Travelers Insurance Company v. Davis
| Decision Date | 03 January 1974 |
| Docket Number | No. 72-1373.,72-1373. |
| Citation | 490 F.2d 536 |
| Parties | TRAVELERS INSURANCE COMPANY, Appellant, v. Marjorie DAVIS et al., Appellees. |
| Court | U.S. Court of Appeals — Third Circuit |
Joseph J. Murphy, Robert J. Murphy, Thomas W. Murphy, Murphy, Murphy & Murphy, Philadelphia, Pa., for appellants.
Marshall A. Bernstein, Marlene F. Lachman, Bernstein, Bernstein, Harrison & Kessler, Philadelphia, Pa., for appellees.
Before FORMAN, VAN DUSEN and GIBBONS, Circuit Judges.
This is an appeal from an order of the United States District Court for the Eastern District of Pennsylvania dismissing with prejudice under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6)1 a complaint under the Declaratory Judgment Act, 28 U.S.C. §§ 2201-2202, by Travelers Insurance Company ("Travelers") against Marjorie Davis, Paul Davis and Morris Solomon, the Executors of the Estate of Edward P. Goldburgh (the "insured"), the American Arbitration Association (the "Association"), and Arbitrators Guy T. Matthews, Arthur G. Raynes, and Richard M. Rosenbleeth.
The relevant facts, substance of the complaint, and procedural history of the case are set forth below.
On October 30, 1967, the appellant, Travelers, a Connecticut corporation, issued in Massachusetts a comprehensive automobile liability policy to American Biltrite Rubber Co., Inc. ("Biltrite"), a Delaware corporation whose principal place of business was Massachusetts. The policy covered forty-three vehicles located throughout the United States. Each vehicle was listed in the policy for uninsured motorists coverage of $10,000 per person and $20,000 per vehicle.
On November 21, 1967, Edward P. Goldburgh, a Pennsylvania citizen and employee of Biltrite, was killed in the course of his employment in Texas while a passenger in vehicle number forty, when struck by a piece of lumber which fell from a passing truck. Since the alleged tortfeasor was not protected by liability insurance, claim was made by the Executors (all of whom were Pennsylvania citizens) of the Estate against Travelers under the arbitration clause of the uninsured motorists provision of the policy.2 Travelers and the Executors were unable to reach agreement upon the extent of coverage or the amount of payment due. Travelers contended that the limit was $10,000. The Executors contended that the limit was $430,000.3 The Executors sought arbitration as provided for in the insurance contract. Travelers agreed. The three Arbitrators named above were appointed by the American Arbitration Association. Both parties entered into a written stipulation that the Arbitrators initially should make a preliminary determination of the extent of coverage.4
The first hearing was on September 21, 1970 with oral argument and the submission of written briefs. Supplemental briefs were received by the Association on October 13, 1970, and mailed to the Arbitrators. On November 30, 1970, the Association notified counsel for the parties that it had received a letter dated November 25 from Arthur C. Raynes, one of the Arbitrators, that they had unanimously ruled for the appellees. There was no written opinion by the Arbitrators. A second hearing on negligence and damages has not been held because of the ensuing legal proceedings.
Travelers petitioned the Court of Common Pleas of Philadelphia County to "Vacate the Award of the Arbitrators . . . Strike the Panel . . . and Direct the Arbitrators to File an Opinion in Support of its Award" on December 14, 1970. The petition to vacate the award of the Arbitrators alleged that a more than thirty-day delay from the closing of the hearing to the "Award" divested the Arbitrators of jurisdiction because it represented a violation of the rules of the Association. The petition also alleged that the Arbitrators did not rule on whether any "award" could be reduced by amounts paid and payable under Workmen's Compensation laws. The petition to strike the panel of Arbitrators alleged various violations and irregularities in the selection thereof. The petition to direct the Arbitrators to file an opinion alleged a disregard of the insurance contract and the intent of the parties. The petitions were denied on February 16, 1971. No copy of the opinion of the Court of Common Pleas appears in the record of the instant case. Travelers appealed to the Superior Court of Pennsylvania on March 1, 1971. This appeal was quashed on June 25, 1971. No copy of the opinion of the Superior Court appears in the record herein.
