Case: 23-11026 Document: 107-1 Page: 1 Date Filed: 06/25/2024
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
____________ FILED
June 25, 2024
No. 23-11026 Lyle W. Cayce
____________ Clerk
Ascension Data & Analytics, L.L.C.; Rocktop Partners,
L.L.C.; Rocktop Holdings, II, L.L.C.,
Plaintiffs—Appellants,
versus
Pairprep, Incorporated, doing business as OpticsML,
Defendant—Appellee.
______________________________
Appeal from the United States District Court
for the Northern District of Texas
USDC No. 3:23-CV-552
______________________________
Before Smith, Wiener, and Douglas, Circuit Judges.
Jacques L. Wiener, Jr., Circuit Judge:
Plaintiffs-Appellants Ascension Data & Analytics, L.L.C., Rocktop
Partners, L.L.C., and Rocktop Holdings II, L.L.C. (collectively, “Ascension”) appeal the district court’s dismissal of their application to vacate an
arbitral award made under Section 10 of the Federal Arbitration Act
(“FAA”), for want of jurisdiction. Finding no error, we AFFIRM.
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I. Background
This appeal arises from a contractual dispute between Ascension and
Defendant-Appellee Pairprep, Inc. (“Pairprep”). Under the parties’
contract, Pairprep was obligated to provide data extraction services to
Ascension. However, that contract was terminated because of an alleged data
breach involving Pairprep’s servers and Pairprep’s “failure to extract reliable
data.” Ascension subsequently contracted with another vendor, Altada
Technologies Solutions, Ltd. (“Altada”), for data extraction services, but
that contract “was terminated early after Altada suffered a crippling financial
crisis.”
Ascension then initiated arbitration proceedings against Pairprep in
Dallas, pursuant to the parties’ contract, in an attempt to recover “the
remediation costs incurred as a result of [Pairprep’s] data breach.”
Thereafter, Pairprep brought an action1 against Ascension, Rocktop
Partners, LLC, and their affiliates, in the Eastern District of Texas, in which
Pairprep asserted claims for, inter alia, breach of contract and violation of the
federal Defend Trade Secrets Act (“DTSA”). The district court referred
that action to the Ascension arbitration, where Pairprep “asserted
counterclaims in the Arbitration with nearly verbatim allegations and
essentially the same claims” as those asserted in the complaint previously
filed in the Eastern District of Texas. However, Pairprep attempted to name
Altada and its domestic subsidiary, Altada U.S., Inc., (together, “Altada”)
as additional counter-respondents in the arbitration, alleging that Ascension
and Altada “operated as a joint enterprise.” But, “[d]espite naming Altada
as a party to the Arbitration, Pairprep never effectuated service on Altada in
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1
Pairprep, Inc. d/b/a OpticsML v. Ascension Data & Analytics, LLC, No. 2:21-CV-
00057-JRG (E.D. Tex.).
2
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No. 23-11026
the Arbitration proceeding.”2 Instead, Pairprep brought another action3 in
the Eastern District of Texas, this time against Altada, “asserting nearly
verbatim the same claims based on the same allegations in the Arbitration.”
Pairprep and Altada settled that litigation, and the district court dismissed
Pairprep’s claims against Altada with prejudice. During the arbitration
proceedings, Ascension learned of the dismissal of Pairprep’s claims against
Altada and asserted a res judicata defense to Pairprep’s DTSA and breach of
contract claims. The arbitration panel ultimately rejected Ascension’s
defenses to Pairprep’s counterclaims, “including res judicata, and granted
Pairprep a monetary award.”
Consequently, Ascension filed an application under the FAA to vacate
the arbitration award in the Northern District of Texas, arguing that
“Pairprep’s [counter]claims are barred by res judicata arising from its
dismissal with prejudice of identical claims brought against Altada in federal
court based on the same common nucleus of operative facts.”4 Shortly
thereafter, Pairprep filed an application to confirm the arbitral award in
Texas state court in Dallas County. On October 31, 2023, the state court
confirmed the award and entered judgment in favor of Pairprep. In the federal
proceeding, Ascension filed a motion for a preliminary injunction of the state
court proceeding pursuant to the Relitigation Exception of the Anti-Injunction Act, while Pairprep argued that Ascension’s application should be
dismissed for lack of subject matter jurisdiction. The district court agreed
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2
Altada, as a non-signatory to the arbitration agreement, refused to consent to
arbitration.
3
Pairprep, Inc. d/b/a OpticsML v. Altada Tech. Sols., Ltd., No. 2:22-CV-00251-JRG
(E.D. Tex.).
