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Rebecca AllenArbitration
Arbitration Dispute
Arbitration DisputeUnited Natural Gas v. Eastern Europe Efficiency
Table of Contents
1. Arbitration Clause2. Outline of Rules
included: rules applied, improvements that could be made to rules3. Plaintiff’s claim for relief
serves notice, summary of facts, claims for relief used by arbitrators
4. Defendant’s response affirms notice was given, counterarguments
5. Perry Deposition6. Lopez Deposition7. Kensington Deposition
ARBITRATION CLAUSE
1. In the case of any dispute arising out of this agreement, arbitration administered by
the International Chamber of Commerce in accordance with International Arbitration
Rules will be the exclusive means of resolving such disagreement. The arbitration panel
is to adhere to United States law. By signing this agreement, both parties consent to
United States federal law as the law governing the dispute. The decision of the
arbitration panel shall be binding. The judgment on the award rendered in any such
arbitration will be entered by whichever court that has jurisdiction.
1.1: Service. The arbitration demand must be delivered either in person or by
certified mail to the parties involved. It must include a clear statement of the dispute. A
response must be served within the following three weeks. The response must respond
to any issues raised in the initial demand and must also raise any counterclaims that will
be relied upon.
1.2: Arbitrator. Following proper service and response the parties will have
three (3) weeks to collaboratively select three (3) arbitrators from the International
Chamber of Commerce. The selected arbitrators must have over ten (10) years of
experience in the area of the dispute. If the parties cannot agree on a panel of arbitrators
they must submit a petition to the International Chamber of Commerce to select a panel
for them. At this time the selections of the International Chamber of Commerce will be
binding.
1.3: Pre-hearing Procedure.
1.3(a): Conferences. The panel of arbitrators shall hold at least one (1)
meeting with the parties and their representation to establish arbitration schedule and
the rules by which the arbitration shall be governed.
1.3(b): Discovery. Any discovery request shall be reviewed by the
arbitrators and if necessary to the claims and defenses of the parties shall be approved.
This includes expert reports, any necessary depositions, names and addresses of the
witnesses, and anything else the parties deem necessary.
1.3(c): Motions. Any and all motions must be filed with the panel of
arbitrators before the beginning of the arbitration.
1.4: Hearing
1.4(a): Location. The hearing will be held at a site deemed agreeable by
the panel and the parties prior to the beginning of the arbitration.
1.4(b): Time. The hearing must not last beyond a three (3) month
period.
1.4(c): Award. The arbitrators must submit their decision in written
format no later than one (1) month after the conclusion of the hearing. The sole remedy
allowed shall be actual damages.
1.5: Costs and Fees. Barring any contrary agreement by the parties and
arbitrators, the cost of the location, arbitrators, and any other expenses shall be split
evenly by the parties.
Outline
The arbitration dispute involves a failure to deliver natural gas from Eastern European
Efficiency to United Natural Gas. The facts, which are further expanded upon in the plaintiff’s
claim, are as follows: the parties entered into a contract for the sale of $2.2 million US worth
of natural gas. Eastern European Efficiency failed to deliver and the parties signed an
amended contract to deliver two weeks later. They failed to deliver again. At this point, United
Natural Gas filed a suit in the 9th Circuit against Eastern European Efficiency. Eastern
European Efficiency filed a response and the claim was then sent to arbitration, where it is to
be decided by a panel of arbitrators from the International Chamber of Commerce.
The arbitration clause signed by the parties states several actions that must occur
before the beginning of arbitration. First, according to rule 1.1, an arbitration demand must be
delivered to the parties involved and include a clear statement of the dispute. In this case, the
plaintiff served notice when they filed a claim with the courts. Additionally, the defendants
acknowledged service when they filed an answer in court.
According to 1.2 the parties have three weeks to select from the International Chamber
of Commerce three arbitrators. The rules of the International Chamber of Commerce will
govern the dispute, therefore the arbitrators must be pre-selected by the organization.
In terms of other processes that must occur, the parties must meet to establish the
arbitration meeting times under rule 1.3. In the pre-arbitration meeting the parties can also
decide on the location of the arbitration. Additionally, the arbitrators can review and approve
any discovery requests and any and all motions. In this case, the parties each produced
depositions that were completed prior to arbitration and those were used by the arbitrator. The
Perry, Lopez, and Kensington depositions are all attached.
