Psara Engy v. Advantage Arrow Shpg, et al

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT

No. 19-40071

PSARA ENERGY, LIMITED,

Plaintiff - Appellant

v.

ADVANTAGE ARROW SHIPPING, L.L.C.;
ADVANTAGE TANKERS, L.L.C.;
ADVANTAGE HOLDINGS, L.L.C.;
FORWARD HOLDINGS, L.L.C.,

Defendants – Appellees

***********************************************

PSARA ENERGY, LIMITED,

Plaintiff - Appellant
v.

ADVANTAGE START SHIPPING, L.L.C.; ADVANTAGE TANKERS, L.L.C.;
ADVANTAGE HOLDINGS, L.L.C.; FORWARD HOLDINGS, L.L.C.,

Defendants - Appellees

Appeal from the United States District Court
for the Eastern District of Texas

United States Court of Appeals
Fifth Circuit
FILED
January 9, 2020

Lyle W. Cayce
Clerk
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Before KING, JONES, and DENNIS, Circuit Judges.
EDITH H. JONES, Circuit Judge:
Plaintiff Psara Energy Limited appeals the district court’s January 2019
Order granting a motion to refer to arbitration this suit filed against
Defendant-Appellees, Advantage Arrow Shipping, LLC; Advantage Holdings,
LLC; Advantage Tankers, LLC; and Forward Holdings, LLC, (collectively, “the
Advantage Defendants” or “Advantage”). We DISMISS this appeal for lack of
appellate jurisdiction because the district court’s Order, which
administratively closed the case, is not a final, appealable order either as we
have construed the Federal Arbitration Act (“FAA”) or under any other theory.
BACKGROUND
In 2010, Psara entered into a bareboat charter agreement with
Defendant Space Shipping, Ltd. (“Space Shipping”) to charter the vessel CV
STEALTH.
1
Through an amendment to the charter party later that year,
Geden Holdings, Ltd. (“Geden”) was made the “performance guarantor” of
Space Shipping.
In 2014, the CV STEALTH was detained in Venezuela for more than
three years by prosecutorial authorities, and Space Shipping failed to return
the ship by the latest contractual redelivery date of June 22, 2015. When the
CV STEALTH was finally released from Venezuela, it was out-of-class and so

1
The Bareboat Charter agreement also included a provision that:

(a) This Contract shall be governed by and construed in accordance with
English law and any dispute arising out of or in connection with this
Contract shall be referred to arbitration in London in accordance with
the Arbitration Act 1996 or any statutory modification or re-enactment
thereof save to the extent necessary to give effect to the provisions of the
Clause.

The charter party refers “any dispute arising out of or in connection with the Contract” to
arbitration in London, England.
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extensively damaged due to neglect that it was incapable of sailing and in need
of extensive repairs. Space Shipping towed the CV STEALTH to Trinidad
where Psara took possession on March 24, 2018. She was sold as scrap. As a
result of the damage, Psara initiated a London maritime arbitration claim
against Space Shipping and Geden for damages equivalent to the repaired
market value of the ship ($18,000,000.00) and amounts for unpaid charter hire,
legal costs, interest, and other costs (an additional $1,860,063.80).
Shortly after the contractual redelivery date but before it commenced
arbitration, Psara discovered that Geden Holdings had transferred its entire
fleet of vessels to other corporate entities (including the Advantage
Defendants). Based on the transfer of the fleet, Psara brought the instant suit
in April 2018 against Space Shipping, Geden, and the Advantage Defendants
alleging breach of contract, fraudulent transfer and corporate succession
theories. In conjunction with its lawsuit, Psara sought and obtained a
maritime attachment against the ADVANTAGE ARROW, one of the
defendants’ vessels found within the Eastern District of Texas. Psara obtained
similar relief against the MV ADVANTAGE START in the Eastern District of
Louisiana. The Louisiana case was transferred to the Eastern District of Texas
under 28 U.S.C. § 1404(a) and consolidated with Psara’s case pending there.
The Advantage Defendants’ motions under Supplemental Admiralty
Rule E(4)(f) to vacate the respective attachments were rejected, but the vessels
were released upon the posting of substitute security.
2
In the case of the
ADVANTAGE ARROW, the district court’s order stated, “[t]he court will
address the ‘Motion to Vacate Attachment’ at a later time.”

