United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
June 8, 2006
FOR THE FIFTH CIRCUIT
_____________________ Charles R. Fulbruge III
Clerk
No. 05-30126
_____________________
KEN ACOSTA; ET AL.,
Plaintiffs,
HENRY CHIRO, SR.; JACQUELINE B. CHIRO; ZACHARY SMITH, III,
Plaintiffs - Appellants,
versus
MASTER MAINTENANCE AND CONSTRUCTION INC.; ET AL.,
Defendants,
MASTER MAINTENANCE AND CONSTRUCTION INC.;
GEORGIA GULF CORP.; PAYNE & KELLER COMPANY INC.;
LEXINGTON INSURANCE CO.; LOUISIANA INTRASTATE GAS CO.;
LA INTRASTATE GAS CORP.; HYDROCHEM INDUSTRIAL SERVICES INC.;
LIG LIQUIDS CO.; EQUITABLE RESOURCES INC;
ASSOCIATED ELECTRIC & GAS INSURANCE SERVICES LTD.,
Defendants - Appellees.
_________________________________________________________________
Appeal from the United States District Court
for the Middle District of Louisiana
_________________________________________________________________
Before JOLLY, HIGGINBOTHAM, and SMITH, Circuit Judges.
E. GRADY JOLLY, Circuit Judge:
The United States is a party to the Convention on the
Recognition and Enforcement of Foreign Arbitral Awards
(“Convention”), which Congress has implemented at 9 U.S.C. § 201,
et seq. (“Convention Act”). Among the Convention Act’s provisions
are jurisdictional grants giving the federal district courts
original and removal jurisdiction over cases related to arbitration
agreements falling under the Convention. This appeal asks whether
Appellants’ action is related to an arbitration agreement falling
under the Convention and therefore removable to federal court, and
if so, whether the unanimity rule applicable to removals under 28
U.S.C. § 1441(a) also applies to Convention Act removals. We need
not decide this last question because even if the unanimity rule
applies, it is satisfied here.
I
A
Appellants constitute a three-person subset of over 2,000
plaintiffs who brought state-law tort actions in Louisiana state
court alleging injuries stemming from the September 1996 release of
a mustard-gas agent at the Georgia Gulf Corporation (“GGC”)
facility in Plaquemine, Louisiana. Louisiana state law allows
direct actions against a tortfeasor’s insurers, so the plaintiffs
named as defendants, in addition to GGC and several of its
contractors, two foreign insurers, Primex, Ltd. (“Primex”) and X.L.
Insurance Company, Ltd. (“X.L.”), whose insurance policies included
arbitration clauses governing disputes over coverage.
In October 1998, the plaintiffs amended their complaints to
assert intentional tort claims against GGC. Shortly thereafter,
Primex and X.L. notified GGC in writing that they were disputing
insurance coverage as a result of these new allegations. In
December 1998, Primex and X.L. notified GGC that they had commenced
arbitration pursuant to their policies’ arbitration clauses. Five
2
days later, and one day after a subset of defendants (“the LIG
defendants”)1 were severed from the case by joint motion of the
parties, Primex and X.L. removed this and scores of related cases
to federal court, arguing that the allegations of an intentional
tort created a coverage dispute between them and GGC, thus invoking
the arbitration clauses of their insurance policies and bringing
the action within the purview of the Convention Act and its
provisions for removal. The plaintiffs filed a motion for remand
to state court shortly thereafter, which the District Court denied
in March 1999.
Primex filed a motion to compel arbitration and stay the
plaintiffs’ actions, and the plaintiffs filed a motion requesting
certification of the remand denial for immediate appeal under 28
U.S.C. § 1292(b). While these motions were pending, a settlement
agreement was negotiated, but Appellants elected not to participate
and pursued the litigation, which was eventually dismissed with
prejudice on summary judgment in December 2004. Appellants appeal
only to contest the District Court’s jurisdiction. If jurisdiction
exists for the District Court to have entertained this action, it
is to be found in the Convention Act.
B
1
The “LIG defendants” are Louisiana Intrastate Gas Company,
L.L.C.; LIG Chemical Company; Equitable Resources, Inc.; and
Associated Electric Gas Insurance Services, Ltd.
3
The provision of the Convention Act providing for removal is
9 U.S.C. § 205:
Where the subject matter of an action or
proceeding pending in a State court relates to
an arbitration agreement or award falling
under the Convention, the defendant or the
defendants may, at any time before the trial
thereof, remove such action or proceeding to
the district court of the United States for
the district and division embracing the place
where the action or proceeding is pending. The
procedure for removal of causes otherwise
provided by law shall apply, except that the
ground for removal provided in this section
need not appear on the face of the complaint
but may be shown in the petition for removal.