Travelers resorted to the District Court on October 22, 1971 by filing suit under the Declaratory Judgment Act. The complaint comprised some twenty-seven numbered paragraphs and a prayer for relief. Paragraphs 1-4 alleged diversity, jurisdictional amount, and the presence of federal questions. Paragraphs 5-7 repeated the facts out of which this dispute arose. Paragraph 8 alleged that the widow of the decedent was entitled to some $36,000 as Workmen's Compensation benefits. Paragraphs 9-12 detailed the claims of the Executors which led to arbitration, asserting among other things that the stipulation between counsel specified the extent of coverage as the initial issue to be resolved by the Arbitrators, but that Travelers never conceded that the Arbitrators had "jurisdiction over the person or the subject matter . . ." and had "never waived its right to challenge the propriety of such an adjudication, the application of Pennsylvania law or, the denial of the right of Appeal." Travelers further alleged in paragraph 12 that it never waived "its right to challenge the right of the Arbitrators to determine the construction of the insuring agreement, with particular reference to the extent of the coverage, nor to determine the extent of their own jurisdiction."
Paragraphs 13-15 refer to the Arbitrators' "decision" and challenge it as a violation of Association rules. Paragraph 16 challenges the Arbitrators' jurisdiction "ab initio" because the interpretation of the insurance agreement was not the Arbitrators' function. In paragraph 17 Travelers avers that ". . . if there be a dispute, the issue is restricted to the damages suffered by the claimant and to no other facet of the litigation." Paragraph 18 alleges that "an adjudication which includes the stacking of coverage" violates the due process and equal protection clauses of the Fourteenth Amendment. Paragraph 19 alleges that by "stacking the coverage" the Arbitrators burden its interstate business and "may not be tolerated whether" caused by Pennsylvania statutes, Insurance Commission directives, or Association rules. Paragraph 20 avers that plaintiff cannot "obtain relief, either from the arbitrators or by appeal to the courts of this Commonwealth, in the absence of fraud or misconduct of the arbitrators not present herein." Therefore, Travelers urges, it is entitled to relief under the Declaratory Judgment Act "as otherwise it will suffer great damage and prejudice . . . ."
Paragraph 21 avers that a declaratory judgment is proper because there are only issues of law in dispute. Paragraph 22 avers that "immediate and irreparable injury" will result unless the District Court issues "a temporary restraining order and/or a preliminary injunction to be followed by a permanent injunction . . . ." Paragraph 23 asserts that the Executors propose to conduct discovery proceedings in Beaumont, Texas "on or about November 8, 1971 or at such time prior to the time in which Travelers . . . may give the requisite notice for an injunction . . . ." Paragraph 24 urges that if the Executors are not restrained irreparable harm will ensue. Paragraph 25 asserts other reasons for invalidating the discovery proceedings. Paragraph 26 requests that the court declare the law of Pennsylvania not applicable to the case. Paragraph 27 requests that the "award or order of the arbitrators . . . be vacated, dissolved and set aside and the panel of arbitrators discharged."
Other relief sought includes:
The Executors' answer denied the presence of a federal question; relied upon the stipulation as their second defense; urged that Travelers had failed to state a claim upon which relief may be granted; that it was estopped from making the claim contained in the Complaint; that the court lacked subject matter jurisdiction and that the policy provided for arbitration.
In the motion to dismiss under Rule 12(b), the Executors reiterated the defenses in their answer and added that the Arbitrators had made a "preliminary finding" and not a final award, and that plaintiff had petitioned and lost in the two state courts.
In a memorandum opinion on March 1, 1972, the District Court dismissed Travelers' complaint with prejudice. In its brief opinion, the court first reviewed the factual and procedural history. The court accepted as fact the stipulation by counsel "that the issue of the amount of coverage available under the policy would be the first issue to be settled by arbitration."5 The court then considered the instant case in the light of the decision of its colleague, Judge Luongo, in Gulf Insurance Co. v. American Arbitration Association,6 and stated that Gulf held "that Pennsylvania rule in common law arbitration is that the arbitrator is the final judge of both law and facts in any dispute before him."7 The court noted that in Gulf there was also a question of the extent of liability of an insured...
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