Balkrishna Setty v. Shrinivas Sugandhalaya LLP ( 2021 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
BALKRISHNA SETTY, individually No. 18-35573
and as general partner in Shrinivas
Sugandhalaya Partnership with D.C. No.
Nagraj Setty; SHRINIVAS 2:17-cv-01146-
SUGANDHALAYA (BNG) LLP, RAJ
Plaintiffs-Appellees,
v. OPINION
SHRINIVAS SUGANDHALAYA LLP,
Defendant-Appellant.
On Remand from the United States Supreme Court
Filed July 7, 2021
Before: Dorothy W. Nelson, Johnnie B. Rawlinson, and
Carlos T. Bea, Circuit Judges.
Opinion by Judge D. W. Nelson;
Dissent by Judge Bea
2 SETTY V. SHRINIVAS SUGANDHALAYA
SUMMARY **
Arbitration
On remand from the Supreme Court, the panel affirmed
the district court’s order denying defendant’s motion to
compel arbitration against plaintiffs pursuant to the New
York Convention and to grant a stay pending arbitration.
In a prior opinion, the panel held that defendant
Shrinivas Sugandhalaya LLP (“SS Mumbai”) could not
equitably estop plaintiffs Balkrishna Setty and Shrinivas
Sugandhalaya (BNG) LLP (collectively, “SS Bangalore”)
from avoiding arbitration. SS Mumbai was a non-signatory
to a partnership deed that contained an arbitration provision.
The Supreme Court granted certiorari, vacated the Court of
Appeals’ judgment, and remanded for further consideration
in light of GE Energy Power Conversion France SAS v.
Outokumpu Stainless USA, LLC, 140 S. Ct. 1637 (2020).
SS Mumbai argued that, based on the arbitration
provision, Indian law applied to the question whether SS
Mumbai could compel Bangalore to arbitrate. The panel
declined to apply Indian law because whether SS Mumbai
could enforce the partnership deed as a non-signatory was a
threshold issue for which the panel did not look to the
agreement itself. Moreover, the deed’s arbitration provision
applied to disputes “arising between the partners” and not
also to third parties such as SS Mumbai.
**
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
SETTY V. SHRINIVAS SUGANDHALAYA 3
In this case involving the Convention on the Recognition
and Enforcement of Foreign Arbitral Awards, or New York
Convention, the panel applied federal substantive law in
determining the arbitrability of federal claims by or against
non-signatories to the arbitration agreement. On remand
following GE Energy (holding that the New York
Convention does not conflict with the enforcement of
arbitration agreements by non-signatories under domestic-
law equitable estoppel doctrines), the panel accepted that a
non-signatory could compel arbitration in a New York
Convention case. The panel concluded, however, that as a
factual matter, the allegations here did not implicate the
agreement that contained the arbitration clause—a
prerequisite for compelling arbitration under the equitable
estoppel framework. Accordingly, the district court did not
abuse its discretion in rejecting SS Mumbai’s argument that
SS Bangalore should be equitably estopped from avoiding
arbitration.
Dissenting, Judge Bea would hold that whichever
background body of state contract law that governs the
arbitration agreement governs equitable estoppel claims to
compel arbitration under the Federal Arbitration Act,
regardless whether the arbitration agreement is primarily
governed by the FAA or the New York Convention, and
would remand to the district court for the district court to
perform the choice of law analysis in the first instance.
4 SETTY V. SHRINIVAS SUGANDHALAYA
COUNSEL
Brian W. Esler and Vanessa L. Wheeler, Miller Nash
Graham & Dunn LLP, Seattle, Washington, for Defendant-
Appellant.
Scott S. Brown, Mixon Firm LLC, Birmingham, Alabama;
Benjamin J. Hodges and Devra R. Cohen, Foster Garvey
PLLC, Seattle, Washington; for Plaintiffs-Appellees.
OPINION
D.W. NELSON, Circuit Judge:
Shrinivas Sugandhalaya LLP (“SS Mumbai”) appeals
from the district court’s order denying its motion to compel
arbitration against Balkrishna Setty and Shrinivas
Sugandhalaya (BNG) LLP (collectively, “SS Bangalore”)
and denying SS Mumbai’s motion to grant a stay pending
arbitration.
Relying on Yang v. Majestic Blue Fisheries, LLC,
876 F.3d 996 (9th Cir. 2017), we previously held that SS
Mumbai could not equitably estop SS Bangalore from
avoiding arbitration, and thus affirmed the district court’s
order. Setty v. Shrinivas Sugandhalaya LLP, 771 F. App’x
456 (9th Cir. 2019). The Supreme Court granted certiorari,
vacated the judgment, and remanded for further
consideration in light of GE Energy Power Conversion
France SAS v. Outokumpu Stainless USA, LLC, 140 S. Ct.
