main image

Transfer of Venue under 28 U.S.C. Section 1404(a) in an Arbitration Conducted Virtually: An Arbitration Award is Made at the Arbitral Seat, Which is Determined by the Parties’ Agreement

January 9th, 2025 1404(a) Transfer of Venue, Application to Confirm, Application to Vacate, Arbitral Seat, Arbitration Law, Arbitration Practice and Procedure, Arbitration Situs, Awards, Confirmation of Awards, Consent to Confirmation, FAA Chapter 1, FAA Section 9, Federal Arbitration Act Enforcement Litigation Procedure, Federal Arbitration Act Section 9, Federal Courts, Federal Rules of Civil Procedure, Federal Subject Matter Jurisdiction, Petition or Application to Confirm Award, Petition to Vacate Award, Section 9, United States Court of Appeals for the Second Circuit, United States District Court for the Southern District of New York, Venue 2 Comments » By Philip J. Loree Jr.

1404(a) transfer of venue; virtual hearings Questions about venue transfer under 28 U.S.C. Section 1404(a) of Section 9 or 10 petitions to confirm or vacate arbitration awards may require determination of where the award was made.

Particularly in today’s world of virtual hearings, determining where an arbitration award is made can raise questions. In Citizens Bank v. Magleby, 24 Civ. 4827 (AKH), slip op. at 4 (S.D.N.Y. Jan. 6, 2025), the Court, following existing precedent, held that an award is made at the location where the parties agree the arbitration will take place, even if the arbitration hearings are held in another place or virtually. That rule may not be perfect but it simplifies resolution of what otherwise could be a vexing question.

Background

In Citizen’s Bank, the question arose on a 28 U.S.C. § 1404(a) motion to transfer a petition to confirm an arbitration award from the Southern District of New York to Las Vegas, Nevada. The award arose out of an employment-related dispute between: (a) a bank, two other related financial services entities, and two individuals (collectively, the “employer parties”); and (b) an individual who was an employee of the bank (the “employee”). The arbitrator’s award granted summary judgment to the employer parties.

The arbitration agreement provided that arbitration would take place “within fifty (50) miles of the [employee’s] primary work location with [the bank].” Slip op. at 2 (citation omitted). When the employee was terminated he lived and worked in Las Vegas, Nevada but during an earlier period of his employment he lived in California. The agreement did not stipulate in what specific U.S. district court a motion to confirm should be made.

The arbitrator conducted most of the arbitration proceedings virtually from her Los Angeles office and performed her arbitration-related work there. She initially set a hearing to be held in Las Vegas, but adjourned that hearing to a later date, this time to be held, pursuant to the agreement of the parties, in New York. But that hearing never took place because the Arbitrator granted summary judgment to the employer parties prior to the hearing date.

The employer parties then petitioned to confirm the award in the U.S. District Court for the Southern District of New York. The employee moved to dismiss on venue grounds or to transfer to the District of Nevada.

United States District Judge Alvin K. Hellerstein granted the motion to transfer to the District of Nevada and denied the motion to dismiss.

Discussion

The relevant statutory provisions governing disposition of the motion were 28 U.S.C. § 1404(a) and Section 9 of the Federal Arbitration Act. Section 1404(a) authorizes district courts to transfer “any civil action to any other district or division where it might have been brought,” 28 U.S.C. § 1404(a), “provided that such transfer is for the convenience of the parties and witnesses, in the interest of justice.” Slip op. at 3 (citing 28 U.S.C. § 1404(a). Whether or not such transfer is appropriate, explained the Court, depends on (a) “‘whether the action might have been brought’ in the transferee court” and (b) “whether a transfer would further the convenience of the parties and the interests of justice.” Slip op. at 3 (citation omitted).

Section 9 of the FAA states:

If the parties in their agreement have agreed that a judgment of the court shall be entered upon the award made pursuant to the arbitration, and shall specify the court, then at any time within one year after the award is made any party to the arbitration may apply to the court so specified for an order confirming the award. . . . If no court is specified in the agreement of the parties, then such application may be made to the United States court in and for the district within which such award was made.

9 U.S.C. § 9.

The Court explained that Section 9 venue was permissive—all that is required is the court have subject matter jurisdiction. Slip op. at 3. That requirement was satisfied here because the parties were of diverse citizenship and the amount in controversy exceeded $75,000.00, exclusive of interests and costs. See 28 U.S.C. § 1332.

The parties did not specify a court in which an application to confirm should be made, which meant that a default, appropriate venue would be “the United States court in and for the district within which the award was made.” 9 U.S.C. § 9. That raised the question of where the award was made.

