Shandong Luxi Pharmaceutical Co., Ltd. v. Camphor Technologies, Inc.

UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF FLORIDA

TAMPA DIVISION

SHANDONG LUXI

PHARMACEUTICAL CO., LTD.,

Plaintiff,

v. Case No: 8:21-cv-942-CEH-AEP

CAMPHOR TECHNOLOGIES, INC.,

Defendant.

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ORDER

This matter comes before the Court on Defendant’s Motion to Compel

Arbitration (Doc. 17). In the motion, Defendant Camphor Technologies, Inc. requests

an order compelling the parties to arbitrate their disputes pursuant to the arbitration

provision contained in the parties’ Exclusive Agency and Supply Agreements. Plaintiff

filed a response in opposition (Doc. 30) and Defendant replied (Doc. 51). The Court,

having considered the motion, responses, and being fully advised on the premises, will

deny Defendant’s Motion to Compel Arbitration.

BACKGROUND

A. Factual Background

Plaintiff Shandong Luxi Pharmaceutical Co., Ltd., (“Plaintiff”) is a

manufacturer and developer of chemical compounds, and Defendant Camphor

Technologies, Inc. (“Defendant”) is in the business of process development and

commercial production of consumer pharmaceutical products. Doc. 37 ¶¶ 3–4. Since

2014, Plaintiff and Defendant have maintained a commercial business relationship

with Defendant purchasing pharmaceutical products from Plaintiff. Id. ¶ 5. According

to Plaintiff, the parties operated under agreements for sale and purchase from 2014–

2019, but their 2016 contract terminated at the end of 2019. Id. ¶¶ 6–8. Plaintiff claims

that on January 28, 2020, the parties met and negotiated the resumption of their

business relationship; but rather than being bound by a formal agreement, the parties

agreed to be governed by each individual purchase order containing the terms and

conditions of the sale. Id. ¶ 39. By contrast, Defendant claims the parties’ commercial

relationship has always been governed by a fully executed Exclusive Agency and

Supply Agreement contract, with the most recent agreement executed in 2019 and

effective through February 25, 2024. Doc. 17 ¶ 2.

Plaintiff filed its Amended Complaint on May 21, 2021, which details the

underlying dispute whereby Plaintiff claims it fulfilled a Purchase Order submitted by

Defendant, and Defendant took possession of the product but has refused to remit

payment. Doc. 37 ¶¶ 45–52. Plaintiff further alleges that Defendant has threatened to

employ assistance from United States agencies such as the Food and Drug

Administration (“FDA”) and Customs and Border Protection (“CBP”) to seize future

shipments that Plaintiff lawfully imports into the United States intended for its other

business partners. Id. ¶¶ 54–55. Plaintiff seeks injunctive relief enjoining Defendant or

its agents from: (1) interfering with any future shipments of Plaintiff’s products

lawfully imported and intended for other customers, and (2) transferring,

encumbering, converting, or otherwise disposing of any of Plaintiff’s goods that are

already in Defendant’s possession but have not been paid for. Id. ¶¶ 59. Plaintiff seeks

additional relief under claims for breach of contract, conversion, tortious interference

with a business relationship, unjust enrichment, and replevin. Id. ¶¶ 68, 75, 83, 90, 95,

101. The Court has jurisdiction pursuant to diversity of citizenship. Id. ¶ 13.

On April 30, 2021, Defendant filed a Motion to Compel Arbitration, declaring

that Plaintiff’s claims are subject to the parties’ long-standing agreement to arbitrate

all disputes, which would still be applicable per the 2019 Agreement that Defendant

asserts is in full effect. Doc. 17 ¶¶ 2–3. In support of its motion, Defendant filed the

affidavit of its president, Michael Creaturo. Doc. 18.

In its motion to compel, Defendant contends the substantially same provision

to arbitrate was included in each of the parties’ agreements executed in 2014, 2016,

and 2019. Doc. 17 ¶ 2. The agreement to arbitrate excludes a party’s claim for

immediate injunctive relief and other provisional remedies that arise under the parties’

agreements. Id. ¶ 3. However, Defendant argues that Plaintiff’s attempt to seek an

injunction in this case concerns matters which Plaintiff concedes are outside the

purview of the parties’ agreement. Id. ¶ 3. Thus, Defendant contends that each of

Plaintiff’s claims, including the request for injunction, is subject to arbitration. Id.

Plaintiff filed the affidavit of its counsel, Katherine Burghardt Kramer, in

opposition. Doc. 30-1. In response to the motion to compel, Plaintiff argues that even

if one of the contracts governs their relationship, the arbitration provision is

unenforceable because the arbitration forum and procedural rules specified in the

provision are unavailable. Doc. 30 at 1–2. Plaintiff contends that the forum and

procedural rule selections were integral to the parties’ agreements to arbitrate; and

where such is the case, an arbitration clause is null if the designated forum does not

exist at the time an arbitrable dispute arises. Id. Arguing in the alternative, Plaintiff

alleges Defendant has waived any right to seek redress through arbitration because its

conduct has been inconsistent with its position that the claims here are subject to

arbitration. Id.

Defendant denies that the forum or procedural rules are integral to the parties’

agreement and claims the Court may appoint a substitute arbitral forum where the

forum is unavailable. Doc. 51 at 2-3. In addition, Defendant contends that the 2019

Contract contained a severability clause, which allows a court to sever any invalid

clause of the agreement and, in this instance, compel arbitration according to the

remaining, valid terms of the parties’ agreement. Id.

B. Arbitration Agreement

Defendant argues that the arbitration provision included in the 2014, 2016, and

2019 agreements are in substantially the same form, and it provides copies of the 2014

and 2019 arbitration provisions. Doc. 17 at 12–13; Doc. 17-1; Doc. 17-2. Plaintiff

admits to the execution of the 2104 and 2016 Agreements, including the arbitration

clauses, but claims the 2016 Agreement expired at the end of 2019. Doc. 37 ¶ 8.

Plaintiff provides a copy of the 2016 Agreement, which includes the following

arbitration provision:

12. Governing Law and Venue: This Agreement shall be governed by

and construed in accordance with the laws of the State of Florida U.S.

District Court Middle District Florida without giving effect to the

conflicts of law principles thereof. Any dispute arising out of this

Agreement that is not amicably settled, except for seeking injunctive

relief as provided below, shall be submitted to be resolved through final

and binding arbitration by the Arbitration Institute of the United States

Chamber of Commerce in accordance with its Arbitration Rules (the

“Rules”). Any such arbitration will take place in Sarasota, Florida, USA.

The number of arbitrators shall be one, and the arbitrator shall be selected

by agreement of the Parties or, failing such agreement, shall be selected

according to the relevant Rules. The Party against whom an award is

passed shall bear the costs of such arbitrator. If either Party seeks judicial

enforcement or review of such award, judgment may be entered upon

such award in any court of competent jurisdiction.

The Arbitration clause shall not prevent either Party from bringing any

claimed breach hereof before the ordinary courts for the purpose of

applying for provisional remedies. Luxi submits to the jurisdiction of the

courts of the State of Florida and the federal district court of the District

of Florida for purposes of enforcement and interpretation of this

agreement.

The Parties each expressly agree that due to the unique nature of

disclosing Party’s confidential information, monetary damages would be

inadequate to compensate the disclosing party for any breach by the

receiving party of its covenants and agreements set forth in this

Agreement. Accordingly, if a Party breaches or threatens to breach its

obligations hereunder, such Party agrees that the other Party may

immediately seek an injunction ex-parte, that such Party waives notice

thereof, that said violation constitutes immediate irreparable harm for

which no adequate remedy at law exists and to waive any requirement in

such case for the securing or posting of any bond in connection with such

remedy. Each Party agrees to pay the other Party’s costs and expenses

(including court and/or arbitration costs and reasonable attorneys’ fees)

incurred in successfully enforcing or defending any of its rights hereunder

against the other Party.

Doc. 37-1 at 11–12.

LEGAL STANDARD

The Federal Arbitration Act (“FAA”), 9 U.S.C. § 1 et seq., codifies a “liberal

federal policy favoring arbitration” and requires the courts to “rigorously enforce

agreements to arbitrate.” Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473

U.S. 614, 625–26 (1985) (internal quotation marks omitted). The “principal purpose”

of the FAA is to ensure “that private arbitration agreements are enforced according to

their terms.” Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Junior Univ., 489 U.S.

468, 478 (1989).

The Court must first determine whether “the making of the agreement for

arbitration or the failure to comply therewith is . . . in issue.” 9 U.S.C. § 4. If, under a

“summary judgment-like standard,” the district court concludes that there “is no

genuine dispute as to any material fact concerning the formation of such an

agreement,” it “may conclude as a matter of law that [the] parties did or did not enter

into an arbitration agreement.” Burch v. P.J. Cheese, Inc., 861 F.3d 1338, 1346 (11th Cir.

2017) (quoting Bazemore v. Jefferson Capital Sys., LLC, 827 F.3d 1325, 1333 (11th Cir.

2016) (citation and quotation marks omitted)). When a genuine dispute exists, “the

court shall proceed summarily to the trial thereof.” 9 U.S.C. § 4.

DISCUSSION

Defendant moves this Court for an order compelling the parties to arbitrate their

disputes pursuant to the arbitration provision contained in the 2014, 2016, and 2019

Agreements. Plaintiff contends the 2019 agreement is no longer in effect, but even if it

was, Plaintiff argues the arbitration provision is unenforceable because the arbitral

forum, which was integral to the parties’ agreement, no longer exists. The Eleventh

Circuit recognizes a “two-step process required in considering the arbitrability of any

contract containing an arbitration clause: 1) resolution of any formation challenge to

the contract containing the arbitration clause, . . .; and 2) determination of whether

any subsequent challenges are to the entire agreement, or to the arbitration clause

specifically . . . .” Solymar Invs., Ltd. v. Banco Santander S.A., 672 F.3d 981, 990 (11th

Cir. 2012).

A. Formation Challenge to the 2019 Agreement

The parties agree they entered into the 2014 and 2016 Agreements, both of

which contain the arbitration language at issue. Plaintiff disputes, however, the

validity of the 2019 Agreement. Rather, Plaintiff contends the 2016 Agreement ended

in 2019, and the parties thereafter proceeded under various Purchase Orders, which

did not contain an arbitration clause. Defendant argues the 2019 Agreement is a valid

and enforceable contract.

The Court must necessarily address as a threshold matter the formation of the

2019 Agreement containing the arbitration clause. See Solymar Invs., Ltd., 672 at 990.

State law governs the formation of a contract. Id. at 991 (citing First Options of Chicago

v. Kaplan, 514 U.S. 938, 944 (1995)). It is undisputed that Florida law applies to the

claims here. Under Florida law, a valid contract requires an “offer, [an] acceptance,

consideration,” St. Joe Corp. v. McIver, 875 So. 2d 375, 381 (Fla. 2004), and mutual

assent as to sufficiently definite essential terms, Gibson v. Courtois, 539 So. 2d 459, 460

(Fla. 1989). In its motion to compel arbitration, Defendant argues that the specific

terms of the 2019 Agreement were agreed to by the parties at a meeting in Shanghai,

China on January 14, 2019, and the 2019 Agreement was fully executed on March 5,

2019. Doc. 17 at 8; see also Doc. 18 (affidavit of Camphor’s president Michael

Creaturo). The effective dates of the 2019 Agreement were from February 26, 2019

through February 25, 2024. Doc. 18 ¶ 14. Additionally, the fully executed 2019

Agreement was delivered to Luxi by UPS courier on March 23, 2019. Id. ¶ 15; Doc.

18-1.

Plaintiff’s response in opposition to the motion to compel does not proffer any

evidence that the 2019 Agreement is invalid. In summary fashion, Plaintiff contends

the parties disagree as to which contracts govern their relationship. Doc. 30 at 1.

Plaintiff does not offer any proof to rebut the formation of the 2019 Agreement.

Defendant, on the other hand, has provided a fully signed copy of the 2019 Agreement

and declaration of its president as to the offer, acceptance, consideration, and

discussion of essential terms of the 2019 Agreement. The Court applies a “summary

judgment-like standard” to determine if there “is no genuine dispute as to any material

fact concerning the formation of such an agreement.” Burch, 861 F.3d at 1346.

Applying this standard, the Court concludes, for purposes of this motion, that the 2019

Agreement was valid and in effect. Plaintiff offers no evidence to create an issue of

disputed fact as to the formation of the 2019 Agreement.1 As Plaintiff concedes, the

arbitration provision contained in the 2019 Agreement is identical to the provisions in

the prior agreements in any event. The Court now turns to the language of the

1 The Court’s finding regarding the formation and validity of the 2019 Agreement is based on

the record before it on the instant motion. However, the Court notes that the Magistrate Judge

found, in considering the motion for preliminary injunction, that the Plaintiff similarly failed

to provide any evidence to support its allegations that it did not timely receive a fully executed

version of the 2019 Agreement or that the parties agreed to continue their relationship without

the rubric of the prior exclusivity agreements. See Doc. 52 at 12.

arbitration provision, which mandates that arbitration be conducted by the Arbitration

Institute of the United States Chamber of Commerce in accordance with its

Arbitration Rules.

B. Unavailability of Arbitral Forum

The parties agree that the arbitration forum designated in the agreements does

not exist or is otherwise unavailable. Under § 5 of the Federal Arbitration Act, when

the arbitral forum chosen by the parties is unavailable, the court can appoint a

substitute arbitrator. See 9 U.S.C. § 5; Brown v. ITT Consumer Financial Corp., 211 F.3d

1217, 1222 (11th Cir. 2000). Because arbitration is a matter of contract, however, the

Eleventh Circuit has held that where a forum is unavailable, an arbitration agreement

is only enforceable if the choice of forum is not an integral part of the parties’

agreement to arbitrate. See Inetianbor v. CashCall, Inc., 768 F.3d 1346, 1350 (11th Cir.

2014). The unavailability of the parties’ chosen forum precludes arbitration if “the

choice of forum is an integral part of the agreement to arbitrate, rather than an ancillary

logistical concern.” Id. “To determine whether the forum selection clause is integral,

we must consider how important the term was to one or both of the parties at the time

they entered into the agreement.” Id. at 1350.

Plaintiff provides the following excerpt from the 2016 Contract:

Any dispute arising out of the Agreement that is not amicably settled,

except for seeking injunctive relief as provided below, shall be submitted

to be resolved through final and binding arbitration by the Arbitration

Institute of the United States Chamber of Commerce in Accordance with its

Arbitration Rules (the ‘Rules’).

Doc 30 at 9 (citing Doc. 1–2 at 10) (emphasis added). Identical language appears

in the 2014 and 2019 agreements.

According to Plaintiff, the arbitration provision within the 2016 Contract (and

repeated in the 2019 document) chooses an arbitral forum and set of procedural rules,

but the chosen forum and rules do not exist. Plaintiff claims Defendant acknowledged

such prior to compelling arbitration through this Court. Id. at 2–3. Plaintiff provides

an affidavit from Katherine Burghardt Kramer, counsel for Plaintiff, in which she

relays an exchange between herself and defense counsel on April 30, 2021. Kramer

expressed her concern that the arbitration clause could not be enforced because the

specified forum and procedural rules did not exist. 30-1 ¶ 3. On May 11, 2021, defense

counsel responded that “[t]he Issue of whether the entity exists is not relevant to the

ultimate conclusion.” Id. ¶ 4.

According to Kramer, an extensive internet search did not generate any results

regarding the specified forum. Id. ¶ 5. Finally, Kramer states Plaintiff received a letter

from defense counsel dated March 16, 2021, wherein he declares that any action by

Defendant against Plaintiff would be brought in this Court Id. ¶ 6. According to

Kramer, this letter led her to assume his position was a result of the unavailability of

the designated arbitration forum and rules of procedure. Id.

Plaintiff goes on to argue that the arbitration forum and procedural rules in this

case are integral to the arbitration clause, emphasizing the plain meaning of the clause,

which provides that “[a]ny dispute arising out of this Agreement . . . shall be submitted

to be resolved through final and binding arbitration by the [specified arbitral forum

and procedural rules.]” Doc. 30 at 9 (emphasis added). Plaintiff also points out that

the sentence providing for the designations is the sole sentence in which the parties

agree to arbitrate. Id. Next, Plaintiff underscores that both the forum and the

procedural rules were expressly designated (rather than merely one or the other), and

the contract did not contemplate an alternate for either. Id.

Plaintiff relies on Flagg v. First Premier Bank, 644 F. App’x 893, 896 (11th Cir.

2016) (finding a choice of forum integral to the parties’ agreement to arbitrate because

it was mentioned throughout the agreement and because it was designated exclusively

to govern all claims, along with its Code of Procedure). Id. at 9–10. Plaintiff also relies

on Inetianbor, 768 F.3d at 1350 (explaining that while the presumption in favor of

arbitration is recognized, federal policy cannot be elevated above the intent of the

parties). Id. at 10–11. Consequently, Plaintiff contends the arbitration provision is

unenforceable and has no binding effect on the current dispute. Id. at 11.

Defendant disagrees that the specified forum and rules were integral to the

parties’ agreement to arbitrate, reasoning that the Agreements only once reference the

chosen forum and twice reference the forum’s rules. Doc. 51 at 2–3. Defendant relies

on Brown, 211 F.3d at 1222 (deciding an arbitral forum was not integral to an

agreement to arbitrate because it provided only for claims to be resolved under a

specified code of procedures but did not specify a forum). Id. Defendant urges the

Court to choose a substitute forum, citing De Pombo v. Irinox North America, Inc., No.

20-cv-20533-BLOOM/Louis, 2020 WL 6290153 * 4 (S.D. Fla. Oct. 27, 2020)

(explaining that where a chosen arbitral forum fails, unless it was integral to the

agreement to arbitrate, arbitration should still be ordered with a substitute forum). Id.

at 3–4.

