Xiangkai Xu v. China Sunergy (US) Clean Tech Inc. et al
Filing
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Order granting in part 16 motion to dismiss. Signed by Magistrate Judge Howard R. Lloyd. (hrllc1, COURT STAFF) (Filed on 7/20/2016)
E-Filed 7/20/16
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UNITED STATES DISTRICT COURT
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NORTHERN DISTRICT OF CALIFORNIA
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XIANGKAI XU,
Petitioner,
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Case No. 15-cv-04823-HRL
ORDER GRANTING IN PART MOTION
TO DISMISS
v.
CHINA SUNERGY (US) CLEAN TECH
INC., et al.,
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United States District Court
Northern District of California
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Re: Dkt. No. 16
Respondents.
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Petitioner Xiangkai Xu (“Xu”) seeks confirmation of an arbitral award against his former
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employer, China Sunergy Co., Ltd., and two corporate affiliates: China Sunergy (Hongkong) Co.,
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Ltd. and China Sunergy (US) Clean Tech Inc. (collectively “Respondents”). Each party has
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consented to magistrate-judge jurisdiction. Respondents move to dismiss for lack of jurisdiction
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and for failure to state a claim, Fed. R. Civ. P. 12(b)(1), (6); Xu opposes. The court read the
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parties’ briefs, conducted additional research on the operative law, and heard oral arguments from
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the parties; the motion to dismiss is granted in part.
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Legal Standards
Federal courts have limited jurisdiction, and so they lack the “power” to retain a case
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unless the “Constitution or [a] statute” provides subject-matter jurisdiction.
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Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). A federal court therefore “must”
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dismiss a case if there is no constitutional or statutory source of subject-matter jurisdiction. See
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Fed. R. Civ. P. 12(h)(3). A federal court has federal-question jurisdiction over “actions arising
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under the Constitution, laws, or treaties of the United States.” 28 U.S.C. § 1331.
Kokkonen v.
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A federal court applies the pleading standard set out in Bell Atlantic Corp. v. Twombly, 550
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U.S. 544 (2007), and clarified in Ashcroft v. Iqbal, 556 U.S. 662 (2009), to determine whether to
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dismiss a claim as implausibly pled. The court assumes the truth of specific factual allegations,
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Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001), but may disregard conclusions not supported
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by specific factual allegations, Iqbal, 556 U.S. at 663-64.
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“experience and common sense” to answer a “context-specific” question: do the alleged facts
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support a plausible legal theory? Id.
The court then draws upon its
Discussion
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Respondents admit this court has jurisdiction over petitions to confirm arbitral awards, but
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they argue this court cannot exercise that jurisdiction when the petition fails to specifically invoke
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the correct jurisdictional statute—Respondents argue the true source of jurisdiction in this case is
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Title 9 U.S.C. Section 201 and that Xu failed to cite it. Respondents therefore ask this court to
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United States District Court
Northern District of California
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conclude that it cannot exercise its subject-matter jurisdiction over the “[im]proper petition” that
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“[Xu] has . . . brought[.]” Dkt. No. 16 at 8.
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The court agrees that it has federal-question jurisdiction through a statutory provision
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which Xu’s petition does not cite. The Convention on the Recognition and Enforcement of
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Foreign Arbitral Awards (the “Convention”) governs Xu’s petition—it governs any petition to
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confirm an arbitral award where, as here, the award resulted from a “commercial . . . legal
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relationship” and the parties to the arbitration proceedings were not all “citizens of the United
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States[.]” 9 U.S.C. § 202; see, e.g., Freaner v. Valle, 966 F. Supp. 2d 1068, 1076 (S.D. Cal. 2013)
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(discussing and applying the “expansive definition” for arbitral awards governed by the
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Convention). District courts have “original” jurisdiction over such petitions because “[a]n action
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or proceeding falling under the Convention shall be deemed to arise under the laws and treaties of
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the United States.” 9 U.S.C. § 203.
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Xu argues the Convention does not govern his petition because the Convention applies
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only when a petitioner is seeking to enforce the arbitral award in a “secondary” jurisdiction—a
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jurisdiction which neither issued the arbitral award nor supplied the law that governed the issuance
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of the award. Dkt. No. 19 at 4-5 (citing Gulf Petro Trading Company, Inc., 512 F.3d 742, 746
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(5th Cir. 2008)). Xu asserts the Convention does not apply here because the United States is the
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“primary” jurisdiction—the jurisdiction which issued the arbitral award and supplied the law that
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governed the issuance of the award. Dkt. No. 19 at 5. But Xu has not provided, and the court has
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not found, Ninth Circuit case law that recognizes the doctrine described by Xu. Indeed, one
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recently published treatise describes this distinction “between primary and secondary
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jurisdictions” as a doctrine which “primarily” exists within the Fifth Circuit. See 3 Litigation of
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International Disputes in U.S. Courts § 19:2.
