FILED: NEW YORK COUNTY CLERK 10/09/ :52 PM INDEX NO /2015 NYSCEF DOC. NO. 69 RECEIVED NYSCEF: 10/09/2015

Transcription

1 FILED NEW YORK COUNTY CLERK 10/09/ PM INDEX NO /2015 NYSCEF DOC. NO. 69 RECEIVED NYSCEF 10/09/2015 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF MANHATTAN x CHAO JIANG, Plaintiff, -against- PING AN INSURANCE, a China Limited Company; PING AN PROPERTY & CASUALTY INSURANCE COMPANY OF CHINA, LTD., a China Limited Company; Index No /2015 CHINA PING AN INSURANCE OVERSEAS (HOLDINGS) LIMITED, a Hong Kong Commercial Division Part 48 Limited Company; HUATAI INSURANCE GROUP OF CHINA, a China Limited Justice Jeffrey K. Oing Company; ACE INSURANCE LIMITED, a Hong Kong Limited Company; ACE GROUP HOLDINGS INC., a Delaware Corporation; CHUBB CORPORATION, a New Jersey Corporation; FEDERAL INSURANCE COMPANY, an Indiana Corporation; and CHUBB INSURANCE (CHINA) COMPANY LIMITED, a China Limited Company, Defendants x MEMORANDUM OF LAW IN SUPPORT OF MOTION TO STAY ARBITRATION

2 TABLE OF CONTENTS I. PRELIMINARY STATEMENT... 1 II. FACTUAL BACKGROUND... 1 III. ARGUMENT... 3 Page A. ARBITRATION SHOULD BE STAYED WHERE THERE IS NO BINDING AGREEMENT TO ARBITRATE... 3 B. THE PRIMARY POLICY DOES NOT CONTAIN A MANDATORY AGREEMENT TO ARBITRATE AND MR. JIANG PROPERLY EXERCISED HIS CHOICE TO LITIGATE IN THIS COURT... 4 IV. CONCLUSION... 6 i

3 TABLE OF AUTHORITIES Page(s) Cases Cusimano v. Berita Realty, LLC, 103 A.D.3d 720, 959 N.Y.S.2d 711 (2d Dep't 2013)... 6 Marek v. Alexander Laufer and Son, Inc., 257 A.D.2d 363, 683 N.Y.S.2d 50 (1st Dep't 1999)... 5 Marlene Indus. Corp. v. Carnac Textiles, Inc., 45 N.Y.2d 327, 380 N.E.2d 239 (1978)... 5, 6 Primavera Labs, Inc. v. Avon Products, Inc., 297 A.D.2d 505, 747 N.Y.S.2d 16 (1st Dep't 2002)... 5, 6 Waldron v. Goddess, 61 N.Y.2d 181, 461 N.E.2d 273 (1984)... 5 Weiner v. Mercury Artists Corp., 284 A.D. 108, 130 N.Y.S.2d 570 (1954)... 8 Statutes N.Y. C.P.L.R. 7503(b)... 3 ii

4 I. PRELIMINARY STATEMENT Plaintiff Chao Jiang respectfully submits this memorandum of law in support of his motion for an Order, pursuant to CPLR 7503(b), for a stay of the arbitration proceeding commenced by defendants Ping An Insurance, Ping An Property & Casualty Insurance Company of China, Ltd. and China Ping An Insurance Overseas (Holdings) Limited (together the "Ping An Defendants") on the grounds that (1) the Primary Policy does not contain a provision requiring arbitration; (2) Plaintiff properly exercised his choice under the Primary Policy to litigate the dispute with the Ping An Defendants and their co-insurer defendants; (3) the Ping An Defendants breached the Primary Policy by failing to respond to any one of Mr. Jiang's pre-litigation demands, notices, and attempts to negotiate, thus leaving Mr. Jiang with no choice but to secure the protection of the U.S. courts, and waiving any basis for the Ping An Defendant's tardy attempt to invoke arbitration; and (4) the Ping An Defendants' attempt to move this matter to China contradicts the Ping An Defendants' representations to a California Court and ignores the travel restrictions Mr. Jiang faces. II. FACTUAL BACKGROUND This is an action seeking to recover more than $2.5 million, plus interest, penalties, and attorneys' fees, due to Mr. Jiang from the Ping An Defendants for their share of defense costs and coverage paid or incurred by Mr. Jiang under a directors and officer's insurance policy defined in the Complaint as the Primary Policy. The Ping An Defendants' issued and delivered the Primary Policy, along with non-party AIG/Chartis, to Mr. Jiang's former employer China North East Petroleum Holdings Limited ("CNEP") to CNEP's New York business address. Bhandari Aff., Exh. A; Ping An Defendants' Answer, p. 2. The face of the Primary Policy issued by the Ping An Defendants contains CNEP's New York business address. Bhandari Aff., Exh. A at p. 2.