2
The ADVANTAGE ARROW was secured for the amount of $4,000,000 and the
ADVANTAGE START was secured for $800,000. After transfer, the total amount of
substitute security for the vessels stands at $4,800,000.
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In June 2018, the Advantage Defendants moved for referral to
arbitration in London on the basis that Psara’s claims all arise from the charter
party between Psara and Space Shipping, which contains a valid and
enforceable arbitration clause. The Advantage Defendants contended that
they should be included in Psara’s ongoing arbitration proceedings against
Space Shipping because Psara claims that the Advantage Defendants are a
successor to Space Shipping and therefore liable for Psara’s losses under the
charter party. As Psara points out, however, the Advantage Defendants are
non-signatories to the charter party and should not normally benefit from its
arbitration provision. Al Rushaid v. Nat’l Oilwell Varco, Inc., 814 F.3d 300,
305 (5th Cir. 2016) (describing limited theories of nonsignatory participation
in arbitrations).
The district court granted the motion to refer to arbitration. The court
found that the Advantage Defendants invoked the intertwined claims rule
because without the underlying charter party and performance guarantee,
Psara has no claims against the Advantage Defendants. Moreover, Psara
cannot be permitted to sue the Advantage Defendants for contractual claims
while insisting they are not entitled to the benefit of the arbitration clause in
those underlying agreements. The district court further held that, while the
dispute is being arbitrated, the Rule B attachments (for the vessels ARROW
and START) remain in effect with posted security for Psara’s potential arbitral
award pursuant to the district court’s jurisdiction under Sections 8 and 207 of
the FAA. The district court then “administratively closed” the case, denied
pending motions as moot, and retained jurisdiction to enforce any arbitration
award.
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Months later, the district court denied Psara’s motion to stay the referral
to arbitration pending appeal, and this court denied an identical motion. Psara
timely appealed.
DISCUSSION
A preliminary, and here dispositive, issue is whether the district court’s
order referring the suit to arbitration and administratively closing the case
constitutes an appealable order. “If not, then this Court lacks jurisdiction and
the appeal should be dismissed, which would pretermit any consideration of
the merits of [the Appellant’s] appeal.” Mire v. Full Spectrum Lending, Inc.,
389 F.3d 163, 165 (5th Cir. 2004).
The Advantage Defendants question our appellate jurisdiction, and
Psara responds that either the district court’s order compelling arbitration is
final and appealable under 9 U.S.C. § 16(a)(3), or it is appeable pursuant to the
collateral order doctrine. We discuss each theory in turn.
Psara’s first theory turns on whether the district court’s order is final.
Section 16 of the FAA “governs appellate review of arbitration orders.” Apache
Bohai Corp., LDC v. Texaco China, B.V., 330 F.3d 307, 309 (5th Cir. 2003). The
statute accomplishes Congress’s intent to favor arbitration “by authorizing
immediate appeals from orders disfavoring arbitration and forbidding
immediate appeals from orders favoring arbitration.” S. La. Cement, Inc. v.
Van Aalst Bulk Handling, B.V., 383 F.3d 297, 300 (5th Cir. 2004). Thus,
9 U.S.C. § 16(a)(3) permits appeals taken from “a final decision with respect to
an arbitration that is subject to this title,” but § 16(b)(3) explicitly denies
appellate jurisdiction over nonfinal orders “compelling arbitration under
section 206.” See also S. La. Cement, 383 F.3d at 300.
The Supreme Court has explained that a “final decision with respect to
an arbitration” means “a decision that ends the litigation on the merits and
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leaves nothing more for the court to do but execute the judgment.” Green Tree
Fin. Corp.–Ala. v. Randolph, 531 U.S. 79, 86 (2000) (quoting Dig. Equip. Corp.
v. Desktop Direct, Inc., 511 U.S. 863, 867 (1994). In Green Tree, because the
district court “ordered the parties to proceed to arbitration, and dismissed all
the claims before it,” the order constituted a final, appealable decision. Id. at
89. Crucially, the Supreme Court went on to state that “[h]ad the District
Court entered a stay instead of a dismissal in this case, that order would not
be appealable.” Id. at 87 n.2; see also Mire, 389 F.3d at 165.
Acknowledging the dichotomy expressed in Green Tree, this Circuit has
