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January 7, 2004.


The opinion of the court was delivered by: SHIRA SCHEINDLIN, District Judge


Raytheon Company ("Raytheon") brings this action against National Union Fire Insurance Company of Pittsburgh, Pa. ("National Union") seeking a stay of arbitration*fn1 and a declaration under the Federal Arbitration Act ("FAA")*fn2 that the dispute between the parties is not subject to arbitration.*fn3 Page 2 National Union cross moves under section 4 of the FAA to compel arbitration of the underlying dispute.*fn4 National Union also seeks to enjoin Raytheon from the prosecution of parallel litigation in Massachusetts.*fn5 Raytheon, in turn, asks this Court to "defer ruling on National Union's motion" pending disposition of Raytheon's motion to stay arbitration now pending in the Massachusetts action or, in the alternative, either (1) stay arbitration pending disposition of the entire Massachusetts action or (2) deny National Union's motion to compel arbitration because National Union has waived its right to demand Page 3 arbitration.*fn6


  A. The Parties

  Raytheon is a Delaware corporation with its principal place of business in Massachusetts. National Union is a Pennsylvania corporation with its principal place of business in New York.*fn7

  B. The Insurance Policies

  National Union provided an insurance program (the "Program") to Raytheon from April 1, 1994 through June 1, 2002.*fn8 A Payment Agreement between Raytheon and National Union v/as added to the Program on June 1, 1998.*fn9 The Payment Agreement states that it is part of a "Program" that "comprises a uniquely negotiated set of agreements'7 between Raytheon and National Union.*fn10 Under the Payment Agreement, Raytheon consented to "pay Page 4 [National Union] all [of Raytheon's] Payment Obligation*fn11 and to perform all [its] obligations according to this Agreement and Schedule*fn12 for all entities covered by the Policies."*fn13 "Policies" is defined as "any or all of the insurance policies described by their policy numbers in the Schedule, and their endorsements, modifications, replacements and renewals."*fn14 One of the policies listed on the Schedule is National Union Policy Number RMGL 319-7097 (the "Master Policy"), which is discussed in greater detail below.*fn15

  Notably, the Payment Agreement provides that unresolved disputes "must be settled by Arbitration."*fn16 The dispute resolution provision states:

  If a dispute that you [Raytheon] and we [National Union] cannot settle by mutual agreement arises about this agreement or any transaction related to it, that dispute must be submitted to 3 arbitrators. We may submit to such arbitration any Page 5 dispute not resolved within 30 days after it arises.

You must notify us in writing as soon as you have submitted a dispute to arbitration. We must notify you in writing as soon as we have submitted a dispute to arbitration.
This Section will apply whether that dispute arises before or after termination of this Agreement . . .
The arbitration must take place in New York, New York unless you and we agree otherwise. The arbitration must be governed by the United States Arbitration Act, Title 9 U.S.C. § 1, et seq. Judgment upon the award rendered by the arbitrators may be entered by a court having jurisdiction thereof.*fn17
Additionally, the Payment Agreement provides that "[t]he arbitrators . . . will have exclusive jurisdiction over the entire matter in dispute, including any question as to its arbitrability."*fn18

  C. The Dispute

  Pursuant to a stock purchase agreement of 2000, Raytheon sold various engineering and construction subsidiaries to Morrison Knudsen Corporation, now known as Washington Group International, Inc.*fn19 These former Raytheon subsidiaries were Page 6 covered under insurance policies issued by National Union.*fn20 The primary policy under which these former Raytheon subsidiaries were covered is the Master Policy, which was executed in April 1994.*fn21 The Master policy provided commercial general liability ("CGL") coverage, among other coverages, insuring the former Raytheon subsidiaries, as well as Raytheon itself, in the amount of $5 million.*fn22 The Master Policy also provided that "`in the Page 7 event' National Union paid any damages under the Policy, [Raytheon and its subsidiaries] would reimburse the full amount of such payment up to the $5 million per occurrence retained amount for CGL Claims."*fn23

  On May 14, 2001, the WGI Companies filed a petition for bankruptcy in Nevada.*fn24 Until that date Raytheon and its former subsidiaries defended the insurance claims, managed the defense of those claims, assessed the risk of exposure to liability and damages, and negotiated and paid all settlements of significant insurance claims.*fn25 After the WGI Companies filed for bankruptcy, both Raytheon and the WGI Companies stopped paying the insurance claims.*fn26

  Raytheon alleges that during and after the bankruptcy proceedings, National Union "claimed that Raytheon was the guarantor of the obligations of the WGI Companies under the self-insured retention*fn27 endorsements of the National Union Page 8 policies."*fn28 Raytheon further contends that to the extent that "National Union unilaterally has paid or settled claims after WGI emerged from bankruptcy, National Union did ...

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