Chinese Dentons Partner’s Firing Suit Sent Back to State Court

June 14, 2021, 4:27 PM

Dentons U.S. LLP failed to keep a Chinese former partner’s employment dispute—which it says he agreed to arbitrate—in federal court because a U.N. Convention didn’t give rise to federal jurisdiction, the Central District of California ruled.

Jinshu John Zhang was a partner in the international legal giant’s Los Angeles office, the court said. He was fired after getting into a dispute with the firm over his share of a “large award of attorneys’ fees” obtained as part of a multi-million dollar settlement he achieved in a foreign arbitration on behalf of a client based in the People’s Republic of China, the court said.

According to Dentons, Zhang breached his employment contract by going behind its back to directly negotiate his share with the client. But Zhang says Dentons directed its attorneys to forge the client’s signature on a letter to “third-party issuers,” who would then transfer securities held by the client to Dentons. He says he was fired for calling out the fraud.

Dentons brought arbitration proceedings against Zhang, and Zhang sued in California state court after “the arbitrator issued some adverse rulings” against him, the U.S. District Court for the Central District of California said. The suit also alleges Chinese-based employment bias, the court said.

Dentons removed the state case to federal court, alleging jurisdiction “through the New York Convention” and the Federal Arbitration Act, Judge R. Gary Klausner said. The New York Convention is the shorthand name for the Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

But the suit belongs in state court, Klausner said June 11.

The FAA doesn’t separately confer jurisdiction to federal courts, and Dentons failed to show jurisdiction was proper under the New York Convention, the judge said.

The convention governs international arbitration agreements, but the agreement at issue between Zhang and Dentons is his employment agreement—and its arbitration clause—not the arbitration agreement the client sued under in the foreign matter that was settled and triggered Zhang’s and Dentons’ dispute over sharing the attorneys’ fees, Klausner said.

Zhang’s employment agreement was entirely between U.S. citizens, as both Zhang and Dentons U.S. LLP are U.S.-based, the court said.

Dentons didn’t otherwise show the New York Convention was implicated by pointing to the firm’s participation in a Swiss-law recognized partnership or its “foreign corporate parentage,” Klausner said.

That Zhang engaged in international activity as a Dentons partner likewise wasn’t enough, the judge said.

Murphy Rosen LLP represents Zhang. King & Spalding LLP represents Dentons.

The case is Zhang v. Dentons U.S. LLP, 2021 BL 218819, C.D. Cal., No. 2:21-cv-04682, 6/11/21.

To contact the reporter on this story: Patrick Dorrian in Washington at pdorrian@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Patrick L. Gregory at pgregory@bloomberglaw.com

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