Certain Underwriters at Lloyd's v. Argonaut Ins.

• Court: U.S. District Court — Northern District of Illinois
• Writing for the Court: Filip
• Citation: Certain Underwriters at Lloyd's v. Argonaut Ins., 444 F.Supp.2d 909 (N.D. Ill. 2006)
• Decision Date: 11 August 2006
• Docket Number: No. 04 C 5852.,04 C 5852.
• Parties: CERTAIN UNDERWRITERS AT LLOYD'S, LONDON, Petitioners, v. ARGONAUT INSURANCE COMPANY, Respondent.

Page 909

444 F.Supp.2d 909

CERTAIN UNDERWRITERS AT LLOYD'S, LONDON, Petitioners, v. ARGONAUT INSURANCE COMPANY, Respondent.

No. 04 C 5852.

United States District Court, N.D. Illinois, Eastern Division.

August 11, 2006.

Willis Rollin Tribler, H. Wesley Sunu, Tribler Orpett and Meyer, P.C., Chicago, IL, for Respondent.

Robert Anthony Badgley, Susan Patricia Jordan, Lord Bissell & Brook, Chicago, IL, for Petitioners.

MEMORANDUM OPINION AND ORDER

FILIP, District Judge.

Petitioners, Certain Underwriters at Lloyd's, London ("Petitioners" or "Underwriters"), have petitioned this Court for an order confirming the appointment of Harry Hinkleman and Stephen Lewis as arbitrators in an arbitration proceeding instituted by Respondent, Argonaut Insurance Company ("Respondent" or "Argonaut"). (D.E. 1 ("Petition").)¹ The case is before the Court on the parties' cross-motions for summary judgment. (D.E. 19; D.E. 25). For the reasons stated below, the Court grants Underwriters' summary judgment motion and denies Argonaut's summary judgment motion.

RELEVANT FACTS²

Petitioners are a group of underwriting syndicates, whose participants include citizens of the United Kingdom. (Petition ¶ 1; D.E. 29 ¶ 1.) The Court obtained jurisdiction over the Petition by virtue of Chapter 2 of the Federal Arbitration Act, which implements the United Nations' Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the "Convention"). See 9 U.S.C. § 203. That federal statute (i.e., 9 U.S.C. § 203 establishes that, "rain action or proceeding falling under the Convention shall be deemed to arise under the laws and treaties of the United States." Id. It further provides that, "[t]he district courts of the United States ... shall have original jurisdiction over such an action or proceeding, regardless of the amount in controversy."); see also. D.E. 26 ¶ 3 (parties' agreement concerning the statute under which they are litigating).

Between 1959 and 1973, Underwriters subscribed to reinsurance contracts, or "Treaties," with Argonaut. (Petition ¶ 6; D.E. 26 ¶ 6.) Argonaut is an insurance company with its principal place of business in Menlo Park, California, although it also operates from two offices in Illinois. (Id. ¶ 2.)

The treaties executed by the Parties contain an arbitration clause that brings the agreements within the Convention. See 9 U.S.C. §§ 202, 203. The arbitration clauses state, in relevant part:

If any dispute shall arise between the Company and the Underwriters with reference to the interpretation of this Agreement or their rights with respect to any transaction involved, this dispute shall be referred to three arbitrators, one to be chosen by each party and the third by the two chosen. If either party refuses or neglects to appoint an arbitrator within thirty days after the receipt of written notice from the other party requesting it do so, the requesting party may nominate two arbitrators, who shall choose the third.

(D.E. 26 ¶ 9; D.E. 21-3 at 1.) The dispute here relates solely to the proper interpretation of two words contained in this clause: namely, "thirty days."

The dispute stems from a settlement between Argonaut and Western MacArthur, one of Argonaut's insureds. (D.E. 26 ¶ 5.) Pursuant to that settlement, Argonaut made payments to Western MacArthur. (Id.) Argonaut then sought to recover some portion of those payments from Underwriters pursuant to the Treaties. (Id. ¶ 6.) After receiving Argonaut's request for reimbursement, Underwriters requested supporting information and the opportunity to inspect Argonaut's claim files relating to Western MacArthur. (Id. ¶ 7.)

Instead of providing the requested information, Argonaut chose to invoke the arbitration provision of the Treaties. (Id. ¶ 8.) Argonaut issued a demand for arbitration via a facsimile to Underwriters dated August 4, 2004. (Id.) For whatever reason, Argonaut did not designate an arbitrator with its arbitration demand. (Id. ¶ 10.) Argonaut instead demanded that Underwriters designate the first arbitrator within thirty days, noting that the last day for designation, according to Argonaut's calculation, would be September 3, 2004. (Id.) Two days later, on August 6, 2004, Underwriters similarly requested, via a letter faxed to Argonaut's counsel, that Argonaut designate the second arbitrator within thirty days; (Id. ¶ 11.)

