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You are here: Home / Archives for Arbitration / Court Decisions / Jurisdiction Issues

Jurisdiction Issues

Eleventh Circuit Clarifies Standard for New York Convention’s Public Policy Defense to Foreign Arbitration Awards

December 17, 2019 by Michael Wolgin

The dispute involved an arbitration related to alleged medical malpractice by doctors selected by Carnival Cruise Lines to treat a wrist injury of a Serbian employee of Carnival. The employee’s employment agreement with Carnival contained mandatory arbitration and forum selection clauses and a choice-of-law clause designating the governing law as the law of Panama, the law of the flag of the employee’s cruise ship. Notwithstanding the choice of Panamanian law, the employee filed a foreign arbitration asserting a claim under U.S. law, including the Jones Act, for vicarious liability against Carnival. The arbitrator ruled that the employee could not assert the U.S. law claims and that she would not be entitled to relief under Panamanian law. The employee then filed a lawsuit in a federal district court seeking to vacate or deny enforcement of the foreign award under the New York Convention. The district court denied the employee’s petition, rejecting the employee’s arguments that the arbitrator wrongfully deprived her of the opportunity to assert her claim under the Jones Act and that the award was void as against U.S. public policy.

On appeal, the Eleventh Circuit affirmed the district court’s ruling. The Eleventh Circuit rejected the employee’s argument that the court was required to refuse to enforce the award because she was allegedly deprived of a statutory remedy against Carnival. The court ruled that it would not refuse to enforce the award “simply because the remedies available under Panamanian law [were] less favorable” to the employee “than the remedies available under U.S. law.” The court further found that the remedies available under Panamanian law were not “so inadequate that enforcement would be fundamentally unfair.” The court held: “[T]he test for whether a court should refuse to enforce a foreign arbitral award based on public policy is not whether the claimant was provided with all of her statutory rights under U.S. law during arbitration. Rather the public-policy defense ‘applies only when confirmation or enforcement of a foreign arbitration award would violate the forum state’s most basic notions of morality and justice.'” The employee had not made that showing here.

Cvoro v. Carnival Corp., No. 18-11815 (11th Cir. Oct. 17, 2019).

Filed Under: Arbitration / Court Decisions, Jurisdiction Issues

Ninth Circuit Reverses Dismissal of Case Involving Foreign Arbitration Award Based on Comity for French Appellate Ruling and Quasi in Rem Jurisdiction

October 17, 2019 by Benjamin Stearns

The parties entered into a contract under which the plaintiff Cerner Middle East Limited would provide hardware, software, and services to iCapital S/E to facilitate iCapital’s fulfillment of a contract that it had been awarded by the United Arab Emirates Ministry of Health. The contract required the parties to submit any disputes to binding arbitration under the rules of the International Chamber of Commerce, specified that the seat of arbitration would be in Paris, and provided a choice-of-law clause electing the law of the state of Missouri.

A dispute arose and Cerner issued a request for arbitration when iCapital failed to make payments due under the contract, to which iCapital responded by objecting to the arbitration. The principal of iCapital, Ahmed Saeed Mahmoud Al-Badi Al-Dhaheri, declined to respond at all. The International Court of Arbitration concluded that the arbitration should proceed against both iCapital and Dhaheri and appointed a tribunal. The tribunal issued an award against both iCapital and Dhaheri for $62 million in July 2015, determining that it had jurisdiction over the latter as he was the sole proprietor of iCapital and, alternatively, because he was the alter ego of the reorganized iCapital LLC.

Cerner sought to enforce the arbitration award in Oregon state court seeking to attach funds in an Oregon bank account owned by Dhaheri. Cerner relied on a quasi in rem theory to establish jurisdiction. The case involved “type two” quasi in rem jurisdiction, which requires that (1) a court of competent jurisdiction render a judgment against the defendant; and (2) the defendant owns property in the forum state. The defendants removed to federal court and moved to dismiss for lack of personal jurisdiction, arguing that Cerner did not possess a valid judgment against Dhaheri and therefore could not rely on quasi in rem to establish jurisdiction. The district court agreed and dismissed the case.

