United States District Court, S.D. New York
In the Matter of the Arbitration Between NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, Petitioner,
FEDERAL INSURANCE COMPANY, Respondent.
OPINION AND ORDER
VALERIE CAPRONI, United States District Judge:
cross petitions to compel arbitration present the unusual
circumstance of parties agreeing that they have a binding
arbitration clause and agreeing that the arbitration clause
applies to their dispute but nevertheless filing petitions
and cross-petitions in federal court rather than proceeding
1986, National Union Fire Insurance Company of Pittsburgh, PA
(“National Union”) entered into a reinsurance
agreement with Federal Insurance Company
(“Federal”). According to Federal, it acted as a
“front” for a syndicate or pool of reinsurers
known as the Pinehurst Accident Reinsurance Group
(“PARG”). National Union contends that Federal is
required to reinsure it for excess workers' compensation
claims totaling approximately $3.85 million. National Union
petitioned to compel arbitration pursuant to Section 4 of the
Federal Arbitration Act (“FAA”), 9 U.S.C. §
4. Dkt. 1. Federal cross-petitioned to compel arbitration,
also pursuant to Section 4 of the FAA. Dkt. 18. The parties
agree that they are required to arbitrate their dispute over
the workers' compensation claims. The primary bone of
contention is whether PARG will have a role in the
arbitration and, if it does, the parameters of that role.
Whether this issue will ever arise, whether PARG's
involvement will raise an issue of arbitrability that should
be resolved by the Court, and whether the arbitrator will
ever rule on it, is entirely speculative at this juncture
and, therefore, need not be decided. For the reasons that
follow, National Union's petition is GRANTED and
Federal's cross-petition is GRANTED IN PART. The parties
are directed to commence arbitration.
noted above, the parties first entered into a relevant
agreement in 1986. They executed a “placement
slip” that includes the essential terms of their
agreement and a list of standard clauses applicable to the
relationship, including “arbitration.”
Declaration of Damian F. Salonick (Dkt. 21) (“Salonick
Decl.”) Ex. A. The parties executed another placement
slip in 1988. Salonick Decl. Ex. B. In 1989, they entered
into a more complete agreement, called a treaty. Salonick
Decl. Ex. C. Both placement slips and the Treaty provide for
Federal to reinsure certain excess workers' compensation
policies issued by National Union, subject to terms and
conditions not relevant here. While the parties dispute which
agreement governs their relationship, they agree that all
three agreements include arbitration clauses. The parties
also agree on the essential terms of the arbitration
Union submitted the workers' compensation claims at issue
to Federal in 2014, Declaration of Seema A. Misra (Dkt. 4)
(“Misra Decl.”) ¶¶ 5-7, Ex. 3, and
Federal denied the claims in late 2014. Misra Decl. Ex. 3. In
April 2016, National Union demanded arbitration.
Decl. Ex. 4. The parties negotiated the terms of the
arbitration in a series of email exchanges, the details of
which are not pertinent. As is relevant here, they agreed
that their dispute was arbitrable and that it should be heard
by a panel of three arbitrators, one arbitrator selected by
each party and a mutually-agreed-upon neutral umpire. Misra
Decl. Exs. 8, 9.
broke down over the terms of a questionnaire to be sent to
the umpire candidates. Federal proposed to identify the
members of PARG in the questionnaire as interested entities.
Misra Decl. Ex. 13. National Union disagreed. Misra Decl. Ex.
14. After further back-and-forth, the parties were unable to
resolve their disagreement and so National Union filed its
petition to compel. Dkt. 1. According to National Union,
Federal is attempting to substitute PARG as the respondent to
the arbitration. National Union's Mem. (Dkt. 3) at 5-7,
14. It seeks an order compelling Federal “to proceed
immediately to  [a]rbitration on its own, i.e., not
conditioned on the substitution or addition of non-party PARG
or any of its twenty-three (23) members.” Pet. (Dkt. 1)
that the parties' tactical jousting may have led to a
miscommunication, Federal responded by email: “I
[counsel for Federal] have read your filing and believe
[National Union] has totally misunderstood our position. We
have never denied that Federal is the signatory to the
National Union reinsurance treaty nor that it is primarily
liable under that Treaty. We understand and agree that as a
formal matter, Federal will have to seek indemnity from other
member[sic] of the PARG Pool and that the PARG Pool is not
liable to National Union in the first instance.”
