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Outokumpu Stainless USA, LLC v. GE Energy SAS

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

March 19, 2019

OUTOKUMPU STAINLESS USA, LLC, et. al., Plaintiff,
v.
GE ENERGY SAS, a foreign corporation now known as GE ENERGY POWER CONVERSION FRANCE SAS, CORP., Defendant.

          REPORT AND RECOMMENDATION

          William E. Cassady United States Magistrate Judge

         This matter is before the undersigned on the Motion to Remand (Doc. 87) filed by Plaintiffs Outokumpu Stainless USA, LLC (“Outokumpu”) and 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 (collectively, “Insurers, ” and together with Outokumpu, “Plaintiffs”). Defendant GE Energy Power Conversion France SAS, Corp., formerly known as Converteam SAS, (“GE Energy”) has filed a Brief in Opposition; Plaintiffs then filed a Reply Brief; and GE Energy filed a Notice of Additional Authority. (See Docs. 98, 100, & 106.) Oral argument was held before the undersigned on February 27, 2019.

         Upon consideration, and for the reasons stated herein, the undersigned RECOMMENDS, pursuant to 28 U.S.C. § 636(b) and General Local Rule 72(a)(2)(S), that the Motion to Remand be GRANTED and that this action be remanded to the Circuit Court of Mobile County, Alabama.

         I. PROCEDURAL BACKGROUND

         Plaintiffs initiated this action in the Circuit Court of Mobile County, Alabama. GE Energy removed the action to this Court in July 2016. This is the second time Plaintiffs have sought to remand the action back to state court. The first time Outokumpu and the Insurers moved to remand, the undersigned recommended the denial of Plaintiffs' motions. (See Doc. 50.)

         That Report and Recommendation applied Beiser v. Weyler, 284 F.3d 665 (5th Cir. 2002), and explained that GE Energy's Notice of Removal pleaded that Plaintiffs' claims “related to” an international arbitration agreement for purposes of the broad removal provisions contained in 9 U.S.C. § 205. Plaintiffs objected to the Report and Recommendation, but the Court overruled the objections and adopted the Report and Recommendation. (See Doc. 57.)

         Following its adoption of the Report and Recommendation, the Court also compelled Plaintiffs to arbitrate their claims against GE Energy. (See Docs. 68 & 69.) Plaintiffs filed an appeal, and the Eleventh Circuit entered its decision in August 2018. See Outokumpu Stainless USA, LLC v. Converteam SAS, 902 F.3d 1316 (11th Cir. 2018). The Eleventh Circuit upheld this Court's denial of Plaintiffs' motions to remand and expressly agreed with the Fifth Circuit's Beiser analysis, broadly interpreting § 205's “relates to” language as applied to GE Energy's Notice of Removal. See Id. at 1323. The Eleventh Circuit, however, reversed this Court's Orders compelling Plaintiffs to arbitrate their claims against GE Energy and remanded the matter to this Court “for further proceedings consistent with this opinion.” See Id. at 1327.

         II. ANALYSIS

         Removal under § 205 authorizes the removal of actions to federal court even where “the ground for removal” does “not appear on the face” of a plaintiff's complaint. Instead, the statute allows for removal to federal court based upon a defense, which “may be shown in the petition for removal.” See 9 U.S.C. § 205. Specifically, where an arbitration agreement falling under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “Convention”) provides a defense to a plaintiff's claims, the defendant may, “at any time before the trial, ” remove the action to federal court. The statute allows removal whenever “the subject matter of an action or proceeding pending in a State court relates to an arbitration agreement or award falling under the Convention.” Id.

         Here, the Court has already held-and the Eleventh Circuit agreed-that GE Energy's Notice of Removal adequately pleaded that Plaintiffs' claims, for purposes of § 205, “related to” an arbitration agreement falling under the Convention. (See Docs. 50 & 57.) But, the Eleventh Circuit also held that GE Energy could not compel Plaintiffs to arbitrate their claims because GE Energy was not a signatory to any arbitration agreement with Outokumpu, as is required under the Convention. See Outokumpu, 902 F.3d at 1327.

         The issue Plaintiffs' new Motion to Remand (Doc. 87) poses is this: with arbitration not being compelled-that is, with GE Energy no longer being able to assert an international arbitration defense and with the Complaint asserting only state-law claims-should the Court now remand this action to the Circuit Court of Mobile County, where it was originally filed? The Beiser decision provides an answer to this question that makes sense:

If the district court decides that the arbitration clause does not provide a defense, and no other grounds for federal jurisdiction exist, the court must ordinarily remand the case back to state court. Except for state law claims that turn out to be subject to arbitration, § 205 will rarely permanently deprive a state court of the power to decide claims properly brought before it. The district court will ordinarily remand those cases that turn out not to be subject to arbitration, such that the state court will be able to resolve the merits of the dispute.

Beiser, 284 F.3d at 675 (citations omitted).

         The possibility of remand discussed in Beiser was central to the Fifth Circuit's reasoning to allow for removability under a broad “relates to” standard: “§ 205 does not interfere with state courts as much as ordinary removal under the general removal statute, 28 U.S.C. § 1441. When a case is removed under § 1441, it will often remain in federal court until its conclusion.” Beiser, 284 F.3d at 674. The same is not true for cases removed under § 205 because “the ...


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