Petition for Writ of Certiorari — Ventilatoren Stork Hengelo B. V. v. Forsikringsaktieselskabet Hafnia

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eA Supreme Court, U.S,

f ‘

(90-8 28 i} FILED

Fu om 4

AUG 24 80

No. - JOSEPH F. SPANIOL, UR,

CLERK

In The Supreme Court

OF THE

United States

OCTOBER TERM, 1990

VENTILATOREN STORK HENGELO B.V.,

VERENIGDE MACHINEFABRIEKEN STORK N.V.,

Petitioners,

VS.

FORSIKRINGSAKTIESELSKABET HAFNIA,

aka HAFNIA,

Respondent.

Petition for Writ of Certiorari to the United States

Court of Appeals for the Ninth Circuit

PETITION FOR WRIT OF CERTIORARI

BRIANE NELSON MITCHELL ROGER E. PODESTA

PAUL, HASTINGS, JANOFSKY DEBEVOISE & PLIMPTON

& WALKER 875 Third Avenue

1299 Ocean Avenue, Fifth Floor New York, New York 10022

Santa Monica, California 90401 (212) 909-6000

(213) 319-3300

Counsel of Record for Petitioners

Bowne of Los Angeles, Inc., Law Printers. (213) 627-2200.

QUESTIONS PRESENTED FOR REVIEW

1. Whether the bar on appellate consideration cf re-

mand orders contained in 28 U.S.C. § 1447(d) is applica-

ble where:

(a) the district court first determined the substan-

tive issue of whether the parties were bound by an

arbitration agreement in a case which was removed

from state court pursuant to 9 U.S.C. § 205 (authoriz-

ing removal where the matter at issue relates to an

arbitration agreement falling under the Convention on

the Reeognition and Enforcement of Foreign Arbitral

Awards);

(b) the effect of the district court’s order was to

deny an application to compel arbitration, the appeala-

bility of which is expressly and specifically authorized

by 9 U.S.C. § 15;

was preceded “in logic and in fact” by its determina-

tion of the arbitrability of the controversy (Waco v.

United States Fidelity & Guaranty Co., 293 U.S. 140, 55

S.Ct. 6, 79 L.Ed. 244 (1935) );

(d) it is inconsistent with this Court’s interpretation

of the important nature of the right to arbitration; and

(e) several Cireuit Courts have recognized an excep-

tion to the bar in cases involving forum selection

clauses and, at least one other Circuit Court has also

recognized an exception where removal was pursuant to

a special removal statute such as 9 U.S.C. § 205.

2. Whether the appellate courts should discourage

litigants from appealing district court orders which effee-

tively deny the right to arbitration by imposing sanctions

under Rule 38 of the Federal Rules of Appellate

Procedure.

PARTIES TO THE PROCEEDING

The names of the parties to this proceeding are

all listed in the caption of the case. Verenigde

Machinefabrieken Stork N.V. (‘“‘Machinefabrieken”’) is

the parent company of Ventilatoren Stork Hengelo B.V.

(“Ventilatoren”). The nonwholly-owned subsidiaries of

Machinefabrieken include Stovee Industries, Stork

Torbed, Bombas Stork, Cochrane Stork Zimbabwe, Stork

Pumps India, Stork Pumps Kenya, Stork-Wartsila Die-

sel, Stork Boilers, Delaval Stork, Stork Colorproofing,

Storkdata, Ventilators Stork Howden, Carrosseriefabriek

Hainje, Locamation, Peja Holding, Comprimo and Stork

Filtration Systems.

ill

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED FOR REVIEW...... i

PARTIES TO THE PROCEEDING ............. ii

MT ITED 5 ccc csc cccscsscccs iii

TABLE OF AUTHORITIES .................... Vv

Nee cc e cc tncecesccn 2

JURISDICTIONAL STATEMENT .............. 2

STATUTORY PROVISIONS INVOLVED ........ 2

STATEMENT OF THE CASE .................. 3

EE eee 3

re )

hss whence cases ccac ce 6

REASONS FOR GRANTING THE WRIT........ 8

I. A WRIT SHOULD BE ISSUED TO PERMIT

THE APPEAL OF THE DISTRICT COURT'S

DECISION ON THE ARBITRATION QUES-

ITE Gee be sh Gb hse 6 tas ss bec ccccense 8

A. The Ninth Cireuit’s Ruling Conflicts With

Congressional Efforts To Allow For The

Immediate Appeal Of Orders Denying Ap-

plications To Compel Arbitration ........ 8

B. The Ninth Cireuit’s Ruling Conflicts With

This Court’s Interpretation Of 28 U.S.C.

LE ES oe een 10

C. The Ninth Circuit's Ruling Is Inconsistent

With This Court's Interpretation Of The

Right To Arbitration ................... 12

D. The Ninth Cireuit’s Ruling Conflicts With

Other Court Of Appeals’ Decisions ...... 14

Il. A WRIT SHOULD BE ISSUED BECAUSE

THE RULE 38 AWARD WILL DISCOURAGE

ACCESS TO THE APPELLATE PROCESS 17

TABLE OF CONTENTS

Page

on Freres ry Serre ts 21

APPENDIX

Order, United States Court of Appeals for the

Ninth Cireuit, Filed June 25, 1990 ......... la

Memorandum, United States Court of Appeals

for the Ninth Cireuit, Filed April 30,1990... 3a

Order, United States Court of Appeals for the

Ninth Cireuit, Filed April 11, 1989......... 9a

Amended Memorandum Decision Re: Plaintiff's

Motion to Remand; Defendants’ Motion to

Dismiss, or Alternately, to Compel Arbitra-

tion, Filed January 4, 1989................ 10a

Memorandum Decision Re: Defendants’ Motion

to Remand, or Aiternately, to Dismiss, Filed

ieeEe GB, BOO oc sc wc es ccccccnecensice l4a

Federal Rules of Appellate Procedure, Rule 38 18a

Bie oe OD PPP TTT TTT TT Te 18a

Bie Fee” | PSP eT Tee TTT Tee eee 19a

Rik tom | PPT Tee TT Teer err eee 19a

pik So RPC TTTTTT Tree Tee 20a

DU, SE ED cca cenccencinasencctuss 2la

» Bie Co es err 2la

, Bik ae Sy ere ere erer 23a

TABLE OF AUTHORITIES

Cases

: Page

Aeronaves de Mexico, S.A. v. McDonnell Douglas

Corp., 677 F.2d 771 (9th Cir. 1982)........... 4

Armstrong v. Alabama Power Co., 667 F.2d 1385

SE ds ob donde caaccsuced ewes ths 12

Avila Group, Inc. v. Nerma J. of California, 426

PF map. Sot CDN. 1677) ow. cn cscccscecss 17,18

Clorox Co. v. United States District Court, 779 F.2d

ae es Ss Es vk kea coc cake ebukeaers 6, 15, 20

Coastal Steel Corp. v. Tilghman Wheelabrator, Lid.,

709 F.2d 190 (3d Cir. 1983), cert. denied, 464

U.S. 938, 104 S.Ct. 349, 78 L.Ed.2d 315 (1983) 4

Cooter & Gell v. Hartmarz Corp., et al., ___. U.S.

—___, 119 8.Ct. 2447, 110 L.Ed.2d 359 (1990) .. 18

Fourco Glass Co. v. Transmitra Product Corp., 353

U.S. 222, 77 S.Ct. 787, 1 L.Ed.2d 786 (1957) .. 10

FSLIC v. Frumenti Development, 857 F.2d 665 (9th

Se EE ha sede eda eh a echekbcecueneioas 16

Hansen v. Blue Cross of California, 891 F.2d 1384

Se IS x's Gu uceeedecnudecckeheases ce 20

Hughes Masonry v. Greater Clark County School

Building, 659 F.2d 836 (7th Cir. 1981)........ 17

In Re Delta America Re Ins. Co., 900 F.2d 890 (6th

CC KiNG laa wae ah ecsesuegce bebeaeasees 15

In re FSLIC, 837 F.2d 432 (11th Cir. 1988) ..... 16

In re Oil Spill by the “Amoco Cadiz”, etc., 659 F.2d

Se DE Se ca dietcarkiakbakeebekes 17

Karl Koch Erecting Co. v. New York Convention

Center Development Corp., 838 F.2d 656 (2d Cir.

TABLE OF AUTHORITIES

CASES

Page

Matson Navigation Co. v. Stal-Laval Turbin AB, 609

F.Supp. 579 (N.D. Cal. 1985) ................ 4

Mitchell v. Carlson, 896 F.2d 128 (5th Cir. 1990) 11

Mitsubishi Motors v. Soler Chrysler-Plyr-outh, 473

U.S. 614, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985) 12, 13

Moses H. Cone Memoria! Hospital v. Mercury Con-

struction Corp., 460 U.S. T, 103 S.Ct. 927, 74

i CD 4.54 0s 05 606646004086 8000 13

Pelleport Investors, Inc. v. Budco Quality Theatres,

Inc., 741 F.2d 273 (9th Cir. 1984) ..... 6, 11, 12, 15, 20

Regis Associates v. Rank Hotels, Ltd., 894 F.2d 193

EL EN sg. ou 0 4 50 68 66405 06068 608 ORSOS8 15

Rodriguez de Quijas v. Shearson/American Express,

490 U.S. ___, 109 S.Ct. 1917, 104 L.Ed.2d 526

cS. sae eRe M OMAR REORDER NER RCA 13

Scherk v. Alberto-Culver, 417 U.S. 506, 94 S.Ct.

