determining that a Filipino seaman who had signed an employment contract containing an arbitration clause was enough to constitute an agreement in writing to arbitrate the dispute per the Convention
How later courts described this case
- determining that a Filipino seaman who had signed an employment contract containing an arbitration clause was enough to constitute an agreement in writing to arbitrate the dispute per the Convention
- finding a Montana statute that voided arbitration clauses unless they were typed in underlined capital letters to be preempted by the FAA
Written by the judges who cited it.
The opinion
United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT May 18, 2004
Charles R. Fulbruge III
Clerk
No. 02-31068
VINOD KUMAR DAHIYA,
Plaintiff-Appellee,
versus
TALMIDGE INTERNATIONAL, LTD., NEPTUNE SHIPMANAGEMENT SERVICES
(PTE) LTD., AMERICAN EAGLE TANKERS, INC., LTD., AMERICAN EAGLE
TANKERS AGENCIES, INC., BRITANNIA STEAM SHIP INSURANCE
ASSOCIATION, LTD.,
Defendants-Appellants.
--------------------
Appeal from the United States District Court
for the Eastern District of Louisiana, New Orleans
--------------------
Before BARKSDALE, DeMOSS, and BENAVIDES, Circuit Judges.
BENAVIDES, Circuit Judge:
Defendants-Appellants filed a motion for rehearing complaining
of this court’s order of dismissal entered March 11, 2004. After
considering this motion for rehearing, which we treat as a petition
for reconsideration, the motion is GRANTED, the previous order of
dismissal is withdrawn, and the following opinion is entered in
lieu thereof.
Plaintiff-Appellee Vinod Kumar Dahiya filed this maritime
personal injury action in Louisiana state court against several
Defendants-Appellants: his employer, Neptune Shimpmanagement
No. 02-31068
-2-
Services; the owner of the ship on which he was injured, Talmidge
International; co-owners of the fleet to which the ship belongs,
American Eagle Tankers and American Eagle Tankers Agencies; and the
ship’s insurer, Brittania Steam Ship Insurance Association.
Appellants removed to federal court on the grounds that their
dispute with Dahiya was subject to an arbitration agreement
governed by the Convention on the Recognition and Enforcement of
Foreign Arbitral Awards (the “Convention”), 9 U.S.C.A. §§ 201-208
(West 1999 & Supp. 2003). The district court remanded the case to
state court for lack of subject matter jurisdiction and denied
Appellants’ motions to compel arbitration and to stay the
proceedings. Because this remand deprives us of appellate
jurisdiction to consider any part of the district court’s order, we
dismiss this appeal.
I.
In 1999, Dahiya and Neptune signed two documents--a “deed” and
a “bond”--in New Delhi, India. Together, the documents provided
that Dahiya would receive two years of training, then work for
Neptune for two years. The deed included an arbitration clause
providing that any dispute arising out of the deed would be subject
to arbitration in Singapore or India.1
As part of his training, Dahiya worked on the M/T EAGLE
AUSTIN, a vessel owned by Talmidge. Dahiya suffered burns while
1
The bond included a similar arbitration clause, but only the deed’s
arbitration clause is at issue in this case because the dispute arose during
Dahiya’s training.
No. 02-31068
-3-
operating the vessel’s incinerator and was later evacuated to a
Louisiana hospital, where he received treatment.
Dahiya returned to India, but he sued Neptune, Talmidge, and
the three other Appellants in Louisiana state court. Dahiya’s
suit, brought under the Savings to Suitors Clause, 28 U.S.C.A.
§ 1333(1) (West 1993), alleged that Appellants had breached
obligations under the Jones Act, 46 U.S.C.A. app. § 688 (West
2003), general maritime law, and other applicable law.
Appellants invoked federal jurisdiction as a federal question,
see 28 U.S.C.A. § 1441(b) (West 1994), and under § 205 of the
Convention, 9 U.S.C.A. § 205 (West 1999),2 and removed to federal
court. Appellants filed their removal petition more than thirty
days after receiving notice of Dahiya’s suit. Generally, such a
delay would preclude removal. See 28 U.S.C.A. § 1446(b) (West
1994). Section 205, however, allows removal at any time prior to
trial, and Dahiya does not dispute that Appellants filed their
petition before trial.
Once in federal court, Appellants moved to compel arbitration
and to stay the proceedings or, in the alternative, to dismiss
Dahiya’s suit. Dahiya moved to remand. Dahiya argued that the
deed’s terms did not qualify as an arbitration agreement under the
Convention and therefore could not support removal under § 205.
2
Section 205 provides that “[w]here 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.”
No. 02-31068
-4-
The district court sided with Dahiya and, in a single order,
remanded the case to state court and denied Appellants’ motions to
stay proceedings and to compel arbitration. The court began its
order by assessing the validity of what it called the “forum
selection clause”--i.e., the arbitration clause in the deed between
Dahiya and Neptune. The court held that this clause was invalid
because forum selection clauses contravene Louisiana public policy.
The court then turned directly to the question of its jurisdiction.
The court began by noting that because Appellants failed to remove
within thirty days, federal jurisdiction hinged entirely on § 205.
With respect to jurisdiction under § 205, the court reasoned that
because the deed contained no valid forum selection clause, the
parties had not entered an agreement to arbitrate valid under the
Convention. The court therefore concluded that it had no
jurisdiction under § 205, remanded the case, and denied Appellants’
pending motions.
Appellants sought review of the district court’s order and
moved for a stay of the the ongoing state court proceedings.
Dahiya moved to dismiss for lack of appellate jurisdiction. Both
motions have been carried with the case.3
3
While this appeal was pending, Dahiya’s state court suit proceeded. Even
before we heard oral arguments, a Louisiana trial court overruled Appellants’
exceptions regarding arbitration and jurisdiction. Subsequently, Appellants
unsuccessfully sought supervisory writs from the Louisiana Court of Appeals and
the Louisiana Supreme Court.
Based on the denial of these writs, Dahiya filed in this Court a motion to
dismiss for res judicata. Dahiya claimed that the Louisiana trial court rulings
and the denial of supervisory writs constituted final judgments and precluded
Appellants from seeking a motion compelling arbitration from this Court.
Appellants failed to respond in time, and we dismissed the appeal. Appellants
promptly filed a motion for panel rehearing, which we treated as a motion for
No. 02-31068
-5-
II.
Our analysis begins and ends with Dahiya’s motion to dismiss,
for in the absence of appellate jurisdiction, we have no authority
to review the district court’s order.
We cannot review the remand itself. After a district court
remands a case to state court for lack of subject matter
jurisdiction, 28 U.S.C. § 1447(d) bars a federal appellate court
from reviewing the remand ruling “no matter how erroneous.” Arnold
v. State Farm Fire & Cas. Co., 277 F.3d 772, 775 (5th Cir. 2001);
see 28 U.S.C.A. § 1447(c), (d) (West 1994). The district court
appears to have concluded that it lacked subject matter
jurisdiction and to have remanded on that basis. Thus, under
§ 1447(d), we cannot review the remand.
That Appellants removed under § 205 of the Convention does not
vest us with jurisdiction despite § 1447(d). In cases removed
under § 205, “[t]he procedure for removal of causes otherwise
provided by law shall apply.” 9 U.S.C.A. § 205. This “procedure
for removal” includes the strictures of § 1447(d). Transit Cas.
Co. v. Certain Underwriters at Lloyd’s of London, 119 F.3d 619,
624-625 (8th Cir. 1997); LaFarge Coppee v. Venezolana de Cementos,
S.A.C.A., 31 F.3d 70, 71-72 (2d Cir. 1994); In re Amoco Petroleum
Additives Co., 964 F.3d 706, 712-13 (7th Cir. 1992). Thus, when a
case removed under § 205 is subsequently remanded for lack of
panel reconsideration. Because we have granted that motion, we now turn to the
other issues in this case.
