Neptune Shipmanagement Srv v. Dahiya ( 2021 )

Case: 20-30776 Document: 00516038374 Page: 1 Date Filed: 10/01/2021
United States Court of Appeals
for the Fifth Circuit
United States Court of Appeals
Fifth Circuit
FILED
October 1, 2021
No. 20-30776 Lyle W. Cayce
Clerk
Neptune Shipmanagement Services PTE, Limited;
Talmidge International, Limited; American Eagle
Tankers Incorporated Limited; American Eagle Tankers
Agencies, Incorporated; Britannia Steam Ship
Insurance Association Limited,
Plaintiffs—Appellees,
versus
Vinod Kumar Dahiya,
Defendant—Appellant.
Appeal from the United States District Court
for the Eastern District of Louisiana
USDC No. 2:20-CV-1525
Before Jones, Southwick, and Costa, Circuit Judges.
Gregg Costa, Circuit Judge:
Last year, we noted that arbitration does not always fulfill its goal of
avoiding court and “increas[ing] the speed of dispute resolution.” OJSC
Ukrnafta v. Carpatsky Petroleum Corp., 957 F.3d 487, 493 (5th Cir. 2020)
(quoting AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 345 (2011)). That
international dispute was tied up in arbitration and courts for thirteen years.
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This case involves even more protracted litigation arising out of an
arbitration agreement. In a dispute dating back to the last century, the parties
have turned to Louisiana state court, federal court, civil court in India, and
arbitration to resolve their dispute. Although Vinod Kumar Dahiya has
secured an arbitral award for his maritime injuries, he continues to pursue
litigation against the alleged wrongdoers—and he still disputes that there was
an enforceable agreement to arbitrate at all.
The district court concluded that, after two decades, the dispute was
finally at an end. It confirmed the Indian arbitration award and enjoined
further litigation. We agree and affirm.
I.
In the fall of 1999, Dahiya, an Indian national, began working as an
engine cadet for the Singapore-based ship crewing agency Neptune
Shipmanagement Services. He was soon assigned to the M/T Eagle Austin,
an oil tanker owned by Talmidge International, bareboat chartered 1 to
American Eagle Tankers, insured by the Britannia Steam Ship Insurance
Association, and crewed by Neptune (collectively known as “the Vessel
Interests”).
Dahiya’s employment contract—which the parties refer to as “the
Deed”—bound him to sail for Neptune, but it did not mention Talmidge,
American Eagle, or Britannia. Only Dahiya signed it. The Deed contained a
1
In a bareboat charter, “the vessel owner transfers full possession and control to
the charterer, who in turn furnishes the crew and maintenance for the vessel (thus the term
‘bareboat’).” Forrester v. Ocean Marine Indem. Co., 11 F.3d 1213, 1215 (5th Cir. 1993). The
charterer therefore becomes responsible “for the negligence of the crew and the
unseaworthiness of the vessel.” Id.2
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clause stating that any dispute arising out of the agreement would be subject
to arbitration in either Singapore or India and governed by Indian law.
Dahiya joined the Eagle Austin crew in Texas and sailed on the vessel
as it travelled along the Gulf Coast, making stops in Beaumont, Lake Charles,
and other oil ports. In late 1999, while in international waters en route to
Louisiana, Dahiya was severely burned as he operated the vessel’s trash
incinerator. He was evacuated by helicopter to Baton Rouge and treated for
second- and third-degree burns and an infection.
After recovering, Dahiya sued the Vessel Interests in Louisiana state
court. The Vessel Interests sought to compel arbitration under the Deed.
They removed the case to federal court, invoking jurisdiction under the
removal provision relating to the Convention on the Recognition and
Enforcement of Foreign Arbitral Awards (New York Convention). See 9
U.S.C. § 205. But the district court denied the motion to compel arbitration,
holding that forum selection clauses in employment contracts “contravene
strong Louisiana public policy.” Dahiya v. Talmidge Int’l, Ltd., 2002 WL
31962151, at *2 (E.D. La. Oct. 11, 2002). The court also determined that,
because the forum selection clause was invalid, no basis for removal existed,
so it remanded the case to state court. Id.We dismissed the Vessel Interests’ appeal of that order. Dahiya v.
