FILED: ALBANY COUNTY CLERK 08/11/2021 09:47 AM
`NYSCEF DOC. NO. 1
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`INDEX NO. 907022-21
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`RECEIVED NYSCEF: 08/11/2021
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`SUPREME COURT FOR THE STATE OF NEW YORK
`COUNTY OF ALBANY
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`In the Matter of the Application of
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`NEW YORK STATE DEPARTMENT OF HEALTH,
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`For an Order, Pursuant to Article 75 of the CPLR, staying
`an arbitration commenced by
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`Petitioner,
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`RUSI TECHNOLOGY COMPANY, LIMITED,
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`Respondent.
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`Index No. ________
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`VERIFIED PETITION
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`Petitioner New York State Department of Health (“NY DOH”), by and through its
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`undersigned attorneys, Binder & Schwartz LLP, hereby alleges for its petition pursuant to Article
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`75 of the New York Civil Practice Law and Rules as follows:
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`PRELIMINARY STATEMENT
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`1.
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`This is a verified petition seeking an Order pursuant to CPLR 7503(b) to stay an
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`arbitration proceeding purported to have been commenced by Respondent Rusi Technology
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`Company, Limited (“Rusi”) against NY DOH in China that is not authorized by the parties’
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`written contract.
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`2.
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`In March 2020, as the COVID-19 pandemic was first cresting in New York State,
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`NY DOH sought to procure medical respirators—masks—to help cover the shortfall in personal
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`protective equipment for medical personnel and first responders in the State of New York.
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`FILED: ALBANY COUNTY CLERK 08/11/2021 09:47 AM
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`INDEX NO. 907022-21
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`RECEIVED NYSCEF: 08/11/2021
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`3.
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`Rusi, a Chinese company headquartered in Hong Kong, offered to sell N-95 and
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`KN-95 masks to NY DOH. This action involves the KN-95 masks. This offer was
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`communicated through an individual working at a New York-based organization.
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`4.
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`NY DOH and Rusi negotiated, and ultimately agreed, to a written contract for the
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`sale of KN-95 masks, consisting of three parts. First, Rusi drafted a sales contract written in both
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`English and Chinese. NY DOH then returned a purchase order that revised the sales price listed
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`in the contract and incorporated two appendices: the standard terms for New York State contracts
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`and additional COVID-19 standard terms. The parties then executed a written amendment to the
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`sales contract that reflected the sales price term from the purchase order. The contract provided
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`for, and NY DOH made, a partial payment to Rusi, and Rusi shipped the masks.
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`5.
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`Upon receipt and inspection of Rusi’s initial shipments of the KN-95 masks, NY
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`DOH found that a substantial number of masks did not comply with the KN-95 standards
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`specified in the contract. NY DOH thus concluded that Rusi was in breach and withheld the
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`balance of payment due.
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`6.
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`The English and Chinese text in the sales contract materially conflicts regarding
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`dispute resolution. The English text specifies that the English language version precedes over
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`the Chinese, and states that NY DOH and Rusi shall settle any dispute by friendly consultation.
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`The Chinese text in the sales contract states that the Chinese language version precedes over the
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`English, and states that any disputes shall be settled by friendly consultation or by arbitration in
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`China.
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`7.
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`The purchase order, which is entirely in English, was sent after the sales contract
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`and provides that for COVID-19 contracts involving the international shipment of goods, any
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`FILED: ALBANY COUNTY CLERK 08/11/2021 09:47 AM
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`INDEX NO. 907022-21
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`disputes unable to be resolved by friendly consultation shall be resolved by arbitration in New
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`York with the International Chamber of Commerce, with all proceedings to be in English.
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`8.
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`On or about June 28, 2021, the New York State Office of General Services
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`received a notice of arbitration issued by the China International Economic and Trade
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`Arbitration Commission regarding a dispute submitted by Rusi with respect to the KN-95 masks.
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`The arbitration petition itself was filed by Rusi in Chinese. The notice of arbitration, which was
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`never sent to NY DOH, contains no date by which NY DOH must challenge the propriety of
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`arbitration in China. It requests a response from NY DOH to Rusi’s arbitration demand within
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`45 days of receipt, which would be August 12, 2021.
