Luong v. Circuit City Stores, Inc.

• Citation: 356 F.3d 1188
• Decision Date: 30 January 2004
• Docket Number: No. 02-56522.,02-56522.
• Parties: Vernon Vu LUONG, Petitioner-Appellant, v. CIRCUIT CITY STORES, INC., Respondent-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

356 F.3d 1188

Vernon Vu LUONG, Petitioner-Appellant, v. CIRCUIT CITY STORES, INC., Respondent-Appellee.

No. 02-56522.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted July 7, 2003.

Filed January 30, 2004.

As Amended February 19, 2004.

Mai D. Wells, Infinity Law Group, Anaheim, CA, for the petitioner-appellant.

Rex Darrell Berry, Livingston & Mattesich, Sacramento, CA, for the respondent-appellee.

Appeal from the United States District Court for the Central District of California, Gary L. Taylor, District Judge, Presiding. D.C. No. CV-02-00593-GLT.

Before: KOZINSKI, FERNANDEZ, and RYMER, Circuit Judges.

Opinion by Judge RYMER; Dissent by Judge KOZINSKI.

RYMER, Circuit Judge.

We must decide whether there is an independent basis for federal jurisdiction to hear a challenge to an arbitration award of zero dollars.

Vernon Vu Luong filed a petition in federal district court to vacate an arbitration award in favor of Circuit City Stores, Inc., on his claim that Circuit City violated his rights under the Americans with Disabilities Act, 42 U.S.C. §§ 12101-12213(ADA). The court dismissed the action as the award was less than the jurisdictional amount ($75,000) required for diversity jurisdiction under 28 U.S.C. § 1332(a). The court also held that even though the petition alleges that the arbitrator acted in manifest disregard of federal law, Luong's petition does not raise a federal question, 28 U.S.C. § 1331, because the presence of federal questions in the underlying arbitration is insufficient to confer jurisdiction under Garrett v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 7 F.3d 882 (9th Cir.1993).

We agree that the amount in controversy for purposes of diversity jurisdiction over a petition to vacate an arbitral award is the amount awarded in the arbitration proceeding, not the sum claimed in the underlying action. However, we do not need to decide whether it is ever possible for federal question jurisdiction to lie if a petitioner complains about an arbitrator's manifest disregard of federal law. Luong's petition shows on its face that his complaint is not about manifest disregard, which occurs only when an arbitrator recognizes the applicable law yet ignores it, but is rather about the arbitrator's misinterpretation and misapplication of Toyota Motor Manufacturing, Inc. v. Williams, 534 U.S. 184, 122 S.Ct. 681, 151 L.Ed.2d 615 (2002). This we have no authority to consider. Lacking any independent basis for subject matter jurisdiction, the court had to dismiss the petition. Accordingly, we affirm.

I

On August 24, 2000, Luong (a citizen of California) brought an action for discrimination in violation of the ADA against Circuit City (a citizen of Virginia) in federal district court, seeking damages in excess of $75,000. Circuit City moved to compel arbitration based on an arbitration agreement. The district court granted the petition to compel and dismissed the action.

The dispute was arbitrated. The arbitrator found that Luong was neither disabled nor regarded as disabled under Toyota, thus Circuit City did not violate the ADA.

Luong then filed a petition to vacate the arbitration award in the district court pursuant to Section 10 of the Federal Arbitration Act, 9 U.S.C. § 10(FAA).¹ This petition, filed June 17, 2002, premised federal jurisdiction only on the FAA, but an amended petition cured that deficiency by alleging diversity of citizenship with more than $75,000 in controversy and a federal question on the ground that the arbitrator's award was rendered in manifest disregard of the law. In so doing, the petition asserts, the arbitrator "ignored federal law as well as refused to correctly apply federal law." A copy of the arbitrator's decision is attached as an exhibit to the petition and incorporated by reference.

