Lander Co., Inc. v. MMP Investments, Inc., 96-2684

• Decision Date: 18 February 1997
• Docket Number: No. 96-2684,96-2684
• Citation: 107 F.3d 476
• Parties: LANDER COMPANY, INC., Plaintiff-Appellant, v. MMP INVESTMENTS, INC., Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 476

107 F.3d 476

42 U.S.P.Q.2d 1393

LANDER COMPANY, INC., Plaintiff-Appellant, v. MMP INVESTMENTS, INC., Defendant-Appellee.

No. 96-2684.

United States Court of Appeals Seventh Circuit.

Argued Jan. 8, 1997.

Decided Feb. 18, 1997.

Peter B. Ritz (argued), Arthur H. Seidel, Seidel, Gonda, Eavorgna & Monaco, Philadelphia, PA, for Plaintiff-Appellant.

Brian D. Roche (argued), Robert H. Nathan, Jack S. Tenenbaum, Sachnoff & Weaver, Chicago, IL, for Defendant-Appellee.

Before POSNER, Chief Judge, and COFFEY and DIANE P. WOOD, Circuit Judges.

POSNER, Chief Judge.

This is a suit by the Lander Company against MMP Investments to enforce an arbitration award. The district court dismissed the suit for want of federal jurisdiction 927 F.Supp. 1078 (N.D.Ill.1996), and Lander appeals. The parties are American firms that made a contract (actually two contracts, but we can ignore that detail) for the distribution by MMP in Poland of shampoos and other products manufactured by Lander in the United States. The contract provides that disputes under it shall be settled by binding arbitration in New York City pursuant to the arbitration rules of the International Chamber of Commerce. The parties had a falling out, Lander notified MMP that it was terminating the contract, and the latter filed a request for arbitration with the International Court of Arbitration, an organ of the International Chamber of Commerce. Lander did not contest the jurisdiction of the Court of Arbitration. The dispute proceeded to arbitration in New York City before a New York lawyer designated by the Court, who after five days of evidentiary hearings decided in favor of Lander, awarding it more than $500,000 plus interest.

The arbitration rules of the International Chamber of Commerce make arbitration awards final and deem the parties by submitting their dispute to arbitration "to have waived their right to any form of appeal insofar as such waiver can validly be made." ICC Rules of Arbitration Art. 24(2). MMP refused to pay the award, so Lander brought this suit to enforce it in the federal district court in Chicago, which is MMP's home. The complaint (captioned "petition to confirm") recites the diverse citizenship of the parties, notes that the United States is a party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of June 10, 1958, 21 U.S.T. 2517 (1970) (the "New York Convention," as it is known), claims that the suit arises under the Convention and its implementing legislation, specifically 9 U.S.C. § 207, and states that the district court "has jurisdiction under 9 U.S.C. §§ 1, 9, 201, 202, 203 and 207, and under 28 U.S.C. § 1332" and that the amount in controversy (exclusive of interest and costs) exceeds $50,000. When the complaint was filed this was the minimum amount in controversy specified by 28 U.S.C. § 1332, the statute that confers diversity jurisdiction on the federal courts. The amount has since been raised to $75,000.

MMP moved to dismiss the suit on the ground that the New York Convention was inapplicable to the parties' arbitration; but in addition it moved to vacate the award. The Federal Arbitration Act, 9 U.S.C. §§ 1 et seq., allows only three months for mounting a judicial challenge to an arbitration award that is subject to the Act, 9 U.S.C. § 12, and MMP was concerned, as it explained to the district court, that "although Lander takes the position now that the Arbitral Award is covered by the New York Convention, other allegations in its Petition to Confirm suggest that if it is unsuccessful under the Convention, it will seek to enforce the Arbitral Award under the Federal Arbitration Act." Under the Act, if you fail to move to vacate an arbitration award you forfeit the right to oppose confirmation (enforcement) of the award if sought later by the other party. Chauffeurs, Teamsters, Warehousemen & Helpers v. Jefferson Trucking Co., 628 F.2d 1023, 1027 (7th Cir.1980); Taylor v. Nelson, 788 F.2d 220, 225 (4th Cir.1986); Florasynth v. Pickholz, 750 F.2d 171, 174-77 (2d Cir.1984); 4 Ian R. Macneil, Richard E. Speidel & Thomas J. Stipanowich, Federal Arbitration Law § 38.3.3.2 (1994). In contrast, the New York Convention contains no provision for seeking to vacate an award, although it contemplates the possibility of the award's being set aside in a proceeding under local law, Art. V(1)(e), 21 U.S.T. at 2520, and recognizes defenses to the enforcement of an award.

