Nat'l Union Fire Ins. Co. of Pittsburg v. Beelman Truck Co.

• Decision Date: 24 August 2016
• Docket Number: 15-cv-8799 (AJN)
• Parties: NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURG, Petitioner, v. BEELMAN TRUCK COMPANY, et al., Respondents and Third Party Petitioners, v. Rebsamen Insurance, Inc., et al., Third Party Respondents.
• Court: U.S. District Court — Southern District of New York

203 F.Supp.3d 312

NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURG, Petitioner,

v.BEELMAN TRUCK COMPANY, et al., Respondents and Third Party Petitioners,

v.Rebsamen Insurance, Inc., et al., Third Party Respondents.

15-cv-8799 (AJN)

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

Signed August 24, 2016

Joshua Seth Sklarin, Samuel Jay Thomas, Bressler, Amery & Ross P.C., Florham Park, NJ, for Petitioner.

Anthony C. Xanthakis, Galvano & Xanthakis PC, New York, NY, Ted Lee Perryman, Roberts Perryman, P.C., St. Louis, MO, for Respondents and Third Party Petitioners.

Sarah Gordon, Steptoe & Johnson, LLP, Washington, DC, Evan Glassman, Jeffrey Adam Novack, Steptoe & Johnson, LLP, New York, NY, for Third Party Respondents.

MEMORANDUM & ORDER

ALISON J. NATHAN, District Judge:

Petitioner National Union Fire Insurance Company of Pittsburg ("National Union") moves the Court to order nine related companies to arbitrate an insurance dispute under the Federal Arbitration Act ("FAA"), 9 U.S.C. § 4, et seq. Eight Respondents (the "Resistors") deny any obligation to arbitrate. The ninth, Beelman Truck Company ("Beelman Truck"), consents, and petitions to compel third-party insurance brokers to join it in arbitration. For the reasons below, National Union's petition is granted, and Beelman Truck's petition is denied.

I. Background

National Union provided insurance coverage to Beelman Truck for a four-year period from 2007 to 2011. Thomas Pet. Aff. ¶ 4. The terms of the insurance are set forth in a set of interlocking contracts including annual policies, schedules of policies and payments, and biennial payment agreements.¹ See id. ¶¶ 6–9 & Exs. B–E. The contracts were signed by Frank J. Beelman, III ("Beelman") on behalf of Beelman Track.² However, National Union claims that the Resistors, eight other Respondent companies controlled by Beelman, see Beelman Aff. ¶¶ 3-10, should also be considered signatories.³

The payment agreements each contain an arbitration clause. Thomas Pet. Aff. Ex. B at 2-11 ("2007 Payment Agreement"), at 8; id. Ex. D at 2-11 ("2009 Payment Agreement"), at 8. The clauses state that "If You disagree with us about any amount of Your Payment Obligation that we have asked You to pay," the insured must write National Union with the details of the disagreement, and National Union will provide a written response. If the dispute is not resolved within 60 days, then it must be submitted to arbitration. The clauses also provide that "[a]ny other unresolved dispute arising out of this Agreement must be submitted to arbitration." 2007 Payment Agreement at 8; 2009 Payment Agreement at 8. The contract states that the arbitrators "will have exclusive jurisdiction over the entire matter in dispute, including any question as to its arbitrability." 2007 Payment Agreement at 9; 2009 Payment Agreement at 9. Addenda to the payment provisions specify that "any action or proceeding concerning arbitrability, including motions to compel or to stay arbitration, may be brought only in a court of competent jurisdiction in the City, County, and State of New York." Thomas Pet. Aff. Ex. B at 18; id. Ex. D at 23.

On November 9, 2015, National Union filed a petition to compel arbitration in this Court. According to the petition, Respondents failed to pay for accrued loss adjustment expenses that they are responsible for under the contracts, and rejected National Union's subsequent arbitration demand. Pet.¶¶ 20, 25–29. Beelman Truck concedes its obligation to arbitrate. Apr. 15, 2016, Conference Tr. 5:17-22. The Resistors oppose the petition.⁴

On January 4, 2016, Beelman Truck filed a third party petition against its former insurance brokers (the "Brokers"), seeking to compel them to join it in arbitration. Beelman Truck signed Letters of Understanding ("Letters") with the Brokers on July 18, 2007 and June 9, 2008.⁵ According to the third party petition, the Letters state that the insurers, and not the insureds, are responsible for loss adjustment expenses, and Beelman Truck refused to pay these expenses in reliance on the Letters. Third Party Pet. ¶¶ 11–14, 26, 29-32, 44, 47-52, 64.

II. Legal Standard

The FAA "requires courts to enforce privately negotiated agreements to arbitrate ... in accordance with their terms." Volt Info. Scis., Inc. v. Bd. of Tr. of Leland Stanford Junior Univ. , 489 U.S. 468, 478, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989). The statute limits the Court's role in adjudicating the petition to "determining two issues: i) whether a valid agreement or obligation to arbitrate exists, and ii) whether one party to the agreement has failed, neglected or refused to arbitrate." LAIF X SPRL v. Axtel, S.A. de C.V. , 390 F.3d 194, 198 (2d Cir.2004) (citation omitted). If the Court finds that these requirements are met, it must issue "an order directing the parties to proceed to arbitration in accordance with the terms of the agreement." 9 U.S.C. § 4.

