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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 2005
- **Citation:** 544 U.S. 1032

## Text

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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,

V.

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

i
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

il
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

mS

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

iv

Contents

REASONS FOR GRANTING THE PETITION ...

I.

II.

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:

A.

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
10

12

12

14

20

21

22

25

27

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

la

2a

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.

2

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

3

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.

4

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

5

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”).

si

6

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.

5

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.

8

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

9

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.

10

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

11

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.

12

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

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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

es

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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

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15

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

16

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

17

§ 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)

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18

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

19

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

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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

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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.

22

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.

23

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

24

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

26

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

27

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

la

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
v.

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]

2a

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.

3a
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

4a

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.

Sa
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.

6a
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

7a
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.

8a
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).

9a
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

eg

—

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

3
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

;
F
é
3

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
V.
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

Ce

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,
V.

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

TY

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
ya

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).

I

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

a

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
v.

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.

* * *

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386007_0584%3A1. Public record. Not legal advice.