Opposition Brief — Zurich American Insurance Co. v. Pioneer Natural Resources USA, Inc.

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(0. 09-1805

IN THE

Supreme Court of the Gluited States

ALURICH AMERICAN INSURANCE COMPANY, ET Al

i Littoners

PIONEER NATURAL RESOURCES USA, INC. AND

PIONEER NATURAL RESOURCES COMPANY.

Le spond its

On Petition for a Writ of Certiorari

to the United States Court of Appeals

for the Fifth Circuit

BRIEF FOR THE RESPONDENTS

IN OPPOSITION

BARRETT? HL. REASONER

Counsel of Record

JEFFREY C. KUBIN

ANTHONY N. KAIM

GIBBS & BRUNS, LLP

1100 Louisiana, Suite 53800

HHouston, exas 77002

(713) G50 8805

June 28, 2OLO breasonen¢ribbsbruns.com

QUESTION PRESENTED

Whether ue OF ( 8144 7(d) pron boat appellal

review of a dustrict court order remandu lor tact

() ubjyect matter yur diction a Cast removes Liaise

the Convention on tlre hecorvnition and buy

of Koreien Arbitral Awards. 9 ULS.C. S805

TABLE OF CONTENTS

QUESTION PRESENTED

TABLE OF AUTTPHORUTT

TATEMEN'

REASONS FOR DENYING TH PETITION

NO CONFLICT EXISTS TO JUSTIFY

REVIEW BY THIS COUR]

\ The Fifth Cireunt Order 1) N

Conthet with Any Decision of thi

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ith Arthur A |

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re irre] int

\ Lit hitth Coireult Correctly Coon

cluded that It Lacked dur Lichlon

) The District Court Correctly ¢

cluded that lt | icked dur ay LO)

hI MHERE IS NO JUSTIFICATION FOR

\ GRANT, VACATI AND REMANTD

ORDER IN THIS CASI

CONCLUSION

iV

TABLE OF AUTHORITIES

Page

CASES

Amoco Petroleum Additives Co., In re, 964 F.2d

Ue ee ick vce cy cance cess ccbaceusssecucruseeoce 16, 19

Arthur Andersen LLP v. Carlisle, 129 S. Ct.

1896 (2009) o..ccccccccecccccececccecesseeseesseeeeeee.D, 6, 8, 9, 24

Behrens v. Pelletier, 516 U.S. 299 (1996)........0..0.0..... 8

Beiser v. Weyler, 284 F.3d 665 (5th Cir. 2002)............3

Briscoe v. Bell, 432 U.S. 404 (1977)

Certain Underwriters at Lloyd’s London. v.

Warrantech Corp., 461 F.3d 568 (5th Cir.

I oe secadacnce asnesdbonsconaeasavedeusaedaal oO, 6, 18, 19, 24

City of Waco v. United States Fid. & Guar. Co.,

re cs I ivan ccaeccenosansassacusaveseaseesntes o, 9

Dahiya v. Talmidge Intl, Ltd., 371 F.3d 207

(5th Cir. 2004)......... Po i decptieininscale ay he ee hae

First Opitons of Chicago, Inc. v. Kaplan,

BE ree, Re 0 ID no cic cce du cnnseaaesssokeuasiapbardaccsessss 21

Kircher v. Putnam Funds Trust, 547 U.S. 633

SNE etic ss cucueacersicsunuidh caviwcsguae dea tebe caeidees 7, 9,17, 19

Kontrick v. Ryan, 540 U.S. 443 (2004)... 22

Koveleskie v. SBC Capital Mkts., Inc., 167 F.3d

Pe a kaa ick ces senate vecuncasaceikes 16

Lakarge Coppee v. Venezolana De Cementos,

S.A.C.A., 31 F.3d 70 (2d Cir. 1994) ....cccccccceccccee 16

Lawrence ex rel. Lawrence v. Chater, 516 U.S.

Lot) 5 Se sccguaiceudiniscasviiketivaions 24, 25

McLaughlin Gormley King Co. v. Terminix

Int? Co., 105 F.3d 1192 (8th Cir. 1997)............... 16

Moses H. Cone Mem Hosp. v. Mercury Constr.

Corp., 460 U.S. 1 (1983) .cccccccccssccscsceseccscecsececeeeees 99

Northcross v. Board of Educ., 412 U.S. 427

Se Sa gcse eve cu ten cs aauiowe noe ea sense eT a ea 25

Ocean Marine Mut. Protection & Indem. Ass'n,

Lid., In re, 3 F.3d 353 Ql ith Cir. 1993)............... 17

Osborn v. Haley, 549 U.S. 225 (2007) ........5, 6, 10, 11,

£2; 1a, 3m, 25

Powerex Corp. v. Reliant Energy Seruvs., Inc.,

ee Bee, ee ES xe ccc cnckcocncsssncnescacs 6, 47, &, 42. 32,

14, 16. 38, 393... 20. Zz

Price v. J & H Marsh & McLennan, Inc.,

PON ge Be aE Be ce 1 7 dr 14

Reddam v. KPMG LLP, 457 F.8d 1054

Fee ae. Er oss occasioned eater Es pee 6, 13, 14, 15

Sandvik AB v. Advent Int'l Corp., 220 F.3d 99

ee See | a een ee eee 2 Pete in ne: 6, 15,16

Sarhank Group v. Oracle Corp., 404 F.3d 657

UN IS I eo fe cca ncggans vase cau tsdvesvetel weeks 6, 15, 16

Severonickel v. Gaston Reymenants, 115 F.3d

ee I ook ve eee ose viovan sa vareevesk<daccatnces 16

Taylor v. McKeithen, 407 U.S. 191 (1972) ....000.... 25

Thermtron Prods., Inc. v. Hermansdorfer,

ee ee ogo cc csckavnecaocdessacscsceivesasasss 7,17

Things Remembered, Inc. v. Petrarca, 516 U.S.

Dee I coro ne Boeke ae Se. oe 12

v1

Transit Cas. Co. v. Certatn Underwiters at

Lloyd's of London, 119 F.8d 619 (8th Cir.

tf PAAR aE eS oS CRE Fray es Soe BO an ae 16, 19

Ultimate Creations, Inc. v. McMahon, 300 F.

