In Voltage Pictures,LLC v. Gussi S.A. de C.V., No. 23-55123 (9th Cir. Feb. 5, 2023), the Ninth Circuit holds that when the Federal Arbitration Act (FAA) § 9’s nonresident service provision does not apply to service of notice of an application to confirm a foreign arbitral award – because the adverse party is not subject to service in any federal judicial district – the party should follow the service rules of Fed. R. Civ. P. 5. The Second Circuit previously held that a party, in such cases, serves notice instead under Fed. R. Civ. P. 4 (Commodities & Mins. Enter. Ltd. v. CVG Ferrominera Orinoco, C.A., 49 F.4th 802, 812 (2d Cir. 2022), cert. denied, 143 S. Ct. 786 (2023)).
The parties’ arbitration concerned a Distribution and License Agreement (the DLA) that gave Gussi SA the right to “license the distribution rights of [Voltage’s] film Ava in Latin America on an exclusive basis . . . . Exhibit A to the DLA contains an arbitration provision, which states that ‘[a]ny dispute arising out of or relating to this Agreement will be resolved by final binding arbitration under the [Independent Film & Television Alliance (IFTA)] Rules [for International Arbitration] . . . in effect at the time of the notice of arbitration is filed . . . .’”
“Voltage filed and served its demand for arbitration against Gussi SA after a dispute arose between Voltage and Gussi SA regarding their respective rights and obligations under the DLA . . . . [T]he Arbitrator issued a final arbitral award in Voltage’s favor. Shortly thereafter, Voltage mailed a notice of motion to confirm the arbitral award and the accompanying motion papers to the attorneys who had represented Gussi SA in the underlying arbitration. On June 10, 2021, Voltage filed its motion to confirm the award in the United States District Court for the Central District of California.”
Following California law for service on a non-resident party, “Voltage mailed its notice of motion and accompanying motion papers to Gussi SA’s address in Mexico via Federal Express and requested the return of a signed receipt upon delivery. A few days later, Voltage received a return receipt, signed by Silvia Torres, who had been designated by Gussi SA as its representative for service of process during the underlying arbitration proceedings. Then, on May 3, 2022, Voltage delivered the same papers through personal service on the registered service agent for Gussi, Inc., a Delaware corporation registered to do business in California and with its executive offices located in Los Angeles, California.”
The district court upheld the arbitral award. On appeal, a principal issue was whether the notice of motion was properly served on Gussi SA.
The Ninth Circuit affirms. It first addresses whether the district court had subject-matter jurisdiction. The court below held there was diversity jurisdiction. But the panel demurs. “[W]hile Section 1332(a)(2) vests federal district courts with subject matter jurisdiction over suits involving ‘citizens of a State and citizens or subjects of a foreign state,’ 28 U.S.C. § 1332(a)(2), but not over suits in which ‘aliens [are] on both sides of the case.’” The record failed to reveal the citizenship of Voltage’s members (for LLCs, citizenship is based on each of its members).
“Nevertheless, we hold that 9 U.S.C. § 203 and 28 U.S.C. § 1331 provided the district court with an independent basis for exercising jurisdiction over the matter . . . . Section 203 of Chapter 2 of the [FAA] vests federal district courts with subject matter jurisdiction over motions seeking to confirm non-domestic arbitral awards . . . . Here, it is undisputed that the arbitral award at issue is ‘between at least one foreign party’ because Gussi SA is a citizen of Mexico . . . . Accordingly, we are satisfied that Section 203 provided the district court with an independent basis for exercising subject matter jurisdiction over the motion.”
“Gussi SA maintains that it was never properly served with notice of Voltage’s motion to confirm the arbitral award, and therefore, the district court lacked personal jurisdiction over Gussi SA to confirm the award. For us to evaluate whether service of Voltage’s motion on Gussi SA was sufficient, we must first determine what law governs service of a confirmation motion.”
The panel holds that the district court erred in applying California law rather than federal procedural law. It disaffirms lower court authority in California holding that Independent Film & Television Alliance (IFTA) Rule 12.5 necessarily mandates application of California state-law service rules.
“We therefore reject the district court’s ruling that by agreeing to abide by IFTA Rule 12.5, Gussi SA voluntarily waived its right to be served with notice of Voltage’s motion in compliance with federal law in federal court. Instead, we hold that, by incorporating IFTA Rule 12.5 into the DLA, Voltage and Gussi SA both agreed to accept service of a confirmation motion pursuant to any law, treaty, or convention (except for the Hague Convention) that applies to such motions in the prevailing party’s chosen confirmation forum. Because Voltage filed its confirmation motion in a federal court, we must analyze whether service of the motion on Gussi SA complied with whatever federal law applies to such motions.”