2449, 41 L.Ed.2d 270 (1974) .............. 12, 13, 16

Sedco, Inc. v. Petroleos Mexicanos Mexican Nat. Oil

Co., 767 F.2d 1140 (5th Cir. 1985)............ 14

Southland Corp. v. Keating, 465 U.S. 1, 104 S.Ct.

Se ee RAE BREED ccccccccaesdtsecececs 12

Stewart v. Smith, 673 F.2d 485 (D.C. Cir. 1982) .. 10

Talamini v. All-State Insurance Co., 470 U.S. 1067,

105 S.Ct. 1824, 85 L.Ed.2d 125 (1985) ...-.... 19

Thermtron Products, Inc. v. Hermansdorfer, 423 U.S.

336, 96 S.Ct. 584, 46 L.Ed.2d 542 (1976)...... 10, 14

United States v. Rice, 327 U.S. 742, 66 S.Ct. 835, 90

EE oak 6 6 on tea eebees eb wutee 16

Waco v. United States Fidelity & Guaranty Co., 293

U.S. 140, 55 S.Ct. 6, 79 L.Ed. 244 (1935)

Men Se nT Ce or ere i, 6, 10, 11, 20, 21

Vil

TABLE OF AUTHORITIES

Statutes

Page

RT a a 6-00 0:40 00S Kad nae ecrade nes 8

9 U.S.C. Section 15 ................... i, 2, 8, 9, 10, 21

9 U.S.C. Section 201 ......... 0.0.0.0... 0.008, 2,4

9 U.S.C. Section 202 .............0.0..0.0.0. 008. 2

9 U.S.C. Section 203 ........... 0.0... eee eee 2

9 U.S.C. Section 204 ............ 0000000. 2

9 U.S.C. Section 205 .............0.... i, 2,4, 5, 14, 16

9 U.S.C. Seetion 206 ...... 0.0000 0.00000000... 2,5, 8,9

9 U.S.C. Seetion 207 .........00 0.000 eee 2

9 U.S.C. Seetion 208 ... 2.0... eee, 2

28 U.S.C. Section 1254 .........0..000000000.08.. 2

28 U.S.C. Section 1441... 0.0.0.0. 000 ee, 2,16

28 U.S.C. Section 1446... 0.0.0.0 00, 16

28 U.S.C. Section 1447 ....... i, 2, 6, 9, 10, 11, 14, 15, 16

Rules

Federal Rules of Appellate Procedure, Rule 34 .. 20

Federal Rules of Appellate Procedure, Rule 38 ..

i tecondeu vedere soak sks ree ne i, 2, 7, 17, 18, 19, 20, 21

Federal Rules of Civil Procedure, Rule 11....... 18

Miscellaneous

House Report (Judiciary Committee) No. 100-889,

100th Congress, 2d Session, pp. 36-37 (Aug. 26,

1988) reprinted in 1988 U.S. Code Cong. & Ad-

Se IE wa 3 bon 544 bcd ae ob ee cake acs 8,9

134 Congressional Record, $16284 (daily ed. Oct.

PI he eens 544 has be aiaae aed. 9

No.

In The Supreme Court

OF THE

United States

OCTOBER TERM, 1990

VENTILATOREN STORK HENGELO B.V.,

VERENIGDE MACHINEFABRIEKEN STORK N.V.,

Petitioners,

Vs.

FORSIKRINGSAKTIESELSKABET HAFNIA,

aka HAFNIA,

Respondent.

Petition for Writ of Certiorari to the United States

Court of Appeals for the Ninth Circuit

PETITION FOR WRIT OF CERTIORARI

Petitioners, Ventilatoren Stork Hengelo B.V. (“Venti-

latoren”’) and Verenigde Machinefabrieken Stork N.V.

(““Machinefabrieken”) respectfully pray that a Writ of

Certiorari issue to review the judgment and opinion of the

United States Court of Appeals for the Ninth Circuit

entered in the above-entitled proceeding on April 30, 1990

and amended on June 25, 1990.

OPINIONS BELOW

The memorandum decision of the United States Court

of Appeals for the Ninth Cireuit, dated April 30, 1990, is

presently unreported and is reprinted in the Appendix to

this Petition (“Pet. App.) at p. 3a. The order of the

United States Court of Appeals for the Ninth Circuit,

dated June 25, 1990, which amends the memorandum

decision and denies the petition for rehearing and sugges-

tion for rehearing en banc is presently unreported and is

reprinted in the Appendix to this Petition at p. la. The

amended memorandum decision and memorandum deci-

sion of the United States District Court for the Eastern

District of California are presently unreported and are

reprinted in the Appendix to this Petition at p. 10a and

p. l4a.

JURISDICTIONAL STATEMENT

This Court’s jurisdiction is invoked pursuant to 28

U.S.C. §1254(1). The Court of Appeals filed its memoran-

dum decision on April 30, 1990. On June 25, 1990, in

response to the petition for rehearing filed by Venti-

latoren and Machinefabrieken, the Court of Appeals filed

an order which amended its memorandum decision and

denied the petition for rehearing and suggestion for

rehearing en banc.

STATUTORY PROVISIONS INVOLVED

This case involves the following statutory provisions

which are set forth in the Appendix to this Petition:

9 U.S.C. $15, 9 U.S.C. § 201, 9 U.S.C. § 202, 9 U.S.C.

§ 203, 9 U.S.C. § 204, 9 U.S.C. § 205, 9 U.S.C. § 206,

9 U.S.C. § 207, 9 U.S.C. § 208, 28 U.S.C. § 1441, 28 U.S.C.

§ 1447, Fed. R. App. P. 38.

STATEMENT OF THE CASE

Factual Background

Ventilatoren Stork Hengelo B.V. (‘‘Ventilatoren”’), a

Duteh company, sold windmill blades to Nordtank, a

Danish windmill manufacturer, pursuant to a written

supply contract which contained a clause requiring Inter-

national Chamber of Commerce arbitration.’ Nordtank, in

turn, sold completed windmills to Cannon, a United

States developer of windparks. Nordtank and Cannon

obtained warranty insurance from respondent Forsikring-

saktieselskabet Hafnia (‘“Hafnia”), the plaintiff in the

present lawsuit. With this lawsuit, Hafnia, as a subrogee,

filed suit against Ventilatoren and its parent company,

Verenigde Machinefabrieken Stork N.V. (“Machine-

fabrieken”).”

Since Hafnia was pursuing commercial remedies de-

rived from Ventilatoren’s contractual sale of the windmill

blades to Nordtank, there was a reasonable expectation

that Hafnia’s remedies would be limited by the original

'Ventilatoren’s supply contract for the windmill blades stated that

“(a]ny dispute arising out of the Contract shail be finally settled in

accordance with the Rules of Conciliation and Arbitration of the

International Chamber of Commerce, by one or more arbitrators

designated in conformity with those Rules.”

"In this lawsuit, Hafnia has taken the position that it is pursuing

the rights of Cannon even though Cannon’s alleged rights all derive

from Ventilatoren’s original sale of the windmill blades to Nordtank,

the windmill manufacturer. In fact, Hafnia is attempting to enforce

the five-year express warranty that was contained in the Ventilatoren

supply contract (which also contained the International Chamber of

Commerce arbitration clause).

supply contract — including the arbitration provision.®

Consequently, Ventilatoren and Machinefabrieken re-

moved the case to the United States District Court for the

Eastern District of California pursuant to the Convention

on the Recognition and Enforcement of Foreign Arbitral

Awards (the “Convention’’). 9 U.S.C. § 201, et seg. See-

tion 205 of the Convention provides that:

‘“‘'w]here the subject matter of an action or proceed-

ing pending in a state court relates to an arbitration

agreement... falling under the Convention, the de-

fendant or defendants may, at any time before the

trial thereof, remove such action or proceeding to the

district court of the United States...”

9 U.S.C. § 205 (emphasis added).* -

*See Coastal Steel Corp. v. Tilghman Wheelabrator, Ltd., 709 F.2d

190, 204 (3d Cir. 1983), cert. denied, 464 U.S. 938, 104 S.Ct. 349, 78

L.Ed.2d 315 (1983) (purchaser from manufacturer was bound by

forum selection clause in the supply contract between the manufac-

turer and the manufacturer of the component part); Aeronaves de

Mezico, S.A. v. McDonnell Douglas Corp., 677 F.2d 771, 773 (9th Cir.

1982) (component part manufacturer “had no greater liabilities” and

purchaser “had no greater rights” than those specified in supply

contract); Matson Navigation Co. v. Stal-Laval Turbin AB, 609 F.Supp.

579, 581 (N.D. Cal. 1985) (arbitration clause in component part

manufacturer's contract was recognized).

