On June 24, 2022, the Fourth Circuit Court of Appeals issued a ruling in Reddy v. Buttar concerning enforcement of a Singapore arbitration award under the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “Convention”), against a citizen and resident of North Carolina. The plaintiff, Rachan Reddy, initiated arbitration proceedings against defendant Rashid Buttar after a dispute arose concerning the sale of real property in the Philippines. The parties executed a purchase agreement (the “Agreement’) under which Buttar was to sell Reddy shares of companies purportedly owning an island in the Philippines for $3 million, and for which Reddy paid several advances totaling $1.5 million, as well as $50,000 for taxes. When Reddy later learned Buttar had breached the Agreement’s warranty of title, as a local indigenous tribe actually possessed title to the island, he demanded that Buttar refund the $1.5 million. However, Buttar refused and instead sought to enforce the Agreement and obtain the remainder of the purchase price, along with applicable fees and costs, for a total of $1.99 million.
Pursuant to the arbitration provision of the parties’ Agreement, Reddy commenced arbitration in Singapore, although Buttar objected to the arbitrator’s jurisdiction on the grounds that Reddy did not sign the Agreement, and even if he had, the Agreement submitted to the arbitrator was only a “working draft.” Thereafter, Buttar failed to attend the arbitration hearing. After reviewing evidence including emails between Buttar and Reddy, the arbitrator found both parties signed the Agreement, and enforced the Agreement against Buttar for $1.55 million, along with nearly $500,000 in legal fees and costs.
When Reddy sought to enforce the award in the Western District of North Carolina under the Convention, Buttar moved to dismiss on the grounds that (1) the court lacked subject matter jurisdiction because no executed arbitration agreement existed; (2) the court lacked personal jurisdiction over Buttar because of his insufficient contacts with North Carolina; and (3) the venue was improper. The district court found all of Buttar’s arguments unpersuasive and denied his motion to dismiss, before ultimately granting Reddy’s subsequent motion for summary judgment to enforce the award. Buttar then filed an appeal to the Fourth Circuit.
The Convention, implemented as9 U.S.C. §§ 201– 08 by Congress in 1970, is an international treaty designed to aid in the recognition and enforcement of commercial arbitration agreements in the context of international contracts. The Convention sets out standards for the enforcement of awards, and signatory states must recognize and enforce awards from other signatory states. The district court found subject matter jurisdiction was proper based on 9 U.S.C. § 203, which provides, “[a]n action or proceeding falling under the Convention shall be deemed to arise under the laws and treaties of the United States,” and the “district courts of the United States … shall have original jurisdiction over such an action or proceeding.”
Buttar argued the district court lacked subject matter jurisdiction because parties invoking jurisdiction under the Convention must satisfy the requirement of Articles II and IV that an agreement be in writing and signed by the parties to be enforceable. However, the Fourth Circuit disagreed, and held the Convention’s specific written-and-signed requirements go to the merits of establishing an award’s enforceability under the Convention, rather than the power of the court to assess whether the validity of the plaintiff’s claim, i.e., subject matter jurisdiction. Accordingly, the Fourth Circuit affirmed the district court’s finding that subject matter jurisdiction existed under the Convention.
Buttar also argued that the district court lacked general personal jurisdiction over him, as he had moved to New Zealand prior to Reddy filing suit, and should have been considered a domiciliary of New Zealand rather than North Carolina. General personal jurisdiction turns on where the defendant is domiciled, which requires that the individual have a physical presence in the state with the intent to remain there permanently. An individual’s domicile is presumed to continue indefinitely unless the challenging party successfully proves his domicile has changed.
After conducting limited jurisdictional discovery, the district court concluded Buttar had not overcome the presumption that general personal jurisdiction existed in North Carolina. Factors weighing in favor of general jurisdiction included Buttar’s involvement in multiple business ventures in the state, maintenance of numerous local utility accounts and addresses, receipt of legal documents within the state, and listing of a local address on his sole bank account. Buttar also maintained North Carolina medical and pharmacy licenses and was registered to vote in the state, which weighed heavily in the district court’s consideration. In rebuttal, Buttar contended his lack of a North Carolina driver’s license, absence of local property, contractual and tax obligations, and financial accounts, as well as his New Zealand address and permanent resident visa, weighed against subjecting him to general personal jurisdiction in North Carolina. These efforts were unavailing, as the Fourth Circuit agreed with the district court that Buttar had not overcome the presumption that general personal jurisdiction was proper.
Finally, the Fourth Circuit rejected Buttar’s contention that the arbitration agreement presented to both the arbitrator and the district court was a forgery, finding he submitted no evidence to support this claim. Rather, the evidence demonstrated Buttar attempted to enforce the purchase price against Reddy using the very same agreement and only alleged it was false after Reddy initiated arbitration proceedings against him. Noting that an arbitrator’s findings of fact are entitled to deference, the Fourth Circuit upheld the district court’s granting of summary judgment in favor of Reddy, holding that Buttar could not overcome a motion for summary judgment by relying on conclusory allegations alone. In rejecting Buttar’s last claim of error, the Fourth Circuit affirmed the district court’s opinion in its entirety.
This decision is instructive for those engaged in international contracts and arbitrations, as it clarifies the role the Convention’s substantive requirements play in determining subject matter jurisdiction. Based on this opinion, it appears at least the Fourth Circuit considers the Convention’s written-and-signed requirements entirely separate from a jurisdictional analysis, and any party hoping to rely on these requirements to challenge jurisdiction should be aware that this argument is now unlikely to prevail.
The Reddy decision is also an example of the powerful enforcement powers that come with international arbitration awards.
