Cerner Middle East Limited v. Icapital, LLC ( 2019 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
CERNER MIDDLE EAST LIMITED, a No. 17-35514
Cayman Islands Exempted
Company, D.C. No.
Plaintiff-Appellant, 3:16-cv-01631-
YY
v.
ICAPITAL, LLC, a U.A.E. Limited OPINION
Liability Company; AHMED SAEED
MAHOUD AL-BADI AL-DAHARI,
Defendants-Appellees.
Appeal from the United States District Court
for the District of Oregon
Marco A. Hernandez, District Judge, Presiding
Argued and Submitted October 12, 2018
Portland, Oregon
Filed September 23, 2019
Before: Richard R. Clifton and Consuelo M. Callahan,
Circuit Judges, and Roger T. Benitez,* District Judge.
Opinion by Judge Clifton
*
The Honorable Roger T. Benitez, United States District Judge for
the Southern District of California, sitting by designation.
2 CERNER MIDDLE EAST LTD. V. ICAPITAL
SUMMARY**
Quasi in Rem Jurisdiction
The panel reversed the district court’s dismissal, for lack
of personal jurisdiction, of an action seeking enforcement of
a foreign arbitration award against property in Oregon owned
by defendants.
Quasi in rem jurisdiction exists when a plaintiff seeks to
enforce a judgment against a defendant’s in-state property.
Defendants argued that plaintiff could not enforce the
arbitration award against the property until a court confirmed
the arbitration panel’s conclusion that a defendant was
properly within the arbitration panel’s jurisdiction. The
district court agreed and dismissed for lack of quasi in rem
jurisdiction.
While the appeal was pending, the Court of Appeal of
Paris confirmed the arbitration panel’s conclusion that the
defendant was subject to its jurisdiction. The Ninth Circuit
panel held that plaintiff did not waive arguments based on
the French court’s decision. The panel held that the French
court’s decision was entitled to recognition under the
principles of international comity. As a result, the elements
of quasi in rem jurisdiction were present. Plaintiff possessed
a valid judgment against the defendant, who owned property
in Oregon. The panel therefore reversed the district court’s
order and remanded for further proceedings.
**
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
CERNER MIDDLE EAST LTD. V. ICAPITAL 3
COUNSEL
Warren E. Gluck (argued) and Sean C. Sheely, Holland &
Knight LLP, New York, New York; David J. Elkanich and
Garrett S. Garfield, Holland & Knight LLP, Portland,
Oregon; for Plaintiff-Appellant.
Gary I. Grenley (argued), Paul H. Trinchero, and Eryn
Karpinski Hoerster, Garvey Schubert Barer, Portland,
Oregon, for Defendants-Appellees.
OPINION
CLIFTON, Circuit Judge:
This appeal asks us to determine whether an arbitration
award later confirmed by a court in France is enforceable
against property in Oregon owned by a named respondent in
that arbitration who contends that the arbitration panel did not
have jurisdiction over him.
Plaintiff-Appellant Cerner Middle East Limited filed this
action in Oregon state court to enforce an arbitration award
against property in that state owned by Defendants-Appellees
Ahmed Saeed Mohammed Al Badi Al Dhaheri1 and iCapital,
LLC. Quasi in rem jurisdiction exists when a plaintiff seeks
to enforce a judgment against a defendant’s in-state property.
1
As sometimes happens with names translated from another
language, Dhaheri’s name has been spelled in various ways, including
within briefs filed on his behalf and in the caption of this case. We use the
spelling initially used in the first brief filed in this court on his behalf in
this case.
4 CERNER MIDDLE EAST LTD. V. ICAPITAL
Glencore Grain Rotterdam B.V. v. Shivnath Rai Harnarain
Co., 284 F.3d 1114, 1127 (9th Cir. 2002). Defendants
removed the case to federal district court, where they argued
that Cerner could not enforce the arbitration award against
Oregon property owned by Dhaheri until a court confirmed
the arbitration panel’s conclusion that Dhaheri was properly
within the panel’s jurisdiction. They therefore maintained
that the award could not support the district court’s exercise
of quasi in rem jurisdiction. This district court agreed and
dismissed this action.
While this appeal was pending, the Court of Appeal of
Paris, a court with jurisdiction over Dhaheri, confirmed the
arbitration panel’s conclusion that Dhaheri was subject to the
panel’s jurisdiction. We hold that the French court’s decision
is entitled to recognition under the principles of international
comity. As a result, the elements of quasi in rem jurisdiction
are present. Cerner possesses a valid judgment against
Dhaheri, who owns property in Oregon. We therefore reverse
the district court’s order dismissing this case for lack of
personal jurisdiction and remand for further proceedings.
