793 F.3d 847
8th Cir.2015Background
- AVR (Israeli corporation) and Interton (Minnesota corporation) entered a 2004 Investment Agreement giving Interton a 20% interest and board seat; Agreement incorporated by reference a Stock Purchase Agreement containing a governing-law (Israel) and arbitration clause.
- Investment Agreement funded $412,000 for R&D; AVR contended R&D included DFC technology and W.C. components that Interton would acquire.
- AVR initiated arbitration in Israel asserting claims arising from the Investment Agreement, including DFC and W.C. disputes; Interton participated but argued those two claims fell outside the incorporated arbitration clause and sought Israeli court relief to limit arbitration scope.
- Israeli district court and the Supreme Court of Israel held the DFC and W.C. claims "relate to (or arise out of)" the Investment Agreement and thus were within the arbitration clause; an Israeli arbitrator ultimately awarded AVR damages and fees; Israeli courts denied Interton's attempts to revoke or vacate.
- AVR petitioned a U.S. district court under the New York Convention to confirm the Israeli arbitration award; the district court confirmed. Interton appealed, arguing lack of subject-matter jurisdiction and that the U.S. court should independently decide scope of the arbitration clause.
Issues
| Issue | AVR's Argument | Interton's Argument | Held |
|---|---|---|---|
| Whether the district court had subject-matter jurisdiction under the Convention to confirm the foreign award | AVR supplied a certified written arbitration agreement as required and thus jurisdiction exists | No written agreement covered the DFC and W.C. claims, so Convention jurisdictional prerequisites are lacking | Court held jurisdiction existed; a written agreement was supplied and issue was scope, not existence, of agreement |
| Whether the DFC and W.C. disputes fell within the written arbitration clause | Israeli courts already decided those disputes "relate to (or arise out of)" the Agreement; therefore award is enforceable | Those disputes were separate and not covered by the arbitration clause; U.S. court must decide scope independently | Court deferred to Israeli courts and held the disputes were within the arbitration clause; confirmation appropriate |
| Whether U.S. courts must independently decide arbitrability despite foreign court rulings | AVR: issues of arbitrability already adjudicated in competent Israeli forums and preclusive | Interton: U.S. courts cannot be bound; must independently assess arbitrability under Convention | Court applied principles of res judicata/recognition of foreign judgments and declined to relitigate arbitrability after Israeli courts provided full and fair adjudication |
| Applicability of preclusion/recognition of foreign judgments to an arbitration-confirmation proceeding | AVR: Israeli final judgments satisfy the five Hilton/Shen factors; should have preclusive effect | Interton: contends no written arbitration agreement covered the specific claims, undermining preclusion | Court found the five factors present and gave preclusive effect to Israeli court rulings; confirmation affirmed |
Key Cases Cited
- ABF Freight Sys., Inc. v. Int'l Bhd. of Teamsters, 645 F.3d 954 (8th Cir. 2011) (standard of review for subject-matter jurisdiction is de novo)
- Black Clawson Co. v. Kroenert Corp., 245 F.3d 759 (8th Cir. 2001) (doctrine of res judicata precludes relitigation of previously adjudicated issues)
- Shen v. Leo A. Daly Co., 222 F.3d 472 (8th Cir. 2000) (factors for recognizing and giving preclusive effect to a foreign judgment)
- Hilton v. Guyot, 159 U.S. 113 (U.S. 1895) (foundational principles for recognition and enforcement of foreign judgments)
- Czarina, L.L.C. v. W.F. Poe Syndicate, 358 F.3d 1286 (11th Cir. 2004) (interpreting Convention to require a threshold written-agreement showing — discussed and distinguished)
- Sarhank Grp. v. Oracle Corp., 404 F.3d 657 (2d Cir. 2005) (rejected Czarina's approach where a written agreement existed and treated arbitrability as a merits issue)