As part of the initial claim required by 1.1 and by 1.3, each party has stated what they
want out of their deposition. The plaintiff is seeking damages for the lost profits and delivery
of the goods, whereas the defendants want the contract nullified under the doctrine of
impossibility. Because they are submitted prior to the hearing the arbitrator can know,
entering the dispute, what the parties will be arguing for or against.
Finally, under rule 1.4, the arbitrators will come to a decision for or against the
plaintiff, which in this case would either grant them damages and delivery or deny them
completely. The costs would then be split between the two parties under rule 1.5, unless the
arbitrators included a decision that one party would pay for the entire arbitration.
In terms of improvements that could be made to these rules, I would revise Rule 1.4 to
be more structured in terms of what the actual arbitration process between the two parties
would look like. Because this is an international dispute, I should have written the rules to
allow the arbitrator to decide on a location if necessary, not relying on the ability of the parties
involved to compromise. Additionally, while I intended the International Chamber of
Commerce rules to govern the arbitration, I should have made it more clear as to the
jurisdiction of the United States.
PLAINTIFF’S CLAIM FOR DELIVERY OF GOODS AND DAMAGES
CLAIM SUBJECT TO ARBITRATION - 1
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Johnny Smith
Bar #385189
Smith International Litigation
9TH CIRCUIT COURT
United Natural Gas,
Plaintiff,
vs.
Eastern Europe Efficiency,
Defendant
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Case No.: 9700185
PLAINTIFF’S CLAIM FOR DELIVERY OF
GOODS AND DAMAGES
CLAIM SUBJECT TO ARBITRATION
Summary of the Facts
United Natural Gas and Eastern Europe Efficiency have
entered into contracts since February of 1999. United Natural Gas, a
Portland-based company, deals exclusively in natural gas purchases from
Eastern Europe. From there, they distribute natural gas throughout North and
South America. Eastern Europe Efficiency is a prominent Ukraine-based natural
gas refining and transporting business.
On November 2, 2013 defendant entered into a contract with
plaintiff for the sale of $2.2 million (US) worth of natural gas to be
delivered by February 2, 2014. Following the delivery of the natural gas, the
$2.2 million would be paid to the defendant and the delivery would be
distributed by plaintiff to the distributing purchases.
On February 1, 2014 defendant informed plaintiff that due
to political unrest it would be unlikely that they would able to be complete
the agreement as signed. Because it was only a day away from the scheduled
delivery date the defendants had no choice but to renegotiate a delivery
agreement, allowing the defendants a two-week extension that they repeatedly
PLAINTIFF’S CLAIM FOR DELIVERY OF GOODS AND DAMAGES
CLAIM SUBJECT TO ARBITRATION - 2
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said they could fulfill. The parties both signed an amended contract with an
extended delivery date of February 15th, 2014.
Defendants failed to deliver the natural gas by February
25th. Additionally, the plaintiff repeatedly attempted to contact the
defendant in order to determine that delivery was going to be completed and
defendants failed to get in touch with plaintiff.
Due to the failed delivery of the natural gas, United
Natural Gas sustained $900,000 in lost profits and the loss of two
distributing contracts.
Argument
I. The Plaintiff is entitled to delivery of the natural gas
a. Due to the scarcity of natural gas and the existing contract with
Eastern Europe Efficiency, plaintiffs should be able to complete
the purchase of the $2.2 million worth of natural gas.
II. The Plaintiff is entitled to damages in the amount of the lost
profit and lost contract
a. The plaintiff began suffering losses following the breach of the
February 2nd, 2014 contract delivery date and should receive the
amount in lost profits and lost contract damages in the amount of
$862,000.
i. The lost profits of $900,000 occurred when the defendant
failed to deliver and several clients could not purchase in
the amount of their order.
ii. The three lost clients will cost United Natural Gas
$862,000 in the next fiscal year. The clients left United
Natural Gas exclusively because of the failed February 2014
delivery, otherwise satisfied with their experience as
long-time customers of United Natural Gas
PLAINTIFF’S CLAIM FOR DELIVERY OF GOODS AND DAMAGES
CLAIM SUBJECT TO ARBITRATION - 3
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Conclusion
Due to the failure to deliver the contracted amount of
natural gas the plaintiff’s are entitled to delivery of the natural gas and
damages stemming from the failure of delivery
Dated this 10th of March, 2014
JOHNNY SMITH, # 385189
DEFENDANT’S RESPONSE TO PLAINTIFF’S CLAIM FOR DELIVERY OF GOODS AND
DAMAGES UNDER UCC 2-615 - 1
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Carol Andrews
Bar # 3252291
Andrews Defense
9TH CIRCUIT COURT
United Natural Gas,
Plaintiff,
vs.