PUREE Oe CTT, BOGE oo scsi vacscnckssecessescsesnenss 14

United States v. Rice, 327 U.S. 742 (1946) ......... 12,19

Youngblood v. West Virginia, 547 U.S. 867

ESS Dae a ane Ahn ei SR ane Sen ey PPO Aen Zo

TREATIES AND STATUTES

Convention on the Recognition and Enforce-

ment of Foreign Arbitral Awards, June 10,

1958. 21 U.S.7. 2517, 330 U.N.TS. 38........... 3, 20

Federal Arbitration Act, 9 U.S.C. §1 et seq. ........0..... 8

Pe gy occa o spiny vase Sasiddinsesenaiwaccxess 14

A aes capac ste ccovsvcnessvanesinesinass 8

BPR I ri vnnies cas cecivastavcsanisinsees 8, 16, 19

Federal Tort Claims Act, 28 U.S.C. §2671

SE SOA Se EO DOO ANDI ARS GS ast EID ns i Dee a aa RS ee 10

28 U.S.C. §2679(d) ...cccccccceccseeeeee. uA ert 10, 12

AEE ey | | Se 10

ee arson cenehvckncreenexcssssanernivas 10

Foreign Sovereign Immunities Act of 1976............... 1]

Dy PT, isc osc ces ences acca ecnnesne vsnencsayes 1}

SN erga vicxcesisecttscnpsascivsiavasedintvioss 1]

a eee ang sus candvceieveciésnevunanivacs 2

Se cs evauanieavvensnce 21, 23

STATEMENT

1. This case 1s a dispute about insurance cover-

age for the Kast Cameron 322 drilling platform (“HC

322”) in the Gulf of Mexico. Respondent Pioneer

Natural Resources USA, Inc. owned IC 322, and

respondent Pioneer Natural Resources Company

held insurance policies that provided coverage for

damage to KC 822 and resulting liability. One of

these policies was Package Insurance Policy No. CR-

5591 (the “Package Policy”). Petitioners are under-

writers that are responsible to pay claims under the

Package Pohey. See Pet. App. 24a-25a.

The Package Policy applies to the period from June

15, 2005, until dune 15, 2006. Section 1 of the Pack-

age Policy covers damage to IC 822 and related

property. Section 2 covers expenses for bringing re

lated wells under control. Section 3 covers hability

expenses to the extent they exceed respondents’ cov-

erage under a separate policy issued by Associated

Electric & Gas Insurance Services Limited (the

“AEGIS Policy”). See id. at 25a.

‘The Package Polhcy contains multiple dispute reso-

lution provisions. As a whole, the Package Policy is

subject to General Insuring Conditions, which by

their terms are “APPLICABLE TO ALL SECTIONS

OF THIS POLICY.” /d. at 31a. Paragraph 36(A)

of those general conditions provides a process to be

followed “[iJn the event it is mutually agreed by

[respondents] and [petitioners] to arbitrate any dis-

pute arising under this Policy.” /d. Paragraph 36(B)

provides that

liJf any dispute is not resolved through arbi-

tration in accordance with Paragraph [36(A)}],

it is agreed that in the event of the failure of

[petitioners] to pay any amount claimed to be

due hereunder, [petitioners], at the request of

[respondents], will submit to the jurisdiction of

a court of competent jurisdiction within the

United States of America.

Id. at 82a. Respondents have not agreed to arbitrate

their claims in this case under Paragraph 386(A).

Section 3 of the Package Policy also contains a

“following form” clause, which provides that, “[s]ub-

ject to the Limit and Excess specified in the Declara-

tions and any paramount exclusions contained in the

General Conditions, this Section Three shall follow

the terms and conditions” of the AEGIS Policy. Id.

at 33a. Among those terms and conditions is a

mandatory arbitration clause that applies to “[a]ny

controversy or dispute arising out of or relating to

[the AEGIS Polhecy], or the breach, termination or

validity thereof.” Td.

2. On September 23, 2005, Hurricane Rita de-

stroyed EC 322 and severely damaged other property

covered by the Package Policy. See Pet. App. 4a, 25a.

Respondents notified petitioners of their losses and

later filed a claim under the Package Policy.

Respondents have alleged that petitioners appoint-

ed a claims representative, and respondents agreed

with the representative about appropriate repairs

and remedial work that Pioneer would undertake.

See Notice of Removal, Exh. B 44] 15-19. Respon-

dents then undertook substantial and costly repairs

in reliance on the Package Policy and on that agree-

ment. See id. 44) 21-29. Petitioners later took the

position that no agreement had been reached and

that some of the repairs undertaken were outside the

-ackage Policy’s coverage. See id. {| 30, 35, 37.

3. On August 8, 2007, respondents brought an

action in Louisiana state court seeking to recover un-

oO

der state law, including (1) under the Package Policy,

(2) for breach of contract, (3) for reliance on petition-

ers’ representations, and (4) for breach of petitioners’

duties of good faith and fair dealing. See Pet. App.

25a-26a. On February 8, 2008, respondents filed an

amended petition for damages that stated a claim

under Section 3 of the Package Policy. See td. at 26a.

On April 18, 2008, petitioners removed the action

lo the Middle District of Louisiana. The sole basis

for federal subject matter jurisdiction stated in the

notice of removal was petitioners’ allegation that this

case involved an “arbitration agreement ... falling

under” the Convention on the Recognition and En-

forcement of Foreign Arbitral Awards, 9 U.S.C. §205.

See Notice of Removal 4] 10. In support of that alle-

gation, petitioners claimed that the “following form”

provision of Section 38 of the Package Policy incorpo-

rated the mandatory arbitration provision of the

AEGIS Policy. See Pet. App. 5a, 26a. Respondents

moved to remand, denying that the Package Policy

provided for mandatory arbitration. See id. at 5a.

The motion was referred to a magistrate judge.

4. On January 6, 2009, the magistrate judge rec-

ommended that the district court deny respondents’

motion to remand. She reasoned that the AKGIS

Policy’s mandatory arbitration provision was “an

arbitration agreement [that] could conceivably affect

the outcome of Ittigation” and that this sufficed to

confer subject matter jurisdiction on the district

court. Pet. App. 19a; see id. at 10a-lla (discussing

Beiser v. Weyler, 284 F.3d 665 (5th Cir. 2002)).

