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SUPERIOR COURT OF CALIFORNIA
COUNTY OF KENT
GLOBAL MERCHANT, LLC, )
) MEMORANDUM OF
Plaintiff, ) AUTHORITY IN SUPPORT OF
) APPLICATION FOR
v ) ATTACHMENT AND STAY
) PENDING ARBITRATION
AGRI FEED, LLC, )
Plaintiff Global Merchant, LLC, hereby submits the following memorandum of authority
in support of its application for pre-arbitral attachment and request for stay of this action pending
Even though the facts have already been set forth in the contemporaneously filed
complaint, the pertinent facts are restated below for the Court's convenience.
STATEMENT OF FACTS
On March 18, 2014, Agent, Ltd., as agent for Plaintiff Global Merchant, LLC ("Global"),
entered into a contract with Defendant Agri Feed, LLC ("Agri"), for the delivery of 1,500 metric
tons of hay in consideration of a purchase price of USD 600,000.00. The agreement between the
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parties provided for final and binding arbitration before the China International Economic and
Trade Arbitration Commission (CIETAC), for "all disputes in connection with the contract."
The contract was drafted by Defendant Agri, and the quality specifications provided, in
part, that the RFV (relative feed value) be no less than 140, and that Crude Protein ("CP") be no
less than 22%, where the former reflects the digestibility of agricultural feed, and where the latter
measures protein content. Through the contract, the parties also chose Test A-OK, Inc., of
Zeeland, Michigan, as the independent testing laboratory to conduct the testing of the samples.
The third quality specification pertained to "moisture" levels but is not relevant here.
The contract further provided that upon the receipt of, among others, the hay analysis
report from Test A-OK, Inc., a sight letter of credit, opened by Plaintiff Global at the Bank of
Hong Kong, would be released to Defendant Agri. Defendant Agri selected Macatawa Bank of
Los Angeles as the receiver/advising bank. On April 10, 2014, Defendant Agri submitted four
laboratory reports containing hay analyses, purportedly conducted by Test A-OK, Inc., to the
Macatawa Bank of Los Angeles. With all delivery conditions ostensibly met, the sight letter of
credit in the amount of the full purchase price was released to Defendant Agri. However, after
Plaintiff Global received the hay at the end of April, it found the quality to be substandard, and
its investigation confirmed that Defendant Agri had altered and forged the Test A-OK reports in
order to reflect a higher quality product in line with the contractual terms. Specifically, the four
reports contained altered numbers for the crude protein and RFV values to render the findings
acceptable and compliant under the contract.
As early as June 2014, Plaintiff Global attempted to communicate with both Defendant
Agri as well its holding company Mega, Ltd. No feedback was ever received, and this suit has
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a. Subject-matter jurisdiction.
As aforementioned, the contract between the parties provides for final and binding
arbitration before the China International Economic and Trade Arbitration Commission
(CIETAC) for "[a]ll disputes in connection with [the] Contract." As such, the Convention on the
Recognition and Enforcement of Foreign Arbitral Awards ("Convention"), codified at 9 U.S.C.
§201, et seq., governs the parties' agreement. See 9 U.S.C. §202 ("[a]n arbitration agreement or
arbitral award arising out of a legal relationship, whether contractual or not, which is considered
as commercial, including a transaction, contract, or agreement described in section 2 of this title,
falls under the Convention"); see also China National Metal Products Import/Export Co v. Apex
Digital, 155 F.Supp.2d 1174, 1178 (C.D. CA 2001).
While the Convention provides that federal district courts enjoy "original" jurisdiction,
the Convention implicitly recognizes that those state courts, enjoying general subject-matter
jurisdiction, can properly entertain such actions. See 9 U.S.C. §205 ("[w]here the subject matter
of an action or proceeding pending in a State court relates to an arbitration agreement or award
falling under the Convention, the defendant or the defendants may, at any time before the trial
thereof, remove such action or proceeding to the district court of the United States") (emphasis
added). Moreover, under the Federal Arbitration Act, being 9 U.S.C. §1, et seq., even state
courts are imbued with the power to, upon application, grant a stay of proceedings on any issue
that, under contract, is referable to arbitration. See 9 U.S.C. §3; see also China National, 155
F.Supp.2d at 1178, and Valencia v. Smyth, 185 Cal.App.4th 153, 165 (2010).