Eastern Europe Efficiency,
Defendant
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Case No.: 9700815
DEFENDANT’S RESPONSE TO PLAINTIFF’S
CLAIM FOR DELIVERY OF GOODS AND
DAMAGES UNDER UCC 2-615
Argument
I. The doctrine of impossibility protects defendants from being held
liable for the failed deliver of the natural gas
a. While it is unfortunate that plaintiff was unable to fulfill
their contractual distribution agreements, it was contractually
impossible for defendants to complete delivery of the natural gas
by the amended delivery date of February 15th, 2014.
b. Impossibility states the general rule is that a thing may be
impossible to perform when it would not be practicable to
perform. A contractual obligation is impracticable "when it can
only be done at an excessive and unreasonable cost"
(Transatlantic Financing Corp. v. United States, 363 F.2d 312
[D.C. Cir. 1966]). As anyone who has been following the
continuing unrest in Ukraine would know, the distribution and
transfer of natural gas is one of many things that has become
impossible for perform in Ukraine.
DEFENDANT’S RESPONSE TO PLAINTIFF’S CLAIM FOR DELIVERY OF GOODS AND
DAMAGES UNDER UCC 2-615 - 2
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c. Because the contract was impossible to perform it is clear that
the defendant should not be held liable for the damages incurred,
nor should they have to deliver the natural gas, assuming it was
even possible now.
II. Plaintiff willingly entered into an amended contract for a later
delivery date, therefore defendant is not liable for the losses
beginning on February 2nd, 2014
a. Even if the defendant were held even partially liable for the
losses incurred by plaintiff, the plaintiff willingly entered
into a contract extending the delivery date to February 15th,
2014. According to the deposition of Diane Perry, CEO of
Vancouver Energy, plaintiff was going to lose their business even
if the natural gas would have been delivered on February 15th.
According to Perry, “We knew that we would have to find our
natural gas elsewhere beginning on February 3rd regardless of any
later shipment.” (Perry Dep. p. 2, 12-16).
b. Additionally, one of the other three clients that plaintiff cites
was planning on dropping United Natural Gas as their supplier at
the end of February regardless. According to Kyle Lopez, CIO of
Midwest Power, the plaintiff’s contract performance had been less
than satisfactory and they were planning on finding another
supplier in February. According to Lopez, “They were really
unreliable and we are all sick of dealing with it. There are
plenty of other suppliers we can turn to.” (Lopez Dep. p. 1-2,
25).
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DEFENDANT’S RESPONSE TO PLAINTIFF’S CLAIM FOR DELIVERY OF GOODS AND
DAMAGES UNDER UCC 2-615 - 3
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Conclusion
The defendant should not be held liable for the losses
incurred nor can they be forced to deliver the goods as they are unable to do
so.
Dated this 10th of March, 2014
Carol Andrews, #3252291
Deposition of Diane Perry pursuant to FRCP 30 - 1
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Carol Andrews
Bar # 3252291
Andrews Defense
9TH CIRCUIT COURT
United Natural Gas,
Plaintiff,
vs.
Eastern Europe Efficiency,
Defendant
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Case No.: 9700185
Deposition of Diane Perry pursuant to
FRCP 30
Deposition of Diane Perry
Deposition of Diane Perry, a witness in the above-entitled case, taken
before Saul Anderson, notary public located in Washington County, Oregon,
pursuant to Uniform Trial Court Rules.
Direct Examination by Ms. Andrews:
Q: Hello, Ms. Perry. Please state you name and occupation.
A: Diane Perry, CEO of Vancouver Energy.
Q: Thank you. Ms. Perry, you have had a contract for the purchase and
distribution of natural gas with United Natural Gas for the last 8 years,
correct?
A: Yes, we entered into a contract in 2006 and have continued doing business
together since then.
Q: What is the nature of your distribution?
A: We distribute natural gas to municipalities and entities like hospitals
and local businesses. We operate on a structure where we are incredibly
reliant on the deliver of gas by our supplier, as our customers need
predictability and reliability more than anything.
Deposition of Diane Perry pursuant to FRCP 30 - 2
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Q: That makes sense. Before February 2014 how was your working relationship
with United Natural Gas?
A: Generally, fine. There have been a couple of hiccups in terms of late
delivery, but never anything more than a few hours.
Q: Tell us about what happened in February 2014.