I. Background
This action is one of several disputes between Cerner, on
one side, and Dhaheri and entities he controls on the other. 2
2
Another one of those disputes resulted in an appeal from a decision
by the U.S. District Court for the Western District of Washington, argued
to the same panel of this court on the same day. Although there is
substantial overlap in the factual background, the issues in the two appeals
are distinct and they are resolved in separate opinions. For the opinion in
that case, see Cerner Middle East Limited v. Belbadi Enterprises, LLC,
No. 17-35157, ___ F.3d ____ (9th Cir. 2019).
CERNER MIDDLE EAST LTD. V. ICAPITAL 5
Plaintiff Cerner Middle East Limited (identified in this
opinion as “Cerner”) is a Cayman Islands corporation with its
principal place of business in Kansas City, Missouri. It is a
subsidiary of Cerner Corporation, a medical services
technology company based in Kansas City, whose revenue in
2018 was excess of $5 billion and whose stock is listed on the
NASDAQ exchange.
Dhaheri, a businessman with substantial holdings, is a
citizen and domiciliary of the United Arab Emirates
(“UAE”). iCapital, LLC is a UAE limited liability
corporation with its principal place of business in Abu Dhabi,
UAE. Cerner alleges that Dhaheri owns and controls
iCapital, LLC. iCapital’s predecessor was iCapital S/E, a
UAE sole proprietorship through which Dhaheri did business.
In 2008, the United Arab Emirates Ministry of Health
awarded iCapital S/E a contract to develop medical
information software for use in the UAE. iCapital S/E and
Cerner signed a contract (the “Cerner Business Agreement”
or “CBA”) under which Cerner would provide hardware,
software, and services for the UAE project. The CBA
required the parties to submit any disputes to binding
arbitration under the rules of the International Chamber of
Commerce (“ICC”), specified that the seat of arbitration shall
be in Paris, France, and stated that the language of an
arbitration shall be English. The contract also contained a
choice of law clause that stated that it “shall be governed by,
construed, interpreted and enforced in accordance with the
laws of the State of Missouri[.]”
Cerner filed a request for arbitration with the ICC in
September 2012. It contended that iCapital S/E had failed to
make payments due under the CBA. It also complained that
6 CERNER MIDDLE EAST LTD. V. ICAPITAL
iCapital S/E, a sole proprietorship, had been reorganized into
iCapital, LLC, a limited liability company, without Cerner’s
consent, which Cerner alleged was contrary to the terms of
the CBA.
That dispute appeared to have been settled three months
later. The settlement divided iCapital’s liability into two
parts: the amount that iCapital owed Cerner for the work
already completed under the CBA (the “Overdue Amount”),
and the amount that iCapital would owe Cerner for the future
work contemplated by the CBA (the “Future Payments”).
The liability of iCapital for the Overdue Amount was
addressed in a Settlement and Payment Agreement
(“Settlement Agreement”) signed by Cerner and iCapital,
LLC. It set the amount owed to Cerner for past performance
and waived claims for past acts or omissions by the other
party and its affiliates and their directors, officers, employees,
agents, and representatives. The liability for the Future
Payments was addressed in Amendment No. 5 to the CBA,
also signed by Cerner and iCapital, LLC. That Amendment
“re-schedule[d] the Future Payments owed to Cerner” under
the original CBA.
Amendment No. 5 also revised the language of the
original CBA’s arbitration clause, retaining the elements
described above that required the parties to submit any
disputes to binding arbitration under the rules of the ICC to
be conducted in English in Paris. The Settlement Agreement
adopted the arbitration clause set forth in Amendment No. 5
CERNER MIDDLE EAST LTD. V. ICAPITAL 7
to the CBA, and the choice of law clause set forth in the
original CBA.3
Unfortunately, the settlement did not bring a lasting
peace. In August 2013, Cerner initiated a second request for
arbitration against iCapital, LLC and Dhaheri with the ICC,
contending, among other things, that iCapital had failed to
make payments called for by the Settlement Agreement.
iCapital responded to the notification by objecting to the
arbitration. Dhaheri declined to respond to correspondence
from the arbitration administrator. The International Court of
Arbitration of the ICC concluded that the arbitration should
proceed against both respondents and appointed a three-
member arbitral tribunal (“Tribunal”).
