Amazon Seeks Rule 11 Monetary Sanctions vs. Attorney for Former 3rd-Party Seller

Amazon seeks monetary sanctions against Julie Guo, counsel for former Amazon third-party seller Shenzhen Zongheng Domain Network, for submitting legal arguments in Zongheng’s May 8 motion to remand a vacatur petition to New York Supreme Court that she knew to be “legally frivolous.” Amazon filed its memorandum of law Thursday (docket 1:23-cv-03334) in U.S. District Court for Southern New York in Manhattan, seeking the sanctions under Rule 11 of the Federal Rules of Civil Procedure.

Zongheng sought to vacate an arbitration award in Amazon’s favor and to recover the $508,000 in sales proceeds that Amazon seized, and the arbitrator let Amazon keep, when it deactivated the seller’s account for manipulating customer product reviews (see 2305080023). U.S. District Judge Jennifer Rochon rejected the remand motion (see 2307210035) and ultimately denied the vacatur petition itself (see 2311090003). Zongheng’s motion for reconsideration of that denial is pending (see 2312140032).

Guo of JS Law was "admonished" by another SDNY judge in a separate arbitration case she brought against Amazon “about the lack of any basis” for her remand motion, said Amazon's memorandum. She also was warned that bringing a remand motion would “likely be sanctionable,” it said. In that case, “with identical bases for federal court jurisdiction” as in the case the lawyer brought on Zongheng's behalf, Guo didn’t bring a motion to remand, it said.

But “in an insult” to this court, and as an example of “blatant forum shopping,” Guo “thought it appropriate to take a shot with the same motion” before multiple other SDNY judges, including in the Zongheng proceeding, said the memorandum. The court should issue an award of monetary sanctions against Guo in the amount of Amazon’s attorneys’ fees and costs incurred in opposing Zongheng’s motion to remand, it said.

Though no party brings a Rule 11 motion “lightly,” Rule 11 sanctions “are uniquely appropriate here,” said the memorandum. It has been settled law within the 2nd Circuit for more than a decade that federal courts have subject-matter jurisdiction over actions to vacate arbitration awards under the New York Convention and Section 2 of the Federal Arbitration Act if one or more parties to the underlying arbitration is a foreign corporation, it said.

The 2nd Circuit’s 2012 decision in Scandinavian Reinsurance Co. v. Saint Paul Fire & Marine Insurance Co. “is binding authority,” said the memorandum. Scandinavian settled questions about the scope of jurisdiction under the New York Convention “by concluding that the jurisdiction exists on the basis of one foreign party to the proceeding, full stop,” it said.

It’s therefore “beyond dispute” under Scandinavian that the SDNY has subject-matter jurisdiction over Zongheng’s vacatur action because Zongheng is a foreign company based in China, and the arbitration award Zongheng seeks to vacate was entered in the U.S., said the memorandum. Guo “is fully aware that Scandinavian forecloses any argument to the contrary,” it said.

Guo’s argument in support of Zongheng’s remand motion not only fails to contend that Scandinavian’s holding should be overturned or modified for some reason, but her papers also “fail to acknowledge Scandinavian’s existence” at all, said the memorandum. In so doing, Guo violated Rule 11(b) and should be sanctioned under Rule 11(c) “to deter such misconduct in the future,” it said.

Guo’s argument that the SDNY lacks subject-matter jurisdiction under the New York Convention and Section 2 of the FAA is “legally frivolous” because binding 2nd Circuit authority in Scandinavian “forecloses that exact argument,” said the memorandum. For violating Rule 11(b) by ignoring “applicable and binding” 2nd Circuit authority, an award of Amazon’s attorneys’ fees and costs as sanctions against Guo “would be appropriate,” it said.