United States District Court, N.D. California
ORDER GRANTING IN PART MOTION TO DISMISS Re: Dkt. No.
R. LLOYD UNITED STATES MAGISTRATE JUDGE
Xiangkai Xu (“Xu”) seeks confirmation of an
arbitral award against his former employer, China Sunergy
Co., Ltd., and two corporate affiliates: China Sunergy
(Hongkong) Co., Ltd. and China Sunergy (US) Clean Tech Inc.
(collectively “Respondents”). Each party has
consented to magistrate-judge jurisdiction. Respondents move
to dismiss for lack of jurisdiction and for failure to state
a claim, Fed.R.Civ.P. 12(b)(1), (6); Xu opposes. The court
read the parties’ briefs, conducted additional research
on the operative law, and heard oral arguments from the
parties; the motion to dismiss is granted in part.
courts have limited jurisdiction, and so they lack the
“power” to retain a case unless the
“Constitution or [a] statute” provides
subject-matter jurisdiction. Kokkonen v. Guardian Life
Ins. Co. of Am., 511 U.S. 375, 377 (1994). A federal
court therefore “must” dismiss a case if there is
no constitutional or statutory source of subject-matter
jurisdiction. See Fed. R. Civ. P. 12(h)(3). A
federal court has federal-question jurisdiction over
“actions arising under the Constitution, laws, or
treaties of the United States.” 28 U.S.C. § 1331.
federal court applies the pleading standard set out in
Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007),
and clarified in Ashcroft v. Iqbal, 556 U.S. 662
(2009), to determine whether to dismiss a claim as
implausibly pled. The court assumes the truth of specific
factual allegations, Navarro v. Block, 250 F.3d 729,
732 (9th Cir. 2001), but may disregard conclusions not
supported by specific factual allegations, Iqbal,
556 U.S. at 663-64. The court then draws upon its
“experience and common sense” to answer a
“context-specific” question: do the alleged facts
support a plausible legal theory? Id.
admit this court has jurisdiction over petitions to confirm
arbitral awards, but they argue this court cannot exercise
that jurisdiction when the petition fails to specifically
invoke the correct jurisdictional statute-Respondents argue
the true source of jurisdiction in this case is Title 9
U.S.C. Section 201 and that Xu failed to cite it. Respondents
therefore ask this court to conclude that it cannot exercise
its subject-matter jurisdiction over the “[im]proper
petition” that “[Xu] has . . . brought[.]”
Dkt. No. 16 at 8.
court agrees that it has federal-question jurisdiction
through a statutory provision which Xu’s petition does
not cite. The Convention on the Recognition and Enforcement
of Foreign Arbitral Awards (the “Convention”)
governs Xu’s petition-it governs any petition to
confirm an arbitral award where, as here, the award resulted
from a “commercial . . . legal relationship” and
the parties to the arbitration proceedings were not all
“citizens of the United States[.]” 9 U.S.C.
§ 202; see, e.g., Freaner v.
Valle, 966 F.Supp.2d 1068, 1076 (S.D. Cal. 2013)
(discussing and applying the “expansive
definition” for arbitral awards governed by the
Convention). District courts have “original”
jurisdiction over such petitions because “[a]n action
or proceeding falling under the Convention shall be deemed to
arise under the laws and treaties of the United
States.” 9 U.S.C. § 203.
argues the Convention does not govern his petition because
the Convention applies only when a petitioner is seeking to
enforce the arbitral award in a “secondary”
jurisdiction-a jurisdiction which neither issued the arbitral
award nor supplied the law that governed the issuance of the
award. Dkt. No. 19 at 4-5 (citing Gulf Petro Trading
Company, Inc., 512 F.3d 742, 746 (5th Cir. 2008)). Xu
asserts the Convention does not apply here because the United
States is the “primary” jurisdiction-the
jurisdiction which issued the arbitral award and supplied the
law that governed the issuance of the award. Dkt. No. 19 at
5. But Xu has not provided, and the court has not found,
Ninth Circuit case law that recognizes the doctrine described
by Xu. Indeed, one recently published treatise describes this
distinction “between primary and secondary
jurisdictions” as a doctrine which
“primarily” exists within the Fifth Circuit.
