Baltin v. Alaron Trading Corp. ( 1997 )


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  •                                    United States Court of Appeals,
    Eleventh Circuit.
    No. 96-5123.
    Aubie BALTIN; Gwilda Baltin, Plaintiffs-Appellants.
    v.
    ALARON TRADING CORPORATION, Defendant-Appellee.
    Nov. 25, 1997.
    Appeal from the United States District Court for the Southern District of Florida. (No. 96-8195-CV-
    KLR), Kenneth L. Ryskamp, Judge.
    Before CARNES, Circuit Judge, and KRAVITCH and REAVLEY*, Senior Circuit Judges.
    KRAVITCH, Senior Circuit Judge:
    Plaintiffs-appellants Aubie and Gwilda Baltin ("the Baltins") sought to vacate, modify, or
    correct an arbitration award by filing suit in the United States District Court for the Southern District
    of Florida. Defendant-appellee Alaron Trading Corporation ("ATC") moved to dismiss on the
    ground that the parties had agreed to appeal any arbitration decision to courts in Illinois. In granting
    ATC's motion to dismiss, the district court held that it had "permissive jurisdiction" to entertain the
    case but that, according to a valid provision of the contract between the parties, the Baltins should
    have brought suit in Illinois. We hold that the district court had no subject matter jurisdiction over
    this case, and thus we affirm the district court's dismissal of the case on other grounds.
    I.
    In 1992, the Baltins entered into a written brokerage contract with Linnco Futures Group,
    Inc., the predecessor of ATC. The contract contained both an arbitration clause and a forum
    *
    The Honorable Thomas M. Reavley, Senior United States Circuit Judge for the Fifth Circuit,
    sitting by designation.
    selection clause. The arbitration clause provided for mandatory arbitration of disputes relating to
    the Baltins' brokerage account.1 The forum selection clause stated:
    All actions or proceedings arising with respect to any controversy arising out of this
    Agreement or orders entered or transactions effected for Customer's accounts shall be
    litigated, at the discretion and election of Linnco, only in courts whose situs is within the
    State of Illinois and Customer hereby submits to the jurisdiction of the courts of the state of
    Illinois and the jurisdiction of the United States District Court of the Northern District of
    Illinois, Eastern Division.
    Subsequently, a trading order was entered in the Baltins' account, which had been established
    pursuant to the brokerage contract. When the Baltins learned of this entry, they immediately denied
    knowledge of the order and refused to accept the trade. ATC brought suit against the Baltins in the
    Cook County Circuit Court of Illinois for the damages that arose from the trade. The Baltins moved
    to dismiss the court proceedings and to have the case transferred to arbitration. The Cook County
    Circuit Court compelled arbitration in accordance with the contract and stayed the matter pending
    the outcome of arbitration. The parties proceeded to arbitration before a tribunal located within the
    Southern District of Florida. ATC sought $19,921.36 in actual damages and $50,000.00 in punitive
    damages, plus attorneys' fees, costs, and interest. The arbitration tribunal held in favor of ATC and
    awarded ATC $36,284.69.
    The Baltins, proceeding pro se, then filed the instant action to vacate, modify, or correct the
    award pursuant to the Federal Arbitration Act (FAA) sections 10 and 11,2 which state that "the
    1
    The arbitration clause stated in part: "If you sign this Arbitration Agreement, you will have
    agreed to submit all future disputes with Linnco, its employees and agents to arbitration if such
    disputes arise out of or relate to your account."
    2
    The Baltins brought suit by filing a "Motion ... for an Order Vacating Arbitration Award, or
    in the Alternative, Modifying or Correcting Award." The federal statutory provision referenced
    in the motion, however, is 
    9 U.S.C. § 9
    , which allows parties to apply for confirmation of
    arbitration awards. We construe the motion to be based not on 
    9 U.S.C. § 9
    , but rather on 
    9 U.S.C. § 10
    (a) ("In any of the following cases, the United States court in and for the district
    wherein the award was made may make an order vacating the award upon the application of any
    United States Court in and for the district wherein an arbitration award was made may make an
    order" vacating, modifying, or correcting the award upon application by a party to the arbitration.
    