No. 02-31068
-6-
subject matter jurisdiction, an appellate court cannot review the
order of remand.
Appellants contend that, regardless of whether we can review
the remand itself, we have jurisdiction to review the district
court’s denial of arbitration and denial of stay under 9 U.S.C.
§ 16, which provides that appeals may be taken from orders refusing
stays or denying motions to compel arbitration, see 9 U.S.C.A. §
16(a)(1)(A),(C) (West 1999).4 We lack jurisdiction under § 16
because the denials of Appellants’ motions to stay and to compel
arbitration accompanied a remand for lack of subject matter
jurisdiction. See Transit Cas., 119 F.3d at 623-625. Any order
remanding for lack of subject matter jurisdiction necessarily
denies all other pending motions, for “[u]nless a federal court
possesses subject matter jurisdiction over a dispute, . . . any
order it makes (other than an order of dismissal or remand) is
void.” John G. & Marie Stella Kenedy Mem’l Found. v. Mauro, 21 F.3d
667, 674 (5th Cir. 1994) (quoting Shirley v. Maxicare Tex., Inc.,
921 F.2d 565, 568 (5th Cir. 1991)). Motions to stay proceedings
and to compel arbitration will be common if not universal in cases
removed under § 205. Thus, in the vast majority of cases removed
under § 205, an order of remand will be the effective equivalent of
a denial of motions to stay proceedings and to compel arbitration.
Recognizing appellate review of such remand orders under § 16 would
4
Section 16 is not a part of the Convention, but its provisions are
applicable to cases brought under the Convention. See 9 U.S.C.A. § 208 (West
Supp. 2003).
No. 02-31068
-7-
circumvent § 1447(d) by affording review of remand orders issued in
nearly every case removed under § 205. Section 205, by expressly
invoking “[t]he procedure for removal of causes otherwise provided
by law,” forecloses such a result.
District court determinations accompanying an order of remand
are reviewable in spite of § 1447(d) if they meet the requirements
first outlined in City of Waco, Texas v. United States Fidelity &
Guaranty Co., 297 U.S. 140 (1934). Under Waco, a federal appeals
court can review a pre-remand decision made by a district court if
that decision is “separable” from the remand order and
independently reviewable through a mechanism such as the collateral
order doctrine. Heaton v. Monogram Credit Card Bank, 297 F.3d 416,
421 (5th Cir. 2002). To be separable, the decision must meet two
criteria. First, the decision must have preceded the remand order
“in logic and in fact” such that the decision was “made by the
[d]istrict [c]ourt while it had control of the cause.” Waco, 293
U.S. at 143. Second, the decision must be “conclusive,” i.e.,
“functionally unreviewable in state courts.” Arnold, 277 F.3d at
776.
The district court’s refusal to compel arbitration and to stay
proceedings is not reviewable under Waco because that refusal was
not conclusive. Our precedent “has defined conclusiveness in terms
of whether the order was ‘substantive’ or ‘jurisdictional’: if a
decision is simply jurisdictional it is not conclusive.” Doleac ex
rel. Doleac v. Michalson, 264 F.3d 470, 486 (5th Cir. 2001). Thus,
No. 02-31068
-8-
in Soley v. First National Bank of Commerce, 923 F.3d 406, 410 (5th
Cir. 1991), we considered whether we could review a pre-remand
ruling on ERISA preemption and concluded that “because we
interpret[ed] the remand order as jurisdictional, the state court
[would] have an opportunity to consider the appellants’ preemption
defense and the district court’s order [would] have no preclusive
effect.” Likewise, in Linton v. Airbus Industrie, 30 F.3d 592, 597
(5th Cir. 1994), we considered whether we could review a district
court’s pre-remand rulings on foreign sovereign immunity and held
that “[i]n light of the district court’s ultimate conclusion that
the entire case had to be remanded for lack of subject matter
jurisdiction, the district court’s [foreign sovereign immunity]
determination [could] be deemed a jurisdictional finding under the
facts of this case and, as such, [could] be reviewed by the state
court upon remand.” Most recently, in Angelides v. Baylor College
of Medicine, 117 F.3d 833, 837 (5th Cir. 1997), we explained that
a district court’s pre-remand immunity and exhaustion
determinations “were not ‘conclusive’ because, as jurisdictional
decisions, they [could] be reviewed in the state court.” In sum,
when a district court makes a determination in the process of
remanding a case for lack of jurisdiction, that determination is
jurisdictional and can be revisited by a state court upon remand.
In this case, the district court determined that the
arbitration clause was invalid in the process of ascertaining
whether it had subject matter jurisdiction. Under Soley, Linton,
No. 02-31068
-9-
or Angelides, that determination is jurisdictional and therefore
has no preclusive effect in state court. Thus, because the
district court’s refusals to compel arbitration and to stay
proceedings were not conclusive, those refusals are not reviewable
under Waco.
In their efforts to circumvent § 1447(d), Appellants rely on
Beiser v. Weiler, 284 F.3d 665 (5th Cir. 2002). Beiser does not
control this case. In Beiser, as in this case, defendants removed
to federal court under § 205. Id. at 666-67. The district court
in Beiser, however, determined that it had jurisdiction and denied
the plaintiff’s motion to remand. Id. at 667. Thus, in Beiser we
did not confront the bar to appellate jurisdiction established in
§ 1447(d), which inheres only after remand.5
Appellants insist, and we recognize, that the argument for
remand advanced by Dahiya and accepted in the district court
closely resembles the argument for remand we disapproved in
Beiser.6 If we could review that argument, we might reject it for
many of the reasons outlined in Beiser. Section 1447(d), however,
5
In Beiser, we speculated in dicta about what would have happened had the
district court remanded the case. Id. at 672-74. We recognized that § 1447(d)
would have deprived us of appellate jurisdiction and led to the unappealing
result of having state courts handle questions of federal arbitration law. Id.
6
In Beiser, the plaintiff argued that the district court should have
remanded because his case did not “relate to” the arbitration agreement on which
defendants relied. Id. at 668. We rejected the plaintiff’s theory as
inconsistent with the plain language of § 205 and the federal policy favoring
arbitration. Id. at 668-74. In particular, we advised district courts against
conflating a jurisdictional analysis with an evaluation of the merits of a
defendant’s motion to compel arbitration. Id. at 670-72.
No. 02-31068
-10-
forecloses appellate review even of egregiously mistaken district
court remands. See Arnold, 277 F.3d at 775.
III.
Because we lack appellate jurisdiction to review any facet of
the district court’s order, we cannot address the district court’s
discussion of international arbitration law. We therefore GRANT
Dahiya’s motion to dismiss this appeal and DENY as moot Appellants’
motion to stay proceedings pending arbitration.
DISMISSED.
No. 02-31068
-11-
DeMOSS, Circuit Judge, dissenting:
I agree with the majority that if the district court’s remand
determination was based on a lack of removal jurisdiction,
28 U.S.C. § 1447(d) likely precludes us from reviewing the remand
order itself.7 However, I respectfully disagree with the
majority’s dismissal for lack of jurisdiction and would conclude
that we have appellate jurisdiction over the order denying
7
I would like to point out that while the separate removability provision
under 9 U.S.C. § 205 of the Convention Treaty (the “Convention”), enabled at 9
U.S.C. § 201 et seq., states “the procedure for removal of causes otherwise
provided by law shall apply,” it also explicitly relaxes certain requirements
under 28 U.S.C. § 1446. That is, removals under the Convention are not subject
to the 30-day and one-year time limitations and can occur “at any time before the
trial,” and the ground for removal (here, the arbitration provision in an
international agreement) does not have to appear on the face of the plaintiff’s
state court complaint “but may be shown in the petition for removal.” 9 U.S.C.A.
§ 205 (West 2004).
