Sharp Corp. v. Hisense USA Corp.
This text of 292 F. Supp. 3d 157 (Sharp Corp. v. Hisense USA Corp.) is published on Counsel Stack Legal Research, covering Court of Appeals for the D.C. Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.
Opinion
JAMES E. BOASBERG, United States District Judge
Should 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.
Sharp 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.
*164Although 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.
I. Background
Given 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, ¶ 28.1.
According 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 Agreement].
Emergency 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.
On 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,
In 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 Opinion.
II. Legal Standard
Because 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).
In 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.,
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JAMES E. BOASBERG, United States District Judge
Should 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.
Sharp 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.
*164Although 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.
I. Background
Given 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, ¶ 28.1.
According 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 Agreement].
Emergency 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.
On 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,
In 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 Opinion.
II. Legal Standard
Because 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).
In 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.,
To 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,
Finally, 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.,
III. Analysis
As it 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' suit.
A. Subject-Matter Jurisdiction
Hisense 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.
1. New York Convention
The 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,
Pursuant to the FAA, United States district courts have original jurisdiction over an "action or proceeding falling under the Convention."
*167In this 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
This 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,
Once 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 secondary-jurisdiction courts.
The 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
2. Declaratory Judgment Act
Determining that Plaintiffs are not seeking to vacate the arbitration award, however, does not fully resolve the jurisdictional inquiry. This is because Sharp's suit comes before the Court in a *168somewhat unusual posture-a motion for a declaratory judgment that the emergency order is unenforceable. As Defendants note, the New York Convention discusses the power of a court in a secondary jurisdiction over actions to enforce arbitration awards and the ability of defendants to raise certain affirmative defenses in such enforcement proceedings. The Convention does not, however, expressly address suits in which a party preemptively seeks to have an award declared unenforceable, as is the case here. Hisense argues that this distinction matters, and that the Court therefore lacks jurisdiction over Sharp's "proactive" action. See MTD at 12. Yet this assertion ignores Plaintiffs' chosen vehicle for bringing this suit-the Declaratory Judgment Act.
It has long been clear that the Act is not a jurisdiction-conferring statute. See Skelly Oil Co. v. Phillips Petroleum Co.,
To determine whether it has jurisdiction over Plaintiffs' declaratory-judgment action, then, the Court must imagine the anticipated suit Sharp seeks to avoid by requesting such relief. Here, Plaintiffs are asking for a declaration that the interim relief issued by the emergency arbitrator-the so-called "gag order"-is unenforceable in the United States. Presumably, the suit Sharp wishes to disable is an action by Defendants to enforce the emergency order in U.S. courts. The question is thus whether this Court would have subject-matter jurisdiction over that "hypothetical threatened action." Medtronic,
It requires no gift of premonition to see that the answer is yes. The implementing *169provisions of the FAA state that, when a court has primary or secondary jurisdiction under the New York Convention, "[a]n action or proceeding falling under the Convention shall be deemed to arise under the laws and treaties of the United States."
Finally, the Court at oral argument independently raised the issue of whether a particular SIAC rule precludes Sharp's challenge to the emergency interim award. SIAC Schedule 1, Rule 12 states that an emergency award "shall be binding on the parties from the date it is made" and that the parties "irrevocably waive their rights to any form of appeal, review or recourse to any State court or other judicial authority with respect to such Award insofar as such waiver may be validly made." SIAC Rules, http://www.siac.org.sg/our-rules/rules/siac-rules-2016. Although the text of this rule would appear to preclude Plaintiffs' suit contesting the scope of the emergency award, Defendants did not raise this issue in their papers. The Court will therefore consider this argument forfeited and need not determine the effect of the SIAC rules on Sharp's ability to file the instant suit.
B. Personal Jurisdiction
The Court turns next to Defendants' position that Sharp has not demonstrated personal jurisdiction in the District over Hisense International and Hisense USA. See MTD at 13-16.
