balance of considerations weighs against an entry of judgment by default. Accordingly, the motion to set aside the entry of default is granted.
Before addressing the merits of the confirmation action, the Court must determine whether personal jurisdiction is proper in this Court. Contractual provisions relating to jurisdiction will be honored as long as they are reasonable. See National Equip. Rental, Ltd. v. Szukhent, 375 U.S. 311, 84 S. Ct. 411, 414, 11 L. Ed. 2d 354 (1964). ANERA asserts that under Article 17(b) of the Service Contract, BJI expressly consented to an exercise of personal jurisdiction by the District Court for the District of Columbia in any action to enforce an arbitral decision.
BJI has not challenged the reasonableness of the jurisdiction clause, but rather moves to dismiss pursuant to Fed. R. Civ. P. 12(b)(2) on the ground that the clause is invalid because BJI is not a party to the Service Contract. As will be demonstrated, BJI is a party to the Service Contract; thus, the parties' consent to the jurisdiction of this Court is valid. Accordingly, respondent's motion to dismiss is denied.
III. Validity of the Contract
ANERA moves to confirm the arbitral award on the grounds that: (1) the arbitrator's decision that BJI was a party to the Service Contract is entitled to preclusive effect; (2) BJI ratified the Service Contract by shipping under it and receiving benefits; and (3) TRC had apparent authority to sign the Service Contract on BJI's behalf.
A. Standard of Review
There is a strong federal policy favoring arbitration as an alternative to the "complications of litigation." Davis v. Chevy Chase Fin., 215 U.S. App. D.C. 117, 667 F.2d 160, 164 (D.C. Cir. 1981) (quoting Wilko v. Swan, 346 U.S. 427, 74 S. Ct. 182, 184, 98 L. Ed. 168 (1953)). As a result, judicial review of an arbitration award is extremely limited, Kanuth v. Prescott, Ball & Turben, 292 U.S. App. D.C. 319, 949 F.2d 1175, 1178 (D.C. Cir. 1991), and great deference is appropriate. ANERA argues that the award must be affirmed unless one of the specified grounds for refusing to recognize or enforce a foreign arbitral award exists. 9 U.S.C.A. note § 201. However, Article II of the Convention states that the arbitral agreement is to be in writing and signed by the parties or contained in an exchange of letters or telegrams. Id. Because the issue before the Court is whether the Service Contract validly was signed, the Court is precluded from enforcing the award until it makes this determination as a matter of law. Thus, the standard governing summary judgment applies here. Cf. Davis, 667 F.2d at 160 (applying summary judgment standard in an action to vacate an arbitration award where the arbitrability of a particular issue was disputed).
Summary judgment may be granted only if the pleadings and evidence "show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). In considering a summary judgment motion, all evidence and the inferences to be drawn from it must be considered in a light most favorable to the nonmoving party. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S. Ct. 1348, 1356, 89 L. Ed. 2d 538 (1986). Summary judgment cannot be granted "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S. Ct. 2505, 2510, 91 L. Ed. 2d 202 (1986).
B. Preclusive Effect of Arbitrator's Decision
As discussed supra, it is well-settled that only a court may determine with finality whether parties have entered into a valid agreement to arbitrate. See AT&T Technologies, 106 S. Ct. at 1418-19; National R.R. Passenger Corp., 850 F.2d at 759; Weatherly Cellaphonics, 726 F. Supp. at 321. ANERA argues, however, that BJI was obligated to file a motion to stay the arbitration before the proceedings took place, and that BJI's failure to file such a motion acts as a waiver to any defense in a confirmation action. This argument is unpersuasive. There is no procedure under statutory or decisional law that requires a party challenging arbitrability to seek an injunction before the arbitration commences, or suffer the penalty of a waiver.
Local 719, American Bakery & Confectionery Workers of America v. National Biscuit Co., 378 F.2d 918, 921 (3d Cir. 1967). Furthermore, the federal litigation system does not require special jurisdictional appearances. Fed. R. Civ. P. 12(b). Thus, BJI has not waived its right to contest arbitral jurisdiction in a judicial forum.
