Alfa Laval U.S. Treasury Inc. v. Nat'l Union Fire Ins. Co. of Pittsburgh

• Decision Date: 23 July 2012
• Docket Number: No. 11 Civ. 01872(RJH).,11 Civ. 01872(RJH).
• Citation: 857 F.Supp.2d 404
• Parties: ALFA LAVAL U.S. TREASURY INC. f/k/a Tetra Laval U.S. Treasury, Inc., f/k/a Tetra Laval U.S. Holdings and Finance, Inc. et al., Plaintiffs, v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, Defendant.
• Court: U.S. District Court — Southern District of New York

857 F.Supp.2d 404

ALFA LAVAL U.S. TREASURY INC. f/k/a Tetra Laval U.S. Treasury, Inc., f/k/a Tetra Laval U.S. Holdings and Finance, Inc. et al., Plaintiffs,

v.NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, Defendant.

No. 11 Civ. 01872(RJH).

United States District Court, S.D. New York.

Jan. 26, 2012.

Order Denying Motion for Stay July 23, 2012.

Scott M. Himes, Carolyn Barth Renzin, Stillman, Friedman & Shechtman, P.C., New York, NY, A. Colin Wexler, Kenneth Steven Ulrich, Goldberg, Kohn, Bell, Black, Rosenbloom & Moritz, Ltd., Chicago, IL, Stephanie J. Harris, Johnson Becker PLLC, Minneapolis, MI, for Plaintiffs.

Alex Jason Kaplan, Jonathan Warren Muenz, Andrew W. Stern, Sidley Austin LLP, New York, NY, for Defendant.

MEMORANDUM OPINION AND ORDER

RICHARD J. HOLWELL, District Judge.

Before the Court is Defendant Nation Union Fire Insurance Company of Pittsburg, PA's (“National Union”) motion, pursuant to sections 3 and 4 of the Federal Arbitration Act (“FAA”), 9 U.S.C. § 2 et seq., to stay this action and compel arbitration of its claims for unpaid reimbursements allegedly owed to it by the plaintiffs, an affiliated group of multinational companies. National Union provided insurance coverage to the plaintiffs pursuant to a series of agreements with plaintiff Tetra Laval U.S. Treasury Inc. (“Tetra Laval”).¹ In exchange, Tetra Laval agreed, in a series of Indemnity Agreements with National Union, to pay premiums and to reimburse National Union for certain claims National Union paid on Tetra Laval's and the other plaintiffs' behalves. The Indemnity Agreements contained an arbitration provision. On September 7, 2010, after Tetra Laval refused to make certain payments to National Union, National Union served a demand for arbitration on the plaintiffs. The plaintiffs subsequently brought this action seeking a declaratory judgment that National Union's claims are not subject to arbitration. For the reasons below, National Union's motion to stay this action and compel arbitration is GRANTED.

BACKGROUND

The plaintiffs are an affiliated group of multinational companies. (Decl. of Harrington Williams in Supp. of Def.'s Mot. to Stay this Action and Compel Arbitration (“Williams Decl.”) ¶ 1.) Beginning in 1988, defendant National Union began providing the plaintiffs with various types of insurance coverage, including workers compensation insurance, commercial general liability insurance, and commercial automobile coverage. ( Id. ¶ 2.) The insurance was provided over the course of six policy periods between 1988 and 1998. ( Id.) For each policy period, National Union and plaintiff Tetra Laval signed three documents: (1) a “Policy and Funding Schedule–Retrospective,” (2) a “Policy and Funding Schedule–Loss Reimbursement,” and (3) an “Indemnity Agreement (Adjustable).” ( See id. ¶ 4.) The first two of these documents set forth some of the terms of each of the insurance policies issued, including policy numbers, coverage limits, and deductible amounts, among other things. ( See id. Exs. 3, 4, 6, 7, 9, 10, 12, 13, 14, 15.) The third document—the Indemnity Agreement (Adjustable) (“Indemnity Agreement”)—governed Tetra Laval's obligation to make payments to National Union and National Union's obligation to issue the insurance policies. ( See id. Exs. 2, 5, 8, 11, at 1–2.) Specifically, the Indemnity Agreements provided for a “premium deferral program” and set forth the formula by which the parties would calculate the amounts owed to National Union. ( See id. Exs. 2, 5, 8, 11.) Under the Indemnity Agreements, Tetra Laval was obligated to pay National Union a certain calculated premium amount and to reimburse National Union for certain expenses incurred in connection with National Union's efforts to settle claims on Tetra Laval's (and the other plaintiffs') behalf. ( Id. ¶ 7.) Tetra Laval, for example, was responsible for reimbursing National Union for attorney's fees and for the actual amounts paid to settle claims, up to a specified limit. National Union, for its part, was obligated to “invoice (with appropriate backup documentation) Client [Tetra Laval] for all Paid Losses paid by Company [National Union] during any calendar quarter within sixty days of the end of that quarter.” ( See, e.g., id. Ex. 2, at 8.) Although Tetra Laval was the only plaintiff Lo sign any of these documents, it is undisputed that all of the plaintiffs received insurance coverage from National Union pursuant to the policies at issue here. ( See id. ¶ 13.)