5 CNEP was a New York Stock Exchange-listed, U.S. incorporated company that had principal executive offices in New York, and directors and officers resident and working in the United States during the Primary Policy coverage period. See Bhandari Aff., Exh. B. Mr. Jiang worked in CNEP's principal executive offices in New York State during the coverage period of the Primary Policy. Furthermore, the Primary Policy was specifically aimed at covering U.S. securities and other potential U.S. related actions. See, e.g., Bhandari Aff., Exh. A at pp. 2, 26, 30. Mr. Jiang subsequently required coverage under the Primary Policy for parallel actions brought against him by the U.S. Securities and Exchange Commission and the U.S. Department of Justice. The Ping An Defendants breached their obligations under the Primary Policy. Put simply they took the premium and ran. They failed to respond to a single one of Mr. Jiang's coverage claim requests. Bhandari Aff., Exh. C. The first time Mr. Jiang received any communication from the Ping An Defendants was an in January 2015 that the Ping An Defendants then immediately attempted to recall. Bhandari Aff., Exh. D. When Mr. Jiang again attempted to send communications to the Ping An Defendants he was told "not to involve" the representative who had previously responded and then recalled the only communication he had received up to that point. Id. Not one of the other Ping An Defendant representatives listed on the chain responded. Furthermore the Ping An Defendants, along with their co-defendants, used misleading tactics to attempt to avoid forum in California, and are seeking to make a similar attempt in New York even though they have been properly served, have acknowledged jurisdiction via the filing of their Answer, and are well aware of the fact that Mr. Jiang is prohibited from travelling to China. Bhandari Aff., Exhs. E and F. 2

6 On or about September 24, 2015, the Ping An Defendants sent Mr. Jiang a Notice of Intention to Arbitrate (the "Notice") before the China International Economic Trade Arbitration Commission ("CIETAC"), pursuant to CPLR 7803(c). Bhandari Aff., Exh. G. The Notice stated that the Ping An Defendants demanded arbitration "pursuant to the 'Dispute Resolution' provision [5.17]" of the Primary Policy. According to the Notice, the issues to be determined at the CIETAC arbitration are (i) whether the Ping An Defendants are "relieved" of the obligation to pay Mr. Jiang's defense costs because the Primary Policy was cancelled for CNEP's purported failure to timely pay the premium; (ii) whether, "applying the law of China," the Ping An Defendants are do not have to pay defense costs due to other policy defenses; and (iii) whether the Ping An Defendants are entitled to their fees and costs in connection with the arbitration. The arbitration is to be held "at a time and place to be designated by CIETAC." III. ARGUMENT A. ARBITRATION SHOULD BE STAYED WHERE THERE IS NO BINDING AGREEMENT TO ARBITRATE CPLR 7503(b) provides in pertinent part that "a party who has not participated in the arbitration and who has not made or been served with an application to compel arbitration, may apply to stay arbitration on the ground that a valid agreement to arbitrate was not made." 7503(b). Mr. Jiang is serving this motion for a stay of arbitration within the 20-day response period required by CPLR 7503(c). Accordingly this motion is procedurally proper and timely. New York Courts have long recognized that arbitration forces a party to "waive [] in large part many of his normal rights under the procedural and substantive law of the State." Marek v. Alexander Laufer and Son, Inc., 257 A.D.2d 363, 364, 683 N.Y.S.2d 50, 51 (1st Dep't 1999) (quoting Marlene Indus. Corp. v. Carnac Textiles, Inc., 45 N.Y.2d 327, 334, 380 N.E.2d 239 (1978)). Because of this substantial waiver, it is "well settled that a court will not order a party to 3

7 submit to arbitration absent evidence of that party's unequivocal intent to arbitrate the relevant dispute." Primavera Labs, Inc. v. Avon Products, Inc., 297 A.D.2d 505, 505, 747 N.Y.S.2d 16, 17 (1st Dep't 2002); Waldron v. Goddess, 61 N.Y.2d 181, , 461 N.E.2d 273 (1984) ("a party will not be compelled to arbitrate and, thereby, to surrender the right to resort to the courts, absent 'evidence which affirmatively established that the parties expressly agreed to arbitrate their disputes."') As the Court of Appeals explained in Marlene Industries Corp., It has long been the rule in this State that the parties to a commercial transaction will not be held to have chosen arbitration as the forum for the resolution of their disputes in the absence of an express, unequivocal agreement to that effect; absent such an explicit commitment neither party may be compelled to arbitrate. The reason for this requirement, quite simply, is that by agreeing to arbitrate a party waives in large part many of his normal rights under the procedural and substantive law of the State, and it would be unfair to infer such a significant waiver on the basis of anything less than a clear indication of intent. Marlene Indust. Corp v. Carnac Textiles, Inc., 45 N.Y.2d 327, (internal quotations and citations omitted). The threshold determination as to whether this exacting standard has been met is made by the Court, not the arbitrator. Primavera Labs., Inc. v. Avon Prods., Inc., 297 A.D.2d 505, 747 N.Y.S.2d 16 (1st Dep't 2002). The burden of proof is on the party seeking arbitration. Cusimano v. Berita Realty, LLC, 103 A.D.3d 720, 721, 959 N.Y.S.2d 711 (2d Dep't 2013). The Ping An Defendants cannot meet this burden. B. THE PRIMARY POLICY DOES NOT CONTAIN A MANDATORY AGREEMENT TO ARBITRATE AND MR. JIANG PROPERLY EXERCISED HIS CHOICE TO LITIGATE IN THIS COURT The Primary Policy contains an optional arbitration provision. To be clear, there is not a mandatory arbitration clause in the Primary Policy. The Primary Policy clearly states that any dispute between the parties can be resolved either though litigation, or through arbitration 4

