Ariel Freaner v. Enrique Martin Lutteroth Valle, Case No. 11CV1819 JLS (MDD) (S.D. Cal. 2011), involves the removal of a case to federal court and the court’s decision to maintain federal jurisdiction, and not remane, under the New York Convention.  The issue is an important one for international litigation practitioners.

The noteworthy holdings in the decision include:

First, the Court determined that the international agreement among the parties was one that “falls under” the New York Convention.  Said the Court,

Under § 202 [of the Convention], “[i]n order for an agreement to fall under the Convention, it must arise out of a commercial relationship. At least one of the parties to the agreement must not be a U.S. citizen, or, if the agreement is entirely between U.S. citizens, it must have some ‘reasonable relation’ with a foreign state.”

Second, this, in turn, requires an understanding of whether the agreement “relates to” the subject matter of the action.  In a significant decision that we posted on (here), the Court stated:

The Ninth Circuit has recently interpreted the “relates to” requirement, concluding that “an arbitration agreement or award falling under the Convention ‘relates to’ the subject matter of an action whenever it could conceivably affect the outcome of the plaintiff’s suit.” [Infuturia Global Ltd. v. Sequus Pharm., Inc., 631 F.3d 1133 (9th Cir. 2011)]; see also [Beiser v. Weyler, 284 F.3d 665 (5th Cir. 2002)] (“[Federal courts] will have jurisdiction under § 205 over just about any suit in which a defendant contends that an arbitration clause falling under the Convention provides a defense. As long as the defendant’s assertion is not completely absurd or impossible, it is at least conceivable that the arbitration clause will impact the disposition of the case. That is all that is required to meet the low bar of ‘relates to’.”)

Finally, the Court was unwilling to read the contract’s choice of law provision, designating California, as clear evidence that California’s arbitration rules should apply as well.