On September 3, 2004, Underwriters timely responded to Argonaut's request that they designate the first arbitrator by notifying Argonaut's counsel, via facsimile, that they were appointing Harry Hinkleman as an arbitrator. (Id. ¶ 12.) There is no dispute that Mr. Hinkleman was validly designated. (Id.)

Unlike Underwriters' timely designation of the first arbitrator, however, Argonaut did not timely respond to Underwriters' request to name the second arbitrator within thirty calendar days. (Id. ¶ 13.) When Underwriters did not receive a designation from Argonaut on Sunday, September 5, 2005, thirty calendar days after Underwriters had requested the designation (and not counting August 6, 2004, the date of designation), Underwriters faxed a letter to Argonaut's counsel. (Id. ¶ 14.) This letter, sent on Monday, September 6, 2004, stated that because Argonaut had failed to appoint the second arbitrator as demanded under the arbitration clause in the Treaties, Underwriters were appointing Steven Lewis as the second arbitrator pursuant to that arbitration clause. (Id.) The parties agree that this letter from Underwriters to Argonaut was sent the thirty-first day after Underwriters demanded that Argonaut appoint an arbitrator within thirty days. (Id.)

The next day, September 7, 2004, Argonaut's counsel sent an email to Reinsurers' counsel and alleged that Argonaut had previously sent by mail a letter, dated "Thursday, September 3, 2004,"³ appointing Paul Thomson as Argonaut's designated arbitrator. (Id. ¶ 15.) Argonaut further asserted in its email that Reinsurers' appointment of Mr. Lewis was "void." (Id.)

On September 7, 2004, after being advised by Reinsurers' counsel that Argonaut's purported letter had not arrived, Argonaut's counsel faxed a letter to Reinsurers' counsel retracting the prior email. (Id. ¶ 16.) In this September 7, 2004 letter, Argonaut's counsel acknowledged that the purported letter of September 3rd had not been mailed and further claimed, for the first time, that Argonaut was not bound by the arbitration clause's thirty-day provision because the thirtieth day from August 6, 2004 fell on a Sunday and the next day was the Labor Day Holiday (id. ¶ 17)—at least in the United States, if not in the United Kingdom, where Reinsurers are located. (See D.E. 20 at 5 n. 3.) In the September 7, 2004 letter, Argonaut asserted that its appointment was not untimely and that Mr. Thomson was its appointed arbitrator. (D.E. 28 ¶ 5.)

The parties disagree about whether Steven Lewis or Paul Thomson was appropriately designated as the second arbitrator. After the rejection of a motion to dismiss filed by Argonaut (see D.E. 9 (denying motion)), the parties filed cross-motions for summary judgment. In their motion for summary judgment, Underwriters request that the Court confirm the appointment of Mr. Lewis and Mr. Hinkleman as arbitrators in this case. (D.E. 19 ¶ 2; D.E. 20 at 10.) Conversely, in its cross-motion, Argonaut requests that the Court find that its appointment of Mr. Thomson was timely and valid, and seeks an additional finding that Underwriters' appointment of Mr. Lewis is invalid. (D.E. 25-1 ¶ 1). For the reasons stated below, the Court grants Underwriters' summary judgment motion and respectfully denies Argonaut's summary judgment motion.

SUMMARY JUDGMENT STANDARD

Summary judgment is proper where "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). In determining whether there is a genuine issue of fact, the court "must construe the facts and draw all reasonable inferences in the light most favorable to the nonmoving party." Foley v. City of Lafayette, 359 F.3d 925, 928 (7th Cir.2004). To avoid summary judgment, the opposing party must go beyond the pleadings and "set forth specific facts showing that there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (internal quotation marks and citation omitted). Summary judgment is proper against "a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

DISCUSSION

In this case, the parties agree on a great deal. They agree, for example, on the material facts, and they agree that the Treaties contain an arbitration clause applicable to their dispute. (D.E. 26 at 3.) They agree that Argonaut validly initiated an arbitration and that Underwriters validly appointed Mr. Hinkleman as one of the arbitrators. (Id. at 4.) Moreover, the parties agree that Underwriters sent Argonaut a letter on August 6, 2004 requesting that Argonaut appoint an arbitrator within 30 days of that date. (Id. at 4.) They similarly agree that Underwriters attempted to appoint an arbitrator on September 6, 2004 (id. at 5) and that Argonaut responded by attempting to appoint an arbitrator on September 7, 2004. (D.E. 28 at 2.) They also agree that Argonaut did not appoint any arbitrator within 30 calendar days of the demand that it do so. (E.g., D.E. 26 ¶¶ 14, 17).

The parties disagree as to which law applies—state law or federal law—and they also obviously disagree about who should prevail. The parties' basic threshold legal disagreement regards the law that applies to the Treaties' arbitration clause....