Furthermore, the terms of 9 U.S.C. § 16(a)(1)(C) (which is made applicable
to the Convention by 9 U.S.C. § 208) expressly provide for an appeal from an
order “denying an application under section 206 of this title to compel
arbitration,” which immediate appealability is unique to denials of arbitration
under the Convention. 9 U.S.C.A. § 16(a)(1)(C) (West 2004). The language of §
203 expressly states that “[a]n action or proceeding falling under the Convention
shall be deemed to arise under the laws and treaties of the United States,” 9
U.S.C.A. § 203 (West 2004), and under § 205 an action removed from state court
“shall be deemed to have been brought in the district court to which it is
removed.” Id. § 205. These distinctions suggest a fundamental difference
between removal of a case under 28 U.S.C. § 1441 et seq. and removal of a case
under 9 U.S.C. § 205. Under §§ 1441-1446, the purpose is to change the forum in
which the same case will be tried as would have been tried in the state court;
whereas, under § 205, the purpose is to allow the removing party to assert in
federal court the existence of an agreement to arbitrate under the Convention and
compel such arbitration in lieu of the trial that would otherwise occur in the
state court.
Thus, in a typical removal under § 1441 et seq., the nonappealability of
a remand order is a reflection of the congressional policy to prevent delays of
the trial on the merits by appeals over the validity of the remand order. But
removal under § 205 raises the issue of whether there should be a trial on the
merits at all; and the immediate appeals process authorized under 9 U.S.C. § 16
reflects the strong congressional policy of giving preference to arbitration over
litigation as to agreements covered by the Convention. It seems that Congress
intended to treat removals under the Convention differently and more leniently
than removals under the general removal statutes. There may be an argument that
the language of the Convention should control, rather than § 1447(d), when
dealing with an agreement to arbitrate under the Convention. However, no case
purports to resolve this apparent conflict between 28 U.S.C. § 1447(d) and 9
U.S.C. § 16; so I do not conclude here that the remand order itself is reviewable
under § 16.
No. 02-31068
-12-
arbitration and that the district court erred in refusing to order
arbitration under the Convention Treaty (the “Convention”),
9 U.S.C. § 201 et seq.
I. This Court can review the district court’s denial of the
motion to compel arbitration and stay proceedings.
I firmly believe that an order denying arbitration, such as
the district court entered here, is reviewable as a separable and
collateral order. See Doleac ex rel. Doleac v. Michalson, 264 F.3d
470, 478 (5th Cir. 2001). There are two distinct steps in the
consideration: (1) whether the order is separable from the remand
to overcome the bar of § 1447(d); and (2) whether the order is
appealable under 28 U.S.C. § 1291 or otherwise. Id. at 478-79,
485. The order denying arbitration here meets both requirements.
A. Separability of the denial of arbitration.
In City of Waco v. United States Fidelity & Guaranty Co.,
293 U.S. 140 (1934), the Supreme Court found the appellate court
could review an order dismissing a cross-action that accompanied a
remand for lack of diversity jurisdiction because it “in logic and
in fact . . . preceded that of remand and was made by the District
Court while it had control of the cause.” Id. at 143. To be found
separable, the order also must be conclusive, in that it has the
“preclusive effect of being functionally unreviewable in the state
court.” Doleac, 264 F.3d at 482 (quoting Angelides v. Baylor Coll.
of Med., 117 F.3d 833, 837 (5th Cir. 1997)).
12
No. 02-31068
-13-
In the district court’s single order, the determination that
no agreement to arbitrate existed did precede the remand order “in
logic.” Naturally, without a valid arbitration agreement in play,
any motion to compel arbitration would have to be denied. Here,
the finding that no valid arbitration agreement existed under
Louisiana policy and law also provided the basis “in logic” to
consider remand; it served as the “impetus for remanding the case.”
Doleac, 264 F.3d at 483 (quoting Tillman v CSX Transp., Inc.,
929 F.2d 1023, 1026 (5th Cir. 1991)).
Likewise, although the denial of arbitration and the remand
stemmed from the same physical order, the arbitration determination
also preceded the remand “in fact.” It would have had to, because
the opposite sequence of events (remand, then denial of
arbitration) would have meant the district court rendered a
meaningless denial of arbitration because at that point of remand
jurisdiction would have already passed to the state court. Also,
the “in fact” inquiry considers if:
[T]he issue has independent relevance in adjudging the
rights of the parties (i.e., relevance beyond determining
the existence of federal subject matter jurisdiction),
the decision is separable and falls within the reasoning
of City of Waco – even if it also happens to have an
incidental effect on the court’s jurisdiction.
Doleac, 264 F.3d at 486 (quoting Powers v. Southland Corp., 4 F.3d
223, 228 (3d Cir. 1993)). Here, the district court determined
whether the arbitration clause in Dahiya’s deed was valid under
Louisiana law. While this determination did affect jurisdiction in
13
No. 02-31068
-14-
that an invalid arbitration clause meant there could be no
arbitration agreement under the Convention for proper removal under
§ 205, it also had powerful “relevance beyond determining []
jurisdiction.” It cut Appellants off from their right to have
their dispute with Dahiya settled by an arbitrator, outside the
courtroom.
After considering whether the order is separable “in logic”
and “in fact,” this Court must determine whether the order is
conclusive, that is, functionally unreviewable in the state court.
Doleac, 264 F.3d at 482. “[O]ur court has defined conclusiveness
in terms of whether the order was ‘substantive’ or
‘jurisdictional’: if a decision is simply jurisdictional, it is not
conclusive.” Id. at 486. However, a “substantive” decision will
have a preclusive effect in the state court. Id. at 487. Dahiya
argues, in essence, that the district court’s finding on the issue
of arbitration is just jurisdictional because it can have no
preclusive collateral estoppel effect on the state court. The
doctrine of collateral estoppel has three requirements: (1) the
prior federal decision resulted in a “judgment on the merits”;
(2) the same fact issue must have been “actually litigated” in the
federal court; and (3) the disposition of that issue must have been
“necessary to the outcome” of the prior federal litigation. Falcon
v. Transportes Aeros de Coahuila, S.A., 169 F.3d 309, 312 (5th Cir.
14
No. 02-31068
-15-
1999) (quoting Parklane Hosiery Co., Inc. v. Shore, 439 U.S. 322,
326 n.5 (1979)).
Usually, a determination that a court lacks jurisdiction is
not considered a judgment on the merits for collateral estoppel to
apply. See Nilsen v. City of Moss Point, Miss., 701 F.2d 556, 562
(5th Cir. 1983) (en banc). But legal findings that serve as
prerequisites to and are thus necessary to make a lack of
jurisdiction decision can have a collateral estoppel effect in
state court. See Falcon, 169 F.3d at 312-13.
Here, a finding that no valid arbitration agreement existed
equated precisely to a “judgment on the merits” of the efficacy of
such arbitration clause and shut off any arbitration proceedings
brought by Appellants. Unlike in Doleac where the amendment
allowing joinder merely changed the court in which the same claims
would be litigated, 264 F.3d at 487-88, the denial of arbitration
here closed the “non-court” forum off entirely from Appellants.8
As for the arbitration issue having been “actually litigated”
and “necessary to the outcome,” we indicated in Falcon that when a
federal district court determines it does not have subject matter
8
The situation here is analogous to the resubstitution order we found
separable in Mitchell v. Carlson, 896 F.2d 128, 133 (5th Cir. 1990), where an
entity not otherwise subject to litigation was resubstituted as a party and thus
became subjected to suit. Doleac Doleac ex rel. Doleac v. Michalson, 264 F.3d
470, 487 (5th Cir. 2001). Appellants have become subjected to litigation since
the district court determined they had no valid arbitration defense.
15
No. 02-31068
-16-
jurisdiction, findings necessary to make that decision have
collateral estoppel consequences in a state court. 169 F.3d at
312-13 (citation omitted). Thus, here, because the district
court’s determination that no arbitration agreement existed was a
legal finding “necessary” to its decision that it did not have
§ 205 removal jurisdiction, Dahiya could attempt to preclude
Appellants’ defense of arbitration by raising collateral estoppel
in the state court.
