DotC United, Inc. v. Google Asia Pacific Pte. Ltd.

Background

DotC United and Avazu challenged an International Centre for Dispute Resolution arbitration panel’s decision that it had authority over them. The underlying dispute arose from a 2016 Google AdWords agreement between Google Asia and Jupiter, a subsidiary of Avazu. The agreement was accepted through a click-through process. Google Asia later amended its advertising terms to address claims involving affiliates, parent companies, and related people and entities.

After Google Asia suspended Jupiter’s account over approximately $120 million in unpaid advertising invoices, Google Asia obtained an asset-freeze injunction against Avazu and DotC United from a court in the British Virgin Islands. Google Asia then started arbitration against Jupiter, Avazu, DotC Pte. Ltd., and DotC United. Avazu, DotC Pte. Ltd., and DotC United objected that they were not signatories to the arbitration agreement and that the arbitration panel lacked authority over them.

The panel separated the arbitration into a jurisdiction phase and a merits phase. In a 2-1 decision, it refused to dismiss the arbitration as to the petitioners and held that they were bound to arbitrate Google Asia’s claims. The panel described its jurisdiction decision as a final award that allowed immediate review. The merits hearing was scheduled to begin on May 9, 2023. Google Asia and the panel declined to pause that proceeding, leading the petitioners to seek a preliminary injunction.

Jurisdiction and legal standard

The court concluded that it had jurisdiction under the New York Convention, an international treaty governing certain foreign-related commercial arbitration agreements and awards. The court explained that jurisdiction existed because the petitioners made a non-frivolous claim involving an arbitration covered by the Convention, and the requested stay was a remedy the court could consider.

To obtain a preliminary injunction, the petitioners had to show a likelihood of success on the merits or serious legal questions, likely irreparable harm without an injunction, a favorable balance of hardships, and consistency with the public interest. The court applied the Ninth Circuit’s sliding-scale approach, under which serious legal questions may support an injunction when the other factors favor relief.

Court’s analysis

The court held that questions about whether parties agreed to arbitrate are generally for a court to decide. An arbitration panel may decide those gateway questions only when the parties clearly and unmistakably delegated that authority to the panel. The parties agreed that their arbitration agreement did not contain clear and unmistakable language delegating the question of whether the petitioners were bound by the agreement.

The court therefore found that the petitioners were likely to prevail, or at least had raised serious legal questions, on their argument that the arbitration panel should have dismissed the arbitration as to them. The court rejected Google Asia’s position that the petitioners had to complete the arbitration before obtaining independent court review. It reasoned that the petitioners had sought immediate review after the panel characterized its decision as final and that the Supreme Court had recognized an injunction as a way to obtain a court decision on arbitrability before the merits of an arbitration proceed.

The court also rejected Google Asia’s argument that the petitioners waived their right to seek an injunction by participating in the jurisdiction phase. The petitioners had participated while repeatedly objecting to the panel’s authority and had moved to dismiss the arbitration on the ground that a court, rather than the panel, should decide arbitrability.

The court found irreparable harm because requiring the petitioners to continue arbitrating before the court determined whether they were bound to arbitrate could force them to incur unrecoverable arbitration costs and participate in proceedings they may not have agreed to. The court found that Google Asia had not provided sufficient evidence that briefly delaying the arbitration would harm it, particularly because the British Virgin Islands freeze order remained in place. The court made that freeze order part of its own order, and it found the public-interest factor neutral because the injunction was limited to the parties.

Disposition

Judge Jacqueline Scott Corley granted the petitioners’ motion for a preliminary injunction. The court stayed the ICDR arbitration as to DotC United and Avazu pending further order and incorporated the British Virgin Islands freeze order and its continuation into the court’s order. The order disposed of Docket No. 58. The opinion did not state a final ruling on the separate petitions to vacate or confirm the arbitration panel’s jurisdiction decision.