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Oehme, van Sweden & Associates, Inc. v. Maypaul Trading & Services Ltd.

United States District Court, District of Columbia

November 6, 2012

MAYPAUL TRADING & SERVICES LTD.; Elena Pinchuk, Respondents.

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Paul S. Thaler, Thaler Liebeler, LLP, Washington, DC, for Plaintiff.

Steven Andrew Engel, Alexander Breckinridge, Dechert LLP, Washington, DC, for Defendants.


JOHN D. BATES, District Judge.

Before the Court is petitioner Oehme, van Sweden & Associates, Inc.'s (" OvS" ) motion for confirmation of an arbitration award in its favor and [9] respondents Maypaul Trading & Services Ltd. and Elena Pinchuk's motion to vacate that award.[1] For the reasons that follow, the award will be confirmed in its entirety.


The dispute in this case concerns a contract for architectural and landscape design services on a property in Ukraine. Resp'ts' Mot. to Vacate Arbitration Award [ECF 9] (" Mot. Vacate" ) at 1. OvS is a globally recognized landscape architecture firm based in Washington, DC. Tr. Arbitration Hr'g [ECF 9, Ex. C] (" Hearing Tr." ) at 18. Victor and Elena Pinchuk are a prominent Ukranian couple. Id. at 19. In 2004, OvS met with the Pinchuks to discuss potential projects on the grounds of a property in Kiev, Ukraine (the " Property" ). Id. at 53-54. According to OvS's CEO, Lisa Delplace, the Pinchuks referred to the Property as their own, and on the Property was a house under construction that was to be their home. Id. at 67, 80. The Property was in fact owned, from September 3, 2004 to the present, by Svit Shylahiv Transportation and Forwarding Company, LLC (" Svit Shylahiv" ). Mot. Vacate, State Certificate of the Plot of Land Ownership Right [ECF 9, Ex. G]. Svit Shylahiv is owned by Pantoho Limited, a company of Cyprus controlled by a group of entities that have an " Investment Advisory Agreement" with EastOne Group Limited. Mot. Vacate, Investment Advisory Agreement # 24 [ECF 9, Ex. N] (" EastOne-Pantoho Agreement" ) (signed March 20, 2009; effective July 1, 2008); id., Joint Stipulation of Uncontested Facts [ECF 9, Ex. Q] (" Joint Stip." ) at 2. EastOne Group is solely owned by Victor and Elena Pinchuk, and under the investment advisory agreement with Pantoho, it has rights to give " advisory and consulting services" to Pantoho in relation to, among other things, " operations and strategic planning," " financial advisory matters," and " the selection, retention and supervision of top-managers of [Pantoho]'s subsidiaries." See EastOne-Pantoho Agreement ¶¶ 1.1, 1.2, 1.2.1, 1.2.4, 1.2.7; Joint Stip. at 2. The investment advisory agreement does not give EastOne Group ownership rights in Pantoho or its subsidiaries (including Svit Shylahiv).

After the initial meeting with the Pinchuks, OvS performed landscape design services on the Property. Id. at 80. At first, no contract governed the parties' relationship; OvS sent invoices to the Pinchuks for its services and was paid accordingly through a company called Fortlex Limited. Id. at 80, 82. The house on the Property was later razed, and the Pinchuks

