Translarity, Inc. v. Grand Junction Semiconductor Pte. Ltd.

Background

Translarity filed nine causes of action arising from negotiations and agreements concerning a proposed investment in and acquisition of interests in Shanghai Carson Semiconductor Co., Ltd. The claims were for breach of the Share Purchase Agreement against Grand Junction; breach of an implied non-solicitation agreement; federal and California trade-secret misappropriation; fraud; racketeering and wire fraud under the Racketeer Influenced and Corrupt Organizations Act; breach of fiduciary duty and duty of loyalty; unjust enrichment; and tortious interference with contractual relations.

In February 2024, Translarity, Carson, and Grand Junction signed a Share Purchase Agreement and a Subscription Agreement. The Share Purchase Agreement contained a broad arbitration clause covering disputes arising out of or connected with the agreement. After a 30-day settlement period, the clause allowed a party to refer a dispute to final arbitration administered by the Singapore International Arbitration Centre, with Singapore as the seat and place of arbitration. The agreement stated that Singapore law governed the arbitration provision.

Motion and Legal Standard

Grand Junction, Pacific Gate Advisors LLC, Robert Marassa, and Huan Wang filed a motion framed as one to dismiss for improper venue and to stay the case based on the arbitration provision. The Court construed that motion as a motion to compel arbitration. The court applied the Federal Arbitration Act, including its provisions implementing the Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

Under the Convention, the court examined whether there was a written arbitration agreement covering the dispute, whether it provided for arbitration in a Convention signatory’s territory, whether it arose from a commercial legal relationship, and whether the relationship had a reasonable connection to a foreign country. When those requirements are met, the court must order arbitration unless the agreement is invalid, inoperative, or impossible to perform.

The Arbitration Agreement

The court held that the Share Purchase Agreement was governed by the Convention. It concluded that the agreement was written, provided for arbitration in Singapore, concerned a commercial relationship, and involved Grand Junction, which the opinion describes as a Singapore company.

The court held that the arbitration clause covered at least Translarity’s claim that Grand Junction breached the Share Purchase Agreement by failing to complete the transaction. The court rejected Translarity’s argument that the clause’s use of the word “may” made arbitration optional. It concluded that the word referred to a party’s ability to begin arbitration, not to whether the parties were bound to arbitrate after arbitration was initiated.

Fraud Defense

Translarity argued that the Share Purchase Agreement and its arbitration clause were voidable because the agreement had been obtained through fraud. The court held that the alleged fraud did not specifically target the arbitration clause. Under the rule separating challenges to an arbitration clause from challenges to the contract as a whole, the arbitrator—not the court—must initially decide a general claim that the contract was fraudulently induced. The court therefore found the arbitration provision enforceable.

Who Decides the Scope of Arbitration

The court held that the Share Purchase Agreement’s incorporation of the Singapore International Arbitration Centre’s rules clearly and unmistakably delegated questions about arbitrability to the arbitrator. Those rules authorize the Singapore International Arbitration Centre to decide its own jurisdiction, including objections concerning the existence, validity, or scope of the arbitration agreement.

Because the arbitrator would decide the scope of the arbitration agreement, the court did not decide whether Translarity’s other claims against Grand Junction were covered. Those claims included the second through fifth and eighth through ninth causes of action.

Claims Against Marassa, Wang, and Pacific Gate Advisors

The court held that Marassa and Wang could invoke the arbitration agreement as agents of Grand Junction to the extent Translarity’s claims were based on conduct they took on Grand Junction’s behalf and the claims related to the Share Purchase Agreement. The court identified allegations concerning fraud, racketeering, fiduciary-duty, and interference conduct undertaken as Grand Junction agents.

The court did not require arbitration of claims against Marassa and Wang to the extent they were based on actions taken as Pacific Gate Advisors employees. Because those claims were intertwined with the arbitrable claims, the court stayed them while arbitration proceeded.

The court declined to apply an alternative equitable-estoppel theory to Pacific Gate Advisors. Although the court found a close relationship among the entities, it concluded that Pacific Gate Advisors had no obligations or duties imposed by the Share Purchase Agreement. The court nevertheless stayed the claims against Pacific Gate Advisors because they were closely related to the arbitrable claims and parties.

Disposition

The court granted defendants’ motion to compel arbitration in part. It ordered Translarity and Grand Junction to arbitrate in Singapore under the Share Purchase Agreement. Translarity must also arbitrate claims against Marassa and Wang to the extent those claims are based on actions they took as Grand Junction’s agents.

The court stayed Translarity’s non-arbitrable claims against Marassa, Wang, and Pacific Gate Advisors, as well as the claims against Beijing Zhongyi Fund Management Co. Ltd. and Alpha Wealth, because those claims were intertwined with the arbitrable claims. The court denied the other pending motions as moot. After the stay is lifted, the court stated that it would set a schedule for further motion practice concerning the remaining defendants and claims.