The magistrate judge declined to engage in any

“construction of the terms of the insurance con

tracts.” Jd. at 19a. The only question she considered

was whether petitioners had made “a reasonable

allegation that [the] arbitration agreement [from the

AKGIS Polcy] applies to Section Three of the Pack-

ave Policy through the following form provision.” Id.

at 15a. She cautioned that, because her inquiry was

only preliminary, petitioners “m[ight] not ultimately

prevail on a subsequent motion to compel arbitra-

tion, and they mlight] one day be returned to state

court.” /d. at 19a.

On February 10, 2009, the district court adopted

the magistrate judge’s report and recommendation.

Id. at 22a. Petitioners moved to compel arbitration

of the Section 3 claims.

5. On October 7, 2009, the district court remanded

the case to state court. The court first applied

“ordinary contract principles” under state law to

determine whether Section 3’s following-form clause

incorporated the mandatory arbitration provision

from the AEGJS Policy. Pet. App. 3la (internal quo-

tation marks omitted). It reasoned that “[t}he incor-

poration of a mandatory arbitration clause into the

Third Section of an insurance agreement that also

contains permissive arbitration and right to sue

clauses that are ‘APPLICABLE TO ALL SECTIONS

OF THIS POLICY, creates ambiguity” in the Pack-

age Policy. Jd. at 35a. Because the Package Policy is

an insurance policy, it then “construed [the policy|

in favor of the insured,” t.e., respondents, and as

a result concluded that “no valid agreement exists

between the parties to submit the disputes to arbi-

tration.” Id. at 36a.

The district court then considered the effect of this

conclusion on its jurisdiction. It noted that its pre-

vious ruling, in the form of the magistrate judge's

adopted report and recommendation, had not been

“based on an evaluation of the merits or contract

interpretation.” Jd. Its consideration of the motion

to compel, however, had “require|d] the court ... to

engage in contract interpretation.” Jd. Having done

and having concluded that “the Package Policy

does not present a valid agreement to arbitrate,” the

court concluded that “the Convention is not applica-

SO

,

ble to the dispute before the court and federal ques

tion jurisdiction is, therefore, absent.” /d. at 36a

37a.

Quoting 28 U.S.C. §1447(c)’s directive that “‘fijf at

any time before final judgment, it appears that the

district court lacks subject matter jurisdiction, the

case shall be remanded,” the district court then re

manded the case. /d. at 87a (alteration in original).

It did not rule on petitioners’ motion to compel.

6. On October 27, 2009, petitioners filed a notice

of appeal, which stated their intent to “appeal

from the |district court’s] Order ... remanding this

action” to state court. Notice of Appeal at 1. Respon-

dents moved to dismiss the appeal for lack of appel-

late jurisdiction. On December 17, 2009, the court

of appeals issued a one-sentence unpublished, per

curiam order dismissing the appeal for lack of juris-

diction. See Pet. App. la-2a. Petitioners then sought

rehearing en banc, which the court of appeals denied.

See id. at 39a-40a.

In their motion before the court of appeals, respon-

dents rehed on Dahiya v. Talmidge International,

Ltd., 371 F.3d 207 (5th Cir. 2004), and Certain

U/nderwriters at Lloyd’s London v. Warrantech Corp..,

461 F.3d 568 (Sth Cir. 2006). See Appellees’ Mot.

To Dismiss at 38-8. Petitioners did not suggest in

response that Dahiya or Warrantech was inconsis-

tent with Arthur Andersen LLP v, Carlisle, 129 S. Ct.

1896 (2009), or Osborn v. Haley, 549 U.S. 225 (2007).

6

Indeed, petitioners did not even cite those cases to

the court of appeals. Petitioners also never called the

attention of the court of appeals to Reddam v. KPMG

LLP, 457 F.3d 1054 (9th Cir. 2006), or any of the

other decisions they now claim conflict with Dahiya

and Warrantech.' They argued instead that Dahiya

and Warrantech were distinguishable, inconsistent

with the Fifth Circuit’s own precedent, or inconsis-

tent with City of Waco v. United States Fidelity &

Guaranty Co., 293 U.S. 140 (1934), which is not men

tioned in the petition. See Appellants’ Opp. to Mot.

To Dismiss at 5-8 & n.10; Appellants’ Pet. for Reh’g

Kn Bane at v-vi n.3, 1-2.

REASONS FOR DENYING THE PETITION

Petitioners have failed to show that this case war-

rants review by this Court. There is no conflict be-

tween the one-sentence unpublished, per curiam or-

der of the court of appeals and this Court’s decisions

in Arthur Andersen or Osborn. That is particularly

true in light of this Court’s decision in Powerex Corp.

v. Reliant Energy Services, Inc., 551 U.S. 224 (2007),

which rejected arguments very similar to those that

petitioners advance here. No conflict exists between

the court of appeals’ judgment and any decision of

any other circuit. The cases on which petitioners rely

are easily distinguishable and, in the case of the

Ninth Circuit’s decision in Reddam, no longer good

law in light of intervening Supreme Court precedent.

Petitioners also have failed to show that either the

court of appeals or the district court erred in this

case or that their decisions otherwise warrant review.

! See Pet. 20-22 (citing Sarhank Group v. Oracle Corp., 404

F.3d 657 (2d Cir. 2005), and Sandvik AB v. Advent Intl Corp.,

220 F.3d 99 (3d Cir. 2000))

"7

/

The Fifth Cireuit’s ruling that it lacked appellate

jurisdiction was correct in light of Powerex and this

Court’s cases holding that 28 U.S.C. §1447(d) bars

appellate review of a remand for lack of subject mat-

ter jurisdiction. The district court’s conclusion that if

lacked subject matter jurisdiction was also correct,

although this Court hkely would not reach that ques

tion even if it granted review.

Finally, a grant, vacate, and remand (“GVK”) order

is not warranted in this case. The summary disposi

tion of this matter by the Fifth Circuit was entirely

appropriate, especially given that petitioners them-

selves failed to cite to that court the cases they say it

should have followed, and no intervening develop-

ments warrant vacatur and remand.

