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Nature of Suit Code: 820
Nature of Suit: Copyright
Cause of Action: 

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FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

SEISMIC RESERVOIR 2020, INC.,

Plaintiff,

v.

BJÖRN PAULSSON,

Defendant-CounterclaimantAppellant,

v.

WANDA DOROSZ, an individual;

MICKEY ABOUGOUSH, an individual;

ROBERT HEMING, an individual,

Third-Party Defendants-Appellees.

No. 13-55413

D.C. No.

8:09-cv-00561

JAK-RNB

OPINION

Appeal from the United States District Court

for the Central District of California

John A. Kronstadt, District Judge, Presiding

Argued and Submitted

February 12, 2015—Pasadena, California

Filed April 27, 2015

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2 PAULSSON V. DOROSZ

Before: David Bryan Sentelle,* Morgan Christen,

and Andrew D. Hurwitz, Circuit Judges.

Opinion by Judge Sentelle

SUMMARY**

Jurisdiction

The panel affirmed the district court’s dismissal of Bjorn

Paulsson’s counterclaim seeking damages for breach of

fiduciary duties owed by directors of an Alberta company

under § 242 of the Alberta Business Corporations Act.

The panel held that the district court had jurisdiction to

entertain the controversy, but Paulsson’s counterclaim arising

under the Alberta Act did not raise a cause of action for

which the district court could grant relief. The panel

concluded that the district court should have dismissed

Paulsson’s counterclaim under Fed. R. Civ. P. 12(b)(6) for

failure to state a cause of action rather than under Fed. R. Civ.

P. 12(b)(1) for lack of jurisdiction. The panel noted that there

was no occasion to remand to provide Paulsson an

opportunity to amend his pleadings because he could not

possibly win relief in the district court where the right created

* The Honorable David Bryan Sentelle, Senior Circuit Judge for the U.S.

Court of Appeals for the District of Columbia Circuit, sitting by

designation.

** This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

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PAULSSON V. DOROSZ 3

by § 242 of the Alberta Act can only be enforced in the

designated tribunal – the Queens Bench of Alberta.

COUNSEL

John M. Whelan (argued), and Lawrence J. Hilton, O’Neil

LLP, Irvine, California, for Defendant-CounterclaimantAppellant.

Joe Sibley (argued), and Kiwi Alejandro Danao Camara,

Camara & Sibley LLP, Houston, Texas, for Third-Party

Defendants-Appellees.

OPINION

SENTELLE, Senior Circuit Judge:

Björn Paulsson appeals from the dismissal of his

counterclaim seeking damages under § 242 of the Alberta

Business Corporations Act for breach of fiduciary duties

owed by directors of an Alberta company. The district court

dismissed Paulsson’s claim under Federal Rule of Civil

Procedure 12(b)(1), concluding it did not have subject matter

jurisdiction to issue a remedy because the Alberta Act vested

exclusive jurisdiction in the Court of the Queen’s Bench of

Alberta. Paulsson argues that the Act’s exclusive jurisdiction

provision did not deprive the federal district court of subject

matter jurisdiction, and asks this Court to vacate the

dismissal. For the reasons set forth below, we affirm the

judgment of dismissal, although we do so under Federal Rule

of Civil Procedure 12(b)(6) for failure to state a claim, rather

than Rule 12(b)(1) for lack of jurisdiction.

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4 PAULSSON V. DOROSZ

I.

In 2009, Seismic Reservoir 2020, Inc. (“Seismic”), a

California company with its principal place of business in

California, brought suit against Paulsson alleging violations

of the Lanham Act and breach of fiduciary duty. In response,

Paulsson raised counterclaims against two Canadian directors

of Seismic arising from his status as a shareholder and

director of Seismic’s parent company, Seismic Reservoir

2020, Ltd., “a corporation organized and existing under the

laws of the Province of Alberta, Canada.” First Am.

Counterclaim at 2, Seismic Reservoir 2020, Inc. v. Paulsson,

et al., No. 09-00561 (C.D. Cal. Oct. 19, 2011), ECF No. 57. 

Originally the counterclaim alleged three causes of action: 

(1) fraud and conspiracy to defraud; (2) breach of fiduciary

duty; and (3) unfair business practices in violation of

California Business and Professions Code § 17200, et seq.