‘In a virtually identical case, Judge Pfaelzer of the United States

District Court for the Central District of California ruled that the

same arbitration agreement should be enforced against parties who

were in essentially the same position as Hafnia. (Difwind Farms

Limited VIII, et al. v. Ventilatoren Stork Hengelo B.V., United States

District Court for the Central District of California, Case No. CV 88-

5038 MRP, appeal dismissed, United States Court of Appeals for the

Ninth Cireuit, No. 89-55145, June 14, 1989.) Difwind involved the

exact same arbitration provision (i.e., from the Ventilatoren supply

contract) that is at issue in the present case.

District Court

At the time of removal, Ventilatoren and

Machinefabrieken filed a motion to compel arbitration

pursuant to 9 U.S.C. § 206. Hafnia responded to the

removal and the motion to compel arbitration by filing a

motion to remand based upon its argument that it should

not be bound by the arbitration agreement in Venti-

latoren’s supply contract.

The district court held that Hafnia was not bound.

However, it did not specifically address the question of

whether Ventilatoren and Machinefabrieken had properly

removed this case to federal court pursuant to 9 U.S.C.

§ 205, nor did it decide the question of whether the

present case “relates to” an arbitration agreement cov-

ered by the Convention.’ After deciding that Hafnia was

not bound to arbitrate the dispute, the district court

remanded the case to state court. The district court

did not state whether it was issuing its remand order

*Ventilatoren and Machinefabrieken also filed a motion to dismiss

for lack of personal jurisdiction and a motion to dismiss based on

forum non conveniens. The district court did not reach the merits of

those motions because of its resolution of the arbitration issue.

*The district court’s analysis was exclusively concerned with the

arbitrability of Hafnia’s claims:

“Since no arbitration award has been entered in this matter, the

Court turns its attention as to whether there is a contraci that

requires the parties before the Court to engage in arbitration.

The transaction that gave rise to this dispute was the condition

of the completed windmills purchased by Cannon from

Nordtank. However, it is undisputed that Cannon was not a

signatory to the Stork B.V./Nordtank supply contract...”

A copy of the district court’s Amended Memorandum, filed January

4, 1989, is included in the Appendix to this Petition at p. 10a.

pursuant to 28 U.S.C. § 1447(¢c) or any other statutory

provision.

Court Of Appeals

Ventilatoren and Machinefabrieken sought appellate

review of the district court’s ruling on the substantive

contract question — that is, whether Hafnia should be

bound by the arbitration clause. Hafnia then filed a

motion to dismiss arguing that 28 U.S.C. § 1447(d)

should bar the appeal because the arbitration question

had been decided as part of the district court’s ruling on

the remand nmioticn. In response, Ventilatoren and

Machinefabrieken argued, among other things, that

28 U.S.C. § 1447(d) should not apply based upon this

Court’s decision in Waco v. United States Fidelity &

Guaranty Co., 293 U.S. 140, 55 S.Ct. 6, 79 L.Ed. 244

(1935), as well as the Ninth Circuit’s own decisions in

Clorox Co. v. United States District Court, 779 F.2d 517

(9th Cir. 1985), and Pelleport Investors, Inc. v. Budco

Quality Theatres, Inc., 741 F.2d 273 (9th Cir. 1984), which

recognized limitations on the appealability bar of Section

1447(d). After Hafnia’s motion to dismiss the appeal was

fully briefed, a three judge panel of the Ninth Circuit

entered an order consolidating Hafnia’s jurisdictional

challenge with the appeal on the merits.’

"The motions panel, which consisted of Judges Wallace, Alarcon

and Norris, entered an crder which provided, in pertinent part, as

follows:

“The motion to dismiss the appeal and al] related memoranda

are referred for disposition to the panel that will consider this

appeal on the merits.”

A copy of the Ninth Circuit's order, filed Apri! 11, 1989, is included in

the Appendix to this Petition at p. 9a.

er AC ce he ONS ARM in De

ee er ee Se

Si A AGEN AS 9 ntti et (in pats ott

On March 14, 1990, a panel of the Ninth Cireu2t consist-

ing of Judges Boochever, Wiggins and Noonan, heard

argument in the present case. On April 30, 1990, the panel

issued an opinion in which it held that the arbitration

question was shielded from appellate review because it

had been decided in the context of a remand order.®

Consequently, the panel never reached the substantive

contract question which was the basis for the appeal —

that is, was Hafnia bound by the arbitration clause. The

panel also found that one of the arguments in support of

appellate jurisdiction was “wholly without merit” and

awarded sanctions against Ventilatoren and

Machinefabrieken under Rule 38 of the Federal Rules of

Appellate Procedure. In response to a petition for rehear-

ing, the panel amended its memorandum on June 25,

1990, by deleting the last paragraph of the decision which

had contained a suggestien of misconduct and by adding

two new sentences suggesting that sanctions were some-

how appropriate because Ventilatoren and

Machinefabrieken could have withdrawn their appeal

rather than have a court decide the jurisdictional

question.®

* A copy of the Ninth Circuit's Memorandum Decison, filed April

30, 1990, is included in the Appendix to this Petition at p. 3a.

°A copy of the Ninth Circuit’s order, filed June 25, 1990, is

included in the Appendix to this Petition at p. la.

REASONS FOR GRANTING THE WRIT

A WRIT SHOULD BE ISSUED TO PERMIT THE

APPEAL OF THE DISTRICT COURT'S DECISION

ON THE ARBITRATION QUESTION

A. The Ninth Circuit’s Ruling Conflicts With Con-

- gressional Efforts Tc Allow For The Immediate

Appeal Of Orders Denying Applications To Com-

pel Arbitration :

By adopting the Arbitration Act and the Convention on

the Recognition and Enforcement of Foreign Arbitral

Awards, Congress has expressed a clear preference for

arbitration. Moreover, Congress has also expressed a

clear preference for the immediate appeal of district court

decisions which refuse to recognize the right to arbitra-

tion. In 1988, Congress adopted a new statute which

authorizes the immediate appeai of rulings which refuse

to compel arbitration — 9 U.S.C. § 15.”°

The Ninth Cireuit refused to even consider the impact

of 9 U.S.C. §15 on this appeal. This recently-enacted

statute authorizes the immediate appeal of orders deny-

ing applications to compel arbitration under either

9 U.S.C. § 4 or 9 U.S.C. § 206. The legislative history of

Section 15 suggests that Congress favors the immediate

appeal of decisions favoring litigation over arbitration. As

the House Report explained:

“Section 207 amends Title 9, United States Code, in

order to improve the appellate process in the Federal

courts with respect to arbitration. It adds a new

"Section 15 on “Appeals” was added as part of the 1988 Judicial

Improvements and Access to Justice Act, Pub. L. 100-702, Title X.

§ 1019(a), November 19, 1988, 102 Stat. 4671.

te ae rl Ht, Rate No

section 15 to chapter 1 of title 9. In that section,

interlocutory appeals are provided for when a trial

court rejects a contention that a dispute is arbitrable

under an agreement of the parties and instead re-

quires the parties to litigate.”

House Report (Judiciary Committee) No. 100-889, 100th

Congress, 2d Session, pp. 36-37 (Aug. 26, 1988), reprinted

in 1988 U.S. Code Cong. & Admin. News 5982, 5997."

Section 15 specifically authorizes the immediate appeal

from orders “denying an application under Section 206 of

this title to compel arbitration.” in the present case,

Ventilatoren and Machinefabrieken filed their motion to

compel arbitration under Section 206. The district court

decided that Hafnia was not bound by the arbitration

clause in its remand order even though it did not ex-

pressly address the motion to compel. Nevertheless, bv

resolving the substantive contractual issue of whether

Hafnia must honor the arbitration clause, the clear effect

of the remand order was to deny the motion to compel.

Thus, the district court’s decision should be reviewable

pursuant to 9 U.S.C. § 15.

This appeal poses a classic case of conflict between a

general statute, 28 U.S.C. § 1447(d), and a recently-

enacted, more specific statute, 9 U.S.C. § 15. Under well-

"The Senate Report also expressed a policy in favor of the

appealability of orders denying arbitration:

“Subsection (a) of the proposal, in effect, permits an appeal

where the effect of the court order favors litigation over arbitra-

tion — e.g., refusal to stay judicial action on issue referable to

arbitration, denial of an application to compel arbitration, ef seq.

— or where a final decision with respect to the arbitration is

involved.”

134 Congressional Record 816284, 816309 (daily ed. Oct. 14, 1988).

established principles of statutory construction, Sec-

tion 15 should control. As this Court explained in Fourco

Glass Co. v. Transmitra Product Corp., 353 U.S. 222, 228-

229, 77 S.Ct. 787, 1 L.Ed.2d 786 (1957), “specifie terms

prevail over the general in the same or another statute

which might be controlling”.’” The Ninth Cireuit’s deci-

sion conflicts with the specific statute — 9 U.S.C. § 15 —

which authorizes the immediate appeals of refusals to

compel arbitration.

