Motion to Vacate Jurisdiction – When filing a motion to vacate an arbitration award, the court must have jurisdiction. This case holds that for Purposes of Determining Diversity Jurisdictionthe Dollar Threshold Is the Amount of the Award, not the Amount Claimed in the Underlying Controversy
ED: Mmotion to vacate an arbitration award, there are usually a number of choices as to the court where you file the petition. The basic choice is state or federal court. However, in order for the federal court to have jurisdiction over the case, the amount in controversy must be over $75,000 and all plaintiffs and all defendants must be from different states. 28 USC 1332
LUONG v. CIRCUIT CITY STORES, INC., No. 02-56522 (9th Cir., 1/30/04).
May a federal court hear a vacatur petition concerning a zero-dollar Arbitration Award? The answer, for the most part, is no, according to this recent Ninth Circuit Opinion, meaning that most Claimants will be unable to look to federal court review when they lose in arbitration.
Mr. Luong initiated the underlying dispute by suing in federal court, alleging disability discrimination and damages exceeding $75,000. When the trial court granted Circuit Citys petition for an order compelling arbitration, it also dismissed the action, instead of staying the litigation or retaining jurisdiction to review the Award.
The Court relies upon this dismissal as closing the original suit and severing the jurisdictional tie with the case. The vacatur proceeding must stand on its own jurisdictional feet. Thus, it is immaterial that the district court had jurisdiction to compel arbitration. Those jurisdictional feet must be planted in either diversity or federal question jurisdiction. Diversity of citizenship exists, but jurisdiction on diversity grounds depends, too, upon whether the amount in controversy in the vacatur proceeding refers to Mr. Luongs six-figure claim for damages or the zero-dollar Award amount.
On that point, the Court holds that the better rule is that the matter in controversy on a petition to vacate an arbitration award should be measured by the amount of the award.
Appellant also claimed jurisdiction on the basis of a federal question, because he challenges the Award for manifest disregard of federal law. The federal law is the American with Disabilities Act, but the challenge, the Court finds in parsing the petition, relates to the Arbitrators allegedly erroneous reading of a controlling U.S. Supreme Court case. The Arbitrator may have misread the case law, the Court observes, but it is clear that the arbitrator did not ignore it.There can be no manifest disregard without that.
Accordingly, no substantial federal question is at issue in the vacatur motion and the District Court properly ruled. (ed: Just how a federal court ends a case procedurally, once it relegates the claims to arbitration, has tactical significance. On the one hand, it impacts the immediate appealability of the order compelling arbitration. (See, Green Tree v. Randolph, SLA 2000-41, where a dismissal order in an embedded proceeding was held to be a final (immediately appealable) judgment.) On the other hand, if a stay of arbitration would have allowed Mr. Luong to return to federal court with his challenge, the disposition may also have impacted his post-Award options.) (SAC Ref. No. 2004-05-04)
Copyright 2004 Securities Arbitration Commentator, Inc. P.O. Box 112, Maplewood, NJ 07040; t: 973-761-5880 f: 973-761-1504. Materials denoted with a SAC Reference No. (e.g. SAC Ref. No. 99-01-001) are on hand at SAC and may be obtained by calling the Securities Arbitration Commentator, or by email to email@example.com. The Securities Arbitration Commentator is the leading publication for securities arbitration news and information, and maintains the most complete database of arbitration awards availalble anywhere. For more information regarding their services, visit their website at www.sacarbitration.com
Nothing herein is intended as legal or financial advice. The law is different in different jurisdictions, and the facts of a particular matter can change the application of the law. Please consult an attorney or your financial advisor before acting upon the information contained in this article.
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