U.S. federal court upholds a party's right to attach the assets of its opponent in arbitration before final award on the merits

On 1 September 2017, the U.S. Court of Appeals for the Fifth Circuit (the “Fifth Circuit”) revived an attachment order, sought in aid of future arbitration proceedings, that had been previously dismissed by the Eastern District of Louisiana. The court had originally refused to grant the attachment on the grounds that the action in aid of which the attachment was sought (an action to compel arbitration) was not an “action for a money judgment” in respect of which attachments were allowed under the relevant Louisiana statute. The Fifth Circuit disagreed, finding that because the Louisiana statute allowed attachments in aid of suits to confirm monetary arbitration awards (which are “actions for money judgment”), it also allowed attachments in aid of arbitration proceedings that were likely to lead to such a confirmation suit, even before any final arbitral award on the merits had been rendered.

This case involved two creditors of America Metals Trading (“AMT”) who sought attachment orders over the same pig iron shipment to secure an eventual judgment/award against AMT. Daewoo International Corp. (“Daewoo”), the first creditor, sued AMT in the Eastern District of Louisiana seeking an order compelling AMT to arbitrate and an attachment of the pig iron under the Louisiana non-resident attachment statute, which allows attachments in aid of any “action for a money judgment.” The district court granted Daewoo an attachment. Thyssenkrupp Mannex GmbH (“TKM”), the second creditor, successfully attached the same pig iron in a proceeding in Louisiana state court, and then intervened in Daewoo’s federal proceedings before the district court, arguing Daewoo’s attachment should be vacated because, inter alia, the Louisiana statute was inapplicable in aid of arbitration before any confirmation suit had been filed. The district court agreed with TKM, vacating Daewoo’s attachment. The court also found that it could not exercise in rem jurisdiction over property already seized by another parallel court, in this case at the state level, under the doctrine of “prior exclusive jurisdiction,” a point that was not revisited by the Fifth Circuit.

The Fifth Circuit, however, rejected the district court’s interpretation of the Louisiana statute. Although Daewoo’s action (seeking to compel arbitration) was not directly an action for a money judgment, it found that the statute allowed for the possibility of attachments (1) before the suit underlying the requested attachment had been filed, and (2) in an action to confirm an arbitral award (which, TKM conceded, was an action for money judgment). Therefore, the court held, the statute also allowed attachments in aid of arbitration before the arbitration proceedings were concluded (and a final award rendered) but where a party would eventually be seeking an action to confirm the arbitral award.

Although this case is a cautionary reminder of the difficulty of navigating the differing U.S. state laws that govern the availability of attachment orders in aid of arbitration proceedings, it is a notable example of a U.S. federal court upholding a party's right to attach the assets of its opponent in an arbitration before the arbitration proceedings are concluded and a final award on the merits is rendered.

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