F OR P UBLICATION



### UNIT E D ST AT E S CO URT O F APPE AL S FO R T H E NINT H CIRCUIT

S E I S M I C R E S E R

V O I R 2020, I

N C ., Plaintiff
,

v

.

B J Ö R N P A UL S S O N , D efendant-CounterclaimantAppellant
,

v

.

W A ND A D O R

O S Z , an individual; M I C K E Y A B O U G O U S H , an individual; R O B E R T H E M I N G , an individual, Third-Party Defendants-Appellees

. N o. 13-55413

D.C. No. 8:09-cv-00561 J AK-RNB

OPI NI ON

Appeal from the United States District Court for the Central District of California J ohn A. Kronstadt, District J udg e, Presiding

Arg ued and Submitted F ebruary 1 2, 2015—Pasadena, California

F iled April 27, 2015P A U L S S O N V

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B efore: David B r

y a n Sentelle, * Morg an Christen, and Andrew D. Hurwitz
, Circuit J udg es.
Opinion by

J udg e Sentelle

SUMMARY * *

Jurisdiction

The panel affirmed the district court’s dismissal o f B jorn Paulsson’s coun t e r c laim seeking damag es for breach o f f i d u c i a ry d

uties owed by directors of an Alberta company under § 242 of the Alberta B usiness Corporations Act.

T h e panel held that the district court had jurisdiction t o entertain the controversy , but Paulsson’s counterclaim a rising

u nder the Alberta Act d id n ot raise a cause of action f o r which t h e d i strict c o u rt could g rant relief. The panel concluded that the district court should have dismissed Paulsson’s counterclaim under F e d. R. Civ. P. 12(b) ( 6 ) for failure to state a c ause of action rather than under F ed. R. Civ. P. 12(b)(1) for lack of

jurisdiction. The p anel n o ted that there

was no o c casion to r emand to provide Paulsson an opportunity to amend his pleading s be c a u s e he could not possibly win relief in the district court w here the r ig ht created

* T h e Ho n orab l e Dav id B ry an Sen telle, Sen io r Circu i t J u d g e f o r th e U .S. Co urt o f A

pp eals fo r t h e District o f Co lu m b ia Circu it, s ittin g b y d esig n atio n

.

** T h is su m m ary co n stitu

t es n o p ar t o f t h e o p in io n o f th e co urt. It h as b eenp rep ared b y

co urt staf

f f o r th e co n v en i en ce o f

th e read er.P A U L S S O N V

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by § 2 4 2 o f t h e A lberta Act c an o nly be enforced in the desig nated tribunal – the Queens B ench of Alberta.

COUNSEL

J ohn M. W helan (arg

ued), and L a

wrence J

. Hil t o n, O’Neil L L P, I r vine, California, for Defendant-Countercla i m antAppellant.

J oe Sibley (arg

u ed), and Kiwi Alejandro Da n a o C amara, Camara & Sibley L L P, H ouston, Tex as, for Thir d

- P arty Defendants-Appellees.

OP INION

SENTEL L E, Senior Circuit J udg e:

B jörn Pau l s son appeals from the dismissal of his counterclaim seeking damag es under § 242 of the Alberta B usines s C orporations A ct for breach of fiduciary duties owed by directors of an Alberta c ompany

. The district court dismissed Paulsson’s claim under F ederal Rule of Civil Procedure 12(b)(1), concluding it d id not have subject matter jurisdiction to issue a remedy because the Alberta A ct vested

ex c lusive jurisdiction in the Cou r t of the Queen’s B ench o f Alberta. Paulsson argues that the Act’s ex clusive jurisdiction provision did not deprive the federal district court of subject
matter jurisdiction, and asks t his Court to vacate the dismissal. F o r the reasons set forth belo w , we affirm the judg ment of dismissal, a lthoug h w e do so under F ederal Rule of Civil Procedure 12(b)(6) for failure to state a claim, rather than Rule 12(b)(1) for lack of jurisdiction.P A U L S S O N V

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I

.

I n 2009, Seismic Reservoir 2020, I nc. (“Sei s mic”), a C a lifornia company with its principal p lace of b u sines s i n California, broug ht suit ag ainst Paulsson alleg ing violations of the L a nham Act and breach o f fiduciary duty

. I n response, Paulsson raised counterclaims ag ainst two Canad i an directors of Seismic arising f

rom h is status as a sh a r eholder a nd director of Seismic’s parent c o mpany , Seismic Reservoir 2020, L td.
, “ a corporation org aniz ed a nd ex isting under the laws of the Province of Alb e rta, Canada.” F irst Am. Counterclaim at 2, S

eismic Reservoir 2020, I

nc. v. Paulsson,
et a l.
, No. 09-00561 (C.D. Cal. Oct. 19, 2011), ECF No. 57. O r ig inally the counterclaim alleg ed three causes of actio n : (1) fraud and conspiracy to defraud; ( 2) breach of fiduciary duty ; a nd (3) u nfair busine ss p ractices in violation o f California B usiness and Professions Code § 17200, et seq.