    9 U.S.C. §§ 10-11.3
    ATC moved to dismiss on the basis that the forum selection clause required the Baltins to
    file suit in Illinois. The district court granted ATC's motion. It held that it had "permissive
    jurisdiction" to entertain the case4 but that the Baltins should have brought suit in Illinois, as
    required by the contract.
    On appeal, the Baltins claim that:
    1. the district court erred in finding that sections 10 and 11 of the FAA impart permissive, rather
    than exclusive, jurisdiction on federal district courts;
    2. the district court's dismissal violated the Baltins' due process rights because it occurred more than
    ninety days after the arbitration award, at which point the Baltins could not file in Illinois
    a timely motion to vacate, modify, or correct the award;5 and
    party to the arbitration ....") and 
    9 U.S.C. § 11
     ("In either of the following cases the United States
    court in and for the district wherein the award was made may make an order modifying or
    correcting the award upon the application of any party to the arbitration....").
    3
    The Baltins' suit was based, in the alternative, on section 682.10 of the Florida Arbitration
    Code, 
    Fla. Stat. Ann. § 682.10
    .
    4
    The circuits are split on the issue of whether the district court where an arbitration award was
    made has exclusive or permissive authority to adjudicate an action to vacate, modify or correct
    the award. Compare Cent. Valley Typographical Union No. 46 v. McClatchy Newspapers, 
    762 F.2d 741
    , 744 (9th Cir.1985) (exclusive), and Tesoro Petroleum Corp. v. Asamera, 
    798 F.Supp. 400
    , 403 (W.D.Tex.1992) (exclusive), with In re VMS Sec. Litigation, 
    21 F.3d 139
    , 144-145 (7th
    Cir.1994) (permissive), and Dombrowski v. Swiftships, Inc., 
    864 F.Supp. 1242
    , 1251
    (S.D.Fla.1994) (permissive). Because we hold that the district court did not have subject matter
    jurisdiction in this case, we need not decide whether City of Naples v. Prepakt Concrete Co. is
    controlling precedent on this question. 
    490 F.2d 182
    , 184 (5th Cir.) (holding that the proper
    court to confirm an arbitration award pursuant to section 9 of the FAA was the federal district
    court where the arbitration award was made, even though a federal court in another district had
    stayed the initial lawsuit and compelled arbitration), modified on other grounds and reh'g
    denied, 
    494 F.2d 511
    , cert. denied, 
    419 U.S. 843
    , 
    95 S.Ct. 76
    , 
    42 L.Ed.2d 71
     (1974).
    5
    See 
    9 U.S.C. § 12
     ("Notice of a motion to vacate, modify, or correct an award must be served
    upon the adverse party or his attorney within three months after the award is filed or
    3. the district court's dismissal violated the Baltins' constitutional right to be sued for damages in
    their home state of Florida.
    II.
    This court can conduct plenary review of subject matter jurisdiction sua sponte. Fitzgerald
    v. Seaboard System R.R., Inc., 
    760 F.2d 1249
    , 1251 (11th Cir.1985). Indeed, this court has the
    obligation to inquire into subject matter jurisdiction whenever it may be lacking. 
    Id.
     (citing
    Philbrook v. Glodgett, 
    421 U.S. 707
    , 
    95 S.Ct. 1893
    , 
    44 L.Ed.2d 525
     (1975); City of Kenosha, Wis.
    v. Bruno, 
    412 U.S. 507
    , 511, 
    93 S.Ct. 2222
    , 2225, 
    37 L.Ed.2d 109
     (1973)). See Fed.R.Civ.P.
    12(h)(3).
    In a given case, a federal district court must have at least one of three types of subject matter
    jurisdiction: (1) jurisdiction under a specific statutory grant; (2) federal question jurisdiction
    pursuant to 
    28 U.S.C. § 1331
    ; or (3) diversity jurisdiction pursuant to 
    28 U.S.C. § 1332
    (a). See
    Klein v. Drexel Burnham Lambert, 
    737 F.Supp. 319
    , 323 n. 11 (E.D.Pa.1990). In this case, the
    district court did not have any of the three types of subject matter jurisdiction.
    A.
    It is a matter of first impression for this court whether sections 10 and 11 of the FAA confer
    federal subject matter jurisdiction. Consistent with other courts that have addressed the issue, we
    hold that sections 10 and 11 are not statutory grants of federal subject matter jurisdiction.
    Federal courts and state courts have concurrent jurisdiction to enforce the FAA. Moses H.
    Cone Memorial Hosp. v. Mercury Constr. Corp., 
    460 U.S. 1
    , 25, 
    103 S.Ct. 927
    , 942, 
    74 L.Ed.2d 765
    (1983).6 As courts have long held, however, the FAA does not confer subject matter jurisdiction on
    delivered....").
    6
    The Court in Moses H. Cone concluded that state courts are obliged to grant stays of
    litigation pursuant to FAA section 3, 
    id. at 26
    , 
    103 S.Ct. at 942
    , but the Court declined to resolve
    federal courts. Instead, federal courts must have an independent jurisdictional basis to entertain
    cases arising under the FAA. The Supreme Court has stated:
    The Arbitration Act is something of an anomaly in the field of federal-court jurisdiction. It
    creates a body of federal substantive law establishing and regulating the duty to honor an
    agreement to arbitrate, yet it does not create any independent federal-question jurisdiction
    under 
    28 U.S.C. § 1331
     or otherwise.
    
