The case of the day is Tesla Motors, Inc. v. Balan (9th Cir. 2025). It’s a fun procedural gem in the world of domestic arbitration. Balan was a former Tesla employee who was the subject of an article in the Huffington Post in 2017. After the article was published, Tesla published statements about her, including an accusation that she had stolen money from the company. Balan sued in the federal court in Seattle. Tesla moved to dismiss or stay the action on the grounds that it was subject to the arbitration agreement in Balan’s employment contract. The court granted the motion and dismissed the case; this was before Smith v. Spizzirri, 601
U.S. 472 (2024), the recent case holding that a district court must stay, rather than dismiss, an action when it grants a motion to compel arbitration (at least if someone asks for a stay). The arbitrator ruled in favor of Tesla, holding that the claim was barred by the one-year statute of limitations applicable to defamation claims under California law. Tesla then brought a petition in the federal court to confirm the award.

You might ask why Tesla cared about having the award confirmed. It’s not really clear from the decision. Perhaps the arbitrator awarded costs or fees to Tesla, but that seems unlikely, as the decision refers to the award as a “zero-dollar award.” Perhaps there was other litigation between the parties, or Tesla expected other litigation, and it wanted the award to have some preclusive effect. In any case, under the FAA, a party can petition for confirmation of an award. But the FAA itself does not give federal courts jurisdiction to hear such petitions. There has to be another basis for federal subject-matter jurisdiction, typically diversity of citizenship. But there is a $75,000 “amount-in-controversy” requirement in diversity cases. And under Badgerow v. Walters, 596 U.S. 1 (2022), courts cannot look to the underlying facts of the case to decide whether that requirement is met, but must look at the face of the pleadings. Here, the award said it was for zero dollars, and so the Ninth Circuit held that the award could not support diversity jurisdiction.

It’s not clear to me what exactly Tesla pleaded, and so the scope of the rule isn’t clear. The decision is clearly right if Tesla’s petition said, in effect, “please confirm the award attached to this petition as Exhibit A.” But suppose the petition explained what the underlying claims were and how much in damages could or would have been awarded had the claim not been barred by the statute of limitations?

Anyway, Tesla had another argument. Under Smith v. Spizzirri, with the benefit of hindsight, the district court was wrong to dismiss rather than stay the case. And if the court had stayed the case, then it’s clear that after the arbitrator issued the award, the court would have had jurisdiction to confirm it. (The Supreme Court has held that the FAA does permit courts to look through the pleadings when deciding whether to compel arbitration). But Tesla did not appeal from the decision dismissing rather than staying the case. When you start a new proceeding, you have to show that the court has jurisdiction. So the Ninth Circuit concluded, correctly I think, that Tesla could not argue that the court had jurisdiction because it should have stayed rather than dismissed the case.

The practical implication is that if Tesla wants the award confirmed, it has to seek confirmation in a state court. Suppose you have an international arbitral award that you want to confirm in the United States. Do you have to worry about this decision? Not really. While the FAA does not create subject-matter jurisdiction as a general matter, it does create subject-matter jurisdiction for awards falling under the New York Convention. So parties to an international arbitral award will have the benefit of a federal forum, if they want it.