McDermott Intern., Inc. v. Lloyds Underwriters of London
| Decision Date | 02 September 1997 |
| Docket Number | No. 96-30676,96-30676 |
| Court | U.S. Court of Appeals — Fifth Circuit |
| Parties | McDERMOTT INTERNATIONAL, INC., Plaintiff-Appellant, v. LLOYDS UNDERWRITERS OF LONDON, John Richard Ludbrooke Youell, as rep of those certain underwriters Subscribing to memorandum of insurance no. 104207, Defendant-Appellee. McDERMOTT INTERNATIONAL, INC., Plaintiff, v. The ORION INSURANCE COMPANY PLC T A/C; et al., Defendants. |
Neal R. Brendel, James E. Scheuermann, Brian Richard Davidson, Robert L. Byer, Kirkpatrick & Lockhart, Pittsburgh, PA, Thomas A. Casey, Jr., John V. Baus, Jones, Walker, Waechter, Poitevent, Carrere & Denegre, New Orleans, LA, for McDermott Intern., Inc.
Luther T. Munford, Rebecca Lynn Wiggins, Phelps Dunbar, Jackson, MS, Danny G. Shaw, James H. Roussel, Gerardo Rafael Barrios, Michael David Kurtz, Phelps Dunbar, New Orleans, LA, for Defendant-Appellee.
Appeal from the United States District Court for the Eastern District of Louisiana.
Before JONES, STEWART and DENNIS, Circuit Judges.
This case--on appeal before us a third time 1--presents the questions of whether enforcement of an arbitration clause in an insurance contract was error, and if not, whether the district court had the authority to confirm the arbitration decision rendered in favor of Certain Underwriters at Lloyds (Lloyds). Pursuant to an arbitration clause in an all-risks installation floater policy issued to McDermott International, Inc. (McDermott) by Lloyds, the district court ordered McDermott to submit to arbitration. The arbitration panel concluded that there was no coverage under the policy. The district court confirmed the panel's decision, rejected McDermott's argument that the arbitration clause was void under Louisiana law (La.R.S. 22:629 (West 1995)), and concluded that the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (9 U.S.C. § 9 et seq.) (the Convention) rendered the arbitration clause enforceable. McDermott appeals. We affirm, but for slightly different reasons than those articulated by the district court.
McDermott is a Panamanian corporation with headquarters in New Orleans, Louisiana. McDermott purchased an all-risks installation floater policy from Lloyds that covered losses suffered by McDermott's subsidiary Babcock & Wilcox Company (Babcock). A London insurance broker negotiated the policy terms in London on behalf of McDermott, and the original policy was delivered to McDermott's broker in London; the original of the policy remained in London and photocopies of the policy were sent to McDermott's Canadian broker and McDermott headquarters in New Orleans. McDermott's policy covered risks of physical loss or damage to Babcock's "property ... during the course of installation, erection, or whilst being dismantled ... including transits." The policy also contained an arbitration clause which provided in part that "[a]ll differences arising out of this contract" must be resolved through arbitration.
Babcock supplies utilities with equipment that generates electrical power. In 1989, Babcock was installing two air-heat exchangers for Baltimore Gas & Electric Company (Baltimore) when a chemical reaction irreparably
damaged the exchangers. McDermott tendered coverage under the policy. Lloyds denied coverage, thus triggering this litigation.
McDermott first filed suit in Louisiana state court, seeking $39,247,000 in damages under the policy. Citing the arbitration clause, Lloyds demanded that McDermott submit to arbitration to resolve the issues raised in the state-court suit. McDermott promptly filed a declaratory judgment action in Louisiana state court seeking a declaration that it need not submit to arbitration.
Lloyds removed both suits to federal court pursuant to the Convention. After consolidating the two suits, the district court remanded the cases to state court, holding that the service-of-suit clause in the policy entitled McDermott to resolve its claim in the forum of its choosing. Lloyds appealed the remand order and we reversed. McDermott I, 944 F.2d 1199. We concluded in McDermott I that the insurance contract, Congress's intent with regard to the scope of the Convention, and Fifth Circuit precedent compelled the conclusion that the service-of-suit clause did not extinguish Lloyds's removal rights.
Back to federal district court the parties went. In addition to the two suits that were the subject of McDermott I, three other suits were also pending in federal court. 3 These additional suits were consolidated with the two prior suits. Lloyds moved to compel arbitration and stay all related litigation pending the outcome of the arbitration. The district court granted Lloyds's motion in February 1992. McDermott once again appealed to this court, and in the alternative, asked us to review the district court's order compelling arbitration under the rubric of a writ of mandamus. We dismissed the appeal and declined to issue a writ of mandamus, holding that the district court's order was interlocutory (and not final) and that McDermott failed to meet the rigorous standard governing issuance of a writ of mandamus. In so holding, we stopped short of addressing the correctness of the decision to compel McDermott to submit to arbitration.
A panel of three arbitrators ultimately heard the McDermott-Lloyds dispute. One arbitrator was picked by Lloyds; one by the district court; and one by McDermott. After the panel of arbitrators was convened, McDermott and Lloyds spent some time exchanging information and agreeing on arbitration procedures. After an approximately four-week hearing (occurring in two sessions), the arbitration panel decided by a 2-1 vote 4 that the Lloyds policy did not cover the damage to the air-heat exchangers.
Lloyds thereafter moved the district court to confirm the arbitration decision. McDermott opposed the motion, arguing that because the arbitration provision did not contain a consent-to-confirmation clause, the district court had no jurisdiction to confirm the arbitration panel's decision. The district court rejected McDermott's position and confirmed the award. This timely appeal followed.
McDermott makes three arguments in this appeal. 5 First, it claims that La.R.S. 22:629--which, if triggered, renders arbitration In McDermott II, we left open the question of whether McDermott was properly ordered to submit to arbitration. We now field the McDermott II pitch and conclude that the arbitration clause in the Lloyds policy is enforceable. In reaching this conclusion, we decline to address McDermott's first contention--whether the Convention preempts La.R.S. 22:629--because resolving that question is not necessary to the disposition of this case. Rather, we shall assume, without deciding, that the Convention does not preempt La.R.S. 22:629. 6 Accordingly, this appeal presents the questions of whether La.R.S. 22:629 renders the arbitration clause in the Lloyds policy nugatory, and if not, whether the district court had the authority to confirm the arbitration decision. We turn to these questions now.
clauses in insurance policies null and void--is not preempted by the Convention because the McCarran-Ferguson Act (15 U.S.C. § 1101 et seq.) insulates state regulation of insurance from federal preemption. Second, McDermott argues that the facts surrounding the negotiation, purchase, and delivery of the Lloyds policy bring this case within the ambit of La.R.S. 22:629. Third, McDermott contends that the district court did not have jurisdiction to confirm the arbitrators' decision. Although we ultimately reject McDermott's position, we first address a few preliminary matters that narrow considerably the scope of this appeal.
Compulsory arbitration clauses in certain insurance contracts are unenforceable in Louisiana because of La.R.S. 22:629, which provides in part as follows:
A. No insurance contract delivered or issued for delivery in this state and covering subjects located, resident, or to be performed in this state or any group health and accident policy insuring a resident of this state, regardless of where made or delivered shall contain any condition, stipulation, or agreement:
* * * * * *
(2) Depriving the courts of this state of the jurisdiction of action against the insurer; ...
* * * * * *
B. Any such condition, stipulation, or agreement in violation of this Section shall be void, ...
(emphasis added); see West of England Ship Owners Mut. Ins. Ass'n (Luxembourg) v. American Marine Corp., 981 F.2d 749, 750 n. 5 (5th Cir.1993) ( La.R.S. 22:629); Doucet v. Dental Health Plans Management Corp., 412 So.2d 1383, 1384 (La.1982). The threshold question we face is whether the Lloyds policy was "delivered or issued for delivery" in Louisiana. We conclude that it was not.
Shortly before the enactment of the predecessor to La.R.S. 22:629, the Louisiana Supreme Court interpreted the meaning of "delivery" as it had been used in insurance contracts. In Pruitt v. Great Southern Life Ins. Co., 202 La. 527, 12 So.2d 261 (1942), the supreme court held that whether an insurance policy has been delivered depends upon the intentions of the parties; delivery can be actual or constructive. Id. at 531. There are three requirements for delivery: (1) "whether the company or its agent intentionally parts with control or dominion of the policy"; (2) whether the company or its agent "places [the policy] in the control or dominion of the insured or some person acting for him"; and (3) the underlying purpose of the delivery is to make "valid and binding [a] contract of insurance." Id. at 531-32. Although Pruitt did not specifically interpret 22:629(A), the Pruitt approach to discerning the meaning of "delivery" has been...
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