    Id.
     at 25 n. 32, 
    103 S.Ct. at
    942 n. 32.
    In particular, the Court has ruled that FAA sections 3 and 4 do not confer subject matter
    jurisdiction on federal courts.7
    Section 4 provides for an order compelling arbitration only when the federal district court
    would have jurisdiction over a suit on the underlying dispute; hence, there must be diversity
    of citizenship or some other independent basis for federal jurisdiction before the order can
    issue. E.g., Commercial Metals Co. v. Balfour, Guthrie, & Co., 
    577 F.2d 264
    , 268-69 (5th
    Cir.1978), and cases cited. Section 3 likewise limits the federal courts to the extent that a
    federal court cannot stay a suit pending before it unless there is such a suit in existence.
    
    Id.
     See also Southland Corp. v. Keating, 
    465 U.S. 1
    , 15 n. 9, 
    104 S.Ct. 852
    , 861 n. 9, 
    79 L.Ed.2d 1
    (1984) (stating that, in light of language of sections 3 and 4, the FAA "does not create any
    independent federal-question jurisdiction under 
    28 U.S.C. § 1331
     or otherwise").8
    Federal courts consistently have applied the Moses H. Cone analysis of sections 3 and 4 to
    whether state courts have the power to compel arbitration pursuant to FAA section 4, 
    id.
     at 26 &
    n. 35, 
    103 S.Ct. at
    942 & n. 35.
    7
    Section 3 provides that "any of the courts of the United States" can stay proceedings where
    an issue therein is referable to arbitration "under an agreement in writing for such arbitration...."
    