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`9.
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`The initial sales contract executed by NY DOH and Rusi did not have the
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`“meeting of the minds” required to refer any dispute between them to arbitration, let alone in
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`China and to be handled in Chinese. If anything, under New York law, which incorporates the
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`Convention for the International Sale of Goods (the “CISG”), Rusi agreed to NY DOH’s
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`additional terms set forth in the purchase order attachments requiring any arbitration proceeding
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`to be brought in New York before the International Chamber of Commerce, to be handled in
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`English. As there is no agreement to arbitrate in China, NY DOH seeks an order permanently
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`staying the Chinese arbitration proceedings.
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`10.
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`An immediate preliminary stay is also necessary to prevent an unauthorized
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`proceeding from moving forward while this court hears this Petition. Failing a preliminary stay,
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`NY DOH risks an unauthorized finding of default in the Chinese arbitration.
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`11.
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`Service upon Rusi by certified or registered mail is authorized pursuant to the
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`parties’ agreement in the purchase order as well as CPLR Section 7503(c). Service upon Rusi
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`FILED: ALBANY COUNTY CLERK 08/11/2021 09:47 AM
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`INDEX NO. 907022-21
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`via email to its counsel in the Chinese arbitration and to the authorized email address in the
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`parties’ contract is also appropriate to ensure immediate notice to Rusi of the immediate stay.
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`THE PARTIES
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`12.
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`NY DOH is an agency of the State of New York. Its offices are located at
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`Corning Tower, Empire State Plaza, Albany, NY 12237.
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`13.
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`Rusi is a Chinese corporation with its principal place of business at Flat1406A,
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`14/F Belgian Bank Building, NOIS 721-725 Nathan Road, Mongkok, Hong Kong, China.
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`JURISDICTION AND VENUE
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`14.
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` This Court has jurisdiction over Rusi pursuant to CPLR 301 and 302(1). Rusi
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`solicited the business of NY DOH in New York through an authorized representative, negotiated
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`the contracts in New York, and shipped goods that it was aware would be used in New York.
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`15.
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`Venue is proper pursuant to CPLR 7502(a)(i) because NY DOH is located in
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`Albany County.
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`STATEMENT OF FACTS
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`16.
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`In March 2020, New York became the global epicenter of the COVID-19
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`pandemic. The speed of the virus’s spread led to shortages in personal protective equipment for
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`hospital workers and first responders, including shortages of medical masks. In order to mitigate
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`this shortfall, New York State took an active role in acquiring PPE for distribution to healthcare
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`workers.
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`17.
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`Numerous vendors solicited New York State to purchase their PPE, including
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`Rusi. Rusi communicated with New York State through a local representative based in New
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`York, who handled contract negotiations with NY DOH on behalf of Rusi. Rusi provided the
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`initial draft of a contract for the purchase of masks, which was written in both English and
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`INDEX NO. 907022-21
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`Chinese. NY DOH edited the English version and relied on the provision that stated that the
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`English language version controlled. Ultimately, NY DOH and Rusi executed two contracts, one
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`for N-95 masks and one for KN-95 masks. The contract at issue here is the one for KN-95
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`masks, agreed on March 27, 2020 (the “March 27 Contract”).
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`18.
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`The March 27 Contract consists of three documents – (1) a Sales Contract, signed
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`by NY DOH, attached as Exhibit A, (2) a purchase order with two Appendices, changing the
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`price and adding standard New York State contracting terms, attached as Exhibit B (collectively,
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`the “Purchase Order”), and (3) an Amendment to the Sales Contract, conforming the price to that
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`listed in the Purchase Order, attached as Exhibit C.
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`19.
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`The Sales Contract, drafted by Rusi, contains a section titled “Governing Law and
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`Arbitration,” which provides, in English, that “All disputes arising from the execution of or in
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`connection with the contract shall be settled through friendly consultation between both parties.”
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`20.
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`In that same provision, there are Chinese terms. These terms purport to provide
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`for application of Chinese law and arbitration in China. A certified translation of these Chinese
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`terms is attached as Exhibit D.
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`21.