B. The Ninth Circuit's Ruling Conflicts With This

Court’s Interpretation Of 28 U.S.C. § 1447(d)

The Ninth Circuit’s application of the jurisdictional bar

of 28 U.S.C. § 1447(d) is inconsistent with this Court’s

prior decisions which have interpreted that statute and its

predecessors. For example, after reviewing the legislative

history of 28 U.S.C. § 1447(d) in Thermtron Products, Inc.

v. Hermansdorfer, 423 U.S. 336, 350, 96 S.Ct. 584, 46

L.Ed.2d 542 (1976), this Court found “no indication

whatsoever that Congress intended to extend the prohibi-

tion against review to reach remand orders entered on

grounds not provided by statute.”

In fact, the Ninth Circuit’s decision in the present case

conflicts with this Court’s decision in Waco v. United

States Fidelity & Guaranty Co., 293 U.S. 140, 55 S.Ct. 6,

79 L.Ed. 244 (1935). In Waco, this Court held that a

district court’s dismissal of a defendant, which simultane-

ously led the district court to remand the action for lack

"See also Stewart v. Smith, 673 F.2d 485, 492 (D.C. Cir. 1982)

(“[w]hen one statute speaks in general terms while the other is

specific, conflicting provisions may be reconciled by carving out an

exception from the more general enactment for the more specific

statute”).

Fentans

of subject matter jurisdiction, was reviewable on appeal.

As this Court explained:

“True, no appeal lies from the order of remand; but

in logie and in fact the decree of dismissal preceded

that of remand and was made by the District Court

whiie it had control of the cause. Indisputably this

order is the subject of an appeal; and, if not reversed

or set aside, is conclusive upon the petitioner.

We are of the opinion that the petitioner was entitled

to have the Cireuit Court of Appeals determine

whether the dismissal of its cross-action against the

Fidelity Company was proper.”

Waco, 293 U.S. at 143.

In the present case, the district court’s decision on the

arbitration question “... preceded that of remand and

was made by the District Court while it had control of the

eause.” Waco, 293 U.S. at 143. That is, the district court

first decided that Hafnia was not bound by the arbitration

clause contained in the supply contract for the windmill

blades before deciding to remand. The resolution of this

substantive contractual question should not be insulated

from appellate review under 28 U.S.C. § 1447(d) simply

because it was included as part of a remand decision.”

The Ninth Cireuit’s decision conflicts with Waco.

'SThere are numerous cases which have followed Waco and held

that substantive issues affecting the merits of the dispute should not

be shielded from appellate review. See, e.g., Mitchell v. Carlson, 896

F.2d 128, 132-133 (5th Cir. 1990) (under Waco, the order “in the

present case is separable from the remand order and may be subject

to review on appeal”); Pelleport Investors, Inc. v. Budco Quality

Theatres, Inc., 741 F.2d 273, 277 (9th Cir. 1984) (remand order was

appealable, since “(t]o hold otherwise would deprive Budco of its

right to appeal a substantive determination of contract law. We

cannot believe that Congress intended to immunize such decisions

C. The Ninth Circuit’s Ruling Is Inconsistent With

This Court’s Interpretation Of The Right To

Arbitration

This Court has consistently recognized the importance

of federal policies promoting arbitration. The Ninth Cir-

cuit’s inexplicable rejection of this well-established line of

eases provides further support for issuance of the writ.

There is a strong presumption which favors the arbitra-

tion of commercial disputes such as the present matter.

According to the Court’s decision in Southland Corp. v.

Keating, 465 U.S. 1, 10, 104 S.Ct. 852, 79 L.Ed.2d 1

(1984), “[i]n enacting. ..the Federal [Arbitration] Act,

Congress declared a national policy favoring arbitra-

tion....’’ The presumption in favor of arbitration is even

stronger in the international context. The concerns “of

international comity, respect for the capacities of foreign

and transnational tribunals, and sensitivity to the need of

the international commercial system for predictability in

the resolution of disputes”, requires that arbitration

clauses be enforced even if “a contrary result would be

forthcoming in a domestic context.” Mitsubishi Motors v.

Soler Chrysler-Plymouth, 473 U.S. 614, 629, 105 S.Ct.

3346, 87 L.Ed.2d 444 (1985).

In case after case, the Court has placed the importance

of arbitration as a means of dispute resolution over

barriers opponents have attempted to erect. In Scherk v.

Alberto-Culver, 417 U.S. 506, 94 S.Ct. 2449, 41 L.Ed.2d

270 (1974), this Court held that an arbitration clause

arising out of an international commercial transaction

from review’’); Kozera v. Spirito, 723 F.2d 1003, 1005 (1st Cir. 1983)

(district court’s remand order was appealable); Armstrong v. Ala-

bama Power Co., 667 F.2d 1385, 1387 (llth Cir. 1982) (district

court's order was appealable, notwithstanding that suit was subse-

quently remanded to state court).

wee

should be “respected and enforced by the federal courts

in aceord with the explicit provisions of the Arbitration

Act.” Scherk, 417 U.S. at 519-520. According to Scherk,

“[a] parochial refusai by the courts of one country to

enforce an international arbitration agreement would...

invite unseemly and mutually destructive jockeying by the

parties to secure tactical litigation advantages.” Scherk,

417 U.S. at 516-517."

In dismissing the present appeal, the Ninth Circuit

ignored this Court’s arbitration decisions. Removal based

upon arbitration should not be considered in the same

light as removal based upon diversity jurisdiction. An

insurance company like Hafnia should not be able to

circumvent an arbitration clause merely because it is

proceeding as a subrogee. Given the importance of the

right to arbitration, especially the right to arbitration in

international commercial disputes, there should be an

opportunity to have any ruling which denies that right

subject to appellate review.’° The Ninth Cireuit’s decision

"In Moses H. Cone Memorial Hospital v. Mercury Construction

Corp., 460 U.S. 1, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983), this Court

ruled that “any doubts concerning the scope of arbitral issues should

be resolved in favor of arbitration...” Moses H. Cone Memorial

Hospital, 460 U.S. at 24-25. Mitsubishi Motors held that the policy of

promoting arbitration requires “national courts to subordinate do-

mestic notions of arbitrability to the international policy favoring

commercial arbitration.” Mitsubishi, 473 U.S. at 639. The arbitration

clause in Rodriguez de Quijas v. Shearson/American Express, 490 U.S.

109 S.Ct. 1917, 1920, 104 L.Ed.2d 526 (1989) was enforced,

given “our current strong endorsement of the federal statutes favor-

ing this method of resolving disputes.”

‘Unlike the Ninth Circuit's decision in the present case, the Fifth

Circuit has held that the Convention on the Recognition and Enforce-

ment of Foreign Arbitral Awards and the policies favoring interna-

tional arbitration take precedence over a general rule barring

is inconsistent with this Court’s interpretation of the

importance of the right to arbitration.

D. The Ninth Circuit’s Ruling Conflicts With Other

Court Of Appeals’ Decisions

The Ninth Circuit’s decision conflicts with other federal

appellate decisions. First, the decision conflicts with the

fact that other Court of Appeals’ decisions have recog-

nized an exception to the appealability bar of 28 U.S.C.

§ 1447(d) when the remand was based upon the interpre-

tation of a forum selection clause. Second, the Ninth

Cireuit’s decision also conflicts with an Eleventh Circuit

decision that held that 28 U.S.C. § 1447(d) did not have

any application to cases which were removed pursuant tc

special removal statutes like 9 U.S.C. § 2085.

Several appellate court decisions have specificaily rec-

ognized a forum selection exception to Section 1447(d).

For example, the Second Cireuit recently explained that:

“The rationale for Section 1447(d)’s

nonreviewability rule is not implicated in the instant

ease. That rationale is ‘to prevent delay in the trial of

remanded cases by protracted litigation of jurisdic-

tional issues.’ Thermtron, 423 U.S. at 351. This policy

is not applicable when a district court with subject-

appellate review of interlocutory decisions similar to 28 U.S.C.

§ 1447(d). Sedco, Inc. v. Petroleos Mexicanos Mexican Nat. Oil Co., 767

F.2d 1140 (5th Cir. 1985). While Sedco addressed an admiralty rule,

its reasoning applies to Section 1447(d):

“The Convention was negotiated pursuant to the Constitution's

treaty power. Congress then adopted enabling legislation to

make the Convention the highest law of the land. As such the

Convention must be enforced according to its terms over all

prior inconsistent rules of law.”

Sedco, 767 F.2d at 1145.

matter jurisdiction remands a case on the basis of its

interpretation of a forum-selection clause. If Section

1447(d) applied in such cases, a party would have no

right to appeal from the determination of the validity

and meaning of a contract....We agree and hold

that a remand order based on a district court's

interpretation of a forum-selection clause is review-

able on appeal.”

Karl Koch Erecting Co. v. New York Convention Center

Development Corp., 838 F.2d 656, 658-659 (2d Cir. 1988).

The Sixth Circuit and the Ninth Circuit (although not in

the present case) have also recognized that certain forum

selection questions that are decided in the context of

remand orders should not be shielded from appellate

review.'®

The cases which have found a forum selection exception

to 28 U.S.C. § 1447(d) should apply with equal force to

The Sixth Cireuit recently explained that:

“In [another case], we specifically addressed the appealability

of a remand order predicated upon the interpretation of a forum

selection clause, and we joined with those circuits which have

held such orders appealable.”

