SIM LAKE, District Judge.
On August 6, 2010, Third-Party Defendant, LNM Marketing FZE removed this action from the 11th Judicial District Court of Harris County, Texas, where it was pending under No. 2009-54103. Pending before the court are Welspun's Motion to Remand (Docket Entry No. 19), and Kinder Morgan Louisiana Pipeline LLC's Motion to Remand and Alternatively Motion to Sever and Remand (Docket Entry No. 20). For the reasons explained below, the motions to remand will be granted and this action will be remanded to state court for lack of subject matter jurisdiction.
On August 24, 2009, plaintiff, Kinder Morgan Louisiana Pipeline LLC ("KMLP"), filed an action in state court against defendant, Welspun Gujarat Stahl Rohren Ltd. ("Welspun"), for breach of contract. KMLP alleged that pipe manufactured by Welspun in India used to construct a natural gas pipeline in Louisiana was defective. Welspun responded by filing counterclaims against KMLP, and a third-party petition seeking declaratory judgment that the entity or entities that supplied the steel used to manufacture the allegedly defective pipe were the proximate cause of KMLP's alleged injuries, and that the third-party defendants are contractually obligated to indemnify Welspun for any losses—including attorneys' fees—it incurs as a result of KMLP's claims.
On July 22, 2010, Welspun filed an Amended Third-Party Petition naming as defendants ArcelorMittal, LNM Marketing FZE, and ArcelorMittal Galati S.A. Welspun alleged that ArcelorMittal is a Luxembourg corporation with its principal place of business in Luxembourg, that LNM Marketing FZE ("LNM") is a wholly-owned subsidiary of ArcelorMittal that maintains its home office in Dubai, United Arab Emirates, and that ArcelorMittal Galati S.A. is a wholly-owned subsidiary of ArcelorMittal that maintains its principal place of business in Galati County, Romania. Welspun alleged that all of the third-party defendants "have acted as a single entity and/or as agents or alter egos of each other, including in connection with the transaction of business in Texas and this jurisdiction, such that disregard of the corporate structure is necessary to avoid injustice and inequity."
On August 6, 2010, LNM filed its Notice of Removal (Docket Entry No. 1) pursuant to 9 U.S.C. § 205 and 28 U.S.C. § 1441(c). On September 3, 2010, Welspun filed a
A defendant has the right to remove a case to federal court when federal jurisdiction exists and the removal procedure is properly followed. See Manguno v. Prudential Property and Casualty Insurance Co., 276 F.3d 720, 723 (5th Cir.2002) (citing 28 U.S.C. § 1441). The removing party bears the burden of establishing that a state court suit is removable to federal court. Id. (citing De Aguilar v. Boeing Co., 47 F.3d 1404, 1408 (5th Cir.), cert. denied, 516 U.S. 865, 116 S.Ct. 180, 133 L.Ed.2d 119 (1995). To determine whether there is removal jurisdiction, the claims in the state court petition are considered as they existed at the time of removal. Manguno, 276 F.3d at 723. Doubts about the propriety of removal are to be resolved in favor of remand. See In re Hot-Hed Inc., 477 F.3d 320, 323 (5th Cir.2007) (per curiam)).
LNM contends that 9 U.S.C. § 205 and 28 U.S.C. § 1441(c) provide subject matter jurisdiction because the contract on which Welspun's claims are based contains a mandatory arbitration clause requiring that any dispute related to the contract be arbitrated by the London Court of International Arbitration in accordance with the UNCITRAL Arbitration Rules. LNM explains that
LNM contends that federal question and removal jurisdiction exist for the claims asserted in Welspun's third-party petition pursuant to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards ("the Convention"). The Convention was negotiated in 1958 and entered
Beiser v. Weyler, 284 F.3d 665, 666 n. 2 (5th Cir.2002). The same year that the United States entered the Convention, Congress adopted enabling legislation for it, 9 U.S.C. §§ 201-208.
Section 203 grants federal courts jurisdiction over cases involving arbitration agreements that fall under the Convention. That section provides:
9 U.S.C. § 203.
Section 202 sets forth the standards that courts apply in determining whether an arbitration agreement falls under the Convention. Section 202 provides:
9 U.S.C. § 202. See Lim v. Offshore Specialty Fabricators, Inc., 404 F.3d 898, 903 (5th Cir.2005) (describing Fifth Circuit's four-part test for determining if an arbitration agreement falls under the Convention).
