Facts
- Frydman and Cosmair, Inc. (associated with L’Oréal) were involved in two proceedings before the same neutral, Mayoux.
- After the first proceeding, Frydman and L’Oréal entered into a share-purchase agreement in France in which the purchase price would be “determined” by Mayoux.
- The parties jointly communicated to Mayoux that his valuation would supply the contract’s price term.
- In the second proceeding, Mayoux issued a valuation fixing the price to be paid for Frydman’s shares.
- Frydman challenged that valuation in the Paris Tribunal de Grande Instance, which quashed the price determination.
- Frydman then sued Cosmair in New York state court, alleging fraud related to the transaction and valuation.
- Cosmair removed the case to federal court, asserting jurisdiction under the New York Convention and Chapter 2 of the Federal Arbitration Act.
- Frydman moved to remand, arguing Mayoux’s role was a contractual expert price determination (including under French Civil Code art. 1592), not “arbitration” under the Convention.
Issues
- Whether the Mayoux price-setting mechanism constituted “arbitration” (and/or produced an “arbitral award”) within the meaning of the New York Convention and 9 U.S.C. §§ 201–208.
- If not, whether federal subject-matter jurisdiction existed under 9 U.S.C. § 203 to support removal, requiring remand to state court.
Decision
- The court granted Frydman’s motion to remand.
- The court held that Mayoux’s valuation was an expert determination of a contractual price term, not arbitration governed by the New York Convention.
- Because the dispute did not “fall under the Convention,” removal jurisdiction under 9 U.S.C. § 203 was absent, and the case was returned to New York state court.
Legal Principles
- “Arbitration” under the New York Convention generally contemplates an agreement to submit disputes to a neutral tribunal empowered to issue a binding adjudication of contested rights.
- A third-party mechanism that fixes a contractual parameter (such as a purchase price) functions as an expert determination when it is directed at setting a term rather than adjudicating a dispute.
- Labels are not controlling; courts examine the parties’ intent and the function of the neutral’s role to decide whether the process is arbitration or an expert determination.
- An expert valuation or price determination, without indicia of a dispute-submission and adjudicatory mandate, does not provide a basis for federal jurisdiction under 9 U.S.C. § 203.
Conclusion
The court concluded that the parties’ use of Mayoux to set the share purchase price was a contractual expert determination rather than Convention arbitration, so the Convention did not supply federal jurisdiction and the removed fraud action had to be remanded to state court.