For the purposes of Chapter 1 of this title
any action or proceeding removed under this
section shall be deemed to have been brought
in the district court to which it is removed.
The parties agree that the insurance policies’ arbitration clauses
“fall[] under the Convention” as defined in § 202.2 We must
2
9 U.S.C. § 202:
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. An
agreement or award arising out of such a
relationship which is entirely between
citizens of the United States shall be deemed
not to fall under the Convention unless that
relationship involves property located abroad,
envisages performance or enforcement abroad,
or has some other reasonable relation with one
or more foreign states. For the purpose of
this section a corporation is a citizen of the
United States if it is incorporated or has its
principal place of business in the United
States.
4
therefore decide whether this action “relates to” the arbitration
clauses within the meaning of § 205 and whether the failure of the
LIG defendants to consent to removal defeats jurisdiction for lack
of unanimous consent among defendants.
II
A
Section 205 does not explicitly define when an action “relates
to” an arbitration agreement falling under the Convention.
However, the federal courts have recognized that the plain and
expansive language of the removal statute embodies Congress’s
desire to provide the federal courts with broad jurisdiction over
Convention Act cases in order to ensure reciprocal treatment of
arbitration agreements by cosignatories of the Convention.
Congress’s purpose and intent, in enacting the Convention Act,
was “to encourage the recognition and enforcement of commercial
arbitration agreements and international contracts and to unify the
standard by which the agreements to arbitrate are observed and
arbitral awards are enforced in the signatory countries.” Sherck
v. Alberto-Culver Co., 417 U.S. 506, 520 n.15 (1974). The
unambiguous policy in favor of recognition of arbitration
agreements falling under the Convention is reflected in provisions
incorporating by reference the Federal Arbitration Act, 9 U.S.C. §
208,3 and independently and explicitly empowering courts to compel
3
9 U.S.C. § 208:
5
arbitration in accordance with the arbitration agreements involved.
9 U.S.C. § 206.4
Because “uniformity is best served by trying all [Convention]
cases in federal court unless the parties unequivocally choose
otherwise,” McDermott Int’l, Inc. v. Lloyds Underwriters of London,
944 F.2d 1199, 1207-08 (5th Cir. 1991), Congress granted the
federal courts jurisdiction over Convention cases5 and added one of
the broadest removal provisions, § 205, in the statute books. So
generous is the removal provision that we have emphasized that the
general rule of construing removal statutes strictly against
Chapter 1 [9 U.S.C. § 1 et seq.] applies to
actions and proceedings brought under this
chapter to the extent that chapter is not in
conflict with this chapter or the Convention
as ratified by the United States.
4
9 U.S.C. § 206:
A court having jurisdiction under this chapter
may direct that arbitration be held in
accordance with the agreement at any place
therein provided for, whether that place is
within or without the United States. Such
court may also appoint arbitrators in
accordance with the provisions of the
agreement.
5
9 U.S.C. § 203:
An action or proceeding falling under the
Convention shall be deemed to arise under the
laws and treaties of the United States. The
district courts of the United States
(including the courts enumerated in section
460 of title 28) shall have original
jurisdiction over such an action or
proceeding, regardless of the amount in
controversy.
6
removal “cannot apply to Convention Act cases because in these
instances, Congress created special removal rights to channel cases
into federal court.” Id. at 1213.