1637 (2020). See Shrinivas Sugandhalaya LLP v. Setty, No.
19-623, 2020 WL 3038281, at *1 (U.S. June 8, 2020).
We have jurisdiction under 9 U.S.C. § 16. We review
the denial of a motion to compel arbitration de novo and the
SETTY V. SHRINIVAS SUGANDHALAYA 5
district court’s decision regarding equitable estoppel for
abuse of discretion. Nguyen v. Barnes & Noble Inc.,
763 F.3d 1171, 1175, 1179 (9th Cir. 2014). We review the
denial of a motion to stay pending arbitration for abuse of
discretion. Alascom, Inc. v. ITT North Elect. Co., 727 F.2d
1419, 1422 (9th Cir. 1984). We affirm.
The parties dispute whether the law of India or federal
common law applies to the question of whether SS Mumbai,
a non-signatory to the Partnership Deed containing an
arbitration provision, may compel SS Bangalore to arbitrate.
To argue that Indian law applies, SS Mumbai points to
the Partnership Deed’s arbitration provision. But whether
SS Mumbai may enforce the Partnership Deed as a non-
signatory is a “threshold issue” for which we do not look to
the agreement itself. See Casa del Caffe Vergnano S.P.A. v.
ItalFlavors, LLC, 816 F.3d 1208, 1211 (9th Cir. 2016).
Moreover, the Partnership Deed’s arbitration provision
applies to disputes “arising between the partners” and not
also to third party such as SS Mumbai. See Mundi v. Union
Sec. Life Ins. Co., 555 F.3d 1042, 1045 (9th Cir. 2009). We
decline to apply Indian law on the basis of the Partnership
Deed.
The New York Convention and its implementing
legislation emphasize the need for uniformity in the
application of international arbitration agreements. See
Certain Underwriters at Lloyd’s v. Argonaut Ins. Co.,
500 F.3d 571, 580–818 (7th Cir. 2007) (“The Supreme Court
has recognized that in the context of the New York
Convention, uniformity of the law is of paramount
importance” and concluding application of state-specific law
would undermine this purpose). In cases involving the New
York Convention, in determining the arbitrability of federal
claims by or against non-signatories to an arbitration
6 SETTY V. SHRINIVAS SUGANDHALAYA
agreement, we apply “federal substantive law,” for which we
look to “ordinary contract and agency principles.” Letizia v.
Prudential Bache Secs., Inc., 802 F.2d 1185, 1187 (9th Cir.
1986); Casa del Caffe, 816 F.3d at 1211 (concluding that
“[b]ecause this case arises under Chapter 2 of the Federal
Arbitration Act, the issue of whether the Commercial
Contract constituted a binding agreement is governed by
federal common law”) (citing Argonaut Ins. Co., 500 F.3d
at 577–78). 1
In GE Energy, the Supreme Court specifically
concluded, “[w]e hold only that the New York Convention
does not conflict with the enforcement of arbitration
agreements by non-signatories under domestic-law equitable
estoppel doctrines.” 140 S. Ct. at 1648. The Court “did not
determine whether GE Energy could enforce the arbitration
clauses under principles of equitable estoppel or which body
1
This decision comports with First, Second, and Fourth Circuit
decisions applying federal common law to threshold issues of
arbitrability in New York Convention cases. See InterGen N.V. v. Grina,
344 F.3d 134, 143 (1st Cir. 2003) (reasoning, “[i]f the federal statute in
question demands national uniformity, federal common law provides the
determinative rules of decision.”); Smith/Enron Cogeneration Ltd.
P’ship, Inc. v. Smith Cogeneration Int’l, Inc., 198 F.3d 88, 97 (2d Cir.
1999) (explaining that when the court exercises jurisdiction under
Chapter Two of the FAA, it has “compelling reasons to apply federal
law, which is already well developed, to the question of whether an
agreement to arbitrate is enforceable” and that to conclude otherwise
would “introduce a degree of parochialism and uncertainty into
international arbitration” and undermine the FAA’s goal of simplicity
and uniformity.); Int’l Paper Co. v. Schwabedissen Maschinen &
Anlagen CMBH, 206 F.3d 411, 413–14 (4th Cir. 2000) (recognizing that
the FAA and the New York Convention “create a body of federal
substantive law of arbitrability, applicable to any arbitration agreement
within the coverage of the Act” and looking to the “federal substantive
law of arbitrability” to determine whether a non-signatory was bound by
the contract).
