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In re Metrosvyaz Ltd. v. Whale Telecom Ltd.

Supreme Court of the State of New York, New York County
Jan 24, 2006
815 N.Y.S.2d 495 (N.Y. Misc. 2006)

Opinion

600061/05.

Decided January 24, 2006.


In this CPLR Article 75 proceeding, motion sequence numbers 001 and 002 are consolidated for disposition.

In motion sequence 001, petitioner Metrosvyaz Limited (Metro) seeks to permanently stay the arbitration demanded by respondent Whale Telecom Limited before the International Chamber of Commerce (ICC). In sequence 002, Whale moves to dismiss the petition.

Whale, a Cyprus corporation, commenced the underlying ICC arbitration proceeding on October 20, 2004. It alleged that Metro, also a Cyprus corporation, breached a March 4, 1999, services agreement between them concerning the installation of a Code Division Multiple Access (CDMA) wireless telecommunications system in the Russian Federation (the Metro services agreement), using infrastructure and equipment supplied by nonparty Qualcomm Inc., a Delaware corporation, pursuant to a 1998 equipment purchase agreement. The Metro services agreement which is the basis of the arbitration, provides that any disputes arising under, or related to, the agreement are to be settled by arbitration before the ICC in New York City. The agreement also specifies that it shall be subject to California law.

Whale has commenced an action in this court against Qualcomm ( see Whale Telecom Ltd. v. Qualcomm Inc., Georgiou, Molozanov, Sup Ct, NY County, index no. 116103/04) to recover more than $100 million on allegations that Qualcomm tortiously interfered with a March 1999 services agreement between Whale and nonparty Qualcomm Global Services, Inc., (QGS), a Qualcomm wholly-owned subsidiary and a California corporation, in connection with the development of a wireless telecommunications network in the Russian Federation. Whale also alleges that Qualcomm fraudulently induced Whale to enter into the agreement.

In the ICC arbitration demand, Whale alleges that Metro breached the Metro services contract by failing to pay approximately $352,000 on eight past due invoices. Whale also alleges that Metro breached the agreement's exclusivity provisions by hiring third-party contractors without Whale's knowledge or consent to perform services related to the installation and deployment of the CDMA wireless telecommunications system. Whale demands more than $3 million in compensatory damages.

Whale has also commenced a separate ICC arbitration proceeding against Metro for breach of a March 3, 1999, agreement regarding the supply of services related to customs clearance (the customs agreement). The customs agreement is not now before the court.

Both ICC proceedings were assigned to arbitrator David R. Haigh, Q.C. Metro requested that both arbitrations be stayed pending resolution of the instant special proceeding. In a ruling dated December 16, 2005, the arbitrator denied Metro's request on the ground that the arbitration provisions set forth in the Metro services and customs agreements evidence the parties' intent to arbitrate the underlying disputes. The arbitrator also determined that he is authorized under the arbitration provisions to resolve all issues, including the statute of limitations issues, raised by the parties.

Metro now petitions this court to permanently stay the ICC arbitration proceeding arising out of the Metro services agreement on grounds that the claims for breach of the agreement are time barred.

As a threshold matter, the court notes that neither party disputes the validity of the Metro services agreement or its arbitration provision.

Careful review of the arbitration provision to which the parties voluntarily agreed and the circumstances surrounding the formation of the services agreement reveals that the agreement is governed by the Federal Arbitration Act ( 9 USC § 1, et seq. [the FAA]). Therefore, the issue of timeliness is reserved for the arbitrator to decide.

"The FAA is intended to encourage speedy resolution of disputes and to bind parties to their voluntary agreements" ( Ideal Unlimited Servs. Corp. v. Swift-Eckrich, Inc., 727 F Supp 75, 76 [D Puerto Rico 1989]). The FAA provides that a written arbitration provision in "a contract evidencing a transaction involving commerce . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract" ( 9 USC § 2 [emphasis added]). "The Supreme Court has interpreted the words `involving commerce' as the functional equivalent of the phrase `affecting commerce,' which ordinarily signals Congress' intent to exercise its Commerce Clause powers to the fullest extent. Thus, where a contract containing an arbitration clause `affects' . . . commerce, disputes arising thereunder are subject to the FAA" ( Diamond Waterproofing Sys., Inc. v. 55 Liberty Owners Corp., 4 NY3d 247, 252 [internal citations omitted], citing Allied-Bruce Terminix Cos., Inc. v. Dobson, 513 US 265). The term, "commerce," as defined by the FAA, refers to interstate, territorial, or foreign commerce ( Varley v. Tarrytown Assocs., Inc., 477 F2d 208 [2d Cir 1973]; Ideal Unlimited Servs. Corp. v. Swift-Eckrich, Inc., 727 F Supp 75, supra; see 9 USC § 1).

