the asserted dispute.' " 745 F.2d at 194-95 (citations omitted). The instant Arbitration Clause does not clearly exclude fraudulent inducement claims. Indeed, the clause here provides for arbitration of "any dispute arising out of" the agreement. As Judge Mishler observed in Meadows Indemnity, 760 F. Supp. at 1044-45, with respect to a clause identical to the one before me, the phrase "arising out of" is capable of a potentially broader interpretation than the phrase "arising under," which was used in Kinoshita.5 Because I am directed to resolve any doubts in favor of arbitration, Moses H. Cone, 460 U.S. at 24-25, the conclusion is inescapable that all of St. Paul's claims are subject to arbitration.
II. ENFORCEABILITY OF THE ARBITRATION CLAUSE
I next turn to whether the Arbitration Clause is enforceable under federal and state law. St. Paul contends that this dispute is governed by Kansas law and that under Kansas law the Arbitration Clause is unenforceable. ERC asserts that New York law applies and that under New York law the clause is enforceable under the Federal Arbitration Act. The Treaties themselves contain no choice of law provision, but the parties agree that if New York law controls, the arbitration agreement is enforceable. I conclude that New York law applies. In any event, the laws of both New York and Kansas compel the same result.
A federal court sitting in diversity jurisdiction must apply the substantive law of the state in which it sits, including that state's choice of law rules. Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 496, 85 L. Ed. 1477, 61 S. Ct. 1020 (1941). New York courts apply an "interest analysis" to choice of law issues involving contractual disputes. Progressive Casualty Ins. Co. v. C.A. Reaseguradora Nacional de Venezuela, 991 F.2d 42, 46 n.6 (2d Cir. 1993). This approach provides that "the law of the jurisdiction having the greatest interest in the litigation will be applied." Intercontinental Planning, Ltd. v. Daystrom, Inc., 24 N.Y.2d 372, 382, 300 N.Y.S.2d 817, 248 N.E.2d 576 (1969). In conducting an "interest analysis," the court looks to such factors as the place of contracting, where the contract was negotiated, where the contract was to be performed, the location of the subject matter of the contract, and the domicile and place of business of the parties. Wm. Passalacqua Builders, Inc. v. Resnick Developers South, Inc., 933 F.2d 131, 137 (2d Cir. 1991).
Applying these principles to the instant case, I find that New York has a substantial interest in this dispute. The Treaties were executed in New York; St. Paul's principal place of business is in New York; and St. Paul's obligations under the contract were surely to be performed, at least in part, at its principal place of business in New York. Kansas also has an interest in the litigation. The Treaties were negotiated by a brokerage agency in Kansas as well as by the two parties; defendant's principal place of business is in Kansas; and the parties chose Kansas as the situs of arbitration.
St. Paul contends that the situs of arbitration alone must determine the choice of law outcome: "Courts have consistently held that absent an express choice of law provision, agreements to arbitrate should be governed by the law of the jurisdiction in which the arbitration proceeding is to be conducted." (Pl.'s Mem. of Law at 6.) This statement, however, is accurate only when applied to arbitration proceedings that are already in progress. In Federated Rural Elec. Ins. Co. v. Nationwide Mut. Ins. Co., 874 F. Supp. 1204 (D.Kan. 1995), a Kansas district court applied Ohio law--not, as St. Paul avers, because Ohio was the chosen site of arbitration, but because Kansas follows the principle of lex loci contractus, the law of the state where the contract was made, and the contract at issue was executed in Ohio. Id. at 1207.
In Bergesen d.y. A/S v. Lindholm, 760 F. Supp. 976 (D.Conn. 1991), the court found that English law governed the shipping charter agreements--not solely, as St. Paul asserts, because the situs of arbitration was London, but because other factors also mitigated in favor of English law. Finally, St. Paul cites the inapposite Splosna Plovba of Piran v. Agrelak S.S. Corp., 381 F. Supp. 1368 (S.D.N.Y. 1974) (Knapp, J.), which involved an arbitration proceeding that had already taken place in London. In that case, Judge Knapp found that by agreeing to arbitrate in London, "the parties implicitly agreed that British law should apply to the arbitration, since it is a recognized principle that the law of the country in which the arbitration proceeding takes place governs, unless the parties to such arbitration agree to the adoption of laws of a different jurisdiction." Splosna Plovba, 381 F. Supp. at 1370 (emphasis added) (citation omitted).
In the instant case, however, no arbitration proceeding has taken place in the parties' chosen site of Overland Park, Kansas, for the simple reason that St. Paul has decided to litigate instead in New York. Having thus invoked the powers of this Court, St. Paul cannot now argue that New York has no interest in the outcome. New York has an undisputed interest in enforcing valid contracts executed and performed within its borders. St. Paul's suggestion to the contrary is particularly disingenuous given its other statements to this Court. In its Complaint, for example, St. Paul asserts that "a substantial part of the events and omissions giving rise to the claim occurred within this district." (Cmplt. at 2.) In its motion papers, St. Paul even seeks the protections of New York law, stating: "We do not believe that Kansas law governs all issues in this action and reserve the right to argue . . . that New York has 'the most significant contacts' with respect to issues raised by St. Paul's fraudulent inducement claims." (Pl.'s Mem. of Law at 8, n.7.) St. Paul cannot have it both ways. Either New York has the most significant contacts with this litigation or it does not.
