Fifth Circuit Withdraws Prior Opinion in Case Involving Arbitration

The United States Court of Appeals for the Fifth Circuit has withdrawn its earlier opinion following a second rehearing of a case involving arbitration.  In Stemcor USA Inc. v. Cia Siderurgica do Para Cosipar, et al., No. 16-30984 (June 25, 2019), two foreign corporate creditors, Daewoo and Thyssenkrupp Mannex GMBH (“TKM”), sought to attach the same pig iron that was owned by America Metals Trading, LLP (“AMT”) after AMT apparently failed to comply with its separate contractual obligations with each company.  In the case, Daewoo filed a lawsuit against AMT in the Eastern District of Louisiana seeking both an order compelling arbitration and attachment of pig iron AMT had stored on a ship that was docked in New Orleans.  According to Daewoo, the company’s request for attachment was merited under both maritime law and Louisiana’s non-resident attachment statute.  The district court initially agreed and issued an attachment order in favor of Daewoo.

Later, TKM attached the same pig iron in a Louisiana state court and intervened in the federal case.  After that, the federal district court vacated Daewoo’s attachment since the company’s motion to compel arbitration “was not an ‘action for a money judgment.’”  In addition, the district court transferred the pig iron sale proceeds to the state court.  Daewoo then filed an appeal with the Fifth Circuit over “the district court’s conclusion that its Louisiana non-resident attachment writ was invalid.”  Eventually, the Fifth Circuit certified the question to the Louisiana Supreme Court.

In May, the Louisiana Supreme Court stated:

We accepted the certified question presented to this court by the United States Fifth Circuit Court of Appeals in Stemcor USA Incorporated v. CIA Siderurgica Do Para Cosipar, et al, 740 Fed. Appx. 70 (5th Cir. 2018): “Is a suit seeking to compel arbitration an ‘action for a money judgment’ under Louisiana’s non-resident attachment statute, La. Code Civ. Proc. art. 3542?”

For the reasons set forth below, we answer the question as follows: Louisiana Code of Civil Procedure article 3542 allows for attachment in aid of arbitration if the origin of the underlying arbitration claim is one pursuing money damages and the arbitral party has satisfied the statutory requirements necessary to obtain a writ of attachment.

Next, the federal appellate court once again reviewed the parties’ case.  The Fifth Circuit first examined whether federal subject matter jurisdiction existed under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “Convention”).  The court said:

For a federal court to have jurisdiction under the Convention, two requirements must be met: (1) there must be an arbitration agreement or award that falls under the Convention, and (2) the dispute must relate to that arbitration agreement. These requirements flow from the text of two sections of the Convention. The explicit jurisdictional provision is Section 203, which gives federal courts jurisdiction over all “action[s] or proceeding[s] falling under the Convention.” 9 U.S.C. § 203. “An arbitration agreement or arbitral award arising out of a legal relationship, whether contractual or not, which is considered as commercial, including a transaction, contract, or agreement described in section 2 of this title, falls under the Convention.” 9 U.S.C. § 202. Accordingly, the first step for determining jurisdiction is deciding whether the “arbitration agreement or award . . . falls under the Convention.” Id.

The next step, derived from Section 203, is to ask whether the “action or proceeding”—as opposed to the arbitration agreement or award—falls under the Convention. The Convention’s removal statute offers guidance on what “falling under” means because “[g]enerally, the removal jurisdiction of the federal district courts extends to cases over which they have original jurisdiction.” Francisco v. Stolt Achievement MT, 293 F.3d 270, 272 (5th Cir. 2002). Section 205 of the Convention allows for removal whenever “the subject matter of an action or proceeding pending in a State court relates to an arbitration agreement or award falling under the Convention.” 9 U.S.C. § 205. We have read “relates to” to mean “has some connection, has some relation, [or] has some reference” to. Acosta v. Master Maint. & Constr. Inc., 452 F.3d 373, 378–79 (5th Cir. 2006). And reading “falling under” to mean “relates to” makes sense grammatically. “Fall” means “to come within the limits, scope, or jurisdiction of something.” Merriam-Webster’s Collegiate Dictionary 418 (10th ed. 2002). Accordingly, the second step of the jurisdictional question is asking whether the “action or proceeding” “relates to” a covered arbitration agreement or award. See Fred Parks, Inc. v. Total Compagnie, 981 F.2d 1255, 1992 WL 386999, at *1–2 (5th Cir. 1992) (unpublished) (treating the question of original and removal jurisdiction under the Convention as identical).

After determining the district court correctly ruled that subject matter jurisdiction existed in the case, the Fifth Circuit turned to the question of “whether Louisiana’s non-resident attachment statute allows for attachment in aid of arbitration.”  According to the court:

Louisiana’s attachment statute provides that “[a] writ of attachment may be obtained in any action for a money judgment, whether against a resident or a nonresident, regardless of the nature, character, or origin of the claim, whether it is for a certain or uncertain amount, and whether it is liquidated or unliquidated.” La. Code Civ. Proc. art. 3542. The underlying action seeking to compel arbitration here is clearly an “action for a money judgment” under Louisiana’s non-resident attachment statute. See La. Code Civ. Proc. art. 3542. Daewoo has made it clear from the outset that it would be pursuing a money judgment. The “nature, character, or origin of the claim” just happens to be arbitration. La. Code Civ. Proc. art. 3542. Thus, we conclude that the district court erred in finding that the Louisiana nonresident attachment statute was not available to Daewoo.

Finally, the United States Court of Appeals for the Fifth Circuit vacated the lower court’s decision and remanded the case.

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