Ninth Circuit Reverses Dismissal of Case Involving Foreign Arbitration Award Based on Comity for French Appellate Ruling and Quasi in Rem Jurisdiction

Carlton Fields

Carlton Fields

The parties entered into a contract under which the plaintiff Cerner Middle East Limited would provide hardware, software, and services to iCapital S/E to facilitate iCapital’s fulfillment of a contract that it had been awarded by the United Arab Emirates Ministry of Health. The contract required the parties to submit any disputes to binding arbitration under the rules of the International Chamber of Commerce, specified that the seat of arbitration would be in Paris, and provided a choice-of-law clause electing the law of the state of Missouri.

A dispute arose and Cerner issued a request for arbitration when iCapital failed to make payments due under the contract, to which iCapital responded by objecting to the arbitration. The principal of iCapital, Ahmed Saeed Mahmoud Al-Badi Al-Dhaheri, declined to respond at all. The International Court of Arbitration concluded that the arbitration should proceed against both iCapital and Dhaheri and appointed a tribunal. The tribunal issued an award against both iCapital and Dhaheri for $62 million in July 2015, determining that it had jurisdiction over the latter as he was the sole proprietor of iCapital and, alternatively, because he was the alter ego of the reorganized iCapital LLC.

Cerner sought to enforce the arbitration award in Oregon state court seeking to attach funds in an Oregon bank account owned by Dhaheri. Cerner relied on a quasi in rem theory to establish jurisdiction. The case involved “type two” quasi in rem jurisdiction, which requires that (1) a court of competent jurisdiction render a judgment against the defendant; and (2) the defendant owns property in the forum state. The defendants removed to federal court and moved to dismiss for lack of personal jurisdiction, arguing that Cerner did not possess a valid judgment against Dhaheri and therefore could not rely on quasi in rem to establish jurisdiction. The district court agreed and dismissed the case.

Cerner appealed to the Ninth Circuit Court of Appeals. While the appeal was pending, the Court of Appeal of Paris affirmed a French trial court decision that confirmed the arbitration award and found that the tribunal had jurisdiction over Dhaheri in addition to iCapital. In light of this development, the Ninth Circuit determined that it was not required to decide whether the district court was correct in deciding that the tribunal’s award had to be confirmed as valid by another court before quasi in rem jurisdiction could be exercised.

The defendants then argued that the Ninth Circuit should not recognize the tribunal’s award (or the Paris court’s ruling), in part because the French decision was not entitled to recognition under the principles of international comity. Citing to the U.S. Supreme Court, the Ninth Circuit stated that foreign decisions should be accorded deference unless an underlying issue renders the judgment suspect. The Ninth Circuit found that none of the grounds for disregarding a foreign judgment applied here, noting that a foreign judgment may be entitled to comity even if the U.S. court disagrees with its reasoning. The decision of the Paris court met the minimum standard of reasonableness, and therefore the decision deserved recognition under principles of international comity. The requirements for quasi in rem jurisdiction were thus met, and the action seeking to enforce the award should not have been dismissed for lack of jurisdiction.

Cerner Middle E. Ltd. v. iCapital, LLC, No. 17-35514 (9th Cir. Sept. 23, 2019).

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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