The Court explained that awards are  deemed to be made “at the location of the arbitral seat.” Slip op. at 4 (quotation omitted; citing Oleo-X LLC v. St. Paul Commodities, Inc., No. 1:24-cv-04706-CM, 2024 U.S. Dist. LEXIS 173687 at *9 (S.D.N.Y. Sept. 24, 2024) (citing CBF Industria de Gusa S/A v. AMCI Holdings, Inc.850 F.3d 58, 70 (2d Cir. 2017))). But the arbitral seat is not necessarily the jurisdiction where the hearing is held: “[I]t is determined by the location in which the parties agreed to hold the arbitration and is unaffected by the arbitration hearing being held in a different city or virtually.” Slip op. at 4 (citing Oleo-X, 2024 U.S. Dist. LEXIS 173687 at *8-9.). The arbitral seat is not determined by where the arbitrator resides or drafts her decision. Slip op. at 4 (citing Motion Picture Laboratory Technicians 780, I.A.T.S.E. v. McGregor & Werner, Inc., 804 F.2d 16, 18 (2d Cir. 1986)).

In Citizen’s Bank, the parties agreed that “arbitration would take place within fifty miles of [the employee’s] work location with Citizen’s Bank.” Slip op. at 4. Although the employee originally lived and worked in California, at the time the bank terminated him, he was working and living in Las Vegas, Nevada, and the Court determined that Las Vegas was therefore the arbitral seat.

It did not matter that the arbitrator’s office was in Los Angeles, California, “much of the arbitration was conducted electronically and virtually, and that the parties had agreed to hold a meeting in New York, New York. . . .”

The Court held that the award was made in Las Vegas, Nevada and that the District of Nevada was therefore a jurisdiction where a motion to confirm “might have been brought[.]” Slip op. at 4 (quotation omitted; citing 28 U.S.C. § 1404(a) & 9 U.S.C. § 9).

Turning to the question of whether transfer to the Nevada district court “would further the convenience of the parties and the interests of justice[,]” the Court held that it would. Slip op. at 4-5. The Court noted that courts within the Second Circuit generally find that interests of justice and convenience “are best served by having the action heard in the forum where the arbitration took place.” Slip op. at 4 (quotation an citation omitted).

That Las Vegas, Nevada was the arbitral seat and where the award was made weighed in favor of transfer. Additionally, the employee’s current current residence was in Las Vegas and he lived and worked there when the bank terminated him.

By contrast, New York was the locus of the employer parties’ counsel, the place where two of the employer parties were deposed, and the place where the parties had agreed to hold a final hearing, a hearing that ultimately never took place because the arbitrator made her award on summary judgment. Slip op. at 5.

The balance of convenience and the interests of justice thus weighed in favor of transfer to the District of Nevada, and the Court accordingly granted the motion. It denied the motion to dismiss because where, as here, transfer is possible  under 28 U.S.C. § 1404(a), dismissal on venue grounds is considered to be “too harsh.” Slip op at 5 (quotation and citation omitted).

For two Arbitration Law Forum articles that concerns whether Courts have the power under Section 7 of the FAA to purport to permit or require third party witnesses to attend virtual hearings, rather than in-person hearings, see here and  here.

Contacting the Author

If you have any questions about this article, arbitration, arbitration-law, or arbitration-related litigation, then please contact Philip J. Loree Jr., at (516) 941-6094.  PJL1@LoreeLawFirm.com.

Philip J. Loree Jr. is principal of the Loree Law Firm, a New York attorney who focuses his practice on arbitration and associated litigation. A former BigLaw partner, he has nearly 35 years of experience representing a wide variety of corporate, other entity, and individual clients in matters arising under the Federal Arbitration Act, as well as in insurance- or reinsurance-related, and other, matters.

ATTORNEY ADVERTISING NOTICE: Prior results do not guarantee a similar outcome.

 Photo Acknowledgment

The photo featured in this post was licensed from Yay Images and is subject to copyright protection under applicable law.

 

Tags: , , , , , , , , , , , , , , , , , , , , , ,

2 Responses to “Transfer of Venue under 28 U.S.C. Section 1404(a) in an Arbitration Conducted Virtually: An Arbitration Award is Made at the Arbitral Seat, Which is Determined by the Parties’ Agreement”

  1. Philip Floyd says:

    Thank you for your insight and information. I have been burned by a highly unfair arbitrator and now an unfair and at times criminally unfair legal system but it good to read your blogs to see I am jot alone. At some point the justice system needs a reset back to its original intent.

    Thanks,

    Philip

  2. Philip,
    I’m sorry to hear that but unfortunately your story is one we hear all too often. I agree with you on the need for a reset.

    Philip J. Loree Jr.

Leave a Reply