I n J anuary 2012, Paulsson dismissed h i s c o u n t e r c l a i ms for fraud and unfair business practices with p r e judice. He also specified that his remaining counterclaim alleg ed a b reach o f fiduciary duti e s “ o wed by d irectors to shareholders a s codified in Alberta law.” Counterclaimant B jörn Paulsson’s Trial B r

. Re : Duties Owed to Shareholders Under Alberta Bu siness Corporations A ct § 242, at 4, Seismic Reservoir 2020
, No. 09-00561 (C.D. Cal. D ec. 19, 2011), ECF No. 71. As the district court ex p lained : “Paulsson did not merely seek the a p p l i cation of Alberta law concerning breach o f fiduciary d

uty ”—rather, he “broug ht an action f o r s hareholder oppressio n p u rsuant to [ the Alberta] statute.” Order at 5, Seismic Reservoir 2 020
, No. 09-00561 (C.D. Cal. Se p t

. 1 4, 2012), ECF No. 111 (hereinafter “Order”).P A U L S S O N V

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A.

Titled “Relief by Court on the g r ound o f op p r es s i on o r unfairness,” § 242 of the Alberta B usiness Corporations Act allows a complainant to “apply to the Court for a n order

. . . to rectify the matters complained of” if the alleg ed activities

are “oppressive or u nfairly prejudicial” or if t h e c o rporation

or its di rectors “unfairly disreg ard[ ed] the interests of any security holder, creditor
, director or officer.” § 242(1), (2). The Act defines “Court” as “t h e C o u rt of Queen’s B ench o f Alberta,” § 1(m), and g ives that Court broad e quitable powers to reg ulate c orporate matters, see § 242(3). The Q ueen’s B ench of Alberta may , among othe r t h i n g s, issue “an order for the liquidation and d i s solution of the corporation,” reg ulate corporate aff

a i rs “ b y amending the articles o r by laws,” direct the “issue o r ex chang e of securities,” appoint directors, set aside contracts or transac t i o n s , and, as is relevant here, issue “an order compe n sating an ag g rieved person.” § 242(3).

B

.

The district court requested additional briefing reg arding its jurisdiction to issue a shareholder opp r es sion remedy under § 242 and appointed Peter T. L i nder to act a s an independent ex pert on Alberta c orporate law. In h is ex pert report, L inder ex plained how § 2 4 2 provides the desig nated
court broad p owers to regulate matters of internal corporate manag ement. Canadian courts have recog niz ed that § 242 o f the Alberta B usiness Corporations Act g ives “co m plete jurisdiction” for the purpose of the Act to “the C o urt o f Queen’s B ench of Alberta.” Ironrod Invs. Inc. v. E n q uest Energy S ervs. Corp.
, 2011 CarswellOnt 1045 (Can. O nt. Sup. C t

. J

. ) (W L ). L inder survey ed Canadian law and concl u d e dP A U L S S O N V

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that “the prevailing a

uthorities establish that only an Alberta Court has ju r i s diction to g rant a remedy for oppression broug ht in respect of an Alberta corporation.” I ndep. Ex pert Rep. of Peter T. L inder, Q.C. at 10, Seismic Reservoir 2020
, No. 09-00561 (C.D. Cal. Aug . 21, 2012), ECF No. 109-1.

Rely ing on L inder’s report as well as analy ses f r om other
courts that have c o n sidered similar questions, the district
court co n c luded that it could not issue a remedy for shareholder o ppression under § 242 of the Alberta B usiness Corporations Act. Citing Tennessee Coal, Iron, & Railroad Co. v. George
, 233 U.S. 354 (1914), the district court noted, “in some a ctions, the location a n d t h e remedy could be so united such that the remedy could be administered only in a specified court.” Order a t 8. I t co n c l u d e d : “This is such a matter.” Id. B ecause it is not an Alberta c o urt, the district
court dismissed Paulsson’s counterclaim pursuant to F ederal Rule of Civil Procedure 12(b)(1). Paulsson timely appealed.

I I

.

W e have jurisdiction to review the distri c t c o u rt’s order under 2 8 U .S.C. § 129 1

. “W e review de novo dismissals under Rules 12(b)(1) a

n d 12(b)(6).” Rhoades v. Avon Prods., Inc. , 504 F .3d 1151, 1156 (9th Cir. 2007).