In Re Delta America Re Ins. Co., 900 F.2d 890, 892 (6th Cir. 1990). In

Clorox Co. v. United States District Court, 779 F.2d 517, 520 (9th Cir.

1985}, the Ninth Cireuit held that Section 1447(d) did not prevent

the review of a remand order that had been based on a forum

selection clause in an employee handbook. The Ninth Circuit also

found that Section 1447(d) did not apply to a remand order that was

based upon the interpretation of a forum selection clause in Pelleport

Investors, Inc. v. Budco Quality Theatres, Inc., 741 F.2d 273, 277 (9th

Cir. 1984). See also Regis Associates v. Rank Hotels, Lid., 894 F.2d 193,

194 (6th Cir. 1990) (“...a body of case law has developed holding

that a remand order is reviewable on appeal when it is based on a

substantive decision on the merits of a collateral issue as opposed to

just matters of jurisdiction”).

cases involving arbitration agreements. As this Court has

explained, ‘‘[a]n agreement to arbitrate before a specified

tribunal is, in effect, a specialized kind of forum selection

clause.” Scherk v. Alberto-Culver Co., 417 U.S. 506, 519, 94

S.Ct. 2449, 41 L.Ed.2d 270 (1974). Indeed, given the

federal presumptions and policies favoring arbitration,

any forum selection exception to 28 U.S.C. § 1447(d)

should be broad enough to inelude arbitration

agreements.

The Ninth Cirecuit’s decision also conflicts with an

Eleventh Cireuit decision which held that 28 U.S.C.

§ 1447(d) only applies to those cases which were removed

pursuant to 28 U.S.C. § 1441. In re FSLIC, 837 F.2d 432,

435 (11th Cir. 1988).’’ If the Eleventh Circuit’s analysis

were followed in the present case, there would have been

appellate jurisdiction since the matter was originally

removed from state court pursuant to 9 U.S.C. § 205, not

28 U.S.C. § 1441. Indeed, the language in 9 U.S.C. § 205

providing that “the procedure for removal otherwise pro-

vided by law shall apply” appears to be intended to

incorporate by reference the provisions set forth in 28

U.S.C. § 1446 (“Procedure for removal”). By making no

reference to the provisions of Section 1447 (“Procedure

after removal generally”), 9 U.S.C. §205 appears to

implicitly exclude application of Section 1447(d). Such a

reading of 9 U.S.C. § 205 would be wholly consistent with

‘The Ninth Cireuit, in FSLIC v. Frumenti Development, 857 F.2d

665, 669 (9th Cir. 1988), rejected the argument that the bar of 28

U.S.C. § 1447(d) should be limited to those cases which were re-

moved pursuant to 28 U.S.C. § 1441. The Frumenti court based its

holding on its interpretation of United States v. Rice, 327 U.S. 742, 66

S.Ct. 835, 90 L.Ed 982 (1946), which applied the predecessor of 28

U.S.C. § 1447(d) to preclude the review of a remand order even

though the case had not been removed pursuant to the predecessor of

28 U.S.C. § 1441.

the policy favoring international arbitration that is the

very basis for removal under the Convention on the

Recognition and Enforcement of Foreign Arbitral

Awards.

Il.

A WRIT SHOULD BE ISSUED BECAUSE THE

RULE 38 AWARD WILL DISCOURAGE ACCESS

TO THE APPELLATE PROCESS

There was a substantial basis for the appeal that was

taken in the present case.’® Ventilatoren and

Machinefabrieken had good arguments on the arbitration

question.’* Ventilatoren and Machinefabrieken also had

In Difwind Farms Limited VIII, et al. v. Ventilatoren Stork

Hengelo B.V., United States District Court for the Central District of

California, Case No. CV 88-5038 MRP, appeal dismissed, United

States Court of Appeals for the Ninth Circuit, No. 89-55145, June 14,

1989, the court recognized the binding nature of the arbitration

clause involved in the present case and ordered the parties that were

in Hafnia’s position te “... arbitrate their disputes at the Interna-

tional Chamber of Commerce in accordance with the arbitration

clause contained in the sales agreement between Ventilatoren Stork

Hengelo B.V. and Nordtank A/S.”

'*Numerous cases have held that parties in this situation are bound

by arbitration agreements. See, ¢.g., Hughes Masonry v. Greater Clark

County School Building, 659 F.2d 836, 839 (7th Cir. 1981) (court held

that “tort” claims were covered by the arbitration clause because a

party “ ‘cannot rely on the contract when it works to its advantage,

and repudiate it when it works to [its] disadvantage’”); In re Oil

Spill by the “Amoco Cadiz”, etc., 659 F.2d 789, 796 (7th Cir. 1981)

(arbitration clause enforced because “[i]t would advance neither

judicial economy nor the purposes of the federal arbitration act to

permit International to assert in a judicial forum claims grounded

upon its alleged relationship to Transport and to allow it to disavow

the relationship for purposes of arbitration”); Avila Group, Inc. v.

Norma J. of California, 426 F.Supp. 537, 542 (S.D.N.Y. 1977) (to

good arguments on the questicn of appellate jurisdiction.

Application of Rule 38 sanctions in these circumstances |

would chill resort to the appellate courts.

The present case is similar to Cooter & Gell v. Hartmarz

Corp., etal. U.S. __, 110 S.Ct. 2447, 110 L.Ed.2d

359 (1990), where this Court refused to extend Rule 11 in

a manner that would have discouraged appeals:

“Limiting Rule 11's scope in this matter accords with

the policy of not discouraging meritorious appeals. If

appellants were routinely compelled to shoulder the

appellees’ attorney’s fees, valid challenges to district

court decisions would be discouraged. The knowledge

that, after an unsuccessful appeal of a Rule 11

sanction, the district court that originally imposed

the sanction would also decide whether the appellant

should pay his opponent’s attorney’s fee would be

likely to chill all but the bravest litigants from taking

an appeal.”

Cooter & Gell, 110 S.Ct. at 2462.

In the present case, the Ninth Circuit apparently be-

lieved that Ventilatoren and Machinefabrieken should be

punished for having taken an appeal from the district

court’s arbitration decision. The Ninth Circuit apparently

believed that Ventilatoren and Machinefabrieken should

have accepted the district court’s erroneous conclusion on

the arbitration question. The Ninth Circuit, however,

ignores the fact that Ventilatoren and Machinefabrieken

should be allowed to seek appellate review of a decision

that might have the effect of denying their right to seek

arbitration.

allow a party “to claim the benefit of the contract and simultaneously

avoid its burdens would both disregard equity and contravene the

purposes underlying enactment of the Arbitration Act’).

Unless the Ninth Circuit intends to discourage access

to the courts, there is no basis for its application of Rule

38 to the present case. Rule 38 should not be applied in

such a cavalier manner. As Justice Stevens observed in a

related context:

“Freedom of access of the courts is a cherished value

in our democratic society.... There is, and should

be, the strongest presumption of open access to ail

levels of the judicial system. Creating a risk that the

invocation of the judicial process may give rise to

punitive sanctions simply because the litigant’s claim

is unmeritorious could only deter the legitimate exer-

cise of the right to seek a peaceful redress of griev-

ances through judicial means....[T]he strong

presumption is against the imposition of sanctions

for invoking the processes of the law.” (footnotes

omitted)

Talamini v. All-State Insurance Co., 470 U.S. 1067, 105

S.Ct. 1824, 1827-1828, 85 L.Ed.2d 125 (1985) (Stevens,

J., joined by Brennan, Marshall and Blackmun, JJ.,

concurring).

The Ninth Cireuit never reached the question of

whether the arguments of error were “wholly without

merit.” Indeed, the Ninth Circuit never reached the sub-

stantive question which was at the heart of the appeal —

that is, was Hafnia bound by the arbitration clause that

was contained in the supply contract for the windmill

blades. Instead, the Ninth Cireuit found that one argu-

ment relating to appellate jurisdiction was “wholly with-

out merit” and, on the basis of that one finding, awarded

sanctions under Rule 38.

The panel’s dislike of one argument is not sufficient

support for a finding of frivolousness in the present case.

The result below was not obvious. If it had been, the

Ninth Cireuit panel which first considered Hafnia’s mo-

tion to dismiss would have decided the question of appel-

late jurisdiction rather than deferring the question to the

panel which considered the appeal on the merits. More-

over, if the result had been obvious, then the panel that

decided the case could have refused to schedule oral

argument pursuant to Fed. R. App. P. 34(a).

Allowing Rule 38 sanctions here would send a dramatic

and unwarranted signal to the federal courts. This is not

a case where there was any misconduct. This is not a case

where there was any controlling authority directly on

point.” In fact, this is a case where there was substantial

support on the question of appellate jurisdiction. If

Ventilatoren and Machinefabrieken are punished for at-

tempting to protect their right to arbitration, other liti-

gants will think twice before filing meritorious appeals.

