Adam Joseph Resources (M) SDN. BHD. v. CNA Metals Limited

At a glance

Parties

Adam Joseph Resources (M) SDN. BHD. (Malaysia), plaintiff-appellant, and Brown Sims (movant-appellant) v. CNA Metals Limited (Texas), defendant-appellee

Case no.

U.S. Court of Appeals, Fifth Circuit, No. 17-20685

Court

U.S. Court of Appeals for the Fifth Circuit, on appeal from the U.S. District Court for the Southern District of Texas

Underlying award(s)

Final award made under the American Arbitration Association, which applied Texas law: USD 503,943.56 to AJR. The arbitrator certified that the award was made under the New York Convention.

Treaty

New York Convention, implemented at 9 U.S.C. § 201 et seq.

Court panel

Circuit Judges Jolly, Dennis and Higginson; opinion by E. Grady Jolly

Sector

Commercial contract dispute; attorney's contingency fee

Outcome

The court reversed the denial of Brown Sims's motion to intervene, vacated the district court's Rule 60(b) rulings and its dismissal of the case as moot, and remanded the case for decision on the merits (26 March 2019).

Amount

Award: USD 503,943.56. Settlement between AJR and CNA: USD 395,000. Brown Sims claimed USD 188,167.02, its assigned 37% interest in the award including costs.

The dispute

AJR, a Malaysian company, sued CNA Metals, a Texas corporation, in federal court for breach of contract on the basis of diversity jurisdiction. The district court compelled arbitration under the New York Convention. AJR won an award of USD 503,943.56. Its Houston law firm, Brown Sims, had acted on a contingency fee basis, and AJR had assigned it a 37% interest in any recovery. After the award, AJR and CNA settled privately for USD 395,000 without telling Brown Sims or the court, which cut out Brown Sims's fee. The district court then set aside its judgment confirming the award as satisfied and dismissed the case as moot. It held that it had no jurisdiction over Brown Sims's claim because Brown Sims's entry into the case would destroy diversity. CNA argued on appeal that there was no federal jurisdiction, that intervention was properly denied and that the case was moot.

Key holdings

1. The New York Convention gives federal courts jurisdiction over Brown Sims's claim to its contingency fee interest in the award. Applying Stemcor and the broad 'relates to' test of 9 U.S.C. § 205, the court found that the claim goes to the heart of the arbitration: whether the award is confirmed or set aside as settled, and how it is distributed. Because the Convention overrides the well-pleaded complaint rule, it does not matter that the complaint relied only on diversity. pp. 8–11
2. The court rejected CNA's argument that Brown Sims had waived the Convention as a ground of jurisdiction, because Brown Sims had raised it in its Rule 59(e) motion below. p. 7 n. 5
3. The settlement between AJR and CNA did not make the case moot. Where the court has jurisdiction over the claim in intervention, a request to intervene after settlement raises a question of timeliness under Rule 24, not of mootness. pp. 11–12
4. Brown Sims's motion was timely. It acted promptly once it knew its interest was at risk. Any prejudice to AJR and CNA was of their own making. Brown Sims would suffer serious prejudice if refused. The secret settlement was an unusual circumstance that favours Brown Sims. pp. 13–15
5. Under Gaines v. Dixie Carriers, a contingency fee is a sufficient interest for intervention as of right. That interest would be impaired in practice, and neither existing party represents it. The district court must therefore grant the Rule 24 motion on remand. pp. 15–18
6. The Rule 60(b)(6) and Rule 60(b)(5) rulings rested on the same jurisdictional error and are vacated. The court refused to enter judgment for Brown Sims itself: the district court must decide whether Brown Sims had a valid interest in the award and whether CNA is liable for it. pp. 19–20

Procedural history

1. AJR sued CNA in the Southern District of Texas. The district court compelled arbitration under the Convention and stayed the proceedings.
2. After about two years of AAA arbitration, AJR was awarded USD 503,943.56.
3. 8 December 2016CNA paid AJR's Malaysian counsel USD 395,000 under a settlement that Brown Sims and the court did not know about.
4. 13 December 2016The district court entered final judgment confirming the award for USD 503,943.56.
5. The district court denied Brown Sims's Rule 60(b)(6) motion for lack of jurisdiction, granted CNA's Rule 60(b)(5) motion, vacated the judgment and dismissed the case as moot.
6. 23 October 2017The district court denied Brown Sims's renewed Rule 24 motion to intervene and its Rule 59(e) motion.
7. 26 March 2019The Fifth Circuit reversed, vacated and remanded the case for decision on the merits.

Tribunal, counsel and experts

Decided by

• E. Grady Jolly Judge, U.S. Court of Appeals for the Fifth Circuit (authored the opinion)

For the claimant

Brown Sims, P.C.

For the respondent

Cohen & Small, P.C. · Mahendru, P.C.

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Keywords

• New York Convention
• 9 U.S.C. § 203
• 9 U.S.C. § 205
• subject matter jurisdiction
• relates to
• Stemcor
• intervention as of right
• Rule 24
• contingency fee
• collusive settlement
• Rule 60(b)
• mootness
• confirmation of award
• Brown Sims
• American Arbitration Association
• diversity jurisdiction
• well-pleaded complaint rule

Summary generated with AI from the published documents — refer to the award for the authoritative text.