    9 U.S.C. § 3
    . Section 4 allows "a party aggrieved by the alleged failure, neglect, or refusal of
    another to arbitrate under a written agreement for arbitration" to petition "any United States
    district court which save for such agreement would have jurisdiction under Title 28, in a civil
    action or in admiralty of the subject matter of a suit arising out of the controversy between the
    parties, for an order directing that such arbitration proceed...." 
    9 U.S.C. § 4
    .
    8
    The Supreme Court's statements in Moses H. Cone and Keating overrule prior language of
    this court in Ultracashmere House, Ltd. v. Meyer, 
    664 F.2d 1176
    , 1180 n. 5 (11th Cir.1981) ("In
    this case jurisdiction is authorized by the diversity jurisdiction provision, 
    28 U.S.C. § 1331
    , and
    the Arbitration Act, 
    9 U.S.C. § 4
    .").
    other provisions of the FAA, as well. Thus, even though several sections of the FAA authorize
    particular actions by the United States district court, see 
    9 U.S.C. §§ 7
    ,9-11,9 "courts have not
    construed these references to the United States district court as intending to confer federal court
    jurisdiction, but rather as specifying the powers possessed by the court in a case that is properly
    before it."    Drexel Burnham Lambert, Inc. v. Valenzuela Bock, 
    696 F.Supp. 957
    , 961
    (S.D.N.Y.1988) (citing 
    9 U.S.C. §§ 7
    ,9-11); see also Giangrande v. Shearson Lehman / E.F.
    Hutton, 
    803 F.Supp. 464
    , 470 (D.Mass.1992) (reviewing cases and concluding that sections 7, 9, 10,
    and 11 "have not been understood to confer jurisdiction on federal courts").
    For example, courts have held that actions brought in federal court to confirm arbitration
    awards pursuant to section 9 of the FAA10 must demonstrate independent grounds of federal subject
    matter jurisdiction. As the Ninth Circuit reasoned, to hold that section 9 confers subject matter
    jurisdiction would present
    a significant possibility of eviscerating the clear limits on federal jurisdiction contained in
    sections 3 and 4. [Such an] expansive interpretation would mean, for example, that a district
    court lacking jurisdiction to compel arbitration under section 4 might nonetheless threaten
    to confirm a subsequent ex parte award under section 9. Such a threat would have a
    substantial compulsory effect. We cannot approve an interpretation which would achieve
    by indirection that which Congress has clearly forbidden.
    General Atomic Co. v. United Nuclear Corp., 
    655 F.2d 968
    , 969 (9th Cir.1981), cert. denied, 
    455 U.S. 948
    , 
    102 S.Ct. 1449
    , 
    71 L.Ed.2d 662
     (1982); see also 
    id. at 970
     (adopting district court
    opinion, which stated in part, "Section 9 does not contain language common to jurisdictional grants,
    9
    These sections authorize the court to: compel the attendance of witnesses at arbitration
    proceedings, 
    9 U.S.C. § 7
    ; confirm arbitration awards, 
    9 U.S.C. § 9
    ; vacate arbitration awards,
    