With these considerations in mind, we turn to the statutory
text and the meaning of the statutory phrase “relates to”; that is,
we must decide whether the subject matter of the underlying lawsuit
“relates to” the arbitration agreement in the insurance policy
between the alleged tortfeasor and the defendant insurers. In
Beiser v. Weyler, 284 F.3d 665 (5th Cir. 2002), we examined the
plain meaning of the phrase, relevant Supreme Court dicta regarding
the phrase, and Congressional use of the phrase in other statutes,
e.g., 28 U.S.C. § 1334 (giving federal district courts jurisdiction
over any state proceeding that “relates to” a bankruptcy case). We
noted that the phrase “relates to” “conveys a sense of breadth” and
“sweeps broadly . . . .” 284 F.3d at 669. We interpreted the
phrase in a way that was sufficient to dispose of that case on its
facts, namely, “whenever an arbitration agreement falling under the
Convention could conceivably affect the outcome of the plaintiff’s
case, the agreement ‘relates to’ the plaintiff’s suit,” 284 F.3d at
669 (emphasis in original), but we emphasized that the adopted rule
for that case was not exhaustive of the cases in which jurisdiction
would be appropriate.6
6
“This definition of ‘relates to’ as ‘conceivably having an
effect on the outcome of’ seems to capture at least one sense in
which we commonly use the phrase . . . . Whatever else the phrase
‘relates to’ conveys, it means at least as much as having a
7
Appellants now assert that the definition given to the phrase
“relates to” in Beiser means that jurisdiction is lacking here
because Louisiana’s direct-action statute cancels the binding
effect of the arbitration clauses; thus, whatever is decided in the
arbitration proceedings will not affect the outcome of the
litigation.7 Even if this asserted effect of the Beiser rule on
possible effect on the outcome of an issue or decision.” 284 F.3d
at 669 (emphases added).
7
If not for the direct-action statute, this case would fit
easily under the Beiser rule: Appellants’ claims against the
foreign insurers hinge on policy coverage, which is to be
determined, according to the policy, by arbitration. Hence,
arbitration would appear likely, if not certain, to affect the
ultimate outcome of Appellants’ lawsuit, since “an arbitration
award can be enforced in a subsequent proceeding against parties
that did not participate in an arbitration in circumstances when
the parties to the arbitration had related and congruent interests
which were properly advanced during the arbitration.” Nauru
Phosphate Royalties, Inc. v. Drago Daic Interests, Inc., 138 F.3d
160, 166 (5th Cir. 1998).
However, a plausible argument for Appellants, which relies on
dictum in In re Talbott Bigfoot, Inc., 887 F.2d 611, 614 (5th Cir.
1989) (court not required by Federal Arbitration Act to stay direct
action pending arbitration of coverage dispute), and Zimmerman v.
Int’l Cos. & Consulting, Inc., 107 F.3d 344 (5th Cir. 1997) (same),
contends that binding a direct-action plaintiff to the results of
an arbitration proceeding to which it has not consented would
contradict the direct-action statute by taking the insurance
coverage question away from the state courts as guaranteed by the
state statute, and such a result is not required by federal policy.
Thus, the district court in Mangin v. Murphy Oil USA, 2005 U.S.
Dist. LEXIS 8338 (E.D. La. Apr. 29, 2005), held that arbitration
could not conceivably affect the outcome of the lawsuit because
collateral estoppel would not apply to the results of arbitration
in which the direct-action plaintiffs did not participate.
Appellants failed to make this collateral-estoppel argument in
their opening brief, and cite Mangin in their reply brief only for
its favorable conclusion, otherwise mischaracterizing Mangin’s
analysis as “effectively illustrat[ing] the straightforward logic
8
the arbitration clauses is correct, it does not dispose of the
jurisdictional question, for as we have indicated, Beiser did not
purport to establish a comprehensive rule disposing of all cases.
Thus we return to the statutory text to determine whether the
Convention Act’s grant of jurisdiction extends to this case.
underpinning Appellants’ position in the instant case.”
Notwithstanding this gloss, as the issue before us is
jurisdictional, we note our skepticism of the analysis adopted by
the Mangin court.
First, the assertion that arbitration can have no preclusive
effect is difficult to square with Bigfoot’s statement that a
discretionary stay pending arbitration might still be available,
887 F.2d at 614 (5th Cir. 1989); see also Moses H. Cone Memorial
Hospital v. Mercury Constr. Corp., 460 U.S. 1, 20 n. 23 (1983); In
re Complaint of Hornbeck Offshore Corp., 981 F.2d 752, 755 (5th
Cir. 1993). Thus, in Lannes v. Operators Int’l, 2004 U.S. Dist.
LEXIS 25781 (E.D. La. 2004), the district court held that the
availability of a discretionary stay left open the possibility that
arbitration could affect the outcome. Second, whether collateral
estoppel is the legal equivalent of “could not conceivably affect”
is unclear. Irrespective of a stay, a court might find the results
of arbitration between insurers and insured (whether voluntary or
compelled by the court pursuant to § 206) to be persuasive, if not
binding, and thus rely thereon in determining policy coverage.