1. Legal Framework
Personal jurisdiction may take the form of general or specific jurisdiction. The former exists where a non-resident defendant maintains sufficiently systematic and continuous contacts with the forum state, regardless of whether those contacts gave rise to the claim in the particular suit. See Helicopteros Nacionales de Colombia, S.A. v. Hall,
This leaves the possibility of specific jurisdiction. "In contrast to general, all-purpose jurisdiction, specific jurisdiction is confined to adjudication of issues deriving from, or connected with, the very controversy that establishes jurisdiction." Goodyear Dunlop Tires,
2. Sufficient Contacts
In denying such connections, Defendants assert that "the alleged sale of televisions [in the District] is not sufficiently related to Plaintiffs' attempt to challenge a foreign arbitration award as violating their rights to free speech." Reply at 9. Rather, Hisense's perspective is that "[t]he entire controversy" giving rise to Sharp's Complaint "focuses solely on the validity of the arbitration proceeding, the Emergency Order, and Plaintiff's free-speech rights," none of which has any "causal nexus" with the District. See MTD at 15. Plaintiffs retort that "[t]his action directly arises from Hisense's activities directed at and occurring in the District." Sharp Resp. at 16. Sharp asserts that "Hisense sells the [Sharp-branded] televisions at issue in physical retail stores throughout the District of Columbia," and that this commercial activity is sufficiently related to the Licensing Agreement so as to give rise to personal jurisdiction. Id. at 17-18. Because the televisions "are on retail shelves in the District of Columbia and expressly assert compliance with FCC standards," Plaintiffs contend that these "contacts form one of the core bases for [their] attempt to declare the Gag Order unenforceable." Id. at 19.
Although it is a close call, the Court finds that Sharp is unable to show that Hisense's contacts with the District have the requisite nexus to the instant suit. This inquiry is fact intensive, focusing on "the relationship among the defendant, the forum, and the litigation." Shaffer v. Heitner,
There is some surface appeal to Sharp's assertion that the relatedness inquiry is *171satisfied because it seeks relief, in part, to communicate with regulators and consumers about the television sets being sold in the District. Yet Sharp's Complaint is not really about Hisense's sale of televisions here; rather, Plaintiffs' grievances are grounded in the emergency order itself, which has no connection to the forum. FC Inv. Grp. LC v. IFX Mkts., Ltd.,
3. Government-Contacts Doctrine
Sharp is not yet ready to cede the field, and it offers two other theories to support personal jurisdiction. It first argues that Hisense is subject to specific personal jurisdiction in the District because the company has made repeated filings with the FCC, which is headquartered here. Yet such interactions with the Commission do not, by themselves, confer personal jurisdiction. Under the "government contacts" doctrine, a nonresident who files with a government agency in the District does not thereby subject itself to personal jurisdiction here. See Envl. Research Int'l, Inc. v. Lockwood Greene Engineers, Inc.,
Plaintiffs nonetheless invoke a narrow exception to this doctrine, which instructs that personal-jurisdiction requirements may be satisfied when a defendant's contacts with a government agency "fraudulently induced unwarranted government action against the plaintiff." Companhia Brasileira Carbureto De Calcio v. Applied Indus. Materials Corp.,
Such position notwithstanding, Sharp cannot satisfy two crucial components of the Companhia exception: it failed to allege "fraud" on the part of Defendants, and it did not plausibly allege that Hisense's filings induced adverse government action. See Companhia,
Even if Sharp's allegations did rise to such a level, the Complaint nonetheless does not satisfy the second condition under Companhia, which requires that "[t]he plaintiff must also allege that the agency actually relied on the fraudulent information in making its decision," and that the fraudulent information thus "induced unwarranted government action against the plaintiff."
This construction of adverse government action stretches the requirement that "the [fraudulent] petition must provoke government action against the plaintiff" beyond its reasonable bounds. See Globe Metallurgical, Inc. v. Rima Indus. S.A.,
4. State-Owned Entities
In a final attempt to persuade the Court of its jurisdiction over Defendants, Sharp asserts that Hisense Intl. and Hisense USA, as Chinese state-owned entities, are not persons capable of asserting personal-jurisdiction defenses under the Fifth Amendment. See Omnibus Response at 20-21. As Defendants correctly rejoin, this argument is contrary to both governing precedent and the facts of this case.