Circuit City responded with a motion to dismiss Luong's petition for lack of subject matter jurisdiction, which the court granted. This timely appeal followed, and we have jurisdiction pursuant to 28 U.S.C. § 1291.²

II

It is well-settled that federal courts must have an independent basis for federal jurisdiction to hear claims under the FAA, see, e.g., Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 25 n. 32, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983); Southland Corp. v. Keating, 465 U.S. 1, 15 n. 9, 104 S.Ct. 852, 79 L.Ed.2d 1 (1984), and that 9 U.S.C. § 10 does not provide it, see Garrett, 7 F.3d at 884. Hence, a petitioner seeking to vacate an award must establish diversity of citizenship or a federal question.³

A

Luong maintains that he has satisfied the requirements for diversity as the parties are citizens of different states and the claim at the beginning of the case was for more than $75,000. He contends that it is the claim, rather than the award, which determines the amount in controversy and that we so held in American Guaranty Co. v. Caldwell, 72 F.2d 209 (9th Cir.1934). Further, in his view, the district court had acquired jurisdiction over the same case and controversy, with the same parties, when it asserted jurisdiction to compel the case to arbitration and did not lose this jurisdiction simply because the amount at issue had changed. As Luong puts it, the arbitrator's ruling was just another link in the chain of events that originated with the original filing in district court. We disagree.

The original action, initiated August 24, 2000 by Luong's filing of a complaint for violation of the ADA, was dismissed on March 27, 2001. The court neither stayed the action nor retained jurisdiction. That action was over and done with when the petition to vacate was filed. The petition to vacate, filed June 17, 2002, initiated a new, and separate, proceeding. Cf. Green Tree Fin. Corp. — Ala. v. Randolph, 531 U.S. 79, 86, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000) ("The FAA ... permit[s] parties to arbitration agreements to bring a separate proceeding in a district court to enter judgment on an arbitration award once it is made (or to vacate or modify it),...."); Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 380-81, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994) (courts have ancillary jurisdiction to enforce settlement agreement only if action has not been dismissed). The vacatur proceeding must stand on its own jurisdictional feet. Thus, it is immaterial that the district court had jurisdiction to compel arbitration. This case cannot be a continuation of that action because the action in which arbitration was ordered is no longer pending. Therefore, the district court did not have jurisdiction over Luong's petition to vacate based upon the jurisdiction that it had over the previous, and previously terminated, action.

American Guaranty does not hold to the contrary. There, the petitioner initially sought to confirm an arbitration award of $32,500 in state court, but the action was removed to federal court. On American Guaranty's motion, the district court vacated the award on the ground that the arbitrator was biased, and directed rehearing without dismissing the action. The second arbitration resulted in an award of zero dollars. Caldwell filed a motion to vacate in the action that was still pending in district court, which was granted. American Guaranty appealed, arguing that the district court lacked diversity jurisdiction over Caldwell's petition to vacate the award because the amount of the award was less than $3,000, the jurisdictional requirement at the time. We held that there was jurisdiction. We explained that the district court first acquired jurisdiction in the matter when the controversy as to the original award of $32,500 was transferred by removal to the federal court, and that it retained jurisdiction to hear the petition to vacate the second award in the same action because that action was still pending. This is consistent with the general rule that "diversity jurisdiction is determined at the time the action commences, and a federal court is not divested of jurisdiction if a party subsequently moves to another state, or if the amount in controversy subsequently drops below the minimum level." Hill v. Blind Indus. and Servs., 179 F.3d 754, 757 (9th Cir.1999) (citations omitted), amended by 201 F.3d 1186 (9th Cir.2000).

In a passage upon which Luong particularly relies, we observed that in addition to the record showing the original award of $32,500, it also disclosed evidence that Caldwell had suffered damages greater than $100,000 and "[i]t is the amount in controversy which determines jurisdiction, not the amount of the award." Am. Guar., 72 F.2d at 211. While this remark in isolation lends support to Luong's position that the amount which counts is the amount that is claimed, it is unlikely that we meant to hold that jurisdiction turns on the amount in controversy rather than the amount of the award given the posture in which the issue arose and the context in which the remark was made. Certainly jurisdiction did not turn on any such distinction in that case. American Guaranty has never been cited for this proposition, and two circuits have since taken a contrary view. See Baltin v. Alaron Trading Corp., 128 F.3d 1466, 1472 (11th Cir.1997) (it was a legal certainty that amount in controversy was less than the $50,000 required when the maximum remedy sought by party against whom a $36,284.69 award was rendered was vacatur); Ford v. Hamilton Invs., Inc., 29 F.3d 255, 260 (6th Cir.1994) (a claim by the losing party for vacation of an arbitration award in an amount less than the jurisdictional minimum is not sufficient for diversity jurisdiction).⁴

Luong argues that we should not be influenced by Baltin or Ford because in each, the party seeking vacatur wanted to pay less money than awarded and did not seek to vacate an award that might provide more money. He posits that in those circumstances, it was legally certain that the amount at issue on the petition to vacate was less than the jurisdictional amount whereas it...