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asked OvS to submit a design proposal for a new house to be built on the Property. Id. at 91. OvS submitted a " master plan" that included the house, interior courtyard, lily pool, several gardens, and rear garden terrace. Id. at 96. OvS, primarily through Lisa Delplace, and the Pinchuks, through intermediaries Aurika Dmitrieva, Konstantin Ussar, and others, then negotiated a contract to govern OvS's services going forward. Id. at 90-93, 96-99. Early letter proposals circulated by OvS included signature lines for the Pinchuks and did not include an arbitration clause. Mot. Vacate, 2004-2006 Letter Proposals [ECF 9, Ex. I]. Later, more formal draft agreements contemplated a " legal entity" as OvS's counterparty to the contract and included an arbitration clause. Id., 1/15/2007 Draft Agreement [ECF 9, Ex. L] (Agreement entered into by OvS and " ___, a legal entity duly organized and operating under the laws of ___, with its registered office at: ___, represented by ___ (hereinafter referred to as the ‘ Owner’ )" ). Throughout the negotiations, Delplace believed that the Pinchuks owned the Property and that, notwithstanding the space for a " legal entity" on draft agreements, the Pinchuks would be designated as the owner on the final agreement. Hearing Tr. at 142; 212-15. But on the day the contract was to be executed, Delplace learned that Maypaul would be the other signatory. Id. at 150. Delplace had never heard of Maypaul before that date but said that Ussar told her that Maypaul was " Elena's representative." Id. at 150, 158-59. Delplace, who said she had " no reason to believe otherwise," signed a contract with Maypaul on behalf of OvS. See id. at 259.

On paper, however, Maypaul did not sign the contract as the Pinchuks' " representative." Maypaul is a company of Cyprus in which the Pinchuks are not officers, directors, or shareholders. Mot. Vacate, Certificate [ECF 9, Ex. O]. Svit Shylahiv, through Transport Investments LLC,[2] had contracted with Maypaul " to provide all necessary services in connection with the search and organization of the landscape services" on the Property. Mot. Vacate, 1/10/2007 Agency Agreement [ECF 9, Ex. M] (" Transport-Maypaul Agreement" ) ¶ 1.1. The " Agency Agreement" between Transport Investments and Maypaul authorized Maypaul to " (i) sign any documents or agreements; (ii) effect all necessary payments; and (iii) make any other settlements, in any event relating to the performing Services." Id. ¶ 1.3. On the Pinchuks' side, before the signing of the contract, Ms. Pinchuk had entered into a preliminary lease agreement with Svit Shylahiv, in which Svit Shylahiv had agreed to lease the Property to Ms. Pinchuk upon completion of construction and improvements thereon. Mot. Vacate, 8/1/2006 Prelim. Agreement [ECF 9, Ex. B] (" Prelim. Lease" ) ¶¶ 1.1, 3.3.[3] The preliminary lease agreement gave Ms. Pinchuk the rights " to take part in choosing, ordering and performing interior works ... territory improvement works [on the Property]" and " to bring in reasonable critical comments and desires in respect of the ... construction, furnishing and improvement [on the Property]." See id. ¶ 3.2.

On February 2, 2007, OvS and Maypaul, designated as the " Owner," entered into the agreement (" Agreement" ) that is at

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the heart of this dispute. Agreement [ECF 9, Ex. A] at 1. The Agreement does not mention Elena Pinchuk or her husband. In the Agreement, OvS agreed to provide landscape design services on the Property as specified in the Agreement and an addendum thereto, and additional services " if requested, subject to an agreed upon revision in the scope of services and authorized fee(s)." Id. ¶¶ 1.1, 1.2. In return, Maypaul agreed to pay OvS $447,600 in twenty monthly installments, plus reimbursable expenses not to exceed 40% of the monthly installment amount absent prior written approval by Maypaul. Id. ¶¶ 7.1, 7.3, addendum ¶¶ 6.3.1, 6.4. Under the Agreement, Maypaul was " not obliged to any payments that [were] not specified in [the addendum] unless negotiated in advance and authorized in writing." Id. ¶ 7.5. All work was to be completed by July 1, 2008. Id. addendum ¶ 5.1. OvS was not liable for " approvals or construction delays outside [its] scope of work," but any delays were to be " documented in advance and approved by both parties." Id. ¶ 6.4. Services not included in the Agreement or addendum or " not customarily furnished in accordance with generally accepted [OvS] practice," if required, were to be provided " under separate agreement." Id. ¶ 8.1.