The Tribunal issued its award in July 2015. It determined
that it had jurisdiction over both iCapital, LLC and Dhaheri
personally. It held that iCapital, LLC had agreed to submit to
arbitration by signing the Settlement Agreement and
Amendment No. 5 to the CBA. The Tribunal also concluded
that it could exercise jurisdiction over Dhaheri on two
separate grounds. First, Dhaheri was personally liable, as a
sole proprietor, for the obligations of iCapital S/E under the
original CBA and had consented to be bound by the
arbitration clause in the original CBA. The Tribunal
concluded that he had not been released from his obligations
as the “owner” of iCapital S/E, including the agreement to
arbitrate disputes that arose up to the execution of the
3
To induce Cerner to enter the settlement, another entity owned and
controlled by Dhaheri that was not previously involved in the transaction,
Belbadi Enterprises, LLC entered into agreements to guarantee the
obligations of iCapital (the “Guarantees”). Belbadi is a party to the other
appeal presented to this panel, but is not otherwise involved in this appeal.
8 CERNER MIDDLE EAST LTD. V. ICAPITAL
Settlement Agreement, at which point Cerner agreed to
recognize the restructuring of iCapital S/E into iCapital, LLC.
Second, Dhaheri was the alter ego of iCapital, which had
signed a binding arbitration agreement. As to the merits of
Cerner’s claim, the Tribunal held that both iCapital, LLC and
Dhaheri were liable to Cerner for more than $62 million in
damages.
After the Tribunal ruled in its favor, Cerner filed a series
of actions in the United States that sought to enforce either
the Arbitration Award or the Guarantees. This is one of those
actions.
Cerner initiated this case by filing a verified complaint in
Oregon state court seeking to attach funds in an Oregon bank
account owned by Dhaheri. To establish jurisdiction, Cerner
relied on a quasi in rem theory. Quasi in rem jurisdiction
exists when a plaintiff seeks to collect on an existing
judgment by executing on the defendant’s in-state property.
Glencore Grain, 284 F.3d at 1127.
Defendants removed the case to federal court. They then
filed a motion to dismiss for lack of personal jurisdiction
under Federal Rule of Civil Procedure 12(b)(2). In that
motion, they maintained that the district court could not rely
on the quasi in rem theory because Cerner did not possess a
valid judgment against Dhaheri.4 Specifically, they
contended that the Tribunal’s award could not be enforced
because the Tribunal lacked the authority to rule on the issue
of whether Dhaheri was subject to arbitration. While
4
While Defendants did not dispute the validity of the Tribunal’s
award against iCapital, Cerner has not identified any Oregon property
owned by iCapital.
CERNER MIDDLE EAST LTD. V. ICAPITAL 9
Defendants apparently agreed that a court could confirm the
Tribunal’s decision, they contended that to make that
determination a court needed to have jurisdiction over
Dhaheri, which the district court in Oregon did not have. The
district court agreed and granted Defendants’ motion to
dismiss.
This appeal followed. In the initial briefing, Defendants
relied on the same arguments, that (1) the Tribunal could not
independently determine whether Dhaheri had agreed to
arbitrate, and (2) the district court could not confirm the
Tribunal’s decision because he was “entitled to have a court
of competent jurisdiction determine whether he is bound by
the arbitration provision [in the SPA and CBA].”
While this appeal was pending, on October 16, 2018, the
Court of Appeal of Paris (the “Paris Court”) affirmed a
French trial court decision that confirmed the Arbitration
Award. In reaching that conclusion, the Paris Court
specifically concluded that “it was rightly that the [Tribunal]
declared [that it] had jurisdiction with respect to [Dhaheri].”5
We asked the parties to submit supplemental briefs
addressing the impact of the Paris Court’s decision on this
case. In their supplemental briefing, Defendants implicitly
acknowledged the Paris Court as a court of competent
jurisdiction. They nevertheless continued to assert that the
Arbitration Award should not provide the basis for quasi in
rem jurisdiction here.
5
The decision of the Paris Court has been provided to us in its
original French language form and also translated into English. We have
relied upon the latter. The parties have not disputed the authenticity of the
decision or the accuracy of the translation.
