Case of the Day: Mont Blanc v. Khan
Posted on April 14, 2014
The case of the day is Mont Blanc Trading Ltd. v. Khan (S.D.N.Y. 2014). Mont Blanc, which had won an arbitral award at the LCIA and then won confirmation at the English High Court, came to the US seeking recognition and enforcement. But a simple error will send Mont Blanc back to the drawing board.
The underlying contractual dispute, which is set out in the award, are not of any particular importance to today’s decision. The key facts were that the claimant, Mont Blanc Trading Ltd., was a Mauritius company with its place of business in Mauritius; and the respondent, Zahid Ali Khan, was a Pakistani national residing in Dubai. Because both Mont Blanc and Khan are aliens under US law, and because the diversity jurisdiction statute, 28 U.S.C. § 1332(a), does not grant US district courts subject matter jurisdiction of actions between two aliens, any action brought by Mont Blanc against Khan in a U.S. district court must rest on another jurisdictional basis.
After obtaining the award, Mont Blanc sought and obtained a judgment from the High Court permitting enforcement of the award. Mont Blanc then sought recognition and enforcement in the District Court in New York. But instead of seeking recognition and enforcement of the award, it sought recognition and enforcement of the English judgment. The petition references the award, so you might think that it could be read to seek confirmation of the award, but the demand for relief is pretty specific:
WHEREFORE, the Petitioner prays that:
This Court enter and (sic) Order pursuant to New York’s Uniform Foreign Money Judgment Recognition Act, codified in New York’s C.P.L.R. Article 53, recognizing and confirming the English Order rendered in favor of the Petitioner and against the Respondents as a judgment of this Court.
The problem with proceeding this way is that an action for recognition and enforcement of a foreign judgment arises under state law, not federal law. So the court did not have subject matter jurisdiction under 28 U.S.C. § 1331, which provides: “The district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States.” Nor, as we have seen, did the court have subject matter jurisdiction under § 1332, because both parties were aliens. So the case had to be dismissed for want of jurisdiction.
What should Mont Blanc have done instead? It had two options. First, of course, it could have sought recognition and enforcement of the arbitral award itself, since an action for recognition and enforcement of an arbitral award falling under the New York Convention does arise under federal law for jurisdictional purposes. Second, if for some reason Mont Blanc thought it important to seek recognition and enforcement of the English judgment rather than the award,it could have proceeded in the state courts, which, unlike the U.S. District Court, are courts of general jurisdiction.