Under this Circuit's law, "foreign states are not 'persons' protected by the Fifth Amendment," and they are thus not afforded the jurisdictional protections of that provision. See Price v. Socialist People's Libyan Arab Jamahiriya,
Here, Plaintiffs have not met their burden of showing that the Chinese government exercises such extensive control over Defendants as to form a principal-agent relationship. Indeed, Sharp ignores a simple, insurmountable stumbling block to its foreign-state theory-viz. , Hisense Co., Ltd., the Chinese-owned company, is not a named party in this suit. The two named Defendants, Hisense Intl. and Hisense USA, are both subsidiaries of Hisense Co., Ltd., and Sharp does not allege that these subsidiaries act as "agents" of the Chinese state. Indeed, precedent shows that the foreign-government status of a parent company is not automatically imputed to its subsidiaries. See Dole Food Co. v. Patrickson,
Sharp has nonetheless just submitted a recent district court order from the Central District of California, which concluded that Hisense Co., Ltd. is an "instrumentality of a foreign state" for the purposes of the Foreign Sovereign Immunities Act. See ECF No. 42 (October 18, 2017, Order from Case No. 17-3341 (C.D. Cal.)). Yet that determination has little relevance to this case.
First, as discussed above, Hisense Co., Ltd. is not a party to this suit. The California court order in fact supports Defendants' argument that, regardless of the status of Hisense Co., Ltd., the two subsidiaries in this case are not agents of a foreign state. In the California case, Sharp initially filed an action in state court, and Hisense Co., Ltd. removed the entire action to federal district court under the FSIA. In order to show federal jurisdiction under the FSIA, Hisense Co., Ltd. asserted that it was an "agency or instrumentality of a foreign state," as it is directly and wholly owned by a political subdivision of the Chinese government. See C.D. Cal. Order at 3. Yet, although Hisense USA and Hisense Intl. were named defendants in the California state action, they did not join the notice of removal, and Hisense Co., Ltd. did not assert that its subsidiaries were also agencies or instrumentalities of the Chinese state. Indeed, as the California order noted, "[O]nly direct ownership of a majority of shares by the foreign state satisfies the statutory requirement under the FSIA."
Second, the California order addressed the standard governing whether an entity is an "instrumentality" of a foreign government under the FSIA, which is distinct from the determination of that entity's due-process protections under the Fifth *174Amendment. See GSS Grp. Ltd.,
* * *
In sum, the Court rejects all of Sharp's theories of personal jurisdiction here. While their arguments are creative, Plaintiffs can show neither adequate government contacts by Defendants, nor a bar as foreign entities. As the question of whether Hisense's contacts with the District give rise to specific personal jurisdiction is sufficiently close, however, the Court will, out of an abundance of caution, proceed to address the merits of the case.
C. Merits
In a nutshell, Sharp contends that the emergency order issued by the SIAC arbitrator is unenforceable because it violates a fundamental U.S. public policy: freedom of speech and the right to petition the government as enshrined in the First Amendment. Hisense responds that such an argument omits a critical component of a viable First Amendment claim-namely, the existence of state action. The question before the Court is thus whether this case does, in fact, involve state action, and, if not, whether Sharp nonetheless may assert a claim that the emergency order offends U.S. public policy.
1. Legal Background
"[A] secondary jurisdiction court must enforce an arbitration award unless it finds one of the grounds for refusal or deferral of recognition or enforcement specified in the Convention." Karaha Bodas,
"Although this defense is frequently raised, it has rarely been successful." Ministry of Def. & Support for the Armed Forces of the Islamic Republic of Iran v. Cubic Def. Systems, Inc.,
*175TermoRio,
2. State-Action Doctrine
Sharp believes it can meet this high bar by relying on the public policy of free speech enshrined in the First Amendment. More specifically, Plaintiffs assert that the emergency order violates the First Amendment's "well defined and dominant" public policy against "one-sided gag orders" and restrictions on a party's ability to petition the government. In relying on the First Amendment, however, Sharp runs into a significant obstacle-the principle that without governmental action, there can be no First Amendment violation. According to Hisense, as this suit presents no such state action, Sharp is out of luck. In response, Sharp first argues that there is in fact governmental action in this case-in the form of the Court's enforcement or nonenforcement of the arbitration award. Unfortunately for Plaintiffs, that theory holds no water.