Paulsson argu es the district court erred when it dismissed his counterclaim for lack of subject matter jurisdic t i o n

. W e ag ree. I n t h i s anomalous case, the district court h ad jurisdiction to entertain the controversy , but Pa u l s son’s counte r c laim arising under the A lberta Act does n o t raise a

cause of action for w hich the district c ourt c ould g rant relief. Thus, the district court should have dismissed Pauls s o n ’sP A U L S S O N V

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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
t o h e a r a g iven ty

pe of case.’” Carlsbad Tech., I nc. v. H I F Bio, Inc.
, 556 U.S. 6 35, 639 (2009) (quoting United States v

. Morton
, 4 67 U.S. 822, 828 (1984)). “ S t r i c t ly speaking
, ‘subject-matter jurisdiction’ concerns ‘the courts’ statutory o r constitutional power to a d judic a t e ’ cases.” Leeson v

. Transamerica Disability Income Plan
, 671 F .3d 969, 975 (9th Cir. 2 012) (quoting Steel Co. v. Citizens for a Be t t e r Env’t
, 523 U.S. 8 3, 89 (1998)). I n 28 U.S.C. § 1332(a)(2), Cong r ess, acting pursuant to Articl e I I I of the Constitution,

con f e r red upon the district courts jurisdiction over “all civil actions where the matter in c ontroversy ex ce eds the sum o r value of $75,000, ex c lusive of inte r est and costs, a nd is between

. . . c itiz ens of a State and citiz ens or subjects of a foreig n state.” T his a ction b y Paulsson, a citiz en o f California, ag ainst Canadian citiz ens s e e k i ng damag es in

ex c e ss of $75,000, fits squarely within the languag e o f § 1332(a)(2). Therefore, the district court had subject matter jurisdiction.

The ex clusive jurisdiction provision in § 242 of the Alberta B usiness 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 controve r s i e s our federal courts may hear.” Randall v. Arabian Am. Oil Co.
, 778 F .2d 1146, 1150 (5th Cir. 1985); see also M arkham v

. City of Newport News
, 292 F .2d 711, 713 (4th Cir. 1961) (“In determining its o wn jurisdiction, a District Court of the United States must look to the sources of its power a nd not to acts of states which have

no power to enlarg e or to contract the federal jurisdiction.”).P A U L S S O N V

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I n h olding that it lacked subject matter jurisdiction, th e district c ourt r elied on several non-binding decisions it f ound “instructive and p ersuasive.” O rder at 6. The district court’s reliance on these decisio n s , while understandable, is ultimately

misplaced.

The district court first relied on Taylor v. LSI Logic Corp.
, 715 A.2d 837 (Del. 1998), overruled on oth e r g r o unds by Martinez v

. E.I. DuPont de Nemours & Co., Inc.
, 8 6 A.3d 1102, 1112 n.42 (Del. 2014). I n Taylor
, the plaintiff broug ht

an equitable action under the Canada B u siness Corporations Act (a statute similar to the Alberta B usiness Corporations Act) in the Delaware Court o f Chancery seekin g t o enjoin a Delaware company from ac quiring a minority shareholder’s interest in a Canadian c ompany

. Id. at 8 3 8. B ecause the A ct vested e x clusive jurisdicti o n in Canadian courts, the Delaware Supreme Court held that t h e C ourt of Chancery lacked subject matter jurisdiction to g rant equitable relief. Id. at 841–42.

Of note , t h e Court of Chancery is “Delaware’s Constitutional court of equity ,” a n d it “ can acquire subject
matter jurisdiction over a c ause in only three w ay s, namely
, if: (1) one o r more o f t h e p laintiff’s claims for relief is equitable in character, (2) the plaintiff requests relief that is equitable in nature, or (3) subj e ct m atter jurisdiction is conferred b y statute.” Candlewood Timber Grp., LLC v. Pan Am. E nergy, LLC
, 859 A.2d 989, 997 (Del. 2004) (footnotes omitted). The third method did not apply in Taylor because

no statute c onferred subject matter ju ri s d i ction on the Court of Cha ncery

. See 715 A.3d at 839–41. Therefore, the court had to consider whether it had subject matter jurisdiction over

a claim f or equitable relief arising u n d e r the Canadian Act. B ecause “the rig ht and the rem e d y w ere f ound to be soP A U L S S O N V

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insepar a b l y intertwined that e q u itable relief under the [ Canadi an Act] could only be obtained from o ne of the specific Canadian trib unals mandated in the statute,” the Court of Chancery lacked s u b j ect matter jurisdiction. Candlewood , 859 A.2d at 1007 (summariz ing Taylor ).

