. ¶ 6 & Ex. D. The ICC rules allow the arbitrator to determine arbitrability. See Reynoso Decl., Ex. F at 7, Art. 6.2 ("any decision as to the jurisdiction of the Arbitral Tribunal shall be taken by the Arbitral Tribunal itself.").

On March 26, 2011, Crain's counsel emailed Shany's counsel that he was unable to find anything showing that the "Terms and Conditions" were provided to Shany before March 26, 2010. ...

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