Talmidge Int’l, Ltd., 371 F.3d 207, 208 (5th Cir. 2004). The statute governing
removal procedure, we explained, bars appellate review of a remand order
“no matter how erroneous.” 2 Id. at 209 (quoting Arnold v. State Farm Fire
& Cas. Co., 277 F.3d 772, 775 (5th Cir. 2001)); see 28 U.S.C. § 1447(d).
2
The district court has since acknowledged that it made a mistake and should have
enforced the arbitration clause. Lejano v. Bandak, 2004 U.S. Dist. LEXIS 27341, at *3 n.1
(E.D. La. May 27, 2004) (recognizing the error); see Lim v. Offshore Specialty Fabricators,
Inc., 404 F.3d 898, 906 (5th Cir. 2005) (holding that Louisiana law does not invalidate
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Back in state court, the trial court also denied the Vessel Interests’
motion to compel arbitration. At the end of the resulting trial, the court
awarded Dahiya more than $579,000.
It was a short-lived victory. A Louisiana appellate court reversed the
judgment on the ground that the Deed’s arbitration clause was enforceable.
Dahiya v. Talmidge Int’l Ltd., 931 So. 2d 1163, 1171–73 (La. Ct. App. 2006).
It thus remanded the case to the trial court with instructions to stay the
lawsuit and compel arbitration in India. Id. at 1173.
On remand, Dahiya argued that the case should be stayed only against
Neptune because the remaining Vessel Interests were not parties to the Deed
containing the arbitration clause. But the trial court stayed the case “in its
entirety pending arbitration,” halting Dahiya’s lawsuit against all the
defendants.
The parties then shifted their focus to arbitration. After various delays
and procedural blunders in India, Dahiya at last obtained an award in early
2020. The arbitrator awarded Dahiya 95 Lakh (about $130,000) against
Neptune; Dahiya had not named the other Vessel Interests as respondents.
Although the Vessel Interests offered to satisfy the award, Dahiya refused to
accept payment, preferring instead to rekindle the state-court litigation.
Following the award, Dahiya returned to Louisiana court. With the
stay now expired, he sought to reinstate the previously rendered $579,000
arbitration clauses in employment contracts of foreign seamen). But even apart from
whether the district court correctly ruled on the clause’s enforceability, removal
jurisdiction exists under 9 U.S.C. § 205 as long as “there is a conceivable connection to an
arbitration agreement.” OJSC Ukrnafta, 957 F.3d at 495. “Removal to federal court may
thus be proper even when it turns out there is no arbitration agreement.” Id. at 496. The
district court improperly raised this “low bar” for removal by assessing the validity of the
agreement in the course of determining its jurisdiction. Id. at 495.
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judgment or obtain a new trial. The Vessel Interests again removed the
lawsuit to federal court.
The Vessel Interests also filed a new federal lawsuit to confirm the
Indian arbitration award under the New York Convention (this time invoking
9 U.S.C. § 207) and to enjoin Dahiya from pursuing any further litigation.
Although both of these cases were pending before the same district court, the
court declined to consolidate them.
Dahiya then moved to dismiss the new, award-confirmation suit
brought by the Vessel Interests, arguing that the district court’s remand in
the original case prevented federal jurisdiction from ever again being
exercised over the dispute. Undeterred, the Vessel Interests sought
summary judgment confirming the award and reiterated their request for
injunctive relief “to bring this interminable litigation to an end.”
The district court granted summary judgment, terminating Dahiya’s
“increasingly quixotic bid to win greater damages in the United States.”
