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YORK HANNOVER HOLDING A.G. v. AMERICAN ARBITRATION

June 22, 1992

Application of YORK HANNOVER HOLDING A.G., Plaintiff, -against- AMERICAN ARBITRATION ASSOCIATION, Defendant, -and- MCDERMOTT INTERNATIONAL, INC., MCDERMOTT OVERSEAS INVESTMENT COMPANY N.V., MCDERMOTT INTERNATIONAL TRADING (HOLLAND 1) B.V., MCDERMOTT INTERNATIONAL TRADING (HOLLAND 2) B.V. MCDERMOTT INTERNATIONAL TRADING (HOLLAND 3) B.V., MCDERMOTT INTERNATIONAL TRADING (HOLLAND 4) B.V. and MCDERMOTT INTERNATIONAL TRADING (HOLLAND 5) B.V., Intervenors-Defendants. In re: Arbitration between York Hanover Holding, A.G. and McDermott International, Inc. et al.


The opinion of the court was delivered by: CHARLES S. HAIGHT, JR.

 HAIGHT, District Judge:

 Following removal of this action from state court, plaintiff moves for remand. Background

 Plaintiff York Hannover Holding, A.G. ("York") and intervenors-defendants McDermott International, Inc. and related companies (hereinafter collectively "McDermott") are engaged in a significant commercial arbitration administered by the American Arbitration Association ("AAA"). The underlying contract between York and McDermott provided for arbitration of disputes in New York under the AAA's Commercial Arbitration Rules. The arbitration clause in the contract further provided that each party would appoint an arbitrator and the two party-appointed arbitrators would appoint a third, neutral arbitrator who would be chairman of the arbitration panel. Failing agreement by the party-appointed arbitrators, the AAA would appoint the chairman. In point of fact, the arbitrators appointed by the parties could not agree on the panel chairman, and the AAA appointed him. The arbitration clause further provided that the parties consented to the jurisdiction of this Court "for the enforcement of this Agreement." The AAA's rules, by which the parties agreed to be bound in the arbitration clause, provide: "Neither the AAA nor any arbitrator in a proceeding under these rules is a necessary party in judicial proceedings relating to the arbitration." Rule 47(b).

 During the hearings but before award the arbitrator appointed by York resigned, complaining of misconduct by the chairman of the panel. The arbitrator appointed by York resigned in a letter dated December 4, 1991 addressed to the AAA case administrator. That letter expressed the hope that the AAA would "re-examine this entire proceeding" and bring about "an immediate recasting" of the arbitration panel.

 In response to the resignation of York's arbitrator, the AAA convened an administrative conference on January 16, 1992. Both York and McDermott were represented by counsel at the conference. After a further exchange of correspondence, the AAA sent the parties a letter dated January 27, 1992 appointing a different individual as York's party-appointed arbitrator. By letter dated February 3, 1992 the AAA advised the parties that it had reaffirmed the appointment of the original neutral arbitrator and panel chairman.

 York is dissatisfied with the AAA's response to the complaint of its original arbitrator about the conduct of the panel chairman. Accordingly York filed a petition with the Supreme Court of the State of New York, New York County, seeking orders directing the AAA to remove the panel, and staying the arbitration pending a hearing on the petition. York's petition named only the AAA as respondent. At the hearing in state court (Greenfield, J.) counsel for the AAA did not appear. Counsel for McDermott appeared and sought leave to intervene and to file opposition papers. Justice Greenfield granted McDermott leave to intervene from the bench and set a further briefing schedule.

 McDermott then removed the case to this Court. McDermott alleges federal question jurisdiction based upon the Convention on the Recognition and Enforcement of Foreign Arbitrable Awards of June 10, 1985, ratified by the United States and enacted into domestic law by Pub.L. 91-368, § 1, July 31, 1970, 84 Stat. 692, as amended, codified at 9 U.S.C. §§ 201-207 (the "Convention").

 Counsel for McDermott tendered the notice of removal to the AAA's general counsel for signature under the typed statement "Consented To: American Arbitration Association." The AAA's counsel added the phrase "Has No Objection To" above the phrase "Consented To" and signed the notice of removal. In an affidavit previously filed with the state court, the AAA's counsel had stated that "in order to preserve its impartial status," it "does not wish to participate in this litigation and has encouraged the real party to the arbitration to move to intervene herein. By "real party" the AAA meant McDermott. Counsel's affidavit went on to say that the AAA "has no interest in the outcome of the arbitration and will abide by the decision of the court." Counsel for the AAA had earlier written to counsel for York, stating in response to the state court order to show cause:

 As the impartial administrator of the arbitration the AAA does not generally appear or participate in judicial proceedings relating to the arbitration. The AAA should not have been named as a party-defendant. Section 47(b) of the Rules provides that the AAA is not a "necessary party".

 In these circumstances, York moves to remand the case to state court. McDermott opposes remand. The AAA has filed no papers. Counsel for York submits an affidavit quoting counsel for the AAA as saying that it has no objection to remand. Discussion

 The parties agree that the arbitration agreement at bar, between foreign corporations and providing for arbitration in New York, falls under the Convention. See 9 U.S.C. § 202. Accordingly removal of the action from state to federal court is governed not by the general removal statute, 28 U.S.C. §§ 1441 et seq., but by 9 U.S.C. § 205, which provides in pertinent part:

 Where the subject matter of an action or proceeding pending in a state court relates to an arbitration agreement or award falling under the Convention, the defendant or the defendants may, at any time before the trial thereof, remove such action or proceeding to the district court of the United States for the district and division embracing the place where the action or proceeding is pending. The procedure for removal of causes otherwise provided by law shall apply, except that the ground for removal provided in this section need not appear on the face of the complaint but may be shown in the petition for removal.

 York moves for remand on procedural and substantive grounds. The procedural ground is that the AAA has not joined in the petition to remove, as required by the general removal statute, 28 U.S.C. § 1441(a). Substantively, York contends that ...


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