Texaco Exploration and Production Co. v. AmClyde Engineered Products Co., Inc.

This case arose from an accident during the offshore construction of an oil and gas production facility for Texaco. A barge-mounted crane designed and manufactured by AmClyde failed, causing a deck module to fall into the sea. Texaco sued AmClyde, as well as both the manufacturer and the seller of the wire rope line that failed and the classification society that inspected and certified the crane and line. Because of a mandatory arbitration clause in the contract between Texaco and McDermott, the crane operator, Texaco did not sue McDermott.

Texaco initiated arbitration proceedings which were frustrated when AmClyde tendered McDermott as a third-party defendant under Federal Rule of Civil Procedure 14(c), which provides for liberal joinder in admiralty actions. Texaco moved to strike the joinder, but before the court ruled on the motion, McDermott filed a motion for partial summary judgment against Texaco. Texaco opposed the motion, arguing that the court was required to stay the proceedings between McDermott and Texaco pending their arbitration. The trial court denied the motion to strike and the request for a stay and granted McDermott partial summary judgment. Texaco appealed.

The Court of Appeals reviews a refusal to stay litigation pending arbitration de novo. The Federal Arbitration Act (FAA), which specifically applies to maritime causes of action, clearly states in Section Three that trial courts shall stay litigation pending arbitration upon application of one of the parties. The FAA’s purpose is to enforce private arbitration agreements, even if the result is piecemeal litigation. Therefore, the Court of Appeals held that the trial court erred in refusing to stay the Texaco-McDermott portion of the litigation and specifically held that Federal Rule of Civil Procedure 14(c) does not trump Section Three of the FAA.