McDermott Intern., Inc. v. Lloyds Underwriters of London, No. 104207

• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)
• Writing for the Court: Before REAVLEY, JONES and SMITH; REAVLEY
• Citation: 944 F.2d 1199
• Parties: McDERMOTT INTERNATIONAL, INC., Plaintiff-Appellee, v. LLOYDS UNDERWRITERS OF LONDON, John Richard Ludbrooke Youell as rep of those Certain Underwriters Subscribing to Memorandum of Insuranceefendant-Appellant.
• Decision Date: 03 October 1991
• Docket Number: No. 104207,D,No. 91-3568

Page 1199

944 F.2d 1199 1994 A.M.C. 302 McDERMOTT INTERNATIONAL, INC., Plaintiff-Appellee,
v.
LLOYDS UNDERWRITERS OF LONDON, John Richard Ludbrooke Youell
as rep of those Certain Underwriters Subscribing
to Memorandum of Insurance No. 104207,
Defendant-Appellant. No. 91-3568. United States Court of Appeals,
Fifth Circuit. Oct. 3, 1991.
Rehearing and Rehearing En Banc
Denied Oct. 30, 1991.

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Chuck D. Barlow, Carlton Reeves, Luther T. Munford, Phelps Dunbar, Marks, Claverie & Sims, Jackson, Miss., James H. Roussel, Danny G. Shaw, Harry S. Redmon, Jr., Bruce V. Schewe, Phelps Dunbar, New Orleans, La., for defendants-appellants.

John V. Baus, Bruce J. Brumfield, Nan Roberts Eitel, Jones, Walker, Waechter, Poitevent, Carrere & Denegre, New Orleans, La., Arden J. Lea, W. Clay McGehee, Lea, Plavnicky & Moseley, New Orleans, La., for plaintiff-appellee.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before REAVLEY, JONES and SMITH, Circuit Judges.

REAVLEY, Circuit Judge:

The district court remanded this case to state court on the ground that an insurance policy issued by underwriters at Lloyds, London (Underwriters) to McDermott International, Inc. (McDermott) gave McDermott the right to choose the forum where the policy's arbitration provision would be enforced. We consider the court's remand order appealable and vacate it.

I. BACKGROUND

McDermott bought an all risks installation floater policy from Underwriters every year from 1952 to 1989. This case concerns construction of the following two clauses in the 1989 policy:

8. Service of Suit Clause

It is agreed that in the event of the failure of Underwriters hereon to pay any amount claimed to be due hereunder, Underwriters hereon, at the request of the Assured will submit to the jurisdiction of any court of competent jurisdiction within the United States and will comply with all requirements necessary to give such Court jurisdiction and all matters arising hereunder shall be determined in accordance with the law and practice of such court.

It is further agreed that service of process in such suit may be made upon Messrs. Mendes & Mount, Three Park Avenue, New York, N.Y. 10016 and that in any suit instituted against any one of them upon this contract, Underwriters will abide by the final decision of such Court or of any Appellate Court in the event of an appeal.

The above-named are authorized and directed to accept service of process on behalf of Underwriters in any such suit and/or upon the request of the Assured to give a written undertaking to the Assured that they will enter a general appearance upon Underwriters' behalf in the event such a suit shall be instituted.

. . . . .

9. Arbitration

All differences arising out of this contract shall be referred to the decision of any arbitrator to be appointed by the parties in difference, or if they cannot agree upon a single arbitrator to the decision of two arbitrators, one to be

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appointed in writing by each of the parties and in case of disagreement between the two arbitrators to the decision of any umpire to be appointed in writing by the arbitrators or by a court of competent jurisdiction within the limits of the United States of America. It is agreed that the place of arbitration shall be designated by the Assured and the expenses in connection with the arbitration shall be borne equally between the parties in difference.

McDermott's subsidiary, the Babcock and Wilcox Company (B & W), supplies utilities with electric power generation equipment and structures. In 1989, a chemical reaction irreparably damaged two air heat exchangers that B & W was installing for Baltimore Gas & Electric Company.

McDermott submitted a policy claim for its losses from the Baltimore incident, Underwriters denied coverage, and McDermott sued on the policy for $39,247,000 in Louisiana state court. Underwriters demanded that McDermott submit to arbitration of the issues in the state suit. The demand prompted McDermott to file a separate petition asking the Louisiana court to declare that McDermott had no obligation to arbitrate.

Underwriters removed both suits to federal district court under 9 U.S.C. § 205. McDermott filed a motion to remand the cases. The district court held that City of Rose City v. Nutmeg Ins. Co., 931 F.2d 13 (5th Cir.1991) establishes that, pursuant to the policy's service-of-suit clause, McDermott is entitled to choose the forum where the parties' dispute regarding arbitration will be resolved. The court remanded the cases to Louisiana state court.

