Petition for Writ of Certiorari — Coastal Salvadoran Power Ltd. v. Crystal Power Co.

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MAR 2° 2005

No. 04- O4L1IS1!

IN THE

Supreme Court of the United States

COASTAL SALVADORAN POWER LTD., COASTAL NEJAPA

LTD., EL PASO CGP CO., SUCCESSOR IN INTEREST TO

COASTAL STATES GAS CORP. AND THE COASTAL CORP.,

AND EL PASO CORP., SUCCESSOR IN INTEREST TO

COASTAL STATES GAS CORP. AND THE COASTAL CORP.,

Petitioners,

CRYSTAL POWER COMPANY,

Respondent.

On PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES CouRT OF APPEALS FOR THE FirtH CIRCUIT

PETITION FOR A WRIT OF CERTIORARI

C. MARK BAKER

Counsel of Record

Joy M. SoLoway

FULBRIGHT & JAworskI L.L.P.

1301 McKinney, Ste. 5100

Houston, Texas 77010-3095

(713) 651-5151

Counsel for Petitioners

192050 ce

COUNSEL PRESS

{808} 274-3321 * (800) 359-6859

QUESTIONS PRESENTED FOR REVIEW

1. Did the Fifth Circuit wrongly construe 9 U.S.C. § 205

by holding that 28 U.S.C. § 1447(d) bars appeals from

remand orders of causes removed under the statute

implementing the Convention on the Recognition and

Enforcement of Foreign Arbitral Awards?

2. Must the procedural bar of unreviewability of remand

orders fall in the face of the United States’ treaty obligations

to 135 other nations? See Mitsubishi Motors Corp. v. Soler

Chrysler-Plymouth, Inc., 473 U.S. 614, 629 (1985)

(“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 require that we enforce the

parties’ agreement, even assuming that a contrary result

would be forthcoming in a domestic context”)?

3. Did the Fifth Circuit erroneously refuse to review a

remand order which either satisfies the collateral order

doctrine or is reviewable because it was based on a non-

§ 1447(c) ground in conflict with this Court’s precedent?

aaa attain ie

PARTIES TO THE PROCEEDING BELOW

The parties to the proceeding below are:

Crystal Power Company (plaintiff/appellee/ respondent);

Coastal Salvadoran Power, Ltd., Coastal Nejapa,

Ltd., El Paso CGP Co., successor in interest to Coastal States

Gas Corporation and The Coastal Corporation, and El Paso

Corp., successor in interest to Coastal States Gas Corporation

and The Coastal Corporation (defendants/ appellants

petitioners).

CORPORATE DISCLOSURE STATEMENT

Coastal Salvadoran Power, Ltd. and Coastal Nejapa, Ltd.

are Cayman Islands companies.

El Paso CGP Company, successor in interest to Coastal

States Gas Corporation and The Coastal Corporation, and El

Paso Corporation, successor in interest to Coastal States Gas

Corporation and The Coastal Corporation, are Delaware

corporations.

El] Paso Corporation is the ultimate parent company of

Coastal Salvadoran Power, Ltd., Coastal Nejapa Ltd., and

El Paso CGP Company. Two publicly held companies own

more than 10% of El Paso Corporation’s stock. They are

Pacific Financial Research and Brandes Investment Partners

iil

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED FOR REVIEW ...... i

PARTIES TO THE PROCEEDING BELOW ..... il

CORPORATE DISCLOSURE STATEMENT ..... il

TABLE OF CONTENTS ...................... ill

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

TABLE OF APPENDICES .................... ix

Co A ee l

STATEMENT OF JURISDICTION ............. 2

STATUTORY PROVISIONS INVOLVED ....... 2

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

1. Dispute Between Nejapa Power and CEL

Over the Power Project Is Resolved By

MIN Wut nea Featotcs cos eoccen. 3

Il. Crystal Seeks Award Proceeds ........... 4

Ill. Petitioners Remove, District Court Remands,

and Fifth Circuit Refuses to Review the First

I oe coe oe ae 5

IV. Petitioners’ Second Removal, the Second

Remand and Dismissal of Appeal

Contents

REASONS FOR GRANTING THE PETITION ...

II.

The Fifth Circuit Incorrectly Applied

§ 1447(d) to Deny Review of Remand Orders

in a Convention Case, Effectively Vitiating

i TIE SU ko Se dickcccacdae sess:

The Fifth Circuit’s Orders Conflict With

This Court’s Longstanding Commitment

to the Convention .................

The Fifth Circuit Dismissals Violated

Statutory Construction Rules - in

PO OP Fabio os cccteagees

The Fifth Circuit’s Refusal to Review the

Remand Orders in a Convention Case

Impermissibly Frustrates the Goals of the

ae. <u 42) bavuuhabewekouss

Policy Goals of § 1447(d) Have No

PIE TENS a once bss eesui eau

Additionally, the District Court’s Second

Remand Order Is Reviewable Because it Was

Predicated on a Non-1447(c) Ground .....

The Remand Orders Are Reviewable Under

the Collateral Order Doctrine ............

eR PC Se ee re ee rer

Page

TABLE OF CITED AUTHORITIES

Page

FEDERAL CASES

Bautista v. Star Cruises,

No. 03-15884 , 2005 WL 90949 __ F.3d ois

SeaGe Ga EE Jick hoe kuee eee 5. 9.45

Beiser v. Weyler,

284 F.3d 665 (Sth Cir. 2002) ................ a

Bell v. Hood,

See Gls OTe CAE 23 nde cane ee 23

Chevron U.S.A. Inc. v. Echazabal.,

SPM Chek. FO Gg phe eine ee 15, 16

City of Waco v. United States Fidelity

& Guar. Co.,

Ee Ui POP OREP) 60 3 kas eect 25, 26

Cohen v. Beneficial Indus. Loan Corp.,

CMR re ey ary wr ee! 25

Dahiya v. Talmidge Int’l, Ltd.,

371 F.3d 207 (Sth Cir.),

reh’g denied, 380 F.3d 218 (Sth Cir. 2004),

cert. denied, 543 U.S. __ (2005) ........ 9, 14, 17, 18

Fair v. Kohler Die & Specialty Co.,

pa, Bk ee a hE eee ant torre pay 22

Foster v. Chesapeake Ins. Co.,

Fad Fe Ade? C96 Ce FEO) ok ie ees 23, 25

Cited Authorities

Page

Franchise Tax Bd. of Cal. v. Constr. Laborers

Vacation Trust for So. Cal.

SOS US. ECEDRED oc ouvonceescansscuee 19

Freudensprung v. Offshore Tech. Servs.. Inc..

379 F.3d 327 (Sth Cir. 2004) ................ 4

In re Adm'rs of the Tulane Educ. Fund.

954 F.2d 266 (Sth Cir. 1992) ............ ~—T Oe

In re Amoco Petroleum Additives Co..

964 F.2d 706 (7th Cir. 1992) ............... 17

LaFarge Coppee v. Venezolana de

Cementos S.A.C.A.,

31 F.3d 70 (2d Cir. 1994) ... 2.020. 17

Mitsubishi Motors Corp. v. Soler Chrysler-

Plymouth, Inc.,

473 U.S. 614 (1985) ................... 1, 1, 11, 12

Phoenix Aktiengesellschaft v. Ecoplas, Inc.,

391 F.3d 433 (2d Cir. 2004) ................. 21 |

Quackenbush v. Allstate Ins. Co..

SET UB. FOO CRUD 5 vv ccoussuvcaviaeeeeee 26

aes

Robinson v. Shell Oil Co..

DED UD. BSF CHBOTD ccccccskencecciissn. 15

Cited Authorities

Page

Scherk v. Alberto-Culver Co..

S07 U.S. SOG (1974) occ ccc ccc ccc cece 11, 12

Soley v. First Nat'l Bank of Commerce,

923 F.2d 406 (Sth Cir. 1991) ............. 23, 24, 25

Steel Co. v. Citizens for a Better Env't,

Ee, , x

Thermtron Prods., Inc. v. Hermansdorfer,

423 U.S. 336 (1976) ................... 15, 23, 25

Transit Cas. Co. v. Certain Underwriters

at Lloyd's of London,

119 F.3d 619 (8th Cir. 1997) ................ 17

United States v. Rice.

S20 U.S. TEZ CIDE) . on cc cccccccccceccccne 21

United States v. Ron Pair Enters., Inc..

GE Ghuts BOD CHO 6 odwccewceeccscieagnn. 15

Whitman v. Raley’s, Inc.

886 F.2d 1177 (9th Cir. 1989) ............... 24

Wisconsin Dept. of Corr. v. Schacht,

PO a BOE CRO obo ocd bedb kd oewwe cau 15

vill

Cited Authorities

Page

STATUTES AND CODES

Nn a rh nr AN eh I Xe ta 20, 21

POE OO MNOMED hidden deeddweses ce wks 2, 3, 14, 21

| SP ee ree eee rrr Te 5

PU. cs fuhin wae ede ove ak oe daa sehen 20

PR 4 op aro sid os odd nd eed sane kas passim

ee eer rr ee 20

AE PE Se tos core rneeveeusdaveecete. 2

Pes ON aS bosons end cks eee ee 19

PE a u's vanes bo acs cae ea dare eees 20

is 2. 05h aonb éuden eoudes woke 15, 16, 17

SL FEE 6-5 bah adesescee ach eenesas passim

Federal Rule of Civil Procedure 12(b)(1) ........ 18

ee en

TABLE OF APPENDICES

Appendix A — Order Of The United States Court

Of Appeals For The Fifth Circuit Filed June 1,

PIP OTE EN eR eT Perr es Pre eee tree gare

Appendix B — Memorandum And Order And Order

Of Remand Of The United States District Court

For The Southern District Of Texas, Houston

Division Both Dated November 10, 2003 And

Both Filed November 13, 2003 ..............

Appendix C — Order Of The United States District

Court For The Southern District Of Texas,

Houston Division Entered December 29, 2003

2's. 42.828 6 £6 2 2 2 2 2.4.06 O2AD SE C4 AD ES E.6.8 2.8 8.8.9 2 ORC OO

Appendix D —- Order Of The United States Court

Of Appeals For The Fifth Circuit Filed October

Pe as wk owe 5 A GLy aad <a

Appendix E — Opinion Of The United States Court

Of Appeals For The Fifth Circuit Filed November

GE ca aoa uudces ea ea hed eae es

Appendix F — Memorandum And Order Of The

United States District Court For The Southern

District Of Texas, Houston Division Entered

PE es HE. hav ecer ein sede enseexssasen

Appendix G — Order Of The United States Court

Of Appeals For The Fifth Circuit Denying Petition

For Rehearing Filed January 7, 2005 ..........

Appendix H — Statutes Involved ...............

Page

12a

15a

17a

19a

Coastal Salvadoran Power, Ltd. (“Coastal Salvadoran’’),

and Coastal Nejapa, Ltd. (“Coastal Nejapa”), Cayman Islands

companies, E] Paso CGP Company, successor in interest to

Coastal States Gas Corporation and The Coastal Corporation,

and El Paso Corporation, successor in interest to Coastal

States Gas Corporation and The Coastal Corporation, file

this petition for writ of certiorari to review decisions of the

United States Court of Appeals for the Fifth Circuit.

OPINIONS BELOW

Pursuant to Supreme Court Rule 12(4), this single

petition is being filed in connection with two separate orders

issued by the Fifth Circuit dismissing two appeals of

remand orders in a case removed twice under Section 205 of

Chapter 2 of the Federal Arbitration Act.

The district court’s orders of remand and memorandum

opinions were unpublished. The district court’s first remand

order was entered in Civil Action No. H-03-3634; Crystal

Power Company v. Coastal Salvadoran Power Ltd.; in the

United States District for the Southern District of Texas,

Houston Division. See App. B. The Court of Appeals order

dismissing the appeal for lack of jurisdiction is unpublished.

See App. A. The district court’s second order of remand was

entered in Civil Action No. H-04-1250; Crystal Power

Company v. Coastal Salvadoran Power Ltd.; in the United

States District for the Southern District of Texas, Houston

Division. See App. F. The Court of Appeals order dismissing

Petitioners’ appeal from the second order of remand for lack

of jurisdiction is also unpublished. See App. E.