I. NO CONFLICT EXISTS TO JUSTIFY REVIEW

BY THIS COURT

A. The Fifth Circuit’s Order Does Not Con-

flict with Any Decision of this Court

The Fifth Cireuit’s order dismissing petitioners’

appeal is consistent with (indeed, was compelled by)

this Court’s “relentlessly repeated” instruction that

““any remand order issued on the grounds specified

in §1447(c) [is immunized from all forms of appellate

review|, whether or not that order might be deemed

erroneous by an appellate court.” Kircher v. Putnam

Funds Trust, 547 U.S. 633, 640 (2006) (quoting

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

336, 351 (1976)) (alteration in Kircher). Nothing in

the cases on which petitioners rely undermines the

application of that rule to this case.

re)

l. Petitioners’ claimed conflict with Arthur Ander-

sen has no merit.

The Fifth Cireuit’s judgment does not conflict with

Arthur Andersen. See Pet. 12-14. Arthur Andersen

involved 9 U.S.C. §16(a)(1)(A), which permits imme

diate appeal from “an order ... refusing a stay of any

action under [9 U.S.C. §] 3,” which is part of the Fed-

eral Arbitration Act. Section 16(a)(1)(A) is an excep-

tion to the rule that only final judgments of the dis-

trict courts are appealable under 28 U.S.C. §1291.

See 129 8S. Ct. at 1900. The question presented in

Arthur Andersen was whether this exception applied

to “denials of stays requested by litigants who were

not parties to the relevant arbitration agreement.”

Id. at 1899. The Court held that it did, criticizing

contrary appellate precedent for “conflating the juris-

dictional question with the merits of the appeal.” /d.

at 1900. It cautioned that “[j]urisdiction over the

appeal... ‘must be determined by focusing upon the

category of order appealed from, rather than upon

the strength of the grounds for reversing the order.”

Id. (quoting Behrens v. Pelletier, 516 U.S. 299, 31)

(1996)).

Arthur Andersen did not involve a remand order.

‘The Court had no occasion to, and did not, consider

whether §16(a)(1)(A) (or §16(a)(1)(C), on which peti-

tioners rely) affects the application of §1447(d) to a

remand in a case that involves an alleged arbitration

agreement. The Fifth Circuit’s order therefore does

not conflict with Arthur Andersen.

Arthur Andersen’s reasoning is also fully consistent

with (indeed, positively supports) the court of ap-

peals’ conclusion that §1447(d) bars appellate review

here. In this case, the “category of order appealed

from,” 129 S. Ct. at 1900, is a remand for lack of sub

0

ject matter jurisdiction. That kind of order may not

be appealed under §1447(d). Petitioners did not ap

peal an order denying their motion to compel because

the district court did not issue one. On the contrary,

their own notice of appeal referred only to the district

court's order “remanding this action.” See p. 5, supra

Petitioners repeatedly assert that the district court

did deny their motion to compel, relying on a state

ment in the Fifth Circuit’s Dahiya decision that “|a|ny

order remanding for lack of subject matter jurisdic-

tion necessarily denies all other pending motions.”

$71 F.8d at 210; see Pet. 11, 12, 14, 19, 24. It is true

that if the district court lacked subject matter juris

diction it could not compel arbitration. That is all

that the Fifth Circuit said in Dahiya. See 371 F.3d

at 210 (‘[U]nless a federal court possesses subject

matter jurisdiction over a dispute, any order it makes

(other than an order of dismissal or remand) is void.”)

(internal quotation marks and alterations omitted)

That truism does not make a remand order anything

but a remand order and does not make such an order

reviewable under §1447(d).?

2. The order below does not conflict with Osborn

Recognizing (as they must) that Arthur Andersen

did not involve a remand or §1447(d), petitioners also

soth Kircher and Powerex rejected arguments that §1447(d)

permits review of a merits-related determination that “cannot

be disapyrepated’ from a remand order. Aurcher, 547 U.S. at

645-46 n.18; see Powerex, 551 U.S. at 235-36 (following Aurcher)

In doing so, both cases also distinguished City of Waco, 293

U.S. 140, on which petivioners relied before the court of appeal:

but do not rely in their petition, See Powerex, 551 U.S. at 236

(“As we reiterated in Kircher, Waco does not permit an appeal

when there is no order separate from the unreviewable remand

order.) (citation omitted): see also p. 6, Supra

1Q

assert that the court of appeals order conflicts with

Osborn. See Pet. 14-19. That claim also fails

Osborn involved 28 U.S.C. §2679(d), the provision

of the Federal ‘Tort Claims Act (“F’PTCA”) that autho

rizes the Attorney Genera! to remove to federal court

a suit raising a tort claim against a federal employee

after certifying that the employee was “acting within

the scope of his office or employment at the time of

the incident out of which the claim arose.” 28 U.S.C

§2679(d)Q1). Such a “certification conclusively es

tablishles] SCOPE of office or employment lor purposes

of removal.” /d. §2679(d)(2)

In Osborn, this Court considered the interaction

between §1447(d) and §2679(d)(2) It determined

that §2679(d){2) was an “antishuttling provision| |" by

which “Congress hal[d] barred a district court from

passing the case back to the state court where it

originated’ and that because of that categorical bar

appellate review of a remand was appropriate despite

$1447(d). 549 U.S. at 243-44. The Court cautioned,

however, that it:

decision that §2679(d)(2) leave the district

court without authority to send a certified case

back to the state court scarcely means that

whenever the district court misconstrues a

irisdictional statute, appellate review of the

remand is in order. Such an exception would

of course, collide head on with §1447(d), and

with our precedent. Only in the extraordinary

case in Which Congress has ordered the inte

court huttle to travel just one way Irom

state to federal court does today’s decision

hold Way

Id. (citation omitted)

1]

Nothing in 9 U.S.C. §205, the removal statute that

petitioners have invoked, makes this a_ similarly

“extraordinary case in which Congress has ordered

the intercourt shuttle to travel just one way.” Jd. On

the contrary, §205 itself directs (with an exception

not relevant here) that “[t}he procedure for removal

of causes otherwise provided by law shall apply”

to cases removed under that section. Accordingly,

Osborn’s narrow holding based on the language of a

different statutory provision does not conflict with

the Fifth Cireuit’s order.

3. Powerex ts fatal to petitioners’ argument.

This Court confirmed the narrowness of Osborn’s

holding in Powerex, which was issued a few months

after Osborn. Petitioners cite Powerex only in a foot-

note and quote only the dissent. See Pet. 17 n.6. The

majority opinion, however, conclusively defeats peti-

tioners’ claim of a conflict with Osborn.