The Agreement contains a number of provisions that are pertinent here, including: (1) an integration clause stating that the Agreement " supersedes all prior negotiations, representations or agreement, either written or oral" and " may be amended only by written instrument signed by both Owner and [OvS]," id. ¶ 9.3; (2) a clause stating that the Agreement is " binding upon and shall inure to the benefit of the parties and their respective successors, permitted assigns, legal or personal representative, or partners," id. ¶ 9.2; (3) a District of Columbia choice of law clause, id. ¶ 9.1; [4] and (4) the following arbitration clause:

All claims, disputes and other matters in question between the parties to this Agreement, arising out of or relating to this Agreement or the breach thereof, shall be decided by arbitration in the District of Columbia in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association then obtaining unless the parties mutually agree in writing otherwise. This Agreement to arbitrate and any agreement to arbitrate with an additional person or persons duly consented to by the parties to this Agreement shall be specifically enforceable under the prevailing arbitration law. Arbitration fees may be assessed.

After the Agreement was executed, Ms. Pinchuk played a central role in directing the services provided by OvS under the Agreement. For example, representatives of Ms. Pinchuk and Svit Shylahiv referred to Ms. Pinchuk as the " client" or " customer" and looked to Ms. Pinchuk for approval on design, price, and payment issues, and Ms. Pinchuk communicated with OvS about the Agreement in person, by email, and through her representatives. See Arbitration Award [ECF 9, Ex. D] (" Award" ) at 19-23; Hearing Tr. at 265-66; 297-98; 397; 477-97. At the request of Ms. Pinchuk or her representatives, OvS made significant modifications to the landscape design plans, and as a result of these changes and delays in the construction of the house (that were beyond OvS's control), OvS's completion of the work was delayed. See Award at 23-24; Hearing

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Tr. at 112-13; 186-87; 189-90. As early as December 2007, OvS raised the subject of an addendum covering additional services beyond the Agreement's July 1, 2008 completion date. See Hearing Tr. at 188. OvS discussed the addendum with representatives of Ms. Pinchuk in the ensuing months but did not send them a draft addendum until July 2008. Id. at 191. At that time, OvS had completed all but the final phase of the project set out in the original Agreement. Id. at 197. OvS continued to provide services on the Property and asked for additional payments for these services. Several drafts of the addendum were circulated, but none was executed, and in October 2008 OvS stopped work on the Property. See id. at 128; Award at 24; Mot. Vacate, Emails [ECF 9, Ex. P]. Maypaul paid OvS in full under the original Agreement in the amounts of $447,556.25 for professional fees (which included $50,000 allotted to the not-yet-completed final phase) and $175,016.64 for reimbursable expenses. See Agreement addendum ¶¶ 5.1, 6.1; Mot. Vacate, Kiev Project Summary [ECF 9, Ex. V] (" Kiev Project Invoice" ). The final phase of the project was never completed, and Maypaul refused to make any additional payments.

On April 13, 2010, OvS filed a demand for arbitration under the Construction Industry Arbitration Rules of the American Arbitration Association (" AAA Construction Rules" ) against Ms. Pinchuk and Maypaul. OvS's Opp. to Mot. Vacate [ECF 10] (" Opp." ), Demand for Arbitration [ECF 10, Ex. 2]. OvS alleged that respondents had breached the Agreement and had been unjustly enriched because respondents had not paid OvS for services it provided after July 1, 2008. Id. at 5-7. OvS sought damages, or in the alternative, restitution, in the amount of $169,933.96,[5] plus interest at 18% per annum, attorney's fees, and costs. Id. at 7. Ms. Pinchuk objected to the jurisdiction of the arbitrator, and Maypaul filed a counterclaim for $50,000 based on OvS's non-completion of the project's final phase. Mot. Vacate, Resp'ts' Answering Statement & Statement of Countercls. [ECF 9, Ex. W] at 4-5. After submissions from the parties on the issue of arbitral jurisdiction, the arbitrator determined that OvS had made a prima facie showing of jurisdiction over Ms. Pinchuk and deferred final resolution ...

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