B. Appealability of the denial of arbitration.
Having found the arbitration determination separable, the
second step under Doleac is that the separable ruling must also be
appealable as a final decision under 28 U.S.C. § 1291 or under an
exception to finality. 264 F.3d at 489. A denial of a motion to
compel arbitration is not a final decision per § 1291. See
Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 712 (1996).
However, this Court has noted the importance of a party’s right and
ability to appeal decisions by district courts refusing to enforce
arbitration under the Convention. Beiser v. Weyler, 284 F.3d 665,
673 (5th Cir. 2002).
Here, Appellants argue that 9 U.S.C. § 16 provides direct
appealability of the denial of arbitration. Section 16(a)(1)(A)
clearly does provide for direct appeals from orders “refusing a
stay of any action under section 3 of this title,” and
§ 16(a)(1)(C) clearly allows for direct appeals from orders
16
No. 02-31068
-17-
“denying an application under section 206 of this title to compel
arbitration.” 9 U.S.C.A. § 16(a) (West 2004). However, because
the district court ultimately did not believe it had removal
jurisdiction under the legislation adopting the Convention,
9 U.S.C. § 201 et seq., its denial of Appellants’ motion to compel
arbitration could not have been under § 206 and likewise its denial
of Appellants’ motion to stay proceedings pending arbitration could
not have been under § 3. Thus, this Court cannot rely on 9 U.S.C.
§ 16 itself for the order’s appealability.9
1. Cohen exception to finality rule.
To determine whether a nonfinal order is appealable, the
common analysis entails the approach first outlined in Cohen v.
Beneficial Industrial Loan Corp., 337 U.S. 541, 546-47 (1949), used
to determine whether district court orders not appealable as final
decisions under 28 U.S.C. § 1291 can nonetheless be reviewed as
collateral orders. In Doleac this Court restated this four-step
analysis: the decision (1) cannot be tentative, informal, or
incomplete; (2) must deal with claims of right separable from, and
9
This Catch-22 problem cries out for immediate remedy from the Supreme Court
in this case and, ultimately, from Congress for all comparable cases that are
sure to follow. It seems entirely absurd – in light of the Supreme Court’s and
Congress’s extremely clear intentions that arbitration properly subject to the
Federal Arbitration Act (the “FAA”), 9 U.S.C. § 1 et seq., and the Convention be
treated and interpreted favorably and that denials of arbitration properly
subject to the FAA and the Convention be immediately appealable – (1) that a
state could successfully legislate an end run to defeat preferred federal removal
jurisdiction in cases where there can scarce be doubt that the arbitration
agreement at issue falls under the auspices of the Convention and is validly
invoked, and (2) that district courts could apply that state’s law to ignore
preemptive federal arbitration law.
17
No. 02-31068
-18-
collateral to, rights asserted in the action; (3) must be
effectively unreviewable on the appeal from final judgment; and
(4) must involve an issue too important to be denied review.
264 F.3d at 490-91 (citing Cohen, 337 U.S. at 546). Whether an
order denying arbitration is appealable as a collateral exception
to § 1291 is a res nova issue for this Court.10
First, the denial of arbitration by the district court here
was anything but tentative, informal, or incomplete. The
determination that no valid arbitration clause existed due to
Louisiana law and policy conclusively decided the disputed legal
question of the validity of Appellants’ arbitration defense.
Second, the denial of arbitration did not in any way affect,
nor was it affected by, the underlying merits of Dahiya’s Jones Act
maritime action. The district court’s denial of arbitration dealt
solely with Appellants’ separate right to assert arbitration as a
10
This Court has previously decided that district court decisions that favor
or accommodate arbitration, such as orders compelling arbitration and grants of
stays of legal proceedings pending arbitration, are not appealable under the
Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541 (1949), collateral order
exception. West of England Ship Owners Mut. Ins. Assoc. (Luxembourg) v. Am.
Marine Corp., 981 F.2d 749, 751 (5th Cir. 1993) (order compelling arbitration and
staying litigation); Turboff v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 867
F.2d 1518, 1520 n.5 (5th Cir. 1989) (same); Jolley v. Paine Webber Jackson &
Curtis, Inc., 864 F.2d 402, 404 (5th Cir. 1989), supplemented, 867 F.2d 891 (5th
Cir. 1989) (order staying litigation). This Court has also previously decided
that a district court order denying a stay of litigation, where pending
litigation in the same district court concerned the question of arbitrability of
a dispute, is not appealable as a Cohen collateral order. Rauscher Pierce
Refsnes, Inc. v. Birenbaum, 860 F.2d 169, 171-72 (5th Cir. 1988) (noting such
decision was not effectively unreviewable because the final judgment of the
declaratory judgment action could be appealed and set aside in favor of
arbitration). However, these cases addressed entirely different questions than
what this Court considers here, whether anti-arbitration decisions are appealable
as collateral orders.
18
No. 02-31068
-19-
defense, not with any right of Dahiya to recover on his negligence
and unseaworthiness claims.
Third, as already discussed in Part I.A., because the state
court could be bound by collateral estoppel on remand as to the
district court’s finding on the validity of Dahiya’s arbitration
agreement, the denial of arbitration would be effectively
unreviewable on the appeal from final judgment.11
Lastly, the denial of a party’s right to enforce arbitration
and thus not be subject to litigation in court is an issue too
important to be denied appellate review. Congress expressed that
very policy by enacting 9 U.S.C. § 16. See H.R. Rep. No. 100-889,
at 36-37 (1988), reprinted in 1988 U.S.C.C.A.N. 5982, 5997.
Because in Moses H. Cone Memorial Hospital v. Mercury
Construction Corp., 460 U.S. 1 (1983), the Supreme Court found a
district court stay that effectively denied arbitration appealable
within the Cohen exception to finality rule, the step to an
outright denial of arbitration also constituting an exception to
11
This is analogous to the situation presented in Moses H. Cone Memorial
Hospital v. Mercury Construction Corp., 460 U.S. 1 (1983). There, plaintiff
filed suit in state court seeking a declaratory judgment that there was no right
to arbitration under the construction contract with defendant. Id. at 7.
Defendant then filed a diversity suit in federal district court, seeking an order
compelling arbitration under § 4 of the Federal Arbitration Act (the “FAA”), 9
U.S.C. § 1 et seq. Id. The district court stayed the federal case pending
resolution of the state action. Id. The Supreme Court found the district court’s
refusal to decide the arbitration issue appealable under the Cohen exception to
the finality rule. Id. at 11. “[T]his order would be entirely unreviewable if not
appealed now. Once the state court decided the issue of arbitrability, the
federal court would be bound to honor that determination as res judicata.” Id.
at 12.
19
No. 02-31068
-20-
finality under § 1291 is small indeed. In fact, the Fourth Circuit
made this exact step in Peoples Security Life Insurance Co. v.
Monumental Life Insurance Co., 867 F.2d 809, 812 (4th Cir. 1989).
I would take that same step and find the district court’s denial of
Appellants’ motion to compel arbitration and stay proceedings
pending arbitration appealable as a collateral order exception to
§ 1291.
2. Interlocutory decision appealable per 28 U.S.C. § 1292.
The Cohen collateral order exception is not the only means to
achieve appellate review of the district court’s denial of
arbitration. See Peoples, 867 F.2d at 812 (easily conflating an
order denying arbitration falling under the Cohen exception and
also being appealable of right as an interlocutory decision
refusing an injunction under § 1292(a)). Where a district court
disfavors arbitration by staying arbitration proceedings pending
outcome of litigation, this Court has found such stays appealable
as interlocutory injunctions under § 1292(a)(1), which grants
appealability over certain nonfinal interlocutory decisions.