Powerex involved a removal by an entity that

claimed “foreign state” status under the Foreign

Sovereign Immunities Act of 1976 (““FSIA”), 28 U.S.C:

§$1441(d), 1608. The district court had held that

Powerex, a subsidiary of a state-owned hydropower

company, was not a foreign state; and, concluding

that this deprived it of subject matter jurisdiction,

had remanded the case to state court. See 551 U.S.

at 227-28, 232-33. Powerex sought appellate review

and argued (like petitioners here) that the impor-

tance of FSIA immunity to foreign relations was such

that “Congress could not have intended to grant dis-

trict judges irrevocable authority to decide questions

with such sensitive foreign-relations implications.”

Id. at 236 Gnternal quotation marks omitted).

The Powerex Court firmly rejected that argument.

Describing §1447(d) as a “clear jurisdictional stat-

12

ute,” the Court reasoned that an equally clear excep-

tion to §1447(d) would be required to make a particu-

lar class of remand orders reviewable on appeal. Jd.

at 237. ‘The Court therefore reaffirmed “longstand-

ing precedent” that a “‘clear statutory command’” is

required when Congress seeks to depart in a particu-

lar context from the “‘“universal|] ... practice” of

denying appellate review of remand orders.’” /d.

(quoting Things Remembered, Inc. v. Petrarca, 516

U.S. 124, 128 (1995), in turn quoting United States v.

Rice, 327 U.S. 742, 752 (1946)).

The Powerex Court discussed Osborn in two long

footnotes. One explained that Osborn “had nothing

to say about the scope of review that is permissible

under §1447(d), since it held that §1447(d) was dis-

placed in its entirety by 28 U.S.C. §2679(d)(2).” Td.

at 233 n.2. ‘The other, responding to an argument

made in the dissent, explained that the key to Osborn’s

holding was its “repeated[] emphas|is] that [§2679(d)]

certification is ‘““conclusiv[e] ... for purposes of

removal.”’” Id. at 238 n.5 (quoting Osborn, 549 U.S.

at 242, 248, in turn quoting 28 U.S.C. §2679(d);

fourth alteration, omission, and emphasis added in

Powerex). Powerex therefore rejected a reading of

Osborn that would “license ... courts to assume the

legislative role” by making exceptions to “§1447(d)’s

bar on appellate review” without a textual mandate.

ld. Notably, Justice Ginsburg, who wrote Osborn,

joined Powerex in full.

Petitioners’ studied avoidance of Powerex is telling:

Osborn on its face fails to support their claim of a

conflict with the court of appeals’ order, but the gloss

given to Osborn by Powerex disposes of that claim

completely. Petitioners cannot credibly contend that

the removal provision at issue here “displace[s]

13

({$1447(d)] in its entirety,” rd. at 233 n.2, in light of its

express incorporation of “[t]he procedure for removal

of causes otherwise provided by law,” 9 U.S.C. §205.

Their attempt to establish a conflict between the

Fifth Circuit’s order and a decision of this Court

therefore fails.

B. The Fifth Circuit’s Order Does Not Con-

flict with the Decisions of Other Circuits

1. There ts no conflict with the Ninth Circuit’s

Reddam decision.

Petitioners claim that the order below conflicts

with the Ninth Circuit’s decision in Reddam. Reddam

is distinguishable and inconsistent with this Court’s

intervening precedent. In any event, it does not pro-

vide a basis on which to grant certiorari.

In Reddam, the Ninth Circuit reviewed a district

court’s decision to remand a case removed under

§205 after the chosen arbitrator (the National Asso-

ciation of Securities Dealers) declined to arbitrate.

See 457 F.3d at 1057. The Reddam court heid that,

“[w|here [a] remand order is not based on defective

removal or Jack of subject matter jurisdiction at the

time of removal, §1447(c) does not apply and the

§1447(d) restriction fon appellate review] does not

apply either.” Jd. at 1058 (emphasis added, footnote

omitted). It relied on a line of cases holding that

events occurring after the time of removal “cannot be

the basis for a §1447(c) remand order.” /d. at 1059.

The district court’s remand order in this case did

not rely on events occurring after the time of removal.

Instead, the court relied exclusively on the contents

of insurance policies signed years before removal.

See Pet. App. 3la-37a. Reddam thus does not sug-

gest that the Ninth Circuit would have reached a dif-

ferent result on the present facts.

14

In addition, Powerex considered and rejected the

proposition that “a remand for lack of subject-matter

jurisdiction is not covered [by §1447(c)] so long as the

case was properly removed in the first instance,”

“hold[ing]” instead that, “when a district court re-

mands a properly removed case because it nonethe-

less lacks subject-matter jurisdiction, the remand 1s

covered by §1447(c) and thus shielded from review

by §1447(d).” 551 U.S. at 230, 232. That holding

is contrary to Reddam. See Price v. J & H Marsh &

McLennan, Inc., 493 F.3d 55, 60-61 (2d Cir. 2007)

(listing Reddam among cases applying the so-called

“post-removal-event” doctrine that was rejected by

this Court in Powerex). It is likely that, if and when

the Ninth Circuit again has occasion to consider

Reddam, it will revisit that case without further

guidance from this Court.*

Petitioners rely upon a footnote in Reddam that

reads, in its entirety: “Beyond that, we have jurisdic-

tion under 9 U.S.C. §16(a)(1)(A) & (B) to review the

district court’s conclusion that it could no longer

enforce the arbitration agreement.” 457 F.3d at 1059

n.8. That conclusory footnote is more dictum than

holding and does not even cite §1447(d). It does not

establish that the Ninth Cirewit has adopted a rule

that §16(a)(1) displaces §1447(d) in cases that do not

involve a district court’s reliance on post-removal

events. When the Ninth Circuit ultimately reconsid-

ers Reddam in light of Powerex, it hkely will not

* Since Powerex, the Ninth Circuit has applied Reddam once

in an unpublished memorandum affirmance that did not involve

an arbitration agreement. See Ultimate Creations, Inc. v.

McMahon, 300 F. App’x 528, 529 (9th Cir. 2008). Ultimate

Creations is nonprecedential and does not suggest that the

Ninth Circuit will not follow Powerex when better advised.

