939 F.3d 1009
9th Cir.2019Background
- Cerner Middle East Ltd. (Cayman corp.; parent in Kansas City) contracted with UAE entity iCapital S/E under a CBA requiring ICC arbitration in Paris and Missouri choice-of-law; disputes led to a series of ICC proceedings.
- Cerner and iCapital LLC entered a Settlement Agreement and Amendment No. 5; Belbadi (a separate UAE entity) executed two Guarantees securing iCapital’s payment obligations.
- An ICC Tribunal (respondents: iCapital LLC and Ahmed Dhaheri) issued a 2015 Arbitration Award holding iCapital LLC and Dhaheri liable for over $62 million.
- Cerner sued Belbadi and Vandevco (a Washington corporation alleged to be Belbadi’s alter ego) in Washington state court to enforce the Guarantees; Cerner attached the Arbitration Award to its complaint.
- Defendants removed under 9 U.S.C. § 205 (New York Convention removal) arguing the state action “relates to” the Arbitration Award; the district court denied remand and dismissed Belbadi for lack of personal jurisdiction.
- The Ninth Circuit reversed the denial of remand, holding § 205 did not authorize removal or supply federal subject-matter jurisdiction, and directed remand to Washington state court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether 9 U.S.C. § 205 authorized removal / supplied federal SMJ because the state action “relates to” an international arbitration award | §205 does not apply here; federal courts lack jurisdiction and case should be remanded | §205 authorizes removal and provides federal jurisdiction because the case could be affected by the Arbitration Award | Held: §205 did not apply; removal improper and federal courts lack jurisdiction under §205; remand ordered |
| Whether the ICC Arbitration Award has preclusive effect over alter-ego or damages claims against Belbadi/Vandevco | Award cannot preclude claims against Belbadi/Vandevco because they were not parties to the arbitration; Cerner must prove claims anew | Award’s findings could preclude or collaterally estop issues relevant to Cerner’s claims | Held: No preclusive effect — different parties and issues; collateral estoppel inapplicable |
| Whether factual findings in the Award could meaningfully affect litigation in state court | Award’s factual findings do not establish Cerner’s claims and would be inadmissible hearsay if used for truth | Award’s factual findings might influence the action’s outcome | Held: Findings would be inadmissible to prove truth; Cerner can plead same facts without relying on the Award; not enough to satisfy §205 |
| Whether the Award’s legal analysis could be persuasive enough to make the case “relate to” the arbitration | Persuasive value of an award alone is insufficient to create §205 jurisdiction | The Tribunal’s legal reasoning could be persuasive and thus conceivably affect the case | Held: Persuasive potential alone (like a law review or foreign tribunal opinion) is insufficient to bring the case within §205 |
Key Cases Cited
- Infuturia Global Ltd. v. Sequus Pharmaceuticals, Inc., 631 F.3d 1133 (9th Cir. 2011) (interpreting “relates to” under §205 as conceivably affecting the outcome)
- Beiser v. Weyler, 284 F.3d 665 (5th Cir. 2002) (adopted the “could conceivably affect” standard for §205 removal)
- Kleenwell Biohazard Waste & Gen. Ecology Consultants, Inc. v. Nelson, 48 F.3d 391 (9th Cir. 1995) (collateral estoppel requires identical issues and parties)
- United States v. Stinson, 647 F.3d 1196 (9th Cir. 2011) (prior judgments offered for truth are hearsay)
- Goel v. Ramachandran, 823 F. Supp. 2d 206 (S.D.N.Y. 2011) (foreign arbitral determinations do not necessarily make a related action removable under the Convention)
- Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574 (1999) (federal courts should resolve jurisdictional issues before reaching merits)
- Caterpillar Inc. v. Lewis, 519 U.S. 61 (1996) (defects in removal/remand practice do not automatically deprive federal courts of jurisdiction if requirements are otherwise met)
- Kircher v. Putnam Funds Trust, 547 U.S. 633 (2006) (procedural principles related to removal and remand)