SETTY V. SHRINIVAS SUGANDHALAYA 7
of law governs that determination.” Id. On remand
following the Supreme Court’s decision in GE Energy, we
accept that a nonsignatory could compel arbitration in a New
York Convention case. We conclude, however, that as a
factual matter, the allegations here do not implicate the
agreement that contained the arbitration clause—a
prerequisite for compelling arbitration under the equitable
estoppel framework.
“Equitable estoppel precludes a party from claiming the
benefits of a contract while simultaneously attempting to
avoid the burdens that contract imposes.” Mundi, 555 F.3d
at 1045 (citation and internal quotation marks omitted). In
the arbitration context, the doctrine has generated various
lines of cases, including one involving “a nonsignatory
seeking to compel a signatory to arbitrate its claims against
the nonsignatory.” Id. at 1046–47. For equitable estoppel to
apply, it is “essential . . . that the subject matter of the dispute
[is] intertwined with the contract providing for arbitration.”
Rajagopalan v. NoteWorld, LLC, 718 F.3d 844, 847 (9th Cir.
2013). “We have never previously allowed a non-signatory
defendant to invoke equitable estoppel against a signatory
plaintiff[.]” Id.Here, the claims have no relationship with the
partnership deed containing the arbitration agreement at
issue in this appeal. SS Bangalore’s claims against SS
Mumbai are not clearly “intertwined” with the Partnership
Deed providing for arbitration. To be sure, the crux of
several claims is that the Partnership, and not SS Mumbai, is
the true owner of the disputed marks. But the Partnership
does not own the marks because of any provision of the
Partnership Deed, but rather because of the Partnership’s
“prior use” of the marks over several years. Moreover, any
allegations of misconduct by Nagraj Setty (a signatory to the
8 SETTY V. SHRINIVAS SUGANDHALAYA
Partnership Deed) are not clearly intertwined with SS
Bangalore’s claims against SS Mumbai.
Thus, the district court did not abuse its discretion in
rejecting SS Mumbai’s argument that SS Bangalore should
be equitably estopped from avoiding arbitration.
Because the district court did not err in denying SS
Mumbai’s motion to compel arbitration, it did not abuse its
discretion in denying SS Mumbai’s motion to stay the
proceedings pending arbitration. See Alascom, 727 F.2d
at 1422.
AFFIRMED.
BEA, Circuit Judge, dissenting:
On remand from the Supreme Court, we are faced with
the question of which equitable estoppel law governs an
Indian company’s motion to compel another Indian
company and its Indian owner to arbitration based on an
agreement entered into in India, signed by two Indian
brothers (who own the Indian companies), and governing
conduct in India and the United States. The majority holds
that, not Indian, but U.S. federal common law governs the
issue.
I dissent. The Supreme Court and Ninth Circuit have
time and again held that whichever background body of state
contract law that governs the arbitration agreement governs
equitable estoppel claims to compel arbitration pursued
under the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1 et
SETTY V. SHRINIVAS SUGANDHALAYA 9
seq. 1 We should not hold differently here solely because the
arbitration agreement is otherwise governed by the New
York Convention.
I
After their father’s death, brothers Balkrishna and Nagraj
Setty signed a Partnership Deed agreeing to joint ownership
of Shrinivas Sugandhalaya, their late father’s incense
manufacturing company. The Partnership Deed was “made
and entered into at Mumbai [India] on this 24th December
1999.” The Partnership Deed contained an arbitration clause
requiring that “[a]ll disputes of any type whatsoever in
respect of the partnership arising between the partners either
during the continuance of this partnership or after the
determination thereof shall be decided by arbitration . . . .”
For a time, the Setty brothers jointly operated their
father’s company, but soon they decided to split up and
operate their own incense manufacturing firms, though still
under the same trademark. Plaintiff-Appellee Balkrishna
founded Shrinivas Sugandhalaya (BNG) LLP (“SS
Bangalore”) operating out of Bangalore, while brother
Nagraj founded Shrinivas Sugandhalaya LLP operating out
of Mumbai (“SS Mumbai”). Neither SS Bangalore nor SS
Mumbai were signatories to the Partnership Deed and its
arbitration clause. Since then, the two brothers and their
companies have competed against each other in the incense
1
The Federal Arbitration Act is codified at Title 9, Chapter 1 of the
U.S. Code, 9 U.S.C. §§ 1–16. Chapter Two of this title codifies the
Convention Act of 1970 (enforcing the Convention on the Recognition
and Enforcement of Foreign Arbitral Awards of June 10, 1958, or “New
York Convention”).