I am fully persuaded that New York's interest in this litigation outweighs that of Kansas. The elements of execution and performance are directly tied to the purpose of a contract as a whole. The same cannot be said of the mere location in which the parties have agreed to arbitrate--a location which, if all goes well, will prove irrelevant. Furthermore, my finding does no violence to Kansas public policy. Although for many years Kansas law provided that arbitration clauses contained in reinsurance contracts were invalid, see infra at n.7, that provision did not reflect "the type of strong public policy that would bar application of another jurisdiction's contrary law." Federated Rural, 874 F. Supp. at 1207-08. Moreover, the Kansas statute was recently amended to make such arbitration clauses valid and enforceable. Because Kansas policy is now identical to New York's on the subject of arbitration clauses in reinsurance contracts, Kansas' interest in the instant matter is amply protected.
Even if Kansas law applied, however, the result would favor arbitration. St. Paul vigorously disputes this notion, insisting that the previous version of the Kansas Arbitration Act applies in this case because that version was in effect when the Treaties were executed in 1990.
Although St. Paul is correct that the previous version of the Act did render the Arbitration Clause invalid,
the Act has since been amended, effective July 1, 1995. The Act now provides that arbitration clauses in reinsurance contracts are "valid, enforceable and irrevocable."
The question is whether the amendment applies retroactively, which in turn raises the issue of whether the right to a judicial forum is a substantive right or merely a procedural one.
St. Paul, arguing that the amendment applies only prospectively, cites a venerable principle of contract law: that "contracts must be interpreted in light of the law which existed at the time of their execution." (Pl.'s Mem. of Law at 16-17.) This principle, however, exists to protect the reasonable expectations of the parties. St. Paul freely negotiated a written agreement to arbitrate. It cannot also claim to have relied on a Kansas law that made that very agreement unenforceable. Moreover, St. Paul again misconstrues the case law on which it relies. In Norfolk & Western Ry. Co. v. American Train Dispatchers Ass'n, 499 U.S. 117, 113 L. Ed. 2d 95, 111 S. Ct. 1156 (1991), for example, the full quote to which St. Paul refers is, "Laws which subsist at the time and place of the making of a contract, and where it is to be performed, enter into and form a part of it, as fully as if they had been expressly referred to or incorporated in its terms." Id. at 130 (emphasis added) (citations omitted). Under the holding of that case, the instant Treaties incorporated the law of New York, not Kansas. St. Paul also mangles Steele v. Latimer, 214 Kan. 329, 521 P.2d 304, 310 (Kan. 1974), in which the Kansas Supreme Court noted the "general rule that contracting parties are presumed to contract in reference to the existing law." The opinion continues: "Thus, it is commonly said that all existing applicable or relevant and valid [laws] at the time a contract is made become a part of it and must be read into it just as if any express provision to the effect were inserted therein, except where the contract discloses a contrary intention.. . ." Id. (emphasis added) (citations omitted). Here, the contract disclosed an intention that was directly contrary to Kansas law: the intention to arbitrate. Thus, St. Paul cannot rely on Steele or on contract theory to rescue it from its contractual obligations.
St. Paul next appeals to a settled principle of statutory construction: that a statutory amendment may not be given retroactive effect if to do so would violate the substantive or vested rights of a party. In Kansas, as in other jurisdictions, the general rule is that "a statute will operate prospectively unless its language clearly indicates that the legislature intended that it operate retrospectively." Chamberlain v. Schmutz Mfg. Co., 532 F. Supp. 588, 589 (D.Kan. 1982) (citations omitted). The rule is modified, however, "where the statutory change is merely procedural or remedial in nature and does not affect the substantive rights of the parties." Id. A procedural statute may be applied retrospectively without regard to its effective date. Id. at 589-90. See also NAL II, Ltd. v. Tonkin, 705 F. Supp. 522, 527 (D.Kan. 1989).
St. Paul asserts that the right to have one's day in court is without exception a substantive right. St. Paul had a substantive right to litigate its disputes--until it chose arbitration. Once St. Paul made a contractual agreement to resolve its disputes in an alternate forum, it did not retain a vested right to litigate them, too. Substantive legal rights are equally protected both in arbitration and in the courts. As the U.S. Supreme Court has observed:
By agreeing to arbitrate a statutory claim, a party does not forego the substantive rights afforded by the statute; it only submits to their resolution in an arbitral, rather than a judicial, forum. It trades the procedures and opportunity for review of the courtroom for the simplicity, informality, and expedition of arbitration.
Mitsubishi Motors, 473 U.S. at 628 (favoring arbitration of antitrust claim raised under Sherman Act).
In short, the current Kansas Arbitration affects only a procedural right and therefore, the Act applies retroactively because the parties' substantive rights remain amply protected. St. Paul never had a vested right in the provisions of the procedural laws of Kansas--or of New York, for that matter. If St. Paul had wanted to ensure its right to a judicial forum, it could have done so by contract. Instead of formalizing such a desire in writing, however, it expressed a clear preference for arbitration. St. Paul cannot now claim that it suffers any harm by being required to live by the terms of its own agreement.
For the foregoing reasons, defendant's Motion is granted and this action is stayed pending arbitration. Furthermore, because all of the issues raised in the Complaint are arbitrable, this case need not remain on the Court's active calendar. Hence, the Clerk of the Court is directed to close this matter administratively with leave to either party to restore the case to the active calendar if the need arises after completion of the arbitration.
Dated: New York, New York