LG Elecs. Mobilecomm United Statesa., Inc. v. Reliance Commc'ns, LLC

• Decision Date: 03 May 2018
• Docket Number: Case No. 18-cv-0250-BAS-RBB
• Parties: LG ELECTRONICS MOBILECOMM U.S.A., INC., Plaintiff, v. RELIANCE COMMUNICATIONS, LLC, Defendant.
• Court: U.S. District Court — Southern District of California

LG ELECTRONICS MOBILECOMM U.S.A., INC., Plaintiff, v. RELIANCE COMMUNICATIONS, LLC, Defendant.

Case No. 18-cv-0250-BAS-RBB

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA

May 3, 2018

ORDER GRANTING PETITION FOR CONFIRMATION OF ARBITRATION AWARD

[ECF Nos. 1, 6]

Plaintiff LG Electronics MobileComm U.S.A., Inc. ("LG") has filed a petition (the "Petition") pursuant to the Federal Arbitration Act ("FAA"), 9 U.S.C. §9, for a court order confirming an arbitration award in its favor and against Defendant Reliance Communications, LLC ("Reliance"). (ECF Nos. 1, 6.) For the reasons herein, the Court grants LG's Petition.

I. BACKGROUND

LG is a California corporation and wholly owned subsidiary of LG Electronics U.S.A., with its corporate offices located in San Diego, California. (Pet. ¶2.) Reliance is a New Jersey-based limited liability company with offices in Hauppauge, New York. (Id. ¶3.) It is comprised of four members, who are citizens of New York. (Id.)

The parties entered into a Master Purchase Agreement ("MPA"), by which LG agreed to supply LG-branded accessories to Reliance for distribution. (ECF No. 1-4 Ex. A, MPA.) The MPA included a mandatory arbitration provision to resolve disputes between the parties related to the agreement, with any arbitration proceedings occurring in San Diego, California. (Id. ¶14.1) The underlying dispute arose due to Reliance's failure and refusal to pay invoices for LG products that it ordered and received from LG, in breach of the MPA's terms. The unpaid invoices totaled $9,986,124.14, not including accrued interest. (Pet. ¶7.)

Pursuant to the arbitration provision, LG initiated an arbitration with Reliance before the Honorable J. Richard Haden (Retired) with the Judicial Arbitration and Mediation Service in San Diego, California on September 3, 2016. (Id. ¶8; ECF No. 1-5 Ex. B.) The parties entered into a settlement agreement which stayed arbitration and held in abeyance a stipulated judgment signed by both parties to be entered by the Arbitrator if Reliance defaulted on its settlement payment obligations. (Pet. ¶9.) Reliance defaulted and, after LG provided written notice to the Arbitrator and Reliance, the Arbitrator executed and entered the stipulated judgment (the "Award") in favor of LG on January 17, 2018. (Id. ¶10; ECF No. 1-8 Ex. E.) Under the Award, LG is entitled to: (1) $9,986,124.14, less any payments previously made by Reliance on or after January 15, 2017; (2) monthly interest set at the contractual rate of 1.5% for each unpaid invoice; and, according to proof, (3) attorneys' fees and (4) costs. (Award at 2.)

After the issuance of the Award, LG filed the Petition on February 2, 2018. (ECF No. 6.) Reliance was subsequently served with the Petition on February 12, 2018, by delivery through a private process server of the Petition and Summons on its statutorily authorized agent for service of process in New Jersey. (ECF No. 4.) After several weeks with no response to the Petition, LG filed a notice on March 27, 2018 regarding Reliance's failure to respond. (ECF No. 5.) LG subsequently filed a request for entry of an order granting its unopposed Petition. (ECF No. 6.)

II. DISCUSSION

A. The Court Possesses Personal Jurisdiction Over Reliance

The Court first addresses whether it has personal jurisdiction over Reliance to enter a confirmation of the arbitration award against it. Personal jurisdiction over a defendant in a conformation proceeding may arise upon service of a petition for confirmation of an arbitration award under Section 9 of the FAA. See Reed & Martin, Inc. v. Westinghouse Elec. Corp., 439 F.2d 1268, 1277 (2d Cir. 1971) ("The Arbitration Act provides for a specific means of obtaining personal jurisdiction in the district agreed to by the parties . . ."); see also Weststar Assoc., Inc. v. Tin Metals Co., 752 F.2d 5, 7 (1st Cir. 1985) ("[Section] 9 was precisely meant to enable the district court for the district within which the award was made to exercise personal jurisdiction over the parties to the award.").

Section 9 provides that "[n]otice of the application shall be served upon the adverse party, and thereupon the court shall have jurisdiction of such party as though he had appeared generally in the proceeding." 9 U.S.C. §9 (emphasis added). Section 9 establishes two methods of providing notice depending on whether the "adverse party" is a resident of the district in which the award was made. "If the adverse party is a resident of the district, . . . service shall be made upon the adverse party or his attorney as prescribed by law for service of notice of motion in an action in the same court." 9 U.S.C. §9. However, "[i]f the adverse party shall be a nonresident, then the notice of the application shall be served by the marshal of any district within which the adverse party may be found in like manner as other process of the court." Id.

