Despite already pending litigation between United States
and Australian religious organizations in Australian court, Sixth Circuit finds
that international comity does not stand in way of U.S. federal suit to compel
arbitration under arbitration convention to which both U.S. and Australia are
parties
“Answers in Genesis” of Kentucky (Plaintiff) is a Kentucky
non‑profit corporation. “Creation Ministries International” (Defendant) (which
previously was the “Foundation”) is an Australian non‑profit organization. Its
goal was to promote creationism and apologetics throughout Australia. In 1987,
one of Defendant’s leaders, Ken Ham, moved to the U.S. and set up what would
become Plaintiff. The two organizations worked together for years in the area
of teaching creationism. Plaintiff grew faster than Defendant, however, which
led to tensions between Ham and Carl Wieland, the leader of Defendant.
One of the disputes centered on the control over
“Foundation,” Defendant’s predecessor. In October 2005, the boards of directors
of both Plaintiff and the Foundation met in Kentucky to resolve their disputes
over the Foundation, as well as the content of the Foundation’s publication
“Creation Magazine” and the parties’ joint website.
The result of the meeting was a Memorandum of Agreement
(MOA), which transferred inter se certain copyrights and licenses. The MOA
included an arbitration clause, requiring the parties to submit their disputes
to “Christian arbitration.” Wieland objected to the MOA and tensions increased.
In May 2007, the U.S. Defendant filed a lawsuit against the
present Plaintiff in a Queensland, Australia trial court. The following March,
Plaintiff sued in a Kentucky federal court to compel arbitration under the
Federal Arbitration Act (FAA), 9 U.S.C. § 206. Plaintiff also asked the court
to enjoin Defendant from continuing the Australian lawsuit.
After hearing the parties, the district court ordered them
to arbitrate the dispute. Defendant appeals, claiming that the court should
either have dismissed Plaintiff’s lawsuit based on the contract’s forum selection
clause, or should have abstained since Defendant had filed its Australian
lawsuit first.
On Defendant’s appeal, the U.S. Court of Appeals for the
Sixth Circuit affirms. It rules (1) that the district court had properly
ordered the parties to arbitrate, and (2) did not abuse its discretion in
declining to issue an anti‑suit injunction.
Defendant first argues that the district court erred when it
failed to abstain on the basis of international comity. “Whether to abstain in
regard to a motion to compel arbitration because of international comity
concerns is an issue of first impression in this circuit. Case law is available
from other circuits in the area of abstention based upon international comity
in general. ‘One approach has taken the criteria enunciated in [Colorado River
Water Conservation Dist. v. United States, 424 U.S. 800 (1976)] Colorado River
and applied them to the international context’ while another approach has
developed a similar test with more of a focus on the ‘special concerns’ injected
by international comity. ...”
“Defendant suggests adopting the approach of the Eleventh
Circuit in [Turner Entm’t Co. v. Degeto Film GmbH, 25 F.3d 1512 (11th Cir.
1994)], which combined the two complementary lines of cases to develop a multi‑factor
balancing test: weighing international comity, concerns about ‘fairness to
litigants,’ and the ‘efficient use of scarce judicial resources.’”
“By contrast, Colorado River instructed courts to consider
several factors in determining whether to abstain in favor of a parallel
proceeding in the courts of another sovereign. The ‘most important’ factor
courts are to consider is whether there exists a ‘clear federal policy
evinc[ing] . . . the avoidance of piecemeal adjudication.’ supra at 819.
Additional factors include how far the parallel proceeding has advanced in the
other sovereign’s courts, the number of defendants and complexity of the
proceeding, the convenience of the parties, and whether a sovereign government
is participating in the suit. Id. at 820.”
“For the purposes of this appeal, it is not necessary that
we decide whether abstention is ever appropriate when one party seeks to compel
arbitration with regard to an agreement in which the other party is
international in origin. We conclude that even assuming that abstention might
be appropriate in such a circumstance, Defendant has not met its burden in
proving that abstention is required.”
“We base our conclusion upon weighing the factors found in
the Colorado River test. We believe the factors found in Colorado River are the
most applicable to the case at bar because those factors and their relative
weight match most closely the public‑policy concerns the Supreme Court has
identified as vital in the area of arbitration. Colorado River instructs that
the ‘most important’ factor a court must consider is whether there is a ‘clear
federal policy evinc[ing] . . . the avoidance of piecemeal adjudication’ found
within the statutory scheme at issue. Id. at 819. In the case of the Federal
Arbitration Act, there most clearly is not such a policy. [...]”
