Opinion
Case No. C13-02216 HRL
08-27-2013
PACIFIC METRO, LLC and THE THOMAS KINKADE COMPANY, LLC fka MEDIA ARTS GROUP, INC., Petitioners, v. LE INVESTMENTS, INC. and DARRELL TAYLOR, Defendants.
ORDER DIRECTING PETITIONERS
TO SHOW CAUSE RE SUBJECT
MATTER JURISDICTION
Pursuant to the Federal Arbitration Act (FAA), 9 U.S.C. § 1, et seq., petitioners filed this action for an order confirming a $10,853.12 arbitration award issued on April 11, 2013. Now pending before the court is the parties' stipulated request for entry of judgment based on that award. Having reviewed those papers and all other matters of record in this proceeding, the court directs petitioners to show cause why this matter should not be dismissed for lack of subject matter jurisdiction.
All parties have expressly consented that all proceedings in this matter may be heard and finally adjudicated by the undersigned. 28 U.S.C. § 636(c); Fed. R. Civ. P. 73.
Under the FAA, and unless otherwise agreed by the parties, a petition to confirm, vacate, or modify an arbitration award may be made to the district court "for the district in which the award was made." 9 U.S.C. §§ 9, 10, 11. "However, the FAA does not itself confer jurisdiction on federal district courts over actions to compel arbitration or to confirm or vacate arbitration awards, nor does it create a federal cause of action giving rise to federal question jurisdiction under 28 U.S.C. § 1331." United States v. Park Place Associates, Ltd., 563 F.3d 907, 918 (9th Cir. 2009) (citations omitted). Thus, a federal court has jurisdiction to enter judgment on an arbitration award only where an independent basis for federal jurisdiction exists. Id.
Petitioners invoke this court's diversity jurisdiction under 28 U.S.C. § 1332. Federal district courts have jurisdiction over civil actions in which the matter in controversy exceeds the sum or value of $75,000 (exclusive of interest and costs) and is between citizens of different states. 28 U.S.C. §1332. The petition asserts that the parties are citizens of different states, but says nothing at all about the amount in controversy.
Caselaw suggests that the determination whether the jurisdictional amount is based on the amount in controversy in the underlying litigation, or whether it is instead based on the amount of the arbitration award, depends on whether a party seeks to re-open the arbitration proceedings. In Theis Research, Inc. v. Brown & Bain, the Ninth Circuit held that the amount at stake in the underlying litigation, not the amount of the arbitration award, is the amount in controversy for purposes of diversity jurisdiction. 400 F.3d 659 (9th Cir. 2005). In that case, the plaintiff simultaneously filed a motion to vacate an arbitration award, as well as a complaint seeking over $200 million. Viewing plaintiff's complaint for damages as the functional equivalent of a request to reopen the arbitration proceedings, the Ninth Circuit concluded that the required jurisdictional amount was met. In reaching its decision, the Ninth Circuit noted that circuits are split, but that its conclusion nevertheless was consistent with decisions in other circuits where parties "seeking to vacate an arbitration award also sought to reopen the arbitration." Id. at 664. In those cases, courts looked to the amount in controversy in the underlying litigation, and not the arbitration award, as the jurisdictional amount. The Ninth Circuit further noted that its decision was also in keeping with cases where the plaintiffs simply sought to vacate the arbitration awards and did not seek additional relief---in which case, the courts looked to the arbitration award as the amount in controversy. Id. at 665.
Following Theis, courts have held that "[w]hen a petitioner seeks confirmation or vacatur of an award, without seeking a remand for further arbitration proceedings, the amount in controversy is the value of the award itself to the petitioner." Hansen Bev. Co. v. DSD Distributors, No. 08cv0619, 2008 WL 5233180 at *5 (S.D.Cal. Dec. 12, 2008) (quotations and citation omitted). See also Coffey v. Merrill Lynch, Pierce, Fenner & Smith, Inc., No. CV12-00176 PA (PJWx), 2012 WL 94545 at *5 (C.D. Cal., Jan. 11, 2012) (same). Cf. Shannon Associates LLP v. MacKay, No. C09-4184 CW, 2009 WL 4756568 at *3 (N.D. Cal., Dec. 8, 2009) (concluding that petition to confirm a $7,000 arbitration award did not meet the required amount for diversity jurisdiction, but that petitioners' request to strike the arbitrators' $260,000 offset in damages satisfied the jurisdictional amount).
Here, unlike Theis, no one asks this court to reopen the arbitration proceedings. Nor does anyone ask for relief that might be deemed the functional equivalent of such a request. Petitioners (with respondents' stipulation) simply seek to have this court confirm the arbitration award that amounts to a little over $10,000, far below the $75,000 jurisdictional minimum.
Accordingly, petitioners are directed to file a response to this order, showing cause why this matter should not be dismissed for lack of subject matter jurisdiction, without prejudice to seek confirmation of the arbitration award in a proper forum. Petitioners' response shall be filed no later than September 10, 2013 and shall not exceed 5 pages.
SO ORDERED.
________________________
HOWARD R. LLOYD
UNITED STATES MAGISTRATE JUDGE
5:13-cv-02216-HRL Notice has been electronically mailed to: Dana Nisen Levitt dlevitt@zuberlaw.com, lmartinez@zuberlaw.com