Petition to Vacate Arbitration Award Belongs in State Court, Says Amazon Seller

The New York Supreme Court “appears to have jurisdiction over a petition to vacate an arbitration award, even when the parties are from different states,” said a memorandum of law filed Tuesday (docket 1:23-cv-03054) by Amazon third-party seller Cowin Technology in U.S. District Court for Southern New York in support of its motion to remand the petition to state court (see 2304260027). Cowin seeks to recover $1.09 million in sales proceeds that Amazon seized -- and an arbitrator let Amazon keep -- when it accused the seller of violating its business solutions agreement (BSA) by manipulating product reviews.

The final $1.09 million award in Amazon’s favor should be vacated “for exceeding the arbitrator's power,” and because it was “completely irrational” and showed a “manifest disregard of law,” said the memorandum. The Cowin arbitration doesn’t meet the requirements of federal subject-matter jurisdiction, and therefore belongs in New York Supreme Court, it said.

Under federal question jurisdiction, a litigant, regardless of the value of the claim, “may bring a claim in federal court if it arises under federal law,” said the memorandum. Federal question jurisdiction “requires that the federal element appears on the face of a well-pleaded complaint, is a substantial component of the complainant's claim, and is of significant federal interest,” it said.

The subject matter of the Cowin arbitration “is entirely domestic in scope,” said the memorandum. It concerns an Amazon third-party seller that entered into the BSA and elected to sell products in the U.S., with the understanding that the Federal Arbitration Act and Washington state substantive law “applied to any dispute,” it said. “There were no federal laws applied” in the Cowin arbitration, it said. The “applicable substantive laws” were the laws of Washington, and the “applicable procedural laws” were American Arbitration Association domestic “commercial rules,” it said.

In the final award, the arbitrator denied all of petitioner Cowin’s claims and awarded Cowin “zero dollars,” said the memorandum. Amazon didn’t file a counterclaim for its alleged damages, so therefore, the arbitrator “awarded nothing to Amazon,” it said. The Southern District of New York doesn’t have diversity jurisdiction “over this matter because the petition does not satisfy the $75,000 amount in controversy threshold,” it said.

Cowin’s vacatur petition was filed with the New York Supreme Court in March, where a judge was assigned to the case, before Amazon removed it to the Southern District of New York April 12, said the memorandum. There are “no federal questions” in Cowin’s vacatur petition, it said. The petition should be remanded to the New York Supreme Court, “serving values of economy, convenience, comity, and avoidance of delay,” it said.