United States District Court, District of Columbia
E. BOASBERG, UNITED STATES DISTRICT JUDGE.
a federal court stand idly by when a foreign arbitral
commission issues an order restricting the speech of a
private party? Actually, yes. Here, two Asian television
manufacturers, Sharp and Hisense, entered into a 2015
licensing agreement under which Hisense would make and market
televisions bearing Sharp's name. In 2017, alleging that
Hisense had violated various regulatory standards and failed
to maintain the quality of its television sets, Sharp
terminated the agreement. A week later, under a provision of
the licensing agreement providing that all disputes would be
arbitrated by the Singapore International Arbitration Center,
Hisense filed an arbitration action there. Among other
relief, Hisense sought an emergency order requiring that
Sharp abide by the agreement while the full arbitration was
pending and enjoining it from making disruptive or
disparaging statements about Hisense or the licensing
dispute. In May 2017, an emergency arbitrator in Singapore
issued an interim award granting that injunctive request.
thereafter filed suit here and now seeks a preliminary
injunction declaring that the interim award is not
enforceable in the United States because it contradicts U.S.
public policy. Specifically, Sharp argues that the emergency
award - which it deems a “gag order” - would
prevent it from communicating with both consumers and the
Federal Communications Commission, and is thus against the
policies enshrined in the First Amendment of the U.S.
Constitution. Hisense opposes the Motion for a Preliminary
Injunction and has moved to dismiss the case, asserting that
this Court lacks both subject-matter and personal
jurisdiction, and that the award does not violate our public
policy. Although subject-matter jurisdiction exists here,
personal jurisdiction does not; in any event, the interim
award does not contradict any fundamental public policy that
would allow Sharp to prevail. The Court will therefore
dismiss the Complaint in its entirety.
the Court's ruling here, it must consider the facts as
set forth in the Complaint. The relationship between Sharp
and Hisense started on amicable terms. In July 2015, Sharp, a
Japanese electronics company, entered into a limited
trademark-licensing agreement (TLA) with Hisense, a Chinese
manufacturer. See ECF 1 (Complaint), ¶ 24. The
TLA allows Hisense to “manufacture, assemble, promote,
market, distribute, [and] sell” Sharp-branded
televisions. See ECF No. 28-2 (Licensing Agreement),
¶ 2.1. It also provides that “[a]ny disputes
arising out of or in connection with this Agreement,
including any question regarding its validity or termination,
shall be referred to and finally resolved in Singapore by
Singapore International Arbitration Centre in accordance with
the Arbitration Rules of [the Centre, ] . . . which rules are
deemed to be incorporated by reference.” TLA, ¶
to Sharp, “immediately” after entering into the
TLA, Hisense began to fall short of its contractual
obligations. See Mot. for PI at 2. It allegedly
“fail[ed] to comply with regulations and maintain the
required standards and quality of its television sets.”
Id. Based on these violations, Sharp terminated the
TLA on April 17, 2017. Id. at 3. On April 24,
Hisense filed for arbitration in Singapore with the SIAC,
seeking emergency relief to reinstate the TLA. Id.
On May 9, an arbitrator appointed to consider the emergency
motion issued a 33-page “emergency” interim
award. See ECF No. 8-3 (Emergency Award). The
interim award prohibited Sharp from terminating the TLA,
required it to continue to perform under the agreement while
the arbitration was pending, and imposed an order stating:
[Sharp] shall refrain from, directly or indirectly through
its affiliates, disparaging [Hisense] and/or disrupting its
business, including by making public statements or press
releases about this arbitration and/or the dispute between
[Hisense] and [Sharp], or approaching [Hisense's]
business associates and/or other third parties (including,
but not limited to, [Hisense's] customers, suppliers,
content and service providers, and/or regulatory authorities,
except as required by law), in respect of any matters that
are to be addressed in arbitration under the [License
Award, ¶ 135 (iii). It is this portion of the award,
which Sharp characterizes as a “one-sided Gag Order,
” Mot. for PI at 3, that Plaintiffs now contest.
