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ZTE USA, Inc. will be able to enforce an arbitration award against three companies who sued it in separate suits, even though the original plaintiff voluntarily dismissed the current suit in which they were joined, the U.S. Court of Appeals for the Eleventh Circuit held Dec. 15 ( PTA-FLA Inc. v. ZTE USA Inc. , 2016 BL 416599, 11th Cir., No. 15-15159, 12/15/16 ).
Under the exception to supplemental jurisdiction in 28 U.S.C. §1367(b), federal courts don’t have supplemental jurisdiction “over claims by plaintiffs against persons made parties” under Federal Rule of Civil Procedure 14, which deals with third-party practice.
But that exception applies only to the original plaintiff in the case, Judge Stanley Marcus wrote for the court.
The opinion was one of first impression for the Eleventh Circuit. Six other circuits have previously adopted the same reasoning.
Here, plaintiff PTA-FLA Inc. sued defendant ZTE USA Inc. over a contract dispute. Three other parties, with related issues, sued ZTE in other federal courts, and they all participated in a consolidated arbitration.
When ZTE sought to enforce the arbitration award in the PTA-FLA suit, PTA-FLA voluntarily dismissed its claims. The district court nevertheless exercised supplemental jurisdiction over the three joined parties and confirmed the award.
The appeals court made clear that the district court had diversity jurisdiction to confirm the arbitration award because it was a collateral claim.
The three joined parties nevertheless argued that the district court didn’t have supplemental jurisdiction under Section 1367(b).
But “claims by plaintiffs” in Section 1367(b) only refers to claims by original plaintiffs, the appeals court said. Because ZTE’s joinder and enforcement action weren’t claims by the original plaintiff in the suit, Section 1367(b)'s exception was inapplicable, it said.
Judges Joel F. Dubina and Richard W. Goldberg, sitting by designation, joined the opinion.
Stroock Stroock & Lavan LLP represented ZTE. Gallagher & Moore represented the joined plaintiffs.
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