Suit over arbitration in sinkhole cost allocation dispute to remain in federal court

By Carrie Salls | Oct 23, 2018

NEW ORLEANS – The U.S. District Court for the Eastern District of Louisiana recently denied a request by Texas Brine Co. to have its suit against the American Arbitration Association (AAA) regarding a sinkhole cost allocation dispute sent back to state court.

U.S. District Judge Sarah Vance issued the ruling Oct. 11 in a suit filed by Texas Brine regarding arbitration of a dispute with Occidental Chemical Corp. about the allocation of costs related to a sinkhole near a Texas Brine-operated brine production well in Assumption Parish.

Texas Brine filed a lawsuit in state court alleging that AAA arbitrators in the matter, Anthony DiLeo and Charles Minyard, should not have been assigned to the dispute because they “labored under undisclosed conflicts of interest while presiding over Texas Brines’ case,” court filings said.

Specifically, Texas Brine claimed in its lawsuit that “DiLeo was conflicted because he worked on another case in which he was adverse to Texas Brine’s arbitration counsel,” and “that other case spurred a legal malpractice suit in which Minyard represented DiLeo’s interests.”

Texas Brine named the AAA as a defendant in its lawsuit because the association allegedly allowed DiLeo to continue to serve on the Texas Brine arbitration panel.

AAA had the case moved to federal court on July 10. However, Texas Brine said the case should not have been moved because the arbitrators, who had not yet been officially notified of the lawsuit, “are properly joined defendants and that their presence in the action precludes removal,” the Oct. 11 order said.

Despite Texas Brine’s argument that AAA rushed the case removal in an effort to improperly bypass the law regarding joined parties, Vance disagreed in her ruling.

“No exception for gamesmanship exists,” Vance wrote in her ruling. “DiLeo and Minyard … did not render removal improper because they had not been ‘properly joined and served’ at the time of removal.”

The court also refuted Texas Brine’s claim that the case should not have been moved because AAA had not listed its primary place of business in the filings. The court said a magistrate judge correctly allowed the association to submit an amended removal form to correct the mistake.

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