The Miami Marlins' attempt to litigate in federal court their contentious case with the city of Miami and Miami-Dade County regarding the team's accounting of the payment owed to the city and county based on the stadium deal struck with the Marlins' prior owner Jeffrey Loria ended in a double play. Judge Darrin Gayles remanded the action back to state court in Miami following briefing and oral argument by the parties on the issue of whether the Marlins could remove the action to federal court under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of June 10, 1958 (9 U.S.C. Section 205) based on the team's alleged British Virgin Island (B.V.I.) citizenship. Although Judge Gayles' remand order rested on a technicality regarding the parties' arbitration agreement, his order warned the Marlins against trying to remove the case to federal court again under the Convention if and when the arbitration technicality is resolved.

After noting that federal courts are courts of limited jurisdiction and that they should strictly construe removal statutes, resolving uncertainties in favor of remand, the court first addressed the timing issue related to arbitration. Prior to removal, the state court ruled that the arbitration agreement was inoperable “at [that] juncture,” because the Marlins had failed to provide detailed calculations from an independent accountant regarding their calculation of the payment owed to the city and county. The city and county pointed to this ruling as a declaration by the state court that the arbitration agreement was inoperable and the Marlins could not remove the action under the Convention because there was not an operable arbitration agreement in writing. Judge Gayles rejected that argument, but still found that removal to federal court based on the arbitration provision was premature because the city and county had not yet objected to the Marlins' accountants' calculations. The agreement between the city, county, and the Marlins provided for arbitration only after the city and county timely object to the calculations and after the parties attempt to resolve any differences during a 60-day negotiation period. Only after those 60 days of negotiations fail do the parties have the right to commence arbitration. Because that condition precedent to arbitration had not yet occurred, the court found that the arbitration provision—and thus any right to remove to federal court based on it—had not yet been triggered and removal was premature.

Lest the Marlins think, however, that they would soon be back in federal court once the arbitration provision became effective, Judge Gayles brushed them off the plate with a fastball high and inside. Although technically dicta based on the court's finding of remand due to the timing issue, the court nevertheless expressed its views on the Marlins' citizenship arguments as they related to removal under the Convention. The court identified two obstacles blocking the Marlins' path on the bases: the Marlins, as owned by Loria when the agreement was signed, did not even have an argument for foreign citizenship and other members of the Jeter Marlins were U.S. citizens, even if one member had B.V.I. citizenship.

Regarding the first point, the court stated that because the Loria Marlins would not have had a right to arbitrate under the Convention when they signed the agreement—because all parties were U.S. citizens—the Jeter Marlins, as assignees of the Loria Marlins' rights, could not do so either. To find otherwise, according to the court, would give the Jeter Marlins more expansive rights to arbitrate than what the Loria Marlins had to give, running counter to black-letter law that assignees can acquire no greater rights than those possessed by the assignor.

But even if the Marlins' ownership change altered the applicability of the Convention, Judge Gayles was not convinced that the mere existence of a single non-U.S. member would be sufficient to confer a federal court with jurisdiction. The court correctly noted that while Abernue, Ltd. had B.V.I. citizenship, other members of the Jeter Marlins were likely (though not pled in the removal papers) U.S. citizens. Assuming that was the case, the court found that it could potentially disregard the Jeter Marlins' B.V.I. citizenship, focusing only on the Jeter Marlins' U.S. citizenship, in determining whether the Convention applied, as other federal courts had done in deciding whether diversity jurisdiction existed in cases involving dual-citizens. Leaving no doubt as to what he would do if he had to decide the citizenship issue, Judge Gayles ended his order by stating that “any subsequent removal of this local controversy between potentially all United States citizens is likely to fail due to lack of subject matter jurisdiction.”

Although Judge Gayles did not have to opine on the question once he resolved the remand issue based on the arbitration provision, his thoughts on the citizenship question under the Convention provide a helpful guide for both the parties here and, more importantly, future litigants. For example, based on the court's order, it is unlikely that the Jeter Marlins would have been able to remove the action under the convention even if they (rather than the Loria Marlins) were the original signatories to the agreement because the court was inclined to ignore the non-American citizenship of their member entities. Such a standard of only considering American citizenship has the benefits of simplicity and predictability that contracting parties and litigants desire. On the other hand, such formalistic rules can create seemingly unfair results in certain situations, such as when an LLC is primarily composed of non-U.S. citizens with only a single member having U.S. citizenship; under this standard, removal to federal court under the Convention would be impossible.

For now, the battle for home-field advantage is over. Though it is unclear which is the “home team” to “root, root, root” for, it's time to grab some peanuts and Cracker Jack, and watch the hotly contested case between the city, county, and the Marlins unfold in state court. The city and county clearly cared if they never got back.

Corey Berman is a Weil, Gotshal & Manges associate in Miami and a member of its complex commercial litigation practice. Contact him at Corey.Berman@weil.com.