The Fifth Circuit’s decisions in In re Chrystal Power Co. Ltd, No. 11-40115 (5th Cir. 21 March 2011), on rehearing (16 May 2011), address whether mandamus lies for a District Court order erroneously permitting removal of a case to federal court under the New York Convention, as codified in 9 U.S.C. secs. 201, et seq.
Crystal Power (CP) is a corporation based in El Salvador and sued various parties in the U.S. There ensued a squabble among the partners of the law firm representing CP, and the former law firm representing CP, based on a settlement agreement containing an arbitration clause, moved to intervene in a state court suit with the client. The client responded with a series of cross-claims against the law firm, and the law firm filed a notice of removal under the New York Convention, which the Fifth Circuit recognized “creates original federal jurisdiction over certain international arbitration agreements” and permits removal of cases to federal court.
The related Circuit decisions are noteworthy for international practice for the following reasons:
First, the Fifth Circuit addressed a case where a party intervened in the state court action as a plaintiff and then faced claims against it that, it said, gave it the right to remove. There are some statutes that permit any “party” to remove. Removal under the New York Convention is not one of them, for by its terms it limits removal to the defendant. 9 U.S.C. sec. 205. The Circuit, following the Supreme Court’s decision in Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100 (1941), which held that “a counter-claim does not allow a plaintiff to invoke the right of removal granted to defendants by the federal removal statute”.
Second, the Court of Appeals recognized both that it should “strictly construe removal statutes” but that, unlike the general removal statute (28 U.S.C. sec. 1441), removal under the New York Convention “does not incorporate the well-pleaded complaint rule” and “does not impose the general removal statute’s strict time limit on filing a notice of removal”.
Third, on the issue of whether mandamus was a proper remedy, the initial Panel found that it did, yet the Panel on rehearing decided that it did not, since the “petition does not meet the stringent demands of the All Writs Act for extraordinary relief”. The Court of Appeals did not vary its view that, ultimately, continuing the litigation in federal court would be folly, since at some point the case would come up for an appeal, at which point there was no doubt in the Court of Appeals’ mind that federal subject matter jurisdiction would be lacking.