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`The Sales Contract also contains a section titled “Remark” which states in English
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`“This contract is written in both Chinese and English. In case of any discrepancies between the
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`two versions, the English version shall prevail.” See Ex. A at page 5. However, the Chinese
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`language in that same section purports to provide that the Chinese language version of the
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`contract shall prevail over the English. See Ex. A at page 5; Ex. D (certified translation). The
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`Chinese language version also states that the laws of China shall apply, and the United Nations
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`Convention on Contracts for the International Sale of Goods (“CISG”) shall not apply. Id.
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`FILED: ALBANY COUNTY CLERK 08/11/2021 09:47 AM
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`INDEX NO. 907022-21
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`22.
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`After returning the Sales Contract, NY DOH sent to Rusi its Purchase Order,
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`which reflected a price modification, and incorporated additional terms, namely an Appendix A,
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`Standard Clauses for All New York State Contracts, and an Appendix B, Additional Standard
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`Terms (COVID-19 Related Transactions). This is consistent with the Sales Contract, which
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`references an Addendum. See Ex. A at 5.
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`23.
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`Section 15.5 of Appendix B provides that the Sales Contract, Appendix A, and
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`Appendix B collectively form the Contract between the parties. Additionally, Appendix B
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`provides that the hierarchy in case of conflict shall be first Appendix A, then Appendix B, and
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`then the Sales Contract, except that “Appendix B shall control with respect to provisions
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`regarding dispute resolution.” See Ex. B, App. B § 15.5.
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`24. With respect to dispute resolution for international transactions, Appendix B
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`provides that the parties shall settle any dispute through friendly consultation, except that to the
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`extent resolution is not reached within 10 days, any dispute shall be settled “by binding
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`arbitration, which shall be administered by the International Chamber of Commerce in
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`accordance with the ICC rules of arbitration. . . . The place of arbitration shall be New York,
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`New York, United States.” Id. The provision also provides that the proceedings will be
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`conducted in the English language. Id.
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`25.
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`Section 14 of Appendix A and Section 13 of Appendix B provide that the contract
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`“shall be governed by the laws of the State of New York except where the federal supremacy
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`clause requires otherwise.”
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`26.
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`Rusi executed the Sales Contract, did not object to the Purchase Order, which
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`included the modified price and Appendix A and B, and subsequently executed the Amendment
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`to the Sales Contract, reflecting the modified price. Rusi thereafter tendered what it deemed to
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`FILED: ALBANY COUNTY CLERK 08/11/2021 09:47 AM
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`INDEX NO. 907022-21
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`RECEIVED NYSCEF: 08/11/2021
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`be performance to NY DOH by delivering masks. Upon inspection of the goods provided by
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`Rusi, NY DOH determined a large number were significantly defective and not in compliance
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`with the KN-95 standards specified in the March 27 Contract. NY DOH informed Rusi that it
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`could not use the masks for their intended purpose, and that Rusi was in breach of the contract.
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`27.
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`On or about May 18, 2021, the China International Economic and Trade
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`Arbitration Commission (“CIETAC”) accepted an arbitration application apparently submitted
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`by Rusi regarding the March 27 Contract (the “Purported Chinese Arbitration”), and issued a
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`notice of arbitration to NY DOH. The notice of arbitration attached the arbitration application
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`submitted by Rusi, along with what appears to be a book of rules governing the arbitration and
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`information on the arbitration panel, all of which are written in Chinese, with no English
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`translation. The notice of arbitration (without the attachments written in Chinese) is attached
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`hereto as Exhibit E. The notice of arbitration was sent to and received by the New York State
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`Office of General Services, and not NY DOH, on June 28, 2021. The notice of arbitration
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`contains no date by which NY DOH must challenge the propriety of arbitration in China. It
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`requests a response to Rusi’s arbitration demand within 45 days of receipt, which would be
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`August 12, 2021.
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`28.
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`Notably, NY DOH and Rusi had also entered into a contract on March 13, 2020
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`for the purchase of N-95 masks (the “March 13 Contract”). The English text in the March 13
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`Sales Contract is identical to that in the March 27 Contract, but the March 13 Sales Contract has
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`the Chinese text in the “Governing Law and Arbitration” and “Remark” sections blacked out.