Notice here is only proper under Section 9's nonresident method because Reliance is not a resident of the Southern District of California, the judicial district in which the arbitration award was made. LG served the Petition and summons by delivering a copy of both to Reliance's statutorily authorized agent in New Jersey. (ECF No. 4.) This method of service comports with Federal Rule of Civil Procedure4(h), which provides that a limited liability corporation may be served in any judicial district in the United States by delivering through a private service provider a copy of the complaint and summons to an agent authorized by appointment or by law. FED. R. CIV. P. 4(h)(1); see also Amalgamated Leasing & Trading, Inc. v. Sumber Mas, LLC, No. CV 15-05128 TJH (FFMx), 2016 WL 8252921, at *2 (C.D. Cal. Feb. 8, 2016). The question is whether this service, which was not service by a U.S. Marshal, comports with Section 9's notice requirement and, thus, provides this Court with jurisdiction over Reliance.

"[T]here is scant case law interpreting the FAA's §9 service requirement," Hancor, Inc. v. R & R Eng'g Prods., Inc., 381 F. Supp. 2d 12, 15 (D.P.R. 2005). "A review of the existing case law reveals that district courts around the country are applying [it] inconsistently." Logan & Kanawha Coal Co. v. Detherage Coal Sales, LLC, 789 F. Supp. 2d 716, 718 (S.D.W. Va. 2011), rev'd and remanded on other grounds, 514 Fed. App'x 365 (4th Cir. 2013). Some courts have found service must be effectuated by a U.S. Marshal to satisfy Section 9's notice requirement for nonresidents. See, e.g., Logan, 789 F. Supp. 2d at 722; Dobco, Inc. v. Mery Gates, Inc., No. 06-0699(HAA), 2006 WL 2056799, at *2 (D. N.J. July 21, 2006). But a number of other courts have found that service under Rule 4 satisfies Section 9's notice requirement. See Hancor, 381 F. Supp. 2d at 15 ("Section [9] is an anachronism not only because it cannot account for the internationalization of arbitration law subsequent to its enactment, but also because it cannot account for the subsequent abandonment of the United States marshals as routine process servers."); see also United Cmty. Bank v. Campbell, No. 1:10-cv-79, 2011 WL 815684, at *2 (W.D.N.C Mar. 1, 2011) ("Section [9] cannot be taken as the proper standard for service of process. Recourse must be had to the Federal Rules of Civil Procedure.") (service by certified mail, return receipt and by individual service in accordance with Rule 4(e) was proper) (citation omitted); Own Capital, LLC v. David Smith Autoland, Inc., No. 10-mc-51002, 2010 WL 3623173, at *2 (E.D. Mich.Sept. 15, 2010) ("[T]he phrase 'in like manner as other process of court' requires the party applying for confirmation of an arbitration award under [S]ection 9 to follow Fed. R. Civ. P. 4 in providing notice to adversarial parties.").

Much like district courts elsewhere, district courts in the Ninth Circuit have taken varying approaches. Two courts have issued conflicting opinions about Section 9's notice requirement for nonresidents. Compare Amazon.com, Inc. v. Arobo Trade, Inc., No. C17-0804JLR, 2017 WL 3424976, at *4 (W.D. Wash. Aug. 9, 2017) ("[T]he court concludes that serving a nonresident respondent via process server, in accordance with Rule 4, satisfies Section 9 of the FAA") with Kirby Morgan Dive Sys. v. Hydrospace Ltd., No. CV 09-4934 PSG (FFMx), 2010 WL 234791, at *4 (C.D. Cal. Jan. 13, 2010), rev'd and remanded on other grounds, 478 Fed. App'x 382 (9th Cir. 2012) ("[A]s service was not made by a marshal in a judicial district in the United States, such service does not give the Court personal jurisdiction over Smith under §9."). A few courts have addressed service of a petition for confirmation of an arbitration award with reference only to Rule 4. See Wells Fargo Advisors, LLC v. Braver, No: 3:11-cv-06685-JSC, 2012 WL 2990779, at *2 (N.D. Cal. July 9, 2012) (service of petition and summons on petition was proper when it was effectuated in accordance under California state law pursuant to Federal Rule of Civil Procedure Rule 4(e)); Gladstone Wood v. Hampton-Porter Inv. Bankers, No. C-02-5367 MMC, 2004 WL 546888, at *2 (N.D. Cal. Mar. 11, 2004) (finding service of petition and summons on petition proper under Rule 4(h)). Another court has determined that non-compliance with Section 9's literal requirement of service by a U.S. marshal "is of no consequence" when the "parties agreed to waive formal service" including "for any court actions in connection with the arbitration." Collins v. D.R. Horton, Inc., 361 F. Supp. 2d 1085, 1092 (D. Ariz. 2005).

This Court finds persuasive and appropriate the approach taken by courts which find that service under Rule 4 satisfies Section 9's notice requirement. Asthese courts have recognized, Section 9's use of the phrase "in like manner as other process of the court" provides a textual basis for linking Section 9's service requirement with service under Rule 4. Indeed, multiple courts have relied on this phrase as a textual basis for finding service under Rule 4 proper for the purposes of the FAA's...