Viator v. Dauterive Contractors, Inc., Civil Action No. 09-3322.

• Decision Date: 26 June 2009
• Docket Number: Civil Action No. 09-3322.
• Citation: 638 F.Supp.2d 641
• Parties: Larry J. VIATOR, Sr. v. DAUTERIVE CONTRACTORS, INC. and Western Company of America, Inc.
• Court: U.S. District Court — Eastern District of Louisiana

638 F.Supp.2d 641

Larry J. VIATOR, Sr. v. DAUTERIVE CONTRACTORS, INC. and Western Company of America, Inc.

Civil Action No. 09-3322.

United States District Court, E.D. Louisiana.

June 26, 2009.

COPYRIGHT MATERIAL OMITTED

Kevin Reeve Duck, Duck Law Firm, Lafayette, LA, Samuel David Abraham, Afayette, LA, for Larry J. Viator, Sr.

Christine Zebley Carbo, Strasburger & Price, LLP, Houston, TX, for Western Company of America, Inc.

ORDER AND REASONS

MARTIN L.C. FELDMAN, District Judge.

Before the Court are two motions: (1) Magnolia's motion to remand; and (2) Steamship Mutual's motion to dismiss pending arbitration. For the reasons that follow, the motion to remand is DENIED, and the motion to compel arbitration is GRANTED subject to the reasons below.

Background

This removed lawsuit has a tortured state court history. In the underlying personal injury action, Larry S. Viator, an employee of Dauterive Contractors, was injured while aboard the MAG II (a barge owned by Magnolia Quarterboats and chartered by Western Geophysical) in June 1997.

On May 13, 1998 Viator sued Dauterive and Western Geophysical. On November 5, 2002 Western Geophysical filed a third-party demand against Magnolia, asserting that Magnolia owed defense and indemnity for any damages for which Western Geophysical may be liable, as well as for costs, expenses, and attorneys' fees associated with the defense of any claims made by plaintiff. Western Geophysical also asserted that Magnolia was responsible for Viator's damages, if any, because of its negligence or the unseaworthiness of Magnolia's vessel, the MAG II.

Viator settled his claims against Western Geophysical and, as a part of the settlement, Viator was assigned any rights Western Geophysical had as third-party plaintiff against Magnolia. On January 20, 2004 Viator filed a motion to substitute himself for Western Geophysical in the third-party demand against Magnolia. Magnolia, believing that Western Geophysical owed it indemnity and defense from the events giving rise to Viator's, injuries, asked Western Geophysical to defend it against the suit brought by Viator. When Western Geophysical failed to respond to Magnolia's tender of defense, Magnolia filed a third-party demand (or, essentially, counterclaim) for defense and indemnity against Western Geophysical and its insurer on July 17, 2008. Service was made on Western Geophysical on July 21, 2008.

Magnolia amended its third-party demand to add a jury request on October 6, 2008. When Western Geophysical disclosed its insurance policy for the relevant time period, Magnolia learned the identity of Western Geophysical's insurer, Steamship Mutual; Magnolia then filed a second amended third-party demand on December 18, 2008, naming Steamship Mutual, and claimed additional assured as to the coverage (if any) provided by Steamship Mutual to Western Geophysical for Viator's claim.¹

Western Geophysical and Steamship Mutual answered Magnolia's demands in February 2009. Magnolia, Western Geophysical, and Steamship Mutual filed dispositive motions that were set for hearing on May 7, 2009 in the state trial court. But on April 20, 2009 Steamship Mutual removed the suit to this Court.

Steamship Mutual predicates removal on the arbitration clause contained in the insurance policy between Western Geophysical and Steamship Mutual,² and invokes this Court's jurisdiction pursuant to the Convention on the Recognition and Enforcement of Arbitral Awards, 9 U.S.C. §§ 201-208. In its Notice of Removal, Steamship Mutual asserted that "Western consents to and joins in the removal of this action although its consent is not necessary for removal pursuant to the Convention."

Magnolia now moves to remand; Steamship Mutual opposes remand and seeks dismissal of the suit pending arbitration.

I.

