785 F.3d 330
9th Cir.2015Background
- Seismic Reservoir 2020, Inc. (California) sued Björn Paulsson; Paulsson asserted counterclaims against Canadian directors based on his status as a shareholder/director of Seismic Reservoir 2020, Ltd. (Alberta).
- Paulsson dismissed two counterclaims and proceeded only with a claim invoking § 242 of the Alberta Business Corporations Act (shareholder oppression / breach of fiduciary duty) seeking damages and remedies authorized by that statute.
- § 242 vests exclusive jurisdiction to grant the statutory remedies in the Court of Queen’s Bench of Alberta and authorizes wide equitable relief (including compensation, restructuring, dissolution, appointment of directors, etc.).
- The U.S. district court (C.D. Cal.) requested expert briefing on Alberta law, concluded only an Alberta court could grant § 242 relief, and dismissed the counterclaim under Fed. R. Civ. P. 12(b)(1) for lack of subject‑matter jurisdiction.
- The Ninth Circuit affirmed dismissal but held the dismissal should have been under Rule 12(b)(6) (failure to state a claim for which relief can be granted) because federal courts have statutory jurisdiction (diversity) but cannot grant the § 242‑specific remedy.
Issues
| Issue | Paulsson's Argument | Appellees' Argument | Held |
|---|---|---|---|
| Whether a U.S. district court lacked subject‑matter jurisdiction to adjudicate a § 242 claim because the Alberta Act vests exclusive jurisdiction in the Queen’s Bench of Alberta | The Alberta exclusive‑forum clause does not divest federal courts of Article III/statutory jurisdiction; the district court had diversity jurisdiction to hear the claim | The Alberta statute’s exclusive jurisdiction provision prevents any other court from granting the statutory remedies, so the federal court lacked jurisdiction | Federal courts have statutory subject‑matter jurisdiction (diversity) to hear the dispute, so § 242 cannot oust jurisdiction; but dismissal is required because the district court cannot grant the statutory § 242 remedies (dismissal under Rule 12(b)(6)) |
| Whether foreign law can determine availability of federal remedies | Foreign exclusive‑forum provisions cannot defeat federal jurisdiction or bar a federal court from deciding the claim | Foreign law can restrict the forum where a particular statutory remedy may be obtained, making the claim non‑remediable in U.S. court | Foreign law cannot strip federal subject‑matter jurisdiction, but it can limit available remedies; where the right and remedy are tied to a foreign tribunal, federal court cannot grant relief |
| Proper procedural vehicle for dismissal when court has jurisdiction but cannot grant requested relief | Dismissal for lack of jurisdiction (12(b)(1)) was appropriate since relief is unavailable | The district court should instead dismiss for failure to state a claim (12(b)(6)) because jurisdiction exists but no relief can be granted | Dismissal should be under Rule 12(b)(6) because the claim fails as a matter of law (no available federal remedy), not for want of jurisdiction |
| Whether a remand or opportunity to amend was required | Paulsson should be given chance to amend to plead a cognizable claim or alternative remedy | Court need not remand because statutory remedy is exclusive to Alberta and amendment cannot cure that defect | No remand or amendment opportunity required where plaintiff cannot possibly obtain relief in the federal forum |
Key Cases Cited
- Tennessee Coal, Iron & R.R. Co. v. George, 233 U.S. 354 (establishes that sometimes a right and remedy are so united that only a specified forum can administer the remedy)
- Carlsbad Tech., Inc. v. HIF Bio, Inc., 556 U.S. 635 (describes subject‑matter jurisdiction as the court’s statutory or constitutional power to hear a case)
- Randall v. Arabian Am. Oil Co., 778 F.2d 1146 (foreign law cannot unilaterally divest U.S. federal court jurisdiction)
- Flame S.A. v. Freight Bulk Pte. Ltd., 762 F.3d 352 (foreign law cannot determine availability of U.S. subject‑matter jurisdiction; remedies can be limited by foreign law)
- Neitzke v. Williams, 490 U.S. 319 (Rule 12(b)(6) permits dismissal on dispositive questions of law)