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Marine & Energy Alert: U.S. Fifth Circuit Holds That Louisiana's Non-Resident Attachment Statute May Apply to a Suit Compelling Arbitration

October 10, 2017

Recently, the United States Court of Appeals for the Fifth Circuit vacated and remanded a district court’s holding that a suit to compel arbitration was not an “action for a money judgment” such that it did not give rise to a non-resident attachment writ under Louisiana’s non-resident attachment statute.

The case arose as a result of a dispute between two creditors that had each attached the same pig iron owned by America Metals Trading LLP (“AMT”). Specifically, appellant Daewoo International Corp. (“Daewoo”) entered into a sale contract with AMT for the purchase of pig iron. AMT failed to ship the pig iron, so Daewoo filed suit against AMT in the Eastern District of Louisiana seeking an order to compel AMT to arbitrate pursuant to an arbitration clause in the sale contract and seeking attachment of the pig iron pursuant to maritime jurisdiction. In addition, Daewoo sought attachment of AMT’s pig iron pursuant to Louisiana’s non-resident attachment statute. Similarly, appellee Thyssenkrupp Mannex GMBH (“TKM”) entered into a sale contract with AMT for the purchase of pig iron, but AMT never delivered the pig iron. Thereafter, AMT and TKM entered into a settlement that allowed AMT to make quarterly payments to TKM, but AMT did not pay. TKM subsequently filed suit in Louisiana state court seeking a writ of attachment over the same pig iron that Daewoo attached. Thereafter, TKM moved to vacate Daewoo’s attachment. The district court vacated Daewoo’s writ and noted that “because Daewoo’s underlying suit sought to compel arbitration, it was not an ‘action for judgment’ and therefore Daewoo could not receive a non-resident attachment writ.”

Upon appeal, the Fifth Circuit first examined whether the district court had subject matter jurisdiction over Daewoo’s claim under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. First, the Court noted that all four requirements to be covered by the Convention were satisfied: 1) there is an arbitration agreement in writing between AMT and Daewoo, 2) the agreement provides for arbitration in New York and the United States is a signatory to the convention, 3) the agreement arises out of a commercial relationship between Daewoo and AMT, and 4) both Daewoo and AMT are not American citizens. Second, the Court found that Daewoo’s lawsuit related to the arbitration agreement because Daewoo sought an attachment in order to facilitate the arbitration provided in the agreement with AMT. Further, the Court noted that its previous holding in E.A.S.T., Inc. of Stamford v. M/V Alaia, 876 F.2d 1168 (5ht Cir. 1989) “strongly suggests that this court recognizes jurisdiction under the Convention to issue state-law preliminary remedies in aid of arbitration.” As a result, the Court held that the district court had subject matter jurisdiction over Daewoo’s request for attachment.

The Court then turned to the dispute of whether Louisiana’s non-resident attachment statute allows for attachment in aid of arbitration. Louisiana Code of Civil Procedure article 5242 provides that “a writ of attachment may be obtained in any action for a money judgment….” The Court agreed with the district court’s determination that a suit to compel arbitration is not directly an action for a money judgment. Specifically, the Court noted that “a suit seeking to compel arbitration is not an ‘action for a money judgment,’ and Daewoo’s suit seeking to compel arbitration cannot underlie a Louisiana non-resident attachment writ.

But, the Court noted that Louisiana Code of Civil Procedure Article 3502 “provides that, in limited circumstances, an attachment may issue before the suit underlying the attachment is filed.” Essentially, Article 3502 “allows for attachments to issue in aid of arbitration so long as the party seeking the attachment (1) complies with the requirements of Section 3502 and (2) shows good cause for a pre-petition attachment, which will usually require showing that arbitration is likely to result in a confirmation suit and also showing a need for an immediate attachment." So, the issue was not whether Daewoo’s suit was an action for a money judgment, but whether the requirements of Art. 3502 had been satisfied. Here, Daewoo complied with Art. 3502, and the Court held that Daewoo clearly “maintained that it needed an attachment so that it could return to Louisiana and collect on its successful arbitration award." As a result, the Court held that Daewoo’s attachment was valid under the Louisiana non-resident attachment statute.

A copy of the Fifth Circuit’s decision can be found here.