4
In addition to the application to vacate, Ascension also sought a declaratory
judgment pronouncing Pairprep’s counterclaims to be “barred by res judicata.” Ascension,
however, has abandoned its action for a declaratory judgment on appeal.
3
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No. 23-11026
that it lacked subject matter jurisdiction, dismissed Ascension’s application
without prejudice, and denied its motion for preliminary injunctive relief as
moot. Ascension timely appealed. In a pending post-briefing motion to
dismiss the appeal as moot, Pairprep contends that we should dismiss the
appeal because a Texas state court has already confirmed the arbitral award
at issue.5
II. Discussion
This court reviews a dismissal for lack of subject matter jurisdiction
de novo. Pershing, L.L.C. v. Kiebach, 819 F.3d 179, 181 (5th Cir. 2016).
The central issue on appeal concerns a district court’s subject matter
jurisdiction to consider applications to confirm, modify, or vacate arbitral
awards under the FAA. The FAA “authorizes a party to an arbitration
agreement to seek several kinds of assistance from a federal court.” Badgerow
v. Walters, 596 U.S. 1, 4 (2022). “[U]nder Sections 9 and 10 [of the FAA], a
party may apply to the court to confirm, or alternatively to vacate, an arbitral
award.”
Id. But, although the FAA permits a party to apply to a district court
for this type of relief, “the federal courts . . . may or may not have jurisdiction
to decide such a request.”
Id. This is because the FAA’s “authorization of a
petition does not itself create jurisdiction. Rather, the federal court must have
. . . an ‘independent jurisdictional basis’ to resolve the matter.”
Id. (quoting
Hall St. Assocs., L.L.C. v. Mattel, Inc.,
552 U.S. 576, 582 (2008)).
Accordingly, “an applicant seeking, for example, to vacate an arbitral award
under Section 10 [of the FAA] must identify a grant of jurisdiction, apart
from Section 10 itself, conferring ‘access to a federal forum.’”
Id. at 8
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5
One additional motion remains pending: (1) Pairprep’s motion for the court to
take judicial notice of the state court filings relevant to its application to confirm the arbitral
award. We GRANT Pairprep’s motion for judicial notice.
4
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(quoting Vaden v. Discover Bank, 556 U.S. 49, 59 (2009)). If the applicant
“cannot, the action belongs in state court.”
Id. Indeed, “state courts have a
prominent role to play as enforcers of agreements to arbitrate.” Vaden,
556
U.S. at 59; see also Badgerow,
596 U.S. at 18 (“‘[E]nforcement of the Act,’ we
have understood, ‘is left in large part to the state courts.’” (alteration in
original) (quoting Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp.,
460
U.S. 1, 25 n.32 (1983))).
The question becomes what may a district court look to in establishing
an independent basis for its jurisdiction over an application to modify,
confirm, or vacate an arbitral award under Sections 8, 9, or 10 of the FAA.
Prior to the Supreme Court’s recent decision in Badgerow v. Walters, we
permitted district courts to “look through” the application to the underlying
arbitration proceeding to establish jurisdiction. See Quezada v. Bechtel OG &
C Constr. Servs., Inc., 946 F.3d 837, 843 (5th Cir. 2020), rev’d, Badgerow, 596
U.S. at 6–7. That changed after Badgerow, which concluded that the “look
through” approach does not apply to applications to modify, confirm, or
vacate arbitral awards.
596 U.S. at 5-6. Instead, “a court may look only to the
application actually submitted to it in assessing its jurisdiction.”
Id. (emphasis
added).6 As the Badgerow Court explained:
If [the vacatur application] shows that the contending parties
are citizens of different States (with over $75,000 in dispute),
then §1332(a) gives the court diversity jurisdiction. Or if it
alleges that federal law (beyond Section 9 or 10 itself) entitles
the applicant to relief, then § 1331 gives the court federalquestion jurisdiction.
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6
This was the view of the dissent in Quezada. See 946 F.3d at 845–47 (Ho, J.,
dissenting).
5
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Id. at 9. Applying this standard to the vacatur application at issue, the Supreme Court in Badgerow concluded that the district court lacked subject
matter jurisdiction, notwithstanding the existence of “a federal-law claim
satisfying § 1331” in the underlying arbitration. Id. This is because, to establish jurisdiction based on the federal-law claim, the district court “had to proceed downward to Badgerow’s employment action.” Id. Stated differently, it
could find an independent basis for jurisdiction only by looking through the
vacatur application.
Here, Ascension asks us to engage in the exact analysis precluded by
Badgerow, viz., to find that the district court had subject matter jurisdiction
based on (1) Pairprep’s DTSA counterclaims asserted in the arbitration proceeding, and (2) Ascension’s defense of res judicata. Ascension neither asserts that the parties are diverse nor persuasively suggests “that federal law .