28 U.S.C.A. § 1292(a)(1) (West 2004); Tai Ping Ins. Co., Ltd. v.
M/V WARSCHAU, 731 F.2d 1141, 1143, 1146 (5th Cir. 1984) (noting
“only the most exceptional circumstances will justify any action
. . . that serves to impede arbitration of an arbitrable dispute”);
City of Meridian, Miss. v. Algernon Blair, Inc., 721 F.2d 525, 529
20
No. 02-31068
-21-
(5th Cir. 1983) (reversing injunction of arbitration where district
court wrongly determined case was not arbitrable).
In Sedco, Inc. v. Petroleos Mexicanos Mexican National Oil Co.
(Pemex), 767 F.2d 1140 (5th Cir. 1985), this Court determined that
the Convention abrogated a longstanding rule of admiralty law that
otherwise would have barred appeal of the district court’s refusal
to enforce an arbitration clause. Id. at 1147, 1149 (citation
omitted). In finding the denial of arbitration appealable under
28 U.S.C. § 1292(a)(1) as an appeal from an interlocutory decision
that refused injunctive relief, this Court reasoned that if the
defendant’s motion had been granted instead of denied, the court’s
order would have required the plaintiff to participate in
arbitration in a set location. Id. at 1149 (“Such an order would
be, in effect, a mandatory injunction.”). Therefore, even though
it was not styled as such, the district court’s order had “all the
earmarks of a denial of injunctive relief under 28 U.S.C. § 1292.”
Id.
In National Iranian Oil Co. v. Ashland Oil, Inc., 817 F.2d 326
(5th Cir. 1987), although the Convention did not apply because Iran
was not a signatory and we did not mention Sedco, this Court
likewise found that the district court’s interlocutory order
declining to compel arbitration and stay litigation was a denial of
21
No. 02-31068
-22-
injunctive relief directly appealable under 28 U.S.C. § 1292(a)(1).
Id. at 330.12
Title 9's section 16 on appeals was enacted by Congress in
1988 and amended in 1990. 9 U.S.C.A. § 16 note (West 2004). Thus,
we decided Tai Ping, City of Meridian, Sedco, and National Iranian
Oil against a backdrop where the FAA and the Convention did not
specifically provide for immediate appeals of denials of
12
While this Court decided National Iranian Oil v. Ashland Oil, Inc., 817 F.2d
326 (5th Cir. 1987), against the backdrop of the Enelow-Ettelson doctrine, Enelow
v. New York Life Ins. Co., 293 U.S. 379 (1935), overruled in Gulfstream Aerospace
Corp. v. Mayacamas Corp., 485 U.S. 271, 287 (1988), which had provided that an
order granting or denying a stay of litigation where a party had set up an
equitable defense to an action at law was, in effect, a an interlocutory
injunction appealable under § 1292(a)(1), this does not foreclose us from finding
that denials of arbitration are appealable as injunctions under § 1292(a)(1).
The Supreme Court in Gulfstream stressed that § 1292(a)(1) would “continue to
provide appellate jurisdiction over orders that grant or deny injunctions and
orders that have the practical effect of granting or denying injunctions and have
serious, perhaps irreparable, consequence.” 485 U.S. at 287-88 (citations and
internal quotes omitted).
In our cases following Gulfstream, we have denied § 1292(a)(1) review of
district court decisions both denying and granting stays of litigation, but only
where either the arbitration question was still actively pending in the district
court or where the arbitration question had already been decided in favor of
arbitration. See Adams v. Georgia Gulf Corp., 237 F.3d 538, 542 (5th Cir. 2001)
(stay denied after arbitrable dispute found under Convention); Jolley, 864 F.2d
at 404 (stay granted pending arbitration), supplemented, 867 F.2d at 892 (finding
nonreviewability of decision that granted stay pending arbitration consistent
with proarbitration intent of Congress in then-numbered § 15 of the FAA);
Rauscher, 860 F.2d at 169, 171 (stay denied where declaratory judgment action to
determine arbitrability under the parties’ contract was still pending in same
district court, such that denying stay entailed no serious or potentially
irreparable consequences and final judgment in declaratory judgment action could
“be set aside on appeal in favor of arbitration”).
Here, the district court has already clearly decided the arbitrability
question in the negative against Appellants. Without immediate appellate review
of the denial to compel arbitration and associated denial of stay of proceedings,
Appellants face the serious consequence of being forced to litigate a dispute
Dahiya already agreed to have submitted to arbitration. See City of Meridian,
Miss. v. Algernon Blair, Inc., 721 F.2d 525, 529 (5th Cir. 1983) (noting how an
injunction against arbitration causes irreparable harm due to the expense of
litigation). The situation is also potentially irreparable because the state
court on remand may be collaterally estopped from reviewing the validity of
Dahiya’s agreement to arbitrate.
22
No. 02-31068
-23-
arbitration (in admiralty or otherwise). See also Peoples,
867 F.2d at 812 (finding, also before § 16's enactment, that a
district court’s denial of arbitration and of a stay pending
arbitration under an arbitration clause qualifying under the FAA
was appealable of right under § 1292(a)); Becker Autoradio U.S.A.,
Inc. v. Becker Autoradiowerk GmbH, 585 F.2d 39, 42 n.7 (3d Cir.
1978) (noting same). There is nothing to indicate that these
cases’ common holding as to denials of arbitration being appealable
as mandatory injunctions under § 1292(a)(1) has been abrogated; in
fact, such a holding is entirely consistent with the proarbitration
policy behind § 16.13 See KKW Enters., Inc. v. Gloria Jean’s
Gourmet Coffees Franchising Corp., 184 F.3d 42, 47 (1st Cir. 1999)
(finding order staying pending arbitration immediately appealable
as an injunction under both § 1292(a) and 9 U.S.C. § 16(a)(2)).14
13
The proarbitration viewpoint of Congress, as it pertains to the appellate
process, could not be clearer. The purpose of § 16, as indicated by its
legislative history, is to provide for interlocutory appeals when a trial court
rejects the contention that a dispute is arbitrable under an agreement of the
parties and instead requires the parties to litigate. H.R. Rep. No. 100-889, at
36-37 (1988), reprinted in 1988 U.S.C.C.A.N. 5982, 5996-97 (discussing then-
numbered § 15 of Title 9). In direct contrast, interlocutory appeals are
specifically prohibited when the trial court finds that the parties have agreed
to arbitrate the dispute. Id. at 37 (same).
14
However, § 16(b) provides that nonfinal orders that grant or favorably treat
arbitration under the FAA or the Convention are not directly appealable except
as provided by the certification process in § 1292(b). See Cargill Ferrous Int’l
v. SEA PHOENIX MV, 325 F.3d 695, 697 (5th Cir. 2003); West of England, 981 F.2d
at 751 (disallowing appeal of order compelling arbitration and grant of stay of
litigation pending arbitration under § 16(b)); Turboff, 867 F.2d at 1520
(disallowing same under then-numbered § 15 of the FAA); Jolley, 867 F.2d at 892
(supplementing prior decision and finding grant of stay pending arbitration not
appealable under then-numbered § 15 of the FAA).
23
No. 02-31068
-24-
In Tejidos de Coamo, Inc. v. International Ladies’ Garment
Workers’ Union, 22 F.3d 8, 10 (1st Cir. 1994), even though the FAA
expressly excludes employment contracts from its scope and so the
labor dispute at issue was not properly subject to § 16, the First
Circuit looked to the strong congressional policy in favor of
immediate appeal of denials of arbitration that led to § 16's
enactment. The First Circuit accepted the distinction based on
proarbitration policy that decisions favoring arbitration are
considered appealable injunctions under § 1292(a) while decisions
disfavoring arbitration are not. Tejidos, 22 F.3d at 10-11.
Accordingly, the First Circuit held that even where § 16 of the FAA
is not formally applicable to a particular order staying
arbitration, such order is immediately appealable as denial of an
injunction under § 1292(a)(1). Id. at 11.
