The US Court of Appeals for the Ninth Circuit recently affirmed dismissal of a counterclaim for breach of fiduciary duty brought under Section 242 of the Alberta Business Corporations Act (ABCA), finding that only an Alberta court could provide the remedy provided by the ABCA, and thus the counterclaim failed to state a claim upon which relief could be granted. In 2009, Seismic Reservoir 2020, Inc. brought suit against Bjorn Paulsson for alleged violations of the Lanham Act and breach of fiduciary duty. Paulsson, in his capacity as a shareholder and director of Seismic’s Canadian parent company, counterclaimed for, among other things, breach of fiduciary duty under the ABCA. After additional briefing on Canadian law, the US District Court for the Central District of California found that the ABCA conferred exclusive jurisdiction upon the Court of the Queen’s Bench of Alberta, and dismissed Paulsson’s counterclaim based on lack of jurisdiction.

The Ninth Circuit, however, explained that the ABCA’s exclusive jurisdiction provision cannot divest the District Court of its statutory subject matter jurisdiction. Instead, the interplay between the ABCA’s exclusive jurisdiction and remedy provisions was such that the District Court was unable to grant the relief requested. As such, dismissal under Federal Rule of Civil Procedure 12(b)(6) (failure to state a cause of action), rather than under Rule 12(b)(1) (lack of jurisdiction), was appropriate. The Ninth Circuit also held that an opportunity to amend was not required because Paulsson “cannot possibly win relief” in light of the ABCA’s provisions.

Paulsson v. Dorosz et al., Case No. 13-55413 (9th Cir. April 27, 2015).