In January2012, Paulsson dismissed his counterclaims for

fraud and unfair business practices with prejudice. He also

specified that his remaining counterclaim alleged a breach of

fiduciary duties “owed by directors to shareholders as

codified in Alberta law.” Counterclaimant Björn Paulsson’s

Trial Br. Re: Duties Owed to Shareholders Under Alberta

Business Corporations Act § 242, at 4, Seismic Reservoir

2020, No. 09-00561 (C.D. Cal. Dec. 19, 2011), ECF No. 71. 

As the district court explained: “Paulsson did not merely

seek the application of Alberta law concerning breach of

fiduciaryduty”—rather, he “brought an action forshareholder

oppression pursuant to [the Alberta] statute.” Order at 5,

Seismic Reservoir 2020, No. 09-00561 (C.D. Cal. Sept. 14,

2012), ECF No. 111 (hereinafter “Order”).

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PAULSSON V. DOROSZ 5

A.

Titled “Relief by Court on the ground of oppression or

unfairness,” § 242 of the Alberta Business Corporations Act

allows a complainant to “apply to the Court for an order . . .

to rectify the matters complained of” if the alleged activities

are “oppressive or unfairly prejudicial” or if the corporation

or its directors “unfairly disregard[ed] the interests of any

security holder, creditor, director or officer.” § 242(1), (2). 

The Act defines “Court” as “the Court of Queen’s Bench of

Alberta,” § 1(m), and gives that Court broad equitable powers

to regulate corporate matters, see § 242(3). The Queen’s

Bench of Alberta may, among other things, issue “an order

for the liquidation and dissolution of the corporation,”

regulate corporate affairs “by amending the articles or

bylaws,” direct the “issue or exchange of securities,” appoint

directors, set aside contracts or transactions, and, as is

relevant here, issue “an order compensating an aggrieved

person.” § 242(3).

B.

The district court requested additional briefing regarding

its jurisdiction to issue a shareholder oppression remedy

under § 242 and appointed Peter T. Linder to act as an

independent expert on Alberta corporate law. In his expert

report, Linder explained how § 242 provides the designated

court broad powers to regulate matters of internal corporate

management. Canadian courts have recognized that § 242 of

the Alberta Business Corporations Act gives “complete

jurisdiction” for the purpose of the Act to “the Court of

Queen’s Bench of Alberta.” Ironrod Invs. Inc. v. Enquest

Energy Servs. Corp., 2011 CarswellOnt 1045 (Can. Ont. Sup.

Ct. J.) (WL). Linder surveyed Canadian law and concluded

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6 PAULSSON V. DOROSZ

that “the prevailing authorities establish that only an Alberta

Court has jurisdiction to grant a remedy for oppression

brought in respect of an Alberta corporation.” Indep. Expert

Rep. of Peter T. Linder, Q.C. at 10, Seismic Reservoir 2020,

No. 09-00561 (C.D. Cal. Aug. 21, 2012), ECF No. 109-1.

Relying on Linder’s report as well as analyses from other

courts that have considered similar questions, the district

court concluded that it could not issue a remedy for

shareholder oppression under § 242 of the Alberta Business

Corporations Act. Citing Tennessee Coal, Iron, & Railroad

Co. v. George, 233 U.S. 354 (1914), the district court noted,

“in some actions, the location and the remedy could be so

united such that the remedy could be administered only in a

specified court.” Order at 8. It concluded: “This is such a

matter.” Id. Because it is not an Alberta court, the district

court dismissed Paulsson’s counterclaim pursuant to Federal

Rule of Civil Procedure 12(b)(1). Paulsson timely appealed.

II.

We have jurisdiction to review the district court’s order

under 28 U.S.C. § 1291. “We review de novo dismissals

under Rules 12(b)(1) and 12(b)(6).” Rhoades v. Avon Prods.,

Inc., 504 F.3d 1151, 1156 (9th Cir. 2007).

Paulsson argues the district court erred when it dismissed

his counterclaim for lack of subject matter jurisdiction. We

agree. In this anomalous case, the district court had

jurisdiction to entertain the controversy, but Paulsson’s

counterclaim arising under the Alberta Act does not raise a

cause of action for which the district court could grant relief. 

Thus, the district court should have dismissed Paulsson’s

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PAULSSON V. DOROSZ 7

counterclaim under Rule 12(b)(6) for failure to state a cause

of action rather than Rule 12(b)(1) for lack of jurisdiction.