Cerner appealed to the Ninth Circuit Court of Appeals. While the appeal was pending, the Court of Appeal of Paris affirmed a French trial court decision that confirmed the arbitration award and found that the tribunal had jurisdiction over Dhaheri in addition to iCapital. In light of this development, the Ninth Circuit determined that it was not required to decide whether the district court was correct in deciding that the tribunal’s award had to be confirmed as valid by another court before quasi in rem jurisdiction could be exercised.

The defendants then argued that the Ninth Circuit should not recognize the tribunal’s award (or the Paris court’s ruling), in part because the French decision was not entitled to recognition under the principles of international comity. Citing to the U.S. Supreme Court, the Ninth Circuit stated that foreign decisions should be accorded deference unless an underlying issue renders the judgment suspect. The Ninth Circuit found that none of the grounds for disregarding a foreign judgment applied here, noting that a foreign judgment may be entitled to comity even if the U.S. court disagrees with its reasoning. The decision of the Paris court met the minimum standard of reasonableness, and therefore the decision deserved recognition under principles of international comity. The requirements for quasi in rem jurisdiction were thus met, and the action seeking to enforce the award should not have been dismissed for lack of jurisdiction.

Cerner Middle E. Ltd. v. iCapital, LLC, No. 17-35514 (9th Cir. Sept. 23, 2019).

Filed Under: Arbitration / Court Decisions, Jurisdiction Issues

Court Compels Arbitration Under the New York Convention and Dismisses Case in Windstorm Insurance Claim Dispute

July 1, 2019 by Benjamin Stearns

The underlying insurance policy was issued by Certain Underwriters at Lloyd’s London and contained an arbitration clause. The court applied the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (also known as the New York Convention) under the FAA. The court found that all four requirements under the Convention were met. The court easily determined that there was a written agreement and that the agreement arose out of a commercial relationship. With respect to the requirement that the agreement provide for arbitration in the territory of a signatory of the Convention, the court found that the requirement was met where the insurance policy (although separate from the arbitration clause), provided that “any action brought against [the insurer] must be in the United States of America, ‘in a court having proper jurisdiction.'” And regarding the final requirement of the Convention, that a party to the agreement is not an American citizen or that the commercial relationship has a reasonable relation with a foreign state, the court found it was met because a portion of the insurance policy was subscribed to by Lloyd’s Syndicate 2001, which is wholly owned by a company that is organized and principally based in the United Kingdom.

Although Section 3 of the FAA states that district courts “shall” stay proceedings pending arbitration upon the motion of a party, the court found that it is appropriate to dismiss the lawsuit where all of the issues presented are arbitrable and the plaintiff has not requested a stay. The complaint only raised one claim, which the court found subject to arbitration, and the plaintiff did not respond to the motion to compel or otherwise request a stay. As a result, the court dismissed the complaint with prejudice.

German Int’l Sch. of Fort Lauderdale, LLC v. Certain Underwriters at Lloyd’s, London, No. 0:19-cv-60741 (S.D. Fla. May 14, 2019).

Filed Under: Arbitration / Court Decisions, Jurisdiction Issues

Second Circuit Adopts Standard for Determining Subject-Matter Jurisdiction Over Motions to Confirm Arbitration Awards Under FAA Section 9

June 18, 2019 by Alex Silverman

The Second Circuit Court of Appeals recently held as a matter of first impression that a district court properly looked to the substance of an underlying dispute in determining whether it had subject-matter jurisdiction over a motion to confirm an arbitration award pursuant to Section 9 of the Federal Arbitration Act (FAA). The parties are members of the Bobov Hasidic Jewish community in Brooklyn. The petitioners claimed to own trademark rights in the word “Bobov” and commenced arbitration to prevent the respondents from using the mark in connection with a new Hasidic community. The parties agreed to arbitrate before a rabbinical tribunal, which issued an award in the petitioners’ favor. The petitioners sought confirmation of the award in federal district court under Section 9 of the FAA. After concluding that it had subject-matter jurisdiction over the matter, the district court confirmed the award, and the Second Circuit affirmed.