Declaration of David E. Spector (“Spector Decl.”)
(Dkt. 22) Ex. L. Not willing to take “yes” as an
answer, National Union responded that it would dismiss the
petition if Federal confirmed that “(1) Federal is the
sole respondent in the arbitration; and (2) neither Federal
nor PARG will attempt to substitute, add, or involve
PARG, or any of its members . . . in the arbitration.”
Spector Decl. Ex. L (emphasis added).
then filed a cross-petition to compel on December 13, 2016.
Cross-Pet. (Dkt. 18.) Federal seeks a declaration that the
“[1989 Treaty] reflects the intent and meaning of the
words of the [1986 placement slip]”; an order
“directing the parties to proceed to arbitration . . .,
including arbitration of which entities are the real parties
in interest in the arbitration”; and an order
appointing the parties' chosen umpire, Mr. Charles
Ehrlich, as the umpire in the arbitration. Cross-Pet. at 8-9.
National Union filed a consolidated reply and opposition on
January 6, 2017. Dkt. 31. Federal replied on January 25,
2017. Dkt. 35. The Court held oral argument on May 19, 2017.
Federal Arbitration Act, 9 U.S.C. §§ 1 et
seq., embodies a strong “national policy favoring
arbitration.” AT&T Mobility LLC v.
Concepcion, 563 U.S. 333, 346 (2011) (quoting
Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S.
440, 443 (2006)); see also Ross v. Am. Express Co.,
547 F.3d 137, 142 (2d Cir. 2008). For that reason, “any
doubts concerning the scope of arbitrable issues should be
resolved in favor of arbitration . . ., ” Moses H.
Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S.
1, 24-25 (1983), and courts should “construe
arbitration clauses as broadly as possible, ” David
L. Threlkeld & Co. v. Metallgesellschaft Ltd.
(London), 923 F.2d 245, 250 (2d Cir. 1991) (quotation
marks and citation omitted). Pursuant to the FAA, a district
court must grant a motion to compel arbitration if a valid
arbitration agreement exists and if the scope of the
agreement governs the issues in the case. See Buchman v.
Weiss, No. 08-CV-5453 (RJS), 2009 WL 2044615, at *2
(S.D.N.Y. July 15, 2009) (quoting Nat'l Union Fire
Ins. Co. of Pittsburgh, Pa. v. Belco Petroleum Corp., 88
F.3d 129, 135 (2d Cir. 1996)). “In this Circuit, courts
follow a two-part test to determine the arbitrability of
claims. In deciding whether claims are subject to
arbitration, a court must consider (1) whether the parties
have entered into a valid agreement to arbitrate, and, if so,
the dispute at issue comes within the scope of the
arbitration agreement.” In re Am. Express
Fin. Advisors Sec. Litig., 672 F.3d 113, 128 (2d Cir.
2011) (citing ACE Capital Re Overseas Ltd. v. Cent.
United Life Ins. Co., 307 F.3d 24, 28 (2d Cir. 2002)).
In reviewing a motion to compel arbitration, 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).
the rare case in which the parties agree more than they
disagree, and the parties' common ground suffices to
resolve the case at this stage. The relief requested by
National Union is not contested by Federal. As Federal
explains, it has “twice confirmed that it ‘is the
signatory to the National Union reinsurance Treaty' and
that it ‘is the sole respondent in the
arbitration.'” Federal's Mem. at 1. After
National Union ignored this concession, Federal repeated it:
“Federal has never suggested that PARG be a formal
party to the arbitration . . . . Indeed, Federal made the
opposite clear.” Federal's Reply Mem. (Dkt. 35) at
2. Plainly then, Federal concedes that it must proceed to
arbitration “not conditioned on the substitution or
addition of non-party PARG or any of ...