STATEMENT OF JURISDICTION

The first order of the United States Court of Appeals for

the Fifth Circuit sought to be reviewed was entered on June 1,

2004. A petition for rehearing en banc was timely filed.

The petition was denied on October 18, 2004. See App. D.

Petitioners’ petition for writ of certiorari was originally due

on January 18, 2005. On January 11, 2005, Justice Scalia

granted petitioners’ application for extension of time to file

the petition of certiorari until March 2, 2005 so that a single

petition could be filed in the two related cases.

The second order of the United States Court of Appeals

for the Fifth Circuit sought to be reviewed was entered on

November 10, 2004. See App. E. A petition for rehearing

was timely filed on November 24, 2004, and was denied on

January 7, 2005. See App. G.

This Court has jurisdiction under 28 U.S.C. § 1254(1).

The Petitioners have been unsuccessful in their attempts

to stay or recall the mandate. As a result, the state trial court

has scheduled a trial for May 23, 2005.

STATUTORY PROVISIONS INVOLVED

Congress ratified the Convention on the Recognition and

Enforcement of Foreign Arbitral Awards (“the Convention’)

in 1970. December 29, 1970, Art. II, para. 1, 21 U.S.T. 2517,

330 U.N.T.S. 38. Congress implemented the Convention at

9 U.S.C. §§ 201-08 (the “Convention Act”). Section 205 of

the Convention Act, at issue here, provides for removal of

actions where the subject matter “relates to an arbitration or

agreement falling under the Convention.” 9 U.S.C. § 205.

ARN Oe | a at BAL P

Section 205 and the statute providing for the general

procedure after removal (28 U.S.C. § 1447(d)) are reproduced

in the appendices to this petition Gee App. H).

STATEMENT OF THE CASE

This action arises out of a dispute over the distribution

of a $90 million international arbitral award (the “Final

Award”) that is subject to the Convention.!

Crystal Power Company (“Crystal”), a Bahamian

company, sued four defendants. Defendants/Petitioners

Coastal Salvadoran and Coastal Nejapa are Cayman Islands

companies. Crystal also sued Defendants/Petitioners El Paso

CGP Company and El Paso Corporation, both as successors

in interest to Coastal States Gas Corporation and The Coastal

Corporation. The suit attacks the Final Award and the process

that produced it. It also seeks proceeds due under a contract

entered into pursuant to the terms of the Final Award. The

basis for removal jurisdiction in the federal court is 9 U.S.C.

§ 205.

I. Dispute Between Nejapa Power and CEL Over the

Power Project Is Resolved By Arbitration

In 1994, El Salvador decided to proceed with the

country’s first private power generation project. Comision

Ejecutiva Hidroelectrica del Rio Lempa (“CEL”), an

autonomous institution of the government of El Salvador,

accepted bids for the project, which was eventually (through

various assignments not relevant here) awarded to Nejapa

1. The text of the Convention is reprinted in the notes under

§ 201 of Chapter 2 of the Federal Arbitration Act, 9 U.S.C.A. § 201.

Power Company, L.L.C. (“Nejapa Power”). Crystal and

Coastal Salvadoran own Coastal Nejapa, which is majority

owner of Nejapa Power, which owns the power plant. CEL

entered into a 20-year Power Purchase Agreement (“PPA”)

with Nejapa Power. The PPA provided for construction of

the power plant and the sale of power by Nejapa Power to

CEL. The PPA contained an arbitration clause.

In 1999, CEL filed an arbitration action under the

Arbitration Rules of the United Nations Commission on

International Trade Law seeking the termination of the PPA

without payment of compensation to Nejapa Power. CEL

claimed that due to unforeseeable circumstances, the PPA

had become excessively onerous. The arbitration was

conducted in Geneva, Switzerland. On March 21, 2002, the

Panel issued its Final Award. The Panel allowed CEL to

terminate the PPA provided that CEL: (1) pay Nejapa Power

$90 million USD as indemnification for the PPA’s premature

termination, and (2) execute a new contract with Nejapa

Power, a Transmission Costs Agreement, by which CEL was

to be responsible for and to pay Nejapa Power annually

certain monies for five years. CEL elected to terminate the

PPA, to pay the $90 million, and to execute the Transmission

Costs Agreement. .

II. Crystal Seeks Award Proceeds

In its original petition filed in Texas state district court,

and then as clarified in its later petitions, Crystal complains

that it did not receive its fair share of the Final Award’s

corpus, that it is not receiving other payments, including

payments being made pursuant to the Transmission Costs

Agreement, and that Petitioners mishandled the international

arbitration proceeding. Crystal also claims that Petitioners’

Oe Ce ee ee a ee

conduct amounted to a fraudulent tax evasion scheme

perpetuated against the Salvadoran and United States

governments. Crystal’s pleaded causes of action include

conversion, breach of fiduciary duty, breach of contract,

breach of the duty of good faith and fair dealing,

misrepresentation, shareholder oppression, and fraud.

III. Petitioners Remove, District Court Remands, and

Fifth Circuit Refuses te Review the First Remand

Order

Petitioners removed this case under 9 U.S.C. § 205

(providing for removal of actions that “relate to” an

arbitration agreement or award falling under the

Convention).? An agreement or award falls under the

Convention if it arises “out of a legal relationship, whether

contractual or not, which is considered as commercial,” and

the relationship is not entirely between citizens of the United

States. 9 U.S.C. ’§ 202. Although expressly finding the Final

Award “was one subject to the Convention,” and that the

Final Award and the distribution of funds payable under the

Award may be evidence in Crystal’s state court suit

(App. B), the district court nonetheless granted Crystal’s

motion for remand, reasoning that Crystal’s lawsuit did “not

involve potential recognition and enforcement of any arbitral

Clause, agreement, or award.” App. B.

2. Section 205’s “relates to” criteria has been construed broadly,

as long as the agreement or award falling under the Convention can

conceivably affect the outcome of the plaintiff's case, the agreement

or award “relates to” the plaintiff's action. See Bautista v. Star

Cruises, No. 03-15884 , 2005 WL 90949 at *1, __F.3d__ (11th Cir.

2005); Beiser v. Weyler, 284 F.3d 665, 674 (Sth Cir. 2002) (“relates

to” jurisdiction under Section 205 should be construed “liberally”

because “easy removal is exactly what Congress intended in § 205”).

Petitioners immediately filed a motion for

reconsideration with the district court accompanied by a

motion to compel arbitration based on the arbitration

provision in the Transmission Costs Agreement. The district

court granted the motion for reconsideration, vacated the

remand order, and reinstated the case, finding that remand

would “be futile because the case now clearly would be

removable under the Convention.” App. C. The district court

reasoned that “[w]ith Defendants’ new filings, it is evident

that the subject matter of the action if remanded to state |

court would now relate to the demand for an arbitration

under the Convention to determine Plaintiff’s claim to a |

portion of a previous arbitral award.” Id. (emphasis added).

However, Crystal subsequently convinced the district court

that it lacked jurisdiction to vacate the remand order and

reinstate the case and the district court vacated its order

reinstating the case.

In their appellants’ brief in the appeal from the first

remand order, Petitioners argued that the district court erred

because it had allowed an attack on an international

arbitration award issued under the Convention to proceed

without federal court involvement. Specifically, they argued

that the district court’s requirement that a claim involve

“potential recognition and enforcement of an arbitral clause,

agreement or award” is nowhere to be found in § 205’s

language and instead was an invented limitation that could

not withstand scrutiny under established statutory

3. Petitioners also filed a notice of appeal of the remand order.

Despite the fact that the district court granted the motion for

reconsideration and reinstated the case, Petitioners did not abandon

their appeal. Indeed, Petitioners later amended their notice of appeal

to include an appeal from the district court’s order vacating its

reinstatement order.

construction rules. They also argued that the district court

failed to apply the “low bar” applicable to removal

jurisdiction as set forth in its prior opinion in Beiser, 284

F.3d at 669, and which has since been followed by the

Eleventh Circuit. Bautista, _ F.3d at __- The Fifth Circuit

did not reach these merits arguments.

On June 1, 2004, in a one-sentence order, the Fifth

Circuit dismissed Petitioners’ appeal for lack of jurisdiction,

and on October 18, 2004, the Fifth Circuit denied the petition

for rehearing en banc, treating it as a request for panel

rehearing. App. A.

IV. Petitioners’ Second Removal, the Second Remand and

Dismissal of Appeal

Hours after the hearing at which the district court

announced that it would vacate the order reinstating the case,

but before the district court entered its order vacating the

reinstatement order, Crystal filed an amended petition in state

court, attempting to sanitize its pleading of all references to

the Final Award or the international arbitral proceeding.

However, because Crystal continued to seek proceeds related

to the Final Award and the Transmission Costs Agreement,

which had been entered into pursuant to the Final Award,

and because the Transmission Costs Agreement contains an

arbitration provision, Petitioners removed the cause a second

time.* In addition to asserting that the action “related to” an

arbitration award falling under the Convention, Petitioners

alleged that the cause “related to” an arbitration agreement

falling under the Convention based upon the arbitration

agreement in the Transmission Costs Agreement. This was

4. The case was eventually assigned to the same district judge

that handled the first removal.

the same basis for jurisdiction asserted by Petitioners in their

motion for reconsideration of the first remand order.

Simultaneously, Petitioners filed a motion to compel

arbitration which was incorporated by reference into the

notice of removal.

Even though the district court had previously indicated

that a motion to compel arbitration made it “evident that the

subject matter of the action ... would now relate to the

demand for arbitration under the Convention”, on August 18,

2004, the district court granted Crystal’s motion to remand’

App. C. The district court identified three reasons for the

remand: (1) the “Notice of Removal itself does not contain

an allegation that ‘an arbitration clause falling under the

Convention provides a defense’ to Crystal’s claim against

them”; (2) “the arbitration agreements (incorporated into the

Notice of Removal) do not, on their face, provide any defense

to Crystal’s claims”; and (3) “Crystal’s claims are not

dependent upon any issues that are subject to the agreements

containing the arbitration provisions.” App. F.

The Fifth Circuit stayed the second remand order on

Petitioners’ request. In their appellants’ brief challenging the

second remand order, Petitioners argued that the order was

reviewable because: (1) it was based on a non-§ 1447(c)

ground; and (2) if it applies, § 1447(d) should not be

interpreted to foreclose review of remand orders entered in

causes removed under the Convention. Petitioners contended

that for reasons of international comity, the domestic

considerations that animate the unreviewability of remand

orders must yield. Petitioners also argued that the order was

5. The district court determined that the first remand did not

foreclose Petitioners from removing the case on a different basis.

Ae tie Pein tbat. Ve te Hd De HS

reviewable under the collateral order doctrine. As to the

merits, Petitioners complained that the district court

erroneously: (1) conflated a merits inquiry (whether

Petitioners could enforce the arbitration agreement) with a

jurisdictional inquiry (whether Crystal’s action “relates to”

an agreement falling under the Convention); (2) placed an

onerous and erroneous pleading burden on Petitioners and

then wrongly resolved doubts against Petitioners; and

(3) misconstrued § 205’s “relate to” criteria by requiring that

Petitioners prove that an arbitration agreement is a defense

to the plaintiff's action when the word “defense” is nowhere

in § 205. Petitioners also pointed out that the district court’s

second remand conflicted with its reinstatement order, where

the court had stated that § 205’s “relates to” criteria is

satisfied if there is “potential for enforcement” of an

arbitration agreement “under the Convention.” Again, the

Fifth Circuit did not reach these merits-arguments.

On November 10, 2004, the day after Petitioners’

appellants’ brief was filed, in a per curiam order, the Fifth

Circuit granted Crystal’s motion to dismiss the appeal and

to lift the stay. App. E. The Fifth Circuit’s brief order cites to

Dahiya v. Talmidge Int’l, Ltd., 371 F.3d 207 (Sth Cir.) reh’g

denied, 380 F.3d 218 (5th Cir. 2004), cert. denied, 543 U.S.