    9 U.S.C. § 10
    ; and modify or correct arbitration awards, 
    9 U.S.C. § 11
    .
    10
    "If no court is specified in the agreement of the parties, then such application [to confirm an
    arbitration award] may be made to the United States court in and for the district within which
    such award was made...." 
    9 U.S.C. § 9
    .
    and to require independent jurisdictional grounds under other sections and not under Section 9
    renders the Act a "patchwork of individual statutes bereft of any coherent plan.' ") (citing 13B
    Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure, §
    3569 at 467-70 (1975)). Many other federal courts,11 including the Eleventh Circuit,12 also have
    concluded that section 9 is not a statutory grant of federal subject matter jurisdiction.
    Consistent with this reasoning, we now hold that FAA sections 10 and 11, which allow
    courts to vacate, modify or correct arbitration awards, do not confer federal subject matter
    jurisdiction. As the Second Circuit has ruled:
    Section 10 states in part that "the United States court in and for the district wherein the
    award was made may make an order vacating [an arbitration] award.' This language is less
    than precise and might be read as conferring subject matter jurisdiction. However, we have
    consistently held that Congress did not intend the Arbitration Act as a grant of jurisdiction.
    11
    See, e.g., City of Detroit Pension Fund v. Prudential Sec., Inc., 
    91 F.3d 26
    , 29 (6th
    Cir.1996), cert. denied, --- U.S. ----, 
    117 S.Ct. 1252
    , 
    137 L.Ed.2d 333
     (1997); Yasuda Fire &
    Marine Ins. Co. of Europe, Ltd. v. Continental Cas. Co., 
    37 F.3d 345
    , 346 & n. 1 (7th Cir.1994);
    Transp. Cybernetics, Inc. v. Forest Transit Comm'n, Forest County, Wis., 
    950 F.2d 350
    , 351 n. 1
    (7th Cir.1991); Pac. Reinsurance Management Corp. v. Ohio Reinsurance Corp., 
    935 F.2d 1019
    , 1021 (9th Cir.1991); Stroh Container Co. v. Delphi Indus., Inc., 
    783 F.2d 743
    , 748 n. 7
    (8th Cir.), cert. denied, 
    476 U.S. 1141
    , 
    106 S.Ct. 2249
    , 
    90 L.Ed.2d 695
     (1986); Ballantine
    Books, Inc. v. Capital Distributing Co., 
    302 F.2d 17
    , 19 (2d Cir.1962); Wis. Comm'r of Ins. v.
    Cal. Reinsurance Management Corp., 
    819 F.Supp. 797
    , 800 (E.D.Wis.1993); First Commercial
    Financial Group, Inc. v. Baghdoian, 
    812 F.Supp. 837
    , 840 (N.D.Ill.1993); TM Marketing, Inc.
    v. Art & Antiques Assocs., L.P., 
    803 F.Supp. 994
     (D.N.J.1992); New Hope Baptist Church v.
    Design Bldg. Interiors, Inc., 
    789 F.Supp. 19
    , 19-20 (D.D.C.1992); Quick & Reilly, Inc. v.
    Saglio, 
    717 F.Supp. 822
    , 824 (S.D.Fla.1989); Higgins v. United States Postal Serv., 
    655 F.Supp. 739
    , 741 (D.Me.1987); Hughes-Bechtol, Inc. v. W. Va. Bd. of Regents, 
    527 F.Supp. 1366
    , 1384
    (S.D.Ohio 1981), aff'd, 
    737 F.2d 540
     (6th Cir.), cert. denied, 
    469 U.S. 1018
    , 
    105 S.Ct. 433
    , 
    83 L.Ed.2d 359
     (1984); Paley Assocs., Inc. v. Universal Woolens, Inc., 
    446 F.Supp. 212
    , 213 n. 1
    (S.D.N.Y.1978); Litton RCS, Inc. v. Pa. Turnpike Comm'n, 
    376 F.Supp. 579
     (E.D.Pa.1974),
    aff'd, 
    511 F.2d 1394
     (3d Cir.1975); Bangor & Aroostock R.R. Co. v. Maine Cent. R.R. Co., 
    359 F.Supp. 261