15

interpret AReddam’s footnote as an exception to

§1447(d), or it will reconsider that footnote along

with the rest of Reddam’s holding. It would be pre-

mature for this Court to grant review before seeing

whether the Ninth Circuit will appropriately apply

Powerex’s emphasis on the need for a “clear statu-

tory command” to bypass §1447(d). 551 U.S. at 237

(internal quotation marks omitted).

2. Petitioners cite other cases that are irrelevant.

The remaining cases that petitioners allege conflict

with the Fifth Circuit’s order below have nothing to

do with the question presented. None involved re-

view of a remand to state court, and thus none inter-

preted or apphed §1447(d).4

In Sarhank Group, cited in Pet. 20-21, the Second

Circuit reviewed a district court’s grant of a petition

to enforce an award by an Kgyptian arbitration tri-

bunal. See 404 F.3d at 658-59. The district court

had found that it had subject matter jurisdiction, and

the Second Circuit agreed. See id. at 659-60. ‘There

was no remand, and the Second Circuit never cited

§1447(d).

In Sandvik AB, cited in Pet. 21, the Third Circuit

reviewed a district court’s order denying a motion to

compel arbitration. See 220 F.3d at 102. In denying

4 See Pet. i (presenting the question whether “an order deny-

ing a motion to compel arbitration and remanding to state court

is appealable under the Federa) Arbitration Act’s express nght

of interlocutory appeal from such denials, 9 U.S.C. §16(a)(Q1)(C),

notwithstanding 28 U.S.C. §1447(d)”). Respondents do not

concede that this case actually involves “an order denying a

motion to compel arbitration,” because the district court entered

no such order. See p. 5, supra. Even as petitioners have formu-

lated the question, however, cases that do not involve an order

“remanding to state court” are not within its scope.

16

that motion, the district court had retained juris-

diction to conduct further proceedings in order to

“determin[e] ... whether there was an actual agree-

ment to arbitrate.” Jd. The Third Circuit held that

§16(a)(1)(C) gave it jurisdiction to review the district

court’s interlocutory denial of the motion to compel.

See id. at 102-04. There was no remand, and the

Third Circuit never cited §1447(d).6

The same is not true, however, of the Fourth and

Mighth Circuit cases that petitioners concede support

the Fifth Cireuit’s decision in this case. See Pet. 20

(citing Severonickel v. Gaston Reymenants, 115 F.3d

265, 267 (4th Cir. 1997), and Transit Casualty Co. v.

Certain Underwiters at Lloyd’s of London, 119 F.3d

619, 625 (8th Cir. 1997)). Those cases did involve

district court remand orders based on a lack of sub-

ject matter jurisdiction under 9 U.S.C. §205 and did

hold that appellate review was barred by §1447(d).

See Severonickel, 115 F.3d at 266-69; Transit Cas.,

119 F.3d at 623-25.

The Second, Seventh, and Eleventh Circuits have

reached similar results in cases removed under §205

but remanded based on procedural defects. See La-

karge Coppee v. Venezolana De Cementos, S.A.C.A.,

31 F.8d 70, 72 (2d Cir. 1994) (“[T]he remand was or-

dered on grounds covered by subsection 1447(c), and

appellate jurisdiction is therefore unavailable under

subsection 1447(d).”); In re Amoco Petroleum Addi-

tives Co., 964 F.2d 706, 712 (7th Cir. 1992) (holding

that §205 “incorporates” §1447(d)’s bar on appellate

© Petitioners also cite in a footnote Koveleskie v. SBC Capital

Markets, Inc., 167 F.3d 361 (7th Cir. 1999), and McLaughlin

Gormley King Co. v. Terminix International Co., 105 F.3d 1192

(8th Cir. 1997). As with Sarhank and Sandvik AB, neither of

those cases involved a remand to state court.

)7/

review); In re Ocean Marine Mut. Protection & Indem.

Ass'n, Ltd., 3 F.3d 353, 355 (11th Cir. 1993) ([A]

remand order based on a timely §1447(c) motion

to remand for defects in removal procedure is un-

reviewable pursuant to §1447(d).”). Although not

directly on point, those cases support the Fifth Cir-

cuit’s conclusion that §144’7(d) does apply in cases

removed under §205.

In sum, with regard to the question presented for

this Court’s review — whether, in a case removed

under §205, §1447(d) bars appellate review of a dis-

trict court’s remand order that is based on a lack of

subject matter jurisdiction — there 1s consensus, not

conflict, among the courts of appeals.

Il. THE DECISIONS BELOW ARE CORRECT

AND DO NOT WARRANT REVIEW

A. The Fifth Cireuit Correctly Concluded

that It Lacked Jurisdiction

The court of appeals nghtly determined that it

lacked jurisdiction over petitioners’ appeal. Section

1447(d) directs that “|aJn order remanding a case to

the State court from which it was removed is not re-

viewable on appeal or otherwise,” with the exception

of certain civil nights cases. This broad bar on review

has been narrowed by judicial interpretation, see

Thermtron Prods., 423 U.S. at 345-46, but neverthe-

less still apphes to remands based on lack of subject

matter jurisdiction. It is well-established that, where

§1447(d) applies, “‘review is unavailable no matter

how plain the legal error in ordering the remand.”

Kircher, 547 U.S. at 642 (quoting Briscoe v. Bell, 432

U.S. 404, 4138-14 n.138 (1977)).

The district court’s opinion shows (and petitioners

do not appear to dispute) that the court characterized

its order as a remand for lack of subject matter juris-

Ke)

diction. See Pet. App. 386a-37a.6 Under Powerex,

appellate “review of [a djistrict [c]ourt’s characteriza-

tion of its remand as resting upon lack of subject-

matter jurisdiction, to the extent 1t is permissible at

all, should be limited to confirming that that charac

terization was colorable.” 551 U.S. at 234. The ques-

tion whether the district court correctly determined

that it lacked subject matter jurisdiction was not

before the Fifth Circuit and would not be before this

Court even if certiorari was granted. In any event,

the district court’s conclusion was more than merely

colorable. See pp. 21-28, infra.

The court of appeals’ reasoning in reaching these

conclusions is well set forth in its earlier Dahiya and

Warrantech decisions, in terms that apply equally to

this case.’ Those decisions also correctly concluded

that the applicability of §1447(d)’s bar on appellate

review is reinforced in cases removed under 9 U.S.C.