_ (2005), a case which is inapposite because the district court

there had found that the arbitration agreement did not fall

under the Convention. On January 7, 2005, the Fifth Circuit

denied Petitioners’ petition for rehearing en banc. App. G.

REASONS FOR GRANTING THE PETITION

The ever-increasing use of arbitration to resolve

international commercial disputes reflects the success of the

Convention, which was passed to facilitate the arbitral

process in international contexts. As international arbitrations

multiply, so too does litigation that relates to the broad array

of rights afforded under the Convention Act. The question

presented is whether § 1447(d) will frustrate the important

policy goals of the Convention and the Convention Act by

wrongly imposing the vastly different policy reasons that

prevent review of remand orders in domestic contexts on

remand orders entered in Convention cases. (The district

court found that the Final Award and the arbitration provision

at issue fall under the Convention.) Stated differently, the

question posed by this petition is whether a district court

may determine whether an action “relates to” an award or

agreement falling under the Convention with no review of

that determination afforded.

eee

This petition for writ of certiorari should be granted

because the Fifth Circuit’s refusal to review the district |

court’s orders remanding a cause that was removed pursuant

to 9 U.S.C. § 205 contravenes the Convention and the

nation’s treaty obligations thereunder and is premised on an

erroneous construction of § 205. Section § 1447(d) does not

apply, or if it does, should not be construed in a manner that

frustrates the fundamentally important goals of the later

adopted Convention Act.

This Court previously recognized that the Convention's

purpose is to unify standards by which international

arbitration agreements are enforced, which are achieved in

part by channeling those cases to federal court:

The goal of the Convention, and the principal

purpose underlying American adoption and

implementation of it, was to encourage the

recognition and enforcement of commercial

arbitration agreements in international contracts

and to unify the standards by which agreements |

to arbitrate are observed and arbitral awards are ,

enforced in the signatory countries. ‘

Scherk v. Alberto-Culver Co., 417 U.S. 506, 520 n.15 (1974).

In Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth,

Inc., this Court again emphasized the importance of the

federal policy favoring international arbitration when it held

that:

[C]oncerns 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 require that we enforce the

parties’ agreement, even assuming that a contrary

result would be forthcoming in a domestic context.

473 U.S. 614, 629 (1985).

As this Court recognized, the emphatic federal policy in :

favor of arbitral dispute resolution “applies with special force

in the field of international commerce.” Jd. at 631.

Thus, behind the strong federal policy of support for

international arbitration as a dispute resolution system is

Congress’ recognition that in order for international

commerce to thrive, there must be a system which creates

predictability and uniformity in the marketplace. Both of

these underlying goals were undermined by the Fifth Circuit’s

improper reliance on 28 U.S.C. § 1447(d) as rendering a

remand order of a cause removed under § 205, where the

district court determined that the arbitration award and

arbitration agreement fell within the Convention, impervious

to review. That untenable breach of comity deserves review.

Even if this Court were to conclude that § 1447(d) is an

absolute bar to reviewability, and there are forceful reasons

against that conclusion, here both orders were reviewable

under the collateral order doctrine and the second order

should have been reviewable on the additional basis that the

district court remanded the cause based on a non-§ 1447(c)

ground.

I. The Fifth Circuit Incorrectly Applied § 1447(d) to

Deny Review of Remand Orders in a Convention

Case, Effectively Vitiating an Important Treaty

A. The Fifth Circuit’s Orders Conflict With This

Court’s Longstanding Commitment to the

Convention

This Court has twice held that well-established bars-must

give way in deference to the policies underlying the

Convention. In Mitsubishi Motors, this Court held that the

Convention required abandonment of a bar to the arbitrability

of Sherman Act claims. Mitsubishi Motors, 473 U.S. at 639

n.21. In Scherk, this Court held that an international

;

arbitration agreement would be enforced notwithstanding

language in the Securities Act to the contrary:

[T]he delegates to the Convention voiced frequent

concern that courts of signatory countries in which

an agreement to arbitrate is sought to be enforced

should not be permitted to decline enforcement

of such agreements on the basis of parochial views

of their desirability or in a manner that would

diminish the mutually binding nature of the

agreements.

417 U.S. at 520 n.15. In Mitsubishi Motors and Scherk, the

“parochial views” involved questions of substantive law and

whether claims made under those laws were arbitrable. In

both cases, this Court determined that, despite “parochial

views” to the contrary in domestic contexts, claims made

under those substantive laws were arbitrable in Convention-

related cases. See also Bautista, _ F.3d at __ (because

Congress gave the “treaty-implementing” Convention statute

“primacy”, the Convention “must be enforced according to

its terms over all prior inconsistent rules of law”) (internal

citations omitted). The requested result here is much less

intrusive. It is simply that § 1447(d) does not foreclose review

of remand orders of cases removed under § 205. Without

such a result, defendants in Convention-related cases are

subject to the “parochial view” that because of § 1447(d),

procedural (not substantive) law that pre-dates the adoption

of the Convention, they are not entitled to a federal forum

for resolution of their Convention-related cases.

Following this Court’s directive, both the Fifth and

Eleventh Circuits recently held that the FAA’s exemption of

seaman employment contracts does not apply to arbitration

agreements covered by the Convention. Bautista, _ F.3d at

__3 Freudensprung v. Offshore Tech. Servs., Inc., 379 F.3d

327, 338-39 (Sth Cir. 2004). These cases represent yet another

example of a bar that exists in a domestic context giving

way to the primacy of the Nation’s treaty commitment.

Section 1447(d)’s prohibition of review of remand orders

in the domestic context should not be allowed to thwart the

powerful policy goals animating the enforcement of

international arbitration agreements and awards under the

Convention and the Convention Act. 9 U.S.C. §§ 201-08.

The reasons for curtailing a jurisdictional debate that is

achieved by allegiance to § 1447(d) must yield to the more

important policy of facilitating predictability and uniformity

in Convention cases that is achieved by routing Convention

cases to our federal courts. Like the two prior bars this Court

held to be ineffective in a case governed by the Convention,

this Court should now find the bar to review of remand orders

to be ineffective in Convention cases.

B. The Fifth Circuit Dismissals Violated Statutory

Construction Rules in Interpreting § 205

The Fifth Circuit’s first order of dismissal (App. A)

contains no reasoning; the second order cites only to Dahiya

(App. E). In Dahiya, the Fifth Circuit reasoned that § 205’s

provision that “the procedure for removal of causes otherwise

provided by law shall apply” means that the “strictures of

§ 1447(d)” apply. Dahiya, 371 F.3d at 209. The Fifth Circuit’s

analysis violates settled statutory construction rules.

The first step in interpreting a statute is to determine

whether the statutory language has a plain and unambiguous

meaning. “[T]he language itself, the specific context in which

that language is used, and the broader context of the statute

as a whole” guide this determination. Robinson v. Shell Oil

Co., 519 U.S. 337, 341 (1997). The inquiry ceases if the

language is clear and “the statutory scheme is coherent and

consistent.” Jd. at 340 (quoting United States v. Ron Pair

Enters., Inc., 489 U.S. 235, 240 (1989)).

The Fifth Circuit interpreted § 205’s phrase “the

procedure for removal of causes otherwise provided by law

shall apply” to be an express incorporation of 28 U.S.C.

§ 1447 into § 205. Dahiya, 371 F.3d at 209. The clear and

unambiguous language of that provision demonstrates that

such an interpretation is incorrect. Moreover, the Fifth

Circuit’s reasoning runs contrary to long standing statutory

construction rule expressio unius exclusio alterius (the

expression of one thing is the exclusion of another).

See generally Chevron U.S.A. Inc. v. Echazabal, 536 U.S.

73, 80-81 (2002).

“The procedure for removal” language in 9 U.S.C.

§ 205 is clear and unambiguous and refers to 28 U.S.C.

§ 1446, not § 1447 or any other statute in Chapter 89. The

words “procedure for removal” in § 205 are clear and

unambiguous. It is a direct reference to § 1446, which is

entitled “Procedure for removal” and which is the foundation

for the well-pleaded complaint rule. Conversely, § 1447 is

entitled “Procedure after removal generally.” This Court has

previously noted the distinction between § 1446, which

governs “procedure for removal” and § 1447, which governs

procedure that occurs after removal should the non-removing

party request that the case be returned to state court. See

Thermtron Prods., Inc. v. Hermarsdorfer, 423 U.S. 336, 342

(1976); see also Wisconsin Dept. of Corr. v. Schacht, 524

U.S. 381, 392 (1998) (“[1447] deals, not with the question

of what is removable, but with the procedures that a federal

court is to follow after removal occurs’) (emphasis added).

Therefore, the clear and unambiguous language of § 205

reflects Congress’ intent to incoporate certain aspects of

§ 1446 into § 205; not, as the Fiftu Circuit held, to incorporate

all of § 1447 into § 205. Moreover, had Congress intended

to incorporate § 1447 into § 205, rather than use the phrase

“procedure for removal” it could have referred to procedures

for “removal of cases from state courts” which is the heading

of Chapter 89 which includes §§ 1441-52. Finally, “procedure

for removal” and “procedure after removal” are concepts that

typically go hand in hand. That “procedure for removal” was

included in § 205 and “procedure after removal” was

excluded further compels the holding that Congress did not

intend for § 1447 to apply to § 205 removals. Echazabal,

536 US. at 81.

A contextual reading of “procedure for removal” also

establishes that § 205 is referring to § 1446 and not § 1447.

Additionally, a reading of § 205 as a whole demonstrates

that Congress enacted the statute to make it easy to remove 4

cases related to international arbitration agreements and 8

awards. Congress accomplished this by creating a number :

of exceptions to standard removal procedures. More :

specifically, the statute is designed to free removing parties ‘

in cases related to international arbitration agreements and

awards from certain requirements in 28 U.S.C. § 1446.

For example, § 205 allows the grounds for removal to

be shown on the face of the complaint or the face of the

petition for removal. This is a clear exception to the well-

pleaded complaint rule, which relaies to the operation of

§ 1446.° The other major difference in removal procedure

codified in § 205 is the timing requirement — the action may

be removed at any time before trial — which also alters

removal procedure embodied in § 1446. The Fifth Circuit in

Dahiya considered none of these contextual aids and in a

mere sentence concluded that “procedure for removal” is an

express incorporation of § 1447(d).’ ;

6. With this in mind, the exception to the well-pleaded complaint

rule written into § 205 makes perfect sense because, in Convention

— related matters, the balancing of the separation of powers at the

heart of the development of the well-pleaded complaint rule is

inapplicable. In Convention-related cases, the balance of power is

decidedly shifted to favor federal over state interests.

7. In Dahiya, the Fifth Circuit relied on three cases for the

proposition that § 205 incorporates § 1447(d). 371 F.3d at 209. None

of those cases conducted a statutory construction analysis. Moreover,

those cases are distinguishable on other grounds. In LaFarge Coppee

v. Venezolana de Cementos S.A.C.A., 31 F.3d 70 (2d Cir. 1994), the

district court remanded because of a procedural defect in removal.

Specifically, the defendant had not removed “prior to trial” as

mandated by the express language of § 205 because the state court

had already conducted the injunction hearing and the complainant

only sought injunctive relief. Jd. at 71-73. In Transit Cas. Co. v.

Certain Underwriters at Lloyd’s of London, 119 F.3d 619 (8th Cir.

1997), the district court specifically cited 28 U.S.C. § 1447(c) as the

basis for its remand order. /d. at 624 (“[T]he district court cited 28

U.S.C. § 1447(c) in its order granting . . . remand”). The same is not

true here. Finally, in/n re Amoco Petroleum Additives Co., 964 F.2d

706 (7th Cir. 1992), the defendants did not initially remove under

§ 205 and instead attempted to add § 205 as an alternate basis for

removal at a later date. Jd. at 711. When the defendants removed

again, this time without all of the other defendants, the district court

again remanded for a defect in removal procedure. /d. at 711-12.

