Strike 3 Holdings, LLC v. JOHN DOE subscriber assigned IP address 73.93.118.243

Filing 22

*DOCUMENT FILED IN WRONG CASE. PLEASE DISREGARD.* ORDER TO SHOW CAUSE REGARDING JURISDICTION. Show Cause Response due by 4/23/2018. Signed by Magistrate Judge Sallie Kim on 4/16/2018. (mklS, COURT STAFF) (Filed on 4/16/2018) Modified on 4/16/2018 (mklS, COURT STAFF).

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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XPO LAST MILE INC.,

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Petitioner,

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United States District Court
Northern District of California

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Case No. 18-cv-00709-SK
ORDER TO SHOW CAUSE
REGARDING JURISDICTION

v.
ANESSA'S TRANSPORT INC.,
Respondent.

Pursuant to the Federal Arbitration Act (FAA), 9 U.S.C. § 1, et seq., Petitioner XPO Last

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Mile Incorporated filed this action for an order confirming an arbitration award providing

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Respondent Anessa’s Transport Incorporated with nothing. Now pending before the Court is

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Petitioner’s motion to confirm the arbitration award. However, after reviewing the petition and

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motion, the Court directs Petitioner to Show Cause why this matter should not be dismissed for

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lack of subject matter jurisdiction.

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Under the FAA, and unless otherwise agreed by the parties, a petition to confirm, vacate,

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or modify an arbitration award may be made to the district court “for the district in which the

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award was made.” 9 U.S.C. §§ 9, 10, 11. “However, the FAA does not itself confer jurisdiction

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on federal district courts over actions to compel arbitration or to confirm or vacate arbitration

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awards, nor does it create a federal cause of action giving rise to federal question jurisdiction

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under 28 U.S.C. § 1331.” United States v. Park Place Associates, Ltd., 563 F.3d 907, 918 (9th

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Cir. 2009) (citations omitted). Thus, a federal court has jurisdiction to enter judgment on an

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arbitration award only where there is an independent basis for federal jurisdiction. Id.; see also

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Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 25 n.32 (1983).

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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

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sum or value of $75,000 (exclusive of interest and costs) and is between citizens of different

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states. 28 U.S.C. § 1332. The petition asserts that the parties are citizens of different states and

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that the amount in controversy in the underlying arbitration exceeds $75,000.

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Whether the jurisdictional amount is based on the amount in controversy in the underlying
arbitration, or on the amount of the arbitration award depends upon whether the parties are seeking

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to re-open the arbitration proceedings. See Theis Research, Inc. v. Brown & Bain, 400 F.3d 659

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(9th Cir. 2005). In Theis Research, the plaintiff moved to vacate an arbitration award of zero

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dollars, but also filed a complaint seeking damages for substantially the same claims asserted in

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the underlying arbitration. Id. at 661. The court held that the amount in controversy was satisfied

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because the plaintiff was seeking to obtain $200 million in damages in the underlying action, and

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United States District Court
Northern District of California

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that attempt to seek that amount equated to a request to reopen its arbitrated claims. Id. at 665

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(“Although [neither party has] asked that the arbitration proceedings be reopened, Theis sought to

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obtain by its district court complaint substantially what it had sought to obtain in the arbitration.

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Theis simply chose to ‘reopen’ its claims in the district court rather than in arbitration.”).

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The Theis Research court noted that, although there is a split among the circuits on

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whether the amount in controversy is determined by the arbitration award or the amount at issue in

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the underlying arbitration, in general “the cases have turned upon whether the party seeking to

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vacate an arbitration award also sought to reopen the arbitration.” Id. at 664 (citing cases). The

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court cited Baltin v. Alaron Trading Corp., 128 F.3d 1466 (11th Cir. 1997), in which the court

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found the amount in controversy was not met where the plaintiffs sought to vacate an arbitration

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award requiring them to pay $36,284.69 but did not seek to reopen arbitration. “The maximum

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remedy sought by the Baltins was the vacatur of the arbitration award” which did not meet the

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jurisdictional minimum. Theis Research, 400 F.3d at 665. The court in Ford v. Hamilton

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Investments, Inc., 29 F.3d 255 (6th Cir. 1994), also concluded that the jurisdictional minimum was

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not satisfied because the plaintiffs sought only to vacate a $30,524 arbitration award and neither

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party sought additional damages. Theis Research, 400 F.3d at 665. The court in Ford “was quite

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clear that, had the losing party sought to challenge the arbitrator’s denial of that party’s

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counterclaims,” which were valued over the jurisdictional minimum, then the amount in
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controversy would have been met. Id. (citing Ford, 29 F.3d at 260); accord Peebles v. Merrill

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Lynch, Pierce, Fenner & Smith Inc., 431 F.3d 1320 (11th Cir. 2005) (holding amount in

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controversy was met where plaintiff sought to vacate a zero-dollar award and requested a new

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hearing before a different arbitration panel where he would seek recovery of up to two million

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dollars).

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Following Theis Research, 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

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controversy is the value of the [arbitration] award itself . . . .” Hansen Bev. Co. v. DSD

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Distributors, 2008 WL 5233180 at *5 (S.D. Cal. Dec. 12, 2008) (quotations and citation omitted);

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see also Coffey v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 2012 WL 94545 at *5 (C.D. Cal.,

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United States District Court
Northern District of California

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Jan. 11, 2012) (same); cf. Shannon Associates LLP v. MacKay, CW, 2009 WL 4756568 at *3

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(N.D. Cal., Dec. 8, 2009) (concluding that petition to confirm a $7,000 arbitration award did not

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meet the required amount for diversity jurisdiction, but that petitioners’ request to strike the

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arbitrators’ $260,000 offset in damages satisfied the jurisdictional amount).

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Here, no one is seeking to reopen the arbitration proceedings. Therefore, based on Theis

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Research, it appears as though the amount in controversy is determined by the amount of the

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arbitration award, which is zero dollars. If Petitioner obtains all the relief requested in its Petition,

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it will receive zero dollars. Likewise, Respondent will receive zero dollars. Accordingly,

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Petitioner is directed to file a response to this order, showing cause why this matter should not be

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dismissed for lack of subject matter jurisdiction, without prejudice to seeking confirmation of the

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arbitration award in a proper forum. Petitioner’s response shall be filed no later than April 23,

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2018 and shall not exceed 5 pages.

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IT IS SO ORDERED.
Dated: April 16, 2018
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SALLIE KIM
United States Magistrate Judge

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