Neptune Shipmanagement Servs. (PTE.), Ltd. v. Dahiya, 2020 WL 6059647, at
*1 (E.D. La. Oct. 14, 2020). The court thus enforced the Indian arbitration
award and enjoined all pending and future legal actions arising from Dahiya’s
1999 injuries.
Following its ruling, the district court entered final judgment
confirming Dahiya’s arbitral award in the amount of $300,580, a figure the
parties proposed that includes accrued interest. Days later, the Vessel
Interests paid that amount in full.
These rulings came in the Vessel Interests’ newly filed federal case
seeking confirmation of the arbitration award. But as a result of the
injunction it issued, the district court closed the original state-court case that
the Vessel Interests had again removed to federal court. Dahiya appeals only
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from the new federal case; he did not file a separate appeal of the removed
action.
II.
Dahiya challenges the district court’s subject matter jurisdiction to
confirm the arbitral award, the enforceability of the arbitration clause itself,
and the court’s determination that the award prevents him from pursuing
litigation even against the Vessel Interests that were not parties in the
arbitration.
Our review begins with Dahiya’s challenge to the district court’s
jurisdiction to confirm the award. Federal courts have the power to enforce
awards subject to the New York Convention because these actions “arise
under the laws and treaties of the United States.” 9 U.S.C. § 203. Any party
to an arbitration that falls under the Convention may apply to a federal court
“for an order confirming the award as against any other party.” Id. § 207.
This case fits well within the heartland of that jurisdictional grant. 3
Dahiya nonetheless argues that the district court lost its jurisdiction
to enforce the award—or preside over any aspect of this dispute—in 2002,
when it remanded the prearbitration suit to state court. He is mistaken. A
3
As the district court held, Dahiya’s award falls under the Convention’s umbrella
because it was issued in a signatory state (India), the parties seek enforcement in another
signatory state (the United States), it arises from a commercial dispute, and it involves at
least one non-U.S. citizen (Dahiya). See Asignacion v. Rickmers Genoa Schiffahrtsgesellschaft
mbH & Cie KG, 783 F.3d 1010, 1015 (5th Cir. 2015).
It may be that, as the only plaintiff to participate in the arbitration, Neptune alone
has a claim to confirm the award. But that provides the jurisdictional hook for the suit. The
claims of the other Vessel Interests seeking to enjoin Dahiya from engaging in further
litigation would come into federal court through supplemental jurisdiction. See 28 U.S.C.
§§ 1367(a), 1441(a).
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remand order issued nineteen years ago in a different lawsuit has no impact
on the district court’s ability to confirm the award.
To support his view that the 2002 remand binds this case, Dahiya
emphasizes that “[a]n order remanding a case to the State court from which
it was removed is not reviewable on appeal.” 28 U.S.C. § 1447(d). True
enough, and we followed that command when we dismissed the Vessel
Interests’ direct appeal from the 2002 remand order. Dahiya, 371 F.3d at
209. But the removal statutes also contemplate that a lawsuit not removable
at its inception may later become removable. See 28 U.S.C. 1446(b)(3).
Accordingly, we held that an earlier remand did not preclude a second
removal based on diversity jurisdiction when a postremand deposition made
clear the amount-in-controversy requirement was satisfied. S.W.S. Erectors,
Inc. v. Infax, Inc., 72 F.3d 489, 492 (5th Cir. 1996) (“The Fifth Circuit
recognizes a defendant’s right to seek subsequent removals after remand.”).
Thus, even in the same case, a defendant may seek removal more than once,
so long as the request rests on different grounds, like new pleadings or
ensuing events that reveal a basis for federal jurisdiction. Id.Surely, then, a federal court may hear a separate action premised on
new factual developments that support federal jurisdiction. That describes
this new case, as it seeks to confirm an arbitration award that did not exist
back in 2002. This case was never pending in state court; it is a new action
distinct from the litigation seeking to compel arbitration.