Section 205 permits removal of a state court case to federal court when the claims in the state court proceeding "relate to" an arbitration agreement "falling under the Convention." Section 205 provides:
9 U.S.C. § 205 (emphasis added). To determine if removal has been properly effected under this section a court need only examine the face of the complaint or the removal notice, without an inquiry into the
Welspun and KMLP both argue that remand is required because neither 9 U.S.C. § 205, nor 28 U.S.C. § 1441(c) provides jurisdiction for removal under the facts of this case.
Asserting that 9 U.S.C. § 205 "permits removal of a pending state court proceeding only by `the defendant or the defendants,'"
In BJB Co., 148 F.Supp.2d at 752-53, the court reviewed courts' interpretation of the same language in 28 U.S.C. § 1441(a). Section 1441(a) provides that, "[e]xcept as otherwise expressly provided by an Act of Congress, any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by
LNM responds by citing Viator v. Dauterive Contractors, Inc., 638 F.Supp.2d 641, 644 (E.D.La.2009). In that case, a defendant filed a third-party complaint against Steamship Mutual, which removed the suit on the basis of a foreign arbitration clause and "invoke[d the] Court's jurisdiction pursuant to the Convention." Id. In concluding that the third-party defendant properly removed the case, the court relied on the expansiveness of § 205 relative to the general removal statutes and on the Fifth Circuit's determination that the general rule requiring courts to construe ambiguities strictly against removal does not apply to cases in which removal is based on 9 U.S.C. § 205. Id. at 645-46 (citing Acosta v. Master Maintenance and Construction, Inc., 452 F.3d 373 (5th Cir.2006)). Acosta was a mass tort action brought by individuals under Louisiana's direct action law, which allowed them to bring suit against both the alleged tortfeasors and their insurers. The insurers removed the action to federal court based on jurisdiction granted by the Convention. The Fifth Circuit affirmed the district court's denial of the plaintiffs' motion to remand. The Fifth Circuit explained that the removal provision in § 205 is very broad
Acosta, 452 F.3d at 377.
Because neither the court in Viator nor the court in Acosta was asked to consider the meaning of the language "the defendant or the defendants" as used in § 205, and because Acosta involved removal by a defendant and not a third-party defendant, the court is not persuaded that either Viator or Acosta controls the instant issue. Moreover, LNM has not cited—and the court's independent research has not revealed—any authority that has held that the phrase "the defendant or the defendants" used in § 205 has been interpreted to include third-party defendants. Because the language "the defendant or the defendants" used in the general removal statute, 28 U.S.C. § 1441(a), is commonly interpreted to exclude third-party defendants, BJB Co., 148 F.Supp.2d at 752, the court concludes that the same language used in 9 U.S.C. § 205 should also be interpreted to exclude third-party defendants. See Caringal, 108 F.Supp.2d at 654. Accordingly, the court concludes that § 205 provides no jurisdiction for removal by LNM because LNM is not a defendant in this action but, instead, is a third-party defendant.
Welspun contends that removal under 28 U.S.C. § 1441(c) is improper because "(1) Welspun alleges no claims in its Third-Party Petition that confer federal subject matter jurisdiction; and (2) Welspun's claims . . . are not `separate and independent' from those alleged by KMLP against Welspun."
Section 1441(c) provides:
28 U.S.C. § 1441(c). "Although there is a split among the circuits on the point, [the Fifth Circuit] has held that a third-party. . . defendant may remove a case to federal court pursuant to § 1441(c)." State of Texas v. Walker, 142 F.3d 813, 816 (5th Cir.1998), cert. denied, 525 U.S. 1102, 119 S.Ct. 865, 142 L.Ed.2d 768 (1999) (citing Carl Heck Engineers v. Lafourche Parish Police Jury, 622 F.2d 133 (5th Cir.1980)). In Carl Heck, 622 F.2d at 136, the Fifth Circuit recognized the split in authority on this issue, but reasoned that
Moreover, in Carl Heck the Fifth Circuit concluded "a claim essentially seeking indemnity should be considered separate and independent." Id. The court explained that
Id. See Walker, 142 F.3d at 816 (Carl Heck "affords third-party defendants the opportunity of § 1441(c) removal to federal court . . . [of claims] which they could have removed [if] sued alone."). In order to establish that removal is proper in this case LNM must show that Welspun's claims are separate and independent from KMLP's claims against Welspun, and that they arise under 28 U.S.C. § 1331.