ANERA further contends that BJI submitted to arbitration by providing HKIAC with a sworn statement from BJI's president, and therefore has already litigated the merits of the arbitrability dispute. Even if the party contesting arbitration participates in the proceedings, it can preserve the arbitrability issue for judicial consideration by presenting "its objection to arbitrability to the arbitrator and . . . not thereafter clearly indicate its willingness to forego judicial review." Davis, 667 F.2d at 167-68 (quoting Local 719, 378 F.2d at 922).
Here, ANERA received a letter from BJI's counsel on March 26, 1993, stating that "we can not submit to arbitration . . . we will defend our interests in court." On June 2, 1993, after an arbitrator had been appointed, counsel for BJI wrote to HKIAC stating "my client has requested I inform all parties they are not agreeing to submit to arbitration as they have not entered into any agreement which binds them." A copy of that letter was forwarded to the arbitrator. Coupled with BJI's lack of participation in the arbitration proceedings thereafter, these statements demonstrate that BJI did not submit the arbitrability question to the arbitrator, or at least made an objection to the arbitrator's jurisdiction without a subsequent indication that it was willing to forego judicial inquiry. Even if the arbitrability issue has been litigated on the merits, as ANERA argues, the Court must make an independent determination of whether there was a valid agreement to arbitrate in any subsequent action to confirm the arbitrator's decision. See Mobil Oil v. Local 8-766, Oil, Chem. & Atomic Workers Int'l Union, 600 F.2d 322 (1st Cir. 1979). Accordingly, the Court proceeds to the merits of the ratification issue.
The Service Contract provides that Hong Kong law shall govern the contract. "Under American law, contractual choice-of-law provisions are usually honored." Milanovich v. Costa Crociere, S.P.A., 293 U.S. App. D.C. 332, 954 F.2d 763, 767 (D.C. Cir. 1992). However, because the validity of the Service Contract is the central issue in this case, BJI has argued that Texas law should apply because BJI was doing business in Texas. Because ANERA believes the result will be the same in either jurisdiction, the Court applies Texas law in resolving this matter.
ANERA contends that BJI ratified the Service Contract by shipping under it and paying the freight, thereby receiving the benefits of the contract's lower rates. "The key concern in determining whether a principal has ratified an unauthorized act by an agent is the principal's knowledge of the act and subsequent actions with that knowledge."
Wyatt v. McGregor, 855 S.W.2d 5, 13 (Tex. Ct. App. 1993) (citing Land Title Co. of Dallas v. F.M. Stigler, Inc., 609 S.W.2d 754, 756 (Tex. 1980)). Ratification can be expressed or implied. Id. (citation omitted). It can occur when the principal retains the benefits of a transaction after acquiring full knowledge of the agent's unauthorized act. Id. (citing Land Title, 609 S.W.2d at 756); Methodist Hosps. of Dallas v. Corporate Communicators, Inc., 806 S.W.2d 879, 882 (Tex. Ct. App. 1991) (citing Land Title, 609 S.W.2d at 756). One who asserts ratification must prove that the ratifying party acted upon full knowledge of all material facts. Land Title Co., 609 S.W.2d at 756-57.
BJI argues that it did not have full knowledge of the material facts relating to the Service Contract, and therefore, it could not have ratified the contract. In support of this argument, BJI claims that it did not know that TRC had signed BJI's name as the contracting party. The Court finds this argument unpersuasive. As discussed supra, the moving party need only show that the principal had knowledge of the material facts. Here, BJI admits that TRC was its agent for the purpose of arranging shipment of goods including the fixing of freight rates. BJI also acknowledges that it knew of multiple contracts in which TRC represented that BJI and TRC were affiliated and in which TRC signed on behalf of BJI.
More importantly, BJI admits that it received a copy of the first version of the Service Contract in which BJI was listed as an affiliate, and TRC represented that it was authorized to sign on behalf of BJI.
Under that contract, BJI also would have been entitled to ship cargo at the contract rates and would have been liable for deadfreight. Article 9 of the first version of the Service Contract unambiguously provides that:
In lieu of all damages, which are difficult to calculate, deadfreight shall be assessed as follows:
(i) If the "Shipper" [defined supra note 12 as the contract signatory and its affiliates] fails to tender the Minimum Quantity Commitment specified in Appendix A to this Contract, the Agreement [ANERA] shall invoice the Shipper and the Shipper agrees to pay deficit charges on the difference between the quantity of cargo actually shipped and the Minimum Quantity Commitment at the lowest 40' rate, specified in Appendix A [$ 2,450.00].