For example, a contract executed in a foreign country between a foreign corporation and an American corporation has been held to evidence a transaction involving foreign commerce and, therefore, subject to the FAA ( see Caribbean S.S. Co., S.A. v. La Societe Navale Caennaise, 140 F Supp 16 [ED VA 1956]). A contract involving the purchase and sale of electric power and steam between a New York corporation and a Virgin Islands public utility that required the purchase of generators from a third party located outside the Virgin Islands and the procurement of dollar financing has been held to involve commerce as defined by the FAA ( see CEC Energy Co., Inc. v. Virgin Islands Water Power Auth., 765 F Supp 1234 [D Virgin Islands 1991]). A contract for the renovation and reconstruction of a building in New York was held to affect interstate commerce for purposes of the FAA where the project involved companies headquartered in New Jersey, Massachusetts, Oklahoma, Maryland, and Kansas ( see Diamond Waterproofing Sys., Inc. v. 55 Liberty Owners Corp., 4 NY3d 247, supra).

In the Metro services agreement, Metro and Whale agreed that Whale would provide services necessary to install a CDMA wireless telecommunications system in the Russian Federation. Significantly, the parties also agreed that the project equipment and some of the services will be provided by Qualcomm and its subsidiary, Qualcomm Global Services (QGS). Qualcomm is incorporated under the laws of Delaware, while QGS is a California corporation. Both maintain headquarters in San Diego, California. The Metro services agreement itself references an equipment purchase agreement between Metro and Qualcomm dated July 6, 1998, regarding "CDMA infrastructure and subscriber equipment from Qualcomm for deployment in various regions in the Russian Federation" ( Metro Services Agr., at ¶¶ B, C). The agreement also references a proposed services agreement between Whale and QGS, (later executed in March 1999), "pursuant to which Metrosvyaz will engage QGS to perform certain services in connection with the implementation of one or more CDMA wireless communications systems" in the Russian Federation ( id., at ¶¶ C, D). The agreement also provides that it "shall be governed by and construed and enforced in accordance with the laws . . . of the State of California, U.S.A." ( id., at § 20.5).

These facts demonstrate that the project involved foreign corporations, a site located overseas, and corporations and equipment located in Delaware and California. As contemplated by Metro and Whale and described in the Metro services agreement, the U.S. corporations and equipment were essential to the project. For these reasons, the project affects foreign commerce, mandating application of the FAA.

The parties have requested that this court determine whether the contract claims raised in the ICC arbitration are timely brought. For purposes of the FAA, "[q]uestions concerning whether prerequisites such as time limits, notice, laches, estoppel, and other conditions precedent to an obligation to arbitrate have been met, are [generally] for the arbitrators to decide" ( Diamond Waterproofing Sys., Inc. v. 55 Liberty Owners Corp., 4 NY3d at 252 [emphasis in original] [internal citations omitted]; CEC Energy Co., Inc. v. Virgin Islands Water Power Auth., 765 F Supp 1234, supra; A/S J. Ludwig Mowinckels Rederi v. Dow Chem. Co., 25 NY2d 576, cert denied 398 US 939). While an exception exists where the parties have explicitly agreed that the court may determine timeliness issues ( id.), the exception is not applicable here.

The arbitration provision in the Metro services agreement provides in relevant part that: "Any dispute, claim or controversy arising out of or relating to this Agreement, shall be settled by arbitration in accordance with the rules of the International Chamber of Commerce . . . and judgment upon the award rendered in any such arbitration shall be final and may be entered in any court hav[ing] jurisdiction thereof" (Metro Services Agr., at § 20.5). Further, the provision provides that the parties have "additionally hereby knowingly, voluntarily and intentionally waive any rights they may have to trial by jury in respect to any litigation based hereon or arising out of, under, or in connection with, this Agreement, or any course of conduct, course of dealing, statements (whether oral or written) or action" by the parties ( id.) Clearly, then, the parties agreed that the arbitrator would have authority to decide all issues, including whether a claim is time barred.Accordingly, it is

ORDERED and ADJUDGED that the petition is denied in all respects and this special proceeding is dismissed.

This constitutes the decision, order and judgment of the Court.


Summaries of

In re Metrosvyaz Ltd. v. Whale Telecom Ltd.

Supreme Court of the State of New York, New York County
Jan 24, 2006
815 N.Y.S.2d 495 (N.Y. Misc. 2006)
Case details for

In re Metrosvyaz Ltd. v. Whale Telecom Ltd.

Case Details

Full title:IN THE MATTER OF METROSVYAZ LIMITED, Petitioner, v. WHALE TELECOM LIMITED…

Court:Supreme Court of the State of New York, New York County

Date published: Jan 24, 2006

Citations

815 N.Y.S.2d 495 (N.Y. Misc. 2006)
2006 N.Y. Slip Op. 50219