Moreover, Xu misunderstands the Fifth Circuit’s distinction—it permits a “primary-
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jurisdiction court[]” to vacate arbitral awards “govern[ed]” by the Convention, even though the
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Convention prescribes a limited set of defenses which do not expressly include vacatur. See
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Karaha Bodas Co. v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, 335 F.3d 357,
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364 (5th Cir. 2003) (citing Article V(1)(e) of the Convention); see also 3 Litigation of
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United States District Court
Northern District of California
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International Disputes in U.S. Courts § 19:2. The distinction between primary and secondary
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jurisdictions therefore goes to the question of how, and not whether, the Convention applies to an
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arbitral award.
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Nevertheless, the undersigned does not agree with Respondents that an initial pleading
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must cite precisely to an existent source of federal-question jurisdiction or else the court may not
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exercise that jurisdiction. Respondents rely on a single case to support their formalistic pleading
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rule: Gulf Petro Trading Company, Inc. v. Nigerian Nat. Petroleum Corp., 512 F.3d 742. The
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Fifth Circuit held in Gulf Petro that district courts lack subject-matter jurisdiction over claims
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which collaterally attack a valid arbitral award.
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“reasoning” here is different from the reasoning in Gulf Petro. Dkt. No. 16 at 8. They also cite no
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particular page, quote nothing, and provide no explanation for how a discussion about
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impermissible collateral attacks might support their peculiar pleading rule. Dkt. No. 16 at 8. The
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undersigned is therefore satisfied that a federal court may exercise jurisdictional “power” to the
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extent that it exists, regardless of whether it has been precisely cited in the initial pleadings. Cf.
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Kokkonen, 511 U.S. at 377.
Id. at 743-44.
Respondents admit their
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Respondents raise three 12(b)(6) arguments: (1) Xu’s petition cites the wrong cause of
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action, and the mistaken citation is a “prejudicial[] defect[]” that justifies dismissal, Dkt. No. 16 at
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8-10; (2) the petition admits the arbitration “was conducted in part in San Francisco” even though
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Xu’s contract required arbitration to take place in New York, and so Respondents prevail under
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the affirmative defense that the arbitration violated “the agreement of the parties,” Dkt. No. 16 at
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10 (citing the Convention, Art. V(1)(c)); and (3) the arbitrator was wrong to “adjudicate[]” the
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issue of whether Respondents are alter egos of each other because the contract did not state that
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the alter-ego issue was arbitrable, and so Respondents prevail under the affirmative defense that
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the arbitration used “procedures . . . contrary to the agreement of the parties,” Dkt. No. 16 at 10
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(citing the Convention, Art. V(1)(d)).
Respondents conceded at the hearing on this motion that their second and third 12(b)(6)
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arguments are affirmative defenses available under the Convention; they argue these defenses may
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nevertheless be raised in a 12(b)(6) motion because Xu’s allegations show that these defenses will
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United States District Court
Northern District of California
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eventually prevail. Xu responds that these defenses fail under the pertinent case law.
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The undersigned believes it would be procedurally improper to rule now on the merits of
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the two affirmative defenses raised by Respondents. Plausibility under 12(b)(6) is a “facial”
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question, see Iqbal, 556 U.S. at 678, and a court answers that question by comparing the alleged
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facts with “the elements a plaintiff must plead to state a claim[,]” see id. at 675. This facial
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analysis of claim elements does not depend on whether affirmative defenses might eventually be
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proven. Furthermore, under Article V(1) of the Convention a court may deny a petition for
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confirmation on the basis of an affirmative defense only after a respondent “furnish[es] . . . proof”
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to establish that defense, and Respondents have furnished no proof to support their two affirmative
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defenses. The court therefore denies as procedurally improper Respondents’ second and third
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12(b)(6) arguments.
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The court agrees with Respondents that Xu’s petition cites the wrong cause of action; Title
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9 U.S.C. Section 207 provides the right to petition “for an order confirming” an arbitral award
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which is governed by the Convention, and Xu instead cites Section 9. Dkt. No. 1 at 3. The
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undersigned is satisfied that the petition states an implausible claim for relief because it expressly
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relies on the wrong cause of action, and the court therefore dismisses the petition. Respondents
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concede leave to amend should be granted if Xu’s mistaken citation is the sole basis for dismissal,
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Dkt. No. 16 at 11, and the undersigned agrees.
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Conclusion
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This court will exercise its subject-matter jurisdiction over this case. The court denies as
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procedurally improper the affirmative defenses raised by Respondents under Article V(1) of the
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Convention. The petition is dismissed as implausible for its express reliance on the wrong cause
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of action. The court grants Xu leave to file an amended petition which expressly invokes Section
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207 instead of Section 9 on the third page. Xu may make no other amendments. Xu shall file the
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amended petition no later than July 26, 2016.
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IT IS SO ORDERED.
Dated: 7/20/16
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United States District Court
Northern District of California
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HOWARD R. LLOYD
United States Magistrate Judge
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