10 CERNER MIDDLE EAST LTD. V. ICAPITAL
II. Discussion
“We review de novo a district court’s dismissal for lack
of personal jurisdiction.” Ranza v. Nike, Inc., 793 F.3d 1059,
1068 (9th Cir. 2015). “Where, as here, the defendant’s
motion is based on written materials rather than an
evidentiary hearing, the plaintiff need only make a prima
facie showing of jurisdictional facts to withstand the motion
to dismiss.” Id. (quotation marks omitted).
Cerner contends that the district court possesses quasi in
rem jurisdiction. The parties agree that so-called “type two
quasi in rem” jurisdiction, see Restatement (First) of
Judgments § 32 (1942), requires that (1) a court of competent
jurisdiction rendered a judgment against Dhaheri, and
(2) Dhaheri owns property in the forum state. See Office
Depot Inc. v. Zuccarini, 596 F.3d 696, 700 (9th Cir. 2010).
It does not appear disputed that Dhaheri owns property in
Oregon, specifically a bank account, so it is the first prong
that is at issue here, whether a judgment against Dhaheri has
been rendered by a court of competent jurisdiction.
The argument by Defendants that persuaded the district
court was that the Tribunal’s award against Dhaheri was
ineffective because a court with jurisdiction over Dhaheri had
not determined that the Tribunal had jurisdiction over
Dhaheri.6 Although there is now a decision by the Paris
6
Cerner argued to the contrary before the district court and to us, but
we do not find it necessary at this point to discuss those arguments.
CERNER MIDDLE EAST LTD. V. ICAPITAL 11
Court that appears to satisfy that requirement,7 Defendants
assert that we should not recognize that decision for two
reasons: (1) Cerner has waived arguments based on the
French decision, and (2) the French decision is not entitled to
recognition under the principles of international comity.
Neither contention has persuaded us.
A. Waiver of arguments based on the French decision
Defendants first argue that Cerner cannot rely on the
decision of the Court of Appeal of Paris because Cerner did
not cite the French proceedings to the district court.
Although the Paris Court did not issue its decision until after
the district court ruled, Defendants contend that Cerner could
have cited the French trial court judgment issued on May 23,
2016. That decision confirmed that the Arbitration Award
was valid and enforceable.
We conclude that Cerner did not waive its arguments
based on the Paris Court’s decision. It appears that under
French law, trial court judgments are “stayed pending the
appellate court decision.” Marine Travelift, 324 F. Supp. 3d
at 1007. Defendants concede that the trial court judgment
was stayed on February 9, 2017, prior to the district court’s
decision. In addition, it does not appear that the French trial
court decision spoke clearly to the relevant issue. The present
dispute turns on whether a court has determined that the
7
It appears that the decision of the Court of Appeals of Paris is
considered final even if an appeal to a higher court in France is possible.
See Societe dAmenagement et de Gestion de lAbri Nautique v. Marine
Travelift Inc., 324 F. Supp. 3d 1004, 1007–08 (E.D. Wis. 2018).
Defendants did not challenge the finality of the Paris Court decision in
their supplemental briefing.
12 CERNER MIDDLE EAST LTD. V. ICAPITAL
Tribunal had jurisdiction over Dhaheri. According to
translated excerpts8 of the French trial court decision, the trial
court enforcement order did not discuss that issue. Instead,
it simply stated that the Arbitration Award did “not contain
any provision contrary to the law or to public order.” In
contrast, the Paris Court decision includes a detailed analysis
explaining the basis for its conclusion that Dhaheri was
subject to the jurisdiction of the Tribunal. Thus, the Paris
Court decision is uniquely relevant here.
Cerner’s failure to cite the French trial court judgment to
the district court does not give us reason to disregard the later
decision of the Paris Court.
B. Recognition of a foreign court decision
Defendants also contend that the decision of the Paris
Court is not entitled to recognition. “The extent to which the
United States, or any state, honors the judicial decrees of
foreign nations is a matter of choice, governed by the comity
of nations.” Asvesta v. Petroutsas, 580 F.3d 1000, 1010 (9th
Cir. 2009) (quotations omitted). “Comity is the recognition
which one nation allows within its territory to the legislative,
executive or judicial acts of another nation.” Id. at 1010–11
(quotations omitted). “Extension of comity to a foreign
judgment is neither a matter of absolute obligation, on the one
hand, nor of mere courtesy and good will, upon the other.”
Id. at 1011 (quotations omitted).
The considerations identified by the Supreme Court in
Hilton v. Guyot, 159 U.S. 113 (1895), provide “the guiding
8
As Defendants have requested, we take judicial notice of the
excerpts of the French trial court decision they submitted.
