Menorah Ins. Co., Ltd. v. INX Reinsurance Corp.

Citation72 F.3d 218
Decision Date08 November 1995
Docket NumberNos. 95-1495,95-1497,s. 95-1495
PartiesMENORAH INSURANCE COMPANY, LTD., Plaintiff-Appellee, v. INX REINSURANCE CORPORATION, Defendant-Appellant. MENORAH INSURANCE COMPANY, LTD., Plaintiff-Appellant, v. INX REINSURANCE CORPORATION, Defendant-Appellee. . Heard
CourtUnited States Courts of Appeals. United States Court of Appeals (1st Circuit)

Luis A. Melendez-Albizu, Jaime Sifre Rodriguez, and Sanchez-Betances & Sifre, San Juan, PR, were on brief, for Menorah Insurance Company, Ltd.

Juan H. Saavedra Castro was on brief, San Juan, PR, for INX Reinsurance Corporation.

Before LYNCH, Circuit Judge, CAMPBELL, Senior Circuit Judge, WATSON, * Senior Judge.

LYNCH, Circuit Judge.

After unsuccessfully attempting to invoke arbitration under international business contracts, Menorah Insurance Company obtained an $812,907 default judgment in an Israeli court against INX Reinsurance Corporation and then sought to enforce the judgment in a Puerto Rican court. After waiting a year, and on the eve of having an exequatur judgment entered against it, INX removed the action to the U.S. District Court for Puerto Rico under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, implemented in 9 U.S.C. Sec. 201 et seq. (1994). 1 The federal court found that INX had waived arbitration and remanded. We affirm because INX has both explicitly and implicitly waived arbitration.

Under seven reinsurance treaties between them, Menorah, an Israeli company, and INX, a Puerto Rican corporation, agreed that "all disputes" between them would be arbitrated and should be settled "in an equitable rather than in a strictly legal manner." 2 The locus of arbitration was to be Tel Aviv, Israel. Each side was to appoint an arbitrator and should the two arbitrators disagree, then an "Umpire," previously designated by the two arbitrators, would decide. There was a default provision of sorts: "In the event of either party failing to appoint an umpire within two months after arbitration has been supplied [sic] for under the question in dispute, then in either such case the arbitrators and/or umpire shall be appointed by the chairman for the time being of the Israeli Fire Insurance Association."

Menorah made a claim to INX for over $750,000 under the reinsurance treaties, to which INX replied that it owed no more than $178,000 and intimated that fraud accounted for the $500,000 difference. After unsuccessful negotiations, Menorah, on July 1, 1992, informed INX by letter that it would seek arbitration, asked INX to assent to arbitration and appoint its arbitrator, said if INX failed to appoint an arbitrator, Menorah would ask that one be appointed for INX, and that if INX failed to assent, then Menorah would feel "free to pursue all other legal and judicial measures available." INX responded promptly that it would not arbitrate, that its financial condition was precarious, and that even if ordered to arbitrate, its financial condition would preclude it from doing so.

On September 10, 1992, Menorah filed suit in Tel Aviv against INX. Although actually served, INX chose not to respond or contest, and default judgment was entered against it for $812,907, interest at an annual rate of 11%, costs and attorneys' fees. INX did not pay nor did it seek to remove the default.

On September 2, 1993, Menorah filed an exequatur 3 action in the Superior Court in San Juan to enforce the judgment. INX moved to dismiss, claiming for the first time that the controversies between the parties had to be arbitrated. On August 8, 1994, the court denied the motion, finding that INX had waived arbitration and that the Israeli judgment was valid, and ordered INX to answer. INX answered, again claiming arbitration, and counterclaimed that Menorah's failure to submit the exequatur action to arbitration was in breach of its contractual duty of good faith. On October 14, 1994, the Superior Court issued an order to show cause why the petition for exequatur should not be granted. In response, INX removed the action to the federal court under 9 U.S.C. Sec. 205. 4

The federal court remanded the case on March 15, 1995, finding that INX had waived arbitration and the remaining claims were not subject to the federal arbitration scheme. Now, over three years after Menorah's original request for arbitration was refused and after the travel of this matter internationally through three different courts, INX asks us to reverse the district court and send the matter to arbitration.

