Recent Development by Ronald L. Oran
While constructing Texaco's Petronius oil and gas production facility in the Gulf of Mexico, a crane malfunctioned causing the deck of the facility to fall into the sea. In response to the accident Texaco sued multiple defendants, with the notable exception of J. Ray McDermott, Inc. (McDermott), the owner and operator of the crane. Texaco excluded McDermott from the suit because of a mandatory arbitration clause in the contract between the two parties.
Texaco's attempt to settle its dispute with McDermott through arbitration was thwarted when AmClyde, the manufacturer and designer of the crane, joined McDermott as a third-party defendant pursuant to Federal Rule of Civil Procedure 14(c). Texaco moved to strike the joinder and to stay the litigation, arguing that the Federal Arbitration Act (FAA) required the district court to stay proceedings between McDermott and Texaco pending the outcome of arbitration. The district court denied Texaco's motions, holding that the FAA cannot circumvent Rule 14(c). The United States Court of Appeals for the Fifth Circuit reversed the district court's order and held that while enforcement of the arbitration clause did not conflict with the policy underlying Rule 14(c), enforcement of Rule 14(c) would “utterly thwart the policy of the FAA.” Texaco Exploration & Production Co. v. AmClyde Engineered Products. Co., 243 F.3d 906, 912, 2001 AMC 1199, 1206 (5th Cir. 2001).
About the Author
Ronald L. Oran.
Citation
76 Tul. L. Rev. 833 (2002)