CERNER MIDDLE EAST LTD. V. ICAPITAL 13
principles of comity.” Asvesta, 580 F.3d at 1011; see also
Jacobs v. Tristar Indus., Ltd., 701 P.2d 455, 457–58 (Or. Ct.
App. 1985). In Hilton, the Supreme Court held that foreign
decisions should be accorded deference unless an underlying
issue renders the judgment suspect. For instance, we may
disregard a foreign judgment if it was not decided “‘under a
system of jurisprudence likely to secure an impartial
administration of justice,’” or if it was procured by fraud.
Asvesta, 580 F.3d at 1011 (quoting Hilton, 159 U.S.
at 202–03).
None of those conditions apply here. Defendants do not
challenge the administration of justice in France, either
generally or in this particular case. As noted above, the
parties themselves specified that Paris would be the location
of any arbitration in both the original contract, the CBA, and
in the revisions to that agreement, the Settlement Agreement
and Amendment No. 5.
Defendants instead argue in essence that the Paris Court
decision does not deserve deference because it was incorrect.
Under certain circumstances, we may examine the merits of
a foreign decision and conclude that it should not be
recognized. In Asvesta, for example, we were asked to decide
whether a Greek court decision was entitled to recognition.
It involved the Hague Convention on the Civil Aspects of
International Child Abduction, “an international agreement
governing the return of children removed, usually by one
parent in order to gain a custody advantage over the other
parent, from their ‘habitual residence.’” 580 F.3d
at 1002–03. Because the Greek court decision did not
involve the interpretation of Greek law, we examined the
substance of the Greek court’s decision and held that “we
may properly decline to extend comity to [it] if it clearly
14 CERNER MIDDLE EAST LTD. V. ICAPITAL
misinterprets the Hague Convention, contravenes the
Convention’s fundamental premises or objectives, or fails to
meet a minimum standard of reasonableness.” Id. at 1014.
Similarly, this case involves an international convention,
the Convention on the Recognition and Enforcement of
Foreign Arbitral Awards9 (the “Convention”) and does not
involve the interpretation of French law. We may refuse to
recognize the Paris Court decision if it “clearly misinterprets
the [] Convention, contravenes the Convention’s fundamental
premises or objectives, or fails to meet a minimum standard
of reasonableness.” Id.
Although Defendants contend that the Paris Court’s
decision conflicts with the Convention, that argument rests on
the premise that the decision failed to apply the law specified
by the parties as controlling.10 That is Missouri law, which
Defendants acknowledge includes U.S. federal law regarding
arbitrability under the Federal Arbitration Act (the “FAA”).
According to Defendants, the Paris Court decision should not
be recognized primarily because it was based on “usual
practices of international trade,” not U.S. law.
As noted above, our review of the decision of the district
court here is de novo, but it is important to recognize that our
review of the French court decision is not. We do not sit as
9
The United States is a party to that multilateral treaty, sometimes
called “the New York Convention.” Convention on the Recognition and
Enforcement of Foreign Arbitral Awards, June 10, 1958, T.I.A.S. No.
6997 (Dec. 29, 1970).
10
Because we conclude that the Paris Court’s decision is entitled to
comity even if Missouri law is controlling, we do not need to decide
whether the Paris Court was in fact bound by Missouri law.
CERNER MIDDLE EAST LTD. V. ICAPITAL 15
an appellate court to review the Court of Appeal of Paris by
deciding whether U.S. law was misapplied.
Indeed, the parties explicitly contracted for the resolution
of disputes to be by arbitration conducted in Paris, even while
providing that their agreements should be governed by
Missouri law, including federal law pertaining to arbitrations.
Defendants have affirmatively argued that the court in
Oregon lacks authority to make a decision regarding the
jurisdiction of the Tribunal over Dhaheri because it does not
have personal jurisdiction over Dhaheri, a citizen and resident
of the UAE. The same argument would appear to apply to
any other court located in this country. It could hardly be a
surprise that the Arbitration Award in this case would wind
up being reviewed by a French court, subject to review by a
court of appeals in France, not likely to be experienced in
Missouri or U.S. law. That was nearly inevitable based on
the agreements entered by the parties. Under these
circumstances, a foreign court would have to miss the mark
by a very wide margin to fail to meet a minimum standard of
reasonableness.
C. The decisions in this case
Using our customary terminology, the Paris Court in
effect affirmed a decision by a French trial court that
confirmed the Arbitration Award entered by the Tribunal.
