Convention Grants Broad Federal Court Jurisdiction To Cases That “Relate To” an Arbitration Agreement
The Fifth Circuit Court of Appeals reinforced an expansive definition of cases that “relate to” arbitration agreements, allowing removal of such cases to federal court under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards Act (“Convention”).
In Acosta v. Master Maintenance & Const., Inc., No. 05-30126, 2006 WL 1549959 (5th Cir. June 8, 2006), Acosta brought a tort action in state court against a corporation insured by two foreign insurance companies. Acosta named the insurance companies as additional defendants because Louisiana statute allows for plaintiffs to bring a direct action against insurers of tortfeasors.
The insurance companies disputed coverage of the tort claims, moved to compel arbitration and removed the action to federal court under the Convention. Acosta contested federal court jurisdiction.
The Court examined the language of the Convention, which provided for removal of actions to federal court “where the subject matter of an action…relates to an arbitration agreement or award falling under the Convention.” 9 U.S.C. § 205.
The Court noted that § 205 is “one of the broadest removal provisions … in the statute books.” Additionally, the Court emphasized that uniformity in recognition and enforcement of international contracts and arbitration agreements “is best served by trying all [Convention] cases in federal court.” McDermott Int’l., Inc. v Lloyds Underwriters of London, 944 F.2d 1199, 1207-08 (5th Cir. 1991).
This broad definition of “relates to an arbitration agreement” encompassed Acosta’s claim, the Court held, because “a clause determining the forum for resolution of specific types of disputes relates to a lawsuit that seeks the resolution of such disputes.”
By asserting claims against the insurance companies, Acosta also asserted that the corporation’s torts were covered by the policy. A dispute as to whether the alleged torts are actually covered by the policy triggered the arbitration clause in the policy and therefore “relates to” the arbitration agreement under the Convention. Therefore, federal jurisdiction was appropriate.