"[A]rbitration is a matter of contract," see Ragone v. Atl. Video at Manhattan Ctr. , 595 F.3d 115, 128 (2d Cir.2010) (citation omitted), and "a party cannot be required to submit to arbitration any dispute which [it] has not agreed so to submit." Id. at 126. The issue of whether the parties are obliged to arbitrate their dispute therefore breaks down into two questions: "(1) whether the parties have entered into a valid agreement to arbitrate, and, if so, (2) whether the dispute at issue comes within the scope of the arbitration agreement." In re Am. Exp. Fin. Advisors Sec. Litig. , 672 F.3d 113, 128 (2d Cir.2011). The parties can delegate much of the threshold arbitrability inquiry to the arbitrator as long as the contract "clearly and unmistakably" memorializes their intent to do so. NASDAQ OMX Grp., Inc. v. UBS Sec., LLC , 770 F.3d 1010, 1031 (2d Cir.2014) (citation omitted). But the Court must always ascertain for itself whether the resisting party is subject to a valid arbitration agreement, because even the broadest arbitration clause cannot bind a party who never agreed to it. See Sarhank Grp. v. Oracle Corp. , 404 F.3d 657, 661 (2d Cir.2005) ("As arbitrability is not arbitrable in the absence of the parties' agreement, the district court was required to determine whether [Respondent] had agreed to arbitrate."); Zimring v. Coinmach Corp. , No. 00 CIV. 8111 LMM, 2000 WL 1855115, at *2 (S.D.N.Y. Dec. 19, 2000) (refusing to order nonsignatory to arbitrate arbitrability despite language of arbitration clause).

Petitions to compel arbitration under the FAA are "made and heard in the manner provided by law for the making and hearing of motions." ISC Holding AG v. Nobel Biocare Fin. AG , 688 F.3d 98, 112 (2d Cir.2012) (quoting 9 U.S.C. § 6 ). When evaluating a petition to compel, the Court "applies a standard similar to that applicable for a motion for summary judgment." Bensadoun v. Jobe – Riat , 316 F.3d 171, 175 (2d Cir.2003) ; Schnabel v. Trilegiant Corp. , 697 F.3d 110, 113 (2d Cir.2012). The Court must grant the petition if there is no genuine issue of material fact regarding the requirements to compel arbitration. Schnabel , 697 F.3d at 113.

"[I]n evaluating whether the parties have entered into a valid arbitration agreement, the court must look to state law principles." Cap Gemini Ernst & Young, U.S., L.L.C. v. Nackel , 346 F.3d 360, 364 (2d Cir.2003) ; Whitehaven S.F., LLC v. Spangler , 633 Fed.Appx. 544, 545–46 (2d Cir.2015). The Court will apply New York law in this case because "[t]he parties' briefs assume that New York substantive law governs the issues ... presented here, and such implied consent is, of course, sufficient to establish the applicable choice of law." Arch Ins. Co. v. Precision Stone, Inc. , 584 F.3d 33, 39 (2d Cir.2009). Under New York law, "insurance policies are interpreted according to general rules of contract interpretation." Olin Corp. v. Am. Home Assurance Co. , 704 F.3d 89, 98 (2d Cir.2012). The Court first determines as a matter of law whether the contract is ambiguous when all the terms are given their plain meaning. Gary Friedrich Enters., LLC v. Marvel Characters, Inc., 716 F.3d 302, 313 (2d Cir.2013). "Language whose meaning is otherwise plain does not become ambiguous merely because the parties urge different interpretations in the litigation." Olin , 704 F.3d at 99.

If (and only if) the contract is ambiguous, the Court may "look to extrinsic evidence to discern the parties' intent." Luitpold Pharm., Inc. v. Ed. Geistlich Söhne A.G. Für Chemische Industrie , 784 F.3d 78, 87 (2d Cir.2015). "If the extrinsic evidence fails to establish the parties' intent, courts may apply other rules of contract interpretation, including New York's rule of contra proferentem , according to which ambiguity should be resolved in favor of the insured." Olin , 704 F.3d at 99. If the "evidence presented about the parties' intended meaning is so one-sided that no reasonable person could decide the contrary, or if the non-moving party fails to point to any relevant extrinsic evidence supporting that party's interpretation of the language," then there is no genuine issue of material fact regarding the contract's meaning and the dispute may be resolved as a matter of law. Luitpold , 784 F.3d at 88 (citation and internal quotation marks omitted). Otherwise, the ambiguity must be resolved by a jury. See id. at 94.

III. National Union's Petition to Compel Arbitration

National Union claims that all Respondents, including the Resistors, are signatories to the payment agreements and bound by their arbitration clauses. The Resistors respond that the Court lacks personal jurisdiction over them, and that they never entered an agreement to arbitrate.

Both of the Resistors' arguments turn on the same question: whether they are bound by the payment agreements. In addition to arbitration clauses, the contracts contain forum selection clauses covering litigation over arbitrability. "A valid forum selection clause establishes sufficient contacts with New York for purposes of jurisdiction and...