This Court denied a petition for writ of certiorari in Dahiya on

January 7, 2005. Dahiya is not dispositive of this petition because

(Cont'd)

The Fifth Circuit’s construction of § 205 is inconsistent

with the significant implications of the exception to the

well-pleaded complaint rule that Congress expressly wrote

into § 205. By creating an exception to the well-pleaded

complaint rule, Congress placed removing parties on identical

footing with the party who brought the action. Either party

may invoke federal court jurisdiction by reference to the facts

as that party alleges. The implications of the exception are

pronounced. Most importantly, it signifies a congressional

intent to treat a decision of whether allegations in a removal

petition give rise to federal jurisdiction the same way that

decision would have been treated if that party had brought

the action in federal court originally.’ In cases removed under

§ 205, a district court’s decision that the grounds stated in

the petition for removal fail to establish federal subject matter

jurisdiction is the procedural equivalent of a dismissal under

Federal Rule of Civil Procedure 12(b)(1) and is thus entitled

to review, notwithstanding § 1447(d).

(Cont’d)

the district court in the present case found an award and an agreement

that were covered by the Convention, where in Dahiya, the district

court found that the arbitration agreement did not qualify as an

arbitration agreement under the Convention. Dahiya, 371 F.3d at 209.

8. This result is consistent with the entire statutory scheme of

the Convention-implementing legislation. If this were not so, it would

be an acknowledgement that, after expressly making it easy to channel

all Convention-related cases into federal court, Congress had,

nevertheless, left in place the powerful bias toward the plaintiff's

choice of forum provided in our domestic laws and made the

determination of whether a federal appellate court reviews

Convention-related cases based, in part, on who filed first. Such a

result makes little sense.

BO. ARMM TN ns Reach aa a wikadl So

The origins of the well-pleaded complaint rule prove this

point. Franchise Tax Bd. of Cal. v. Constr. Laborers Vacation

Trust for So. Cal., 463 U.S. 1 (1983), provides an analysis

of this Court’s longstanding interpretation of the current

statutory scheme of removal. Writing for a unanimous Court,

Justice Brennan stated that in non-diversity cases “the

propriety of removal turns on whether the case falls within

the original ‘federal question’ jurisdiction of the United States

district courts: ‘The district court» shall have original

jurisdiction of all civil actions arising under the Constitution,

laws, or treaties of the United States.’”” Jd. at 8 (quoting 28

U.S.C. § 1331). The Court then noted that the statutory phrase

“arising under the Constitution, laws, or treaties of the United

States” had “resisted all attempts to frame a single, precise

definition” and “mask[ed] a welter of issues regarding the

interrelation of federal and state authority and the proper

management of the federal judicial system.” Jd.

The Court concluded by acknowledging that

[o]ne powerful doctrine has emerged, however—

the well-pleaded complaint rule—which as a

practical matter severely limits the number of

cases in which state law creates the cause of action

that may be initiated in or removed to federal

district court, thereby avoiding more-or-less

automatically a number of potentially serious

federal-state conflicts.

Id. at 9-10 (internal quotes omitted).

By granting, in § 205, the removing party the right to

invoke federal question jurisdiction itself based upon matters

that would otherwise be raised only defensively, it necessarily

ee ___—_—_

follows that a district court’s determination that the petition

for removal fails to state a basis for federal court jurisdiction

is equivalent to a dismissal.

The well-pleaded complaint rule, its origins, and its

extraction from § 205 removals confirms that the scope of

removals authorized under § 205 is far greater than other

removals. It makes little sense for Congress to have made it

far easier to remove in a § 205 case, but then presume that :

Congress intended to insulate a remand order in § 205 from ;

any review. }

Plainly put, the Fifth Circuit’s assumption that the

procedures applicable after removal apply in a cause removed

under § 205 is not grounded in the statute, and is at odds

with the statutory scheme and language of § 205.

C. The Fifth Circuit’s Refusal to Review the Remand

Orders in a Convention Case Impermissibly

Frustrates the Goals of the Convention

The Fifth Circuit lumped Petitioners’ Convention-based

removal in with other removals, failing to appreciate the

profound differences between ordinary removals and those

that occur in Convention cases. As discussed above, removals

under § 205 are fundamentally different from removals under

28 U.S.C. § 1441, et seq. in that the period for removal is

greatly extended and the long-established well-pleaded

complaint rule does not apply. 9 U.S.C. § 205; 28 U.S.C.

§ 1446.

It is also noteworthy that although Chapter 1 of the FAA

(9 U.S.C. §§ 1-16) manifests favored status accorded to

arbitration, which implements the Convention, Chapter 2

extends that favored treatment even further. 9 U.S.C. § 208

(the Convention Act residual statute which makes clear that

the Convention Act takes precedence over the FAA).

For example, a case cannot be filed or removed to federal

court on the basis that Chapter 1 applies uniess the filing or

removing party can demonstrate diversity or federal question

jurisdiction. In contrast, a case can be filed or removed on

the sole basis that it is governed by the Convention. 9 U.S.C.

§§ 203, 205. Furthermore, a party moving to confirm an

award governed by Chapter 1 has one year to do so, but a

party moving to confirm an award governed by the

Convention has three years to do so. 9 U.S.C. §§ 9, 207.

A prerequisite to confirmation under Section 9 is the parties’

consent to judgment on the award, which is not a prerequisite

under the Convention Act, Chapter 2 of the FAA. /d.;

see also Phoenix Aktiengesellschaft v. Ecoplas, Inc., 391 F.3d

433, 436 (2d Cir. 2004). Plainiy put, while arbitration

agreements governed by Chapter 1 enjoy favored status, that

favored status is further heightened under the Convention.

That special and favored status should militate against

insulating a remand decision from review.

D. Policy Goals of § 1447(d) Have No Application

Here

Strong policy reasons compel the determination that

parochial domestic views on the non-appealability of remand

orders should be trumped by Convention-related

considerations. The policy of § 1447(d) is to avoid

interruption of the litigation of the merits of a case by

prolonging the dispute over questions of jurisdiction. United

States v. Rice, 327 U.S. 742, 751 (1946). In this regard,

§ 1447(d) complements § 1446(b), which requires prompt

removal of cases, typically at the beginning of the dispute.

The clear language of § 205 demonstrates that this policy is

of no consequence in Convention-related cases because § 205

allows a defendant to remove a case “at any time before trial.”

Obviously, by authorizing removals through the eve of trial,

Congress is not concerned with interruption but is instead

concerned with safeguarding the right to a federal forum. As

such, the strong policy of channeling Convention-related

cases into federal court, fueled by comity concerns, overrides

any policy concerns embodied in § 1447(d), which is based

upon the less important goals of efficiency and economy.

Indeed, § 205 represents the antithesis of § 1447(d) because

it expressly allows for the prolonging of the case in order to

ensure that the dispute is decided by the proper court.

II. Additionally, the District Court’s Second Remand

Order Is Reviewable Because it Was Predicated on a

Non-1447(c) Ground?

The district court rejected the merits of Petitioners’ claim

that Crystal’s action relates to an award and then to an

agreement falling under the Convention, first finding that

the Final Award’s connection to the case was too remote to

satisfy the “relates to” criteria, and second, finding that

because Petitioners were not signatories to the arbitration

agreement in the Transmission Costs Agreement, Petitioners

could not claim that the agreement provided it with a defense

to Crystal’s claims. The district court thus conflated the merits

with its jurisdiction determination, violating this Court’s

longstanding rule that whether a federal court has jurisdiction

to decide an issue is a distinct question from how to decide

that issue correctly. Fair v. Kohler Die & Specialty Co., 228

U.S. 22, 25 (1913); see also Steel Co. v. Citizens for a Better

9. This issue was not raised in Dahiya.

Env’t, 523 U.S. 83, 89 (1998) (“It is firmly established in

our cases that the absence of a valid (as opposed to arguable)

cause of action does not implicate subject-matter jurisdiction,

i.e., the courts’ statutory or constitutional power to adjudicate

the case”) (emphasis in original); Bell v. Hood, 327 U.S. 678,

682 (1946). Nonetheless, while the district court should not

have made the merits decision to decide jurisdiction, the fact

that it did so twice removes this case from the reach of

§ 1447(d)’s prohibition on review of remand orders.

Specifically, § 1447(d) does not apply where the district

court clearly and affirmatively states a non-§ 1447(c) ground

for remand. Thermtron Prods., Inc., 423 U.S. at 351; In re

Adm’rs of the Tulane Educ. Fund, 954 F.2d 266, 269 (Sth

Cir. 1992); Foster v. Chesapeake Ins. Co., 933 F.2d 1207,

1210-11 (3d Cir. 1991). That is the situation here and it is

made clear by contrasting an earlier Fifth Circuit decision,

Soley v. First Nat’l Bank of Commerce, 923 F.2d 406 (Sth

Cir. 1991). In Soley, the issue was the applicability of

§ 1447(d) to a remand order based on a rejection of the

removing party’s claim that the state law claims were

completely preempted by federal law, in that case, ERISA.

Soley, 923 F.2d at 408. In addition to arguing the applicability

of the collateral order doctrine, the defendant argued

that because the district court had remanded based upon a

non-§ 1447(c) ground, review was not foreclosed by

§ 1447(d). Jd. In resolving the question of whether the district

court’s remand order rejecting the defendant’s preemption

argument was a non-§ 1447(c) ground, Soley looked to the

“helpful distinction” between “complete preemption” which

is a jurisdictional inquiry and the “preemption defense” which

is a substantive inquiry. /d. at 408-09 (citing Whitman y.

Raley’s Inc., 886 F.2d 1177, 1181 (9th Cir. 1989)). Soley noted

[t]he jurisdictional question concerning “complete

preemption” centers on whether it was the intent

of Congress to make the cause of action a federal

cause of action and removable despite the fact that

the plaintiff's complaint identifies only state

claims. The latter inquiry, concerning a

“preemption defense,” is a substantive inquiry as

to whether a legal defense exists. This would be a

matter for trial by a court having jurisdiction.

Soley, 923 F.2d at 408-09. So/ey noted that the remand order

was “confusing” and “ambiguous” as to whether the decision

was based on the rejection of the complete preemption

doctrine or on a decision as to the ¢ -fendant’s preemption

defense, but ultimately held it could not review the remand

order. /d. at 409; see also id. at 410 (explaining that “if the

district court considered the preemption defense, it did so

only because of an erroneous belief that the defense was

relevant to the jurisdictional issue.”).

Here, there is no such confusion or ambiguity. First,

Petitioners are not invoking the complete preemption

doctrine, which operates as an exception to the well-pleaded

complaint rule. Indeed, the well-pleaded complaint rule is

explicitly abrogated in § 205 because the grounds for federal

jurisdiction can be alleged in the removal notice. Instead,

Petitioners asserted removal jurisdiction based, in part, upon

the fact that the subject matter of the case related to an

arbitration agreement falling under the Convention. As stated

in Petitioners’ removal notice, the agreement could

conceivably affect the outcome of the case because, in

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Petitioners’ view, the agreement would require Crystal’s

claims to be arbitrated. Accordingly, it is undisputed that,

unlike Soley, where there may have been some confusion as

to whether the district court went beyond the jurisdictional

question in its remand order, here the district court’s remand

order can only be interpreted one way—as based upon the

district court’s substantive determination that Petitioners’

Convention-related defenses lacked merit.

That the district court’s remand order is based on a non-

§ 1447(c) ground is proved by numerous cases which hold

that a district court cannot make a merits determination to

decide the propriety of the removal. See Thermtron, 423 U.S.

at 352; In re Adm'’rs of the Tulane Educ. Fund, 954 F.2d at

269; Foster, 933 F.2d at 1210-11. In short, by exceeding the

bounds of the jurisdictional inquiry allowed and finding

Petitioners’ defenses unmeritorious, the district court here

necessarily based its decision on a substantive issue rather

than a jurisdictional issue.

Because the district court’s remand order was based on

a decision that the arbitration agreement did not provide a

defense, in part because Petitioners are not signatories to the

agreement containing the arbitration clause, the remand order

was based on a non-§ 1447(c) ground and the Fifth Circuit

had jurisdiction to review the order.