    , 263 (D.D.C.1973).
    12
    See Loral Corp. v. Swiftships, Inc., 
    77 F.3d 420
    , 422 (11th Cir.) (stating that subject matter
    jurisdiction for cases filed under section 9 "must be based upon either diversity of citizenship or
    the existence of a federal question"), cert. denied, --- U.S. ----, 
    117 S.Ct. 390
    , 
    136 L.Ed.2d 306
    (1996).
    There must be an independent basis of jurisdiction before a district court may entertain
    petitions under the Act.
    Harry Hoffman Printing, Inc. v. Graphic Communications Int'l Union, Local 261, 
    912 F.2d 608
    , 611
    (2d Cir.1990) (citations omitted). Although the Supreme Court in Moses H. Cone analyzed sections
    3 and 4 of the FAA, rather than section 10, the Hoffman court concluded that "it would be
    anomalous to conclude ... that section 4 confers no jurisdiction to compel arbitration, but that section
    10 confers jurisdiction to vacate an award once arbitration takes place." 
    Id.
     at 611 n. 1 (citing Stroh
    Container Co. v. Delphi Indus., Inc., 
    783 F.2d 743
    , 747-48 n. 7 (8th Cir.), cert. denied, 
    476 U.S. 1141
    , 
    106 S.Ct. 2249
    , 
    90 L.Ed.2d 695
     (1986)).
    Furthermore, a narrow interpretation of section 10 is consistent with the limited nature of
    federal subject matter jurisdiction. See Hoffman, 912 F.2d at 611 n. 1 (stating that "we should not
    readily impute to Congress" an intent to open federal courts to "a host of arbitration disputes"
    brought under section 10). Indeed, if sections 9, 10, and 11 of the FAA were to be read as
    conferring jurisdiction, then any contract that involved commerce and contained a valid arbitration
    clause13 could give rise to a federal court action for the confirmation, vacatur, or modification of an
    arbitration award. See Drexel Burnham Lambert, Inc. v. Valenzuela Bock, 
    696 F.Supp. 957
    , 961
    (S.D.N.Y.1988) ("It would be surprising if Congress had intended so drastic a change of federal
    jurisdiction."); see also Fitzgerald v. Seaboard System R.R., Inc., 
    760 F.2d 1249
    , 1251 (11th
    Cir.1985) (citation omitted) (stating that federal courts are presumed to lack subject matter
    jurisdiction).
    This court hereby adopts the analysis of the court in Hoffman, one of a long line of decisions
    13
    Section 2 establishes the validity, irrevocability, and enforceability of written agreements to
    arbitrate contained "in any maritime transaction or a contract evidencing a transaction involving
    commerce." 
    9 U.S.C. § 2
    .
    holding that section 10 does not confer subject matter jurisdiction on federal courts. See, e.g., Minor
    v. Prudential Sec., Inc., 
    94 F.3d 1103
    , 1104-05 (7th Cir.1996), cert. denied, --- U.S. ----, 
    117 S.Ct. 954
    , 
    136 L.Ed.2d 841
     (1997); United States v. Am. Soc. of Composers, Authors, and Publishers, 
    32 F.3d 727
    , 731 (2d Cir.1994); Ford v. Hamilton Investments, Inc., 
    29 F.3d 255
    , 257 (6th Cir.1994);
    Garrett v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 
    7 F.3d 882
    , 884 (9th Cir.1993); Mengel Co.
    v. Nashville Paper Prods. and Specialty Workers Union, No. 513, 
    221 F.2d 644
    , 648 (6th Cir.1955);
    Lipton v. Shearson, 
    934 F.Supp. 638
    , 639 (S.D.N.Y.1996); Kaplan v. Dean Witter Reynolds, Inc.,
    