This case is different. The district c o u r t , unlike the Delawa r e C o urt of Chancery
, has statutory subject matter jurisdiction to a djudicate Paulsson’s counterclaim under 28 U.S.C. § 1332. Even if the r i gh t c re a t e d by § 242 of the Alberta A ct “is ‘so united’ with the remedies available under the statute that” a remedy can be provided only

by the Court of Queen’s B ench of A lberta, Order at 9 (quoting Tenn. Coal
, 233 U.S. at 359), the ex clus i v e j urisdiction provision in the Alberta Act c annot deprive the f ederal district c ourt of its
st atutory subject matter jurisdiction. As the F ifth Circuit stated in Randall : “W e reject outrig ht the notion that the law of a foreig n country

can unilaterally curtail the power of our federal courts to hear a dispute even t h o u gh t he dispute involves rig hts fix ed by the laws of another nation.” 778 F .2d
at 1 150. Otherwise put, “foreig n law

. . . cannot determine the subject matter jurisdiction of an American court.” Flame S.A. v

. F reight Bulk Pte. Ltd.
, 762 F .3d 352, 3 6 6 (4th Cir. 2014) (W ilkinson, J
., c oncu rring ) ; see a lso 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 F ull F aith and Credit Clause at the internati onal level, is

no t v i o l a ted by a federal court’s refusal to apply a foreig n

ex c lusive jurisdiction provision.” (citing Randall
, 7 78 F .2d at 1153)).

“ To allow foreig n law to d ictate the availability o f subject-matter jurisdiction would be to divest t h e C o n s t i t ution and Cong r ess of their sovereig n authority to decide the ex tentP A U L S S O N V

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

. 3d at 363 (W ilkinson, J ., concurring ). W e cannot do that.

Nonetheless, dismissal was the proper judg ment. A l thoug h foreig n law cannot limit the jurisdiction of a n Article I I I court to enterta i n c o ntroversies, when it creates a rig ht, that foreig n law can determine the remed y

. Here, the Alberta B usiness Corporations Act provided a remedy available only th roug h “the Court of Queen’s B e nch o f Alberta.” § 1(m). Thus, the counterclaim asserted b y Paulsson is one u

pon which no relief could be g ranted by the distric t c o urt. Rule 12(b)(6) p rovides the vehicle for dismissal of a complaint (or in this case, a counterclaim) for “failure to state a claim upon which relief can be g ranted.”

“Rule 1 2(b)(6) authoriz es a court to dismiss a claim on the basis of a dispositive issue of law.” Neitzke v. W illiams
, 490 U.S. 319, 326 (1989). W hether t h e court can provide P au l sson a remedy under § 242 of the Alberta B usiness Corporations Act is a dispositive issue of law. Moreover, we have recog niz ed that “[ a] trial court may dismiss a claim sua sponte u nder F ed. R. Civ. P. 12(b)(6).” O m a r v

. S ea-Land Serv., Inc.
, 8 13 F .2d 986, 991 (9th Cir. 1987). Of course, the district court mus t g ive notice of its sua sponte intention to dismiss and provi d e t h e plaintiff with “an opportunity to at least submit a written m e morandum in opposition to such motion.” W

ong v. Bell
, 642 F .2 d 3 5 9, 362 ( 9th Cir. 1981). He r e, h owever, the district court f ulfilled its notice requirement when it requested additional briefing reg arding its jurisdiction to issue a shareholder oppressio n r emedy und e r § 2 42 of the Alberta B usiness Corporations Act. Althoug h the district court spoke in terms of the w r o n g subsection of Rule 12, it nonetheless provided Paulsson with ample knowledge t hat it contemplated dismissing hisP A U L S S O N V

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counterclaim because o f its lack of aut hority to g rant relief. I ndeed, the district court n otified Paulsson and provided him

an opportunity to brief, argu e, a nd, if he c o u l d
, correct the defect. He could not and therefore, of course, did not.

I n affirming the judg ment o f dismissal, we note that there is no occasion to remand to provide Paulsson any opportunity
to amend his pleading s b e c a u se he “cannot possibly win relief.” Id. As the d istrict court correctly stated: “[ T ]he rig ht created by § 242 of the [ A lberta B usiness Corporations Act]

. . . can be enforced o nly in the desig nated tribunal—the Court of Queen’s B ench o f Alberta.” Order at 9. B ecause the district court is n o t t h e Queen’s B ench o f A lberta, Paulsson
cannot possi b l y w i n r elief in the district court. Dismissal under Rule 12(b)(6) is therefore proper.

* * *

F or the reasons stated, we affirm the district c o u r t ’s dismissal of Paulsson’s counterclaim for breach of fiduciary duties owed by directors under § 242 of the Alberta B usiness Corporations Act.

AF F IRMED.