§205 by Congress’s instruction that “|t}he procedure

for removal of causes otherwise provided by law shall

© Two sitting Justices have taken the position that a “conclu-

sion that the District Court purported to remand for lack of

subject-matter jurisdiction is alone enough to bar review under

§1447(d).” Powerex, 551 U.S. at 233 (citing Osborn, 549 U.S. at

264 (Scalia, J., joined by Thomas, J., dissenting)). That view

would make it even clearer that the Fifth Circuit lacked juris

diction here.

’ See Dahiya, 371 F.3d at 209 (“The district court appears to

have concluded that it lacked subject matter jurisdiction and to

have remanded on that basis. Thus, under §1447(d), we cannot

review the remand.”); Warrantech, 461 F.3d at 573 (“Section

1447(d) precludes examination of the merits of the district

court’s actions; we only must determine what the district court

perceived it was doing, as no matter how erroneous, a remand

order based on a §1447(c) ground precludes review on appeal.”)

(footnote and internal quotation marks omitted).

19

apply.” See Dahiya, 371 F.3d at 209; Warrantech,

461 F.3d at 576; accord Transtut Cas., 119 F.3d at 625

(likewise relying on this language); Amoco Petroleum,

964 F.2d at 712 (same).®

Petitioners object that, if the district court had

denied their motion to compel but not immediately

remanded, its denial would have been appealable

under 9 U.S.C. §16(a)Q1)(C) and that “there is no logi-

cal or jurisprudential rationale for allowing appeals

of such [denials] whenever they precede remand orders,

but denying appeals of the same rulings when the

District Court elects to issue a simultaneous remand.”

Pet. 24.9 On the contrary, there is the best possible

reason for treating the two kinds of orders differ-

ently: Congress has authorized (via §16(a)(1)(C)) an

appeal from the denial of a motion to compel, but has

prohibited (via §1447(d)) an appeal from the grant of

4 motion to remand.

Congress itself also had an exceilent reason for the

prohibition of §1447(d): that section embodies a

longstanding “policy ... opposfing] ‘interruption of

the litigation of the merits of a removed cause by

prolonged litigation of questions of jurisdiction of

the district court to which the cause is removed.”

Kircher, 547 U.S. at 640 (quoting Rice, 327 U.S. at

751); see also Powerex, 551 U.S. at 238-39. The policy

S Petitioners assert in a footnote that this language from 9

U.S.C. §205 refers only to 28 U.S.C. §1446, and not to §1447.

On the contrary, the phrase “procedure for removal of causes

otherwise provided by law” easily encompasses §1447(d), as

every court to consider the question has concluded.

% Petitioners are also wrong that this case involves the “same

ruling||” that would be appealable under §16(a)(1)(C). The

district court never denied petitioners’ motion to compel. See

p. 5, supra

20

question before Congress when it enacted §205 was

not whether arbitration agreements are important,

see Pet. 24-31, but whether those agreements are

important enough to justify an exception to §1447(d)’s

general prohibition against review of remands. If

Congress had thought they were, it would have

said so. See Powerex, 551 U.S. at 237 (Congress has

repeatedly demonstrated its readiness to exempt par

ticular classes of remand orders from §1447(d) when

it wishes.”}.

Petitioners’ arguments that the Convention on the

Recognition and Knforcement of Foreign Arbitral

Awards is itself so important that appellate review

should be available to enforce “the treaty obligation

of the United States,” Pet. 24, is very similar to

the arguments rejected in Powerex. As two Justices

observed in that case, Congress “no doubt considered

lthe FSIA] ... to be of importance for maintaining a

proper relationship with other nations,” and there

was some reason to believe that denying appellate

review of determinations under the FSIA “might well

frustrate a policy of importance to |the federal] Gov-

ernment.” 551 U.S. at 239 (Kennedy, J., concurring).

Those weighty policy considerations, however, could

not overcome “the structure and wording of §1447(d).”

Id. The structure and wording of §1447(d) remain

unchanged, notwithstanding Powerex, as does the

absence of any exception to §1447(d). The policy

considerations that favor enforcing arbitration

ayreements are no weightier (and no less committed

to Congress) than those that urge respect for foreign

sovereigns. Powerex thus forecloses petitioners’ argu-

ments and supports the Fifth Circuit’s conclusion

that it lacked jurisdiction.

2)

B. The District Court Correctly Concluded

that It Lacked Jurisdiction

Petitioners fall short of showing even that the dis-

trict court erred in its jurisdictional determination,

much less showing that it lacked a colorable basis for

that determination. Section 203 provides federal

subject matter jurisdiction only over an “action or

proceeding falling under the Convention,” 9 U.S.C

§203, and only an “arbitration agreement or arbitral

award” can “fallf{] under the Convention,” td. §202.

Similarly, §205 authorizes removal only of an “action

[that] relates to an arbitration agreement or

award falling under the Convention.” Accordingly,

when the district court had determined as a matter

of state contract law that the parties had not reached

any mandatory arbitration agreement at all,!? it

lacked jurisdiction to go further under the plain lan

guage of the statute.

The district court also correctly concluded that,

after construing the contract, 1t could revisit its pre

liminary ruling that it had jurisdiction — as, indeed,

,

10 That determination was itself correct under the language

of the parties’ agreement and under applicable principles of

state law. See Pet. App. 3la-37a. It is also a plainly insuffh

qent ground for review by this Court, and petitioners do not

seek review of that question. Further, although petitioners

suppvest in passing that the district court erred by applying

state rather than federal law to determine whether the parties

had agreed to arbitrate their dispute, see Pet. 2%-29, they do not

seck review of that question cither. The district court was in

any event correct. See First Options of Chicago, Inc. v. Kaplan,

514 U.S. 938, 944 (1995) (explaining with exceptions not rele

vant here that “|wjhen deciding whether the parties agreed

to arbitrate a certain matter ... courts generally ... should

apply ordinary state-law principles that govern the formation of

contracts”)

‘)*)

it had earlier signaled. See Pet. App. 17a, 19a, 27a

section 1447(c) expressly permits a remand for lack

of subject matter jurisdiction “at any time before

final judgment.” ‘That is consistent with the rule

that a lack of subject matter jurisdiction in the dis

trict court may be raised “at any time in the same

civil action, even initially at the highest appellate

instance.” Kontrick v. Ryan, 540 U.S. 4438, 455

(2004). It is also consistent with the rule that “every

order short of a final decree is subject to reopening at

the discretion of the district judge.” Moses H. Cone

Mem Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 12

(1983). There is no sign that Congress intended to

depart from these settled procedural principles in

enacting §205.

