A United States District Court dismissed the petition submitted by a party in an arbitration [Plaintiff] seeking to confirm an arbitration award opining that it lacked of subject matter jurisdiction to consider the matter.
The district court had concluded that any confirmation action must be brought in the State courts of New Jersey or New York as the Arbitration Agreement Forum Selection Clause provided "The decree of the Arbitrators shall be enforceable in the courts in the State of New Jersey and/or New York."
This, said the district court, required the Parties to submit themselves to the personal jurisdiction of the courts of the State of New Jersey and, or, New York for any action or proceeding to confirm or enforce a decree of the Arbitrators pursuant to NJSA 2A:24-1 et seq. and Article 75 of the New York Civil Practice Law and Rules."
Plaintiff appealed the District Court's ruling that the district court had been "deprived of subject
matter jurisdiction" by a clause set out in the arbitration award.
The Circuit Court of Appeals, Second Circuit, agreed with Plaintiff, holding that:
1. The district court erred in dismissing Plaintiff's petition; and
2. Plaintiff adequately pleaded subject matter jurisdiction based on diversity of citizenship.
The Circuit Court explained "parties cannot contractually strip a district court of its subject matter jurisdiction." Accordingly, said the court, it was error for the district court to conclude that the forum selection clause in the arbitration award "did so."
Further, the Circuit Court said it interpreted the relevant forum selection clauses as permissive arrangements that merely allow "litigation in certain fora, rather than mandatory provisions that require litigation to occur only there."
Accordingly, the forum selection clauses "did not bar proceedings from going forward in the United States District Court for the Southern District of New York" and vacated the district court's judgment of dismissal, remanding the matter to the district court for further proceedings.
Click HERE to access the Second Circuit Court of Appeals decision posted on the Internet.