MOTION TO CONFIRM-FEDERAL JURISDICTION

Tesla Motors, Inc. v. Balan, 134 F. 4th 558

Plaintiff Balan filed a lawsuit in the Western District of Washington alleging that she was defamed by Tesla. Tesla moved to dismiss the case and compel arbitration and dismiss the case. The motion was granted. After the arbitrator ruled in favor of Tesla, it filed a motion to confirm the award in the Northern District of California. The motion was granted and Balan appealed, arguing that there was no federal jurisdiction.

The Ninth Circuit reversed. In Badgerow v. Walters, 596 U.S. 1 (2022), the Court explained that Congress had included express language authorizing a jurisdictional "look-through" approach as to petitions under a different provision of the FAA, Section 4. But such language is conspicuously absent in Sections 9 and 10 of the FAA. Because a "look through" approach is prohibited under Badgerow, the facts establishing that the amount in controversy exceeds $75,000 must be present on the face of a Section 9 petition to confirm an arbitration award before a district court can assert diversity jurisdiction over the action. That requirement was not satisfied in this case. Tesla went to the district court to confirm a zero-dollar award dismissing Balan's libel claims. On its face, a petition to confirm a zero-dollar award cannot support the amount in controversy requirement. Consequently, jurisdictional facts establishing the amount in controversy requirement were not found on the face of the petition, and a court cannot "look through" the petition to the underlying substantive controversy under Section 9, the district court did not have subject matter jurisdiction.

Tesla argued alternatively that while there may not be jurisdiction under Section 9 of the FAA, there was jurisdiction under Section 3 of the FAA, which governs stays in federal court proceedings during the pendency of an arbitration. In support of its argument, Tesla cited Smith v. Spizzirri, 601 U.S. 472 (2024), which held that under Section 3 when a party has requested a stay of the court proceeding pending arbitration, the court does not have discretion to dismiss the case and, instead, must stay the case. Tesla argued that because it asked the district court to "dismiss or stay" the action pursuant to Section 3, under Spizzirri the district court should have stayed the suit, rather than dismissing it. Because the district court did not have authority to dismiss the suit, Tesla asserted that it should be allowed to return to court to confirm the award under Section 9—just as a properly entered stay under Section 3 would have allowed it to do. But Tesla's argument fails because, even with the hindsight of Spizzirri that the district court should have stayed the case, it didn't—the court dismissed it. Tesla never contested the dismissal and never appealed the issue. Because Tesla never appealed the dismissal, that unappealed and nowbinding judgment was a dismissal, not a stay. The upshot is that this case is a Section 9 case is controlled by Badgerow's instruction that the facts establishing a jurisdictional basis must be present on the face of the petition to confirm the arbitration award.