The opinion of the court was delivered by: CONNER
Petitioner R3 Aerospace, Inc. ("R3") commenced a Special Proceeding in the Supreme Court of the State of New York seeking to disqualify the law firm of Haight, Gardner, Poor & Havens ("HGPH") from representing respondent Marshall of Cambridge Aerospace Limited ("Marshall") in an arbitration proceeding because of alleged violations of New York's Code of Professional Responsibility and Disciplinary Rules. Marshall removed, asserting that the district court has original jurisdiction over this action pursuant to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 9 U.S.C. §§ 201-207 (the "Convention"), because the state court proceeding "relates" to an arbitration agreement which falls under the Convention. R3 has moved this court to remand or, in the alternative, to abstain from determining issues raised in the state court proceeding. For the reasons discussed below, petitioner's motion to remand is granted.
By letter dated October 12, 1995, R3 filed a Demand for Arbitration against Marshall, together with its Statement of Claim, with the American Arbitration Association ("AAA") in White Plains, New York. Shortly thereafter, HGPH notified R3 that it would be representing Marshall. The arbitration concerns a dispute arising out of an agreement involving a joint venture between R3 and Marshall to jointly develop and market a program to convert Lockheed L-1011 aircraft from passenger airplanes to commercial cargo airplanes (the "Agreement"). The Agreement contains the following arbitration provision:
This Agreement shall be deemed to have been made in and shall be construed in accordance with the laws of the State of New York. Any controversy or claims arising out of, or relating to, this Agreement or the breach thereof, shall be settled by arbitration before three arbitrators in accordance with the rules then obtaining of the American Arbitration Association. The arbitration shall be held in New York, and judgment upon any award rendered by all or a majority of the arbitrators may be entered in any court having jurisdiction thereof.
Prior to the appointment of an arbitrator, counsel for R3 notified HGPH that it believed that HGPH had a conflict of interest requiring HGPH's disqualification. Upon HGPH's refusal to withdraw from the arbitration, on February 8, 1996, R3 filed a proceeding ancillary to the arbitration with the Supreme Court of the State of New York, Westchester County, see Bidermann Indus. Licensing, Inc. v. Avmar N.V., 173 A.D.2d 401, 570 N.Y.S.2d 33 (App. Div. 1991) (issue of attorney disqualification can not be left to determination of arbitrators), seeking, inter alia, an order disqualifying HGPH from representing Marshall in the pending arbitration proceeding. In response, Marshall removed, claiming that the district court had jurisdiction pursuant to section 205 of the Convention. R3 has moved to remand or, in the alternative, to abstain from determining the disqualification issue because the Convention does not apply to disqualification proceedings, and the state court action does not relate to an arbitration agreement as required by section 205 of the Convention.
Respondent Marshall invokes this court's jurisdiction pursuant to section 205 of the Convention, which provides in pertinent Part:
Where the subject matter of an action or proceeding pending in a state court relates to an arbitration agreement or award falling under the Convention, the defendant or the defendants may, at any time before the trial thereof, remove such action or proceeding to the district court of the United States for the district and division embracing the place where the action or proceeding is pending.
9 U.S.C. § 205. Federal removal statutes should be restrictively interpreted so as to "scrupulously confine" removal jurisdiction to the precise limits which the statute has defined. See Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 109, 85 L. Ed. 1214, 61 S. Ct. 868 (1941). The removing party bears the burden of establishing federal jurisdiction. R.G. Barry Corp. v. Mushroom Makers, Inc., 612 F.2d 651, 655 (2d Cir. 1979). Any doubts as to removal should be resolved in favor of remanding the case to state court. Somlyo v. J. Lu-Rob Enterprises, Inc., 932 F.2d 1043, 1045-46 (2d Cir. 1991).
As a threshold matter, we address whether the Convention even applies to this dispute. The Convention governs only disputes that are "commercial" in nature.
The dispute between R3 and Marshall can not be "considered as commercial" because the state court proceeding concerns the application and enforcement of the Code of Professional Responsibility and Disciplinary Rules. In addition, the Convention governs "differences which have arisen or which may arise between [the parties] in respect of a defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration. " 9 U.S.C. § 201, art. I (emphasis added). The subject matter of the dispute in this case--i.e., possible attorney disqualification--is not capable of settlement by arbitration. See Bidermann, 570 N.Y.S.2d at 34 ("Issues of attorney disqualification . . . involve interpretation and application of the Code of Professional Responsibility and Disciplinary Rules . . . and cannot be left to the determination of arbitrators. . . .") . Therefore, by operation of self-imposed limitations, the Convention can not apply to the state court proceeding that Marshall seeks to have removed pursuant to a removal statute in the Convention.
Marshall argues that "there are a host of arbitration-related issues which arbitrators may not be able to decide, but which federal courts are authorized to decide under the Convention or under the Federal Arbitration Act." Respondent's Memorandum in Opposition to Petitioner's Motion to Remand and/or Abstain, at 7. However, respondent cites, and the court is aware of, not a single example of a non-arbitrable issue that falls under the Convention. No such example could exist because the Convention, by its own terms, does not apply to non-arbitrable disputes.
Respondent's reliance on First Options of Chicago, Inc. v. Kaplan, 514 U.S. , 131 L. Ed. 2d 985, 115 S. Ct. 1920 (1995), is misplaced. According to First Options, "a court must defer to an arbitrator's arbitrability decision when the parties submitted that matter to arbitration." 115 S. Ct. at 1924. However, absent clear and unmistakable evidence that parties agreed to do so, courts make an independent review of arbitrability. Id. Respondent cites this case apparently for the proposition that some non-arbitrable issues (in this example, the issue of arbitrability) ...