HOGGING THE PIG IRON: 5TH CIRCUIT COURT OF APPEALS GRANTS LOUISIANA NON-RESIDENT ATTACHMENT TO ESTABLISH QUASI IN REM JURISDICTION

Hogging the Pig Iron: 5th Circuit Court of Appeals Grants Louisiana Non-Resident Attachment to Establish Quasi In Rem Jurisdiction

By: Meredith Bro

Stemcor USA Inc. v. CIA Siderurgica Do Para Cosipar DOC, No. 16-30984, 2017 U.S. App. LEXIS 16916 (5th Cir. 2017).Appellant, South Korean trading company Daewoo International Corp. (“Daewoo”) entered into a series of contracts for the purchase of pig iron to be delivered to New Orleans by American Metals Trading L.L.P. (“AMT”). The contracts between Daewoo and AMT contained arbitration clauses. Daewoo paid AMT for the pig iron, yet AMT failed to fulfill its delivery to Daewoo. Roughly two years prior appellee, Thyssenkrupp Mannex GMBH (“TKM”), entered into six contracts to purchase pig iron from AMT. Like Daewoo, TKM did not receive the delivery from AMT. In response to the breach of contract, AMT was required to make quarterly payments to TKM but failed to pay.Daewoo filed suit against AMT in the Eastern District of Louisiana seeking an order to compel AMT to arbitrate and asserted admiralty jurisdiction by seeking an attachment of AMT’s pig iron aboard a vessel on the Mississippi river. Following the district court’s issuance of the attachment, Daewoo amended its complaint to seek a writ of attachment under the Louisiana non-resident attachment statute. The district court accepted Daewoo’s amendment and the writ was granted. Similarly, TKM filed suit in Jefferson Parish state court seeking a writ of attachment over AMT’s pig iron, which Daewoo attached a few days prior. TKM moved to intervene in Daewoo’s federal suit against AMT seeking a federal writ of attachment over AMT’s pig iron. The writ of attachment was granted and served. The three parties moved to sell the pig iron in a federal court approved sale. Four months following the parties’ agreement to sell the pig iron, TKM moved to vacate Daewoo’s attachment. The district court ruled in favor of TKM, vacating Daewoo’s writ and ordering the proceeds from the pig iron sale to be transferred to the Jefferson Parish state court. Daewoo moved to stay the district court’s order; however, the request was denied. Daewoo appealed the district court’s holding that Louisiana non-resident attachment writ was invalid. The Fifth Circuit overturned the district court’s ruling.On appeal, the Fifth Circuit determined that Daewoo’s arbitration agreement with AMT was covered by the Convention of the Recognition and Enforcement of Foreign Arbitral Awards. Accordingly, the Fifth Circuit concluded that the Convention granted jurisdiction over Daewoo’s request for an attachment. Relying on its prior ruling in E.A.S.T., Inc. of Stamford v. M/V Alaia, 876 F.2d (5^th Cir. 1989), the court reasoned that because Daewoo’s suit related to a covered arbitration agreement, the court maintained subject matter jurisdiction over the case.In determining that a suit to compel arbitration is not a suit for a money judgment, the Fifth Circuit concluded Daewoo’s writ was not in compliance with the provisions of the Louisiana non-resident attachment statute. Relying on Lavergne v. de Lavergne, 244 So. 2d 698 (La. App. 4^th Cir. 1971) and other aspects of Louisiana law, the court reasoned that “money judgments” have been interpreted to refer to judicial proceedings seeking judgments of money damages. The court determined that a suit to compel arbitration was not an action for a money judgement, rather an order requiring a party to arbitrate a dispute. Furthermore, the court determined that Daewoo’s suit to compel arbitration could not be the basis of a Louisiana non-resident attachment.The court concluded, however, that Daewoo could seek an attachment before commencing its confirmation proceeding. Relying upon Article 3502 of the Louisiana Code of Civil Procedure, the court recognized that Louisiana law allows, in limited circumstances, for an attachment to be issued before the suit underlying the attachment is filed. The court’s determination that Daewoo satisfied Article 3502 of the Louisiana Code of Civil Procedure was two-fold. First, the court concluded that TKM’s counsel conceded at oral argument that Daewoo followed the procedural requirements of Article 3502. Second, the court determined that from the outset of the case it was clear that Daewoo would be pursuing a money award in arbitration and that it needed a pre-confirmation suit attachment to provide financial security against AMT who was hemorrhaging assets. Moreover, the court determined that Daewoo needed an attachment so that it could return to Louisiana and collect its arbitration award if the confirmation suit was successful. Accordingly, the Fifth Circuit held that Daewoo followed the requirements of Article 3502 and that the Article allowed Daewoo to seek a Louisiana non-resident writ of attachment before commencing its confirmation proceedings; therefore Daewoo’s attachment was valid.