August 15, 2017, Plaintiffs Sharp Corporation and Sharp
Electronics Corporation filed a Complaint in this Court,
alleging that the emergency order “is contrary to the
public policy of the United States embodied in the First
Amendment of the Constitution, including (1) the public
policy that prohibits a prior restraint on speech absent
extraordinary circumstances, and (2) the public policy that
favors the right to petition the Government.” Compl.,
¶ 5. Sharp requested declaratory and injunctive relief
pursuant to the Declaratory Judgment Act, 28 U.S.C.
§§ 2201-02, seeking an “order declaring that
the Gag Order against Sharp is not recognizable or
enforceable in the United States” and
“enjoin[ing] Hisense from taking any action to enforce
the Gag Order in the United States.” Id.,
¶¶ 2, 5. The same day they submitted their
Complaint, Plaintiffs also filed a Motion for Preliminary
Injunction, asking the Court to enjoin the enforcement of the
“gag order” and declare that it is
“contrary to the public policy of the United States and
is thus unenforceable.” Mot. for PI at 2.
response, Defendants Hisense USA Corporation and Hisense
International filed an Opposition to Plaintiffs' Motion
for Preliminary Injunction, see ECF No. 22, as well
as a Motion to Dismiss, or, alternatively, stay the action.
See ECF No. 21. On October 27, this Court heard oral
argument on the Motions and now issues this expedited
the Court grants Hisense's Motion to Dismiss, it need not
address the standards governing a preliminary injunction and
will instead consider this case under Rules 12(b)(6),
12(b)(1), and 12(b)(2).
evaluating Defendants' Motion to Dismiss for failure to
state a claim pursuant to Rule 12(b)(6), the Court must
“treat the complaint's factual allegations as true
. . . and must grant plaintiff ‘the benefit of all
inferences that can be derived from the facts
alleged.'” Sparrow v. United Air Lines,
Inc., 216 F.3d 1111, 1113 (D.C. Cir. 2000) (quoting
Schuler v. United States, 617 F.2d 605, 608 (D.C.
Cir. 1979)) (internal citation omitted). The Court need not
accept as true, however, “a legal conclusion couched as
a factual allegation, ” nor an inference unsupported by
the facts set forth in the Complaint. Trudeau v. Fed.
Trade Comm'n, 456 F.3d 178, 193 (D.C. Cir. 2006)
(quoting Papasan v. Allain, 478 U.S. 265, 286 (1986)
(internal quotation marks omitted)).
survive a motion to dismiss under Rule 12(b)(1), conversely,
Plaintiffs bear the burden of proving that the Court has
subject-matter jurisdiction to hear their claims. See
Lujan v. Defenders of Wildlife, 504 U.S. 555, 561
(1992); U.S. Ecology, Inc. v. U.S. Dep't of
Interior, 231 F.3d 20, 24 (D.C. Cir. 2000). A court has
an “affirmative obligation to ensure that it is acting
within the scope of its jurisdictional authority.”
Grand Lodge of Fraternal Order of Police v.
Ashcroft, 185 F.Supp.2d 9, 13 (D.D.C. 2001). For this
reason, ‘“the [p]laintiff's factual
allegations in the complaint . . . will bear closer scrutiny
in resolving a 12(b)(1) motion' than in resolving a
12(b)(6) motion for failure to state a claim.”
Id. at 13-14 (quoting 5A Charles A. Wright &
Arthur R. Miller, Federal Practice and Procedure
§ 1350 (2d ed. 1987) (alteration in original)).