That Award explicitly explained the Tribunal’s determination
that Dhaheri was subject to its jurisdiction. We conclude that
the decision of the Paris Court deserves recognition.
The Tribunal was mindful that there were different bodies
of law that might apply to the question of jurisdiction. In the
Arbitration Award it specifically identified the possibility of
16 CERNER MIDDLE EAST LTD. V. ICAPITAL
applying Missouri law (the law of the contract), French law
(the law of the place of arbitration), UAE law (the law where
iCapital, LLC was incorporated and Dhaheri resided), and
transnational principles. Its subsequent discussion on the
subject cited to several Missouri and federal court decisions,
and that appeared to be what the Tribunal primarily relied
upon. The Tribunal offered two separate reasons for its
conclusion that Dhaheri was subject to its jurisdiction.
First, the Tribunal reasoned that Dhaheri was the sole
proprietor of iCapital S/E. Citing UAE law, the law that
directly governed the responsibilities of a UAE sole
proprietorship, it observed that Dhaheri was “personally
liable for all of iCapital S/E’s obligations.” iCapital S/E
signed the original CBA. The Tribunal therefore held that
because iCapital S/E did not have a legal personality
independent of Dhaheri, Dhaheri was also bound by the
arbitration clause in the original CBA. Although the Tribunal
recognized that Cerner had waived any claims against
iCapital S/E arising out of the original CBA by signing the
Settlement Agreement, it concluded that the waiver did not
extend to iCapital S/E’s owner, Dhaheri. The Arbitration
Award cited testimony by one witness that the parties
understood as much when they entered into the Settlement
Agreement. It noted as well that Dhaheri did not come within
the ambit of the waiver contained in the Settlement
Agreement as he was not personally a party to that
agreement.
Second, the Tribunal held that Dhaheri could be bound by
the arbitration clauses in the Settlement Agreement and
Amendment No. 5 to the CBA as iCapital, LLC’s alter ego.
It explained its finding that all three elements of alter ego
liability under Missouri law were present. Dhaheri’s
CERNER MIDDLE EAST LTD. V. ICAPITAL 17
involvement in the affairs of iCapital demonstrated that
iCapital had no separate mind, will, or existence of its own.
Dhaheri had used his control over iCapital to permit iCapital
to violate a positive legal duty by causing iCapital to breach
the Settlement Agreement and CBA. The violation of that
legal duty caused Cerner’s injuries. The Tribunal concluded
that Dhaheri was subject to its jurisdiction under either
theory.
In its opinion, the Paris Court expressly discussed the
question of whether the Tribunal had jurisdiction over
Dhaheri. It cited to the discussion of the Tribunal in support
of its conclusion on both grounds.
It then made the reference to “the usual practices of
international trade” that appears to form the basis of
Defendants’ current argument: “Considering that, according
to the usual practices of international trade, the arbitration
clause inserted in an international contract has its own
specific validity and effectiveness that require its application
to be extended to the parties directly involved in negotiating,
entering into, performing and/or terminating the contract.”
The court concluded that because this action arose out of the
contract Dhaheri signed as the sole proprietor of iCapital S/E,
Dhaheri had necessarily participated in both negotiating and
entering into the Settlement Agreement and Amendment No.
5 to the CBA.
The Paris Court thus held that the Tribunal correctly
determined that Dhaheri had agreed to arbitrate the claims at
issue. As it stated in the translated decision: “it was rightly
that the Arbitrators declared they had jurisdiction with respect
to him.”
18 CERNER MIDDLE EAST LTD. V. ICAPITAL
Defendants challenge the Paris Court decision as not
entitled to comity because it incorrectly relied on the “usual
practices of international trade.” According to Defendants,
under the choice of law clause in the CBA, the Court of
Appeal of Paris should have applied Missouri and U.S. law.
They therefore maintain that the court of appeal erred by
relying on the principle that an arbitration clause can bind
those involved in negotiating and entering into a contract.
The reference in the Paris Court decision to “usual
practices of international trade” does not mean that was all
that the Paris Court considered. To the contrary, its decision
contained express references to specific paragraphs in the
Arbitration Award in which the Tribunal discussed and relied
upon principles of Missouri law. That the French court may
not have separately discussed those legal principles in its
decision does not mean that it was unaware of those
principles or rejected them by basing its own decision on a
different body of law. The Paris Court decision cannot be
disregarded because it did not repeat the Tribunal’s
discussion regarding the law to be applied. Nor have
Defendants demonstrated that the reference by the Paris Court
to the “usual practices of international trade” was in such
conflict with Missouri or U.S. law that we can conclude that
it failed to meet a minimum standard of reasonableness.