10 SETTY V. SHRINIVAS SUGANDHALAYA
market, ultimately leading to the present dispute over
trademark rights in the United States.
Plaintiff-Appellees Balkrishna and SS Bangalore
brought suit against SS Mumbai and its U.S. distributor in
federal court in Alabama. The complaint did not name
Nagraj Setty (SS Mumbai’s owner) as a defendant. Plaintiff-
Appellees claimed federal jurisdiction based on the district
court’s authority to hear federal question, trademark, and
supplemental claims. See 28 U.S.C. §§ 1331, 1338, 1367;
15 U.S.C. §1121. They claim Defendant-Appellant SS
Mumbai committed a number of U.S. federal trademark
violations, including that SS Mumbai had fraudulently
obtained trademark registrations by falsely claiming no other
person had the right to use the Shrinivas Sugandhalaya
trademarks. The complaint alleges that SS Mumbai “knew
that Plaintiff Shrinivas Sugandhalaya (BNG) LLP was
authorized by the Partnership to use the SHRINIVAS
SUGANDHALAYA mark in the United States.” Plaintiff-
Appellees also brought two state law claims based on
Alabama common law: tortious interference to its business
and unfair competition.
The suit was transferred from the Northern District of
Alabama to the Western District of Washington under
28 U.S.C. § 1404(a). SS Mumbai moved to dismiss or stay
the case in favor of arbitration, arguing that Plaintiff-
Appellees should be equitably estopped from avoiding the
arbitration clause present in the Partnership Deed. The
district court denied the motion, ruling against SS Mumbai’s
claim of equitable estoppel. The district court did not
address the question of which law of equitable estoppel
should apply. Instead, the court analyzed the equitable
SETTY V. SHRINIVAS SUGANDHALAYA 11
estoppel claim under generalized estoppel doctrine drawn
from Ninth Circuit cases. 2
On appeal, we affirmed the district court. See Setty v.
Shrinivas Sugandhalaya LLP, 771 F. App’x 456 (9th Cir.
2019) (unpublished), cert. granted, judgment vacated,
141 S. Ct. 83 (2020). However, rather than affirm on the
merits of the equitable estoppel claim, we held instead that
nonsignatory SS Mumbai was barred from compelling
arbitration under the Convention on the Recognition and
Enforcement of Foreign Arbitral Awards (“New York
Convention”) as interpreted by Yang v. Majestic Blue
Fisheries, LLC, 876 F.3d 996 (9th Cir. 2017). Setty, 771 F.
App’x at 457. SS Mumbai sought and obtained certiorari
from the Supreme Court, which vacated our prior decision
and remanded the case in light of its decision in GE Energy
Power Conversion France SAS v. Outokumpu Stainless
USA, LLC, 140 S. Ct. 1637 (2020), which overruled Yang.
See Setty, 141 S. Ct. at 83.
II
Before the panel can answer whether we should reverse
the district court’s denial of SS Mumbai’s motion to compel
arbitration on the basis of equitable estoppel, we must first
resolve the choice of law issue. 3 The majority asserts federal
2
The district court cited to both Kramer v. Toyota Motor Corp.,
705 F.3d 1122, 1128 (9th Cir. 2013) (applying California state equitable
estoppel doctrine) and Rajagopalan v. NoteWorld, LLC, 718 F.3d 844,
847 (9th Cir. 2013) (applying Washington state equitable estoppel
doctrine).
3
In GE Energy, the Supreme Court noted that the choice-of-law
issue remained an open question:
12 SETTY V. SHRINIVAS SUGANDHALAYA
common law governs. I disagree. As we will see, the
Supreme Court has made clear that state substantive law
governs equitable estoppel claims pursued under the FAA.
The Supreme Court has now ruled that nonsignatories to
arbitration agreements governed by the New York
Convention are not precluded from compelling arbitration
under the FAA. That the agreement is otherwise governed
by the New York Convention should not alter the choice of
law doctrine established by the Supreme Court.
A
1
The FAA ensures covered arbitration agreements are
held “valid, irrevocable, and enforceable.” 9 U.S.C. § 2. We
have held that this substantive mandate permits federal
substantive law rather than state law to govern certain issues
arising in litigation involving the FAA, most notably, the
scope of arbitration provisions. Tracer Research Corp. v.