It is axiomatic that to elicit First Amendment protection, the infringement upon speech or petition rights must have "arisen from state action of some kind." Bronner v. Duggan,
In Davis v. Prudential Securities, Inc.,
*176United Egg Producers v. Standard Brands, Inc.,
Plaintiffs are correct that, in one limited instance, the Supreme Court has found that court enforcement of an agreement between private parties can be considered governmental action. In Shelley v. Kraemer,
As this Circuit has underscored, "If, for constitutional purposes, every private right were transformed into governmental action by the mere fact of court enforcement of it, the distinction between private and governmental action would be obliterated." Edwards v. Habib,
3. Public Policy and the First Amendment
Finding no state action, the Court next considers Plaintiffs' argument that the emergency order is, nonetheless, contrary to public policy. On this point, the Court concludes that the First Amendment provides no "well defined and dominant" public policy in favor of permitting private parties to speak absent state action. Instead, the precedent is abundantly clear that the rights enshrined in the First Amendment cannot, and should not, be uncoupled from the state-action requirement.
At bottom, the First Amendment "is a restraint on government action, not that of private persons." Columbia Broad. Sys., Inc. v. Democratic Nat'l Comm.,
Plaintiffs are unable to demonstrate why this case is at all distinguishable from such precedent. Instead, this action boils down to a dispute over a private agreement-precisely the type of controversy that courts have held is not subject to the First Amendment. "Arbitration is a private self-help remedy," and "[w]hen arbitrators issue awards, they do so pursuant to the disputants' contract-in fact the award is a supplemental contract." Smith v. American Arbitration Ass'n,
The SIAC rules, for instance, provide that an emergency arbitrator "shall have the power to order or award any interim relief that he deems necessary," SIAC Rules, Schedule 1, ¶ 8. The Rules also contain a broad confidentiality provision, which states that "all matters relating to the proceedings and the Award" are confidential.
a. Analogous Caselaw
Despite such precedent, Sharp asks this Court to find that there is nonetheless a First Amendment concern in this case. Specifically, Plaintiffs argue that the public-policy defense under the New York Convention expands the scope of the Amendment to include a general policy in favor of free speech, even where there is no state action. This is a matter of first impression in this Circuit, and there is no precedent directly on point. There are, however, certain bodies of caselaw that are helpful in guiding the Court's determination as to the parameters of constitutionally derived public-policy claims.
First, although both sides agree that there is no case addressing whether enforcing an arbitration agreement can violate the public policy of the First Amendment in the absence of state action, see Response at 27, neither party addresses the fact that there are cases addressing an analogous argument with respect to the Due Process Clause. In MedValUSA Health Programs, Inc. v. MemberWorks, Inc.,
*178Recognizing that there was no state action at issue, the defendant nonetheless asserted that the award was unenforceable due to a broader public policy against such punitive damages. The court squarely rejected this claim. It first explained that the Due Process Clause "barred a state from imposing grossly excessive punitive damages," a principle that was "premised on the presence of state action." Id. at 663,
Here, validating Plaintiffs' claims would achieve the same result. By finding that the First Amendment establishes a general public policy in favor of speech, the Court would be permitting private parties to make an end-run around the state-action doctrine. The holdings of MedValUSA and Shahinian thus support Defendants' assertion that the public-policy exception to the New York Convention cannot be so broadly construed so as to swallow the state-action requirements of a First Amendment claim.
The second set of cases that is helpful in guiding the Court's decision today addresses circumstances in which private employees have asserted that the First Amendment supports a public policy against their termination for the exercise of free speech. Like Sharp, these employees were unable to demonstrate state action with respect to the alleged constitutional infringement. Yet, those plaintiffs nonetheless asserted that their discharge violated public policy-an argument that was repeatedly rebuffed by the courts. In Grinzi v. San Diego Hospice Corp.,
Similarly, in Barr v. Kelso-Burnett Co.,
These decisions stand for the proposition that, even when a plaintiff asserts a general public-policy argument, the First Amendment does not apply outside of state action. As is clear from these decisions, the government-action requirement is not some technicality with which plaintiffs can dispense by cloaking their claims in the guise of "public policy." It is, instead, a necessary and fundamental underpinning of the First Amendment.