. . entitles [it] to relief.”7 Id. Thus, a straightforward application of Badgerow
compels the conclusion that the district court lacked subject matter jurisdiction over the vacatur application and was correct in granting Pairprep’s motion to dismiss. This conclusion holds notwithstanding Ascension’s contention that Pairprep’s DTSA counterclaims were originally asserted in federal
court, and that its defense to those counterclaims in the arbitration was based
on the purportedly preclusive effect of a separate federal judgment (Pairprep’s settled federal action against Altada). The Court in Badgerow explained it best:
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7
The closest that Ascension gets is its contention that the district court had
independent jurisdiction to determine the preclusive effect of a federal judgment. But
Ascension’s argument is unpersuasive because it is no more than an attempt to relitigate a
res judicata defense that was first raised—and rejected—during the arbitration proceeding.
Necessarily, the district court would have had to look through the application to vacate to
the res judicata defense in the underlying arbitration to establish its jurisdiction on this
basis. It correctly declined to do so. See Badgerow, 596 U.S. at 9.
6
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Recall that the two are now contesting not the legality of
Badgerow’s firing but the enforceability of an arbitral award.
That award is no more than a contractual resolution of the parties’ dispute—a way of settling legal claims. And quarrels
about legal settlements—even settlements of federal claims—typically involve only state law, like disagreements about other
contracts. So the District Court here, as Walters recognizes,
had to go beyond the face of the Section 9 and 10 applications
to find a basis for jurisdiction. It had to proceed downward to
Badgerow’s employment action, where a federal-law claim satisfying § 1331 indeed exists. In other words, the court had to
look through the Section 9 and 10 applications to the underlying substantive dispute, although that dispute was not before it.
Id. (emphasis added) (internal citations omitted). Similarly, on the procedural posture here, neither Pairprep’s DTSA counterclaims nor Ascension’s
res judicata defense to those counterclaims was before the district court. The
only dispute properly before the district court was the enforceability of the
arbitral award. Because the parties concede that they are not diverse, and because Ascension offers no other federal law entitling it to the relief that it
seeks—vacatur of the award—the enforceability of the arbitral award must
be litigated in state court. See id.; see also Quezada, 946 F.3d at 846 (Ho, J.,
dissenting) (“Like arbitration agreements, settlement agreements are matters of contract, designed to resolve disputes outside of the courtroom. The
enforcement of settlements is ordinarily a matter for state courts, not federal
courts—even when a settlement happens to resolve federal questions.”).8
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8
Ascension’s invocation of our unpublished decision in Rodgers v. United Services
Automotive Association, No. 21-50606, 2022 WL 2610234, at *5 (5th Cir. July 8, 2022), does
not undermine our conclusion. There, the issue of the district court’s jurisdiction to
consider the parties’ competing vacatur and confirmation applications was not in dispute.
Instead, the issue on appeal was whether the district court substantively erred in confirming
the award, which involved employment claims based on federal law. This distinction is
7
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Finally, Ascension suggests that the All Writs Act, as well as the Relitigation Exception to the Anti-Injunction Act, provided the district court
with subject matter jurisdiction over its vacatur application. However, “[t]he
Anti-Injunction Act is not a jurisdictional statute, but goes only to the granting of a particular form of equitable relief.” In re Mooney Aircraft, Inc., 730
F.2d 367, 372–73 (5th Cir. 1984) (citation omitted)). Similarly, “the All Writs
Act does not confer jurisdiction on the federal courts.” Syngenta Crop Prot.,
Inc. v. Henson,
537 U.S. 28, 33 (2002). Thus, the district court was again correct to dismiss the application to vacate for want of jurisdiction. And, because
the vacatur application did not establish an independent justification for subject matter jurisdiction, there was no error in the district court’s denial of
Ascension’s request to enjoin the parallel state court proceeding under the
All Writs Act.
III. Conclusion
Under Badgerow, when a party applies to a district court to confirm,
modify, or vacate an arbitral award, it must establish on the face of the
application a basis for subject matter jurisdiction separate and apart from the
FAA. To accomplish this, it must be shown that (1) there is complete
diversity among the parties and the amount in controversy exceeds $75,000,
or (2) that “federal law . . . entitles the applicant to relief.” Badgerow, 596
U.S. at 9. Here, Ascension seeks to relitigate issues underpinning an
unfavorable arbitral award. Without an independent basis for subject matter
jurisdiction, it cannot do so in federal court.
AFFIRMED.9
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especially apparent when considering that our decision in Rodgers neither applied nor cited
to the appropriate analysis established in Badgerow.
9
Pairprep’s motion to dismiss the appeal is thus DENIED AS MOOT.
8