This Court has already agreed with the First Circuit that
district court decisions favorable to arbitration, such as orders
compelling arbitration and grants or denials of stays of legal
proceedings pending arbitration of claims found arbitrable, are not
appealable as injunctions under § 1292(a). Adams v. Georgia Gulf
Corp., 237 F.3d 538, 542 (5th Cir. 2001); Jolley v. Paine Webber
Jackson & Curtis, Inc., 864 F.2d 402, 403-04 (5th Cir. 1989),
supplemented, 867 F.2d 891 (5th Cir. 1989). This Court has also
held that a denial of a stay pending arbitration, where the
district court had not yet ruled on the arbitrability of the
24
No. 02-31068
-25-
dispute, was not appealable under § 1292(a)(1). Rauscher Pierce
Refsnes, Inc. v. Birenbaum, 860 F.2d 169, 171 (5th Cir. 1988).
However, post-Tai Ping, City of Meridian, Sedco, and National
Iranian Oil, and post-§ 16 enactment, we have not yet held that
decisions ruling against arbitration, not formally subject to § 16,
are otherwise directly appealable as interlocutory injunctions
under § 1292(a)(1).
Though the district court here determined that the arbitration
clause in Dahiya’s deed did not fall under the Convention due to
its invalidity under Louisiana law, this does not change the fact
that Appellants sought an injunction favoring the enforcement of
arbitration, which the district court refused. As explained
earlier, this denial entails serious and potentially irreparable
effects. Therefore, I would find the reasoning and analysis of
Tejidos persuasive. Thus, even though here direct appealability
would not otherwise be formally available under § 16(a)(1)(A) or
§ 16(a)(1)(C) of the FAA and the Convention, the district court’s
refusal to grant Appellants’ motion to compel arbitration and stay
proceedings pending arbitration should be appealable as an
interlocutory denial of an injunction under § 1292(a)(1).
II. The district court erred in denying Appellants’ motion to
compel arbitration and stay proceedings.
Because of what I feel to be the tremendous importance of the
issues this case presents not only on the question of reviewability
25
No. 02-31068
-26-
but also on the merits, I address those merits here. This Court
reviews a district court’s refusal to compel arbitration and stay
litigation de novo. Cargill Ferrous Int’l v. SEA PHOENIX MV,
325 F.3d 695, 697 (5th Cir. 2003). Likewise, the enforceability of
a forum selection clause is a question of law that we review de
novo. Haynsworth v. The Corporation, 121 F.3d 956, 961 (5th Cir.
1997) (citation omitted).
A. Presumption of validity of forum selection clauses15 under
M/S BREMEN v. Zapata Off-Shore Co., 407 U.S. 1 (1972).
The Supreme Court in The BREMEN found that forum selection
clauses in international agreements “are prima facie valid and
should be enforced unless enforcement is shown by the resisting
party to be ‘unreasonable’ under the circumstances.” 407 U.S. at
10. One way to show a clause unreasonable is if enforcement of the
forum selection clause at issue “would contravene a strong public
policy of the forum in which suit is brought, whether declared by
statute or by judicial decision.” Id. at 15. But the party
resisting the clause must meet a “heavy burden of proof.” Id. at
17.16 Here, the district court agreed with Dahiya’s contention that
15
The Supreme Court and the Fifth Circuit have explicitly declared “foreign
arbitration clauses are but a subset of foreign forum selection clauses in
general.” Haynsworth v. The Corporation, 121 F.3d 956, 963 (5th Cir. 1997)
(quoting Vimar Seguros y Reaseguros, S.A. v. M/V SKY REEFER, 515 U.S. 528, 534
(1995)).
16
The Supreme Court has enforced every forum selection clause in an
international contract that has come before it. See M/V SKY REEFER, 515 U.S.
528, 540-42 (1995); Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 595
(1991); Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614,
26
No. 02-31068
-27-
the forum selection clause in his employment deed is unreasonable
under The BREMEN, and therefore unenforceable, because enforcement
of Section II.8 of Dahiya’s deed would violate strong public policy
of Louisiana.
Appellants argue that Louisiana law is completely inapposite.
However, this Court in Haynsworth, 121 F.3d at 965-69, has
considered Texas public policy while affirming the enforceability
of a forum selection clause in certain investors’ agreements with
a foreign underwriting exchange. The investors had argued, in
part, that the clause was unreasonable per The BREMEN because it
contravened Texas public policy as embodied in Texas securities
laws and the Texas Deceptive Trade Practices Act (“DTPA”). There,
we decided that the investors did not overcome the strong
presumption of enforceability established by The BREMEN.
Haynsworth, 121 F.3d at 966-69. Dahiya claims that Louisiana
public policy as expressed in La. R.S. § 23:921 overcomes the
strong presumption of enforceability established by The BREMEN of
the arbitration clause in his deed with Neptune.
There would appear to be two competing policy interests here.
By enacting § 23:921, the Louisiana legislature has expressed its
concern that in order for forum selection and choice of law clauses
in employment contracts to be valid, employees must ratify them
subsequent to the incidents giving rise to the claims. La. R.S.
640 (1985); Scherk v. Alberto-Culver Co., 417 U.S. 506, 519-20 (1974).
27
No. 02-31068
-28-
§ 23:921A(2) (West 2004). The Louisiana Supreme Court, in Sawicki
v. K/S STAVANGER PRINCE, 802 So. 2d 598, 603 (La. 2001), stated
that the statutory requirement that employees agree to the forum
(arbitration versus court, or choice of court) and the law to be
applied after the fact of their injury or dispute occurs reflects
Louisiana’s strong public policy concerning forum selection
clauses. See also Lim v. Offshore Specialty Fabricators, Inc., No.
Civ.A. 02-2126, 2003 WL 193518, at *2 (E.D. La. Jan. 28, 2003)
(unpublished) (“Louisiana has expressed its hostility to forum
selection clauses . . . .”).17
However, the federal policy indicated by the Supreme Court in
The BREMEN pulls in the opposite direction entirely. In The
BREMEN, the ship at issue “was to traverse the waters of many
jurisdictions. . . . That the accident occurred in the Gulf of
Mexico and the barge was towed to Tampa in an emergency were mere
fortuities.” 407 U.S. at 13. The Court explained that the
international contracting parties wanted to provide a neutral forum
beforehand, so that there would be no question as to what would
happen in case of a dispute. Id. This strong federal policy
17
Lim v. Offshore Specialty Fabricators, Inc., No. Civ.A. 02-2126, 2003 WL
193518 (E.D. La. Jan. 28, 2003) (unpublished), is currently awaiting disposition
in this Court. I mention first, that the panel in Lim does not face the §
1447(d) remand bar to appellate jurisdiction to address the merits of the
validity of the arbitration clause at issue there under the Convention, which the
majority feels was encountered here; and second, that the merits questions in
that case as to the application of M/S BREMEN v. Zapata Off-Shore Co., 407 U.S.
1 (1972), and the preemption of Louisiana law hostile to arbitration by the FAA
and the Convention are virtually identical to those in the instant case.
28
No. 02-31068
-29-
regarding the validity of pre-dispute selections of forum arises
from “sensitivity to the need of the international commercial
system for predictability in the resolution of disputes.” Sedco,
767 F.2d at 1149 (citation omitted). This Court must also
recognize the related, strong federal policy in favor of rigorously
enforcing the specific forum choice of arbitration and arbitration
awards, as reflected by Congress in enacting the FAA and the
Convention. See Southland Corp. v. Keating, 465 U.S. 1, 10 (1984);
Scherk v. Alberto-Culver Co., 417 U.S. 506, 520 n.15 (1974).
Predictability in the resolution of disputes is precisely what
Appellants desired and what Dahiya expressly agreed to in his deed
here, and precisely what § 23:921 conflicts with and frustrates.
