284 F.3d 665 (5th Cir. 2002), 01-20152, Beiser v Weyler

Docket Nº:01-20152
Citation:284 F.3d 665
Case Date:March 19, 2002
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit

Page 665

284 F.3d 665 (5th Cir. 2002)

FRED E BEISER, Plaintiff - Appellant,



No. 01-20152

United States Court of Appeals, Fifth Circuit

March 19, 2002

Page 666

Appeal from the United States District Court For the Southern District of Texas

Before BALDOCK1, SMITH, and EMILIO M. GARZA, Circuit Judges.

EMILIO M. GARZA, Circuit Judge:

In this appeal, we decide whether the plaintiff's lawsuit, alleging only state law causes of action, "relates to" an international arbitration agreement with the defendants, such that the district court had removal jurisdiction under 9 U.S.C. § 205.2 That section permits defendants to remove a plaintiff's state-filed lawsuit to federal court when the subject matter of the suit "relates to" an arbitration agreement that "fall[s] under" the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (hereinafter "the Convention").3

Fred Beiser, a consultant in the oil and gas industry, served as a director and the only employee of Horizon Energy Limited ("Horizon"). Horizon is a limited liability company organized under the laws of the State of Jersey, in the Channel Islands. Page 667

Horizon contracted to consult with Roy M. Huffington, Inc. on the acquisition of development rights to an oil and gas field in Hungary. Horizon also entered into a line of credit agreement with Hungarian Horizon Energy Limited ("Hungarian Horizon"). The line of credit agreement provided financing for the development of the oil interest. Both agreements contained clauses providing for the arbitration of any dispute in London. Beiser signed both agreements on behalf of Horizon.

Beiser now contends that the defendants (hereinafter collectively "Huffington") wrongfully deprived him of his financial interest in the Hungary field. The group of defendants includes several individuals and limited liability entities, including Roy Huffington, Horizon, Hungarian Horizon, and Roy M. Huffington, Inc., who together funded and developed the oil and gas field. Beiser avers that the defendants fraudulently induced him to assist with the Hungary project by falsely promising him a financial stake in the field's production. He filed suit in Texas court, alleging a number of state law tort claims. Huffington removed the case to the United States District Court for the Southern District of Texas, contending that Beiser's case "related to" the arbitration clauses in the two agreements. Huffington also moved to compel arbitration.

Beiser moved to remand to state court. He did not contest that the arbitration agreements "fall[] under the Convention" within the meaning of § 205. Instead, he insisted that he was not a party to those agreements. Beiser pointed out that corporate officers or directors sign contracts as agents of the corporation only. When an officer signs as a corporate fiduciary, he does not thereby bind himself personally to the agreement. E.g., Newby v. Von Oppen, 7 L.R.-Q.B. 293, 294 (1872) (Blackburn, J.) ("[I]ndividuals who constitute the . . . corporation cannot be made liable personally on its contracts . . . .").4 Beiser argued that Horizon, the company, agreed to arbitrate its disputes with Huffington. Beiser, the individual, made no such agreement.5

The district court denied Beiser's motion to remand without opinion. Beiser did not file a response to Huffington's motion to compel arbitration. The district court granted that motion, and Beiser now appeals. On appeal, as in the district court, Beiser insists that he challenges only the subject matter jurisdiction of the federal Page 668

courts under § 205, not the merits of the motion to compel arbitration.6


Although Beiser clearly articulates his position that he signed the agreements only as an agent of Horizon, he does not explain precisely why this fact means that the agreements do not "relate to" the subject matter of his suit. We suppose that he means to say that, if he is not bound personally to the agreements, that the agreements are simply unconnected to his claims. That is, corporations (and limited liability companies) are separate legal persons: the agreements here relate to Horizon's transactions with Hungarian Horizon and Roy M. Huffington, Inc., not Beiser's personal relationship with those entities and the people that control them. According to Beiser, he is legally distinct from Horizon: agreements to arbitrate entered into by Horizon have simply nothing to do with him.

Beiser's position finds some support in our vacated and therefore no longer binding decision in Marathon Oil Co. v. Ruhrgas, 115 F.3d 315, 320 (5th Cir. 1997), reh'g en banc granted and opinion vacated, 129 F.3d 746 (5th Cir. 1997), aff'd on other grounds, 145 F.3d 211 (5th Cir. 1998), rev'd on other grounds, 526 U.S. 574 (1999). In that case, Marathon Petroleum Norway (MPN) entered into an agreement with the German gas company Ruhrgas that provided for the binding arbitration of disputes related to a North Sea gas field. Marathon Oil Company, an affiliate of MPN, sued Ruhrgas, claiming that Ruhrgas falsely promised MPN premium prices for the gas from the field, thereby fraudulently inducing Marathon to invest $300 million in MPN. Ruhrgas removed the case on the basis of § 205.

The panel held that § 205 did not provide a basis for jurisdiction. In large part, the panel relied on the fact that Marathon Oil had not signed the agreements. According to the panel, "the issue is whether any relevant arbitration agreement exists between the parties to this litigation . . . . Simply stated, there is no such agreement." Id. at 321. Although signatory MPN was bound to the agreements, and compelled to arbitrate, its non-signatory affiliate company was free to bring suit in state court.

The en banc court reached the same conclusion as the panel on another issue in the case, but did not affirm the panel with respect to § 205. It remanded to the district court for re-examination of whether that section conferred subject matter jurisdiction. Marathon Oil Co. v. A.G. Ruhrgas, 145 F.3d 211, 225 (5th Cir. 1998), rev'd, Ruhrgas A.G. v. Marathon Oil Co., 526 U.S. 574 (1999). The dissent went further. It commented on behalf of eight judges that the defendant's invocation of § 205 was "certainly not frivolous" and noted the "mountain of amicus briefs criticizing the panel's interpretation of § 205." Id. at 233 (Higginbotham, J. dissenting).

Page 669

We reject Beiser's and Marathon Oil's interpretation of "relates to" in § 205. We interpret statutes according to their plain meaning, and the plain meaning of the phrase "relates to" sweeps broadly enough to encompass the relationship between the arbitration clauses in the agreements and Beiser's suit. United States v. Ron Pair Enterprises, Inc., 489 U.S. 235, 242 (1989) (holding that statutes should be interpreted according to their plain meaning). The Supreme Court has described the "normal sense" of the phrase "relates to" as having a "connection with" or "reference to." Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 97 (1983). The phrase "relates to" generally conveys a sense of breadth. See id. at 96 - 97 (giving broad scope to ERISA's preemption of any state law that "relates to" an employee benefit plan). Here, the two agreements are the only written contracts governing Beiser's work in Hungary. Beiser was Horizon's only employee; the contracts were entered into specifically to secure his personal expertise and advice in developing the oil interest. Developing Beiser's case will necessarily involve explaining the scope and operation of the two contracts. Even if Beiser is right on the merits that he cannot ultimately be forced into arbitration, his suit at least has a "connection with" the contracts governing the transaction out of which his claims arise.

The definition that we have given the phrase "relates to" in another area of law where that phrase defines our jurisdiction helps to specify more fully the phrase's plain meaning. In bankruptcy, district courts have jurisdiction over any state proceeding that "relates to" a bankruptcy case. 28 U.S.C. § 1334. We read the phrase "relates to" in § 1334 expansively, permitting jurisdiction whenever the outcome of a proceeding could "conceivably have any effect on the estate being administered in bankruptcy." In re Wood, 825 F.2d 90, 93 (5th Cir. 1987). This definition of "relates to"...

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