Although the plaintiff challenges removal in this case, the removing defendants carry the burden of showing the propriety of this Court's removal jurisdiction. See Manguno v. Prudential Property and Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir.2002)(the removing party bears the burden of showing both that federal jurisdiction exists and, if challenged, that the removal was procedurally proper); see also Jernigan v. Ashland Oil, Inc., 989 F.2d 812, 815 (5th Cir.), cert. denied, 510 U.S. 868, 114 S.Ct. 192, 126 L.Ed.2d 150 (1993); Willy v. Coastal Corp., 855 F.2d 1160, 1164 (5th Cir.1988).

In most removal contexts, any ambiguities are construed against removal, Butler v. Polk, 592 F.2d 1293, 1296 (5th Cir.1979), as the general removal statute should be strictly construed in favor of remand. York v. Horizon Fed. Sav. and Loan Ass'n, 712 F.Supp. 85, 87 (E.D.La. 1989); see also Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 61 S.Ct. 868, 85 L.Ed. 1214 (1941). However, when a party invokes the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the Convention) as its vehicle for removal, the Fifth Circuit broadly instructs, "[s]o generous is [the Convention's removal provision that] the general rule of construing removal statutes strictly against removal `cannot apply ... because in these instances, Congress created special removal rights to channel cases into federal court.'" Acosta v. Master Maint. & Constr. Inc., 452 F.3d 373, 377 (5th Cir.2006)(quoting McDermott Int'l, Inc. v. Lloyds Underwriters of London, 944 F.2d 1199, 1213 (5th Cir.1991)). Because Steamship Mutual's jurisdictional predicate is based on the Convention, the Court examines its provisions to determine whether its grant of jurisdiction extends to this case.

II.

The Convention was negotiated pursuant to the Constitution's treaty power. The United States is a party to the Convention, which Congress implemented at 9 U.S.C. § 201, et seq.,³ "mak[ing] the Convention the highest law of the land." See Sedco, Inc. v. Petroleos Mexicanos Mexican Nat'l Oil Co., 767 F.2d 1140, 1145 (5th Cir.1985). The Fifth Circuit has observed that the purpose of ratifying the Convention was "to secure for United States citizens predictable enforcement by foreign governments of certain arbitral contracts and awards made in this and other signatory nations." McDermott Int'l, Inc. v. Lloyds Underwriters of London, 944 F.2d 1199, 1207 (5th Cir.1991) (citation omitted). Title 9, U.S.C. § 202 crafts the coverage of the Convention:

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 the 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.

Among the Convention's provisions are jurisdictional grants, which confer on federal district courts original and removal jurisdiction over cases related to arbitration agreements reached by the Convention. Section 203 focuses original federal jurisdiction:

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 ... shall have original jurisdiction over an action or proceeding, regardless of the amount in controversy.

Section 205, "one of the broadest removal provisions ... in the statute books",⁴ governs removals to federal court:

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 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.

9 U.S.C. § 205 (emphasis added).

III.

To determine whether removal is proper under Section 205, the removing defendant must show that (1) the arbitration clause at issue "fall[ ] under the Convention" pursuant to Section 202; and (2) the state court litigation "relates to" the arbitration clause for the purposes of Section 205. Acosta, 452 F.3d at 376.

A. The Convention Covers the Arbitration Clause

"In determining whether the Convention requires compelling arbitration in a given case," the Fifth Circuit instructs, the Court "conduct[s] only a very limited inquiry." Freudensprung v. Offshore Technical Services, Inc., 379 F.3d 327, 339 (5th Cir.2004)(citing Francisco v. STOLT ACHIEVEMENT MT, 293 F.3d 270, 274 (5th Cir.), cert. denied 537 U.S. 1030, 123 S.Ct. 561, 154 L.Ed.2d 445 (2002)). An agreement "falls under" the Convention pursuant to Section 202, and the Court should compel arbitration if these four prerequisites are met:

(1) there is a written agreement to arbitrate the matter;

(2) the agreement provides for arbitration in a Convention signatory nation;

(3) the agreement arises out of a commercial legal relationship; and

(4) a party to the agreement is not an American citizen.

Id. (citing Sedco, Inc. v. Petroleos Mexicanos Mexican Nat'l Oil Co., 767 F.2d 1140, 1144-45 (5th Cir.1985) (citation omitted)); 9 U.S.C. § 202. "Once `these requirements are met, the Convention requires the district court[ ] to order...