repeatedly held that “[a]n arbitration order entering a stay, as opposed to a
dismissal, is not an appealable final order.” S. La. Cement, 383 F.3d at 300;
see also Apache, 330 F.3d at 309 (“An arbitration order entering a stay, as
opposed to a dismissal, is not an appealable final order.”); Cargill Ferrous Int’l
v. SEA PHOENIX MV, 325 F.3d 695, 697, 701–02 (5th Cir.2003) (dismissing
for lack of appellate jurisdiction because the stay pending arbitration was not
“a final judgment by the district court”). Nearly on point with this case, the
court held in Mire that administratively closing a case “is the functional
equivalent of a stay” and “thus not an appealable order under the FAA.” Mire,
389 F.3d at 167. This is because the entry of a stay, as opposed to a dismissal,
indicates that “the district court perceives that it might have more to do than
execute the judgement once arbitration has been completed.” Apache, 330 F.3d
at 309 (quoting ATAC Corp. v. Arthur Treacher’s Inc., 280 F.3d 1091, 1099 (6th
Cir. 2002)).
In contrast, “[a] district court order that compels arbitration and
dismisses or closes a case outright possesses finality and confers jurisdiction
on this court.” Sw. Elec. Power Co. v. Certain Underwriters at Lloyds of
London, 772 F.3d 384, 387 (5th Cir. 2014); see also Am. Heritage Life Ins. Co.
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v. Orr, 294 F.3d 702, 707–08 (5th Cir. 2002) (holding an order final and
appealable that “closed” the case; the only claim before the court was one
seeking to compel arbitration, hence there was “no practical distinction
between ‘dismiss’ and ‘close’ for the purposes of [that] appeal”).
The district court here adopted the magistrate judge’s report and
recommendation (“R&R”), “granting the [referral to arbitration], directing the
parties to arbitration, and staying the case pending resolution of the arbitrable
issues” in London. The district court then ordered the case “administratively
closed” and retained jurisdiction to enforce any arbitration award. By adopting
the R&R, the district court stayed the case, and by ordering administrative
closure, it provided itself an additional safe harbor from the district courts’
periodic reporting conditions. Moreover, this case commenced not as a suit
simply to compel arbitration pursuant to the FAA, but to obtain relief against
the defendants for, inter alia, breach of the charter party agreements and
fraudulent transfer of assets. It is not inconceivable in such a situation that,
although the defendants prevailed on a claim seeking arbitration, some aspects
of the case might not be resolved in the arbitral forum, and the district court
would have to reopen the case for purposes other than to enforce the arbitral
award. The court’s order aligns with “our case law [that] has developed clear
distinction between final orders dismissing cases after compelling arbitration
and interlocutory orders staying and administratively closing cases pending
arbitration.” Sw. Electric, 772 F.3d at 387. “The effect of an administrative
closure is no different from a simple stay,” which district courts often use “to
remove from their pending cases suits which are temporarily active elsewhere
(such as before an arbitration panel) or stayed (such as where a bankruptcy is
pending).” Mire, 389 F.3d at 167. The court’s order staying and
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administratively closing the case pending arbitration was nonfinal for
purposes of appellate review.
As an alternative ground for jurisdiction, Psara does not argue that its
appeal satisfies the standards of 28 U.S.C. § 1292(b), which renders only some
interlocutory orders appealable. Instead, Psara contends that the collateral
order doctrine, an exception to the statute, authorizes appellate jurisdiction
over interlocutory appeals from orders compelling arbitration. We rejected this
argument in Al Rushaid, following the Supreme Court’s admonition that, as a
“narrow exception” to finality provisions, the collateral order doctrine should
“never be allowed to swallow the general rule.” Dig. Equip. Corp., 511 U.S. at
868. Plainly, “[s]ection 16 provides a specific framework for determining
whether and when an appeal is proper, and we will not interfere with the
statutory design.” Al Rushaid, 814 F.3d at 304. Every other circuit has
reached the same outcome on this issue. See Johnson v. Consumerinfo.com,
Inc., 745 F.3d 1019, 1022 (9th Cir. 2014); ConArt, Inc. v. Hellmuth, Obata +
Kassabaum, Inc., 504 F.3d 1208, 1211 (11th Cir. 2007); ATAC Corp., 280 F.3d
at 1101–02.
