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Nakamura Trading Co. v. Sankyo Corp.

April 19, 2006


The opinion of the court was delivered by: Judge Blanche M. Manning


Plaintiff Nakamura Trading Company ("NTC") has brought suit alleging various claims such as breach of contract, unjust enrichment, and breach of fiduciary duty, against defendants Sankyo Corporation ("Sankyo") and Sankyo North America ("SNA"). These claims, among others, arise out of a joint venture agreement among the parties. The defendants have brought the current motion to compel arbitration and stay pending arbitration. For the reasons set forth below, the motion is granted in part and denied in part.


NTC is an Illinois corporation whose shareholders are Masahiro Nakamura and Sankyo, a closely-held Japanese corporation. SNA is the American subsidiary of Sankyo. In 1997, NTC was created as a joint venture between Sankyo and Nakamura to market and sell Sankyo products, including press dies and jigs, automobile parts, agricultural machinery parts, and electronic appliance parts, in the United States. According to the defendants, Sankyo invested $40,000 in NTC and became a 40% shareholder, while Nakamura invested $60,000 and became a 60% shareholder in NTC. The parties confirmed their relationship in a written contract (the "Agreement") in April 2002 after operating several years without one.

By letter dated February 18, 2003, Sankyo terminated the Agreement effective May 18, 2003. Sankyo asserts that the termination occurred, in part, because it had loaned a net amount of approximately $850,000 to NTC in the five years of NTC's existence but NTC had yet to turn a profit. The instant lawsuit by NTC alleges that Sankyo wrongfully terminated the contract and seeks payment of several million dollars in commissions.

The Agreement, originally drafted in Japanese, is quite brief and includes an arbitration clause. Sankyo and SNA contend that the proper translation of the arbitration clause is:

When international disputes arise, arbitration proceedings shall take place in the State of Illinois if party A [Sankyo] sues party B [NTC], and arbitration proceedings shall take place in Hyogo Prefecture if [NTC] sues [Sankyo]. Alternatively, NTC asserts that the clause should be translated as follows:

In case there is an international dispute, the arbitration proceeding initiated by Party A [Sankyo] shall be in the State of Illinois, and the arbitration proceeding initiated by Party B [NTC] shall be in Hyogo Prefecture.


In addressing the merits of the motion, the court notes as an initial matter that NTC has failed to cite to any authorities whatsoever in support of its opposition to the motion. Nevertheless, the court proceeds with its analysis.

Claims against Sankyo "The Federal Arbitration Act governs the enforcement, validity, and interpretation of arbitration clauses in commercial contracts in both state and federal courts." Jain v. de Mere 51 F.3d 686, 688 (7th Cir. 1995) (citations omitted). "Chapter 2 of the Act, 9 U.S.C. §§ 201-208, which implements the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, controls arbitration disputes in the international context." Id. In general, the Act creates a strong presumption in favor of arbitration, especially in international commercial agreements. Id. (citations omitted). Moreover, "[b]y acceding to the Convention, the United States joined other signatory nations in proclaiming a willingness to enforce arbitration clauses in international commercial agreements." Marchetto v. DeKalb Genetics Corp., 711 F. Supp. 936, 938 (N.D. Ill. 1989) (citations omitted). Japan is also a signatory to the Convention. See 9 U.S.C. § 201, as note subsequent to the Convention text.

Article II(3) of the Convention states that:

The court of a Contracting State, when seized of an action in a matter in respect to which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed.

Based on the above authorities, courts ask four questions when attempting to ascertain whether arbitration is required pursuant to the Convention: whether (1) there is a written arbitration agreement; (2) the agreement provides for arbitration in a signatory country; (3) the agreement arises out of a commercial legal relationship; and (4) the commercial transaction has a reasonable relationship to a foreign state. ...

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