MMP asked the district judge to defer ruling on its motion to vacate until the judge decided whether the New York Convention was applicable. Lander opposed the motion, taking vigorous exception to MMP's contention that the New York Convention did not apply. It did not argue that the arbitration award was enforceable under the Federal Arbitration Act. There were no other filings, and no oral argument, before the district judge ruled on the motions. He held that the New York Convention did not apply, and went on to dismiss the suit without mention of the Federal Arbitration Act. The Act's one-year statute of limitations (9 U.S.C. § 9) would bar Lander from filing a new suit under the Act. So far as appears, Lander has no other judicial remedy to enforce its award, though conceivably it could sue to enforce it in Poland, hoping MMP has assets there.

The judge should not have dismissed Lander's suit, at least on jurisdictional grounds. The complaint sufficiently alleged jurisdiction under the Federal Arbitration Act as well as under the New York Convention. No other purpose than to allege jurisdiction under the Act can be assigned to the allegation of diversity jurisdiction and the citation of 28 U.S.C. § 1332, the diversity statute, and 9 U.S.C. § 9, the provision of the Federal Arbitration Act that authorizes suits in federal court to enforce arbitration awards in cases arising out of maritime contracts or contracts evidencing a transaction involving interstate or foreign commerce, 9 U.S.C. §§ 1, 2; no one doubts that the contract between Lander and MMP falls into the second category. The allegation of diversity was necessary because the substantive law applicable to the resolution of the parties' dispute is not federal, and the Federal Arbitration Act is limited to arbitration agreements or awards that arise out of disputes that could be litigated in federal court. Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 25 n. 32, 103 S.Ct. 927, 942 n. 32, 74 L.Ed.2d 765 (1983); Amgen, Inc. v. Kidney Center of Delaware County, Ltd., 95 F.3d 562, 567 (7th Cir.1996); 13B Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure § 3569, pp. 170-72 (2d ed. 1984). Chapter 2 of Title 9, the chapter that creates jurisdiction to enforce awards made under the New York Convention, is not so limited, 9 U.S.C. § 203, and citation of the diversity statute would thus have been unnecessary had Lander thought that the district court had jurisdiction only by virtue of the Convention.

MMP's motion to vacate the arbitration award under the Federal Arbitration Act shows that it realized that Lander intended to base jurisdiction on the Act if necessary, and of course MMP said as much. The only basis for arguing that Lander waived jurisdiction under the Act is thus its failure, in responding to the motion to vacate, to confirm MMP's suspicion that the Act was indeed an alternative ground of jurisdiction. The district judge overlooked the significance of the allegation of diversity. He said that "the allegations pertaining to diversity jurisdiction ... are merely surplusage as there are no nonfederal claims presented by the petition to confirm." 927 F. Supp. at 1078 n. 1. Was this oversight a product of deception by Lander? We think not. The thrust of MMP's response to the suit was to challenge jurisdiction under the New York Convention, and it was to this challenge that Lander replied. One reason for Lander to refrain from discussing an alternative basis for jurisdiction was that MMP was not arguing that the Federal Arbitration Act was inapplicable--indeed was acknowledging that it might be applicable. Lander was reasonable, if in retrospect incautious, in assuming that even if the district court agreed with everything that MMP was arguing, the only consequence--because the only relief sought by MMP--would be that the court would dismiss so much of the complaint as depended on the New York Convention and proceed to adjudicate the rest of the complaint under the Federal Arbitration Act.

In any event a "waiver" of jurisdiction in the sense not of a deliberate choice to forgo basing jurisdiction on a particular statute but of an inadvertent failure to cite the statute (so "forfeiture" is the better term than "waiver") is entitled to less weight than a waiver of a substantive ground for relief. Glisson v. U.S. Forest Service, 55 F.3d 1325, 1328 (7th Cir.1995); Buethe v. Britt Airlines, Inc., 749 F.2d 1235, 1238-39 (7th Cir.1984); 5 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1210, pp. 121-22 (2d ed. 1990). The court either has jurisdiction or it does not. If it is pretty obvious that it has jurisdiction, the failure to cite the right statute is harmless and ought not lead to a forfeiture, as it would here, assuming the inapplicability of the New York Convention, because of the one-year statute of limitations for suits to enforce arbitration awards under the Federal Arbitration Act. When a district judge sees a request to confirm an arbitration award coupled with an allegation of diversity jurisdiction, a light bulb labeled "Federal Arbitration Act" ought to flash in his head; it is not an esoteric basis of federal jurisdiction. It is quite otherwise with the substantive allegations in a complaint. A plaintiff typically makes a selection on tactical grounds from a menu of possible grounds for asserting liability, and the district judge is in no position to guess which...