If an accident or incident were to occur during and relating to
Dahiya’s training and employment under Neptune, notwithstanding in
which body of water, Section II.8 of Dahiya’s deed clearly
anticipated the procedure to be followed – arbitration in either
India or Singapore before a specific arbitrator who would apply
Indian arbitration law. That this incident occurred in
international waters near Louisiana and Dahiya received emergency
treatment in Louisiana are “mere fortuities” because Dahiya and
Neptune had already agreed to submit to arbitration elsewhere.
Section 23:921 works to presumptively void all arbitration
clauses in employment contracts, no matter what their terms
dictate. Not only does this policy directly conflict with The
29
No. 02-31068
-30-
BREMEN’s presumption of validity for forum selection clauses in
general, but it conflicts with the proarbitration policy set out by
Congress in the FAA and the Convention that similarly presumes
arbitration provisions to be “valid, irrevocable, and enforceable.”
9 U.S.C.A. § 2 (West 2004). The presumption of validity of
arbitration clauses is also what another public policy of Louisiana
heavily favors, as evidenced by its legislature’s enactment of La.
R.S. § 9:4201, which closely mirrors § 2 of the FAA. See id.; La.
R.S. § 9:4201 (West 2004). Thus, Louisiana’s general policy on
arbitration is consistent with federal policy that arbitration
clauses should be considered presumptively valid.
Given the relative weight of these competing policy concerns,
I would find Dahiya has not met his heavy burden of showing that
the forum selection clause in his deed is unreasonable, and the
district court erred in concluding Dahiya had made such a showing.
B. Preemption of state statutes invalidating arbitration
agreements.
In addition, any argument that the arbitration clause in
Dahiya’s deed is foreclosed by La. R.S. § 23:912 must be tried and
tested by preemption analysis. Federal statutes enacted pursuant
to the United States Constitution are the supreme law of the land.
“[A]ny state law, however clearly within a State’s acknowledged
power, which interferes with or is contrary to federal law, must
yield.” Gade v. Nat’l Solid Wastes Mgmt. Ass’n, 505 U.S. 88, 108
(1992) (citation omitted). Section 2 of the FAA, enacted by
30
No. 02-31068
-31-
Congress pursuant to the Commerce Clause and incorporated by the
Convention in 9 U.S.C. § 208, “is a congressional declaration of a
liberal federal policy favoring arbitration agreements,
notwithstanding any state substantive or procedural policies to the
contrary.” Moses H. Cone, 460 U.S. at 24.
In Southland the Supreme Court held that the FAA preempts
conflicting state law and concluded that even state courts cannot
apply state statutes which invalidate arbitration agreements.
465 U.S. at 16.18 The Court determined that the no-waiver provision
of the California Franchise Investment Law, which required judicial
consideration of claims brought under the law, see Cal. Corp. Code
§ 31512, directly conflicted with the FAA and violated the
Supremacy Clause. Id. This Court has closely adhered to Southland
in its decisions.
For example, in Commerce Park at DFW Freeport v. Mardian
Construction Co., 729 F.2d 334, 337 (5th Cir. 1984), the real
estate partnership plaintiff contended that the DTPA’s no-waiver
provision, see Tex. Bus. & Com. Code Ann. § 1742, precluded the
resolution of DTPA claims by arbitration because it reserved such
claims to a judicial forum. We noted that the broad arbitration
clause in the franchise agreement in Southland was similar to that
found in the construction contract between the parties in Commerce
18
The Supreme Court affirmed its decision regarding the FAA’s preemption of
state law in Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52 (1995), and
Allied-Bruce Terminix Cos., Inc. v. Dobson, 513 U.S. 265 (1995).
31
No. 02-31068
-32-
Park. 729 F.2d at 337-38. Thus, we found Southland dispositive,
and held that the no-waiver provision of the DTPA would abrogate §
2 of the FAA and thus violated the Supremacy Clause. Id. at 338.19
Likewise, in OPE International LP v. Chet Morrison
Contractors, Inc., 258 F.3d 443, 447 (5th Cir. 2001), this Court
found that La. R.S. § 9:2779, which voided as against public policy
any provision in certain construction contracts that required a
suit or arbitration be brought outside Louisiana, was preempted by
the FAA. There, because the Louisiana statute conditioned the
enforceability of arbitration agreements on selection of a
Louisiana forum, a requirement not applicable to contracts
generally, we found § 9:2779 in direct conflict with § 2 of the
FAA. OPE Int’l, 258 F.3d at 447.
The Convention was negotiated in 1958 and entered into by the
United States in 1970 pursuant to the Constitution’s Treaty power.
9 U.S.C.A. § 201 note (West 2004). That same year Congress adopted
enabling legislation, 9 U.S.C. § 201 et seq., to make the
Convention “the highest law of the land.” Id.; Sedco, 767 F.2d at
19
See also Saturn Distrib. Corp. v. Paramount Saturn, Ltd., 326 F.3d 684, 687
(5th Cir. 2003) (noting under Southland Corp. v. Keating, 465 U.S. 1 (1984), that
to extent Tex. Rev. Civ. Stat. Ann. art. 4413(36) §§ 1.02 and 3.01(a), now
repealed, gave Texas Motor Vehicle Board exclusive jurisdiction over franchise
disputes, statute would be preempted by the FAA because it limited availability
of arbitration); Miller v. Public Storage Mgmt., Inc., 121 F.3d 215, 219 (5th
Cir. 1997) (applying Southland and holding the FAA preempts conflicting state
anti-arbitration laws); Ommani v. Doctor’s Assocs., Inc., 789 F.2d 298, 299-300
(5th Cir. 1986) (“[T]o the extent that [the Texas Deceptive Trade Practices Act]
provides a remedy parallel to and often overlapping claims that may fall within
the scope of the Federal Arbitration Act, we find the Southland decision clearly
apposite.”).
32
No. 02-31068
-33-
1145. As a ratified international treaty, the Convention, with its
incorporated FAA provisions, also preempts any state law which
would invalidate arbitration agreements.20
Here, the Louisiana statute cited by Dahiya and relied on by
the district court, La. R.S. § 23:921, presumptively voids any
choice of forum or choice of law clause in any employment contract
unless expressly ratified by the employee after the occurrence of
the subject of the action. This ex post facto approval requirement
directly conflicts with § 2 of the FAA, which presumes written
provisions for arbitration to be “valid, irrevocable, and
enforceable, save upon such grounds as exist at law or in equity
for the revocation of any contract.” 9 U.S.C.A. § 2 (West 2004)
(emphasis added).
By enacting § 2 of the FAA, incorporated by the Convention in
9 U.S.C. § 208, “Congress precluded States from singling out
arbitration provisions for suspect status, requiring instead that
such provisions be placed upon the same footing as other
contracts.” Doctor’s Assocs., Inc. v. Casarotto, 517 U.S. 681, 687
20
Where there is a conflict between a treaty and the provisions of a state
constitution or of a state statute, the treaty will control. Zschernig v.
Miller, 389 U.S. 429, 440-41 (1968); Clark v. Allen, 331 U.S. 503, 508 (1947);
see, e.g., David L. Threlkeld & Co. v. Metallgesellschaft Ltd. (London), 923 F.2d
245, 250 (2d Cir. 1991) (finding the FAA and the Convention preempted a Vermont
statute that required any agreement to arbitrate be displayed prominently in the
contract or contract confirmation and be signed by the parties); F.A. Richard &
Assocs., Inc. v. Gen. Marine Catering Co., Inc., 688 So. 2d 199, 201-02 (La. Ct.
App. 1997) (finding the Convention preempted La. R.S. § 22:629 that prohibited
enforcement of insurance contract provisions which would divest Louisiana courts
of jurisdiction over insurance actions).
33
No. 02-31068
-34-
(1996) (finding a Montana statute that voided arbitration clauses
unless they were typed in underlined capital letters to be
preempted by the FAA) (internal quotations and citations omitted).
Therefore, because § 23:921 targets forum selection clauses in
employment contracts and regards them as suspect, I would find
§ 23:921 preempted by both the FAA and the Convention, at least as
applied to employment agreements containing arbitration clauses.