“‘Subject matter jurisdiction defines the court’s authority

to hear a given type of case.’” Carlsbad Tech., Inc. v. HIF

Bio, Inc., 556 U.S. 635, 639 (2009) (quoting United States v.

Morton, 467 U.S. 822, 828 (1984)). “Strictly speaking,

‘subject-matter jurisdiction’ concerns ‘the courts’ statutoryor

constitutional power to adjudicate’ cases.” Leeson v.

Transamerica Disability Income Plan, 671 F.3d 969, 975 (9th

Cir. 2012) (quoting Steel Co. v. Citizens for a Better Env’t,

523 U.S. 83, 89 (1998)). In 28 U.S.C. § 1332(a)(2),

Congress, acting pursuant to Article III of the Constitution,

conferred upon the district courts jurisdiction over “all civil

actions where the matter in controversy exceeds the sum or

value of $75,000, exclusive of interest and costs, and is

between . . . citizens of a State and citizens or subjects of a

foreign state.” This action by Paulsson, a citizen of

California, against Canadian citizens seeking damages in

excess of $75,000, fits squarely within the language of

§ 1332(a)(2). Therefore, the district court had subject matter

jurisdiction.

The exclusive jurisdiction provision in § 242 of the

Alberta Business Corporations Act cannot divest the district

court of its jurisdiction to entertain Paulsson’s counterclaim. 

“Only the Constitution and the laws of the United States can

dictate what cases or controversies our federal courts may

hear.” Randall v. Arabian Am. Oil Co., 778 F.2d 1146, 1150

(5th Cir. 1985); see also Markham v. City of Newport News,

292 F.2d 711, 713 (4th Cir. 1961) (“In determining its own

jurisdiction, a District Court of the United States must look to

the sources of its power and not to acts of states which have

no power to enlarge or to contract the federal jurisdiction.”).

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8 PAULSSON V. DOROSZ

In holding that it lacked subject matter jurisdiction, the

district court relied on several non-binding decisions it found

“instructive and persuasive.” Order at 6. The district court’s

reliance on these decisions, while understandable, is

ultimately misplaced.

The district court first relied on Taylor v. LSI Logic Corp.,

715 A.2d 837 (Del. 1998), overruled on other grounds by

Martinez v. E.I. DuPont de Nemours & Co., Inc., 86 A.3d

1102, 1112 n.42 (Del. 2014). In Taylor, the plaintiff brought

an equitable action under the Canada Business Corporations

Act (a statute similar to the Alberta Business Corporations

Act) in the Delaware Court of Chancery seeking to enjoin a

Delaware company from acquiring a minority shareholder’s

interest in a Canadian company. Id. at 838. Because the Act

vested exclusive jurisdiction in Canadian courts, the

Delaware Supreme Court held that the Court of Chancery

lacked subject matter jurisdiction to grant equitable relief. Id.

at 841–42.

Of note, the Court of Chancery is “Delaware’s

Constitutional court of equity,” and it “can acquire subject

matter jurisdiction over a cause in only three ways, namely,

if: (1) one or more of the plaintiff’s claims for relief is

equitable in character, (2) the plaintiff requests relief that is

equitable in nature, or (3) subject matter jurisdiction is

conferred by statute.” Candlewood Timber Grp., LLC v. Pan

Am. Energy, LLC, 859 A.2d 989, 997 (Del. 2004) (footnotes

omitted). The third method did not apply in Taylor because

no statute conferred subject matter jurisdiction on the Court

of Chancery. See 715 A.3d at 839–41. Therefore, the court

had to consider whether it had subject matter jurisdiction over

a claim for equitable relief arising under the Canadian Act. 

Because “the right and the remedy were found to be so

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PAULSSON V. DOROSZ 9

inseparably intertwined that equitable relief under the

[Canadian Act] could only be obtained from one of the

specific Canadian tribunals mandated in the statute,” the

Court of Chancery lacked subject matter jurisdiction. 

Candlewood, 859 A.2d at 1007 (summarizing Taylor).