Ill. The Remand Orders Are Reviewable Under the

Collateral Order Doctrine

The Fifth Circuit’s refusal to review the remand orders

also conflicts with Cohen v. Beneficial Indus. Loan Corp.,

337 U.S. 541 (1949), and City of Waco v. United States

Fidelity & Guar. Co., 293 U.S. 140 (1934), providing review

of a pre-remand decision made by a district court if that

decision is “separable” from the remand order and

independently reviewable. To come within the City of Waco

line of cases, the pre-remand decision must have preceded

the remand order “in logic and in fact” such that the decision

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

cause.” Waco, 293 U.S. at 143. The decision must be

“conclusive,” or functionally unreviewable in the state court.

Id. (while a remand order cannot be reviewed on appeal,

certain separable orders that (1) logically precede the remand

and (2) are conclusive, in the sense of being functionally

unreviewable in state courts can be reviewed provided the

order is independently reviewable by means of devices like

the collateral order doctrine). An appealable collateral order

is an order that conclusively resolves an issue separate from

the merits of the controversy, is effectively unreviewable on

appeal from final judgment and is too important to be denied

review. Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 712

(1996).

In the present case, the district court’s “separable” rulings

that precede the remand orders in iogic and in fact satisfy

the first requirement. The separable rulings are three: (1) the

Final Award and arbitration agreement do not provide a

defense to Crystal’s claims; (2) non-signatories cannot

enforce an arbitration agreement; and (3) Crystal’s claims

are not dependent upon any issues that are subject to the

agreement containing the arbitration provision. The district

court ruling that the arbitration agreement does not provide

a defense to Petitioners is a separable ruling premised on the

district court’s conclusion that, as non-parties to the

agreement containing the arbitration clause, it was not

conceivable that the arbitration clause could affect the

outcome of Crystal’s state court action. The district court’s

ruling, which preceded the remand in logic and in fact, also

has powerful relevance beyond determining jurisdiction in

that it cut Petitioners off from their right to have a federal

forum determine whether an arbitrator would resolve their

dispute, in contravention of this Court’s decisions holding

that Convention cases should be channeled to federal court.

CONCLUSION

The district court first found that the arbitration award

upon which Petitioners premised their removal fell within

the Convention. It then found that the arbitration agreement

upon which Petitioners premised their second removal also

fell within the Convention. Yet, on each occasion, the district

court determined it did not have jurisdiction. Section 1447(d),

which has great utility and strong policies in the domestic

context, should not be permitted to frustrate § 205, a statute

enacted to implement treaty obligations. A decision that it

does is inconsistent with this Court’s prior holdings.

Petitioners requests that this petition for writ of certiorari be

granted.

Respectfully submitted,

C. Mark BAKER

Counsel of Record

Joy M. SoLoway

FULBRIGHT & JAworskI L.L.P.

1301 McKinney, Ste. 5100

Houston, Texas 77010-3095

(713) 651-5151

Counsel for Petitioners

APPENDIX

APPENDIX A — ORDER OF THE UNITED STATES

COURT OF APPEALS FOR THE FIFTH CIRCUIT

FILED JUNE 1, 2004

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 03-21232

CRYSTAL POWER COMPANY

Plaintiff - Appellee

COASTAL SALVADORAN POWER LTD; COASTAL

NEJAPA LTD; EL PASO CGP COMPANY, successor in interest

to Coastal States as Corporation and The Coastal Corporation;

EL PASO CORPORATION, successor in interest to Coastal

States Gas Corporation and The Coastal Corporation

Defendants - Appellants

Appeals from the United States District Court for the

Southern District of Texas, Houston

Before HIGGINBOTHAM, DAVIS, and PRADO, Circuit

Judges.

PER CURIAM:

IT IS ORDERED that the motion of appellee to dismiss

appeals is granted.

s/ [illegible]

APPENDIX B — MEMORANDUMAND ORDER AND

ORDER OF REMAND OF THE UNITED STATES

DISTRICT COURT FOR THE SOUTHERN DISTRICT

OF TEXAS, HOUSTON DIVISION BOTH DATED

NOVEMBER 10, 2003 AND BOTH FILED

NOVEMBER 13, 2003

IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF TEXAS

HOUSTON DIVISION

CIVIL ACTION NO. H-03-3634

CRYSTAL POWER COMPANY,

Plaintiff,

VS.

COASTAL SALVADORAN POWER, LTD., COASTAL

NEJAPA, LTD., EL PASO GCP COMPANY, successor in

interest to Coastal States Gas Corporation, and The Coastal

Corporation, and EL PASO CORPORATION, successor in

interest to Coastal States Gas Corporation and The Coastal

Corporation,

Defendants.

MEMORANDUM AND ORDER

Pending is Plaintiff Crystal Power Company’s (“Crystal”)

Motion for Remand (Document No. 4). After carefully

considering the motion, response, reply, and applicable law,

the Court finds that Plaintiff's Motion for Remand should

be granted.

Appendix B

I. Background

This action arises out of a dispute over the distribution of a

$90 million arbitral award. In 1994 the Nejapa Power Company

(“NPC”), which operates a power project in

El Salvador, entered into a Power Purchase Agreement

(“PPA”) with Comisién Ejecutiva Hidroeléctrica Del Rio

Lempa (“CEL”), an autonomous institution of El Salvador.

Though the PPA was to last until 2015, CEL terminated it in

1999. Subsequent arbitration of the “termination indemnity

proceeding” resulted in an arbitral award of $90 million to

NPC.

Crystal and each Defendant directly or indirectly hold

varying degrees of ownership interests in NPC. Crystal,

maintaining that it neither participated in nor approved of

the arbitration, alleges that all Defendants wrongfully

deprived it of a share in the $90 million award, in violation

of prior agreements among the parties. In addition, Crystal

suggests that Defendants’ conduct amounted to a fraudulent

tax evasion scheme perpetrated against the El Salvadoran

and United States governments.

Alleging a host of state law claims, Crystal sued

Defendants in the 23 Judicial District Court of Brazoria

County, Texas. Defendants removed the case to this Court

on the grounds that the state court action related to an

arbitration award governed by the Convention on the

Recognition and Enforcement of Foreign Arbitral Awards

(“Convention”), and therefore fell within the removal

Appendix B

provision of 9 U.S.C. § 205.' Crystal now moves for remand,

arguing that § 205 does not apply and that Defendants

previously waived any right to remove the case to federal

court. |

Il. Discussion

The party removing a case to federal court has the burden

of proving federal jurisdiction. Sid Richardson Carbon &

Gasoline Co. v. Interenergy Res., Ltd., 99 F.3d 746, 751

(Sth Cir. 1996). In their Notice of Removal (Document No.

1) Defendants rely solely on 9 U.S.C. § 205 as the basis for

removal. Plaintiff Crystal disputes that § 205 applies, and

argues that even if § 205 does apply Defendants have waived

their right to remove.

Title 9 U.S.C. § 205 governs removal under the Convention:

Where the subject matter of an action or

proceeding pending in a State court relates to an

arbitration agreement or award falling under the

Convention, the defendant or defendants may, at

any time before the trial thereof, remove such

action or proceeding to the district court of the

United States for the district and division

embracing the place where the action or

proceeding is pending. The procedure for removal

of causes otherwise provided by law shall apply,

except that the ground for removal provided in

1. The case was removed to the Galveston Division of this

Court, and the Honorable Samuel B. Kent sua sponte then transferred

the case to the Houston Division.

Appendix B

this section need not appear on the face of the complaint

but may be shown in the petition for removal. For

purposes of Chapter | 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.

An arbitration agreement or arbitral award falls under the

Convention when it arises out of a “legal relationship, whether

contractual or not, which is considered as commercial,” and

such relationship is “not entirely between citizens of the United

States. . . .”9 U.S.C. § 202. For purposes of § 202, a corporation

is a citizen of the United States if it is incorporated there or has

its principal place of business there. See id. Thus, the arbitral

award between CEL (an autonomous institution of El Salvador

and not a United States citizen) and NPC concerning the

termination of a commercial power purchase agreement, was

one subject to the Convention. See Document No. 7 ex. A, at 2.

“[W]henever an arbitration agreement falling under the

Convention could conceivably affect the outcome of the

plaintiff's case, the agreement ‘relates to’ the plaintiff's suit”

within the meaning of § 205. Beiser v. Weyler, 284 F.3d 665,

669 (5th Cir. 2002). Jurisdiction under § 205 will follow in

“just about any suit in which a defendant contends that an

arbitration clause falling under the Convention provides a

defense. As long as the defendant’s assertion is not completely

absurd or impossible, it is at least conceivable that the arbitration

clause will impact the disposition of the case.” Jd. Defendants

compare their case to Beiser, claiming that the arbitration award

here constitutes a defense to Crystal’s claims just as the

arbitration clause in Beiser constituted a defense.

Appendix B

In Beiser the Fifth Circuit treated the scope of “relates to”

in § 205 as analogous to the “broad scope” given by the Supreme

Court to ERISA’s preemption of any state law that “relates to”

an employee benefit plan. See id. at 669 (citing Shaw v. Delta

Air Lines, Inc., 103 S. Ct. 2890 (1983)). However, the Supreme

Court has also acknowledged limits to the scope of ERISA

preemption: “We simply must go beyond the unhelpful text and

the frustrating difficulty of defining its key term [“relates to”],

and look instead to the objectives of the ERISA statute as a

guide to the scope of the state law that Congress understood

would survive.” New York State Conf. of Blue Cross & Blue

Shield Plans v. Travelers Ins. Co., 115 S. Ct. 1671, 1677

(1995). Similarly, the objective of the Convention Act, 9 U.S.C.

§§ 201-208, serves as a guide to when an action or proceeding

in state court no longer “relates to” an arbitration clause or arbitral

award within the meaning of § 205.

The objective of the Convention Act is the enforcement of

the Convention on the Recognition and Enforcement of Foreign

Arbitral Awards in the United States:

Congress ratified the Convention ... to secure for

United States citizens predictable enforcement by

foreign governments of certain arbitral contracts and

awards made in this and other signatory nations... .

To gain rights under the Convention, though, Congress

had to guarantee enforcement of arbitral contracts and

awards made pursuant to the Convention in United

States courts. ... So Congress promulgated the

Convention Act in 1970 to establish procedures for our

pe ey ee ee. Oe” TANG: INR) RES aR, oe

Bo eR we ee nt Pwr ln Te ee ee, ee er ie ae we Te

Appendix B

courts to implement the Convention. 9 U.S.C. § 201,

et. seq.

McDermott Int’l, Inc. v. Lloyds Underwriters of London, 944

F.2d 1199 (Sth Cir. 1991) (emphasis added). Indeed, § 206 of

the Convention Act empowers a court to order arbitration in

accordance with an arbitration agreement, and § 207 permits a

court to confirm an arbitral award upon application by a party

to the arbitration. See 9 U.S.C. §§ 206, 207.

The situation in Beiser fell within the scope of the

Convention Act’s enforcement objective. Beiser, director and

sole employee of a corporation, signed on its behalf agreements

that contained arbitration clauses falling under the Convention.

See Beiser, 284 F.3d at 667. Later Beiser, acting solely on behalf

of himself, brought state law tort claims against various parties

to the agreements. See id. When the defendants removed under

§ 205, Beiser sought to remand, arguing that the arbitration

clauses were not “related to” his case because he signed the

agreements as a corporate agent rather than an individual.

See id. The Fifth Circuit disagreed, stating that corporate

personhood was not an absolute shield, that the arbitration

clauses could conceivably affect the outcome of Beiser’s case,

and that his state court proceeding therefore “related to” an

arbitration agreement within the meaning of § 205. See id. at

669-670. The arbitration clause “could conceivably affect” the

outcome of Beiser’s case, of course, because compelled

arbitration would be possible if Beiser were held bound to the

arbitration clause. The potential in that case for enforcement of

the arbitration clause was the reason that it couid “conceivably

affect” the outcome of the case and why the case itself was

therefore “related to” an arbitration agreement within the

meaning of 9 U.S.C. § 205.