More broadly, Defendants misapprehend the focus of our
analysis. In Asvesta, we recognized that a foreign decision
may be entitled to comity even if we disagree with its
reasoning. 580 F.3d at 1012, 1021. We will extend comity
to a foreign decision unless the ultimate result fails to meet a
minimum standard of reasonableness. See id.
CERNER MIDDLE EAST LTD. V. ICAPITAL 19
It appears to us that the conclusion of the Paris Court that
Dhaheri was properly bound by the arbitration clauses in the
various agreements was far from unreasonable under
Missouri law. The issue of “arbitrability” is one as to which
federal arbitrability law is controlling. Mitsubishi Motors
Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626
(1985) (the “federal substantive law of arbitrability” applies
to “any arbitration agreement within the coverage of the
[FAA],” including cases falling under the Convention); see
also State ex rel. Pinkerton v. Fahnestock, 531 S.W.3d 36, 49
n.8 (Mo. 2017) (en banc) (applying federal arbitrability law
in FAA action).
Defendants argue that the question of whether the parties
agreed to arbitrate here was to be decided by the court, not
the arbitrator. Assuming that there was such a requirement
here, it was satisfied. The court decision can come after the
arbitration has been conducted, when a court confirms the
arbitrator’s award, as it did here. See generally First Options
of Chicago, Inc. v. Kaplan, 514 U.S. 938 940–41 (1995)
(considering challenge to arbitrability raised in confirmation
proceedings); Carpenters 46 N. California Ctys. Conference
Bd. v. Zcon Builders, 96 F.3d 410, 416 (9th Cir. 1996)
(directing district court to review arbitrability in confirmation
proceedings).
Similarly, as to substance, it does not appear to us that the
conclusion of the Paris Court failed to meet a minimum
standard of reasonableness. “General contract and agency
principles apply in determining the enforcement of an
arbitration agreement by or against nonsignatories.” Mundi
v. Union Sec. Life Ins. Co., 555 F.3d 1042, 1045 (9th Cir.
2009). One of those principles is “veil-piercing/alter ego.”
Id.; accord Cent. Tr. Bank v. Graves, 495 S.W.3d 797, 803
20 CERNER MIDDLE EAST LTD. V. ICAPITAL
(Mo. Ct. App. 2016). The French court was not well off the
mark in concluding the Tribunal could have reasonably
exercised jurisdiction over Dhaheri because iCapital, LLC
signed a valid arbitration agreement and Dhaheri was
iCapital’s alter ego.11
Under Missouri law,12 the corporate veil may be pierced
and a court may conclude that an individual shareholder is the
corporation’s alter ego if (1) the shareholder exerted control
over the corporation, which had “no separate mind, will or
existence of its own,” (2) that control was “used by the
corporation to commit fraud or wrong, to perpetrate the
violation of statutory or other positive legal duty, or dishonest
and unjust act in contravention of [the] plaintiff’s legal
rights,” and (3) “[t]he control and breach of duty . . .
proximately cause[d] the injury . . . complained of.” Doe
1631 v. Quest Diagnostics, Inc., 395 S.W.3d 8, 18 (Mo. 2013)
(en banc) (emphases omitted); accord 66, Inc. v. Crestwood
11
In different circumstances, we held in Yang v. Majestic Blue
Fisheries, LLC that a party which did not itself sign an arbitration
agreement could not compel another party which had signed an agreement
with another party to arbitrate in cases governed by the Convention.
876 F.3d 996, 998–1001 (9th Cir. 2017). That case can arguably be
distinguished on the facts. More importantly, other circuits have
disagreed on this issue. See, e.g., Int’l Paper Co. v. Schwabedissen
Maschinen & Anlagen GMBH, 206 F.3d 411, 418 n.7 (4th Cir. 2000)
(“[T]he estoppel doctrine also applies to nonsignatories to arbitration
agreements governed by the Convention.”). In light of that circuit split,
we cannot conclude that it would have been unreasonable for the Tribunal
or the Paris Court to rely on an alter ego theory.
12
State law governs this issue. See First Options, 514 U.S. at 944
(“When deciding whether the parties agreed to arbitrate a certain matter
. . . courts generally . . . should apply ordinary state-law principles that
govern the formation of contracts[.]”).
