Recently, the U.S. District Court for the Southern District of Ohio denied a motion to remand to state court an action seeking to compel arbitration against Certain Interested Underwriters at Lloyd’s of London and other defendants. The plaintiff, a former National Football League player and star defensive player at The Ohio State University, suffered a career-ending injury in 2001 after just 2 years as a member of the New England Patriots professional football team. He allegedly purchased a disability insurance policy from the defendants, but his claim for disability was allegedly denied by the defendants without proceeding to mandatory arbitration called for in the policy. The plaintiff then filed a complaint for specific performance, breach of contract, and insurance bad faith in state court in Columbus, Ohio.
Two of the defendants removed the case to federal court and indicated that the third defendant consented to removal, but the third defendant did not sign the Notice of Removal. The plaintiff moved to remand the case to state court, arguing that the federal court lacked subject matter jurisdiction because removal was not timely consented to by all defendants, as required by the removal statute, 28 U.S.C. § 1446.
The Notice of Removal, however, invoked federal question jurisdiction under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “Convention”), 9 U.S.C. § 201 et seq. and the Federal Arbitration Act, 9 U.S.C. § 1 et seq. The Court explained that it has federal question jurisdiction if the Notice of Removal relied on the Convention as grounds for removal. The Court cited 9 U.S.C. § 203, which states an “action or proceeding falling under the Convention shall be deemed to arise under the laws and treaties of the United States.”
The Court further noted that the Convention applies to written arbitration agreements arising out of a commercial relationship where at least one of the parties is not a U.S. citizen or the commercial relationship has a reasonable relation with at least one foreign state. Despite the Lloyd’s Underwriters not being disclosed parties, the Court found sufficient evidence that the defendant that signed the insurance agreement had acted as an agent for the Lloyd’s Underwriters. The defendant signed the agreement as a “Lloyd’s Correspondent.” Accordingly, the requirements of the Convention were met, meaning the action was deemed to arise under U.S. laws and treaties and the Court had subject matter jurisdiction over the action.
Significantly, the Court went on to hold that the removal statute’s rule of timely unanimity was not applicable. That rule requires all defendants to join in a Notice of Removal within 30 days of when the case became removable to federal court. The Court explained that the failure of the third defendant to consent to removal in a timely manner would generally render removal improper. Here, however, the Convention provides that where the subject matter of a state court action relates to an arbitration agreement falling under the Convention, “the defendant or the defendants may, at any time before the trial thereof, remove such action.” 9 U.S.C. § 205. Since all defendants joined in removal before trial of the state court action, the Court held the case was timely removed to federal court.
The Magistrate Judge issued a Report and Recommendation to deny the plaintiff’s motion to remand. Neither side filed objections and the District Court Judge adopted the Report and Recommendation. See Katzenmoyer v. TR’BL Marketing, Ltd., Civil Action 2:12-cv-660 (S.D.Ohio 2012).
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