“International law, as incorporated by congressional action,
supports our conclusion that abstention is inappropriate in this case. A
similar concern for enforcing private agreements led to the adoption of the
international treaty under which Plaintiff seeks to vindicate its right to
arbitrate. Plaintiff filed this action under § 206 of the FAA. 9 U.S.C. § 206.
Section 206 provides that district courts may compel arbitration upon motion of
a party to an agreement covered by the 1958 Convention on the Recognition and
Enforcement of [Foreign] Arbitral Awards [21 U.S.T. 2517; T.I.A.S. 6997; 330
U.N.T.S. 3; in force for U.S. Dec. 29, 1970] (‘Convention’). ... Chapter Two of
the FAA incorporates the provisions of the Convention into American domestic
law. See 9 U.S.C. §§ 201‑208. Both Australia and the United States are
signatories to the Convention, and thus its terms govern the resolution of this
dispute. ... Article II of the Convention, as incorporated by the FAA,
establishes the requirements necessary for an arbitration agreement to come
within the Convention’s terms. The agreement must be in writing, concern a
‘legal relationship . . . which is considered as commercial,’ and either at
least one party to the contract must not be an American citizen or the
commercial relationship must have a ‘reasonable relation with one or more
foreign states.’ 9 U.S.C. § 202. Cf. Convention, Article II.”
“The MOA and Deed of Copyright License, which concern the
transfer of multiples pieces of intellectual property and corporate stock, are
in writing and clearly concern a commercial topic. Furthermore, it is
undisputed that Plaintiff is an American corporation and [that] Defendant is
Australian in citizenship. All of the Convention’s requirements are therefore
met. Consequently, ‘when one of the parties’ to the arbitration agreement
requests a court refer the dispute to arbitration, that court ‘shall’ do so.
Convention art. II(3). Cf. 9 U.S.C. § 208.”
“As other courts construing the Convention’s language have
observed, ‘there is nothing discretionary about Article II(3) of the
Convention.’ Tennessee Imports, Inc. v. Filippi, 745 F. Supp. 1314, 1322 (M. D.
Tenn. 1990) ... The language of the treaty and its statutory incorporation
provide for no exceptions. When any party seeks arbitration, if the agreement
falls within the Convention, we must compel the arbitration unless the
agreement is ‘null and void, inoperative, or incapable of being performed.’
Convention, art. II(3). Defendant makes no such argument before us.”
“Further, it is difficult to see how comity concerns could
come into play where both Australia and the United States, as signatories to
the Convention, apply the same law. Defendant did not seek to compel
arbitration in its action. Plaintiff instead filed the first action seeking to
compel arbitration. To assume that the district court’s order infringes on
comity concerns is to assume that Australian courts would not follow their
obligation under the Convention, as Defendant’s argument must rest upon an
assumption that an Australian court would be less likely to order arbitration.
Such an argument both demeans the foreign tribunal and hardly advances the
comity interests that Defendant claims to seek to vindicate. Cf. Gau Shan Co.
v. Bankers Trust Co., 956 F.2d 1349, 1355 (6th Cir. 1992) (noting that federal
courts should not seek to convey a message that they have ‘little confidence in
the foreign court’s ability to adjudicate a given dispute fairly’).”
“Finally, we note that the other factors delineated in
Colorado River do not clearly weigh in Defendant’s favor. The Australian
proceeding is only in its initial stages, and the Australian courts have yet to
consider Plaintiff’s jurisdictional and venue defenses. Because one group of
witnesses is in Australia and another separate group is in Kentucky, either
forum will be inconvenient for half of the parties such that this factor is a
draw.”
“The issues raised by the parties involve the interpretation
of a half‑century‑old Convention whose terms are largely unambiguous, and no
sovereign is participating in these proceedings. Cf. Colorado River, 424 U.S.
at 820. Consequently, because neither international comity nor the traditional
abstention factors applicable to parallel proceedings require abstention, we
hold that the district court did not err in declining to abstain in favor of
the prior‑filed Australian proceedings.” [Slip op.4‑6]
Citation: Answers in Genesis of Kentucky, Inc. v.
Creation Ministries Int’l, Ltd., 556 F.3d 459 (6th Cir. 2009).
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