Nat’l Envtl. Servs. Co., 42 F.3d 1292, 1294 (9th Cir. 1994)
(“[T]he scope of the arbitration clause is governed by federal
law.”).
Because the Court of Appeals concluded that the
Convention prohibits enforcement by nonsignatories,
the court did not determine whether GE Energy could
enforce the arbitration clauses under principles of
equitable estoppel or which body of law governs that
determination. Those questions can be addressed on
remand. We hold only that the New York Convention
does not conflict with the enforcement of arbitration
agreements by nonsignatories under domestic-law
equitable estoppel doctrines.
140 S. Ct. at 1648 (emphasis added).
SETTY V. SHRINIVAS SUGANDHALAYA 13
That said, federal substantive law does not govern all
questions arising under the FAA. The Supreme Court in
Arthur Andersen LLP v. Carlisle held that the FAA did not
“alter background principles of state contract law regarding
the scope of agreements (including the question of who is
bound by them).” 556 U.S. 624, 630 (2009). Rather,
application of “traditional principles of state law” is
permitted under the FAA to “allow a contract to be enforced
by or against nonparties to the contract through assumption,
piercing the corporate veil, alter ego, incorporation by
reference, third-party beneficiary theories, waiver and
estoppel.” Id. at 631 (citations omitted).
And so, for arbitration agreements entered into in the
United States, we have applied “relevant state contract law”
and not federal common law to the issue whether a
nonsignatory may compel arbitration under a theory of
equitable estoppel. Id. at 632 (“We hold . . . that a litigant
who was not a party to the relevant arbitration agreement
may invoke § 3 [of the FAA] if the relevant state contract
law allows him to enforce the agreement.”); GE Energy, 140
S. Ct. at 1643 (“Chapter 1 of the Federal Arbitration Act
(FAA) permits courts to apply state-law doctrines related to
the enforcement of arbitration agreements.”).
Since Arthur Andersen, the Ninth Circuit has repeatedly
applied state contract law any time a nonsignatory has
sought to compel arbitration under the FAA. In Kramer v.
Toyota Motor Corp., we acknowledged that “[t]he United
States Supreme Court has held that a litigant who is not a
party to an arbitration agreement may invoke arbitration
under the FAA if the relevant state contract law allows the
litigant to enforce the agreement. We therefore look to
California contract law to determine whether . . . a
nonsignatory[] can compel arbitration.” 705 F.3d 1122,
14 SETTY V. SHRINIVAS SUGANDHALAYA
1128 (9th Cir. 2013) (citing Arthur Andersen, 556 U.S.
at 632).
We reaffirmed that proposition in In re Henson, 869 F.3d
1052 (9th Cir. 2017). There, as here, a nonsignatory
defendant sought to compel arbitration against a plaintiff
(who had agreed to arbitrate with a third party) under the
theory of equitable estoppel. Id. at 1056–57. In granting a
writ of mandamus, we held that state law applies to the issue
whether equitable estoppel is available, and that when
determining which state law governs “whether [a]
nonsignatory[] can compel arbitration under the doctrine of
equitable estoppel,” “we apply the choice-of-law principles
of the forum state.” Id. at 1059.
Indeed, even this panel had agreed that “[u]nder the
FAA, a non-signatory may invoke arbitration if state law
permits.” Setty, 771 F. App’x at 456 (emphasis added). But
that decision has been vacated by the Court.
Thus, under both Supreme Court and our own precedent
(including this panel’s since-vacated original decision),
equitable estoppel claims pressed by nonsignatories under
the FAA are governed by state law. Up until today, we did
not need to apply this principle to arbitration agreements
governed by the New York Convention. But with the
Supreme Court’s decision overruling Yang, this is the
question now before the panel.
2
“The New York Convention is a multilateral treaty that
addresses international arbitration,” ensuring that foreign
arbitral awards are recognized in each of the ratifying
countries and that foreign-based arbitration agreements are
SETTY V. SHRINIVAS SUGANDHALAYA 15
enforceable. 4 GE Energy, 140 S. Ct. at 1644. Congress
statutorily implemented the New York Convention within
Title 9, Chapter 2 of the U.S. Code. 9 U.S.C. §§ 201 et seq.
In so doing, however, Congress ensured that the FAA
(Chapter 1) would still apply to actions and proceedings
brought pursuant to arbitration agreements covered by the
New York Convention, except for any provision within
Chapter 1 that conflicts with the New York Convention. 9
U.S.C. § 208 (“Chapter 1 applies to actions and proceedings
brought under this chapter to the extent that chapter is not in
conflict with this chapter or the Convention as ratified by the
United States.”); GE Energy, 140 S. Ct. at 1644.