Third, to the extent Mangin’s analysis relies on Bigfoot’s
assumption that an arbitration clause is no different from a no-
action clause, we think that assumption unnecessary to the holding
and therefore dictum. Fourth, we note that the federal policy
favoring arbitration, which was held not to conflict with the
direct-action statute, may not be identical in the FAA and
Convention Act contexts. At the least, we note that the FAA
contains no independent grant of federal jurisdiction, see Nauru
Phosphate Royalties, Inc. v. Drago Daic Interests, Inc., 138 F.3d
160, 163 (5th Cir. 1998); the Convention Act does.
As this last point suggests, the holdings of Bigfoot and
Zimmerman are inapposite to the jurisdictional question posed here.
In fact, the very assertion that arbitration clauses undisputedly
falling under the Convention Act must be ignored emphasizes our
responsibility to reasonably ensure the availability of a federal
forum in which the uniform observance of such arbitration
agreements can be most consistently effected.
9
“Relate” means “to have connection, relation, or reference,”
AMERICAN HERITAGE DICTIONARY OF THE ENGLISH LANGUAGE (4th Ed. 2000); see
also Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 97 (1983). It is
unarguable that the subject matter of the litigation has some
connection, has some relation, has some reference to the
arbitration clauses here. Appellants’ assertion of claims against
the insurers is, in part, an assertion of policy coverage of the
insured’s alleged torts. Common sense dictates the conclusion that
policy provisions relating to coverage of the insured’s torts are,
almost by definition, related to claims that are based on the
disputed assertion of coverage of the insured’s torts. The
arbitration clauses here declare the forum for the resolution of
coverage disputes; they are therefore related to Appellants’
disputed assertion of coverage and, hence, to the subject matter of
Appellants’ claims against the defendant insurers that depend on
the existence of coverage. Stated as a rule, a clause determining
the forum for resolution of specific types of disputes relates to
a lawsuit that seeks the resolution of such disputes.
The jurisdictional question need not be confused by the
presence of the direct-action statute. The operation of the
direct-action statute as a matter of Louisiana state law does not
alter the fact that the litigation is related to the arbitration
clause as a matter of logic and federal removal law. Both state
and federal courts can give proper effect to the direct-action
statute; but we cannot ignore Congress’s decision that the federal
10
courts are best able to establish uniformity in the enforcement of
arbitral agreements. We therefore apply the jurisdictional
provision, § 205, according to the plain meaning of its broadly
drafted terms.
In sum, we conclude that the District Court correctly
determined that the instant case “relates to” an arbitration
agreement falling under the Convention.
B
We now come to the parties’ dispute over whether § 205
removals require the unanimous consent of (non-nominal) defendants.
The District Court held that § 205 does not require unanimity, but
ruled in the alternative that unanimity was satisfied. Because we
affirm the second conclusion, we need not consider the first.
The District Court ruled that unanimity was achieved because
the allegedly non-consenting defendants, the LIG defendants, were
nominal parties whose consent was not required under the unanimity
rule. See, e.g., Tri-Cities Newspapers, Inc. v. Tri-Cities P.P. &
A. Local 349, 427 F.2d 325, 327 (5th Cir. 1970). The District
Court so held because, prior to removal, Appellants had signed a
letter evincing an agreement in principle to settle their claims
against the LIG defendants, and the state court had granted the
parties’ joint motion to sever the LIG defendants from the ongoing
litigation. Appellants stated that they would “terminate the
involvement of LIG group in all matters arising out of the chemical
exposures that are the subject of this consolidated action.”
11
We agree with the District Court that Appellants’ attempt to
retain the LIG defendants in the litigation for the sole purpose of
defeating removal jurisdiction fails. Whether a party is “nominal”
for removal purposes depends on “whether, in the absence of the
[defendant], the Court can enter a final judgment consistent with
equity and good conscience which would not be in any way unfair or
inequitable to the plaintiff.” Tri-Cities Newspapers, Inc., 427
F.2d at 327. We are satisfied that the severance of the LIG
defendants, voluntarily requested by Appellants based on their
agreement to settle and dismiss all claims against those
defendants, would enable the court to reach a final judgment
“consistent with equity and good conscience” and fair to
Appellants. Thus, even assuming unanimity is required, it is
satisfied.
III
For the foregoing reasons, we affirm the conclusion of the
District Court that the subject matter of the instant action
relates to arbitration agreements falling under the Convention and
that federal jurisdiction was not defeated by a lack of unanimous
consent of defendants because the allegedly non-consenting
defendants were nominal parties whose consent was not required.
Therefore, the judgment of the District Court that removal was
proper under the Convention Act, 9 U.S.C. § 205, is
AFFIRMED.
12