Jiakeshu Technology Limited v. Amazon.com Services, LLC

Background

Jiakeshu Technology Limited was a former third-party retailer on Amazon.com. The opinion states that Jiakeshu is a Hong Kong corporation with its principal place of business in China. Jiakeshu entered into Amazon’s Business Solutions Agreement, which prohibited sellers from paying or otherwise incentivizing customers or third parties to submit favorable reviews.

Amazon deactivated Jiakeshu’s account on April 29, 2021, alleging that Jiakeshu had offered compensation for customer reviews through materials included in product packaging. Amazon also froze $50,000 in Jiakeshu’s sales proceeds and later notified Jiakeshu that its selling privileges would be terminated.

Jiakeshu filed an arbitration demand seeking recovery of the withheld funds. It claimed that Amazon breached the Business Solutions Agreement and the implied duty of good faith and fair dealing, and it sought a declaration that a provision allowing Amazon to withhold payments was unenforceable. On August 4, 2022, the arbitrator denied Jiakeshu’s claims in their entirety, finding that Amazon’s actions were justified because Jiakeshu had violated the agreement.

Jiakeshu then filed a petition in New York state court seeking to vacate the arbitration award, arguing that the award was rendered in “manifest disregard of the law.” Amazon removed the case to the U.S. District Court for the Southern District of New York. Jiakeshu moved to remand, meaning it asked the federal court to return the case to state court.

Issue

The issue was whether the federal court had subject-matter jurisdiction over the petition to vacate the arbitration award under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, commonly called the New York Convention.

Jiakeshu argued that the award was entirely domestic because the arbitrator applied Washington State substantive law and American Arbitration Association procedural rules. Amazon argued that the Convention applied because Jiakeshu was a foreign corporation.

Court’s reasoning

The court explained that the Federal Arbitration Act does not independently provide federal subject-matter jurisdiction over petitions to confirm or vacate arbitration awards. However, 9 U.S.C. § 203 provides federal jurisdiction over actions that fall under the New York Convention.

Under 9 U.S.C. § 202, an arbitration award falls under the Convention when it arises from a commercial legal relationship connected to a foreign state and is not entirely domestic in scope. The court identified four requirements: a written agreement, an arbitration provision covering arbitration in the territory of a Convention signatory, a commercial subject matter, and a dispute that is not entirely domestic.

The court relied on Second Circuit decisions stating that an arbitration agreement or award generally falls under the Convention when at least one party is foreign. Because Jiakeshu is a Hong Kong corporation with its principal place of business in China, the court concluded that the award did not arise from a relationship entirely between U.S. citizens. The court therefore held that federal subject-matter jurisdiction existed under the Convention and that no additional basis for federal jurisdiction was required.

Disposition

Judge Ronnie Abrams denied Jiakeshu’s motion to remand. The court also directed the parties to propose, by July 5, 2023, a briefing schedule for Jiakeshu’s petition to vacate and any other next steps. The opinion addressed the federal court’s jurisdiction over the removed case and did not decide whether the arbitration award should ultimately be vacated.