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Tecnimont SPA v. Holtec International

United States District Court, D. New Jersey

August 13, 2018

TECNIMONT S.P.A., Plaintiff,

          Gabriel Hertzberg, Esq. CURTIS MALLET-PREVOST COLT & MOSIE LLP Attorney for Plaintiff

          Adam Lurie, Esq. LINKLATERS LLP Attorney for Defendant



         I. Introduction

         This case involves a business dispute between Plaintiff, an engineering, procurement, and commissioning contractor, and Defendant, a manufacturer of (inter alia) steam condensers. The parties entered into a contract for the purchase by Plaintiff of steam condensers manufactured by Defendant. After certain business disputes, described in more detail infra, Plaintiff filed the instant suit, alleging defamation by Defendant to Plaintiff's client and business partners.

         Presently before the Court is Defendant's Motion to Dismiss [Docket Item 12]. The principal issue to be decided is whether the arbitration clause contained in the contract between the parties mandates the dismissal of this suit and a referral to arbitration in its stead. For the reasons described herein, the Court concludes that it does, and will grant Defendant's Motion to as it relates to the Arbitration Clause, and will stay the case pending arbitration.

         II. Background[1]

         Plaintiff Tecnimont S.p.A. is an engineering, procurement and commissioning contractor, based in Milan, Italy, that engaged in work on a project to build a large thermoelectric power plant in Punta Catalina, Dominican Republic (the “Power Plant”). [Docket Item 1 at 2.] Plaintiff's client and the owner of the Power Plant is Corporación Dominicana de Empresas Eléctricas Estales [“CDEEE”). Id. at 5. On April 14, 2014, CDEEE, Plaintiff, and Plaintiff's business partners, Constructora Norberto Odebrecht and Ingenieria Estrella, S.R.L. (collectively the “Consortium”), executed an Engineering, Procurement and Construction Contract (the “EPC Contract”) that governs the design and construction of the Power Plant. Id. Plaintiff estimates that the value of the EPC Contract is worth hundreds of millions of dollars. Id. Pursuant to the EPC Contract, Plaintiff is responsible for the design, construction, and commissioning of two Steam Condensers for the Power Plant. Id.

         On October 29, 2014, Plaintiff placed an order (“Purchase Order”)[Docket Item 12-2] with Defendant, Holtec International, a manufacturer of heat transfer equipment, to purchase a pair of steam condensers (“Condensers”) for the Power Plant. [Docket Item 1 at 2.]

         Under the Purchase Order, Defendant was to deliver the first fully tested Condenser in October 2015 and the second in December 2015. Id. However, Defendant did not manufacture the Condensers. Instead, Defendant subcontracted the manufacture of the Condensers to Godrej, a firm located in Mumbai, India. Id. Godrej had never manufactured the steam condenser of the type required for the Power Plant, so Defendant was supposed to provide qualified, skilled personnel from the United States to supervise and assist Godrej during the manufacturing process. Id. Plaintiff asserts that delivery of the Condensers was significantly delayed due to problems with Defendant's supply chain and gross incompetence in connection with its subcontracting to Godrej. Id. at 6. Plaintiff alleges that as a result of Defendant's gross incompetence, the first Condenser was not delivered until October 2016 - a year behind schedule. Id. Defendant tendered the second Condenser on November 2016. Id.

         Defendant asserts that the delay in tendering of the Condensers was due to a “Change Order.” The Purchase Order is governed by the General Purchase Conditions (“GPC”). [Docket Item 12-2 at 38.] Article 5.1 of the GPC confers the right on the Respondent (Plaintiff Tecnimont S.p.A.) to request the Claimant (Defendant Holtec International) implement changes with respect to any goods and/or works supplied under the Purchase Order. Article 5.2 of the GPC provides that in the event of such a change, an equitable adjustment to the relevant price and/or time of performance mutually satisfactory to both Parties shall be discussed and negotiated by the Parties. Article 5.2 of the GPC requires the Respondent Tecnimont S.p.A. to make any such change request in the form of a “Change Order.” [Docket Item 12-2 at 8.]

         Defendant asserts that on May 2015, Plaintiff requested an alteration of the design provided for under the Purchase Order. Id. Defendant states that Defendant notified Plaintiff that the request changes would jeopardize the agreed performance schedule and that Plaintiff failed to submit a Change Order as required by Article 5.3 of the GPC. Id. Defendant argues that Plaintiff “attempted to shift responsibility for the delays” on to Defendant by asserting that Defendant's management of the manufacturing process at Godrej was inadequate. Id. As a result of the dispute, Defendant alleges, Plaintiff has failed to comply with its obligations to settle four invoices issued by Defendant pursuant to the Purchase Order. Id.

         Article 33.1 of the GPC states that “Any dispute between the PARTIES in connection with or arising out of the PURCHASE ORDER which cannot be settled amicably shall be finally settled by means of the proceeding specified in the SPECIAL PURCHASE CONDITIONS[.]” [Docket Item 12-2 at 63.] Article 32 of the GPC states that “The PURCHASE ORDER shall be governed by and construed in accordance with the Laws of the Country specified in the [Special Purchase Conditions (‘SPC')].” Id. Article 32 of the SPC states that the Purchase Order shall be governed by the Law of England and Wales. [Docket Item 12-2 at 76.]

         Article 33.1 (the “Arbitration Clause”) of the SPC provides as follows:

Any question, dispute, or difference arising from or connected with the PURCHASE ORDER which cannot be settled in accordance amicable shall be finally settled by means of Arbitration in London.

Id. (emphasis in original).

         On October 11, 2016, the parties made an Amendment Agreement. Id. at 126. Within that agreement, Article 8 of Amendment No. 3 (“Claim Waiver”) provides in pertinent part: “With the exception of the remaining payment obligations of TCM and the remaining performance obligations of Holtec under the Purchase Order, the Parties hereby acknowledge and agree to release the other party from any and all claims, counterclaims, demands, rights or causes of action of any kind . . . ” Id. at 128.

         On January 12, 2017, Defendant sent a letter to CDEEE, Plaintiff's client. The letter was circulated to the Consortium. Id. The letter generally characterizes Plaintiff as difficult to work with and specifically refers to a “myriad of non-payment, contract amendment and change order issues” associated with working with Plaintiff on the delivery of the Steam Condensers. [Docket Item 1-1 at 2.]

         Upon receipt of the letter, various members of the Consortium have advised Plaintiff to resolve the situation with ...

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