Appendix B

The instant case, unlike Beiser, does not involve potential

recognition and enforcement of any arbitral clause, agreement,

or award. Defendants appear not to dispute that the arbitration

agreement between NPC and CEL, neither of which as such is a

party to this case, was fully performed, the arbitration was

completed, the arbitral cash award of $90 million was rendered,

and CEL paid the cash award. See Document No. 7. Neither

Plaintiff nor Defendants seek either to compel an arbitration or

to obtain recognition and enforcement of an arbitral award. Thus,

the NPC/CEL award here does not constitute a defense in the

same sense that the arbitration clause constituted a defense in

Beiser, where the arbitration clause had the potential to require

an arbitration of the dispute raised in the lawsuit. Here, the

arbitration, arbitral award, and payment of that award are all

history. Plaintiff's allegation is that the $90 million cash award

should have been paid to Defendant Coastal Nejapa, Ltd., from

which Plaintiff would have received its share, but instead,

Defendant El Paso Corporation caused the proceeds to be

directed to another entity and thereby deprived Plaintiff of

its share. Evidence of the arbitral award and its prior payment

may therefore be admissible in the dispute that has now arisen

between the parties to this case, which all had interests in

NPC, but that evidence in the context of the dispute here

does not implicate the Convention, or the Convention Act.

In other words, the connection of the NPC/CEL arbitral award

to this case is “too tenuous, remote, or peripheral” to find

that this case “relates to” an award under § 205. Cf. Shaw,

103 S. Ct. at 2901 n.21 (noting that the connection of some

state laws to employee benefit plans is too remote for the

laws to “relate to” the plans for purposes of ERISA

preemption).

Appendix B

As the subject matter of the removed state court proceeding

does not “relate to” an arbitral award within the meaning of

9 U.S.C. § 205, Defendants have not carried their burden of

proving federal jurisdiction and the case must be remanded’

Ill. Order

For the foregoing reasons, it is

ORDERED that Plaintiff Crystal Power Company’s Motion

for Remand (Document No. 4) is GRANTED, and this case is

REMANDED to the 23” Judicial District Court of Brazoria

County, Texas.

The Clerk will mail a certified copy of this Order to the

Clerk of the 23 Judicial District Court of Brazoria County,

Texas, as required by 28 U.S.C. § 1447, and shall notify all

parties and provide them with a signed copy of this Order.

SIGNED at Houston, Texas, on this 10" day of

November, 2003.

s/ Ewing Werlein, Jr.

EWING WERLEIN, JR.

UNITED STATES DISTRICT JUDGE

2. The Court therefore need not address Plaintiff’s alternative

argument that Defendants waived any right to removal.

10a

Appendix B

IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF TEXAS

HOUSTON DIVISION

CIVIL ACTION NO. H-03-3634

CRYSTAL POWER COMPANY,

Plainuff,

VS.

COASTAL SALVADORAN POWER, LTD., COASTAL

NEJAPA, LTD., EL PASO GCP COMPANY, successor in

interest to Coastal States Gas Corporation, and The Coastal

Corporation, and EL PASO CORPORATION,-successor in

interest to Coastal States Gas Corporation and The Coastal

Corporation,

Defendants.

ORDER OF REMAND

For the reasons stated in the separate Memorandum and

Order signed this day, it is

ORDERED that this case is REMANDED to the 23"¢

Judicial District Court of Brazoria County, Texas.

The Clerk will mail a certified copy of this Order to the

Clerk of the 23" Judicial District Court of Brazoria County,

Texas, as required by 28 U.S.C. § 1447, and shall notify all

parties and provide them with a signed copy of this Order.

"tm Bt art

- Oe frie

RET LLLY SE A LO ISAS LE ET LLL IIT SGOT SPST OTTO: TN

—

lla

Appendix B

SIGNED at Houston, Texas, on this* 10" day of November,

2003.

s/ Ewing Werlein, Jr.

EWING WERLEIN, JR.

UNITED STATES DISTRICT JUDGE

a |

12a

APPENDIX C — ORDER OF THE UNITED STATES

DISTRICT COURT FOR THE SOUTHERN |

DISTRICT OF TEXAS, HOUSTON DIVISION F

ENTERED DECEMBER 239, 2003

IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF TEXAS

HOUSTON DIVISION

CIVIL ACTION NO. H-03-3634

CRYSTAL POWER COMPANY, |

Plaintiff, |

COASTAL SALVADORAN POWER LTD., COASTAL ly

NEJAPA LTD., EL PASO CGP COMPANY, Successor in H

Interest to Coastal States Gas Corporation, aad The Coastal i

Corporation, and EL PASO CORPORATION, Successor in

Interest to Coastal States Gas Corporation and The Coastal

Corporation,

Defendants.

ORDER

Afier the Court ordered the remand of this case to the

23rd Judicial District Court of Brazoria County, Texas, by

Order entered November 13, 2003, Defendants Coastal

Salvadoran Power Ltd., Coastal Nejapa Ltd., El Paso CGP

Company, and El Paso Corporation (“Defendants”) filed a

Motion to Compel Arbitration (Document No. 19) and, i

contemporaneously, Moved to Reconsider the Remand Order

in Light of Defendants’ Motion to Compel Arbitration

(Document No. 18).

13a

Appendix C

When the Court remands a case for lack of jurisdiction,

it ordinarily has no authority to reconsider or modify that

Order and no appeal may be taken therefrom. The Fifth °

Circuit has held that a remand order where jurisdiction is

asserted under the Convention on the Recognition and

Enforcement of Foreign Arbitral Awards, however, is subject

to appellate review. Beiser v. Weyler, 284 F.3d 665, 674 (Sth

Cir. 2002). The trial court, therefore, has authority to review

its own Order. See In Re Digicon Marine, Inc., 966 F.2d 158,

161 (Sth Cir. 1992) (“(W]here remand is reviewed on appeal

“a district court has jurisdiction to review its own order, and

vacate or reinstate that order.” quoting Jn Re Shell Oil Co.,

932 F.2d 1523, 1528 (Sth Cir. 1991)).

Defendants’ motion for reconsideration was filed within

ten days after entry of the challenged Order. Accordingly, it

will be considered as a Rule 59(e) motion. Fletcher v. Apfel,

210 F.3d 510, 511 (Sth Cir. 2000) (noting that a motion for

reconsideration that is filed within ten days after entry of a

judgment, is considered a Rule 59(e) motion).

Defendants have now filed a motion to compel arbitration

with respect to Plaintiff's claimed entitlement to a percentage

of an arbitral award. Moreover, Defendants have now

disclosed a representation that they made in this case to the

Honorable Sam Kent at a scheduling conference held last

September that they intended to file a motion to compel

arbitration. At the time of the remand Order, a motion to

compel arbitration had not been filed and Defendants still

offer no explanation as to why not. Nonetheless, the prior

representation to Judge Kent tends to refute an inference of

manipulation that might otherwise be drawn from

;

l4a

Appendix C

Defendants’ present motion. With Defendants’ new filings,

it is evident that the subject matter of the action if remanded

to state court would now relate to the demand for an

arbitration under the Convention to determine Plaintiff's

claim to a portion of a previous arbitral award. Defendants

would be entitled to remove this action to the District Court

of the United States pursuant to 9 U.S.C. § 205. Under these

circumstances, remand would be futile because the case now

clearly would be removable under the Convention. For the

foregoing reasons, it is

ORDERED that the Memorandum and Order (Document

No. 17) and Order of Remand (Document No. 16) both

entered November 13, 2003, are VACATED and SET ASIDE,

and this case is REINSTATED. It is further

ORDERED that the Order for Conference and Disclosure

of Interested Parties filed September 10, 2003, is

REINSTATED, including the setting for an initial pretrial

and scheduling conference on Friday, February 27, 2004, at

2:15 p.m.

The Clerk shall mail a certified copy of this Order to the

Clerk of the 23rd Judicial District Court of Brazoria County,

Texas, and shall notify all parties and provide them with a

signed copy of this Order.

SIGNED at Houston, Texas, on this 224 day of December,

2003.

s/ Ewing Werlein, Jr.

EWING WERLEIN, JR.

UNITED STATES DISTRICT JUDGE

15a

APPENDIX D — ORDER OF THE UNITED STATES

COURT OF APPEALS FOR THE FIFTH CIRCUIT

FILED OCTOBER 18, 2004

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 03-21232

CRYSTAL POWER COMPANY

Plaintiff - Appellee

COASTAL SALVADORAN POWER LTD; COASTAL

NEJAPA LTD; EL PASO CGP COMPANY, successor in interest

to Coastal States as Corporation and The Coastal Corporation;

EL PASO CORPORATION, successor in interest to Coastal

States Gas Corporation and The Coastal Corporation

Defendants - Appellants

Appeals from the United States District Court for the

Southern District of Texas, Houston

ON PETITION FOR REHEARING EN BANC

Before HICGINBOTHAM, DAVIS and PRADO, Circuit

Judges.

li SSS, sid SOSUWUNSACMASLSE

l6a

Appendix D

PER CURIAM:

Treating the Petition for Rehearing En Banc as a Motion

for Reconsideration, the Motion for Reconsideration is

DENIED. No member of the panel nor judge in regular active

service of the court having requested that the court be polled

on Rehearing En Banc (FED.R.APP.P. and 3* CIR.R. 35),

the Petition for Rehearing En Banc is DENIED.

ENTERED FOR THE COURT:

s/ .PEH/d] .

United States Circuit Judge

Judges Garwood and Clement did not participate in the

consideration of the petition for rehearing en banc.

17a

APPENDIX E — OPINION OF THE UNITED STATES

COURT OF APPEALS FOR THE FIFTH CIRCUIT

FILED NOVEMBER 10, 2004

UNITED STATES COURT OF APPEALS

FIFTH CIRCUIT

No. 04-20678

CRYSTAL POWER CO.,

Plaintiff-Appellee,

versus

COASTAL SALVADORAN POWER LTD; COASTAL

NEJAPA LTD; EL PASO CGP CO, successor in interest to

Coastal States Gas Corporation and The Coastal Corporation;

EL PASO CORP, as successor in interest to Coastal States

Gas Corporation and The Coastal Corporation,

Defendant-Appellants.

Appeal from the United States District Court for the

Southern District of Texas, Houston

Before JOLLY, BARKSDALE and PICKERING, Circuit

Judges.

PER CURIAM:

Before the Court is appellee’s motion to lift the stay and

appellee’s motion to dismiss for lack of jurisdiction. The

Court has denied a petition for rehearing en banc in Dahiya

18a

Appendix E

v. Talmidge Int’l, 371 F.3d 207 (5* Cir. 2004). Furthermore,

the mandate has issued in Crystal Power v. Coastal

Salvadoran (No. 03-21232). Thus, there is no longer any

reason to maintain the stay in this case.

IT IS ORDERED that appellee’s motion to lift the stay

is GRANTED.

IT IS FURTHER ORDERED that the appellee’s motion

to dismiss the appeal is

GRANTED.

19a

APPENDIX F— MEMORANDUM AND ORDER OF

THE UNITED STATES DISTRICT COURT FOR THE

SOUTHERN DISTRICT OF TEXAS, HOUSTON

DIVISION ENTERED AUGUST 18, 2004

IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF TEXAS

HOUSTON DIVISION

CIVIL ACTION NO. H-04-1250

CRYSTAL POWER COMPANY,

Plaintiff,

COASTAL SALVADORAN POWER LTD., COASTAL

NEJAPA, LTD., EL PASO CGP COMPANY, successor in

interest to Coastal States Corporation and the Coastal

Corporation, and EL PASO CORPORATION, successor in

interest to Coastal States Gas Corporation and the Coastal

Corporation,

Defendants.

MEMORANDUM AND ORDER

Pending is Defendants’ Motion to Compel Arbitration

(Document No. 3), Plaintiff's Motion for Remand (Document

No. 9), and Defendants’ Motion to Stay Pending Fifth Circuit

Appeal and Related Arbitration (Document No. 18). Having

considered the motions, responses and additional briefing,

the history of Civil Action No. H-03-3634, and the applicable

20a

Appendix F

law, the Court Orders, for the reasons set forth below, that

Plaintiff's Motion for Remand (Document No. 9) is

GRANTED and this case is REMANDED to the 23" District

Court of Brazoria County, Texas.

