Shenzhen Lanteng Cyber Technology Co., Ltd. v. Amazon.com Services, LLC

Background

Shenzhen Lanteng Cyber Technology Co., Ltd. operated as a third-party seller on Amazon’s online marketplace. To sell there, Lanteng agreed to Amazon’s Business Solutions Agreement (BSA). The BSA allowed Amazon to permanently withhold payments if an account was used for deceptive, fraudulent, or illegal activity, or repeatedly violated Amazon’s policies. It also allowed Amazon to suspend or terminate an account for suspected fraudulent activity and required sellers to provide information verifying their identity when Amazon requested it.

Amazon’s customer-review policies prohibited sellers from offering money, discounts, free products, or other compensation in exchange for reviews. Lanteng’s account was blocked after Amazon accused it of manipulating customer reviews. In an appeal, Lanteng admitted that it had bribed customers for positive reviews and for removing negative reviews. Amazon also requested an identity interview with Jiaoyu Cheng, the registered account holder. The arbitrator found that Lanteng failed to establish that Cheng was the account owner or operator and failed to verify its identity as required by the BSA.

Amazon deactivated Lanteng’s seller account and withheld funds. The opinion states that Amazon initially withheld $123,622.24, while Lanteng later asserted that the arbitration award resulted in Amazon being awarded $380,508.61 of Lanteng’s funds.

The Arbitration

Lanteng filed a demand for arbitration seeking the return of the withheld funds. It argued that Amazon had improperly suspended its account and withheld its money. Lanteng also argued that the BSA was an adhesion contract—that is, a contract presented on a take-it-or-leave-it basis—and was procedurally and substantively unfair under Washington law. Lanteng further argued that the BSA’s withholding provision was an unenforceable penalty.

The parties agreed to resolve disputes relating to the BSA or Amazon’s services through binding arbitration conducted by the American Arbitration Association. The arbitration proceeded through written submissions. On October 7, 2022, the arbitrator denied Lanteng’s claims in their entirety.

The arbitrator found that the BSA was not procedurally unconscionable because Lanteng chose to enter the agreement knowing its terms and could have decided not to sell on Amazon’s platform. He also found that the withholding provision was not substantively unconscionable, meaning it was not impermissibly one-sided or overly harsh. The arbitrator determined that the provision was a valid liquidated-damages provision rather than an unenforceable penalty. He concluded that Amazon was authorized to withhold Lanteng’s funds because Lanteng violated the customer-review policies and the identity-verification requirement.

The Court’s Jurisdiction and Legal Standard

Lanteng filed a petition to vacate, or set aside, the award in New York state court. Amazon removed the case to federal court and filed a cross-petition to confirm the award. The court held that it had jurisdiction under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards because Lanteng was a Chinese company. The court also held that it had diversity jurisdiction because the dispute involved Amazon, a citizen of Washington, and Lanteng, a citizen of China, and exceeded $75,000.

The court explained that an arbitration award must generally be confirmed unless the party opposing enforcement proves one of the limited defenses recognized by the Convention. Because the award was issued in the United States, the Federal Arbitration Act also applied. Under that law, an award may be vacated in limited circumstances, including when the arbitrator exceeded the arbitrator’s authority or acted in manifest disregard of the law. Manifest disregard requires more than a legal mistake; it requires showing that the arbitrator knew of a clearly applicable legal rule and deliberately ignored it.

Analysis

The court held that Lanteng did not show manifest disregard of the law. The arbitrator addressed Lanteng’s arguments about unconscionability and penalties and relied on Washington Supreme Court precedent. The court stated that disagreement with the arbitrator’s legal conclusions, or the fact that other arbitrators had reached different results, was not enough to set aside the award.

The court also held that the arbitrator did not exceed his authority. The BSA’s arbitration clause covered any dispute relating in any way to the agreement or Amazon’s services. Lanteng had specifically submitted the dispute over Amazon’s withholding of the funds and had fully briefed the enforceability of the BSA. The court concluded that the arbitrator had authority to decide whether Amazon was required to return the funds and had at least a reasonable contractual and legal basis for the decision.

Lanteng raised a Washington public-policy argument for the first time in its reply brief. The court rejected that argument because it was raised too late and because Lanteng had not shown that it presented the issue to the arbitrator. The court also explained that the relevant public-policy defense concerns whether enforcing the award itself would violate fundamental public policy, not merely whether the underlying contract might violate public policy. The court found that Lanteng had not met that demanding standard.

Disposition

The court denied Lanteng’s petition to vacate the arbitration award and granted Amazon’s cross-petition to confirm the award. The clerk was directed to enter judgment in favor of Amazon, terminate the pending motions, and close the case.