Thursday, April 29, 2004
C.A.: Pending Arbitration Before Israeli Religious Panel Is No Barrier to Jurisdiction Over Interpleader Action
By DAVID WATSON, Staff Writer
A Los Angeles Superior judge erred in dismissing an interpleader filed by two California companies based on the fact the underlying dispute over stock ownership was being arbitrated before a tribunal of three rabbis in Israel, this district’s Court of Appeal ruled yesterday.
Presiding Justice Paul A. Turner of Div. Five said Los Angeles Superior Court Judge Gregory C. O’Brien was wrong in finding that the foreign arbitration deprived the court of jurisdiction over the interpleader filed by Dial 800 LLC and Dial 800 Inc.
The companies deposited $65,824 with the court, asking that it resolve the claims of three individuals and a Seychelles corporation to the funds. The individual defendants are Israeli residents.
The purchase agreement under which two of the defendants, David and Brenda Fesbinder, were to sell their Dial 800 stock to Michael Rosenblum and his corporation included a provision that any disagreements should be submitted to an agreed-upon rabbi or “to an Orthodox Bais Din selected through the process of zavla (‘Bais Din’) for binding resolution.”
After a dispute arose, the Fesbinders and Rosenblum entered into an agreement calling for a panel of three rabbis to arbitrate it, with the Fesbinders naming one, Rosenblum another, and the two selecting a third. But the panel member named by Rosenblum resigned before a decision was reached, and the parties were unable to agree on how to replace him.
The Fesbinders filed a petition in July of 2002 asking the Los Angeles Superior Court to appoint a replacement arbitrator, and Dial 800 filed its interpleader complaint three months later. The two actions were then consolidated, and in February of 2003 O’Brien dismissed both.
Turner noted that in general the existence of an arbitration provision does not affect a court’s jurisdiction, but merely means that any party may seek a stay and an order compelling arbitration.
A rabbinic court, or beth din, is “an authoritative forum of Jewish law,” Turner observed, and decisions of such courts have been enforced in this country as arbitration awards.
Though the fact a foreign arbitration was under way might have justified staying the interpleader action, it did not deprive O’Brien of jurisdiction, especially since the interpleader plaintiff was not a party to the arbitration, Turner explained.
“There is no pertinent authority to support the action taken—dismissal of the present interpleader action because an arbitration, to which plaintiffs are not a party, is pending in Israel,” he declared.
The presiding justice said there was no basis for the concern O’Brien expressed that the religious nature of the arbitration panel would be a barrier to the local court confirming the award under Code of Civil Procedure Sec. 1286. That section authorizes courts to confirm arbitration awards “whether rendered in this state or another state.”
“We disagree that the language in section 1286 divested the court of jurisdiction because of the pending arbitration before the three-person religious panel in Israel.”
The statute does not “by its express terms” bar enforcement of foreign arbitration awards, and the United States is required to honor them under the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards, commonly called the New York Convention, Turner pointed out.
“[T]he fact three rabbis are the arbitrators and the decision will no doubt be based on principals of Jewish law does not bar its enforceability in California secular courts,” Turner reasoned. “As noted previously, American courts routinely enforce money judgments and other orders by beth din panels—.At present, it is speculative to assume that the beth din panel will return an award that will be unenforceable for some reason in California secular courts.”
The presiding justice noted that Rosenbaum and his corporation had also disputed the court’s personal jurisdiction over them, an issue O’Brien did not decide. But he said that by seeking an award of attorney fees under Civil Code Sec. 1717 after O’Brien dismissed the interpleader action, the two defendants had made a general appearance and waived any objections to personal jurisdiction.
The issue of whether a motion for fees constituted a general appearance, Turner said, had “not been directly decided by any California court.” But the presiding justice said numerous cases have held that “a party who seeks relief on any basis other than a motion to quash for lack of personal jurisdiction will be deemed to have made a general appearance and waived all objections to defects in service, process, or personal jurisdiction.”
“In seeking the attorney fees under the terms of a contract in the interpleader action, Mr. Rosenblum and [his corporation] were not merely asserting that the court lacked jurisdiction. Rather, they requested the trial court to determine rights under the July 5, 1998, purchase and trust agreements contract as well as an operating agreement of Dial 800, Inc. which is a request for affirmative relief. Thus, they are deemed to have generally appeared and submitted to the court’s jurisdiction.”
The case is Dial 800 v. Fesbinder, 04 S.O.S. 2108.
Copyright 2004, Metropolitan News Company