The Indemnity Agreements provide, “This Agreement, together with the Policy Funding Schedule(s) and Policy(ies), constitute the Program. The Program is a uniquely negotiated, single contract and no part of the Program would have been issued without the other parts being in force.” ( E.g., id. Exs. 2, 5, 8, 11, at 2.) Similarly, the Policy and Funding Schedules–Retrospective and the Policy and Funding Schedules–Loss Reimbursement provide, respectively, that they are “[a]ttached to and a part of the Indemnity Agreement,” and “[a]ttached to and a part of the Deductible Loss Reimbursement INDEMNITY AGREEMENT (Adjustable).” ( Id. Exs. 3, 4, 6, 7, 9, 10, 12, 13, 14, 15, at 1.) In addition, Article I of the Indemnity Agreements provides, “The Company will issue the insurance policies listed in the Policy Funding Schedule(s).” ( E.g., id. Ex. 2, at 1.)

The Indemnity Agreements also provide a procedure to be followed in the event that Tetra Laval (the “Client”) disputes National Union's calculation of amounts owed under the Agreement. Article II, Section J of the Indemnity Agreements, entitled “Payments in Dispute,” provides that, in the event of a dispute, the Client must (1) notify National Union in writing of the items in dispute, and (2) pay any undisputed portion of the amount due. National Union, in turn, must “promptly review such items.” ( Id. Ex. 2, at 7.) Once the dispute has been resolved, the Client then must pay the disputed items within thirty days. ( E.g., id. Ex. 2, at 6–7.)

The Indemnity Agreements also contain an arbitration provision, which provides, “All disputes or differences arising out of the interpretation of this Agreement shall be submitted to the decision of two (2) Arbitrators, one to be chosen by each party, and in the event the Arbitrators fail to agree, to the decision of an Umpire to be chosen by the Arbitrators.” ( E.g., id. Ex. 2, at 11.)

In 2006, National Union submitted an invoice to the plaintiffs for amounts allegedly due under the Indemnity Agreements. (Aff. of Heather Taylor (“Taylor Aff.”) ¶ 7.) A representative of the plaintiffs' insurance broker analyzed the invoice and determined that many of the claims for which National Union sought reimbursement could not be verified with underlying documentation. ( Id. ¶¶ 8–9.) Nonetheless, on December 21, 2006, Tetra Laval wired $1,017,619.83 to National Union, an amount representing a portion of the total amount allegedly due. (Williams Decl. ¶ 14; see id. Ex. 16.) Then, in March 2007, plaintiffs' insurance broker prepared a chart detailing the amounts the plaintiffs allegedly owed, the amounts the plaintiffs already had paid, and the discrepancy amount. ( See id. Ex. 17.) The chart divided the amounts allegedly owed based on the entity by whom the disputed loss was incurred. Specifically, the chart described amounts owed based on coverage provided to plaintiffs Tetra Pak, Inc. (“Tetra Pak”), DeLaval, Inc. (“DeLaval”), and Alfa Laval Inc. (“Alfa Laval”). ( See id.) The disputed amounts appear to relate primarily to three claims paid by National Union on the plaintiffs' behalf in favor of three individual claimants, Marvin Frost, Robert Beatty, and Edward Trubich. ( See Reply Decl. of Alex J. Kaplan in Further Supp. of Def.'s Mot. to Stay This Action and Compel Arbitration (“Kaplan Reply Decl”), Ex. F.)

In 2009, National Union sent another invoice to the plaintiffs requesting reimbursement for the disputed losses and for additional premiums also allegedly due. As in 2006, the plaintiffs' insurance broker requested additional back-up information to verity the amounts. (Taylor Aff. ¶¶ 12–13.) In 2010, the plaintiffs' broker again requested back-up documentation. ( Id. ¶ 15.) Throughout this time, National Union participated in conference calls with representatives of plaintiffs Tetra Pak, DeLaval, and Alfa Laval in an effort to resolve the dispute. (Williams Decl. ¶ 15.)

On September 7, 2010, after those efforts proved unsuccessful, Nation Union served a demand for arbitration on each of the plaintiffs. The demand asserted “a claim for all amounts owed to it [National Union] as premiums, expenses, fees, reimbursement, damages or as security pursuant to the Agreements.” ( Id. Ex. 1.) On October 1, 2010, plaintiff Alfa Laval requested a thirty day extension of its time to select an arbitrator. (Decl. of Alex J. Kaplan in Supp. of Def.'s Mot. to Stay This Action and Compel Arbitration (“Kaplan Decl.”) ¶ 4.) The other plaintiffs subsequently joined in this request. ( Id. ¶ 5.) On October 29, 2010, the parties agreed to adjourn the arbitration until forty-five days after National Union provided information to the plaintiffs relating to the disputed invoice amounts, ( Id. ¶ 6.) On February 2, 2011, National Union produced some documents that purportedly supported the amounts set forth in the 2009 invoice, but the plaintiffs' broker again concluded that the documentation did not support the claims. ( Id. ¶ 7; see Taylor Decl. ¶ 16.) On March 17, 2011, the plaintiffs filed this action, seeking a declaratory judgment to determine (1) whether National Union's claims are arbitrable, (2) whether the plaintiffs who did not sign the Indemnity Agreements can be compelled to arbitrate, and (3) whether any of National Union's claims for payment are barred by the applicable statute of limitations. ( See Compl. ¶¶ 21–32.)

DISCUSSION

In opposing National Union's motion to compel arbitration, the plaintiffs make three...