I. Procedural History

On October 15, 2002, Plaintiff Crystal Power Company

(“Crystal”) filed suit against Coastal Salvadoran Power, Ltd.

and Coastal Nejapa, Ltd. in the 23” District Court of Brazoria

County, Texas, Cause No. 21815*BHO2. In its Original

Petition, Crystal alleged that it was an investor in a

Salvadoran power plant, that Crystal had not “received proper |

and timely payments consistent with its financial interests

in-the venture” and that Defendants had diverted “a

substantial prepayment of amounts ultimately due to the

venture in excess of $100,000,000.00.” Plaintiff's Original

Petition, attached as Exhibit “3B” to Defendants’ Notice of

Removal (Document No. 1), at 3. Crystal alleged claims for

breach of contract, conversion, breach of fiduciary duty,

breach of the duty of good faith and fair dealing,

misrepresentation, and fraud, and alternative theories of

recovery based on “the doctrines of promissory estoppel and/

Or quantum meruit.” Id. Crystal amended its petition on

November 6, 2002, generally alleging the same facts but

adding El Paso CGP Company (as successor in interest to

Coastal States Gas Corporation and the Coastal Corporation),

and El Paso Corporation (as successor in interest to Coastal

States Gas Corporation and the Coastal Corporation) as

Defendants. Plaintiff's First Amended Petition, attached as

Exhibit “3B” to Defendants’ Notice of Removal (Document

No. 1). After filing a Second Amended Petition in April, 2003,

2la

Appendix F

which also generally alleged the same facts and claims against

the four Defendants, Crystal filed a Third Amended Petition

on June 6, 2003. The Third Amended Petition alleged the

following, particularized facts in support of Crystal’s claims

against Defendants:!

In 1994, the Republic of El Salvador began

to privatize power generation in the country.

[Crystal] used its well-established reputation and

credibility with the El Salvadoran

government-run electric company, Comision

Ejecutiva Hidroelectrica Del Rio Lempa (“CEL”),

. to convince the government to allow some of the

Defendants to build a power plant in El Salvador

and sell power. [Crystal] entered into a joint

venture with Defendant, Coastal Salvadoran

Power, Ltd., a company owned and controlled by

the other Defendants, El Paso CGP and E1 Paso

Corporation. (collectively, “El Paso”), to form

Coastal Nejapa, Ltd. Defendant, Coastal Nejapa,

Ltd., was to receive all the net earnings from the

power project, with a minority percentage being

paid to [Crystal] and the majority percentage going

to Defendant, Coastal Salvadoran Power, Ltd.,

each in their respective ownership percentages.

In 2008, [Crystal’s] percentage in the venture was

to more than double to approximately 29%,

entitling [Crystal] to receive a greater share of the

1. Defendants, as used herein, refers to the same four

Defendants named in the state court action: Coastal Salvadoran

Power, Ltd., Coastal Nejapa, Ltd., El Paso CGP Company, and El

Paso Corporation.

22a

Appendix F

power project’s profits. Through the direct efforts

of [Crystal], the power project and CEL entered

into a Power Purchase Agreement (“PPA”), dated

May 18, 1994, that extends through the year 2015.

Defendants, El Paso, also has ownership and

control of several entities from which the power

project receives its working capital, oil and gas

to run the plant, and management and technology

personnel to head the day-today operations of the

plant. All of these El Paso-owned entities receive

their monies first from the power project before

any monies were paid to Defendant, Coastal

Nejapa, Ltd., whereupon other El Paso

Defendants receive their majority share and

[Crystal] a minority share of the available funds.

In essence, Defendants, E1 Paso, double dip into

the power projects’ earnings while [Crystal]

receives a reduced share of the profits rightfully

owed to [Crystal].

In these Enron-like transactions, Defendants

El Paso have stripped away the future income of

the power project to meet their own current cash

needs without regard to the best interest of the

power project or its El Salvadoran partner. These

Enron-like transactions effectively cashed-in and

virtually eliminated the most valuable assets from

the power project, specifically, the guarantee of

future income and an assurance of solvency.

Through this shell game, El Paso favored its own

23a

Appendix F

subsidiaries over the interest of [Crystal] without

regard to the validity of its actions under

applicable law.

As a result of [Crystal’s] ownership interest,

it was entitled to certain payments relative to the

operation of this project. Some or all of the

Defendants exercise control over the income and/

or cash flow of the project and have a

responsibility to ensure that [Crystal] receives the

proper and timely payment of amounts consistent

with its financial interest in the project.

In 1999, CEL triggered a one-time provision

in the PPA which allowed a possible prepayment

of amounts due in the future at a substantial

discount. Defendants were in sole control of the

negotiations and subsequent arbitration of this

termination indemnity proceeding. The power

project and CEL entered into a lengthy arbitration

to which [Crystal] was never a party nor approved.

In spite of the present value of the PPA being

worth hundreds of millions of dollars, some of

the Defendants agreed to a significantly reduced

price in order to get immediate cash out of the

PPA and forego higher future earnings where

[Crystal] would have owned a substantially greater

share. When the agreement was reached between

Defendants and CEL, the amount paid under the

arbitration award ($90, 000, 000 USD) should

have been paid to Coastal Nejapa, Ltd., from

which [Crystal] would have received its share.

24a

Appendix F

Instead, at Defendant El Paso’s instruction, all

proceeds were paid to another wholly owned

subsidiary of El Paso, and then the funds were

distributed upstream to other El Paso entities.

Neither the project nor [Crystal] received one

dollar of this payment.

Defendants have refused to honor certain

agreements between the parties, including, but not

limited to, the Shareholders Agreement of Coastal

Nejapa, Ltd., as amended, and the Subscription

Agreement, as amended. [Crystal] has not

received proper and timely payments consistent

with its financial interests in the venture. Instead,

Defendants involved in the arbitration directed

that the substantial prepayment of the power

purchase agreement be paid directly to one of

Defendants, El Paso’s, entities (a non-party to the

PPA between the power project and CEL), thereby

never triggering the financial responsibilities and

funding obligations to [Crystal].

Significantly, this substantial payment to

Defendants would be taxable under El Salvadoran

laws if the payment would have been distributed

properly to the power project as owed. However,

since Defendants diverted the funds to its other

entities, the Defendants have never paid local

income taxes on this substantial multi-million

dollar payment. Defendant[’]s deliberate tax

aversion scheme not only cheated [Crystal] but

the El Salvador government. Furthermore, based

25a

Appendix F

on information and belief, Defendants El Paso,

which are corporations registered in Delaware and

qualified to do business in Texas, have engaged

in possible tax fraud as it has also never paid taxes

to the United States government for the income

earned from [the] substantial prepayment of the

PPA.

Plaintiff's Third Amended Petition, attached as Exhibit “3B”

to Defendants’ Notice of Removal (Document No. 1), at 2-5.

Defendants then removed the case to this Court pursuant

to 9 U.S.C. § 205. Crystal timely moved to remand the case,

~ Civil Action No. H-03-3634, which motion was granted by -

Order entered November 13, 2003. In the Memorandum and

Order granting Crystal’s Motion to Remand, the Court

concluded that “the subject matter of removed state court

proceeding does not ‘relate to’ an arbitral award within the

meaning of 9 U.S.C. § 205.” See Document No. 17 in Civil

Action No. H-03-3634 at 8.

Thereafter, Crystal filed a Fourth Amended Petition in

state court. That Fourth Amended Petition deleted the

particularized facts set forth in the Third Amended Petition,

and reverted to the more general allegations of the Second

Amended Complaint that “[Crystal] has not received proper

2. Defendants filed a Motion to Reconsider the Order granting

Plaintiff's Motion for Remand. The Court initially (and erroneously)

granted that motion, but later corrected its action by vacating and

setting aside the Order granting reconsideration. Hence, that vacated

Order is a nullity in Civil Action No. 03-3634 and has no effect or

bearing upon the present case.

26a

Appendix F

and timely payments consistent with its financial interests

in the venture.” Plaintiff's Fourth Amended Petition, attached

as Exhibit “3B” to Defendants’ Notice of Removal

(Document No. 1), at 3. No mention was made in the Fourth

Amended Petition of an arbitration proceeding or monies

received as part of-an arbitral award.

On February 10, 2004, Defendants again removed the

case to this Court pursuant to 9 U.S.C. § 205.3 In the Notice

of Removal, Defendants alleged that “the subject matter of

the state court action relates to an international arbitration

agreement or, alternatively, an international arbitration

award.” Notice of Removal (Document No. 1) at 1.

Defendants additionally alleged:

.... The Fourth Amended Petition deleted the

language in Crystal’s Third Amended Petition

specifying that a significant, if not complete,

portion of its requested relief was its alleged

entitlement to a portion of an international

arbitration award. Jd. Crystal also deleted

reference to possible violations of tax laws. Jd.

3. Despite its attempts to plead around the issues,

the fact remains that an international arbitration

award and an international arbitration agreement

are at the heart of Crystal’s Fourth Amended

Petition. Specifically, Crystal claims that as owner

3. As was the case with the first removal, this case was removed

to the United States District Court for Southern District of Texas,

Galveston Division, and was thereafter transferred to the Houston

Division, and assigned to the undersigned judge.

27a

Appendix F

of a percentage of the Salvadoran power plant, it

was entitled to a commensurate percentage of the

plant’s net earnings. See Fourth Amended Petition

at § 5-7. This includes a claim to a percentage of

the amounts awarded in the international

arbitration proceeding between Nejapa and CEL

(the award referred to herein as the “Final

Award’). Id. See Final Award attached as Exhibit

4. Crystal’s claims are within the scope of the

contracts containing international arbitration

agreements which must be enforced. Crystal seeks

to share in the proceeds from and benefits of a

Final Award in arbitration. The Final Award

resolved a dispute over a contract containing an

agreement to arbitrate all disputes arising

thereunder. Moreover, a contract entered into

pursuant to the order of the Arbitral Tribunal in

the Final Award, and of which Crystal seeks the

benefits, requires arbitration of any and all

disputes arising thereunder or in connection

therewith.

Notice of Removal (Document No. 1) at 3-4 (footnotes

omitted). Crystal has filed a Motion for Remand (Document

No. 9). Defendants have filed a Motion to Compel Arbitration

(Document No. 3).

28a

Appendix F

II. Discussion

As a threshold matter, the Court must determine whether

it has jurisdiction over this case. Steel Co. v. Citizens for a

Better Environment, 118 S. Ct. 1003, 1012-1013 (1998). In

this regard, Crystal first argues that the Court’s jurisdiction

over this case is foreclosed by the prior removal and remand

of Civil Action No. H-03-3634. Additionally and

alternatively, Crystal argues that the subject matter of this

case does not “relate to” an arbitration agreement or an

arbitration award within the meaning of 9 U.S.C. § 205.

Finally, Crystal argues that Defendants waived their right to

remove this case by virtue of the forum selection clause

contained in the parties’ shareholders agreement.

Title 9 U.S.C. § 205, the jurisdictional basis for removal

at issue in both the first and second removals, provides as

follows:

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 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....

29a

Appendix F

The subject matter of an action pending in State court relates

to an arbitration agreement or award within the meaning of

§ 205 whenever an arbitration agreement or an arbitration

award “could conceivably affect the outcome of the plaintiff's

case.” Beiser v. Weyler, 284 F.3d 665, 669 (Sth Cir. 2002)

(emphasis in original). This is a very low bar, whereby

jurisdiction under § 205 will exist ‘over just about any suit

in which a defendant contends that an arbitration clause

falling under the Convention provides a defense.” Jd.

A. Effect of Prior Removal and Remand

In S.W.S. Erectors, Inc. v. Infax Inc., 72 F.3d 489, 492

(Sth Cir. 1996), the Fifth Circuit set forth the general rules

governing the successive removal of a case that has

previously been remanded:

As a general rule, once a case is remanded to state

court, a defendant is precluded only from seeking

a removal on the same ground. The prohibition

against removal ‘on the same grourd’ does not

concern the theory on which federal jurisdiction

exists (i.e., federal question or diversity

jurisdiction), but rather the pleading or event that

made the case removable.

(emphasis in original) (citations and footnotes omitted). Key

to the inquiry is whether the second removal is based on the

same factual ground for removal alleged in the first removal.

