Rabinowitz v. Kelman
75 F.4th 73
2d Cir.2023Background
- Rabinowitz and Kelman entered a 2018 Settlement Agreement (with a Bais Din arbitration clause and a forum-selection provision) and a separate 2020 Arbitration Agreement provided by the Bais Din with a different forum-selection clause.
- The Bais Din issued an arbitration award on January 3, 2021 directing Kelman to pay Rabinowitz $4,000,000 (plus attorneys’ fees to be determined).
- Rabinowitz filed a petition in the U.S. District Court for the Southern District of New York to confirm the award, pleading diversity jurisdiction under 28 U.S.C. § 1332(a)(2).
- Kelman moved to dismiss, arguing the forum-selection clauses required enforcement in New Jersey or New York state courts (depriving the federal court of jurisdiction), and alternatively moved to vacate the award.
- The district court dismissed for lack of subject matter jurisdiction, treating the Arbitration Agreement’s forum clause as mandatory; Rabinowitz appealed.
- The Second Circuit vacated and remanded, holding (1) diversity jurisdiction was adequately pleaded and cannot be contractually ousted, and (2) both forum clauses are permissive rather than mandatory, so dismissal under the modified forum non conveniens framework was not required on that basis.
Issues
| Issue | Plaintiff's Argument (Rabinowitz) | Defendant's Argument (Kelman) | Held |
|---|---|---|---|
| Subject-matter jurisdiction | Petition pleads diversity under §1332(a)(2); federal court has jurisdiction to confirm award | Forum-selection clauses require state-court enforcement, so federal court lacks jurisdiction | Court: Diversity pleaded; parties cannot contractually oust federal SMJ; district court erred in dismissing for lack of SMJ |
| Proper procedure to enforce forum clause | Dismissal should be assessed under forum non conveniens (Atlantic Marine) | Clause mandates suit in state courts, justifying dismissal | Court: Atlantic Marine applies; forum-selection enforcement is via modified forum non conveniens, not Rule 12(b)(1)/(3) |
| Clause interpretation — mandatory vs permissive | Clauses are permissive — they permit enforcement in listed courts but do not exclude others | Clauses mandate enforcement only in NY/NJ state courts | Court: Both clauses are permissive; do not bar federal court; even if mandatory, language referring to courts "in" a state would include federal courts in that state |
| Relief and remaining defenses | Seeks confirmation and attorneys’ fees | Argues award not final, vacatur timely, arbitrators exceeded authority under state law | Court: Remanded for district court to decide those unresolved issues (finality, timeliness, excess authority, fees) |
Key Cases Cited
- Badgerow v. Walters, 142 S. Ct. 1310 (2022) (FAA does not provide independent federal subject-matter jurisdiction)
- Atlantic Marine Constr. Co. v. U.S. Dist. Ct. for W. Dist. of Texas, 571 U.S. 49 (2013) (forum-selection clauses enforced via modified forum non conveniens)
- M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972) (forum-selection clauses generally enforceable; parties cannot oust courts of jurisdiction by contract)
- New Moon Shipping Co. v. MAN B & W Diesel AG, 121 F.3d 24 (2d Cir. 1997) (parties cannot contractually deprive federal court of subject-matter jurisdiction)
- John Boutari & Son v. Attiki Imps. & Distribs., 22 F.3d 51 (2d Cir. 1994) (forum clauses lack of clear exclusionary language are permissive)
- Glob. Seafood Inc. v. Bantry Bay Mussels Ltd., 659 F.3d 221 (2d Cir. 2011) (distinguishing mandatory from permissive forum clauses)
- Martinez v. Bloomberg LP, 740 F.3d 211 (2d Cir. 2014) (applying Atlantic Marine in Second Circuit; forum-selection clauses modify forum non conveniens analysis)
- Phillips v. Audio Active Ltd., 494 F.3d 378 (2d Cir. 2007) (interpreting mandatory language in forum clauses)
- Hall St. Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576 (2008) (FAA does not create jurisdictional grant beyond independent bases)
- Iragorri v. United Techs. Corp., 274 F.3d 65 (2d Cir. 2001) (forum non conveniens factors and deference to plaintiff’s choice of forum)
- Norex Petroleum Ltd. v. Access Indus., Inc., 416 F.3d 146 (2d Cir. 2005) (abuse-of-discretion standard for forum non conveniens analysis)