McDermott asks us to review the district court's remand order either by appeal or writ of mandamus.

II. APPELLATE JURISDICTION

We hold that the district court's remand order is appealable, but this requires explanation. We begin with the proposition that the availability and means of appellate review for a district court's remand order depend entirely on the court's reason for issuing the order. ¹

A. UNREVIEWABLE REMAND ORDERS

Congress denies us authority to review remand orders that district courts issue under 28 U.S.C. § 1447(c) for lack of subject-matter jurisdiction. 28 U.S.C. § 1447(d). And although the question is presently undecided, section 1447(d) may also preclude our review of a district court's granting of a timely motion to remand due to defects in removal procedure. In re Shell Oil Co., 932 F.2d 1518, 1520 n. 5 (5th Cir.1991). The district court remanded this case pursuant to the policy's service-of-suit clause, a reason outside the scope of section 1447(c). Section 1447(d) does not bar our review. Id. at 1520-21.

B. APPELLATE REVIEW BY APPEAL VERSUS MANDAMUS

The parties dispute whether review is appropriate by appeal or mandamus. These methods of review are mutually exclusive, Moses H. Cone Memorial Hosp. v. Mercury Construction Corp., 460 U.S. 1, 8 n. 6, 103 S.Ct. 927, 933 n. 6, 74 L.Ed.2d 765

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(1983), and we look to precedent to decide which to exercise in this case.

In Thermtron, the Supreme Court held that remand is only allowed in accordance with section 1447(c) and a writ of mandamus under 28 U.S.C. § 1651 is the proper tool for securing a district judge's compliance with this rule. Id. 423 U.S. at 352-53, 96 S.Ct. at 593-94 (ordering district judge to hear case remanded due to crowded federal docket). The Court chose to review by mandamus because it understood its precedent to establish that a remand order is not a "final decision" within the meaning of the direct appeal statute, 28 U.S.C. § 1291. ² Id. at 352-53, 96 S.Ct. at 594 ("because an order remanding a removed action does not represent a final judgment reviewable by appeal, '[t]he remedy in such a case is by mandamus to compel action....' ") (quoting Railroad Co. v. Wiswall, 90 U.S. (23 Wall.) 507, 508, 23 L.Ed. 103 (1875)). ³

The Court next chose between direct appeal and mandamus in Moses H. Cone. Like this case, Moses H. Cone concerned the question of whether the arbitrability of a dispute between a hospital and a contractor would be decided in federal or state court. The hospital sued the contractor in state court for a declaration that their dispute was not subject to arbitration. The contractor then filed a separate action in federal court to resolve the same arbitrability question. The district court exercised its discretion under Colorado River Water Conservation District v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976) to stay the federal proceeding pending resolution of the state suit. Moses H. Cone, 460 U.S. at 4-7, 103 S.Ct. at 931-32. The Court held that the district court's stay order was an appealable collateral order under Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949) because it: 1) conclusively determined the issue of which forum would decide the arbitrability question; 2) resolved this important issue that was completely separate from the merits of the action; and 3) was effectively unreviewable on appeal from a final judgment in the case. Id. at 11-13, 103 S.Ct. at 934-35. Moses H. Cone does not mention Thermtron.

The Court last considered remand review in Carnegie-Mellon University v. Cohill, 484 U.S. 343, 108 S.Ct. 614, 621-22, 98 L.Ed.2d 720 (1988). There, the district court allowed the plaintiff in an age discrimination suit to delete the federal claims from his complaint and remanded the remaining pendent claims to state court. The defendant employer filed a notice of appeal and a petition for mandamus with the Third Circuit to keep the case in federal court. A panel of the Third Circuit held the appeal barred by section 1447(d) but granted the petition for mandamus. See Id. 108 S.Ct. at 617 & n. 4. Sitting en banc, the Third Circuit reversed the panel's decision to grant mandamus. The Supreme Court affirmed the en banc decision, ruling that a district court may remand pendent claims when it has the discretion to dismiss them even though no statute sanctions such a remand. Id. at 622.

Cohill is important to our resolution of this case because it expressly precludes our reading Thermtron to require statutory authorization for all remands. Id. at 621. However, Cohill does not address the issue of whether review of a district court's discretionary remand order should be by appeal under Moses H. Cone 's rationale ⁴ or by mandamus. The Court simply affirmed the en banc court's final decision to refuse mandamus. Although the defendant employer could have put before the Supreme Court the panel decision to review the district court's remand order by mandamus rather than appeal, it did not do so. See

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Brief of Petitioners, Carnegie-Mellon University v. Cohill, 484 U.S. 343, 108 S.Ct. 614, 98 L.Ed.2d 720 (1988), (LEXIS, Genfed library, Briefs file) (only question presented was whether district court could remand on ground not listed in section 1447(c)).

We read Thermtron, Moses H. Cone, and Cohill to...