In Yang, we addressed whether the FAA’s clause
permitting nonsignatories to compel arbitration under
equitable estoppel and other traditional contract law theories
described in Arthur Andersen conflicted with the New York
Convention. Yang, 876 F.3d at 1002–03. We held that it
did, and that nonsignatories were barred from using the FAA
to compel arbitration if the relevant arbitration agreement
was governed by the New York Convention. Id. Relying on
Yang, this panel held in our first decision that because SS
Mumbai was a nonsignatory to Balkrishna and Nagraj’s
Partnership Deed and its arbitration clause, and because that
agreement was governed by the New York Convention, SS
Mumbai was not entitled to pursue a theory of equitable
estoppel that relied on the FAA. Setty, 771 F. App’x at 456.
However, the Supreme Court has since overruled Yang,
holding instead that the New York Convention did not
conflict with “the application of domestic equitable estoppel
4
A commercial arbitration agreement is governed under the New
York Convention and Title 9, Chapter 2 of the U.S. Code unless it “is
entirely between citizens of the United States” and does not reasonably
relate to one or more foreign states. 9 U.S.C. § 202.
16 SETTY V. SHRINIVAS SUGANDHALAYA
doctrines permitted under Chapter 1 of the FAA.” GE
Energy, 140 S. Ct. at 1645–46. Thus, Yang’s restriction
barring nonsignatories to agreements governed by the New
York Convention from compelling arbitration as permitted
under the FAA has been lifted.
B
On remand, this case raises a question we neither
considered nor answered in the earlier appeal: what law
applies to equitable estoppel claims pursued under the FAA
for those arbitration agreements otherwise governed by the
New York Convention. This is not a difficult issue, but it is
the basis for this dissent.
Pursuant to GE Energy, nonsignatories to New York
Convention-governed arbitration agreements are now
authorized to compel arbitration using domestic contract law
doctrines. In ruling that the New York Convention did not
conflict with this provision of the FAA, GE Energy merely
removed an obstacle that had prevented application of
existing FAA doctrine. GE Energy did not alter the familiar
framework of Arthur Andersen, Kramer, or In re Henson in
any way.
I would hold, simply, that whether a particular contract
is governed by the New York Convention or not, a
nonsignatory’s equitable estoppel claim to compel
arbitration is brought pursuant to the FAA, which requires
that state contract law (or in the case of a foreign contract,
perhaps the foreign state’s contract law, depending on the
state’s choice of law rules) govern the issue.
After all, it is only because of the provisions of the FAA
that nonsignatories are even permitted to compel arbitration
using equitable estoppel. The New York Convention does
SETTY V. SHRINIVAS SUGANDHALAYA 17
not speak to the issue. GE Energy, 140 S. Ct. at 1645 (“The
Convention is simply silent on the issue of nonsignatory
enforcement . . . .”). Instead, the New York Convention
instructs us to apply nonconflicting FAA law “to actions and
proceedings brought under” the New York Convention.
9 U.S.C. § 208. GE Energy states that the FAA’s provisions
permitting equitable estoppel claims do not conflict with the
New York Convention. GE Energy, 140 S. Ct. at 1645
(“[N]othing in the text of the [New York] Convention
conflicts with the application of domestic equitable estoppel
doctrines permitted under Chapter 1 of the FAA.” (citations
omitted)). And, under Arthur Andersen, the Supreme
Court’s interpretation of the FAA directs that the domestic
background principles of contract law—i.e., state contract
law—govern equitable estoppel claims. See supra § II.A.1.
Logically then, state contract law governs equitable estoppel
claims even for international arbitration agreements because
those claims still rely on the provisions of the FAA, which
are not made inapplicable by the New York Convention. In
the interests of uniformity of application of law, I see no
reason to hold that settled FAA law should somehow apply
differently to nonsignatories of agreements otherwise
governed by the New York Convention.
Here, the relevant contract law that governs the
Partnership Deed should govern SS Mumbai’s equitable
estoppel claim. But the majority holds that federal law
governs because the contract is also subject to the New York
Convention. According to the majority, we should impose
federal law even on American parties to arbitration
agreements and ignore the domestic contract law upon which
the particular arbitration agreement was formed.