Section 1441(c) authorizes removal of cases in which a "separate and independent" federal claim or cause of action is joined with a nonremovable claim or cause of action. A federal claim is separate and independent if it involves an obligation distinct from the nonremovable claims in the case. See American Fire & Casualty Co. v. Finn, 341 U.S. 6, 71 S.Ct. 534, 540, 95 L.Ed. 702 (1951) ("[W]here there is a single wrong to plaintiff, for which relief is sought, arising from an interlocked series of transactions, there is no separate and independent claim or cause of action under § 1441(c)."). In this circuit a third-party action for contribution and indemnity may constitute a separate and independent claim for purposes of section 1441(c) if the third-party complaint seeks indemnity based on a separate legal obligation owed by the third-party defendant to the third-party plaintiff, such as a contract of indemnity.
Citing In re Wilson Industries, 886 F.2d at 96, and JAJ Ventures, L.L.C. v. Environmental Chemical Corp., 2009 WL 911020 (E.D.La.2009), Welspun and KMLP contend that Welspun's claims against the third-party defendants are not "separate and independent" from KMLP's claims against Welspun because the third-party claims allege that the third-party defendants caused KMLP's injuries.
Welspun's and KMLP's contentions that Welspun's claims against LNM are not separate and independent from KMLP's claims against Welspun would be well taken if the only claims that Welspun alleged against LNM were claims that LNM and the other third-party defendants caused KMLP's injuries by failing to supply steel plate meeting required technical specifications. But these are not the only claims asserted in Welspun's third-party complaint, and these are not the claims on which removal is based.
Count Two of Welspun's third-party petition alleges that
Whether LNM has wrongly failed to indemnify Welspun by providing a defense and/or accepting responsibility for any losses that Welspun may suffer as a result of KMLP's claims is a distinct wrong not dependent on whether Welspun supplied defective pipe in violation of its contract to KMLP. Moreover, proof of Welspun's claims for defense and indemnity against the third-party defendants does not involve the same facts as proof of KMLP's claims against Welspun. Because Welspun's third-party petition seeks contractual indemnity, not indemnity under tort-law principles, the court concludes that Welspun's petition asserts claims that are separate and independent from KMLP's claims.
The court's conclusion does not conflict with the authorities cited by Welspun and KMLP. In JAJ Ventures the court explained that
2009 WL 911020 at *1 (citing Wilson, 886 F.2d at 96). In In re Wilson Industries the Fifth Circuit explained that
886 F.2d at 96. Here, KMLP seeks redress from Welspun for Welspun's alleged failure to supply non-defective pipe; Welspun seeks redress from LNM and the other third-party defendants for allegedly failing to supply non-defective steel
Section 1441(c) provides for the removal only of those separate and independent federal claims over which a district court could have exercised original jurisdiction pursuant to 28 U.S.C. § 1331. Section 1331 is the general federal question jurisdiction statute that provides: "[t]he district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331.
Under the well-pleaded complaint rule, a suit "arises under" federal law "only when the plaintiff's statement of his own cause of action shows that it is based upon [federal law]." Louisville & Nashville R. Co. v. Mottley, 211 U.S. 149, 29 S.Ct. 42, 43, 53 L.Ed. 126 (1908). Federal jurisdiction cannot be predicated on an actual or anticipated defense: "It is not enough that the plaintiff alleges some anticipated defense to his cause of action and asserts that the defense is invalidated by some provision of [federal law]." Id. See also Rivet v. Regions Bank of Louisiana, 522 U.S. 470, 118 S.Ct. 921, 925, 139 L.Ed.2d 912 (1998) ("federal jurisdiction exists only when a federal question is presented on the face of the plaintiff's properly pleaded complaint"). In Holmes Group, Inc. v. Vornado Air Circulation Systems, Inc., 535 U.S. 826, 122 S.Ct. 1889, 153 L.Ed.2d 13 (2002), the Supreme Court observed that the clarity and simplicity of the well-pleaded complaint rule would be undermined if federal courts were obliged to consider the contents not only of the complaint but also of responsive pleadings in determining whether a case "arises under" federal law. Id. at 1894 (citing Franchise Tax Board of California v. Construction Laborers Vacation Trust for Southern Cal., 463 U.S. 1, 103 S.Ct. 2841, 2847, 77 L.Ed.2d 420 (1983)). "The well-pleaded complaint rule applies to the original jurisdiction of the district courts as well as to their removal jurisdiction." Franchise Tax Board, 103 S.Ct. at 2847 & n. 9 (citing Phillips Petroleum Co. v. Texaco, Inc., 415 U.S. 125, 94 S.Ct. 1002, 1003-04, 39 L.Ed.2d 209 (1974) (per curiam)).
