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Outokumpu Stainless USA, LLC v. Converteam SAS

United States District Court, S.D. Alabama, Southern Division

January 30, 2017

CONVERTEAM SAS, a foreign corporation now known as GE ENERGY POWER CONVERSION FRANCE SAS, CORP., Defendant.



         This 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.[1]

         I. Background

         On 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. “Interpretations”) “Sub-contractor” 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).

         Pursuant 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.

         Relevant 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 settlement.

(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).

         In 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.

         On June 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 (id.).

         On July 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).

         On 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.

         II. Statement of the law

         “The 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 ...

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