Although the Second Circuit had not previously addressed whether federal courts have subject-matter jurisdiction over motions to confirm under Section 9, it had addressed the issue in the context of a petition to vacate under Section 10. In that case, the court adopted the “look-through” approach used by the U.S. Supreme Court to determine whether a district court had subject-matter jurisdiction over a petition to compel arbitration under Section 4 of the FAA. The Supreme Court instructed district courts to “look through” the petition to the substance of the underlying controversy to assess whether it implicated federal law. The Second Circuit in the current case found no reason not to apply the same standard to a motion to confirm under Section 9. Applying that standard here, it held that because the underlying controversy raised questions of federal trademark law, the district court “unquestionably” had subject-matter jurisdiction over the matter. The court then concluded that the district court properly confirmed the arbitration award, particularly given the extreme deference that courts must afford such awards.

Landau v. Eisenberg, 922 F.3d 495 (2d Cir. 2019)

Filed Under: Arbitration / Court Decisions, Confirmation / Vacation of Arbitration Awards, Jurisdiction Issues

Eleventh Circuit Finds Removal Jurisdiction Is Included Within Federal Subject-Matter Jurisdiction Under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards

May 21, 2019 by Benjamin Stearns

In 2001, Del Monte International GmbH and Inversiones y Procesadora Tropical INPROTSA, S.A. entered into an agreement for the production, packaging, and sale of MD-2 pineapples, a variety of pineapple that Del Monte had developed and which subsequently became the most popular pineapple in the world. The contract included an agreement to arbitrate as well as an agreement that, upon termination of the contract, INPROTSA would either destroy or return its stock of pineapples to Del Monte. However, when the agreement expired in 2013, INPROTSA sold the MD-2 pineapples to third parties rather than destroy or return them to Del Monte.

Del Monte initiated arbitration and was ultimately awarded approximately $26 million and an injunction against INPROTSA’s continued sale of the MD-2 pineapple. INPROTSA filed a petition to vacate the award in Florida state court. Del Monte removed the case to federal court and filed a combined motion to dismiss the petition to vacate and cross-petition to confirm the award. After some “procedural detours,” the district court granted Del Monte’s cross-petition to confirm the award.

INPROTSA appealed, arguing that the district court lacked subject-matter jurisdiction under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, among other issues. INPROTSA argued that there are only two causes of action that may be brought under 9 U.S.C. § 203, the jurisdictional provision of the statute implementing the Convention: (1) an action to compel arbitration; and (2) an action to confirm an arbitral award. According to INPROTSA, because a petition to vacate an arbitral award is not one of the recognized causes of action, the federal court did not have subject-matter jurisdiction over the case.

INPROTSA conceded that the district court had removal jurisdiction under 9 U.S.C. § 205, but argued that the scope of the court’s removal jurisdiction was not coterminous with that of its subject-matter jurisdiction. Effectively, INPROTSA argued that federal courts should be required to remand any case removed to federal court under § 205 that did not also have a federal jurisdictional basis under § 203.

The Eleventh Circuit disagreed on all counts. First, the court held that the Convention does not provide an “exhaustive list of actions and proceedings falling under the Convention” such that the court must inquire whether the action is one of the two types recited above. Rather, the relevant inquiry for the court is whether the action or proceeding “falls under the convention.” The court stated that an action or proceeding falls under the Convention for purposes of § 203 when the action “sufficiently relate[s] to an agreement or award subject to the Convention, such that the agreement or award could conceivably affect the outcome of the case.”

Second, although the court agreed with INPROTSA that removal jurisdiction was not necessarily coterminous with subject-matter jurisdiction, the court nevertheless determined that Congress intended to provide a federal forum for resolving issues implicating the Convention. The court reasoned that it would “make little sense for Congress to specifically authorize removal of cases over which the federal courts would lack subject-matter jurisdiction. … It makes far more sense to conclude Congress intended § 203 to be read consistently with § 205 as conferring subject-matter jurisdiction over actions or proceedings sufficiently related to agreements or awards subject to the Convention.”

Inversiones y Procesadora Tropical INPROTSA, S.A. v. Del Monte Int’l GmbH, 921 F.3d 1291 (11th Cir. 2019).

Filed Under: Arbitration / Court Decisions, Jurisdiction Issues

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