Additionally, unlike with a motion to dismiss under Rule
12(b)(6), the Court “may consider materials outside the
pleadings in deciding whether to grant a motion to dismiss
for lack of jurisdiction.” Jerome Stevens Pharm.,
Inc. v. Food & Drug Admin., 402 F.3d 1249, 1253
(D.C. Cir. 2005).
under Rule 12(b)(2) a defendant may move to dismiss a suit if
the court lacks personal jurisdiction over him. Personal
jurisdiction determines the court's “authority over
the parties . . ., so that the court's decision will bind
them.” Ruhrgas AG v. Marathon Oil Co., 526
U.S. 574, 577 (1999). The plaintiff bears the burden of
establishing that such jurisdiction exists. See FC Inv.
Grp. LC v. IFX Markets, Ltd., 529 F.3d 1087, 1091 (D.C.
Cir. 2008). In deciding whether the plaintiff has shown a
factual basis for personal jurisdiction over a defendant, the
court resolves factual discrepancies in favor of the
plaintiff. See Crane v. N.Y. Zoological Soc'y,
894 F.2d 454, 456 (D.C. Cir. 1990). When personal
jurisdiction is challenged, “the district judge has
considerable procedural leeway in choosing a methodology for
deciding the motion.” 5B Charles A. Wright & Arthur
R. Miller et al., Federal Practice and
Procedure § 1351 (3d ed. 2004). The Court may rest
on the allegations in the pleadings, collect affidavits and
other evidence, or even hold a hearing. Id.
must address jurisdictional concerns first, the Court begins
with Defendants' assertion that the Court does not have
subject-matter jurisdiction over this case. It moves next to
Hisense's arguments on personal jurisdiction and
concludes with an analysis of the merits of Plaintiffs'
first argues that the New York Convention, which governs the
enforcement of international arbitration awards, does not
give the Court jurisdiction to grant the remedy Sharp seeks.
Plaintiffs, of course, see things differently. They assert
that the strictures of the Convention do not preclude the
Court from providing the requested declaratory relief. In
analyzing the issue, the Court starts with the Convention and
then considers the Declaratory Judgment Act.
New York Convention
enforcement of foreign arbitral awards falls under the
Convention on the Recognition and Enforcement of Foreign
Arbitral Awards, better known as the “New York
Convention, ” 1958, 21 U.S.T. 2517, T.I.A.S. No. 6997,
330 U.N.T.S. 38. The Convention controls “the
recognition and enforcement of arbitral awards made in the
territory of a State other than the State where the
recognition and enforcement of such awards are sought.”
Chevron Corp. v. Republic of Ecuador, 949 F.Supp.2d
57, 62 (D.D.C. 2013), aff'd sub nom. Chevron Corp. v.
Ecuador, 795 F.3d 200 (D.C. Cir. 2015). In the United
States, the New York Convention has been codified in Chapter
2 of the Federal Arbitration Act. See 9 U.S.C.
§§ 201-08. Together, the Convention and its
implementing legislation “encourage the recognition and
enforcement of commercial arbitration agreements in
international contracts.” TermoRio S.A. E.S.P. v.
Electranta S.P., 487 F.3d 928, 933 (D.C. Cir. 2007)
to the FAA, United States district courts have original
jurisdiction over an “action or proceeding falling
under the Convention.” 9 U.S.C. § 203. The scope
of that jurisdiction, however, is governed by the terms of
the Convention, which distinguishes between
“primary” and “secondary” courts.
TermRio, 487 F.3d at 935 (citation omitted). The
former are those courts of the country in which, or under the
law of which, an award is rendered. The latter are those
courts of all other signatory countries. The distinction
between these two categories determines the jurisdictional
and remedial authority of a given court. Under the
Convention, primary-jurisdiction courts have the exclusive
authority to affirmatively set aside or
annul an arbitration award, while
secondary-jurisdiction courts have a more limited authority
to review and decide whether to enforce such an
award. Id., 487 F.3d at 935; Gulf Petro Trading
Co., Inc. v. Nigerian Nat'l Petroleum Corp., 512
F.3d 742, 747 (5th Cir. 2008) (holding that “a United
States court sitting in secondary jurisdiction lacks subject
matter jurisdiction over claims seeking to vacate, set aside,
or modify a foreign arbitral award” and “may only
refuse or stay enforcement of an award”); Karaha
Bodas Co. v. Perusahaan Pertambangan Minyak Dan Gas Bumi
Negara, 364 F.3d 274, 287 (5th Cir. 2004) (noting that
in courts of secondary jurisdictions “parties can only
contest whether that state should enforce the arbitral
award”); M & C Corp. v. Erwin Behr GmbH &
Co., KG, 87 F.3d 844, 848 (6th Cir. 1996) (holding that
plaintiff “may not seek to vacate the arbitral award in
the district court” of a secondary jurisdiction).