This case is different. The district court, unlike the

Delaware Court of Chancery, has statutory subject matter

jurisdiction to adjudicate Paulsson’s counterclaim under

28 U.S.C. § 1332. Even if the right created by § 242 of the

Alberta Act “is ‘so united’ with the remedies available under

the statute that” a remedy can be provided only by the Court

of Queen’s Bench of Alberta, Order at 9 (quoting Tenn. Coal,

233 U.S. at 359), the exclusive jurisdiction provision in the

Alberta Act cannot deprive the federal district court of its

statutory subject matter jurisdiction. As the Fifth Circuit

stated in Randall: “We reject outright the notion that the law

of a foreign country can unilaterally curtail the power of our

federal courts to hear a dispute even though the dispute

involves rights fixed by the laws of another nation.” 778 F.2d

at 1150. Otherwise put, “foreign law . . . cannot determine

the subject matter jurisdiction of an American court.” Flame

S.A. v. Freight Bulk Pte. Ltd., 762 F.3d 352, 366 (4th Cir.

2014) (Wilkinson, J., concurring); see also Veitz v. Unisys

Corp., 676 F. Supp. 99, 102 (E.D. Va. 1987) (“Even the Act

of State Doctrine, which functions somewhat as a parallel to

the Full Faith and Credit Clause at the international level, is

not violated by a federal court’s refusal to apply a foreign

exclusive jurisdiction provision.” (citing Randall, 778 F.2d at

1153)).

“To allow foreign law to dictate the availability of

subject-matter jurisdiction would be to divest theConstitution

and Congress of their sovereign authority to decide the extent

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10 PAULSSON V. DOROSZ

of the power of the judicial branch.” Flame S.A., 762 F.3d at

363 (Wilkinson, J., concurring). We cannot do that.

Nonetheless, dismissal was the proper judgment. 

Although foreign law cannot limit the jurisdiction of an

Article III court to entertain controversies, when it creates a

right, that foreign law can determine the remedy. Here, the

Alberta Business Corporations Act provided a remedy

available only through “the Court of Queen’s Bench of

Alberta.” § 1(m). Thus, the counterclaim asserted by

Paulsson is one upon which no relief could be granted by the

district court. Rule 12(b)(6) provides the vehicle for

dismissal of a complaint (or in this case, a counterclaim) for

“failure to state a claim upon which relief can be granted.”

“Rule 12(b)(6) authorizes a court to dismiss a claim on

the basis of a dispositive issue of law.” Neitzke v. Williams,

490 U.S. 319, 326 (1989). Whether the court can provide

Paulsson a remedy under § 242 of the Alberta Business

Corporations Act is a dispositive issue of law. Moreover, we

have recognized that “[a] trial court may dismiss a claim sua

sponte under Fed. R. Civ. P. 12(b)(6).” Omar v. Sea-Land

Serv., Inc., 813 F.2d 986, 991 (9th Cir. 1987). Of course, the

district court must give notice of its sua sponte intention to

dismiss and provide the plaintiff with “an opportunity to at

least submit a written memorandum in opposition to such

motion.” Wong v. Bell, 642 F.2d 359, 362 (9th Cir. 1981). 

Here, however, the district court fulfilled its notice

requirement when it requested additional briefing regarding

its jurisdiction to issue a shareholder oppression remedy

under § 242 of the Alberta Business Corporations Act. 

Although the district court spoke in terms of the wrong

subsection of Rule 12, it nonetheless provided Paulsson with

ample knowledge that it contemplated dismissing his

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PAULSSON V. DOROSZ 11

counterclaim because of its lack of authority to grant relief. 

Indeed, the district court notified Paulsson and provided him

an opportunity to brief, argue, and, if he could, correct the

defect. He could not and therefore, of course, did not.

In affirming the judgment of dismissal, we note that there

is no occasion to remand to provide Paulsson any opportunity

to amend his pleadings because he “cannot possibly win

relief.” Id. As the district court correctly stated: “[T]he right

created by § 242 of the [Alberta Business Corporations Act]

. . . can be enforced only in the designated tribunal—the

Court of Queen’s Bench of Alberta.” Order at 9. Because the

district court is not the Queen’s Bench of Alberta, Paulsson

cannot possibly win relief in the district court. Dismissal

under Rule 12(b)(6) is therefore proper.

* * *

For the reasons stated, we affirm the district court’s

dismissal of Paulsson’s counterclaim for breach of fiduciary

duties owed by directors under § 242 of the Alberta Business

Corporations Act.

AFFIRMED.

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