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U.S. Fifth Circuit Ruling May Provide Support for Obtaining Pre-Award Attachment of Assets

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Pre-award attachment of assets is a powerful tool to prevent the dissipation of assets by a party pending the completion of arbitration proceedings. A recent ruling from the United States Court of Appeals for the Fifth Circuit could provide support for obtaining such relief in certain US jurisdictions, particularly those states that have adopted the UNCITRAL Model Law on International Commercial Arbitration (“UNCITRAL Model Law”), even if the state has no legislation expressly permitting it.

The Fifth Circuit’s Ruling

In Stemcor USA Inc. v. Cia Siderurgica Do Para Cosipar et al.; Daewoo International Corp. v. Thyssenkrupp Mannex Gmbh v. America Metals Trading LLP et al., No. 16-30984, a three-member panel of the Court of Appeals for the Fifth Circuit set aside a lower court decision vacating an attachment order in favor of Daewoo International Corporation (“Daewoo”). The underlying dispute arose from a series of 2012 contracts between Daewoo and America Metals Trading LLP (“AMT”) for the purchase of pig iron for delivery in New Orleans. Although Daewoo made payments under the contracts, AMT did not perform. The contracts contained arbitration clauses.

In December 2012, Daewoo filed suit in the Eastern District of Louisiana to compel arbitration. Daewoo also sought to attach pig iron belonging to AMT on board a vessel anchored in Louisiana. Louisiana has no legislation expressly providing for pre-award attachment in aid of arbitration. Daewoo alleged jurisdiction under both maritime law and Louisiana’s non-resident attachment statute. The district court granted the writ of attachment ex parte and without any significant analysis.

Thyssenkrupp Mannex Gmbh (“TKM”) then intervened in the suit and sought to lift the attachment after it also obtained permission to seize the same pig iron in a separate dispute with AMT. The district court ruled for TKM and vacated Daewoo’s writ. In part, the district court held that Louisiana’s non-resident attachment statute does not allow for attachment in aid of arbitration. Daewoo appealed the vacatur decision.

The Louisiana statute (La. Code Civ. Proc. art. 3542) provides that “[a] writ of attachment may be obtained in any action for a money judgment, whether against a resident or a nonresident, regardless of the nature, character, or origin of the claim, whether it is for a certain or uncertain amount, and whether it is liquidated or unliquidated.” In this context, the Court of Appeals determined that an “action for a money judgment” is a civil or criminal judicial proceeding seeking monetary damages.

Based on that definition, the Court of Appeals agreed with the district court that a suit to compel arbitration is not a direct “action for a money judgment” but noted that confirmation proceedings to convert an arbitral award into a monetary judgment do fall within the statute. Accordingly, the Court of Appeals held that the critical inquiry was not whether Daewoo’s suit to compel arbitration was itself an “action for a money judgment” but rather whether Daewoo had complied with procedural requirements of the statute and whether Daewoo would likely bring a future confirmation suit, which would be an action for a money judgment.

The Court of Appeals found that both requirements were met. First, there was no question that Daewoo had complied with the procedural elements of the statute. Second, Daewoo had confirmed that it would be seeking a monetary award against AMT in the arbitration, which it would then seek to confirm. Accordingly, Daewoo could rely on the statute to obtain a writ of attachment. Daewoo had shown good cause for pre-suit relief to secure the eventual award due to AMT’s “hemorrhaging” of assets. Accordingly, Daewoo’s application was valid under Louisiana law.

TMK has moved for rehearing and rehearing en banc.

Obtaining Pre-Award Attachment in Other US Jurisdictions

Certain states have specific legislation providing for pre-award attachment of assets in aid of arbitration, such as New York and Georgia. See N.Y. Civ. Prac. Law and Rules § 7502(c); Ga. Code Ann. § 9-9-4(3). In particular, New York’s statute has been held to apply to attach assets within New York even where a New York court would have no personal jurisdiction over the parties to the arbitration agreements. For example, in Sojitz Corp. v. Prithvi Information Solutions Ltd., 921 N.Y.S. 2d 14 (N.Y. App. Div. 2011), a dispute arose under a contract for telecommunications equipment between two companies, one Japanese and the other Indian, with no presence or business operations in New York. The contract was to be performed entirely outside the United States. Despite the lack of any connection to the forum by the parties or the contract, the court granted an application prior to commencement of arbitration to attach a debt of $18,500 to one of the parties, Prithvi Information Solutions (“Prithvi”) from a New York company. The key issue was the concern that Prithvi might dissipate the debt before an award could be obtained and enforced. In granting the application, the court held that it had the authority to attach the New York assets solely as security for a possible future award in an arbitration pending outside the United States even though Prithvi lacked any other connection to the forum.

The Stemcor decision could have implications for obtaining pre-award relief in the numerous other states that, unlike New York and Georgia, do not have statutes expressly permitting attachment in aid of arbitration. The Court of Appeals supported its analysis by noting that Louisiana has adopted the UNCITRAL Model Law provision on interim measures in arbitration, which provides “[i]t is not incompatible with an arbitration agreement for a party to request, before or during arbitral proceedings, from a court an interim measure of protection and for a court to grant such measure.” See UNCITRAL Model Law, Art. 9. The Court of Appeals noted that pre-award attachment is one of the interim remedies available under the UNCITRAL Model Law and that “it would be strange” for Louisiana to have adopted that Model Law “without allowing for state law interim remedies in aid of arbitration.”

Based on this reasoning, the Stemcor case could provide support for obtaining pre-award attachments in other United States jurisdictions that have adopted the UNCITRAL Model Law, such as California, Connecticut, Florida, Illinois, and Oregon, even though those states do not have specific legislation addressing the issue. Parties considering future claims may want to take note of the opportunity for interim relief in these jurisdictions in preparing litigation strategy, including possibly structuring asset searches to identify targets for attachment in appropriate circumstances.


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