United States District Court, S.D. New York
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., on behalf of itself and its related insurers, Petitioner,
SENECA FAMILY OF AGENCIES, Respondent.
OPINION AND ORDER
G. Koeltl United States District Judge
petitioner, National Union Fire Insurance Company of
Pittsburgh, PA. (“National Union”), on behalf of
itself and its related insurers has petitioned to compel the
Seneca Family of Agencies (“Seneca”) to arbitrate
a dispute pursuant to the Federal Arbitration Act (the
“FAA”), 9 U.S.C. § 4. National Union has
also moved for a preliminary injunction to prevent Seneca
from pursuing a state court action in California. The
underlying dispute in this case involves a disagreement over
the amount of collateral that Seneca is required to deliver
under a payment agreement (the “Payment
Agreement”) with National Union that governs certain
obligations related to a series of California Workers'
Compensation/Employers' Liability Insurance policies (the
“Policies”) also issued by National Union.
Union alleges subject matter jurisdiction pursuant to 28
U.S.C. § 1332(a)(1).
following facts are taken from the parties' submissions.
Union is a Pennsylvania insurance company with its principal
place of business in New York. Pet. ¶ 4. Seneca is a
California corporation with its principal place of business
in California. Pet. ¶ 5.
Union provided Seneca with workers' compensation and
employers' liability insurance for Seneca's
operations in California pursuant to the Policies, which were
entered into each year from 2004 to 2013. Pet. ¶ 2;
DeHaven Decl., Ex. 4 (Schedules of Policies and Payments).
Each Policy was effective for a one-year period.
November 1, 2004, the parties entered into the Payment
Agreement, which governs the parties' financing and
credit obligations with respect to the Policies. Pet.
¶¶ 8-9; see, e.g., DeHaven Decl., Ex. 1
(The November 1, 2004 Payment Agreement) at 3, 6. Among other
things, the Payment Agreement requires Seneca to deliver
collateral to National Union to secure Seneca's payment
obligations. Pet. ¶¶ 8, 10; see, e.g.,
DeHaven Decl., Ex. 1 at 6.
November 1, 2004 Payment Agreement required arbitration to
decide disputes. The Payment Agreement's arbitration
provisions (the “Arbitration Provisions”)
provided that “any dispute” related to the
amount of Seneca's payment obligations and “[a]ny
other unresolved dispute arising out of [the Payment]
Agreement must be submitted to arbitration.” DeHaven
Decl., Ex. 1 at 8. The Arbitration Provisions included an
arbitral forum provision that left the determination of the
arbitral forum to the arbitrators and a delegation provision
(the “Delegation Provision”) that provided that
the arbitrators would “have exclusive jurisdiction over
the entire matter in dispute, including any question as to
its arbitrability.” DeHaven Decl., Ex. 1 at 9.
Payment Agreement also contained provisions contemplating
court resolution for disputes with respect to “How
arbitrators must be chosen, ” with a litigation forum
selection clause (the “Litigation Forum Selection
Clause”) designating certain New York courts as the
forum for the resolution of disputes related to that subject.
DeHaven Decl., Ex. 1 at 8. Specifically, the Payment
Agreement provided that, in the event of arbitration, each
party was to choose one arbitrator, who together would then
choose a third. The three arbitrators would be the arbitral
panel. However, if the first two arbitrators could not select
the third arbitrator, then either party could make an
application to a “Justice of the Supreme Court of the
State of New York, New York County” to select the
additional arbitrator. DeHaven Decl., Ex. 1 at 8.
parties amended the Payment Agreement through
“mandatory addenda” in 2009, 2011, and 2013.
See DeHaven Decl., Ex. 2 (The 2009 Addendum);
DeHaven Decl., Ex. 5 (The 2011 Addendum); DeHaven Decl., Ex.
3 (The 2013 Addendum). The provision in the Litigation Forum
Selection Clause relating to the court-appointment of the
third arbitrator was amended to provide that the parties
could “make an application only to a court of competent
jurisdiction in the City, County, and State of New
York.” DeHaven Decl., Ex. 3 § 7. And, as relevant
to this case, the parties added the following provision to
the Clause in the 2013 Addendum: “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.” DeHaven Decl., Ex. 3 § 7.
argues that subject matter jurisdiction under 28 U.S.C.
§ 1332(a)(1) is lacking because the amount in
controversy is not in excess of $75, 000. The argument is
frivolous. The Petition alleges that the amount in
controversy is in excess of $75, 000. Pet. ¶ 6. The
amount-in-controversy “burden is hardly onerous”
and there is “a rebuttable presumption that the face of
the complaint is a good faith representation of the actual
amount in controversy.” Scherer v. Equitable Life
Assurance Soc'y of U.S., 347 F.3d 394, 397 (2d Cir.
2003) (citation and internal quotation marks omitted). Seneca
has offered no support to suggest that the
amount-in-controversy allegation was not made in good faith.
See id. (“To overcome the
face-of-the-complaint presumption, the party opposing
jurisdiction must show ‘to a legal certainty' that
the amount recoverable does not meet the jurisdictional
threshold.” (citation omitted)). To the contrary, as
reflected in the Complaint in the California Action (the
“California Complaint”), at stake in this dispute
is nearly $1 million in collateral, years-worth of premiums,
and statutory and common law damages. See Ex. 6
¶¶ 34, 39. The amount-in-controversy is plainly
Union has petitioned to compel arbitration pursuant to §
4 of the FAA.
argues that, with respect to its claims related to any
workers' compensation policies issued or renewed on or
after July 1, 2012 (the “Post-July 2012
Policies”), recently-enacted (and little-interpreted)
Cal. Ins. Code § 11658.5 overcomes the normal
presumption under the FAA in favor of enforcing arbitration
agreements according to their terms. Section 11658.5(a)(1)
An insurer that intends to use a dispute resolution or
arbitration agreement to resolve disputes arising in
California out of a workers' compensation insurance
policy or endorsement issued to a California employer shall
disclose to the employer, contemporaneously with any written
quote that offers to provide insurance coverage, that choice
of law and choice of venue or forum may be a jurisdiction
other than California and that these terms are negotiable
between the insurer and the employer. The disclosure shall be
signed by the employer as evidence of receipt where the
employer accepts the offer of coverage from that insurer.
insurer complies with § 11658.5(a)(1), then “a
dispute resolution or arbitration agreement may be negotiated
by the insurer and the employer before any dispute
arises.” § 11658.5(a)(2). The section only applies
to agreements with “California employers” as
defined in § 11658.5(d). The parties agree that Seneca
is a California employer. By its terms, § 11658.5