CERNER MIDDLE EAST LTD. V. ICAPITAL 21
Commons Redevelopment Corp., 998 S.W.2d 32, 40 (Mo.
1999) (en banc). Based on Cerner’s complaint, all three
factors are met here. As a factual matter, Defendants have
not established anything erroneous in the Tribunal’s findings
to that effect.
Numerous facts demonstrated Dhaheri’s control over
iCapital, LLC, as the Tribunal found. Dhaheri held 99% of
iCapital’s shares, was the “sole financial and operational
decision-maker for iCapital,” and “call[ed] the shots” for
iCapital. In addition, Dhaheri was “a source, if not the main
source” of iCapital’s funds. Indeed, he referred to iCapital’s
debts as his own, and he informed Cerner that iCapital would
make the payments called for by the CBA when he personally
had the funds. That was enough under Missouri law to
establish that Dhaheri controlled iCapital. See State ex rel.
Family Support Div. v. Steak’m Take’m LLC, 524 S.W.3d
584, 593 (Mo. Ct. App. 2017) (control established because
100% shareholder “had complete control over both the
finances and management of [the corporation] and complete
authority to make all decisions”); Mobius Mgmt. Sys., Inc. v.
W. Physician Search, L.L.C., 175 S.W.3d 186, 188 (Mo. Ct.
App. 2005) (control established because 80% shareholder
made all pertinent corporate decisions).
The Tribunal concluded that Dhaheri used the corporate
form to violate his legal obligations under the CBA and SPA.
Under Missouri law, a plaintiff can satisfy this element of
the veil piercing test by showing “actual fraud” or
“undercapitalization.” Crestwood Commons, 998 S.W.2d
at 41. Dhaheri knew how much money iCapital owed Cerner
and promised that the necessary funds would be available, but
Dhaheri failed to provide iCapital with that funding. As the
Tribunal recognized, “it is now obvious that [iCapital] did not
22 CERNER MIDDLE EAST LTD. V. ICAPITAL
have sufficient funds for those payments.” Moreover, the
Tribunal found that Dhaheri transformed iCapital into a
limited liability company for the purpose of evading his
contractual obligations under the CBA. Those facts
supported piercing the corporate veil under Missouri law. See
Mobius, 175 S.W.3d at 189 (second element established
because controlling shareholder “admitted that, when he
agreed to and signed [a consent judgment], he knew [the
corporation] was unable to pay it”); see also Crestwood
Commons, 998 S.W.2d at 41 (second element established
because “the uncapitalized shell corporation was used to
avoid debts arising out of the condemnation proceeding”).
Finally, the third element of Missouri’s veil piercing test,
that Cerner suffered injury as a result, was obviously met.
When Dhaheri failed to ensure that iCapital, LLC was able to
make the payments that were due, Cerner suffered the injury
underlying this action. Dhaheri’s actions satisfy Missouri’s
causation standard. See Mobius, 175 S.W.3d at 189.
The decision of the Paris Court reasonably confirmed the
Tribunal’s conclusion that Dhaheri was iCapital, LLC’s alter
ego. On that basis, it could have determined that Dhaheri was
bound by the arbitration clauses in the SPA and Amendment
No. 5 to the CBA.13 We conclude that the Paris Court’s
conclusion that the Tribunal had jurisdiction did not fail to
meet a minimum standard of reasonableness. That decision
deserves recognition under the principles of international
comity.
13
As it is unnecessary, we do not discuss the other ground relied upon
by the Tribunal and confirmed by the Paris Court, Dhaheri’s personal
responsibility as the sole proprietor of iCapital S/E.
CERNER MIDDLE EAST LTD. V. ICAPITAL 23
III. Conclusion
In sum, we hold that a court of competent jurisdiction has
determined that Dhaheri was properly within the jurisdiction
of the arbitration. Because the Arbitration Award is
enforceable, Cerner has established both elements of quasi in
rem jurisdiction with respect to Dhaheri: Cerner possesses a
valid judgment against Dhaheri, and Dhaheri owns property
that is located in Oregon. Based on the Paris Court decision
issued subsequent to the district court’s order, we reverse the
district court’s order dismissing this case for lack of personal
jurisdiction and remand for further proceedings.14
REVERSED and REMANDED for further
proceedings.
14
As it does not appear that iCapital, LLC owns any property in
Oregon, its status in the litigation at this point is unclear. That has not
been a topic of serious discussion on appeal. If they are interested, the
parties may address that question on remand.