Dahiya attempts to circumvent this problem by arguing that even a
new suit can be an impermissible collateral attack on a remand order issued
in an earlier one. See New Orleans Pub. Serv., Inc. v. Majoue, 802 F.2d 166,
167–68 (5th Cir. 1986) (holding that there was no federal jurisdiction over an
action that was “nothing more than an artful, if not subtle, attempt to
circumvent . . . § 1447(d)”). Such a collateral attack occurs when the same
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arguments advanced in new litigation “were fully before the court on the
petition for removal and subsequent petition for remand.” Id. That is not
what is happening here. The first lawsuit sought to compel arbitration before
it had occurred. This one seeks to confirm an arbitration award that has now
issued. This recent factual developmental—an award in an arbitration falling
under the New York Convention—gives rise to federal jurisdiction. See 9
U.S.C. § 207.
Consider a suit alleging state-law unfair competition and trade secret
claims. Absent diversity, such a case would not be removable. But if the
plaintiff later obtains a patent on the technology at issue, she could then file
an infringement suit in federal court. A remand in the first suit would not
matter because the second one is based on an intervening event—the
acquisition of a patent—that gives rise to federal jurisdiction.
As this hypothetical illustrates, a remand order in an earlier case is not
controlling in a new case with a new basis for federal jurisdiction. Yet Dahiya
still pushes back, arguing that we must ignore the arbitral award in
determining jurisdiction because the remand order in the earlier case held
that no enforceable arbitration agreement existed. That earlier ruling, Dahiya
contends, gave rise to issue preclusion.
The issue preclusion argument also fails, however, because an
unappealable ruling like a remand order is not entitled to preclusive effect.
Beiser v. Weyler, 284 F.3d 665, 673 (5th Cir. 2002) (explaining that when “a
litigant, as a matter of law, has no right to appellate review, then he has not
had a full and fair opportunity to litigate and the issue is not precluded”); see
Winters v. Diamond Shamrock Chem. Co., 149 F.3d 387, 395 (5th Cir. 1998)
(suggesting that “collateral estoppel may not be applied offensively to a
jurisdictional decision—such as one granting a motion to remand—that is
not capable of being subjected to appellate review”); 18A Charles Alan
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Wright et al., Federal Practice and Procedure § 4433 n.39
(3d ed. 2021). 4
The unappealability of remand orders is why, after a remand, a state
court may revisit the federal court’s jurisdictional reasoning. Kircher v.
Putnam Funds Tr., 547 U.S. 633, 647 (2006); Mo. Pac. Ry. Co. v. Fitzgerald,
160 U.S. 556, 583 (1896). We recognized this principle in dismissing the
appeal of the 2002 remand: “[T]he district court determined that the
arbitration clause was invalid in the process of ascertaining whether it had
subject matter jurisdiction,” which meant the ruling “has no preclusive
effect in state court.” Dahiya, 371 F.3d at 211. The state court could freely
reexamine the issue and “reach a different conclusion about [the] dispute’s
arbitrability.” Beiser, 284 F.3d at 674.
The Louisiana Fourth Circuit Court of Appeal did just that, holding
that federal law preempted the state statute prohibiting forum selection
clauses and that the arbitration clause was enforceable. Dahiya, 931 So. 2d at
1172. The remand order lacked preclusive effect then as it does now. It
determined the forum for the suit seeking to compel arbitration and nothing
more. See Kircher, 547 U.S. at 647.
III.
Although a district court’s remand order does not have preclusive
effect, the judgment of a state appellate court surely may. That is the
4
There is another reason issue preclusion does not apply: this case and the earlier
one do not involve an “identical issue.” See B&B Hardware, Inc. v. Hargis Indus. Inc., 575
U.S. 138, 153 (2015) (observing that issue preclusion applies only when “the issues in the
two cases are indeed identical” (quoting 6 J. Thomas McCarthy, Trademarks
and Unfair Competition § 32:99, at 32–244) (4th ed. 2014)). As we have explained,
the issue in this case—whether a federal court has jurisdiction in a suit to confirm an
arbitration award falling under the New York Convention—is not the same one decided in
2002 before Dahiya and Neptune arbitrated.