b. Foreign Judgments
Finally, the Court turns briefly to Plaintiffs' reliance upon a limited number of cases in which U.S. courts have refused to enforce foreign judgments because they were contrary to the public policy of the First Amendment. This line of decisions appears to be confined largely to a narrow area of law-libel judgments issued by foreign courts. As Sharp correctly notes, federal courts have found certain foreign judgments unenforceable in the United States, concluding that such judgments are "repugnant" to the public policy of the First Amendment. See Matusevitch v. Telnikoff,
As an initial matter, all of Sharp's cited cases involve judgments rendered by foreign courts-not arbitration awards issued by private arbitrators. This distinction matters. First, as Defendants point out, the enforcement of foreign judgments is governed not by the New York Convention, but instead by general notions of comity, see Yahoo!, Inc. v. La Ligue Contre Le Racisme et L'Antisemitisme,
Second, the foreign-judgment cases make clear that the courts' concern is whether the underlying cause of action on which the judgment is based-typically a claim for libel-would be consonant with the First Amendment if asserted in the United States. See, e.g., Bachchan,
Finally, it is reasonable that U.S. courts may be more concerned with the First Amendment implications of foreign judgments than foreign arbitral awards. The former come far closer to the state-action concerns of the First Amendment than do the latter, as they involve the coercive power of a state over potentially non-consenting parties. Arbitration, by contrast, simply involves the bargained-for results of the parties' mutual agreement to forgo the judicial system. Although it is not explicit in the reasoning of the foreign libel decisions, the Court finds persuasive this distinction between the level of state action involved in foreign judgments versus foreign arbitration. See Montré D. Carodine, Political Judging: When Due Process Goes International,
Indeed, unlike foreign judgments, arbitration proceedings and awards are "simply a matter of contract between the parties." First Options of Chicago, Inc. v. Kaplan,
Put simply, there is no free-floating, penumbral public policy protecting free speech. The principle underlying the First Amendment-that citizens shall be free from government acts infringing upon their rights of expression and petition-is inherently tied to the state-action requirement. Because Sharp can make no showing of such government involvement, and because all of its counts rely upon the alleged violations of First Amendment policies, the *181Court will grant Defendants' Motion to Dismiss.
D. Discretion Under Declaratory Judgment Act
In addition to the lack of personal jurisdiction and Plaintiffs' failure to state a claim, there is yet another reason why Sharp comes up empty. Given the ongoing arbitration proceedings in this case, the Court is unconvinced that a declaratory judgment is the appropriate relief at this time. As has long been held, the Declaratory Judgment Act gives courts discretion to determine "whether and when to entertain an action." Wilton v. Seven Falls,
As Defendants note and Plaintiffs concede, there is currently a motion to vacate the emergency order pending before a full arbitral panel of the SIAC. See Exh. E. There will be a hearing on this motion next month, with a decision expected two months later. See Omnibus Response at 40; ECF No. 35-3 (Declaration of Woo Shu Yan), ¶¶ 9-10. This pending motion weighs in favor of declining to issue a declaratory judgment and, at the very least, staying the case.
The New York Convention expressly provides that a court may impose a stay when a petition to vacate is pending before a court in the country of primary jurisdiction. See Convention, art. VI. This discretion, coupled with the Court's inherent leeway in deciding whether to exercise its jurisdiction under the Declaratory Judgement Act, counsel against interference in an ongoing international-arbitration dispute. See Telcordia Techs., Inc. v. Telkom SA, Ltd.,
*182is only months away from taking action on the merits of Plaintiffs' claims.
The Court therefore finds that practical considerations counsel it to refrain from exercising its authority to issue a declaratory judgment. Even in a world in which the merits of this case were not so readily resolved in Defendants' favor, Plaintiffs would nonetheless not prevail.
IV. Conclusion
Although Plaintiffs certainly feel aggrieved by the emergency order imposed upon them by the SIAC, they have no legal recourse in this Court. There is no personal jurisdiction over Defendants in the District, and, even if there were, the emergency order does not violate a fundamental public policy. And, assuming arguendo that the Court reached neither of those conclusions, it would nonetheless decline to exercise its authority under the Declaratory Judgment Act in light of the pending motion to vacate before the SIAC. For all of these reasons, the Court will grant Defendants' Motion to Dismiss. A separate Order consistent with this Memorandum Opinion shall issue on this date.
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Cite This Page — Counsel Stack
292 F. Supp. 3d 157, Counsel Stack Legal Research, https://law.counselstack.com/opinion/sharp-corp-v-hisense-usa-corp-cadc-2017.