District Court denies motion to remand a dispute involving arbitration between two foreign nationals domiciled in the United States | Practical Law

District Court denies motion to remand a dispute involving arbitration between two foreign nationals domiciled in the United States | Practical Law

Abby Cohen Smutny (Partner) and Lee A. Steven (Counsel), Leah Witters (Associate) and Daniel Hickman (Associate), White & Case LLP

District Court denies motion to remand a dispute involving arbitration between two foreign nationals domiciled in the United States

Published on 05 Jul 2012USA (National/Federal)
Abby Cohen Smutny (Partner) and Lee A. Steven (Counsel), Leah Witters (Associate) and Daniel Hickman (Associate), White & Case LLP
The United States District Court for the Northern District of Texas has denied a motion to remand to state court a dispute between two foreign nationals, both domiciled in the US, over an arbitral award, holding that federal jurisdiction was proper pursuant to the New York Convention.
Nanda v Atul Nanda & Dibon Solutions Inc., (N.D. Tex. June 12, 2012) involved a dispute between two brothers, Jay and Atul, over control of their corporation, Dibon. The brothers are both citizens of India and residents of Texas. Dibon is a corporation organised under California law with its principal place of business in Texas.
After the dispute arose, the brothers agreed to settle the dispute through arbitration and an award dividing Dibon was issued. However, Jay alleged that Atul would not comply with the award and filed a complaint in state court. Atul then removed the dispute to federal court, relying on the New York Convention because both parties are citizens of India. Jay filed a motion to remand the case back to state courts, arguing that the award did not qualify as a foreign award.
The district court, agreeing with the defendants, explained that "non-domestic" awards falling under the New York Convention may be removed to federal court. The court found that 9 USC § 202 alone defines what constitutes a "non-domestic" award under the New York Convention. That provision states that: "all commercial legal relationships fall under the Convention except for certain agreements 'entirely between citizens of the United States.'"
It rejected the plaintiff's argument that the New York Convention imposes additional requirements beyond those of section 202 for non-domestic awards.
The court thus concluded that an award will fall under the New York Convention if the dispute is commercial and the parties are not citizens of the US, even if the commercial relationship takes place between individuals with a principal place of business or domicile within the US. As a result, removal to federal court was proper.
This case illustrates the scope of the definition of non-domestic awards under the New York Convention.