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problem with Dahiya’s final two arguments: first, that the arbitration clause
is invalid because Neptune never signed it, and second, that Dahiya was not
required to arbitrate his claims against the remaining Vessel Interests.
A.
To begin, Dahiya contends that the district court erred in confirming
the arbitral award against Neptune because Neptune did not sign the contract
containing the arbitration clause. He cites Article II of the New York
Convention, which defines arbitration agreements as “agreement[s] in
writing,” a term that “include[s] an arbitral clause in a contract or an
arbitration agreement, signed by the parties or contained in an exchange of
letters or telegrams.” Convention on the Recognition and Enforcement of
Foreign Arbitral Awards art. II, June 10, 1958, 21 U.S.T. 2517, 330 U.N.T.S.
3. Because Neptune never signed the Deed, and federal courts only have
jurisdiction over awards “falling under the Convention,” 9 U.S.C. § 207,
Dahiya claims the district court had no authority to confirm the award.
But this case is not the first time Dahiya has raised an Article II issue
with the Deed. Before the arbitration, he argued in front of the Louisiana
appellate court that the agreement violated Article II because it was “signed
only by him and not by Neptune.” The state court did not buy the argument.
It held that “Mr. Dahiya’s arbitration clause easily meets all four
requirements of the Convention,” including Article II’s agreement-in-
writing provision. Dahiya, 931 So. 2d at 1172.
This ruling prevents us from revisiting whether the Deed contains an
enforceable arbitration clause. Federal courts must “give preclusive effect
to state-court judgments whenever the courts of the State from which the
judgments emerged would do so.” Allen v. McCurry, 449 U.S. 90, 96 (1980)
(citing 28 U.S.C. § 1738). And under Louisiana law, “[a] judgment in favor
of either the plaintiff or the defendant is conclusive, in any subsequent action
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between them, with respect to any issue actually litigated and determined if
its determination was essential to that judgment.” In re Keaty, 397 F.3d 264,
270 (5th Cir. 2005) (quoting La. Stat. Ann. § 13:4231(3)). It would be
hard to find an issue more essential to a decision compelling arbitration than
the court’s determination that there is a binding arbitration agreement.
Dahiya’s argument that Neptune’s signature was required would have
fared no better in our court. Fifth Circuit caselaw holds that Article II does
not require a signature when the arbitration clause is part of a broader
contract. Sphere Drake Ins. PLC v. Marine Towing, Inc., 16 F.3d 666, 669 (5th
Cir. 1994). Our view may now be in the minority, 5 but even so, we did not
compel arbitration here—the state court did. Preclusion principles prevent
us from revisiting that ruling. And the reliance interests that preclusion law
protects are especially strong here as the parties have spent years pursuing
arbitration in India. See Montana v. United States, 440 U.S. 147, 153–54
(1979) (explaining that preclusion protects against “the expense and vexation
attending multiple lawsuits, conserves judicial resources, and fosters reliance
on judicial action by minimizing the possibility of inconsistent decisions”).
5
Other circuits, led by the Second Circuit, have rejected Sphere Drake’s approach
and held that Article II requires both stand-alone arbitration agreements and contracts
containing an arbitration clause to be signed by the parties. Kahn Lucas Lancaster, Inc. v.
Lark Int’l Ltd., 186 F.3d 210, 218 (2d Cir. 1999), abrogation on other grounds recognized by
Marks on Behalf of SM v. Hochhauser, 876 F.3d 416, 420 (2d Cir. 2017); see also Yang v.
Majestic Blue Fisheries, LLC, 876 F.3d 996, 1001 (9th Cir. 2017) (calling Sphere Drake an
“outlier decision” and questioning whether our court would reach the same conclusion
today), abrogated on other grounds by GE Energy Power Conversion Fr. SAS, Corp. v.