Nevertheless, a complaint purporting to rest on state law can be recharacterized as one "arising under" federal law if the law governing the complaint is exclusively federal. See Beneficial National Bank v. Anderson, 539 U.S. 1, 123 S.Ct. 2058, 2062, 156 L.Ed.2d 1 (2003). Under this so-called "complete preemption doctrine," a plaintiff's "state cause of action [may be recast] as a federal claim for relief, making [its] removal [by the defendant] proper on the basis of federal question jurisdiction." Vaden v. Discover Bank, ___ U.S. ___, 129 S.Ct. 1262, 1273, 173 L.Ed.2d 206 (2009) (quoting 14B Wright & Miller § 3722.1, p. 511). See also Caterpillar Inc. v. Williams, 482 U.S. 386, 107 S.Ct. 2425, 2429-30, 96 L.Ed.2d 318 (1987) ("Once an area of state law has been completely pre-empted, any claim purportedly based on that pre-empted state law is considered, from its inception,
Citing Rivet, 118 S.Ct. at 925, Welspun contends that LNM "has failed to meet the requirements of 28 U.S.C. § 1441(c) because no claim subject to federal jurisdiction was set forth on the face of Welspun's Third-Party Petition."
KMLP similarly contends that
Welspun's Amended Original Third-Party Petition seeks declaratory judgment that pursuant to a contractual agreement between the parties, LNM and the other third-party defendants must indemnify Welspun for any losses—including attorneys' fees—it incurs as a result of KMLP's claims. In support of these claims, Welspun cites four purchase orders dated, respectively, July 19, 2006, September 26, 2006, October 4, 2006, and October 24, 2006, which it argues reflect the contractual agreement between it and the third-party defendants. Only three of these four purchase orders are attached to Welspun's Amended Third-Party Petition, but all four are referenced therein and all four were attached to Welspun's Original Third-Party Petition.
LNM's assertion that Welspun's claims seek to enforce a contract that contains a foreign arbitration clause under the Convention states a defense to Welspun's claims based on federal law; but, absent a showing that the Convention completely preempts state law, LNM has not established that Welspun's claims arise under federal law for purposes of establishing federal question jurisdiction under 28 U.S.C. § 1331.
LNM's reliance on Judge Rosenthal's opinion in Huntsman is misplaced because there the third-party plaintiff asserted a claim for enforcement of a foreign arbitration clause whereas here, Welspun has made no such claim. See Huntsman, 2008 WL 4453170, *18 ("IRIC's alternative request to compel arbitration under the Reinsurance Certificates is a claim to enforce an agreement falling under the Convention."). In Huntsman the court premised the third-party defendant's right to remove on the third-party plaintiff's claim for enforcement of the foreign arbitration clause, not—as LNM asks the court to
Since LNM has neither argued nor cited authority showing that the Convention completely preempts state law such that Welspun's state law claims must be recharacterized as claims arising under federal law because the law governing those claims is exclusively federal, Welspun's claims do not arise under federal law as required to establish jurisdiction under 28 U.S.C. § 1331. Because Welspun's claims do not arise under federal law as required to establish jurisdiction pursuant to 28 U.S.C. § 1331, 28 U.S.C. § 1441(c) provides no jurisdiction for removal.
In order to establish that removal is proper under 28 U.S.C. § 1441(c), LNM had to show that Welspun's claims against LNM are separate and independent from KMLP's claims against Welspun, and that Welspun's claims arise under federal law for purposes of establishing jurisdiction under 28 U.S.C. § 1331. For the reasons explained above, the court concludes that Welspun's claims against LNM are separate and independent from KMLP's claims against Welspun, but that Welspun's claims do not arise under federal law and do not establish federal question jurisdiction under 28 U.S.C. § 1331. Accordingly, 28 U.S.C. § 1441(c) provides no jurisdiction for LNM to remove this action to federal court.
For the reasons explained above, the court concludes that LNM has failed to carry its burden of proving that either 9 U.S.C. § 205 or 28 U.S.C. § 1441(c) provides jurisdiction for removal of this action from state to federal court. Accordingly, Welspun's Motion to Remand (Docket Entry No. 19) is