A: Well, they knew the nature of our business, specifically that it was part
of our business model to operate without a lot of wiggle room in terms of
time. They called us on February 1st and informed me that they would be unable
to the deliver and that that they could now make us a sale on February 16th,
2014. This didn’t work for me or our business model.
Q: So you decided to drop them as your supplier?
A: Yes, we had been pursued by other suppliers that had far better track
records and this was the last straw. I informed United Natural Gas at this
time that we would no longer be needing their services. We knew that we would
have to find our natural gas elsewhere beginning on February 3rd regardless of
any later shipment.
Q: Even if the delivery had come through on February 15th you would not have
retained your contract?
A: No. The second they said no February 2nd delivery we were done.
Dated this 10 of March, 2014
Carol Andrews, #3252291
Deposition of Kyle Lopez pursuant to FRCP 30 - 1
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Carol Andrews
Bar # 3252291
Andrews Defense
9TH CIRCUIT COURT
United Natural Gas,
Plaintiff,
vs.
Eastern Europe Efficiency,
Defendant
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Case No.: 9700185
Deposition of Kyle Lopez pursuant to
FRCP 30
Deposition of Kyle Lopez
Deposition of Kyle Lopez, a witness in the above-entitled case, taken
before Saul Anderson, notary public located in Washington County, Oregon,
pursuant to Uniform Trial Court Rules.
Direct Examination by Ms. Andrews:
Q: Hello Mr. Lopez. Could you please state your name and occupation?
A: Kyle Lopez, CIO of Midwest Power.
Q: Ok Mr. Lopez, why don’t you tell us about the nature of Midwest Power’s
working relationship with United Natural Gas.
A: I have been in contracts with United Natural Gas on and off since 2000.
Q: Have you generally been satisfied with their work?
A: No, I haven’t actually. There simply haven’t been any meaningful
alternatives to their company.
Q: Are there now?
A: Yes, the market has expanded quite a bit. There are at least 3-4 that I
have been talking to for the last six months or so. They were really
Deposition of Kyle Lopez pursuant to FRCP 30 - 2
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unreliable and we are all sick of dealing with it. There are plenty of other
suppliers we can turn to.
Q: So are you saying that you have planned to leave United Natural Gas?
A: Yes, since about November of 2013.
Q: Were they aware of this?
A: Yes. I informed them of competitive pricing and they didn’t give my threat
to leave much credence. I ultimately left in February 2014.
Q: Did their failure to deliver in February lead to that decision?
A: No, I was leaving no matter what.
Dated this 10 of March, 2014
Carol Andrews, #3252291
Deposition of Andrew Kensington - 1
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Johnny Smith
Bar #385189
Smith International Litigation
9TH CIRCUIT COURT
United Natural Gas,
Plaintiff,
vs.
Eastern Europe Efficency,
Defendant
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Case No.: 9700185
Deposition of Andrew Kensington
Deposition of Andrew Kensington, a witness in the above-entitled case,
taken before Saul Anderson, notary public located in Washington County,
Oregon, pursuant to Uniform Trial Court Rules.
Direct Examination by Mr. Smith:
Q: Hi Mr. Kensington. Please state your name and occupation.
A: Andrew Kensington, owner and CEO of International Energy.
Q: Mr. Kensington, what is it that International Energy does?
A: We are a distributer of natural gas that we receive from Eastern Europe,
mainly Ukraine and parts of Russia.
Q: What is your knowledge of United Natural Gas?
A: They are one of our direct competitors.
Q: In the last few months have you received your natural gas shipments with
regularity?
A: Yes, although there is a lot of unrest in Ukraine we have been in
communication with the companies and beyond a little extra work there doesn’t
seem to be many issues in the transfer of natural gas.
Deposition of Andrew Kensington - 2
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Q: So they haven’t had any trouble and you have received your normal
shipments?
A: Yes, and in talking to them I don’t know how shipments are being that
delayed.
Q: Why do you say that?
A: The companies state that they all have shipping clearance and there
shouldn’t be a delay in any company.
Q: Are you familiar with Eastern European Efficiency?
A: Yes, I am. I have worked with them before and they are incredibly
unprofessional.
Q: Why do you say that?
A: Well, they were never on time when I ordered from them. Also, talking to
my guys over there it sounds like they are just using the political issues to
make excuses for not being ready for the shipment.
Q: No further questions, thank you Mr. Kensington.
Dated this 10 of March, 2014
JOHNNY SMITH, # 385189