Stemcor USA Inc. v. Cia Siderurgica Do Para Cosipar; Daewoo Int'l Corp. v. Thyssenkrupp Mannex Gmbh v. America Metals Trading LLP, No. 16-30984 (5th Cir. Sept. 1, 2017) [click for opinion]
This case arose as a dispute between two creditors, each of which attached the same pig iron owned by America Metals Trading L.L.P. ("AMT"). Plaintiff-Appellant Daewoo International Corp. ("Daewoo") sued AMT in the Eastern District of Louisiana, seeking an order compelling AMT to arbitrate and an attachment of the pig iron. Daewoo invoked both maritime attachment and the Louisiana non-resident attachment statute, which allows attachments in aid of any "action for a money judgment." Citing both types of attachment, the district court granted Daewoo its attachment.
Following Daewoo's attachment, Intervenor-Appellee Thyssenkrupp Mannex GMBH ("TKM") attached the same pig iron in Louisiana state court. TKM then intervened in the federal suit, arguing that Daewoo's attachment should be vacated because (1) maritime jurisdiction was improper and (2) Louisiana non-resident attachment was inapplicable. The district court agreed with TKM and vacated Daewoo's attachment. Specifically, the district court found that because Daewoo's underlying suit sought to compel arbitration, it was not an "action for a money judgment" and therefore Daewoo could not receive a non-resident attachment writ. Daewoo appealed only the district court's conclusion that its Louisiana non-resident attachment writ was invalid.
On appeal, the Fifth Circuit agreed with the district court that federal subject matter jurisdiction existed under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the "Convention"). Jurisdiction under the Convention requires two things: (1) there must be an arbitration agreement or award that falls under the Convention; and (2) the dispute must relate to that arbitration agreement. For the second prong, the court undertook a grammatical analysis in determining that "falling under" equates to "relating to."
Both jurisdictional elements were met in this case. First, the arbitration agreements between Daewoo and AMT were covered by the Convention because they met the usual four requirements: (1) they were agreements in writing to arbitrate the dispute; (2) the agreements provided for arbitration in the territory of a Convention signatory (New York); (3) the agreements to arbitrate arose out of a commercial legal relationship (between Daewoo and AMT); and (4) at least one party to the agreement was not an American citizen (neither Daewoo nor AMT was an American citizen).
Second, the court found that the dispute related to the arbitration agreement because Daewoo was seeking its attachment in order to facilitate the very arbitration provided for in the AMT agreements. The court cited case law that favors "recognizing subject matter jurisdiction based on the Convention to issue provisional remedies in aid of arbitration." Under the Convention, the court reasoned, courts have subject matter jurisdiction to order state-law provisional remedies such as attachment. Because Daewoo's object in attaching the pig iron was to facilitate arbitration by increasing its chances of recovery on an eventual reward, the court concluded that it had subject matter jurisdiction.
Disagreeing with the district court, the Fifth Circuit concluded that Louisiana's non-resident attachment statute, which provides for attachment in aid of suits to confirm money judgments, does allow for attachment in aid of arbitration. The court first conceded that a suit seeking to compel arbitration is not an "action for a money judgment," and that Daewoo's suit seeking to compel arbitration cannot underlie a Louisiana non-resident attachment writ. However, arbitral awards can be converted into money judgments when they are confirmed, and Louisiana law specifically provides that, in limited circumstances, an attachment may issue before the suit underlying the attachment is filed. Here, Daewoo specifically contemplated obtaining a pre-confirmation attachment in order to secure a later monetary arbitral award, particularly given that it specifically alleged that AMT was "hemorrhaging assets." Attachment was thus available, because an eventual confirmation suit was contemplated.