18 SETTY V. SHRINIVAS SUGANDHALAYA
C
The majority holds that “[i]n cases involving the New
York Convention, in determining the arbitrability of federal
claims by or against non-signatories to an arbitration
agreement, we apply federal substantive law.” First, there is
no basis to make the choice of law analysis for a motion to
compel arbitration dependent on whether the plaintiff’s
claims sound in federal or state law. Second, that an
arbitration agreement is otherwise governed by the New
York Convention is irrelevant to the choice of law
determination for a nonsignatory’s equitable estoppel claim.
For the proposition that the federal nature of a plaintiff’s
claims dictates that federal substantive law governs
equitable estoppel claims, the majority relies on Letizia v.
Prudential Bache Securities, Inc., 802 F.2d 1185 (9th Cir.
1986). Such reliance on Letizia is misplaced. Letizia was a
securities fraud case decided in 1986 wherein Letizia, who
had invested in Prudential Bache and signed an arbitration
agreement with that defendant, sued Prudential Bache as
well as Prudential Bache’s nonsignatory employees for
fraud. Id. at 1186–87. The nonsignatory employees sought
arbitration under the agreement that Letizia and Prudential
Bache signed. At that time, we determined that federal
substantive law applies to the question of whether the
nonsignatories may enforce that agreement:
“Because the issue involves the arbitrability
of a dispute, it is controlled by application of
federal substantive law rather than state law.
Bayma v. Smith Barney, Harris Upham &
Co., 784 F.2d 1023, 1025 (9th Cir. 1986).”
Letizia, 802 F.2d at 1187. Letizia held that all issues arising
in arbitration disputes are governed by federal substantive
SETTY V. SHRINIVAS SUGANDHALAYA 19
law. To be sure, the FAA provides a substantive mandate
ensuring the “enforceability of arbitration agreements” and
that in applying this mandate, we are applying “substantive
federal law.” Arthur Andersen, 556 U.S. at 630. However,
as discussed above, the Supreme Court has in effect
abrogated Letizia’s broad holding by making clear that the
FAA does not allow federal courts to apply federal common
law to all questions in disputes involving arbitration. The
Supreme Court stated quite clearly that “state law . . . is
applicable to determine which contracts are binding under
§ 2 and enforceable under § 3 if that law arose to govern
issues concerning the validity, revocability, and
enforceability of contracts generally.” Id. at 630–31. The
majority’s reliance on Letizia to hold otherwise is entirely
inconsistent with the Supreme Court’s holding in Arthur
Andersen.
Even if it were not abrogated, the majority’s citation to
Letizia to hold that subject matter jurisdiction has bearing on
whether federal or state substantive law governs equitable
claims is not supported by Letizia’s holding. Letizia itself
held that all issues involving the arbitrability of a dispute are
controlled by federal substantive law. See Letizia, 802 F.2d
at 1187. It did not differentiate between cases brought
pursuant to federal question or diversity jurisdiction.
Neither the Supreme Court’s nor our own cases have ever
relied on the subject matter jurisdiction or the nature of the
claims in holding that state law governs equitable estoppel
under the FAA. That claimed distinction is novel to the
majority. In fact, our precedents demonstrate no qualms in
applying state law to nonsignatory enforcement of
arbitrability of federal claims. See, e.g., Rajagopalan,
718 F.3d at 846–48 (applying state law equitable estoppel
law to resolve nonsignatory enforcement of arbitration
against all of plaintiff’s claims, which included federal
20 SETTY V. SHRINIVAS SUGANDHALAYA
Racketeer Influenced and Corrupt Organizations Act
(“RICO”) claims); Shivkov v. Artex Risk Sols., Inc., 974 F.3d
1051, 1058, 1070 (9th Cir. 2020) (same).
For the proposition that federal substantive law applies
to all questions arising from international arbitration
agreements, majority cites Casa del Caffe Vergnano S.P.A.
v. ItalFlavors, LLC, 816 F.3d 1208 (9th Cir. 2016), but that
case is not applicable here, in no small measure because that
case did not pertain to equitable estoppel claims. In Casa
del Caffe, we examined whether an international arbitration
agreement governed by the New York Convention was a
valid contract; there was no claim by any nonsignatories
seeking to compel arbitration by way of domestic contract
doctrines. In determining choice of law, we stated: “Because
this case arises under Chapter 2 of the Federal Arbitration
Act, the issue of whether the Commercial Contract
constituted a binding agreement is governed by federal
common law.” Id. at 1211. But here, unlike the issue in
Casa del Caffe, whether a nonsignatory may compel
arbitration under principles of equitable estoppel relies on
the FAA, even if interpretation and enforcement of the
arbitration agreement by its signatories is governed by the
New York Convention. See GE Energy, 140 S. Ct. at 1643.