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`The March 13 Contract also includes a purchase order and Appendix A, but did not incorporate
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`Appendix B because at that point in the pandemic the State of New York had not yet created
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`Appendix B. Therefore, the dispute resolution provision in Appendix A governs the March 13
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`INDEX NO. 907022-21
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`RECEIVED NYSCEF: 08/11/2021
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`Contract, providing for New York courts to have exclusive jurisdiction over any dispute between
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`NY DOH and Rusi. The course of dealing between the parties makes clear that Rusi knew NY
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`DOH would not agree to Chinese law or Chinese arbitration. Nor would that be consistent with
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`NY State policy, as demonstrated by the NY State standard contracting forms.
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`FIRST CAUSE OF ACTION
`STAY OF ARBITRATION UNDER CPLR 7503(b)
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`29.
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`The competing choice of law provisions in the English text of the Sales Contract
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`(choosing no law and stating that the English language version controls) and the Chinese text of
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`the Sales Contract (choosing Chinese law, excluding the CISG, and stating that the Chinese
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`language version controls), demonstrate that there was no initial “meeting of the minds” with
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`respect to choice of law, and thus no valid choice of law term. Under the CISG, which governs
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`the construction of contracts related to international commerce in adopting countries, including
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`the U.S. and China and is incorporated into New York law, Articles 18 and 19 provide that an
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`acceptance of a contract that provides additional terms operates as either a counteroffer, which
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`can then be accepted by performance, or an acceptance with the terms added (unless the
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`counterparty objects), depending on whether the additional terms are deemed to be material or
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`not. See Article 18(1), 18(3), 19(1), 19(3). Because Rusi performed under the contract without
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`objecting to the additional terms contained in Appendix A and Appendix B, the additional term
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`found in both that the “contract shall be governed by the laws of the State of New York except
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`where the Federal supremacy clause requires otherwise” applies. See id.
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`30.
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`Even if there were not a binding choice of law provision in Appendix A and
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`Appendix B, New York law would govern the contract except where preempted by federal law.
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`New York courts apply New York’s “center of gravity” test to determine which law governs
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`construction of a contract, including where a contract was formed. See Zurich Ins. Co. v.
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`INDEX NO. 907022-21
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`Shearson Lehman Hutton, Inc., 642 N.E.2d 1065, 1068 (1994). The test examines “the places of
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`negotiation and performance; the location of the subject matter; and the domicile or place of
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`business of the contracting parties.” Id. Here, Rusi negotiated the March 27 Contract with NY
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`DOH through a New York-based representative, the contract was negotiated in New York, and
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`the masks shipped by Rusi are located in New York and were intended to be used in New York.
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`Accordingly, New York is the center of gravity of the dispute, and its law applies.
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`31.
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`Under New York law, parties to a contract have not submitted to arbitration “in
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`the absence of an express, unequivocal agreement to that effect.” Marlene Indus. Corp. v.
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`Carnac Textiles, Inc., 380 N.E. 2d 239, 242 (1978). NY DOH never agreed to the Chinese-
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`language provision in the Sales Contract choosing to arbitrate in China, never mind in Chinese,
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`and certainly did not do so expressly or unequivocally. The Sales Contract’s English text alone
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`purports to prevail over the Chinese text in the event of a conflict and contains no agreement to
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`arbitrate in China. Accordingly, even if Appendix B had not added additional terms requiring
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`arbitration in New York before the ICC, there would nevertheless be no agreement to arbitrate in
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`China.
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`32.
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`However, Appendix B did add additional terms specifying that any arbitration
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`under the March 27 Contract would occur in New York before the ICC and in English, not in
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`China before CIETAC. Under the documents that make up the March 27 Contract, Appendix B
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`governs dispute resolution in the event of any conflict with either the English or Chinese
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`language in the Sales Contract. See Ex. B, App’x B § 15.5. Section 14(a) of Appendix B
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`provides that any arbitration must occur in New York before the International Chamber of
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`Commerce in the English language. Regardless of whether NY DOH’s inclusion of additional
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`terms in Appendix A and Appendix B operated as an acceptance with additional terms or a
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`INDEX NO. 907022-21
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`counteroffer, Rusi accepted the terms sent by NY DOH—including the provision regarding
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`arbitration in New York before the ICC—by tendering partial performance. See CISG Article
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`18(1), 18(3); 19(1), 19(3).
