McConnell & Malek Enterprises v. Proof Mark, Inc

Background

McConnell & Malek Enterprises filed the case in state court in January 2023, and Proof Mark, Inc. removed it to the Northern District of California. The court previously denied McConnell & Malek’s motion to remand, finding diversity jurisdiction under 28 U.S.C. § 1332(a) because the parties were citizens of different states and the amount in controversy exceeded $75,000.

The parties later agreed to submit their dispute to arbitration, and the court stayed the case. An arbitrator issued an award on October 8, 2024, requiring both parties to pay various amounts that offset to a small net award in favor of Proof Mark. The parties notified the court of the award on March 4, 2025. McConnell & Malek filed its motion to vacate the award on April 18, 2025.

Jurisdiction

McConnell & Malek argued that the court lacked subject-matter jurisdiction and that the entire case should be remanded to state court. The court considered the argument even though McConnell & Malek had not filed a formal motion to remand, because federal courts must continue to consider whether they have subject-matter jurisdiction.

The court distinguished the Supreme Court’s decision in Badgerow v. Walters. In Badgerow, the case began as a petition to vacate an arbitration award. Here, the case began as a civil action that was properly removed to federal court before the arbitration. The court had already determined that diversity jurisdiction existed, and the later arbitration award for less than $75,000 was a development occurring after removal. That later development did not eliminate jurisdiction that existed when the case was filed and removed.

The court also addressed a disagreement among courts about whether a court retains jurisdiction over a motion to vacate an arbitration award when the court previously stayed the case for arbitration. The Ninth Circuit had not resolved that issue. Following the reasoning of another Northern District of California decision, the court held that retaining jurisdiction was consistent with the federal arbitration law’s supervisory role for courts. The court therefore held that it retained subject-matter jurisdiction over McConnell & Malek’s motion.

Timeliness of the Motion

Section 12 of the Federal Arbitration Act requires notice of a motion to vacate, modify, or correct an arbitration award to be served on the opposing party or the party’s attorney within three months after the award is filed or delivered. Proof Mark stated that the award was served on both parties on October 8, 2024, while McConnell & Malek did not file its motion until April 18, 2025.

The court concluded that the motion was untimely under Section 12. The court therefore denied the Motion to Vacate the Arbitration Award as untimely. The court stated that McConnell & Malek could no longer seek relief from the award, which resolved the parties’ claims and resulted in a small net recovery for Proof Mark.

Other Orders

The court ordered the parties to show cause—meaning to explain—why the case should not be dismissed. Any party opposing dismissal was required to file a response by September 5, 2025, limited to five pages. The court did not dismiss the case in this order. It continued the case-management conference to October 23, 2025, and struck Proof Mark’s unilateral case-management statement because the court had required a joint statement. The court also noted that McConnell & Malek had not filed a case-management statement.