Paulsson v. Dorosz

Foreign laws cannot divest federal district courts of subject matter jurisdiction, unless a foreign law creates rights that can only be enforced by the foreign nation’s courts, then relief for violations of such rights cannot be sought in federal district courts.

Björn Paulsson raised a counterclaim for damages against two Canadian directors of Seismic Reservoir 2020, Inc. (“Seismic”) in district court for breach of fiduciary duties under § 242 of the Alberta Business Corporations Act (“Act”). Paulsson’s claim stemmed from his position as shareholder and director of Seismic’s parent company, Seismic Reservoir 2020, Ltd., which is organized under the laws of Alberta, Canada. The district court dismissed Paulsson’s claim under Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction, finding that the Act gave the Court of the Queen’s Bench of Alberta exclusive jurisdiction. Paulsson appealed, arguing that the Act did not divest the district court of subject matter jurisdiction. On appeal, the Ninth Circuit found that the district court had jurisdiction under 28 U.S.C. § 1332(a)(2) because the civil suit satisfied the amount in controversy and diversity requirements. The panel rejected the notion that foreign laws may restrain the power of the federal courts, and held that the Constitution and federal laws solely determine what cases and controversies federal courts may hear. Despite a finding of jurisdiction, the panel further held that dismissal was still appropriate under Federal Rule of Civil Procedure 12(b)(6) because Paulsson failed to state a claim for which relief could be granted. Under the Act, Paulsson’s asserted right under § 242 could only be enforced by the Queen’s Bench of Alberta, therefore Paulsson failed to state a claim that could possibly be grated relief by the district court. AFFIRMED.