Where a second removal asserts the same factual basis for

removal as the first removal, the Court’s prior order of

remand, to the extent it “expressly addresses the theory of

30a

Appendix F

federal jurisdiction” has res judicata effect on the subsequent

removal. Jd. at 493. In contrast, where a second removal

asserts a new factual basis for removal, “the new factual basis

is not deemed adjudicated with the remand order and,

therefore, is not barred by res judicata.” Jd.

Crystal argues that Defendants’ second removal, whether

it is construed as being premised on the more particularized

allegations in the Third Amended Petition, or the more

generalized allegations in the Fourth Amended Petition, is

precluded by virtue of the Order of Remand in Civil Action

No. H-03-3634. According to Crystal, because the Court has

already determined that the subject matter of the state court

action, as alleged in the Third Amended Petition, was not

related to an arbitration award, and because Defendants could

have asserted in their first notice of removal that the state

court action related to an arbitration agreement, but did not,

Defendants’ second removal should be determined to be

invalid.

In their first removal, Defendants alleged only that the

State court action related to an arbitration award subject to

removal under 9 U.S.C. § 205. In their second removal,

Defendants now allege that the state court action relates to

both an arbitration award and an arbitration agreement.

Whether the state court action relates to an arbitration award

has already been decided. See Memorandum and Order

(Document No. 17) in Civil Action No. H-03-36344 Under

4. The determination that the state court action was not related

to an arbitration award was based on the following:

.. .. Here, the arbitration, arbitral award, and payment

of the award are all history. Plaintiff's allegation is that

(Cont'd)

31a

Appendix F

S.W.S. Erectors, that determination has res judicata effect

and precludes Defendants’ second removal of this action on

the basis that the state court action relates to an arbitration

award. S.W.S. Erectors, 72 F.3d at 493.

The alternate basis for removal, namely, that the state

court action relates to an arbitration agreement, could have

been asserted by Defendants in the first removal. The Fifth

(Cont’d)

the $90 million cash award should have been paid to

Defendant Coastal Nejapa, Ltd., from which Plaintiff

would have received its share, but instead, Defendant

El Paso Corporation caused the proceeds to be directed

to another entity and thereby deprived Plaintiff of its

share. Evidence of the arbitral award and its prior

payment may therefore be admissible in the dispute that

has now arisen between the parties to this case, which

all had interests in NPC [Nejapa Power Company]. “ut

that evidence in the context of the dispute here does not

implicate the Convention, or the Convention Act. In other

words, the connection of the NPC/CEL arbitral award

to this case is “too tenuous, remote, or peripheral” to

find that this case “relates to” an award under § 205.

Memorandum and Order (Document No. 17) in Civil Action No.

H-03-3634, at 7-8. Defendants appealed the Memorandum and Order

to the Fifth Circuit, which dismissed the appeal on June 1, 2004

without comment. The dismissal of Defendants’ appeal is in accord

with the recent decision of Dahiya v. Talmidge Int’1, Ltd., 371 F.3d

207 (5th Cir. 2004), reh’g and reh’g en banc denied, F.3d , 2004 WL

1663849 (5th Cir. July 27, 2004) (No. 02-31068), in which the Fifth

Circuit determined that a district court’s order remanding a case for

lack of jurisdiction under 9 U.S.C. § 205 was not reviewable on

appeal.

32a

Appendix F

Circuit, however, has not specifically determined that a

second removal is precluded if the factual basis supporting

the second removal could have been, but was not, asserted

in the first removal. S.W.S. Erectors may suggest that result,

but does not so hold. Moreover, no appellate authority has

been found that supports such an extension of S. W.S. Erectors.

But see Grover v. Comdial Corp., 275 F. Supp. 2d 750, 754

(W.D. Va. 2003) (“If nothing of significance changes between

the defendant’s first and second attempts to remove the case,

the prior remand order is the law ef the case.””). Accordingly,

Defendants’ first removal, and the remand order in Civil

Action No. H-03-3634, does not preclude Defendants’ second

removal, which includes different factual assertions--that is,

that the state court action is related to an arbitration

agreement.

B. “Related to” an Arbitration Agreement

Generally, courts should be able to “assess their

jurisdiction from the pleadings alone.” Beiser, 284 F.3d at

671. Under § 205, however, jurisdiction can also be

determined from the notice of removal. Accordine to the court

in Beiser:

The language of § 205 strongly suggests that

Congress intended that district courts continue to

be able to assess their jurisdiction from the

pleadings alone. Section 205 provides in part:

“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

33a

Appendix F

shown in the petition for removal.” 9 U.S.C.

§ 205 (emphasis added). This language does create

one difference between the federal question

jurisdiction conferred by § 205 and most other

forms of federal question jurisdiction: it permits

removal on the basis of a federal defense. The

language that the ground for removal “need aot

appear on the face of the complaint” explicitly

abrogates the well-pleaded complaint rule that

normally keeps such defenses from serving as the

basis for federal question jurisdiction. But at the

same time the statute permits a defense based on

an arbitration clause to serve as a grounds for

removal, it also directs us to treat such c efenses

the same way that we treat offensive claims. That

is, just as we determine whether a plaintiffs claim

arises under federal law from the complaint alone,

the statute directs us to determine whether a

defendant’s defense arises under federal law from

the “petition for removal” alone.

Beiser, 284 F.3d at 671. Therefore, “absent the rare frivolous

petition for removal, as long as the defendant claims in its

petition [for removal] that an arbitration clause provides a

defense, the district court will have jurisdiction to decide

the merits of that claim.” Jd. at 671-72. Such a procedure

“allows the district court to determine its jurisdiction from

the petition for removal, without taking evidence and without

a merits-like inquiry.” /d. at 672.

Here, in their Notice of Removal, Defendants identify

three agreements that contain arbitration provisions: (1) a

34a

Appendix F

1994 Power Purchase Agreement (“PPA”) between CEL and

Nejapa Power Company, L.L.C. (“NPC”); (2) a March 2002

“Final Award,” which reflected CEL’s and NPC’s agreed

resolution of their dispute regarding the PPA; and (3) a

Transmission Costs Agreement (“TCA”), entered into by CEL

and NPC as part of the Final Arbitration Award. Defendants

do not assert in their Notice of Removal that the arbitration

provisions in any of those three agreements provide a defense

to Crystal’s claims. Instead, they assert that it is

‘conceivable’ that the arbitration agreement referenced in

the Final Award and contained in the TCA could affect the

outcome of this case.” Notice of Removal (Document

No. 1) at 8.

The party removing a case to federal court has the burden

of proving federal jurisdiction, Allen v. R & H Oil & Gas

Co., 63 F.3d 1326, 1335 (Sth Cir. 1995); Jernigan v. Ashland

Oil Co., 989 F.2d 812, 815 (Sth Cir.), cert. denied, 114 S. Ct.

192 (1993), with any uncertainty or ambiguities being

resolved in favor of remand. Manguno v. Prudential Property

and Cas. Ins. Co., 276 F.3d 720, 723 (Sth Cir. 2002). Here,

Defendants have not met their burden of establishing

jurisdiction, even under the “low bar” permitted for removal

of a case under § 205.

Defendants do not allege in the Notice of Removal that

any of the three arbitration agreements they have identified

provides them with a “defense” to Crystal’s claims.

Moreover, Defendants’ Notice of Removal discloses that the

three agreements to arbitrate were entered into by CEL and

NPC, neither of which is a party to this case. See Notice of

Removal (Document No. 1) at 2-4; see also PPA, Final Award,

35a

Appendix F

and TCA, attached as Exhibits 1, 2, and 3 respectively, to

Defendants’ Notice of Removal (Document No. 1). The

Notice of Removal likewise discloses that none of the parties

to this case was a signatory of the agreements containing the

arbitration provisions. See Exhibits 1, 2, and 3 to Defendants’

Notice of Removal. Therefore, since Defendants are not

signatories to the arbitration agreements, they cannot facially

or credibly claim that the arbitration agreements provide them

with a defense to Crystal’s claims. See Westmoreland v.

Sadoux, 299 F.3d 462, 465, 467 (Sth Cir. 2002). Indeed,

Defendants have made no such claim. Given that Defendants’

Notice of Removal itself does not contain an allegation that

“an arbitration clause falling under the Convention provides

a defense” to Crystal’s claim against them, Beiser, 284 F.3d

at 669, and because the arbitration agreements (incorporated

into the Notice of Removal) do not, on their face, provide

any defense to Crystal’s claims, Defendants’ Notice of

Removal on its face is inadequate to support jurisdiction

under § 205.

Likewise, Crystal’s state court pleadings contain no

allegations to support jurisdiction under § 205. “[W]henever

an arbitration agreement falling under the Convention could

conceivably affect the outcome of the plaintiff's case, the

agreement ‘relates to’ the plaintiff's suit.” Beiser, 284 F.3d

at 670. Here, Crystal’s claims are not dependent upon any

issues that are subject to the agreements containing the

arbitration provisions. Crystal’s state court action, even when

formerly pled in the Third Amended Petition with more

particularized facts and a reference to the arbitration award,

is simply based on allegations that Crystal has not received

from Defendants-not from any party to the concluded

36a

Appendix F

arbitration-the payments to which it is entitled under the

parties’ shareholders’ agreement. The parties’ shareholders’

agreement does not contain an arbitration clause, and is

separate and distinct from the PPA, the Final Award, and the

TCA. It is therefore not “conceivable” that any arbitration

clause contained in the PPA, the Final Award, or the TCA,

could affect the outcome of Crystal’s state court action on a

completely different contract.

Because neither the allegations in Defendants’ Notice

of Removal nor the allegations in Crystal’s state court

pleadings support jurisdiction under § 205, Plaintiff's Motion

for Remand must be granted.

III. Conclusion and Order

Based on the foregoing, it is

ORDERED that Plaintiff Crystal Power Company’s

Motion for Remand (Document No. 9) is GRANTED and

this case is REMANDED to the 23rd District Court of

Brazoria County, Texas.

The Clerk shall mail a certified copy of this Order to the

Clerk of the 23" Judicial District Court of Brazoria County,

Texas, as required by 28 U.S.C. § 1447, and shall notify all

parties and provide them with a signed copy of this Order.

SIGNED at Houston, Texas, this 18" of August, 2004.

s/ Ewing Werlein, Jr.

EWING WERLEIN, JR.

UNITED STATES DISTRICT JUDGE

37a

APPENDIX G— ORDER OF THE UNITED STATES

COURT OF APPEALS FOR THE FIFTH CIRCUIT

DENYING PETITION FOR REHEARING FILED

JANUARY 7, 2005

No. 04-20678

CRYSTAL POWER CO.

Plaintiff - Appellee

COASTAL SALVADORAN POWER LTD.; COASTAL

NEJAPA LTD.; EL PASO CGP CO., successor in interest to

Coastal States Gas Corporation and The Coastal Corporation;

EL PASO CORP., as successor in interest to Coastal States

Gas Corporation and The Coastal Corporation

Defendants - Appellants

Appeal from the United States District Court for the

Southern District of Texas, Houston

Before JOLLY and HIGGINBOTHAM, Circuit Judges.*

PER CURIAM:

(X) Treating the Petition for Rehearing En Banc as a Petition

for Panel Rehearing, the Petition for Panel Rehearing is

* Judge Pickering was a member of the original panel but retired

from the Court on December 8, 2004 and, therefore, did not

participate in this decision.

38a

Appendix G

DENIED. No member of the panel nor judge in regular active

service of the court having requested that the court be polled

on Rehearing En Banc (Fep. R. App. P. and StH Cir. R. 35),

the Petition for Rehearing En Banc is DENIED.

* * *

ENTERED FOR THE COURT:

s/ E. Grady Jolly

United States Circuit Judge

39a

APPENDIX H — STATUTES INVOLVED

9 USCS § 205 (2004)

§ 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

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.

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.

40a

Appendix H

28 USCS § 1447 (2004)

§ 1447. Procedure after removal generally

* * *

(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 case to the State court from which it

was removed pursuant to section 1443 of this title

shall be reviewable by appeal or otherwise.

* * *

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.