Review of a district court's determination of waiver of arbitration is plenary. See Commercial Union Ins. Co. v. Gilbane Bldg. Co., 992 F.2d 386, 390 (1st Cir.1993); Leadertex, Inc. v. Morganton Dyeing & Finishing Corp., 67 F.3d 20, 25 (2d Cir.1995). "[T]he findings upon which the [legal] conclusion [of waiver] is based are predicate questions of fact, which may not be overturned unless clearly erroneous." Price v. Drexel Burnham Lambert, Inc., 791 F.2d 1156, 1159 (5th Cir.1986).

In the increasingly international business world, the use of arbitration agreements may be particularly important to avoid the

uncertainty [that] will almost inevitably exist with respect to any contract touching two or more countries, each with its own substantive laws and conflict-of-laws rules. A contractual provision specifying in advance the forum in which disputes shall be litigated and the law to be applied is, therefore, an almost indispensable precondition to achievement of the orderliness and predictability essential to any international business transaction.

Scherk v. Alberto-Culver Co., 417 U.S. 506, 516, 94 S.Ct. 2449, 2455, 41 L.Ed.2d 270 (1974). These same interests motivated this country to adopt and implement the Convention, under which this case was removed to federal court:

The goal of the Convention, and the principal purpose underlying American adoption and implementation of it, was to encourage the recognition and enforcement of commercial arbitration agreements in international contracts and to unify the standards by which agreements to arbitrate are observed and arbitral awards are enforced in the signatory countries.

Id. at 520 n. 15, 94 S.Ct. at 2457 n. 15.

Against this backdrop of a strong United States policy favoring arbitration, INX essentially makes two arguments. The district court erred, it says, in deciding that it waived arbitration in the events of 1992. In any event, INX says, it now has the right to have the question of the enforceability of the Israeli judgment, including INX's counterclaim, determined by an arbitrator.

The district court did not err on either the facts or the law. The explicit waiver came when INX was invited to arbitrate in July 1992. INX expressly declined. It is not saved from that declination by the fact that Menorah had offered in the July 1, 1992 letter to have an arbitrator appointed for INX. That offer too was declined and INX said it was both unwilling and unable to participate in the arbitration. 5

The implicit waiver came from INX's entire course of conduct. This court has repeatedly held that "parties may waive their right to arbitration and present their dispute to a court." Caribbean Insurance Services, Inc. v. American Bankers Life Assurance Co., 715 F.2d 17, 19 (1st Cir.1983). In Caribbean, we found waiver where the party claiming arbitration delayed doing so until six months after it was sued and it had entered a stipulation for a speedy trial in exchange for a "reprieve from a likely contempt finding." Id. at 20. In Jones Motor Co. v. Chauffeurs, Teamsters and Helpers Local Union No. 633, 671 F.2d 38, 43 (1st Cir.), cert. denied, 459 U.S. 943, 103 S.Ct. 257, 74 L.Ed.2d 200 (1982), we found waiver where eleven months of litigation occurred before arbitration was first raised, saying:

[T]o require that parties go to arbitration despite their having advanced so far in court proceedings before seeking arbitration would often be unfair, for it would effectively allow a party sensing an adverse court decision a second chance in another forum.

That sentiment applies here. In Gutor Int'l AG v. Raymond Packer Co., 493 F.2d 938, 945 (1st Cir.1974), we found waiver where a party unconditionally submitted part of an arbitrable matter to the courts, but later attempted to take advantage of the arbitration clause when the opposing party counterclaimed. Cf. Raytheon Co. v. Automated Business Systems, Inc., 882 F.2d 6, 8 (1st Cir.1989) (defendant waived issue of whether it consented to issue of punitive damages being submitted to arbitration by delaying and then raising it in desultory manner on first day of arbitration and not pursuing it).