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Therefore, while there are no preliminary procedural impediments to this Court
entertaining the action and the reliefs sought herein by Plaintiff Global, i.e., issuance of an order
for attachment and a stay of proceedings, the analysis does not end here.
b. Pre-arbitral/judgment attachment.
Pre-arbitral or pre-judgment attachment is a temporary statutory remedy, which allows a
commercial creditor to move for a judicial lien on a debtor's property before final adjudication.
Under the statute, an attachment may only issue if there's a readily ascertainable claim for more
than USD 500.00 under a commercial contract, which is either unsecured or secured by personal
property. See Code of Civ. Proc. §483.010; see also e.g., Bank of Am. v. Stonehaven Manor,
LLC, 186 Cal.App.4th 719, 723 (2010); see also Goldstein v. Barak Construction, 164
Cal.App.4th 845, 852 (2008). Procedurally, before a writ of attachment may be issued, a
complaint must be filed. See Code of Civ. Proc. §484.010 ("[u]pon the filing of the complaint or
at any time thereafter, the plaintiff may apply pursuant to this article for a right to attach order
and a writ of attachment by filing an application for the order and writ with the court in which
the action is brought").
The moving party has the burden of proving (1) that "[t]he claim upon which the
attachment is based is one upon which an attachment may be issued," (2) the probable validity of
such a claim, (3) the purpose is not vexatious, and (4) "the amount to be secured by attachment is
greater than zero." Code of Civ. Proc. §484.090(a); see also Goldstein, 164 Cal.App.4th at 852.
Even if the contract calls for arbitration, a party may still apply for attachment as long as
they can demonstrate that the arbitration award might be rendered ineffective without such
temporary relief. Code of Civ. Proc. §1281.8(b).
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Applying the law to the facts, Plaintiff Global submits that the statutory requirements for
the issuance of a writ of attachment have all been met here.
First, the application for attachment has been filed contemporaneously with the
complaint, as required by Section 484.010 of the Code of Civ. Proc. Secondly, this matter
involves a commercial dispute with the claim being for restitutionary damages in the amount of
the purchase price of USD 600,000.00,1 which was unsecured. See Code of Civ. Proc. 483.010.
Thirdly, Plaintiff's claim has probable validity as Plaintiff Global has irrefutable proof that
Defendant Agri altered hay analysis lab results in order to remain compliant under the terms of
the contract and secure the release of the letter of credit from the receiver/advising bank.
Therefore, "it is more likely than not that the plaintiff will obtain a judgment against the
defendant" on both contract and tort claims. See Code of Civ. Proc. §484.090(a) and §481.190;
see also Loeb & Loeb v. Beverly Glen Music, Inc., 166 Cal.App.3d 1110, 1120 (1985). Next,
given the gravity of the grievance, it cannot be claimed that Plaintiff Global's suit is vexatious in
nature. See Code of Civ. Proc. §484.090(a); see also Goldstein, 164 Cal.App.4th at 852. In
similar vein, given the nature of the alleged breach and established proof of fraud, Defendant
1 The fact that Plaintiff is also seeking consequentialdamages associated with the breach of contract, which have not
yet been determined, is not fatal to its application for attachment, as was aptly explained by the Court in Cit Group
v. Super Dvd, Inc., 115 Cal.App.4th 537 (2004):
Additionally, "`[i]t is a well-recognized rule of law in this state that an attachment will lie upon a
cause of action for damages for a breach of contract where the damages are readily ascertainable by
reference to the contract and the basis of the computation of damages appears to be reasonable and definite.
[Citations.] The fact that the damages are unliquidated is not determinative. [Citations.] But the contract
sued on must furnish a standard by which the amount due may be clearly ascertained and there must exist a
basis upon which the damages can be determined by proof.'" (Lewis v. Steifel (1950) 98 Cal.App.2d 648,
650, 220 P.2d 769, quoting Force v. Hart (1928) 205 Cal. 670, 673, 272 P. 583.) Accordingly, it is not
necessary that the amount owed appear on the face of the contract; it often happens that the amount due
under a contract does not appear on the contract itself. (Bringas v. Sullivan (1954) 126 Cal.App.2d 693,
699, 273 P.2d 336.)
Id. at 540 (emphasis added).
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Agri has provided every indication that it might, otherwise, be inclined to transfer, hide or
dissipate assets without the temporary relief that a writ of attachment would afford Plaintiff
Global. See Code of Civ. Proc. §1281.8(b).
c. Whether CIETAC already provides for temporary relief in the form of attachment, and
whether such provision under CIETAC necessarily supplants the operation of California law?
To Plaintiff's best understanding, the sole remaining issue that finds application under the
facts of this case is one that was last visited by the federal district court in China National Metal
Products Import/Export Co v. Apex Digital, 155 F.Supp.2d 1174 (C.D. CA 2001).
In China National Metal Products Import/Export Co v. Apex Digital, 155 F.Supp.2d
1174 (C.D. CA 2001), the parties to the contract acknowledged that they were bound by the
China International Economic and Trade Arbitration Commission (hereinafter "CIETAC"),
adherence to which had been agreed upon in the contract. However, the plaintiff filed a suit in
federal district court for breach of contract. In the decision of the district court judge, the district
court explained that the plaintiff's reason for filing suit was solely to seek the ancillary issuance
of a writ of attachment. Id. at 1177. This, itself, the district court found unobjectionable,
concluding specifically that the International Convention on the Recognition and Enforcement of
Foreign Arbitral Awards did not supplant its own subject-matter jurisdiction to issue ancillary
orders, such as a request for issuance of a writ of attachment. Id. at 1180. However, the Court
decided to, nonetheless, dismiss the suit because it was persuaded by the defendant that a
CIETAC provision, namely Article 23, already provided for provisional relief exclusively
through the "people's court" of China, which effectively supplanted its own authority to issue
such pre-arbitral relief. Id. at 1182. As noted by the district court judge in China National,
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supra, Article 23 of CIETAC, as incorporated by reference into the commercial contract, had
read as follows at the time:
When a party applies for property preservative measures, the Arbitration Commission
shall submit the party's application to the people's court for a ruling in the place where
the domicile of the party against whom the property preservative measures are sought is
located or in the place where the property of the said party is located.
Id. at 1181 (emphasis added). However, subsequently, Article 23 of CIETAC was amended as
follows by significantly narrowing the scope of its reach:
Where a party applies for conservatory measures pursuant to the laws of the People’s
Republic of China, CIETAC shall forward the party’s application to the competent court
designated by that party in accordance with the law.
New Article 23 of CIETAC - Attachment 1 (emphasis added). Thus, whereas the earlier
version by its very terms applied generally to whenever a party sought provisional pre-arbitral
relief (and specifically directed the party seeking such relief to the "people's court)," the present
wording only provides guidance where such relief is sought within the "laws of the People's
Republic of China"[.] By its very terms, the new language does not supplant the authority of
another tribunal from issuing such provisional relief if subject-matter jurisdiction can properly be
maintained in such tribunal. Therefore, given the material change in language under Article 23
of CIETAC, Plaintiff Global submits that China National, supra, does not operate to bar it from
seeking a pre-arbitral issuance of attachment under Code of Civ. Proc. §483.010, pending
Last but not least, the additional argument can be put forward that the facts in China
National, supra, are materially distinguishable from the case at bar because the facts of the
instant matter clearly accommodate intentional tort claims that arguably were never intended to
be within the scope of the contract's arbitration clause. In other words, while Plaintiff Global
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does not dispute that the breach of contract claim is arbitrable or legitimately referable to
arbitration before CIETAC, Plaintiff cannot agree that the intentional torts of fraud and
conversion must be submitted to CIETAC. Plaintiff submits that the language, "all disputes in
connection with the Contract," found under paragraph 13.6 of the Contract, intended to bestow
upon CIETAC the authority to arbitrate contract disputes, not tort matters.
WHEREFORE, Plaintiff Global prays to be granted the following relief:
1. Issuance of a writ of attachment pursuant to Code of Civ. Proc. §483.010, as
Plaintiff has met its burden under Code of Civ. Proc. §484.090(a);
2. Order granting a stay of all proceedings in the action, pursuant to Code of Civ.
Proc. §1281.8(d), pending completion of the arbitration; and
3. Such other relief as the Court deems just and proper, including allowing for the
tort claims to proceed, if this Court deems them to be outside the scope of the arbitration clause.
See Code of Civ. Proc. §1281.8(d).
Dated: _______ , 2015
Attorneys for Plaintiff Global Merchant, LLC