    896 F.Supp. 1219
    , 1219 (S.D.Fla.1995); Riccio v. Gray, 
    852 F.Supp. 5
    , 6 (S.D.N.Y.1993); Galuska
    v. Goldman, Sachs & Co., No. 92-C-8091, (N.D.Ill. June 24, 1993); 470 Stratford Holding Co. v.
    Local 32B-32J, Service Employees Int'l Union, AFL-CIO, 
    805 F.Supp. 118
    , 121 (E.D.N.Y.1992);
    Giangrande v. Shearson Lehman / E.F. Hutton, 
    803 F.Supp. 464
    , 466 (D.Mass.1992); Valenzuela
    Bock, 
    696 F.Supp. at 960-61
    ; S.J. Groves & Sons Co. v. Am. Arbitration Ass'n, 
    452 F.Supp. 121
    ,
    123 (D.Minn.1978); Middlebury Assocs. v. R.E. Bean Constr. Co., 
    446 F.Supp. 28
    , 30 (D.Vt.1977);
    Victorias Milling Co. v. Hugo Neu Corp., 
    196 F.Supp. 64
    , 69-70 (S.D.N.Y.1961).
    Having determined that section 10, concerning petitions to vacate arbitration awards, does
    not confer subject matter jurisdiction on federal courts, we naturally conclude that the similarly
    worded section 11, concerning petitions to modify or correct arbitration awards, also does not
    constitute a statutory grant of jurisdiction. See Valenzuela Bock, 
    696 F.Supp. at 960
     (stating that
    "courts have consistently held" that sections 7, 9, 10 and 11 of the FAA do not confer federal subject
    matter jurisdiction).
    14 B. 14
    Indeed, this court can locate no authority disputing our conclusion that sections 10 and 11 of
    the FAA do not confer subject matter jurisdiction on federal courts.
    Because sections 10 and 11 of the FAA do not provide an independent statutory grant of
    federal subject matter jurisdiction, we turn to the second potential jurisdictional basis: federal
    question jurisdiction. See 
    28 U.S.C. § 1331
    . Federal question jurisdiction exists only when the
    "well-pleaded complaint standing alone establishes either that federal law creates the cause of action
    or that the plaintiff's right to relief necessarily depends on resolution of a substantial question of
    federal law." Franchise Tax Bd. of the State of Cal. v. Constr. Laborers Vacation Trust for S. Cal.,
    