It has been the rule in this Circuit that in order for plaintiffs to prevail on "their claim of waiver, they must show prejudice." Sevinor v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 807 F.2d 16, 18 (1st Cir.1986) (finding no prejudice where defendants explicitly and promptly raised arbitration as a defense to a suit); accord Commercial Union, 992 F.2d at 390. Because there was ample prejudice here, as the district court found, we have no reason to reconsider whether to apply the litmus test of a showing of prejudice to establish waiver or to apply a totality of circumstances test, as other circuits have done. See Metz v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 39 F.3d 1482, 1489 (10th Cir.1994) (applying a "totality of the circumstances" test for the determination of waiver, where prejudice was but one factor); S+L+H S.p.A. v. Miller-St. Nazianz, Inc., 988 F.2d 1518, 1527 (7th Cir.1993).

Ignoring its failure to appear in the Israeli action, 6 INX characterizes its delay of over a year in seeking arbitration as insufficient to show prejudice. There is no per se rule that a one year delay is or is not sufficient to support waiver. Cf. J & S Constr. Co., Inc. v. Travelers Indem. Co., 520 F.2d 809 (1st Cir.1975) (thirteen month delay and participation in discovery was not enough to constitute a...

To continue reading

Request your trial
79 cases
  • Osvatics v. Lyft, Inc.
    • United States
    • U.S. District Court — District of Columbia
    • 22 Abril 2021
    ..."undermine[ ] both the certainty and predictability which arbitration agreements are meant to foster." See Menorah Ins. Co. v. INX Reinsurance Corp. , 72 F.3d 218, 223 (1st Cir. 1995).For all these reasons, with respect to the instant lawsuit, this Court rejects Osvatics's attempt to define......
  • Capriole v. Uber Techs., Inc.
    • United States
    • U.S. Court of Appeals — Ninth Circuit
    • 2 Agosto 2021
    ..."undermine[ ] both the certainty and predictability which arbitration agreements are meant to foster." Menorah Ins. Co. v. INX Reinsurance Corp. , 72 F.3d 218, 223 (1st Cir. 1995) ; see also Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc. , 473 U.S. 614, 631, 105 S.Ct. 3346, 87 L.E......
  • Marie v. Allied Home Mortgage Corp.
    • United States
    • U.S. Court of Appeals — First Circuit
    • 16 Marzo 2005
    ...proceedings constituted conduct inconsistent with the future desire to arbitrate its claims. See, e.g., Menorah Ins. Co. v. INX Reinsurance Corp., 72 F.3d 218, 220-21 (1st Cir.1995); 2 I.R. Macneil et al., Federal Arbitration Law § 21.3.1 (1994). This court has a long history of deciding su......
  • Casey v. Hill
    • United States
    • California Court of Appeals Court of Appeals
    • 23 Mayo 2022
    ...v. Dean Witter Reynolds, Inc. (1986) 180 Cal.App.3d 228, 234, 225 Cal.Rptr. 521 ( Thorup ); see Menorah Ins. Co. v. INX Reinsurance Corp. (1st Cir. 1995) 72 F.3d 218, 223 ( Menorah ) [defendant waived arbitration by allowing a default judgment to be entered and waiting until enforcement pro......
  • Request a trial to view additional results
2 books & journal articles
  • UNFAIR BY DEFAULT: ARBITRATION'S REVERSE DEFAULT JUDGMENT PROBLEM.
    • United States
    • University of Pennsylvania Law Review Vol. 171 No. 2, January 2023
    • 1 Enero 2023
    ...to court). (252) In re Tyco Int'l Ltd. Sec. Litig., 422 F.3d 41, 47 (1st Cir. 2005) (quoting Menorah Ins. Co. v. INX Reinsurance Corp., 72 F.3d 218, 222 (1st Cir. (253) Brown v. Dillard's, Inc., 430 F.3d 1004,1012 (9th Cir. 2005). (254) Id. (255) See supra notes 156-158 and accompanying tex......
  • Reinsurance.
    • United States
    • Defense Counsel Journal Vol. 63 No. 3, July - July - July 1996
    • 1 Julio 1996
    ...coverage, the court stated, granting motions for summary judgment by Lloyd's and Gulf. (3.) 77 F.3d 16 (2d Cir. 1996). (4.) Id at 22. (5.) 72 F.3d 218 (1st Cir. 1995). (6.) 66F.3d41 (2d Cir. 1995). (7.) 70 F.3d 10 (2d Cir. 1995). (8.) 898 F.Supp. 381 (N.D. Miss. (Richard L. Neumeier, McDono......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT