Flintkote Co. v. Aviva, PLC
| Decision Date | 09 October 2014 |
| Docket Number | No. 13–4055.,13–4055. |
| Parties | FLINTKOTE COMPANY v. AVIVA PLC, formerly known as Commercial Union Assurance Company Ltd., Appellant. |
| Court | U.S. Court of Appeals — Third Circuit |
Fred L. Alvarez, Esq. [Argued], Arthur J. McColgan, Esq., Walker Wilcox Matousek, Chicago, IL, Thaddeus J. Weaver, Esq., Dilworth Paxson, Wilmington, DE, Counsel for Appellant.
Louis A. Chiafullo, Esq. [Argued], Gita F. Rothschild, Esq., McCarter & English, Newark, NJ, Michael P. Kelly, Esq., Katharine L. Mayer, Esq., McCarter & English, LLP, Wilmington, DE, Counsel for Appellee.
Before: SMITH, VANASKIE, and SHWARTZ, Circuit Judges.
This case involves an effort by Appellee The Flintkote Company (Flintkote) to compel arbitration on a theory of equitable estoppel against Appellant Aviva PLC (Aviva), a non-signatory to the agreement containing the arbitration clause at issue. Aviva appeals the District Court's order compelling arbitration and denying as moot Aviva's motion to dismiss or transfer. Applying Delaware law, we conclude that Aviva is not equitably bound to arbitrate on these facts. We will therefore reverse the District Court's order insofar as it compels arbitration, and will vacate the order to the extent that it denies as moot the motion to dismiss or transfer.
Flintkote, which is incorporated in Delaware and headquartered in California, was one of the nation's major suppliers of asbestos-based products. From 1980 onward, Flintkote's parent company, Genstar Corporation, hedged against the possibility of asbestos-related bodily injury claims by procuring a vast number of insurance policies from prominent London insurance firms—among them Aviva,1 one of the largest insurance companies in the world. Within a matter of years, it became apparent that Flintkote's claims under these policies would result in costly and protracted disputes regarding the scope of coverage.
On June 19, 1985, Flintkote and several of the London insurers, but not Aviva, entered into a mass settlement known as the Wellington Agreement, which provided a structure for resolution of Flintkote's then-pending and future insurance claims. Specifically, the Wellington Agreement required that disputes over coverage be resolved through a three-step ADR process consisting of open negotiation via mediation, binding arbitration, and an expedited appellate process. (App.104.) Section XX of the Agreement required the London insurers to make certain payments to Flintkote, and Flintkote was obligated to reimburse the payors, with interest, if it also received those same payments from another insurer. (App.89–90.)
In 1989, Flintkote and Aviva entered into a separate agreement (the 1989 Agreement), which in substance was largely similar to the Wellington Agreement, including as to reimbursement for claims also paid by other insurers. Crucial to this case, however, is the fact that the 1989 Agreement contained a clause explicitly reserving each party's right to resolve any disputes arising under that Agreement through litigation:
Flintkote filed for bankruptcy in 2004, resulting in a case which remains pending in the United States Bankruptcy Court for the District of Delaware. See In re The Flintkote Co. & Flintkote Mines, Ltd., No. 04–11300 (Bankr.D.Del.). In 2006, invoking the Wellington Agreement, Flintkote initiated a large-scale coverage-related mediation with the London insurers. The Mediation Agreement, which itself contained no reference to the Wellington Agreement, provided that the parties' conduct and statements made in the course of mediation were to be confidential.2 (App.438–39.) Aviva, although not contractually obligated to participate, opted to join the mediation in an effort to resolve Flintkote's pending claims for coverage.
Throughout the subsequent proceedings, Aviva and the other London insurers were jointly represented by the same counsel, Attorney Fred Alvarez. In a letter dated August 4, 2006, Alvarez requested that Flintkote “participat [e] in submitting a joint motion to lift the automatic bankruptcy stay in Flintkote's bankruptcy proceeding,” citing a concern that the stay might prevent Aviva and the other London insurers from “fully present[ing] their defenses and claims in the Wellington ADR.” (App.149.) Yet for reasons unknown, no such motion was filed at that time. As described below, the automatic stay remained in place until early 2013.
During the course of the ensuing mediation, Flintkote reached individual settlements with some of the London insurers, but not with Aviva. On July 16, 2012, counsel for Aviva and the remaining other London insurers wrote to Flintkote seeking “reimbursement or off-set with respect to prior payments” as well as interest under Section XX of the Wellington Agreement. (App.153.) The July 16 letter further stated that “[a]bsent resolution of the issues in the pending Wellington ADR, [the London insurers] intend[ed] to include the [reimbursement] issue[ ] in the Wellington Arbitration.” (Id. ) Flintkote took no action on the demand.
Two months after the July 16 letter, the parties began to exchange draft arbitration agreements. The drafts contained standard reservations stating that they were provided only for “discussion purposes,” were subject to client review and approval, and were provided “without prejudice” to the parties' rights under the applicable accords. (App.444–47). The last draft arbitration agreement was sent to Flintkote by Alvarez on behalf of Aviva and the London insurers on December 14, 2012.
On December 24, 2012, Aviva, now acting separately from the remaining London insurers, moved in the Delaware Bankruptcy Court to lift the automatic stay imposed under 11 U.S.C. § 362(d) “to allow it to pursue a declaratory judgment action in the United States District Court for the Northern District of California to determine the scope of the insurance coverage available for [Flintkote] under certain insurance policies” Aviva had issued. (App.321.) On January 17, 2013, before the Bankruptcy Court ruled on Aviva's motion, Flintkote filed the instant declaratory judgment action against Aviva in the District of Delaware.
On February 4, the Bankruptcy Court granted Aviva's motion to lift the stay, but delayed its effective date until February 19, thus preventing Aviva from filing its complaint in California until that date. On February 18, as plaintiff in the District of Delaware, Flintkote moved to compel arbitration pursuant to Section 4 of the Federal Arbitration Act (FAA), 9 U.S.C. § 4. The next day, Aviva filed its own declaratory judgment action in the Northern District of California.
On March 1, Aviva moved to dismiss Flintkote's action or transfer it to California. On March 13, Flintkote filed a motion to dismiss the Aviva action initiated in California, or have it transferred to Delaware. On May 14, the California court stayed Aviva's action pending the Delaware court's resolution of Aviva's motion to dismiss or transfer Flintkote's action.
In a memorandum and order filed September 30, 2013, the Delaware District Court granted Flintkote's motion to compel arbitration, concluding that Aviva was equitably estopped from avoiding arbitration by virtue of its participation in the lengthy mediation process. The District Court denied as moot Aviva's motion to dismiss or transfer. Aviva filed a timely notice of appeal. On November 21, 2013, in light of the Delaware District Court's order compelling arbitration, the California District Court dismissed Aviva's suit without prejudice. See Aviva PLC v. Flintkote Co., No. 13–00711, 2013 WL 6139748 (N.D.Cal. Nov. 21, 2013).
The District Court had jurisdiction in this case under 28 U.S.C. § 1332(a) and 9 U.S.C. § 4. We have jurisdiction under 28 U.S.C. § 1291 and 9 U.S.C. § 16(a)(3).
We exercise plenary review over the District Court's order on a motion to compel arbitration. Quilloin v. Tenet HealthSystem Phila., Inc., 673 F.3d 221, 228 (3d Cir.2012). In assessing the motion to compel arbitration itself, we apply the standard for summary judgment in Rule 56(a), under which the motion should be granted where “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). We view the facts and draw inferences in the light most favorable to the nonmoving party. Quilloin, 673 F.3d at 228. We apply this standard “because the district court's order compelling arbitration is in effect a summary disposition of the issue of whether or not there had been a meeting of the minds on the agreement to arbitrate.” Century Indem. Co. v. Certain Underwriters at Lloyd's, London, 584 F.3d 513, 528 (3d Cir.2009) (quotation marks and citations omitted).
With its enactment of the FAA, Congress “expressed a strong federal policy in favor of resolving disputes through arbitration.” Id. at 522. Even in light of the FAA, however, we have recognized that Bel–Ray Co., Inc. v. Chemrite (Pty) Ltd., 181 F.3d 435, 444 (3d Cir.1999). Thus, in deciding whether a party may be compelled to arbitrate under the FAA, we first consider “(1) whether there is a valid agreement to arbitrate between the parties and, if so, (2) whether the merits-based dispute in question falls within the scope of that valid agreement.”3 Century Indem., 584 F.3d at 527. Here, it is undisputed that no express agreement to arbitrate existed between...
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