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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, ))

Defendant. )

_____________________________________________/

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

arbitration.

Even though the facts have already been set forth in the contemporaneously filed com-

plaint, 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 Zee-

land, 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 re-

port 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

followed.

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DISCUSSION

a. Subject-matter jurisdiction.

As aforementioned, the contract between the parties provides for final and binding arbi-

tration 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 Recogni-

tion 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 com-

mercial, 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 Dig-

ital, 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 ju-

risdiction, 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 fall-

ing 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 entertain-

ing the action and the reliefs sought herein by Plaintiff Global, i.e., issuance of an order for at-

tachment and a stay of proceedings, the analysis does not end here.

b. Pre-arbitral/judgment attachment.

Law.

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 com-

plaint 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 ac-

tion is brought").

The moving party has the burden of proving (1) that "[t]he claim upon which the attach-

ment 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 tem-

porary relief. Code of Civ. Proc. §1281.8(b).

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Application.

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 com-

plaint, 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 pur-

chase 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 De-

fendant 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 Agri has provided every

indication that it might, otherwise, be inclined to transfer, hide or dissipate assets without the

1 The fact that Plaintiff is also seeking consequential damages 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.) Accord-ingly, 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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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"), ad-

herence to which had been agreed upon in the contract. However, the plaintiff filed a suit in fed-

eral 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, con-

cluding 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 or-

ders, such as a request for issuance of a writ of attachment. Id. at 1180. However, the Court de-

cided 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-arbi-

tral relief. Id. at 1182. As noted by the district court judge in China National, supra, Article 23

of CIETAC, as incorporated by reference into the commercial contract, had read as follows at the

time:

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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 compe-

tent court designated by that party in accordance with the law.

New Article 23 of CIETAC - Attachment 1 (emphasis added). Thus, whereas the earlier ver-

sion 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 word-

ing 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 tri-

bunal from issuing such provisional relief if subject-matter jurisdiction can properly be main-

tained in such tribunal. Therefore, given the material change in language under Article 23 of CI-

ETAC, Plaintiff Global submits that China National, supra, does not operate to bar it from seek-

ing a pre-arbitral issuance of attachment under Code of Civ. Proc. §483.010, pending arbitration.

Last but not least, the additional argument can be put forward that the facts in China Na-

tional, 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 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

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Contract," found under paragraph 13.6 of the Contract, intended to bestow upon CIETAC the au-

thority to arbitrate contract disputes, not tort matters.

RELIEF SOUGHT

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).

Respectfully Submitted,

Dated: _______ , 2015

________________________________________Attorneys for Plaintiff Global Merchant, LLC

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