Outokumpu Stainless USA, LLC, 140 S. Ct. 1637, 1642 (2020); Czarina, LLC v. W.F. Poe
Syndicate, 358 F.3d 1286, 1290–91 (11th Cir. 2004) (following Kahn Lucas in holding that
Article II requires a signed agreement); Standard Bent Glass Corp. v. Glassrobots Oy, 333
F.3d 440, 449 (3d Cir. 2003) (adopting Kahn Lucas).
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B.
Finally, Dahiya argues that the district court erred in barring him from
litigating against Talmidge, American Eagle, and Britannia because only
Neptune was a party to the Deed. But the state court’s ruling is preclusive
on this question, too. 6
Dahiya argued before the Louisiana appellate court that “[e]ven if
Neptune were entitled to have its liability arbitrated, there is no basis for an
arbitration defense for any of the other defendants.” The court disagreed,
ruling that “the defendants’ Exceptions of No Right of Action, Improper
Venue and Arbitration should have been sustained and the case stayed
pending arbitration.” Dahiya, 931 So. 2d at 1173 (emphasis added). Even
more important than what the court said is what it did--reverse the verdict
that had been entered against all the Vessel Interests. Id. The arbitration
agreement was the only reason cited for undoing that verdict not just as to
Neptune but for all the defendants. See id. Despite Dahiya’s efforts, nothing
in the state court’s opinion segregated his claims against the different parties
on the basis of only some being subject to arbitration.
After the Louisiana appellate court remanded the case for the trial
court to issue a stay, Dahiya again argued that he should be allowed to litigate
against the Vessel Interests other than Neptune. He maintained before the
state trial court that the “defendants other than [Neptune were] not parties
to the arbitration agreement, and have no right to avoid suit in favor of an
arbitration to which they will not be a party.” The state trial court
6
The district court also held that Dahiya’s claims against the Vessel Interests were
intertwined, meaning that the entities excluded from the Deed could enforce its arbitration
clause under the doctrine of equitable estoppel. See Grigson v. Creative Artists Agency,
L.L.C., 210 F.3d 524, 526–27 (5th Cir. 2000). We need not address this question as issue
preclusion alone provides sufficient grounds to affirm the judgment.
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nonetheless stayed the litigation “in its entirety.” In doing so, the court
rejected Dahiya’s attempt to proceed to trial against some of the Vessel
Interests while the arbitration was ongoing. See M.J. Farms, Ltd. v. Exxon
Mobil Corp., 998 So. 2d 16, 26 (La. 2008) (“Generally, when a trial court
judgment is silent as to a claim or demand, it is presumed the relief sought
was denied.” (citations omitted)). We must respect the state court’s
judgment. See U.S. Const. art. IV, § 1.
After the Louisiana courts halted the litigation, ordering Dahiya to
arbitrate his claims, Dahiya had the opportunity to do just that. He could
have named all the Vessel Interests as respondents in the arbitration. In fact,
Dahiya’s submissions to the arbitrator included allegations, such as
unseaworthiness, most appropriately directed at the Eagle Austin’s owner
(Talmidge) or charterer (American Eagle). See Forrester v. Ocean Marine
Indem. Co., 11 F.3d 1213, 1215 (5th Cir. 1993). Yet Dahiya named only
Neptune as the respondent.
Dahiya’s failure to include Talmidge, American Eagle, and Britannia
in the arbitration constitutes a failure to prosecute his claims against those
entities. See Griggs v. S.G.E. Mgmt., L.L.C., 905 F.3d 835, 845 (5th Cir. 2018)
(affirming dismissal for failure to prosecute after plaintiff refused to initiate
arbitration as ordered by court). Having secured an arbitral award for his
injuries, Dahiya cannot now double dip via litigation.
***
The judgment is AFFIRMED.
13