Louisiana Federal Court Finds Removal Proper As Dispute Could Relate To An Underlying Arbitration Clause In Insurance Policy

by Carlton Fields

In this case, a Louisiana federal court denied a motion for remand of a former machinist’s asbestos-related claim, finding that an English insurer’s removal from state court was appropriate and that the dispute could relate to an underlying arbitration agreement contained in an insurance policy.

The background of this case can be found here. In short, plaintiff filed a personal injury action in Louisiana state court against defendants Cove Shipping, Inc. and Maritime Management Corp. (together, “Cove Shipping”), alleging that he now suffers from lung cancer as a result of asbestos exposure from years spent working as a machinist onboard several oil tankers in the early 1980s while he was working for Cove Shipping. Via the Louisiana Direct Action Statute, plaintiff also named West of England Shipowners Mutual Insurance Association, a P&I Club (“West of England”) as a defendant, for its role as Cove Shipping’s insurer during the years in question. West of England subsequently removed the action, invoking the removal provision of the Uniform Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “Convention”).

As justification for using the Convention for removal, West of England cited an arbitration clause found in its Club Rules that it contends were in effect at the time of plaintiff’s alleged employment and now apply to his lawsuit, notwithstanding the fact that plaintiff is a third-party to the insurance agreement between West of England and Cove Shipping. In his motion for remand, plaintiff made various arguments in support of the contention that he is not bound by the arbitration clause and, thus, the case should be remanded: First, West of England has failed to demonstrate it is entitled to arbitration under documents it submitted with removal as the arbitration agreement at issue was not attached. Second, English law forbids the application of this arbitration agreement to non-signatories such as plaintiff. Third, the arbitration agreement is unenforceable because the prohibitive costs of the agreement prevent plaintiff from vindicating his federal statutory rights. Fourth, West of England waived its right to arbitrate. Fifth, Jones Act Claims are not subject to arbitration. And sixth, the law of Louisiana forbids arbitration in insurance disputes, which does not run afoul of the Convention.

Rejecting all of plaintiff’s arguments and/or finding them premature merit-based challenges to arbitration, the Louisiana federal court denied the motion to remand, finding that removal of the direct action plaintiff’s lawsuit against a foreign insurer was appropriate based on the existence of an arbitration clause found in the Club Rules of the insurer. The court noted that what was at issue in the present motion was a jurisdictional question, and that the plaintiff is not left without redress, as merit-based arguments may be presented in the form of an opposition to a motion to compel arbitration, which is typically the first matter to be raised after removal under 9 U.S.C. § 205 of the Convention. Finally, the court found that the arbitration clause at issue could conceivably have an effect on the outcome of plaintiff’s lawsuit, such that the two are related, and that therefore section 205 of the Convention confers subject matter jurisdiction on the court, making removal of the case by West of England proper.

O’Connor v. Maritime Management Corp., et al., No. 16-16201 (E.D. La. Mar. 16, 2017).

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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