case, both parties agree that this Court, unlike Singapore,
is a secondary jurisdiction. Defendants, consequently,
maintain that Plaintiffs' suit falls outside of the
authority of secondary-jurisdiction courts because it
ultimately seeks to “void, annul, or modify” the
arbitral award. See Hisense Reply at 3. Yet Sharp
seeks no such broad relief. Rather, it has requested only
that this Court declare the gag order unenforceable in
the United States, a permissible goal in a secondary
jurisdiction. See Compl., ¶ 6
limited remedial request distinguishes this case from those
relied upon by Hisense, in which plaintiffs sought, at least
in part, to vacate the underlying award in toto. In
Kolel Beth Yechiel Mechil of Tartikov, Inc. v. YLL
Irrevocable Trust, 863 F.Supp.2d 351 (S.D.N.Y. 2012),
for example, the plaintiff sought a declaration that the
arbitration decision was “void and unenforceable,
” a remedy that the court held would “essentially
accomplish” the goal of vacating the award.
Id. at 356. Similarly, in Stedman v. Great Am.
Ins, Co., 2007 U.S. Dist. LEXIS 25973 (D.N.D. Apr. 3,
2007), the court faced a motion asking for the functional
equivalent of vacatur. Plaintiffs there initially brought a
motion to vacate, amend, or correct the arbitration award,
which they later recharacterized as a motion to
“confirm [the award] to the extent confirmable.”
Id. at *11. The court concluded that it lacked
subject-matter jurisdiction over this motion, as Plaintiffs
still sought to “vacate” the portions of
the award that were “indefinite or ambiguous” or
“beyond the arbitrator's authority.”
Id. at *11-12. Finally, Defendants' citation to
Gemini Consulting Group v. Horan Keogan Ryan, 2007
U.S. Dist. LEXIS 39509 (N.D. Ill. May 30, 2007), is
unavailing, as the plaintiff there sought “a
declaration that the Awards issued by the arbitrator are
invalid and not enforceable against Gemini.”
Id. at *12 (emphasis added). The court in that case
noted that entering such an order “would be akin to
setting aside or vacating the awards, ” and it
therefore found that it lacked the requisite jurisdiction.
again, Sharp does not seek such a drastic remedy here.
Granting the motion for a declaratory judgment would not
“set aside” or “vacate” the
underlying award. Instead, it would determine only whether
the emergency order is enforceable in the United States,
see Compl. at 2, not whether it is valid worldwide.
Such a determination clearly falls within the purview of
Court's conclusion that Plaintiffs are not seeking to
vacate the arbitration award also resolves Defendants'
alternative contention that Sharp's suit is untimely.
Although the New York Convention does not contain a statute
of limitations for petitions to vacate arbitration awards,
the FAA, which supplements the Convention, requires that such
actions be filed within three months after the award is filed
or delivered. See 9 U.S.C. § 12. Hisense
asserts that Sharp is, in fact, suing to vacate the emergency
award, and that Plaintiffs' action is untimely because it
was filed one week after the three-month period expired.
See Hisense Reply at 12-13. As the Court concludes
that Sharp is seeking only to have the emergency order
declared unenforceable in the United States - and the FAA
contains a three-year statute of limitations for such
enforcement actions - its suit is therefore timely.
See 9 U.S.C. § 207.