Casa del Caffe was decided prior to the Supreme Court’s
decision in GE Energy, which must guide our analysis here.
Indeed, when Casa del Caffe was decided, Yang still barred
non-signatory litigants from even raising equitable estoppel
claims pursuant to the FAA if the arbitration agreement was
governed by the New York Convention. Casa del Caffe did
not profess to interpret Arthur Andersen and is not a helpful
source in determining whether Arthur Andersen’s rule
applies to equitable estoppel claims to New York
Convention arbitration agreements.
SETTY V. SHRINIVAS SUGANDHALAYA 21
As to the majority’s concern for uniformity in applying
arbitration agreements under the New York Convention, that
interest is not implicated here. First, each of the out-of-
circuit cases upon which the majority relies predates Arthur
Andersen. Those cases, it should be obvious, cannot support
the conclusion that some exception exists for agreements
under the New York Convention to Arthur Andersen’s
holding that state law governs equitable estoppel claims. See
InterGen N.V. v. Grina, 344 F.3d 134 (1st Cir. 2003);
Smith/Enron Cogeneration Ltd. P’ship, Inc. v. Smith
Cogeneration Int’l, Inc., 198 F.3d 88 (2d Cir. 1999); Int’l
Paper Co. v. Schwabedissen Maschinen & Anlagen CMBH,
206 F.3d 411 (4th Cir. 2000); Certain Underwriters at
Lloyd’s v. Argonaut Ins. Co., 500 F.3d 571 (7th Cir. 2007).
Second, any preference that may exist for uniformity as
to the interpretation and enforcement of the international
agreements by their signatories would not be disturbed by
the uniform application of FAA law under Arthur Andersen.
We must remember that this case concerns the “application
of domestic equitable estoppel doctrines” to international
arbitration agreements—which is to say this whole
enterprise is definitionally governed by parochial doctrines
where a certain amount of nonuniformity comes with the
territory. GE Energy, 140 S. Ct. at 1645. But more to the
point, equitable estoppel claims are conceptually different
than the interpretation and enforcement of the arbitration
agreements themselves by the parties. We can and have
distinguished between application of these domestic
doctrines and the conservation of the uniformity of
enforcement of arbitration agreements akin to what is
advocated by the cases the majority cites. For example, we
have distinguished between questions concerning the scope
of domestic arbitration agreements (including construction
of the contract language or applicability of defenses) on the
22 SETTY V. SHRINIVAS SUGANDHALAYA
one hand and their enforcement by nonsignatories through
doctrines such as equitable estoppel on the other. Kramer,
705 F.3d at 1126, 1128 (holding that, although “[t]he scope
of an arbitration agreement is governed by federal
substantive law,” equitable estoppel claims are governed by
“state contract law”). The Supreme Court in GE Energy
reinforced the idea that New York Convention did not
fundamentally supplant our domestic contract doctrines. Id.
(“[T]he Convention requires courts to rely on domestic law
to fill the gaps; it does not set out a comprehensive regime
that displaces domestic law.”). The conclusion we should
draw is that, to the extent uniformity is a primary concern for
agreements under New York Convention, it is not so
paramount that we should jettison the reasonable choice of
law rules handed down by Arthur Andersen and GE Energy.
Finally, I note with confusion the majority’s paean to
uniformity of application of arbitration law when the rule it
advances arbitrarily treats equitable estoppel claims made
pursuant to domestic arbitration agreements differently than
those made pursuant international agreements. Uniformity
would be better served by treating domestic and international
parties alike when they seek justice in the United States.
III
Because SS Mumbai’s motion is brought pursuant to the
FAA, the Supreme Court and Ninth Circuit precedents
governing this question should be adequate to resolve this
issue. Indeed, before the panel is a familiar question: what
law governs a claim by a nonsignatory to compel arbitration
using domestic equitable estoppel law permitted by the
FAA? The Supreme Court in Arthur Andersen determined
that a litigant who was not a party to an arbitration agreement
may invoke the FAA “if the relevant state contract law
allows him to enforce the agreement.” 556 U.S. at 632.
SETTY V. SHRINIVAS SUGANDHALAYA 23
Therefore, I would hold that claims to compel arbitration
under the FAA are governed by the domestic contract law of
the relevant state or country, regardless whether the
arbitration agreement is primarily governed by the FAA or
the New York Convention. We should remand to the District
Court for it to apply the appropriate choice of law rule.
I respectfully dissent.