Rabinowitz v. Kelman

Background

Benzion Rabinowitz commenced this proceeding under the Federal Arbitration Act, asking the court to confirm and enter judgment on an arbitration award issued against Levi Kelman. Rabinowitz alleged that he had invested money involving multiple real estate properties, that the parties later entered into a settlement agreement, and that Kelman breached that agreement. The settlement required disputes to be submitted to a three-member rabbinical arbitration panel. The panel issued a decision in Rabinowitz’s favor.

Rabinowitz moved to confirm the award. Kelman opposed the motion and cross-moved to dismiss under Federal Rule of Civil Procedure 12(b)(1), which permits dismissal when the court lacks subject-matter jurisdiction—the legal authority to hear the matter.

The parties’ agreements

The settlement agreement stated that disputes would be arbitrated before a specified rabbinical tribunal and that the parties submitted to the jurisdiction of New Jersey state courts located in Ocean County or the courts of Israel for enforcement of an arbitration award. The agreement also stated that judgment could be entered in any court having jurisdiction.

The parties later signed an arbitration agreement. That agreement required disputes to be decided by a three-arbitrator panel and stated that the award would be enforceable in New Jersey and/or New York courts. It also stated that the parties submitted to the personal jurisdiction of New Jersey and/or New York courts for proceedings to confirm or enforce an arbitration award under the applicable state procedures.

Court’s analysis

The court explained that the Federal Arbitration Act promotes arbitration but does not itself create federal subject-matter jurisdiction. An independent basis for federal jurisdiction was therefore required. The court also explained that an agreement identifying a particular tribunal or court functions as a forum-selection clause, meaning a contractual choice of where legal proceedings must occur.

The court determined that the later arbitration agreement controlled. It interpreted that agreement as requiring enforcement or confirmation proceedings in New Jersey state courts or New York courts. The court rejected Rabinowitz’s argument that the reference to New York courts included any New York court, including a federal court. The court noted that the agreements specifically referred to state procedures and did not refer to federal courts. It concluded that Rabinowitz’s broader interpretation would make other parts of the agreements unnecessary.

Disposition

The court denied Rabinowitz’s motion to confirm the arbitration award and granted Kelman’s cross-motion to dismiss the petition for lack of subject-matter jurisdiction. The dismissal was without prejudice to Rabinowitz’s right to recommence the proceeding in the appropriate forum. The clerk was directed to terminate the motions and the proceeding.