Petitioners argue that, in enacting §205, “Congress

intended for the district courts to make a quick and

conclusive assessment of their jurisdiction on the

pleadings alone” and that “a district court’s determi

nation that a case relates to an arbitration agree-

ment under Section 205 is conclusive of the juris

dictional inquiry.” Pet. 16, 17. Although petitioners

describe this purported congressional intent with

vreat vigor, they identify no textual basis for that

theory and no persuasive inference drawn from any

other tool of statutory construction. They simply

assert that Congress meant a district court’s first

look at jurisdiction to be conclusive as though that

were enough to make it so. ‘This Court’s refusal in

Powerex to “ignore a clear jurisdictional statute in

reliance upon supposition of what Congress really

wanted,” 551 U.S. at 237, apphes with equal force to

petitioners’ arguments here.

Petitioners further argue that Congress showed its

intent to provide for “easy removal” in §205 cases by

describing the required relationship between an arbi

tration agreement and a case to be removed using

the broad phrase “relates to.” Pet. 16 (internal quo

tation marks omitted). However broad the phrase

“relates to” may be, it does not establish or imply

that Congress meant a district court’s first determi

nation about whether a case relates to an arbitration

agreement to bind that court for the rest of the case

l'urther, on the facts of this case, the breadth of the

phrase “relates to” is irrelevant. The key question

before the district court was whether the parties had

agreed to arbitrate by incorporating a mandatory

arbitration clause into their contract. When it con

cluded they had not, there was no agreement falling

under the Convention in the case and no basis for

jurisdiction under either §208 or §205

In sum, the district court’s conclusion that it lacked

subject matter jurisdiction was correct, and petition

ers have offered no persuasive reason to doubt it

They have certainly fallen short of showing that

it lacked a colorable basis. For that latter reason,

this case would be a poor vehicie for examining the

construction of §205. If after granting review the

Court determined (as it likely would) that the district

court's ruling was colorably characterized as a remand

for lack of subject matter jurisdiction, it would have

no occasion to interpret §205 itself,

lil. THERE IS NO JUSTIFICATION FOR A

GRANT, VACATE, AND REMAND ORDER

IN THIS CASE

Petitioners seek the alternative relief of an order

vranting certiorari, vacating the order of the court of

appeals, and remanding to “require the Fifth Circuit

to explain its actions.” Pet. 338. There is no reason

for such an order in this case

24

oe

In Lawrence ex rel. Lawrence v. Chater, 516 U.S.

163 (1996) (per curiam), this Court set forth the

standard to be applied when considering whether

to grant certiorari and then summarily vacate and

remand (“GVR”):

Where intervening developments, or recent

developments that we have reason to believe

the court below did not fully consider, reveal a

reasonable probability that the decision below

rests upon a premise that the lower court

would reject if given the opportunity for

further consideration, and where it appears

that such a redetermination may determine

the ultimate outcome of the litigation, a GVR

order is, we believe, potentially appropriate.

Id. at 167. Petitioners allege no intervening devel

opments that meet that standard and do not claim

that it is met. Nor could they. Osborn was decided

in 2007, and Arthur Andersen in May 2009, well in

advance of the Fifth Circuit’s order and of petition-

ers’ briefing to that court.

Petitioners fault the Fifth Circuit for not explain-

ing its reasoning when it dismissed their appeal.

That summary disposition, however, is easily explained.

In opposing respondents’ motion to dismiss for lack of

appellate jurisdiction, petitioners did not cite Osborn,

did not cite Arthur Andersen, and did not urge the

court of appeals to reconsider either Dahiya or War-

rantech as conflicting with any decision of this Court.

See pp. 5-6, supra. Instead, they claimed implausibly

that both Dahiya and Warrantech could be distin-

guished on their facts. See id. at 6. Faced with that

argument, the court of appeals no doubt reasonably

concluded that an opinion merely applying Dahiya

and Warrantech would have no precedential signific-

20

ance and that it was unnecessary to write one. The

“equities of the case,” Lawrence, 516 U.S. at 167-

68, do not favor this Court’s intervention to permit

petitioners to reargue this case before the court of

appeals with new arguments and authorities not

presented during tts first stop in that court.

The cases that petitioners cite in which this Court

has issued GVR orders to require a lower court to

clarify the basis for its reasoning, see Pet. 32-33, were

rare exceptions to the general priaciples set forth by

Lawrence.'' Nothing about this case should prompt

this Court to exercise its discretion similarly here.

Petitioners have failed to establish that this case

involves any issue that warrants this Court’s review

and indeed have failed even to cast doubt on the cor-

rectness of the Fifth Circuit’s order.

CONCLUSION

The petition for a writ of certiorari should be

denied.

1! See Youngblood v. West Virginia, 547 U.S. 867, 870 (2006)

(per curiam) (vacating and remanding for further consideration

of a Brady claim that had been “clearly presented” to the state

supreme court and that raised a “significan|t] ... issue” about

the validity of a criminal conviction for a serious offense);

Taylor v. McKeithen, 407 U.S. 191, 194 n.4 (1972) (per curiam)

(in a voting rights case, vacating and remanding for an explana-

tion of a court ot appeals decision “summarily revers|ing] with-

out any Opinion on a point that had been considered at length

by the District Judge”). Northcross v. Board of Education, 412

U.S. 427 (1973) (per curiam), the third case cited by petitioners,

Clarified the statutory standard to be applied on remand to a

request for attorneys’ fees before vacating the order of the court

of appeals and is therefore more accurately described as a

summary merits disposition than a GVK as the Court now uses

the term. See td. at 428-29 (construing 20 U.S.C. §1617 (1972)

(repealed 1978)).

June

28, ZO10

26

Respectfully submitted,

BARRETT H. REASONER

Counsel of Record

JEFFREY C. KUBIN

ANTHONY N. KAIM

GIBBS & BRUNS, L.L.P.

1100 Louisiana, Suite 5300

Hiouston, Texas 77002

(713) 650-8805

breasoner@gibbsbruns.com