Against this conclusion, Psara draws our attention to two cases, Atl.
Fertilizer & Chem. Corp. v. Italmare, S.p.A. of Ravenna, 117 F.3d 266 (5th Cir.
1997) and Heidmar, Inc. v. Anomina Ravennate di Armamento Sp.A, 132 F.3d
264 (5th Cir. 1998). Neither case, however, applied the collateral order
doctrine to authorize appellate review of interlocutory orders compelling
arbitration, nor did either case consider the interaction between the clear
statutory directive in FAA § 16(b) and the collateral order doctrine. Atlantic
Fertilizer dealt with the district court’s summary denial of a request for
counter-security in light of a pending arbitration. 117 F.3d at 269. In
Heidmar, the appellate court reviewed, pursuant to the collateral order
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doctrine, an order vacating attachment pending arbitration because
conducting appellate review of the order at a later date “would be an empty
rite after the vessel had been released and the restoration of the attachment
only theoretically possible.” 132 F.3d at 267 (quoting Swift & Co. Packers v.
Compania Colombiana Del Caribe, S.A., 339 U.S. 684, 689 (1950)). But in this
case, Psara has the security it sought because “the Rule B attachment still
remains in effect in this court and applies as valid security for the claim,” a nd
the district court held than any arbitral award “could come from the Rule B
attachment.”
Finally, we are obliged to consider whether appellate jurisdiction exists
over the order compelling arbitration under 28 U.S.C. § 1292(a)(3), which
confers jurisdiction over “[i]nterlocutory decrees of such district courts or the
judges thereof determining the rights and liabilities of the parties to admiralty
cases in which appeals from final decrees are allowed.” We hold this avenue is
also closed to Psara.
In reaching this conclusion, we adopt the reasoning provided in dicta
from a previous unpublished decision, Bordelon Marine, L.L.C. v. Bibby Subsea
Rov, L.L.C., 685 F. App’x. 330 (5th Cir. 2017). In Bordelon, this court
considered whether to exercise jurisdiction over the district court’s denial of
the appellant’s motion to re-open to enforce the method of selecting arbitrators.
The court held that Appellant waived his argument under § 1292(a)(3) because
it was raised for the first time at oral argument. Id. at 335. Nevertheless, the
court explained in a footnote that the appellant’s argument was unavailing
even if it had not been forfeited. Id. at 335 n.5. The court reasoned that
compelling arbitration and determining the appointment of arbitrators “was
not a determination of the rights and liabilities of the parties; rather, it merely
settled ‘how and where the rights and liabilities would be determined.’” Id.
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(quoting In re Ingram Towing Co., 59 F.3d 513, 517 (5th Cir. 1995)). We agree
with that reasoning and find it equally applicable here.
This holding is consistent with our precedent limiting the applicability
of § 1292(a)(3) to orders determining the parties’ substantive rights and
liabilities. These cases take a strict view of the statute’s language about
“determining the rights and liabilities.” See, e.g., Celtic Marine Corp. v. James
C. Justice Cos., Inc., 760 F.3d 477, 480–81 (5th Cir. 2014) (finding jurisdiction
to review the district court’s grant of summary judgment but not jurisdiction
to review a Rule 60(b) order); In re Ingram Towing Co., 59 F.3d 513, 517 (5th
Cir. 1995) (“Orders which do not determine parties’ substantive rights or
liabilities . . . are not appealable under section 1292(a)(3) even if those orders
have important procedural consequences.” (quoting Francis v. Forest Oil Corp.,
798 F.2d 147, 150 (5th Cir. 1986))); In re Patton–Tully Transp. Co., 715 F.2d
219, 222 (5th Cir. 1983) (holding that the appealed order must “finally
determine the rights or liabilities of either party to this dispute”); MS Tabea
Schiffahrtsgesellschaft MBH & Co. KG v. Bd. of Comm’rs of Port of New
Orleans, 636 F.3d 161, 165 (5th Cir. 2011).
The district court’s order to stay and administratively close Psara’s case
is not a final order for purposes of FAA § 16(a)(3); the collateral order doctrine
does not apply to orders concerning arbitration governed by the FAA; and
§ 1292(a)(3) is inapplicable to referrals to arbitration in admiralty cases that
do not determine a party’s substantive rights or liabilities. Consequently, this
court lacks jurisdiction to review this appeal and does not reach the merits of
Psara’s other issues.
CONCLUSION
For the foregoing reasons, the appeal is DISMISSED.
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