CLMS Mgmt. Servs. Ltd. P'ship v. Amwins Brokerage of Ga., LLC
Decision Date | 12 August 2021 |
Docket Number | No. 20-35428,20-35428 |
Citation | 8 F.4th 1007 |
Parties | CLMS MANAGEMENT SERVICES LIMITED PARTNERSHIP ; Roundhill I, LP, Plaintiffs-Appellants, v. AMWINS BROKERAGE OF GEORGIA, LLC; Amrisc, LLC; CJW & Associates, Inc.; Certain Underwriters at Lloyd's, Defendants-Appellees. |
Court | U.S. Court of Appeals — Ninth Circuit |
Michael A. Barcott (argued) and Daniel P. Barcott, Holmes Weddle & Barcott, Seattle, Washington, for Plaintiffs-Appellants.
Colleen V. McCaffrey (argued) and Shannon M. Benbow, Wood Smith Henning & Berman LLP, Seattle, Washington; Jeffrey S. Weinstein, Mound Cotton Wollan & Greengrass LLP, New York, New York; for Defendants-Appellees.
David S. Watnick, Covington & Burling LLP, San Francisco, California; Mark W. Mosier and Jordan V. Hill, Covington & Burling LLP, Washington, D.C.; for Amicus Curiae United Policyholders.
Before: Michael Daly Hawkins, M. Margaret McKeown, and Morgan Christen, Circuit Judges.
This appeal presents an issue of first impression in this circuit that lies at the intersection of international, federal, and state law: whether the McCarran-Ferguson Act, 15 U.S.C. §§ 1011 – 15, allows a Washington statute to reverse-preempt the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, a multilateral treaty. We conclude that the relevant provision of the Convention is self-executing, and therefore not an "Act of Congress" subject to reverse-preemption by the McCarran-Ferguson Act. Accordingly, we affirm the district court's order compelling arbitration.
In 2016, Plaintiffs CLMS Management Services Limited Partnership (CLMS) and Roundhill I, LP, domestic entities, entered into an insurance contract (the Policy) through defendant Amrisc, LLC. The Policy provided coverage for a townhome complex in Texas that Roundhill owns and CLMS operates. The relevant portion of the Policy was underwritten by defendants Certain Underwriters at Lloyd's London (Lloyd's), members of a foreign organization, and it contains a mandatory arbitration provision:
In August 2017, Hurricane Harvey caused an estimated $5,660,000 in damages to the townhome complex. Plaintiffs submitted a claim under the Policy, but in May 2018 defendant CJW & Associates (CJW), a third-party claims administrator for Lloyd's, responded that the Policy's deductible was $3,600,000.
Plaintiffs filed a complaint in the Western District of Washington asserting three claims: breach of contract, failure to communicate policy changes, and unfair claims handling practices in violation of Washington law.1 The primary allegation underlying plaintiffs’ claims is that "[u]nder the Policy, the deductible should be $600,000, not $3,600,000."
Lloyd's and CJW filed a motion to compel arbitration and stay proceedings in the district court. The motion argued that the Policy's arbitration provision falls within the scope of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the Convention), by which the United States committed to enforce arbitration agreements between foreign and domestic entities. Lloyd's and CJW argued that the Convention required the district court to refer plaintiffs’ claims to arbitration.
Plaintiffs did not contest that the arbitration provision falls within the Convention's scope, but argued the provision is unenforceable because Washington law specifically prohibits the enforcement of arbitration clauses in insurance contracts and the McCarran-Ferguson Act operates to reverse-preempt the Convention, such that Washington law controls. Therefore, plaintiffs argued, the arbitration provision is unenforceable.
The district court granted Lloyd's and CJW's motion. The court reasoned that Article II, Section 3 of the Convention is self-executing, and therefore is not an "Act of Congress" subject to reverse-preemption pursuant to the McCarran-Ferguson Act. The district court held that it was required to enforce the arbitration provision pursuant to the Convention.
The court recognized that the parties’ dispute presents a question of first impression in this circuit, and certified its order for interlocutory review. A motions panel of our court granted plaintiffs’ petition for permission to appeal. We have jurisdiction pursuant to 28 U.S.C. § 1292(b).
We review de novo a district court's order compelling arbitration. Bushley v. Credit Suisse First Boston , 360 F.3d 1149, 1152 (9th Cir. 2004). The district court explained that enforcement of the arbitration clause turns on a clash between two sources of law: a Washington statute that prohibits mandatory pre-dispute arbitration clauses in insurance contracts, and Article II, Section 3 of the Convention, which, with few exceptions, requires United States courts to enforce written arbitration agreements like the one at issue here, between foreign and domestic entities.
As the district court aptly observed, the McCarran-Ferguson Act lies "[a]t the fulcrum" of Washington law and the Convention. In most instances, the Supremacy Clause mandates that a state law gives way to conflicting federal law, but the McCarran-Ferguson Act "provides that state insurance law preempts conflicting federal law." Thus, the question central to this appeal is whether Washington law, by operation of the McCarran-Ferguson Act, reverse-preempts the Convention.
Wash. Rev. Code § 48.18.200 provides:
The Washington Supreme Court has interpreted § 48.18.200 to "prohibit[ ] binding arbitration agreements in insurance contracts," and held that pre-dispute binding arbitration provisions in insurance contracts are unenforceable. State, Dep't of Transp. v. James River Ins. Co. , 176 Wash.2d 390, 292 P.3d 118, 123 (2013). We are bound by the Washington Supreme Court's interpretation of § 48.18.200. See Ticknor v. Choice Hotels Int'l, Inc. , 265 F.3d 931, 939 (9th Cir. 2001) ().
The Convention is a multilateral treaty crafted during a 1958 United Nations conference. ESAB Grp., Inc. v. Zurich Ins. PLC , 685 F.3d 376, 381 (4th Cir. 2012). The United States participated in the Convention's drafting, but did not accede to the Convention until 1970. GE Energy Power Conversion Fr. SAS, Corp. v. Outokumpu Stainless USA, LLC , ––– U.S. ––––, 140 S. Ct. 1637, 1644, 207 L.Ed.2d 1 (2020). Article II of the Convention provides in full:
The Convention art. II, June 10, 1958, 21 U.S.T. 2517 (emphasis added). "The Convention obligates signatories (1) to recognize and enforce written agreements to submit disputes to foreign arbitration and (2) to enforce arbitral awards issued in foreign nations." ESAB Group , 685 F.3d at 381.
Congress amended Title 9 of the U.S. Code to accommodate implementation of the Convention. The Convention Act, 9 U.S.C. § 201 et seq. , states that the Convention "shall be enforced in United States courts in accordance with this chapter." 9 U.S.C. § 201. As the Supreme Court has explained, the Convention Act also "grants federal courts jurisdiction over actions governed by the Convention, § 203; establishes venue for such actions, § 204; authorizes removal from state court, § 205; and empowers courts to compel arbitration, § 206." GE Energy , 140 S. Ct. at 1644. If the Convention and Washington state law were the only provisions in play, the parties agree that Washington's law would be preempted pursuant to ordinary Supremacy Clause principles. U.S. Const. art. VI, cl. 2 .
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