Access to the appellate court will be constricted. Such

constriction is inconsistent with existing law, and this

Court should consider this case to protect free access to

our appellate courts.

There was nothing in any prior Ninth Circuit eases which would

have suggested that there might be an absolute barrier to appellate

jurisdiction. The Ninth Circuit decisions in Pelleport Investors, Inc. v.

Budco Quality Theatres, Inc., 741 F.2d 273 (9th Cir. 1984) and Clorez

Co. v. United States District Court, 779 F.2d 517 (9th Cir. 1985)

supported appellate jurisdiction. The other case cited by the panel in

the memorandum, Hansen v. Blue Cross of California, 891 F.2d 1384

(9th Cir. 1989), did not control the question of appellate jurisdiction.

Hansen did not discuss Waco v. United States Fidelity & Guaranty Co.,

293 U.S. 140, 55 S.Ct. 6, 79 L.Ed. 244 (1935); Hansen did not address

the right to arbitration; and, Hansen also did not involve a dispute

over a forum selection clause.

CONCLUSION

A writ of certiorari should issue since the Ninth Cir-

cuit’s decision conflicts with 9 U.S.C. § 15, this Court’s

decision in Waco, the important nature of the right to

arbitration and other Circuit Court decisions addressing

related issues. In addition, a writ should issue because

the Ninth Circu:t’s sanction award under Fed. R. App.

P. 38 was erroneous given the fact that there was substan-

tial merit to the appeal, the court misinterpreted and

misapplied the plain language of Rule 38 and the award

will discourage access to the appellate process.

Respectfully Submitted,

BRIANE NELSON MITCHELL

PAUL, HASTINGS, JANOFSKY & WALKER

1299 Ocean Avenue, Third Floor

Santa Monica, California 90401

(213) 319-3300

Counsel of Record for Petitioners

ROGER E. PODESTA

DEBEVOISE & PLIMPTON

875 Third Avenue

New York, New York 10022

(212) 909-6000

Dated: September 24, 1990.

Zz.

fx)

re ne a Pet; OA SY al ig ayaa ree ‘ 7" EL PN DY,

No. 88-15708

[FILED JUN. 25, 1990

CATHY A. CATTERSON, CLERK

U.S. COURT OF APPEALS]

NOT FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

FORSIKRINGSAKTIESELSKABET HAFNIA,

aka HAFNIA,

Plaintiff-Appeilee,

VENTILATOREN STORK HENGELU, B.V.;

VERENIGDE MACHINEFABRIEKEN STORK N.V.,

and DOEs 1 through 10, inclusive,

Defendants-Appellants.

D.C. No. CV-88-0475

ORDER

Before: BOOCHEVER, WIGGINS, and NOONAN, Cir-

cuit Judges

The memorandum disposition filed on April 30, 1990 is

amended as follows:

The last paragraph of the memorandum is deleted. The

following is inserted after the first sentence in the second

full paragraph on page five:

Hafnia brought the jurisdictional defect in this case

to the attention of Stork’s counsel before moving to

dismiss the appeal. Even after our opinion was pub-

lished in Hansen v. Blue Cross of California, 891 F.2d

1384 (9th Cir. 1989) (filed Oct. 2, 1989, amended

Dec. 18, 1989) Stork continued to appeal, needlessly

requiring the parties and the court to incur time and

effort.

With this amendment, the panel has voted unanimously

to deny the petition for rehearing and to reject the

suggestion for rehearing en banc. The full court has been

advised of the suggestion for rehearing en bane and no

active judge has requested a vote on whether to rehear the

matter en bane. Fed. R. App. P. 35(b).

The petition for rehearing is DENIED and the sugges-

tion for rehearing en bane is REJECTED.

No. 88-15708

{FILED APR. 30, 1990

CATHY A. CATTERSON, CLERK

U.S. COURT OF APPEALS]

NOT FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

FORSIKRINGSAKTIESELSKABET HAFNIA,

aka HAFNIA,

Plaintiff-Appellee,

Vv.

VENTILATOREN STORK HENGELO, B.V.;

VERENIGDE MACHINEFABRIEKEN STORK N.V.,

and DOEs 1 through 10, inclusive,

Defendants-Appellants.

Appeal from the United States District Court

for the Eastern District of California

Edward D. Price, District Judge, Presiding

Argued and Submitted March 14, 1990

San Francisco, California

D.C. No. CV-88-0475

MEMORANDUM®

Before: BOOCHEVER, WIGGINS, and NOONAN, Cir-

cuit Judges

* This disposition is not appropriate for publication and may not

be cited to or by the courts of this circuit except as provided by

9th Cir. R. 36-3.

Appellants Ventilatoren Stork Hengelo B.V. (“Stork’’)

and Verenigde Machinefabrieken Stork N.V. (“Ma-

chine’) timely appeal the district court’s decision that

appellee Forsikringsaktieselskabet Hafnia (“‘Hafnia’’) is

not bound by an arbitration provision in a contract be-

tween Stork and a third party. Hafnia seeks attorney's

fees for this appeal. We have no jurisdiction and therefore

dismiss Sturk’s appeal and grant Hafnia sanctions.

FACTS AND PROCEEDINGS

Appellant Machine and its wholly owned subsidiary

Stork are Dutch corporations. Stork does not do, and has

never registered io do, business in California. Stork sold

windmill blades to Nordtank A/S, a Danish windmill

manufacturer. The contract governing that sale (the

“Stork-Nordtank contract’) contained an arbitration.

provision.

Nordtank then sold those windmills to Cannon, a

United States developer, fur use in California. The con-

tract governing that sale (the “Nordtank-Cannon con-

tract’) did not contain an arbitration provision. Cannon

was not a signatory to the Stork-Nordtank contract.

Cannon does not do, and has never registered to do,

business in California. Nordtank and Cannon jointly ob-

tained warranty insurance from appellee Hefnia.

After installation of the windmills, Cannon experienced

difficulties with them. Cannon sought recovery from the

warranty insurance policy issued by Hafnia. Cannon exe-

cuted a written assignment to Hafnia of all claims Can-

non had against Stork for defective windmill blades.

Hafnia sued Stork in California state court for the

defective design and manufacture of the windmill blades.

Stork successfully removed to federal court. Stork then

moved to compel Hafnia to arbitrate pursuant to the

terms of the Stork-Nordtank contract. At the same time,

Hafnia moved to remand the action back to state court for

lack of subject matter jurisdiction based on 28 U.S.C.

§ 1447(c) (1982). The district court granted Hafnia’s

motion on November 22, 1988.

DISCUSSION

A. APPELLATE JURISDICTION

We have no jurisdiction to review a district court's

remand order pursuant to 28 U.S.C. §1447(d) if the

district court remanded because it lacked subject matter

jurisdiction. Pelleport Investors, Inc. v. Budco Quality

Theatres, Inc., 741 F.2d 273, 276-77 (9th Cir. 1984).

Likewise, we have no jurisdiction to review a district

court’s conclusions of law related to its determination

that it lacks subject matter jurisdiction. See Hansen v.

Blue Cross of California, No. 88-5910, slip op. at 14471-72

(9th Cir. Dee. 18, 1989). However, we have jurisdiction

over a district court’s conclusions of law that do not

relate to its determination of jurisdiction. Pelleport, 741

F.2d at 276.

Stork seeks review of the district court’s determination

that the Stork-Nordtank arbitration clause does not bind

Hafnia, claiming that decision was not related to its

determination of matter jurisdiction.’ We disagree.

‘The district court's order states, in pertinent part:

None of the parties have made any showing that any agreement

was ever entered into by the parties to this action to submit the

issues raised by the complaint to arbitration.

The Convention on the Recognition and Enforcement of

Foreign Arbitral Awards (““Convention’’), 9 U.S.C. § 201

et seq. provides the only ground for subject matter juris-

diction in this case. For the district court to have had

subject matter jurisdiction under the terms of the Con-

vention, the instant proceeding must “[relate] to an

arbitration agreement or award...under the Conven-

tion.” 9 U.S.C. § 205.

Unless the Nordtank-Stork arbitration clause is en-

forceable by Stork against Hafnia, the proceeding could

not have related to an arbitration agreement, and the

district court would have had no subject matter jurisdic-

tion. Thus, the question of whether the Nordtank-Stork

arbitration clause binds Hafnia can in no way be con-

strued as apart from the question of the district court’s

subject matter jurisdiction. They are in fact the very same

question. Once the district court determined that the

[sic] Hafnia was not subject to the arbitration clause, the

district court could properly have done nothing but

remand.

This case thus differs from those in which the substan-

tive issue decided by the district court was unrelated to

the issue of subject matter jurisdiction. See, e.g., Cloroz v.

United States Dist. Court for the N.D. of Cal., 779 F.2d 517,

520 (9th Cir. 1985) (district court’s decision that Clorox

had waived the right to remove was apart from issue of

whether district court had jurisdiction and remand order

was therefore reviewable); Pelleport, 741 F.2d at 276-77

(district court’s decision that forum selection clause gov-

erned dispute was apart from issue of whether the district

court had jurisdiction and remand order was therefore

reviewable).

Accordingly, the Court remands the action to the mupenter Court

for the State of California...

Appellants demonstrate no facts in support of their

strained assertion that, in reality, the district court:

(1) assumed jurisdiction existed; (2) held that Hafnia

and Stork are not bound by the arbitration agreement in

response to Stork’s motion to compel arbitration; and

(3) remanded this case to state court for some non-

jurisdictional reason, despite the fact that once it deter-

mined conclusion (2) above, it had no jurisdiction to do

anything but remand. We have no jurisdiction over this

appeal.

B. SANCTIONS

We have discretion to impose attorney’s fees and costs

as appellate sanctions for frivolous appeals pursuant to

Fed. R. App. P. 38. Kelley v. International brother of Elec.

_ Workers, 803 F.2d 516, 519 (9th Cir. 1986). An appeal is

frivolous where the result is obvious and the arguments of-

error are wholly without merit. See Gattuso v. Pecorella,

733 F.2d 709, 710 (9th Cir. 1984).

In the instant case, Stork’s argument that the district

court’s finding that Hafnia was not bound by the arbitra-

tion agreement was a determination unrelated to the

district court’s jurisdiction is wholly without merit. We

therefore award Hafnia its costs and attorney’s fees for

this appeal. Hafnia will file appropriate documents sup-

porting the award of costs and fees with this court.

Furthermore, although we do not base our award of

sanctions on a conclusion that Stork deliberately in-

tended to mislead us, we are not blind to the fact that

Stork only diseussed the possibility of a jurisdictional—

defect in appealing the district court’s remand order after

Hafnia raised it in their brief. Hafnia brought this juris-

dictional defect to the attention of Stork’s counsel before

moving to dismiss the appeal. Nevertheless Stork contin-

ued to appeal, needlessly requiring the parties and the

court to incur time and effort.

APPEAL DISMISSED.

No. 88-15708

{FILED APR. 11, 1989

CATHY A. CATTERSON, CLERK

U.S. COURT OF APPEALS]

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

Forsikringsaktieselskabet Hafnia,

Plaintiff-Appellee,

vs.

VENTILATOREN STORK HENGELO, B.V., et al.,

Defendants-Appellants.

DC# CV-88-0475-EDP

Eastern California

(Fresno)

ORDER

Before: WALLACE, ALARCON and NORRIS, Circuit

Judges

On January 6, 1989, appellee filed a motion to dismiss

the appeal for lack of jurisdiction. A supplemental memo-

randum in support of the motion to dismiss was received

on January 11, 1989. Appellants filed an opposition to the

motion to dismiss on January 18, 1989 Appellants filed a

supplemental opposition on February 1, 1989. Appellee’s

reply in support of the motion to dismiss was received on

February 6, 1989. The motion to dismiss-the appea! and

all related memoranda are referred for disposition to the

panel that will consider this appeal on the merits.

10a

CASE NO. CV F-88-475 EDP

[ORIGINAL FILED

JAN. 4, 1989

CLERK, U.S. DIST. COURT

EASTERN DISTRICT OF CALIFORN7A]}

IN THE UNITED STATES DISTRICT COURT FOR

THE EASTERN DISTRICT OF CALIFORNIA

FORSIKRINGSAKTIESELSKABET HAFNIA,

Plaintiff,

VENTILATOREN STORK HENGELO,

B.V., VERENIGDE

MACHINEFABRIEKEN STORK N.V.,

et al.,

Defendants.

AMENDED MEMORANDUM DECISION RE:

PLAINTIFF’S MOTION TO REMAND;

DEFENDANTS’ MOTION TO DISMISS, OR

ALTERNATELY, TO COMPEL ARBITRATION

Defendant Ventilatoren Stork Hengelo, B.V., (hereaf-

ter “Stork B.V.”), is a corporation organized and existing

under the laws of the Netherlands. The principal business

of Stork B.V. is the manufacture of fiberglass blades for

cooling towers and windmills. Stork B.V. does not do

business in California and has never registered or become

licensed in California.

Stork B.V. sold some windmill blades to Nordtank, a

Danish windmill manufacturer. Nordtank is not a party to

this action. Nordtank’s factories and offices are located in

Denmark. All the other component parts for the Nordtank

windmills were purchased from other European manufac-

turers who likewise are not a party to this action. In the

Witt 1 ant, ttn rt anlar oD th ae 4 me

lla

contract between Stork B.V. and Nordtank, there was an

arbitration clause.

Nordtank in turn sold certain windmills to Cannon for

installation in California in this court district. Cannon

likewise is not a party to this action.

Plaintiff Hafnia is a Danish insurance company which

allegedly paid warranty claims pursuant to insurance

policies issued to parties not presently before the court.

After Nordtank filed for bankruptcy in Denmark, Can-

non made claims against Stork B.V., claiming Cannon

was a third-party beneficiary and entitled to the benefit of

the warranty provisions in the Stork B.V./Nordtank con-

tract. Because of Cannon’s threats and the confusion

ereated by Nordtank’s bankruptcy, Stork B.V. initiated

an action against-Cannon in a Netherlands’ court. Al-

though substantial proceedings have been had between

Hafnia, Nordtank and Stork B.V. in Europe, Hafnia filed

the present action in the Kern County Superior Court.

Defendants removed the state court action to this court.

In its petition for removal, counsel for Stork B.V.

alleges in pertinent part: “This court has original jurisdic-

tion in this matter, without regard to the amount of

controversy, under the Convention on the Recognition

and Enforcement of Foreign Arbitral Awards (the ‘Con-

vention’). (9 U.S.C. § 201, et seg.)”

9 U.S.C. § 205 provides:

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 the defendants may, at any time

before the trial_thereof, remove such action or pro-

ceeding to the district court of the United States for

the district and division embracing the place where

12a

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

[9 USCS §§1 et seq.] any action or proceeding

removed under this section shall be deemed to have

been brought in the district court to which it is

removed.

Since no arbitration award has been entered in this

matter, the Court turns its attention as to whether there

is a contract that requires the parties before the Court to

engage in arbitration.

The transaction that gave rise to this dispute was the

condition of the completed windmills purchased by Can-

non from Nordtank. However, it is undisputed that Can-

non was not a signatory to the Stork B.V./Nordtank

supply contract. Further, it is also undisputed that Can-

non’s purchase agreement with Nordtank does not con-

tain an arbitration clause. Stork B.V.’s only claim to

entitlement to the protection of federal court jurisdiction

must necessarily arise from the arbitration agreement

between Stork B.V. and Nordtank.

Further, counsel seem to be in complete agreement that

none of the parties to this action, Hafnia, Stork B.V. or

Stork N.V., have ever qualified to do business in Califor-

nia, or in fact have done business in California.

As was stated in AT&T Technologies v. Communications

Workers, 475 U.S. 643, 648, 89 L.Ed.2d 648, 655, 106 S.Ct.

1415, (1986), “arbitration is a matter of contract and a

party cannot be required to submit to arbitration a dis-

pute which he has not agreed so to submit.” None of the

13a

parties have made any showing that any agreement was

ever entered into by the parties to this action to submit

the issues raised by the complaint to arbitration.

While this Court has serious doubt as to whether the

state court had jurisdiction, that matter is technically not

before this Court.

Accordingly, the Court remands the action to the Supe-

rior Court for the State of California in and for the

County of Kern for further proceedings.

DATED: January 3, 1988 [sic].

EDWARD DEAN PRICE

United States District Judge

l4a

CASE NO. CV F-88-475 EDP

[ORIGINAL FILED NOV. 22, 1988

CLERK, U.S. DIST. COURT

EASTERN DISTRICT OF CALIFORNIA]

[ENTERED NOV. 22, 1988

CLERK, U.S. DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA]

IN THE UNITED STATES DISTRICT COURT FOR

THE EASTERN DISTRICT OF CALIFORNIA

FORSIKRINGSAKTIESELSKABET HAFNIA,

Plaintiff,

VENTILATOREN STORK HENGELO,

B.V., VERENIGDE

MACHINEFABRIEKEN STORK N.V.,

et al.,

Defendants.

MEMORANDUM DECISION RF:

DEFENDANTS’ MOTION TO REMAND, OR

ALTERNATELY, TO DISMISS

Defendant Ventilatoren Stork Hengelo, B.V., (hereaf-

ter “Stork B.V.”), is a corporation organized and existing

under the laws of the Netherlands. The principal business

of Stork B.V. is the manufacture of fiberglass blades for

cooling towers and windmills. Stork B.V. does not do

business in California and has never registered or become

licensed in California.

Stork B.V. sold some windmill blades to Nordtank, a

Danish windmill manufacturer. Nordtank is not a party to

this action. Nordtank’s factories and offices are located in

Denmark. All the other component parts for the Nordtank

windmills were purchased from other European manufac-

15a

turers who likewise are not a party to this action. In the

contract between Stork B.V. and Nordtank, there was an

arbitration clause.

Nordtank in turn sold certain windmills to Cannon for

installation in California in this court district. Cannon

likewise is not a party to this action.

Plaintiff Hafnia is a Danish insurance company which

allegedly provided warranty insurance to parties not

presently before the court.

After Nordtank filed for bankruptcy in Denmark, Can-

non made claims against Stork B.V., claiming Cannon

was a third-party beneficiary and entitled to the benefit of

the warranty provisions in the Stork B.V./Nordtank con-

tract. Because of Cannon’s threats and the confusion

ereated by Nordtank’s bankruptcy, Stork B.V. initiated

an action against Cannon in a Netherlands’ court. Al-

though substantial proceedings have been had between

Hafnia, Nordtank and Stork B.V. in Europe, Hafnia filed

the present action in the Kern County Superior Court.

Defendants removed the state court action to this court.

In its petition for removal, counsel for Stork B.V.

alleges in pertinent part: “This court has original jurisdic-

tion in this matter, without regard to the amount of

controversy, under the Convention on the Recognition

and Enforcement of Foreign Arbitral Awards (the ‘Con-

vention’). (9 U.S.C. § 201, et seq.)”

9 U.S.C. § 205 provides:

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 the defendants may, at any time

before the trial thereof, remove such action or pro-

ceeding to the district court of the United States for

l6a

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

[9 USCS §$§1 et seq.] any action or proceeding

removed under this section shall be deemed to have

been brought in the district court to which it is

removed.

Since no arbitration award has been entered in this

matter, the Court turns its attention as to whether there

is a contract that requires the parties before the Court to

engage in arbitration.

The transaction that gave rise to this dispute was the

condition of the windmills purchased by Cannon from

Verenigde Machinefabrieken Stork N.V. (hereafter

“Stork N.V.”). It is undisputed that Cannon was not a

signatory to the Stork B.V./Nordtank supply contract,

and that further, the Nordtank agreement does not con-

tain an arbitration clause. Hafnia’s only claim to entitle-

ment to the protection of federal court jurisdiction must

necessarily arise from the arbitration agreement between

Stork B.V. and Nordtank.

Further, counsel seem to be in complete agreement that

none of the parties to this action, Hafnia, Stork B.V. or

Stork N.V., have ever qualified to do business in Califor-

nia, or in fact have done business in California.

As was stated in AT&T Technologies v. Communications

Workers, 475 U.S. 643, 648, 89 L.Ed.2d 648, 655, 106 S.Ct.

1415, (1986), “arbitration is a matter of contract and a

party cannot be required to submit to arbitration in a

17a

dispute that which he has not agreed so to submit.” None

of the parties have made any showing that any agreement

was ever entered into by the parties to this action to

submit the issues raised by the complaint to arbitration.

While this Court has serious doubt as to whether the

state court had jurisdiction, that matter is technically not

before this Court.

Accordingly, the Court remands the action to the Supe-

rior Court for the State of California in and for the

County of Kern for further proceedings.

DATED: November 21, 1988.

EDWARD DEAN PRICE

United States District Judge

18a

Federal Rules of Appellate Procedure, Rule 38, Dam-

ages for Delay:

If a court of appeals shall determine that an appeal is

frivolous, it may award just damages and single or double

costs to the appellee.

United States Code, Title 9, Section 15, Appeals:

(a) An appeal may be taken from —

(1) an order —

(A) refusing a stay of any action under section 3

of this title,

(B) denying a petition under section 4 of this title

to order arbitration to proceed, |

this title to compel arbitration,

(D) confirming or denying confirmation of an

award or partia! award, or

(E) modifying, correcting, or vacating an award;

(2) an interlocutory order granting, continuing, or

modifying an injunction against an arbitration that is |

subject to this title; or

(3) a final decision with respect to an arbitration |

that is subject to this title. |

(b) Except as otherwise provided in section 1292(b) of |

title 28, an appeal may not be taken from an interlocutory |

order — |

(1) granting a stay of any action under section 3 of |

this title; |

(2) directing arbitration to proceed under section 4 |

of this title; |

19a

(3) ecompeiling arbitration under section 206 of this

title; or

(4) refusing to enjoin an arbitration that is subject

to this title.

United States Code, Title 9, Section 201, Enforcement

of Convention:

The Convention on the Recognition and Enforcement of

Foreign Arbitral Awards of June 10, 1958, shall be en-

foreed in United States courts in accordance with ihis

chapter.

United States Code, Title 9, Section 202, Agreement or

award falling under 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 aris-

ing out of such a relationship which is entirely between

citizens of the United States shall be deemed not to fall

under the Convention unless that relationship involves

property located abroad, envisages performance or en-

forcement 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.

United States Code, Title 9, Section 203, Jurisdiction;

amount in controversy:

An action or proceeding falling under the Convention

shal! be deemed to arise under the laws and treaties of the

United States. The district courts of the United States

20a

(ineluding the courts enumerated in section 460 of title

28) shall have original jurisdiction over such an action or

proceeding, regardless of the amount in controversy.

United States Code, Title 9, Section 204, Venue:

An action or proceeding over which the district courts

have jurisdiction pursuant to section 203 of this title may

be brought in any such court in which save for the

arbitration agreement an action or proceeding with re-

spect to the controversy between the parties could be

brought, or in such court for the district and division

which embraces the place designated in the agreement as

the place of arbitration if such place is within the United

States.

United States Code, Title 9, Section 205, Removal of

cases from state courts:

Where the subject matter of an action or proceeding

pending in a State court relates to an arbitration agree-

ment or award falling under the Convention, the defen-

dant 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. 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.

a a ee ee ee ee

2la

United States Code, Title 9, Section 206, Order to

compel arbitration; appointment of arbitrators:

A court having jurisdiction under this chapter may

direct that arbitration be held in accordance with the

agreement at any place therein provided for, whether that

place is within or without the United States. Such court

may also appoint arbitrators in accordance with the provi-

sions of the agreement.

United States Code, Title 9, Section 207, Award of

arbitrators; confirmation; jurisdiction; proceeding:

Within three years after an arbitral award falling under

the Convention is made, any party to the arbitration may

apply to any court having jurisdiction under this chapter

for an order confirming the award as against any other

party to the arbitration. The court shall confirm the award

unless it finds one of the grounds for refusal or deferral

of recognition or enforcement of the award specified in

the said Convention.

United States Code, Title 9, Section 208, Chapter 1;

residual application:

Chapter 1 applies to actions and proceedings brought

under this chapter to the extent that that chapter is not in

conflict with this chapter or the Convention as ratified by

the United States.

United States Code, Title 28, Section 1441, Actions

removable generally:

(a) Except as otherwise expressly provided by Act of

Congress, any civil action brought in a State court of

which the district courts of the United States have origi-

nal jurisdiction, may be removed by the defendant or the

defendants, to the district court of the United States for

22a

the district and division embracing the place where such

action is pending. For purposes of removal under this

chapter, the citizenship of defendants sued under ficti-

tious rames shall be disregarded.

(b) Any civil action of which the district courts have

original jurisdiction founded on a claim or right arising

under the Constitution, treaties or laws of the United

States shall be removable without regard to the citizen-

ship or residence of the parties. Any other such action

shall be removable only if none of the parties in interest

properly joined and served as defendants is a citizen of

the State in which such action is brought.

(ec) Whenever a separate and independent claim or

cause of action, which would be removable if sued upon

alone, is joined with one or more otherwise non-removable

claims or causes of action, the entire case may be removed

and the district court may determine all issues therein,

or, in its discretion, may remand all matters not otherwise

within its original jurisdiction.

(d) Any civil action brought in a State court against a

foreign state as defined in section 1603(a) of this title

may be removed by the foreign state to the district court

of the United States for the district and division embrac-

ing the place where such action is pending. Upon removal

the action shall be tried by the court without jury. Where

removal is based upon this subsection, the time limita-

tions of section 1446(b) of this chapter may be enlarged

at any time for cause shown.

(e) The court to which such civil action is removed is

not precluded from hearing and determining any claim in

such civil action because the State court from which such

civil action is removed did not have jurisdiction over that

claim.

23a

United States Code, Title 28, Section 1447, Procedure

after removal generally:

(a) In any case removed from a State court, the dis-

trict court may issue all necessary orders and process to

bring before it all proper parties whether served by

process issued by the State court or otherwise.

(b) It may require the petitioner to file with its clerk

copies of all records and proceedings in such State court

or may cause the same to be brought before it by writ of

certiorari issued to such State court.

defect in removal procedure must be made within 30 days

after the filing of the notice of removal under section

1446(a). If at any time before final judgment it appears

that the district court lacks subject matter jurisdiction,

the case shall be remanded. An order remanding the case

may require payment of just costs and any actual ex-

penses, including attorney fees, incurred as a result of the

removal. A certified copy of the order of remand shall be

mailed by the clerk to the cierk of the State court. The

State court may thereupon proceed with such case.

(d) An order remanding a case to the State court from

which it was removed is not reviewable on appeal or

otherwise, except that an order remanding a vase to the

State court from which it was removed pursuant to

section 1443 of this title shall be reviewable by appeal or

otherwise.

(e) If after removal the plaintiff seeks to join addi-

tional defendants whose joinder would destroy subject

matter jurisdiction, the court may deny joinder, or permit

joinder and remand the action to the State court.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.