United States District Court, S.D. Alabama, Southern Division
K. DuBOSE, UNITED STATES DISTRICT JUDGE.
action is before the Court on the motion to compel
arbitration and to dismiss filed by Defendant GE Energy Power
Conversion France SAS, Corp., formerly known as Converteam
SAS (GE); the response filed by Sompo Japan Insurance Company
of America, Pohjola Insurance Limited, AIG Europe Limited,
Tapiola General Mutual Insurance Company, AXA Corporate
Solutions Assurance SA UK Branch, HDI Gerling UK Branch, MSI
Corporate Capital Ltd., and Royal & Sun Alliance PLC (the
Insurers); the response filed by Outokumpu Stainless USA, LLC
(OTK); GE's reply; the Insurers' reply; and OTK's
reply (docs. 6, 34, 35, 38, 41, 42). Upon consideration, and
for the reasons set forth herein, the motion to compel
arbitration (doc. 6) is GRANTED and this
action is referred for arbitration in accordance with the
terms of the Supply Agreements. Accordingly, the motion to
dismiss is GRANTED.
November 25, 2007, Thyssenkrupp Stainless USA, LLC (TK
Stainless) entered into three separate contracts, Supply
Agreements 1001, 1002, and 1003, with F.L. Industries Inc.
now known as Fives St Corp. (FLI), for the purchase of three
Cold Rolling Mills for its stainless steel manufacturing
facility in Calvert, Alabama (docs. 5-1, 5-2, 5-3, under
seal). Each Supply Agreement identifies TK Stainless as the
“Buyer” and FLI as the “Seller” and
refers to them “collectively as
‘Parties'” (Docs. 5-1, 5-2, 5-3, p. 5). The
Supply Agreements further provide an agreed interpretation
that “[w]hen Seller is mentioned it shall be understood
as Subcontractors included, except if expressly stated
otherwise.” (Docs. 5-1, 5-2, 5-3, p. 9, § 1.2.
is defined as “any person (other than the Seller) used
by the Seller for the supply of any part of the Contract
Equipment, or any person to whom any part of the Contract has
been sub-let by the Seller[.]” (Id., §1.1
“Definitions”). “Contract Equipment”
means the mill and “all equipment, machines, parts,
components and/or spare parts, to be delivered as stipulated
within the Seller's scope of supply.” (Id.
at p. 7).
to the Supply Agreements, FLI was to engage subcontractors
and suppliers necessary for the completion of the work and
the supply of equipment, etc. To that end, the Supply
Agreements set out, in Annex A3, a list of
“mandatory” vendors identified by TK Stainless
from which FLI could select as suppliers of services and
equipment, including, inter alia, Converteam, now GE (docs.
5-1, 5-2, 5-3, p. 91, under seal). Subsequently, FLI entered
into an Agreement for Consortial Cooperation (the Consortial
Agreement) with GE and a third company, DMS SA (DMS) under
which GE was to provide electrical equipment for the Cold
Rolling Mills. The Consortial Agreement states that GE was
“acting as subcontractor of FLI” (doc. 5-4, p.
2). GE designed, engineered and manufactured the motors in
France, which were then shipped to and installed in TK
Stainless's facility in Alabama.
to GE's motion to compel arbitration, Section 23.1 of the
Supply Agreements provides, in pertinent part, as follows:
All disputes arising between both parties in connection with
or in the performances of the Contract shall be settled
through friendly consultation between both parties. In case
no agreement can be reached through consultation … any
such dispute shall be submitted to arbitration for
(Docs. 5-1, 5-2, 5-3, under seal, at § 23.1) The Supply
Agreements further provide that arbitration shall take place
in Dusseldorf, Germany, be “conducted in accordance
with the Rules of Arbitration of the International Chamber of
Commerce” and that the “substantive law of
Federal Republic of Germany shall apply” (id.
at § 23.2, 23.5).
2014, after OTK acquired the facility from TK Stainless, one
of the motors supplied by GE (formerly Converteam) failed.
Inspection of the other motors supplied by GE showed similar
issues as the failed motor.
10, 2016, OTK and the Insurers filed this action against GE
in the Circuit Court of Mobile County, Alabama. OTK asserted
causes of action for negligence, breach of professional
design and construction warranties, breach of implied
warranties, and product liability under the Alabama Extended
Manufacturer's Liability Doctrine arising from the
alleged failure of the motors supplied by GE (doc. 1-2). The
Insurers alleged that they paid OTK and its corporate parent
Outokumpu Oyj under the policies for the losses claimed for
the motors' failures. The Insurers assert that they are
equitably and contractually subrogated to the rights of OTK
and Outokumpu Oyj, to the extent insurance payments were made
18, 2016, GE removed the action to this Court. GE alleged two
jurisdictional grounds: (1) federal subject matter
jurisdiction pursuant to 9 U.S.C. § 205, which
authorizes removal of an action where the subject matter of
the suit “relates to” an arbitration agreement
“falling under” the Convention on the Recognition
and Enforcement of Foreign Arbitral Awards (the Convention);
and (2) diversity jurisdiction based upon the fraudulent
joinder of the Insurers as plaintiffs. After removal, GE
moved to compel arbitration as to OTK and Insurer Sompo and
moved to dismiss the remaining Insurers (docs. 6, 7).
August 17, 2016, OTK and the Insurers moved to remand (docs.
34 and 35). The motions to remand and GE's motion to
dismiss the claims of the Foreign Insurers were denied (doc.
57, Order adopting Report and Recommendation). GE's
motion to compel arbitration is now pending before the Court.
Statement of the law
Convention on the Recognition and Enforcement of Foreign
Arbitral Awards, also known as the New York Convention, is a
multi-lateral treaty that requires courts of a nation state
to give effect to private agreements to arbitrate and to
enforce arbitration awards made in other contracting states.
The United States, as a signatory to the Convention, enforces
this treaty through Chapter 2 of the U.S. Federal Arbitration
Act (FAA), which incorporates the terms of the
Convention[.]” Thomas v. Carnival Corp., 573
F.3d 1113, 1116 (11th Cir. 2009) (abrogation on other
grounds recognized by Williams v. NCL (Bahamas) Ltd.,686 F.3d 1169 (11th Cir. 2009)). The Court of Appeals for the
Eleventh Circuit, quoting the Supreme Court, “has
explained that ‘the principal purpose' behind the
adoption of the Convention ‘was to encourage the
recognition and enforcement of commercial arbitration
agreements in international contracts and to unify the
standards by which agreements ...