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CREDIT SUISSE FIRST BOSTON, LLC v. PADILLA

July 12, 2004.

CREDIT SUISSE FIRST BOSTON, LLC; CASA DE BOLSA CREDIT SUISSE FIRST BOSTON (MEXICO), S.A. DE C.V.; and CREDIT SUISSE FIRST BOSTON ZURICH SWITZERLAND, OFICINA DE REPRESENTACION EN MEXICO, Plaintiffs,
v.
JORGE DAVID GONZALEZ PADILLA and FRANCISO ISAAC CUETO SALMONA Defendants.



The opinion of the court was delivered by: SIDNEY STEIN, District Judge

OPINION & ORDER

This action arises out of an employment dispute between Credit Suisse First Boston and affiliated entities (collectively "CSFB" or plaintiffs) and defendants Jorge David Gonzalez Padilla ("Gonzalez") and Francisco Isaac Cueto Salmona ("Cueto"), both of whom are citizens and residents of Mexico and former CSFB employees. Specifically, plaintiffs petition this Court to compel defendants to arbitrate a dispute between the parties in a forum authorized by the CSFB Employment Dispute Resolution Program ("the EDRP") and to bar defendants from pursuing arbitration in any forum not authorized by the EDRP. Messrs Gonzalez and Cueto have opposed the petition and have cross-moved to dismiss it.

For the reasons set forth below, plaintiffs' motion is granted. BACKGROUND

  The following facts are as set forth in the submissions of the parties and are uncontroverted. In October 2000, Gonzalez, upon joining CSFB, executed an "Agreement to Use Employment Dispute Resolution Program Procedures" in which he agreed that he would "submit all claims [he] may from time to time have against [CSFB] . . . that relate to or arise from [his] employment or termination . . . to and in accordance with the dispute resolution procedures under the [EDRP]." (Compl. Ex. A). The EDRP sets forth a three step procedure for resolving employment-related disputes: first, an internal grievance procedure, then external mediation, and third, if the dispute has not been resolved, it is to be submitted to "final, binding arbitration." (EDRP submitted as Ex. B to Compl.). If an arbitrator is needed, the dispute is to be submitted to the American Arbitration Association ("AAA"), the CPR Institute for Dispute Resolution, or JAMS for resolution by a single arbitrator. (EDRP submitted as Ex. B to Compl.). Though Gonzalez was employed seriatim by several CSFB entities, he continued to be a CSFB employee and remained bound by the EDRP throughout the relevant time period. (Compl. ¶ 14; Defs' Memo Supp. Mot. Dismiss and Opp. to Pls' Order to Show Cause 4-5). Pursuant to the EDRP, "the party that first requests an arbitration" makes the choice of either the AAA, CPR, or JAMS to provide the arbitration services.

  In March 2000, Cueto joined CSFB, LLC in Mexico City and also allegedly executed an agreement binding him to abide by the EDRP.*fn1 (Compl. ¶ 15). Cueto was reassigned later to CSFB Mexico, and on February 11, 2002, he executed another employment agreement governed by Mexican law that provides that each party "irrevocably submit[s], for the purposes of any conflict arising from this agreement, to the jurisdiction of the Labor Courts located in Mexico City. . . ." (Employment Agreement dated Feb. 11, 2002, appended to the Order to Show Cause Ex. G). The term "Labor Courts" refers to Boards of Conciliation and Arbitration — known as the BCA — that are administrative, not judicial, bodies in the Executive Branch of the Mexican Government and provide arbitration services. (Compl. ¶ 17; Navarro Decl. ¶ 4). Though reassigned in June 2002, Cueto maintained the same terms of employment as during his prior position. (Reassignment letter appended to Compl. Ex. C; Defs' Memo Supp. Mot. Dismiss and Opp. to Pls' Order to Show Cause 5-6).

  Both Gonzalez and Cueto resigned from CSFB in March 2003 and instituted proceedings in the BCA the following month against CSFB alleging that CSFB had, among other actions, improperly reduced their compensation and had defamed them. (Order to Show Cause Ex. A). In addition to the proceedings filed in the BCA, Gonzalez and Cueto jointly filed a demand for arbitration against CSFB in the Department of Arbitration of the New York Stock Exchange in February 2004 alleging that CSFB had defamed them to their employer. (Order to Show Cause Ex. A).

  Three months later, CSFB initiated an arbitration proceeding against Gonzalez before JAMS in accordance with the EDRP seeking a declaratory judgment that it is not liable for the claims Gonzalez asserted against it at the NYSE and the BCA. (Order to Show Cause Ex. B). From this Court, CSFB seeks an order compelling Gonzalez to arbitrate his claims not in the NYSE and in the BCA, but before a JAMS arbitrator. (Compl. Request for Relief). CSFB also seeks an order compelling Cueto to arbitrate the claims he asserted in the NYSE before the BCA only. (Id.).

  DISCUSSION

  I. This Court Has Subject Matter Jurisdiction Over This Action

  CSFB seeks an order compelling arbitration pursuant to the Federal Arbitration Act ("FAA"). 9 U.S.C. § 1-14, 201-208, 301-307. However, it is well settled that that act is not an independent grant of subject matter jurisdiction to the federal courts. In order for a federal court to hear a petition pursuant to the FAA, there must be an independent basis of subject matter jurisdiction. See Perpetual Securities, Inc. v. Tang, 290 F.3d 132, 135-36 (2d Cir. 2002); Greenberg v. Bear, Stearns, & Co., 220 F.3d 22, 25-29 (2d Cir. 2000). Defendants claim no such independent basis exists here; plaintiffs respond that because this petition "falls under" the Convention on the Recognition and Enforcement of Foreign Arbitral Awards ("the Convention"), subject matter jurisdiction is present. Specifically, 9 U.S.C. § 203 provides that "[a]n action or proceeding falling under the Convention shall be deemed to arise under the laws and treaties of the United States. The district courts of the United States . . . shall have original jurisdiction over such an action or proceeding, regardless of the amount in controversy." The question therefore is, does this dispute "fall[] under" the Convention?

  The U.S. Court of Appeals for the Second Circuit has set forth four basic requirements to answer that question as follows:

  (1) there must be a written agreement; (2) it must provide for arbitration in the territory of a signatory of the convention; (3) the subject matter must be commercial; and (4) it cannot be entirely domestic in scope. Smith/Enron Cogeneration Ltd. P'ship, Inc. v. Smith Cogeneration Int'l, Inc., 198 F.3d 88, 92 (2d Cir. 1999) (citing 9 U.S.C. § 202); see also 9 U.S.C. § 201.

  Defendants do not disagree that the EDRP in the case of Gonzalez and the February 11, 2002 Employment Agreement in the case of Cueto meet all four of those requirements: each defendant has a written agreement with CSFB agreeing to resolve any employment disputes pursuant to a specific protocol which provides for arbitration in the territory of a Convention signatory,*fn2 the employment dispute is commercial in nature, and is not entirely domestic since the defendants were employed in Mexico.

  Instead, defendants make two other points. First, they cite Credit Suisse First Boston LLC v. Chai, 04 Civ. 228, 2000 WL 936756 (S.D.N.Y. Apr. 29, 2004) for the proposition that this Court lacks subject matter jurisdiction. However, that case is inapposite. Chai involved a straightforward state contract claim without any independent basis for federal subject matter jurisdiction. The Convention was not involved in that action. This matter, unlike Chai, brings this Court to a different jurisdictional conclusion because it "falls under" the Convention and therefore, according to ...


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