In determining whether the forum and rule selection were integral to the parties’

agreement to arbitrate, the Court first considers the text of the provision to determine

the parties’ intent. The provision plainly states that disputes arising out of the

agreement which cannot be amicably settled “shall” be submitted to be resolved

through final and binding arbitration “by the Arbitration Institute of the United States

Chamber of Commerce in accordance with the Rules.” Use of the mandatory word

“shall” in the agreement supports a finding of intent to require arbitration with this

particular arbitral forum and under its procedural rules. The language of the provision

does not indicate that the choice of arbitral forum or procedural rules was otherwise

optional.

Defendant contends the subsequent sentence which states “arbitration shall be

conducted in Sarasota, Florida by one arbitrator to be chosen by the parties” provides

support for an alternative arbitral forum if the specified forum were to be unavailable.

The Court is not persuaded. The sentence reads “any such arbitration shall be

conducted in Sarasota . . . .” Doc. 17-1 at 9 (emphasis added). A plain reading of the

sentence indicates that “any such arbitration” refers the reader to the previous

sentence, which specifies the arbitration will be conducted by the Arbitration Institute

of the United States Chamber of Commerce in accordance with its Rules. Thus,

contrary to Defendant’s suggestion, this sentence seems to clarify logistical details of

the arbitration, such as the number of arbitrators to conduct the proceeding and how

the arbitrator from that forum will be chosen.

Defendant compares this case to Brown, where the court found the arbitral

forum was not integral to the parties’ agreement. Doc. 51 at 3. Defendant cites to the

fact that the 2019 Agreement only references the chosen forum one time and the rules

promulgated by the body twice. Id. As was the case in Flagg and Intetianbor, the facts

here are distinguishable from Brown, most obviously because in Brown, the arbitration

provision only provided the claims to be resolved under a specified code of procedure

and did not designate a specific forum. Brown, 211 F.3d at 1222. See also Flagg , 644 F.

App’x at 896; Inetianbor, 768 F.3d at 1351. Beyond that, although it is true that neither

the forum nor the procedural rules were mentioned multiple times throughout the

agreement (as was the case in Intetianbor), the parties here continued to designate the

same forum and procedural rules in their agreements in 2014, 2016, and 2019. The

repeated choice of forum in all three agreements supports the conclusion that the

designation of that forum and its rules was integral to the agreements. Therefore, it

would not be appropriate for this Court to step in and appoint a different arbitral

forum. Based on the plain reading of the arbitration provision, the use of mandatory

language in the provision, and the reference to the same arbitral forum and its rules in

all three agreements, the Court concludes the arbitral forum was integral to the

Agreements. As such, the Court will not compel the parties to arbitrate where the

arbitral forum, which is integral to the parties’ agreement, is unavailable.2

C. Severability Clause

Finally, Defendant indicates that because the 2019 Contract contained a

severability clause, the choice of forum should be considered an invalid term since the

forum does not exist.3 Id. at 3–4. The severability clause, Defendant argues, should

allow the court to compel arbitration according to the remaining, valid terms of the

arbitration agreement. Id. However, Defendant’s argument fails because provisions are

severed only “if the performance as to which the agreement is unenforceable is not an

essential part of the agreed exchange.” Restatement (Second) of Contracts §184(1). As

the Court has found above, the arbitral forum in this case is essential to the parties’

agreement to arbitrate; therefore, based on these facts, the Court cannot disregard the

limiting provision which specifies the forum and its rules without undermining the

parties’ express intent to arbitrate subject to those limitations.

Because the Court finds the chosen forum and procedural rules were integral to

the parties’ agreement to arbitrate, the Court is unable to designate a substitute arbitral

forum, and Defendant’s motion to compel arbitration is due to be denied. Accordingly,

it is

ORDERED:

2 Because the Court concludes that the arbitral forum is integral and the motion to compel is

due to be denied, the Court need not address Plaintiff’s alternative argument that the

Defendant waived its right to compel arbitration by its conduct.

3 The record is devoid of information regarding whether or when that forum existed.

1. Defendant’s Motion to Compel Arbitration (Doc. 17) is DENIED.

2. The parties shall conduct a case management meeting and file a case

management report, pursuant to M.D. Fla. Local Rule 3.02, on or before January 13,

2022.

DONE AND ORDERED in Tampa, Florida on December 23, 2021.

Chard ene Cards Mo TL ol wel

Charlene Edwards Honeywell

United States District Judge

Copies to:

Counsel of Record and Unrepresented Parties, if any

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