    463 U.S. 1
    , 27-28, 
    103 S.Ct. 2841
    , 2856, 
    77 L.Ed.2d 420
     (1983).
    The Baltins' motion did not raise a federal question. First, even though sections 10 and 11
    of the FAA appear to "create[ ] ... cause[s] of action," see Franchise Tax Bd., 
    463 U.S. at 27-28
    , 103
    S.Ct. at 2856, the Supreme Court has held that a suit brought pursuant to the FAA is not intrinsically
    a case presenting a federal question. As the Court stated in Moses H. Cone, " The Arbitration Act
    ... creates a body of federal substantive law establishing and regulating the duty to honor an
    agreement to arbitrate, yet it does not create any independent federal-question jurisdiction under
    
    28 U.S.C. § 1331
     or otherwise." 
    460 U.S. at
    25 n. 32, 103 S.Ct. at 942 n. 32 (1983) (emphasis
    added).
    Second, the Baltins' right to relief did not depend on the "resolution of a substantial question
    of federal law." See Franchise Tax Bd., 
    463 U.S. at 28
    , 103 S.Ct. at 2856. The Baltins moved to
    vacate, modify, or correct the arbitration award based only on alleged misdeeds of the arbitrators,
    not based on any violation of federal law. As the Seventh Circuit has explained, "[A] motion to
    vacate on the grounds of fraud, corruption, undue means, evident partiality, and failure to consider
    pertinent and material evidence, does not require the resolution of any federal issue, let alone a
    "substantial question of federal law.' " Minor v. Prudential Sec., Inc., 
    94 F.3d 1103
    , 1105 (7th
    Cir.1996) (quoting Franchise Tax Bd., 
    463 U.S. at 27-28
    , 103 S.Ct. at 2856), cert. denied, --- U.S.
    ----, 
    117 S.Ct. 954
    , 
    136 L.Ed.2d 841
     (1997).15 Under Franchise Tax Board, therefore, the district
    court did not have federal question jurisdiction over this case.
    C.
    Finally, we must determine whether the district court had diversity jurisdiction over this
    case. See 
    28 U.S.C. § 1332
    (a). The maximum remedy sought by the Baltins was the vacatur of the
    arbitration award of $36,284.69.16 Diversity jurisdiction did not exist because it was a "legal
    certainty" that the amount in controversy was less than $50,000, the amount required for federal
    diversity jurisdiction at the time the Baltins filed suit.17 See Burns v. Windsor Ins. Co., 
    31 F.3d 1092
    , 1094 (11th Cir.1994) (stating that district court lacks diversity jurisdiction where it appears
    to a "legal certainty" that plaintiff's claim is for less than the jurisdictional amount) (citing St. Paul's
    Indem. Co. v. Red Cab Co., 
    303 U.S. 283
    , 288-289, 
    58 S.Ct. 586
    , 590, 
    82 L.Ed. 845
     (1938)).
    III.
    15
    Because the arbitration proceedings concerned damages from breach of contract, we need
    not decide whether a federal court would have subject matter jurisdiction over an action brought
    under FAA sections 10 or 11 if the underlying claim in arbitration concerned a federal question.
    Compare 
    9 U.S.C. § 4
     (appearing to confer jurisdiction on a federal court to issue a motion to
    compel arbitration where the court would have jurisdiction over the underlying claim in
    arbitration), with Minor, 
    94 F.3d at
    1106 (citing "strong body of case law" that holds "that the
    nature of the underlying dispute is irrelevant for purposes of subject matter jurisdiction, even on
    a motion to compel under section 4"; noting that section 10 has different language than section
    4; and concluding that, even if nature of underlying claim were relevant to question of whether
    jurisdiction existed under section 4, district court has jurisdiction over section 10 petition to
    vacate "only where diversity of citizenship exists or where the motion discloses a federal
    question on its face").
    16
    The Baltins did not request an award modification that would provide the Baltins with
    money. Instead, the Baltins sought merely to reduce or eliminate the arbitration award against
    them.
    17
    The Baltins filed suit on March 29, 1996. Pursuant to the Federal Courts Improvement Act
    of 1996, Pub.L. No. 104-317, § 205(a), 
    110 Stat. 3847
    , 3850, the amount in controversy
    requirement for diversity jurisdiction under 
    28 U.S.C. § 1332
    (a) increased from $50,000 to
    $75,000 on January 17, 1997.
    The district court held that it had permissive jurisdiction over this case but that the Baltins
    should have brought suit in Illinois, pursuant to the parties' contract. As explained above, however,
    the district court did not have subject matter jurisdiction over this case at all. We therefore affirm
    the dismissal of the case,18 although for reasons different than those stated by the district court. See
    Sec. & Exch. Comm'n v. Chenery Corp., 
    318 U.S. 80
    , 88, 
    63 S.Ct. 454
    , 459, 
    87 L.Ed. 626
     (1943)
    (stating that the decision of the lower court must be affirmed if the result is correct even though the
    lower court relied upon a wrong ground or gave a wrong reason), cited in C.H. Robinson Co. v. Trust
    Co. Bank, N.A., 
    952 F.2d 1311
    , 1316 (11th Cir.1992); cf. Kleiman v. Dep't of Energy, 
    956 F.2d 335
    ,
    339 (D.C.Cir.1992) (affirming district court's dismissal of case where action failed to state a claim
    on which relief could be granted, see Fed.R.Civ.P. 12(b)(6), but where the district court had
    dismissed action improperly for lack of subject matter jurisdiction).
    AFFIRMED
    18
    The Baltins' suit was based, in the alternative, on section 682.10 of the Florida Arbitration
    Code, 
    Fla. Stat. Ann. § 682.10
    . Because the district court did not have subject matter jurisdiction
    over the federal claim, we also hold that the district court properly declined to exercise
    supplemental jurisdiction over this state law claim. See 
    28 U.S.C. § 1367
    (c)(3); Carnegie-
    Mellon Univ. v. Cohill, 
    484 U.S. 343
    , 350 n. 7, 
    108 S.Ct. 614
    , 619 n. 7, 
    98 L.Ed.2d 720
     (1988)
    ("When federal law claims have dropped out of the lawsuit in its early stages and only state-law
    claims remain, the federal court should decline the exercise of jurisdiction by dismissing the case
    without prejudice."), cited in Baggett v. First Nat'l Bank of Gainesville, 
    117 F.3d 1342
    , 1353
    (11th Cir.1997).
    The Baltins moved to vacate the arbitration award based on the following alleged
    misbehavior of the arbitrators: evident partiality; misconduct in refusing to hear
    evidence; manifest disregard of the law; and procedural misconduct. They moved to
    modify the award based on a miscalculation of costs.
    

Document Info

Docket Number: 96-5123

Filed Date: 11/25/1997

Precedential Status: Precedential

Modified Date: 12/21/2014

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