Thus, I would hold the district court erred by concluding § 23:921
invalidated the arbitration clause in Dahiya’s deed.
C. The arbitration clause in Dahiya’s deed and the
Convention.
It is clear that both Congress, in enacting the FAA and the
Convention, and the Supreme Court, in interpreting their
application to arbitration agreements, have expressed a liberal
federal policy favoring the enforcement of arbitration provisions.
See Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc.,
473 U.S. 614, 625 (1985) (citation omitted). This strong
presumption in favor of arbitration “applies with special force in
the field of international commerce.” Id. at 631. In light of the
strong federal policy favoring arbitration, courts are to conduct
a “very limited inquiry” when deciding whether to compel
arbitration pursuant to the Convention. Francisco v. STOLT
ACHIEVEMENT MT, 293 F.3d 270, 273 (5th Cir. 2002) (citation
omitted).
34
No. 02-31068
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Thus, this Court has outlined a simple four-step analysis for
courts to perform: whether “(1) there is an agreement in writing
to arbitrate the dispute, (2) the agreement provides for
arbitration in the territory of a Convention signatory, (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, 767 F.2d at 1144-45). Once an arbitration agreement is
found to fall under the Convention, the district court is
authorized by 9 U.S.C. § 206 to order arbitration pursuant to the
parties’ agreement, within or outside the United States. In fact,
the Convention mandates that courts order arbitration. Francisco,
293 F.3d at 273 (citation omitted); see also Sedco, 767 F.2d at
1145, 1151 (“9 U.S.C. § 206 does not confer discretion in
compelling arbitration.”). I would find that Dahiya’s arbitration
clause easily meets all four requirements of the Convention and
that the district court erred in not compelling arbitration and
staying the proceedings per Appellants’ motion.
For the Convention to apply, there must be an agreement in
writing to arbitrate the dispute. Francisco, 293 F.3d at 273.
This Circuit has already decided in Sphere Drake Insurance PLC v.
Marine Towing, Inc., 16 F.3d 666, 669 (5th Cir. 1994), that the
Convention’s definition of “agreement in writing” includes “either
(1) an arbitral clause in a contract or (2) an arbitration
agreement, (a) signed by the parties or (b) contained in an
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exchange of letters or telegrams.” The signature or exchange of
letters qualification only applies to arbitration agreements, not
arbitration clauses found within contracts. Id.; see also
Francisco, 293 F.3d at 273 (determining that a Filipino seaman who
had signed an employment contract containing an arbitration clause
was enough to constitute an agreement in writing to arbitrate the
dispute per the Convention).
Here, seaman Dahiya signed a deed covering his 12 months of
practical training at-sea, which time would be applied to his
three-year Diploma in Maritime Studies. He also agreed in the deed
to serve as an employee to Neptune or a company of Neptune’s
choosing for a bonded period of two years after receiving his
degree and passing his Class V exam. Though Dahiya is correct in
saying that Neptune did not explicitly sign the deed, Section I.16
of the deed specifies that the company – Neptune – “covenants on
its part to cause the Engine Cadet to be trained in the business of
Marine Engineering and duties of an Engine Cadet onboard the
company’s ships and provide the Cadet with sufficient board[.]”
Section I.17 outlined how much Neptune would pay Dahiya as “wages”
for the two years remaining before receiving his degree – the first
consisting of his at-sea training and the second year consisting of
his attendance of classes at the National Maritime Academy in
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Singapore. Because both sides exchanged promises in the deed, it
functioned as an employment contract.21
Like the seaman in Francisco, Dahiya signed an employment deed
that contained an express arbitration clause. Section II.8 of
Dahiya’s deed provided:
Any dispute arising out of this Agreement shall be
subject to Arbitration under the Arbitration and
Conciliation Act, 1996. The said proceedings shall take
place either in Singapore or in India at the option of
the Company. Capt. Karanjit Singh, A 64/3, SFS Flats,
Saket, New Delhi, shall be appointed as the arbitrator in
these proceedings.
This deed was, as in Sphere Drake and Francisco, a contract between
Neptune and Dahiya that indisputably contained an arbitral
provision whereby “[a]ny dispute arising from [Dahiya’s deed] shall
be subject to Arbitration.” Thus, no signature was required; the
arbitration clause found within Dahiya’s deed constitutes an
agreement in writing under the Convention.22
21
In its October 11, 2002, Order and Reasons, the district court stated:
“Dahiya signed an employment contract before starting work on the EAGLE AUSTIN.”
Dahiya’s deposition testimony also indicates that he understood the deed document
he signed to govern his employment aboard the EAGLE AUSTIN and that Neptune was
his employer.
22
I do not pursue a discussion of Dahiya’s remaining defense to arbitration,
that nonsignatories of an agreement cannot compel arbitration. Suffice to say,
this defense fails entirely as to Neptune, see Sphere Drake Insurance PLC v.
Marine Towing, Inc., 16 F.3d 666, 669-70 (5th Cir. 1994), because Neptune was a
party to Dahiya’s employment contract containing the arbitration clause.
However, should Dahiya be able to show that the rest of Appellants do not meet
either requirement under Westmoreland v. Sadoux, 299 F.3d 462, 467 (5th Cir.
2002), allowing nonparties to an agreement to compel arbitration, Dahiya’s
defense as to them would succeed.
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Dahiya also argues that this tort suit is not a dispute
covered by the scope of the arbitration clause.23 He alleged in his
original petition that at the time of his injuries, “[o]n or about
November 13, 1999, [Dahiya] was serving aboard the M.T. EAGLE
AUSTIN as an Assistant Engineer in the employ of defendants.” The
deed’s arbitration clause, Section II.8, clearly provided for
arbitration for “[a]ny dispute arising out of this Agreement”
without limitation. Thus, as we outlined in Francisco, 293 F.3d at
278, although Dahiya’s deed allowed a remedy for work-related
personal injuries, the similarly broad language of Section II.8
covers this tort dispute arising from injuries Dahiya sustained on
the EAGLE AUSTIN during his on-board training pursuant to his
employment “Agreement.” Accordingly, I would find the first
requirement met.
The second requirement for the Convention to apply is that the
agreement must provide for arbitration in the territory of a
Convention signatory. Francisco, 293 F.3d at 273. Dahiya’s deed
explicitly provides for arbitration, which clause (as explained
above) the district court erroneously found to be invalid. As for
the location of such arbitration, the clause provides for
arbitration proceedings to take place in either India or Singapore.
In 1960, India acceded to the Convention; in 1986, Singapore
23
Generally, whenever the scope of an arbitration clause is in question,
courts are to construe the clause in favor of arbitration. See Mitsubishi, 473
U.S. at 626.
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acceded to the Convention. 9 U.S.C.A. § 201 note (West 2004).
Therefore, I would find the second requirement met.
The third requirement for the Convention to apply is that the
agreement arises out of a commercial legal relationship.
Francisco, 293 F.3d at 273. After detailed analysis in Francisco,
this Court held seaman employment contracts to be commercial legal
relationships covered by the Convention, even though they are
excepted by the FAA. Id. at 274-75. Therefore, I would find the
third requirement met.
The final requirement for the Convention to apply is that
there must be a party to the agreement who is not an American
citizen. Id. at 273. It is clear that Dahiya himself is not an
American citizen but an Indian citizen. Further, the other party
to the deed, Neptune, is not an American corporation but a
Singapore corporation. Thus, I would find the fourth requirement
met.
All four requirements having been met here, I would find the
arbitration agreement in Dahiya’s deed satisfies the very limited,
“low bar” inquiry Congress intended courts to apply when
determining whether arbitration agreements fall under the
Convention. See Beiser, 284 F.3d at 674 (“[E]asy removal is
exactly what Congress intended in § 205.”). The district court
clearly erred when it refused to compel arbitration and stay
proceedings under the Convention per Appellants’ motion.
39