In Dedon GmbH and Dedon Inc., v. Janus et Cie, 10-4331-cv (2d Cir. Jan. 6, 2011), the Second Circuit upheld a holding of the District Court for the Southern District of New York that it was required to decide whether a valid contract with an arbitration agreement existed. The District Court held that it could not compel arbitration or stay the court proceedings during arbitration until the matter was decided, and the Second Circuit agreed.

The dispute arose when Dedon, a German furniture manufacturer, began distributing furniture in the US. Janus, Dedon's California-based distributor, believed this violated their exclusive distribution agreement. Pursuant to the alleged distribution agreement (a draft contract that the parties had not signed), Janus filed a claim with the ICC Court of Arbitration. Dedon asked the District Court for the Southern District of New York for a declaration that no agreement existed between the parties. It then asked the same from the ICC Court of Arbitration. Before both the District Court and the ICC, Dedon argued that the ICC had no jurisdiction over the dispute. The District Court ruled that it must determine whether the parties formed a contract and could not compel arbitration.

On appeal, Janus argued that the arbitral tribunal could decide its own jurisdiction and that Dedon waived its opportunity to object to the arbitration when it voluntarily requested the ICC to find that no agreement existed. The court rejected both arguments. First, it found that Dedon was challenging the existence of an agreement. As this was a question of contract formation, it must be resolved by a court before the court can compel arbitration. The court then held that if a party "repeatedly objects" to arbitration, the court is precluded from finding waiver. If a party participates in arbitration to decide issues of arbitrability, it does not forfeit its right to object to jurisdiction. Dedon's submission to the ICC clearly voiced its objections to jurisdiction and so Dedon's actions did not constitute a waiver.

This decision reiterates to practitioners the importance of making objections to jurisdiction before the arbitrators so as to preclude any possibility of waiving rights their clients may have before the courts. As a matter of US federal law in the Second Circuit, the decision also clarifies that the courts may decide the issue of whether a contract exists even when the same issue is before the arbitrators.

Case: Dedon GmbH and Dedon Inc., v. Janus et Cie, 10-4331-cv (2d Cir. Jan. 6, 2011).