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`33.
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`Accordingly, there was no agreement to arbitrate in China, and the Chinese
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`proceedings are improper.
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`34.
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`An order staying the Purported Chinese Arbitration is appropriate under CPLR
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`Article 75 and the Federal Arbitration Act, 9 U.S.C. § 1 et seq. CPLR 7503(b) provides that a
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`party “may apply to stay arbitration on the ground that a valid agreement was not made or has
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`not been complied with.” Under the FAA, the Second Circuit has recognized that courts have
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`the power to stay proceedings. See In re Am. Express Fin. Advisors Sec. Litig., 672 F.3d 113,
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`141 (2d Cir. 2011). Since the FAA provides no express mechanism to do so, see id. at 140, New
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`York law, including Article 75, serves a gap-filling function for the stay of arbitration
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`proceedings. See, e.g., Societe Generale de Surveillance, S.A. v. Raytheon European Mgmt. &
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`Sys. Co., 643 F.2d 863, 867-68 (1st Cir. 1981) (arbitration may be enjoined under Massachusetts
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`law because FAA preempts only inconsistent state law, rather than state law that supplements its
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`terms); see also In re Am. Express Fin. Advisors Sec. Litig., 672 F.3d at 141 (citing Societe
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`Generale with approval).
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`35.
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`Service upon Rusi by certified or registered mail is authorized pursuant to
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`Appendix A, Section 17, of the March 27 Contract, and pursuant to CPLR Section 7503(c).
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`Service upon Rusi via email to its counsel in the Purported Chinese Arbitration and to the
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`authorized email address in the March 27 Contract is also appropriate to ensure immediate notice
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`to Rusi of the immediate stay.
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`INDEX NO. 907022-21
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`36.
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`An immediate stay is necessary to prevent an unauthorized proceeding from
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`moving forward in China. Section 15.4 of Appendix B states that “any breach of this Contract
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`could give rise to irreparable harm,” and thus NY DOH is entitled to obtain “preliminary,
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`injunctive, and other equitable relief without requirement to post any bond.” Ex. B, App’x B
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`§ 15.4.
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`37. Moreover, absent an immediate stay, NY DOH will be in the untenable position
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`of having to either submit to an unauthorized Chinese arbitration or risk default, causing NY
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`DOH irreparable harm in any event.
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`PRAYER FOR RELIEF
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`WHEREFORE, NY DOH respectfully requests that the Court grant an Order:
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`A.
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`Staying the Purported Chinese Arbitration submitted by Rusi in China before the
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`China International Economic and Trade Arbitration Commission; and
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`B.
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`Providing such other and further relief as the Court deems necessary and proper
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`under the circumstances.
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`Dated:
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`August 11, 2021
`New York, NY
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`BINDER & SCHWARTZ LLP
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`/s/ Wendy H. Schwartz
`Wendy H. Schwartz
`Gregory C. Pruden
`366 Madison Avenue, Sixth Floor
`New York, NY 10017
`Tel: (212) 510-7008
`Fax: (212) 510-7229
`wschwartz@binderschwartz.com
`gpruden@binderschwartz.com
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`Attorneys for New York State
`Department of Health
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`FILED: ALBANY COUNTY CLERK 08/11/2021 09:47 AM
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`INDEX NO. 907022-21
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`RECEIVED NYSCEF: 08/11/2021
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`VERIFICATION
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`STATE OF NEW YORK
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`COUNTY OF ALBANY
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`Michael Pasinkoff, being duly sworn, deposes and says:
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`)
`) ss.:
`)
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`•
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`I am Michael Pasinkoff, Special Counsel for Ethics, Risk and Compliance of the
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`New York Division of Human Rights. I am an attorney duly licensed to practice in
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`the courts of the State of New York and have been authorized by NY DOH to handle
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`this matter. I make this affirmation under the penalties of perjury pursuant to CPLR
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`2106.
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`•
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`I have read the foregoing petition and its factual contents are true to my personal
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`knowledge.
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`• The exhibits attached to the foregoing petition are true and correct.
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`______________________________
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`Michael Pasinkoff
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