8 Section 5.17 Dispute Resolution Contractual disputes shall be resolved in one of the following methods determined by the parties in the contract (1) Any disputes arising from performance of this Contract shall be solved by negotiation between the parties, failing which the disputes shall be submitted to China International Economic and Trade Arbitration Commission (CIETAC) for arbitration; (2) Any disputes arising from performance of this Contract shall be solved by negotiation between the parties, failing which the parties may bring up litigation proceedings in people's court. Bhandari Aff, Exh. A at p. 15 (emphasis added). Other than "Contract" there are no defined terms in Section There is also no provision in the Primary Policy that prohibits the bringing of litigation in New York courts, or in U.S. courts in general for that matter. 1 Judge Curtis E. A. Karnow examined this very issue in the currently stayed California Action "Section 5.17 states that parties 'shall' resolve any disputes via negotiation, or, if negotiation fails, via arbitration in the CIETAC, or litigation in the 'people's court.' The use of the word 'shall' indicates that the forum selected for disputes is mandatory, not voluntary. I will assume disputes under the [Primary Policy] must be resolved in the CIETAC or the 'people's court.' But the term 'people's court' is not defined. The phase 'people's court' might reasonably be interpreted as referring to a trial court generally. This interpretation is supported by the fact that the forum selection clause in Section 5.16 establishes jurisdiction not specifically in China, but in the location of issuance of the contract. If the parties intended that only Chinese courts would adjudicate the dispute, the parties could have easily stated this directly and clearly, and would not have had the language on place of issuance." Bhandari Aff., Exh. F at p New York courts strongly urge against requiring non-signatories to agreements to "surrender their rights to the courts, with all of their safeguards, unless [they have] agreed in writing to do so." See Weiner v. Mercury Artists Corp., 284 A.D. 108, 109, 130 N.Y.S.2d 570, 571 (1954). Of course as a covered insured Mr. Jiang was not a signatory to the Primary Policy, and as a vulnerable third party has even greater need of the protection of the court system. 2 The referenced order, dated March 27, 2015, was subsequently amended by Judge Karnow to grant Mr. Jiang s request that the California Action be stayed pending the filing of suit before this Court. Judge Karnow granted Mr. Jiang s request after the Ping An Defendants and their co-insurers misled the court during the hearing on their motions to dismiss for forum non conveniens. Bhandari Aff., Exh. E. 5

9 Moreover, Judge Karnow stated plainly in his order that "China is not an adequate forum," because "Plaintiff is prohibited from traveling to China as a condition of federal probation." Id. Mr. Jiang properly exercised his right to choose litigation instead of arbitration pursuant to the terms of the Primary Policy. The Ping An Defendants breached the negotiation provision of the Section 5.17, leaving Mr. Jiang with the choice of litigation or arbitration as the vehicle for securing his rights and defense costs owed to him under the Primary Policy. The Ping An Defendants cannot demonstrate that arbitration is mandatory, and their attempt to engage in arbitration now, multiple years after Mr. Jiang first attempted to engage them in negotiations, is an obvious ploy to further delay proceedings and burden Mr. Jiang with frivolous motion practice. The Ping An Defendants failed to abide by the negotiation requirement in the Primary Policy, and in light of the non-mandatory nature of the arbitration provision, Mr. Jiang's Motion should be granted and all arbitration attempts stayed. IV. CONCLUSION For the reasons set forth above, Mr. Jiang respectfully requests that the Court grant Mr. Jiang's motion to stay the CIETAC arbitration proceeding commenced by the Ping An Defendants, along with such other and further relief as the Court may deem just and proper. Dated New York, New York October 9, 2015 MANDEL BHANDARI LLP By Rishi Bhandari MANDEL BHANDARI LLP Rishi Bhandari Donald Conklin 80 Pine Street, 33 rd Floor New York, NY Attorneys for Plaintiff Chao Jiang 6