Having established the applicable law (federal, not California), the panel finally reaches the core issue of whether Voltage properly affected service of the notice of motion. But then it reaches another fork in the road.
“Rule 4 of the Federal Rules of Civil Procedure governs service of summons and a complaint in federal district court . . . . However, this case does not concern the service of summons and a complaint. Rather, it concerns the service of a prevailing party’s notice of motion to confirm an arbitral award. Rule 81(a)(6)(B) provides that the Federal Rules of Civil Procedure ‘govern proceedings under the [FAA] . . . relating to arbitration,’ except as the FAA ‘provide[s] other procedures.’ Fed. R. Civ. P. 81(a)(6), (B).”
Section 6 of the FAA points to Fed. R. Civ. P. 5, which governs the service of “written motion[s]” and “notice[s] . . . .” Fed. R. Civ. P. 5(a)(1)(D), (E). Yet Section 9 of the FAA provides that “[i]f the adverse party shall be a nonresident, then the notice of the application shall be served by the marshal of any district within which the adverse party may be found in like manner as other process of the court.” The service-by-marshal rule was an artifact of the pre-Federal-Rules regime (the FAA was passed in 1925), when “service of process—including service of summons and a complaint—was routinely enacted by the U.S. marshal.”
“It is undisputed that Gussi SA does not reside in the district where the award was made—i.e., the Central District of California—and that Voltage did not attempt to serve Gussi SA by a U.S. marshal. Because of these undisputed facts, Gussi SA contends that service of Voltage’s notice of motion was insufficient pursuant to § 9.” The panel sides with Gussi SA, at least as far as holding that the marshal requirement in Section 9 remains good law, despite the advent of the Federal Rules and the panoply of alternatives provided by Rule 4.
Again, the panel disaffirms various district court cases holding that the FAA § 9 service-by-marshal rule was impliedly overruled by 1983 amendments to Fed. R. Civ. P. 4. “Section 9’s marshal requirement does not expressly contradict or irreconcilably conflict with the current Federal Rules, which still allow for service by a U.S. marshal if the court so orders, and still mandates service by a U.S. marshal where Rule 4.1 applies . . . . Accordingly, we hold that later amendments to the Federal Rules of Civil Procedure did not implicitly repeal the marshal requirement in § 9’s nonresident service provision and that it is still valid where it applies.”
Yet “[d]espite lower court disagreement over whether § 9’s marshal requirement has survived into the present day, there is an emerging consensus among district courts that § 9’s nonresident service provision does not apply to adverse parties located outside the United States because service by a U.S. marshal outside of the territorial United States is impossible . . . . In that circumstance, requiring service by the marshal of the district within which the adverse party may be found would disallow a federal court from ever exercising personal jurisdiction over an adverse party and prevent it from confirming an arbitral award governed by the New York Convention [the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards]. That result would necessarily conflict with 9 U.S.C. § 207, which requires a federal court to confirm an award governed by the Convention ‘unless it finds one of the grounds for refusal or deferral of recognition or enforcement of the award specified in the said Convention.’ 9 U.S.C. § 207.”
“[W]e hold that § 9’s nonresident service provision does not apply to the service of notice of an application to confirm a foreign arbitral award governed by the New York Convention if the adverse party is not available for service in any judicial district of the United States at the time of service.”
“When § 9 does not apply, what stands in its place? Many courts, including the Second Circuit, have concluded that Rule 4 necessarily fills the gap,” citing Commodities & Mins. Enter. Ltd. “However, those courts discount § 6 of the FAA, which states that ‘[a]ny application to the court hereunder shall be made and heard in the manner provided by law for the making and hearing of motions, except as otherwise herein expressly provided.’ 9 U.S.C. § 6 . . . . That language plainly refers to the reigning rules governing service of written motions and notices in federal court, which today is found in Rule 5. See Fed. R. Civ. P. 5(a)(1)(D), (E). Accordingly, we hold that Rule 5(b)—the federal procedural law governing how service of a motion is made, Fed. R. Civ. P. 5(b)—is the default rule for serving notice of an application to confirm an award when § 9 conflicts with Chapter 2.”
Thereby, the panel holds that Voltage effected service on Gussi SA by mailing (actually, FedExing) the papers to the Mexican address. “The district court was thus empowered to enter judgment against Gussi SA in confirming the award.”
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