See 3 Litigation of International Disputes in U.S.
Courts § 19:2.
Xu misunderstands the Fifth Circuit’s distinction-it
permits a “primary-jurisdiction court” to
vacate arbitral awards “govern[ed]” by the
Convention, even though the Convention prescribes a limited
set of defenses which do not expressly include vacatur.
See Karaha Bodas Co. v. Perusahaan Pertambangan Minyak
Dan Gas Bumi Negara, 335 F.3d 357, 364 (5th Cir. 2003)
(citing Article V(1)(e) of the Convention); see also
3 Litigation of International Disputes in U.S. Courts §
19:2. The distinction between primary and secondary
jurisdictions therefore goes to the question of how, and not
whether, the Convention applies to an arbitral award.
the undersigned does not agree with Respondents that an
initial pleading must cite precisely to an existent source of
federal-question jurisdiction or else the court may not
exercise that jurisdiction. Respondents rely on a single case
to support their formalistic pleading rule: Gulf Petro
Trading Company, Inc. v. Nigerian Nat. Petroleum Corp.,
512 F.3d 742. The Fifth Circuit held in Gulf Petro
that district courts lack subject-matter jurisdiction over
claims which collaterally attack a valid arbitral award.
Id. at 743-44. Respondents admit their
“reasoning” here is different from the reasoning
in Gulf Petro. Dkt. No. 16 at 8. They also cite no
particular page, quote nothing, and provide no explanation
for how a discussion about impermissible collateral attacks
might support their peculiar pleading rule. Dkt. No. 16 at 8.
The undersigned is therefore satisfied that a federal court
may exercise jurisdictional “power” to the extent
that it exists, regardless of whether it has been precisely
cited in the initial pleadings. Cf. Kokkonen, 511
U.S. at 377.
raise three 12(b)(6) arguments: (1) Xu’s petition cites
the wrong cause of action, and the mistaken citation is a
“prejudicial defect” that justifies
dismissal, Dkt. No. 16 at 8-10; (2) the petition admits the
arbitration “was conducted in part in San
Francisco” even though Xu’s contract required
arbitration to take place in New York, and so Respondents
prevail under the affirmative defense that the arbitration
violated “the agreement of the parties, ” Dkt.
No. 16 at 10 (citing the Convention, Art. V(1)(c)); and (3)
the arbitrator was wrong to “adjudicate” the
issue of whether Respondents are alter egos of each other
because the contract did not state that the alter-ego issue
was arbitrable, and so Respondents prevail under the
affirmative defense that the arbitration used
“procedures . . . contrary to the agreement of the
parties, ” Dkt. No. 16 at 10 (citing the Convention,
conceded at the hearing on this motion that their second and
third 12(b)(6) arguments are affirmative defenses available
under the Convention; they argue these defenses may
nevertheless be raised in a 12(b)(6) motion because
Xu’s allegations show that these defenses will
eventually prevail. Xu responds that these defenses fail
under the pertinent case law.
undersigned believes it would be procedurally improper to
rule now on the merits of the two affirmative defenses raised
by Respondents. Plausibility under 12(b)(6) is a
“facial” question, see Iqbal, 556 U.S.
at 678, and a court answers that question by comparing the
alleged facts with “the elements a plaintiff must plead
to state a claim[, ]” see Id. at 675. This
facial analysis of claim elements does not depend on whether
affirmative defenses might eventually be proven. Furthermore,
under Article V(1) of the Convention a court may deny a
petition for confirmation on the basis of an affirmative
defense only after a respondent “furnish[es] . . .
proof” to establish that ...