United States District Court, D. Nebraska
For National Indemnity Company, Plaintiff: James M. Bausch, Richard P. Jeffries, Tara A. Stingley, LEAD ATTORNEYS, CLINE, WILLIAMS LAW FIRM - OMAHA, Omaha, NE.
For Transatlantic Reinsurance Company, Defendant: Deirdre G. Johnson, George D. Ruttinger, LEAD ATTORNEYS, PRO HAC VICE, CROWELL, MORING LAW FIRM, Washington, DC; Edward H. Tricker, Erin L. Ebeler, LEAD ATTORNEYS, WOODS, AITKEN LAW FIRM - LINCOLN, Lincoln, NE; Stuart C. Levene, LEAD ATTORNEY, PRO HAC VICE, CROWELL, MORING LAW FIRM-NEW YORK, New York, NY.
For Fair American Insurance and Reinsurance Company, formerly known as Putnam Reinsurance Company, Defendant: Edward H. Tricker, Erin L. Ebeler, LEAD ATTORNEYS, WOODS, AITKEN LAW FIRM - LINCOLN, Lincoln, NE; George D. Ruttinger, LEAD ATTORNEY, PRO HAC VICE, CROWELL, MORING LAW FIRM, Washington, DC.
MEMORANDUM AND ORDER
John M. Gerrard, United States District Judge.
This matter is before the Court on its own motion, and on plaintiff National Indemnity Company (NICO)'s motion for a preliminary injunction. Filing 10. NICO asks the Court to enjoin defendant Transatlantic Reinsurance Company (Transatlantic) and its subsidiary, Fair American Insurance and Reinsurance Company (FAIRCO), from taking steps to pursue or commence arbitration against NICO under various reinsurance contracts between Transatlantic and FAIRCO and various third-party insurers. A hearing was held on March 24, 2014, see filing 37, and the matter is now ready for disposition.
The parties are embroiled in a single overarching dispute, but it can be separated into two discrete halves. Each half has given rise to its own set of claims. In the first half, Transatlantic seeks to compel NICO to participate in an ongoing arbitration taking place in Chicago, and NICO seeks declaratory and injunctive relief establishing that NICO need not participate. In the second, Transatlantic and FAIRCO seek to compel NICO to begin arbitration in New York, and NICO again requests declaratory and injunctive relief to the
contrary. Only NICO's claims are before this Court. Transatlantic's and FAIRCO's motions to compel arbitration are pending in the United States District Courts for the Northern District of Illinois and the Southern District of New York. As the Court explains below, all of these matters can be more effectively resolved by severing NICO's claims and transferring them to the federal cases pending in Illinois and New York.
I. The Continental Claim
The first half of the parties' dispute involves a 1985 reinsurance agreement between Transatlantic and Continental Insurance Company (Continental), whereby Transatlantic agreed to reinsure Continental for certain policies issued by Continental. Filing 12-1 at ¶ 5 (the " Transatlantic-Continental Agreement" ). That agreement contains a clause requiring arbitration of any disputes arising under the agreement, with the arbitration to take place in the city of Continental's headquarters (Chicago). Filing 12-1 at ¶ 5; filing 12-2 at 17. In March 2013, Continental initiated arbitration against Transatlantic, seeking payments for various amounts Continental has allegedly paid under certain policies covered by the 1985 agreement. That arbitration is proceeding in Illinois. Filing 27-2 at ¶ 8. An arbitration panel has been selected and an organizational meeting was held on October 29, 2013. Filing 17-2 at ¶ 10.
NICO's involvement began in 2010, when NICO entered into various agreements with Continental. These included a " Loss Portfolio Transfer Reinsurance Agreement." Filing 12-1 at ¶ 14; filing 12-5. NICO alleges that this was (as suggested by its name) a reinsurance contract, under which NICO agreed to reinsure Continental with respect to certain legacy asbestos and environmental liabilities. Filing 12-1 at ¶ 14. NICO also entered into an administrative services agreement with Continental, whereby NICO agreed to provide administrative, claims handling, and reinsurance collection services. Filing 12-1 at ¶ ¶ 4, 14; filing 12-6. This included seeking reinsurance payments from Transatlantic under the Transatlantic-Continental Agreement. Filing 27-2 at ¶ 6.
Transatlantic asserts that, although styled as a reinsurance agreement, NICO has in fact assumed all of Continental's rights and obligations with respect to the underlying asbestos liabilities, including the right to pursue reinsurance from Transatlantic under the Transatlantic-Continental Agreement. Filing 17-2 at ¶ ¶ 9-14. More precisely, Transatlantic argues that the request for reinsurance payments that NICO has been sending to Transatlantic are for the benefit of NICO, not Continental. And, the argument continues, because NICO is seeking to directly
benefit from the Transatlantic-Continental Agreement, NICO should be estopped from denying the agreement's corresponding obligations, including its arbitration clause. So, Transatlantic wants NICO brought into the ongoing arbitration.
NICO counters by arguing that it is simply acting as Continental's agent and not benefitting directly from the 1985 agreement, that NICO is not a signatory to that agreement and not bound by its arbitration provision, and that Transatlantic and Continental can resolve any issues in their pending arbitration without NICO's direct involvement.
In a letter to NICO dated February 27, 2014, Transatlantic demanded that NICO join the arbitration between Transatlantic and Continental. The letter stated that unless NICO consented to arbitration, Transatlantic would take immediate action to compel its participation. Filing 12-3. NICO refused, and on March 4, 2014, Transatlantic kept its word by filing a petition to compel arbitration with the United States District Court for the Northern District of Illinois. See filings 17-1 and 17-2; see also Transatlantic v. NICO, case no. 1:14-cv-1535, filings 1 and 8 (N.D.Ill. 2014) (the " Illinois action" ).
That petition asks the Illinois federal court to compel NICO to participate in the ongoing arbitration between Transatlantic and Continental, under § 4 of the Federal Arbitration Act, 9 U.S.C. § 4. Thus, the Illinois action presents a mirror-image of the first half of NICO's complaint in this case. The Illinois action was also filed before the present suit--1 hour before, to be precise. See filing 17-1. Faced with the prospect of duplicative litigation, this Court must determine whether it or the Illinois court should retain jurisdiction over the case. But, as noted above, there is a second half to this dispute, and it is not mirrored in the Illinois action.
II. The Eaglestone Claim
The second half of this dispute implicates a separate set of 41 reinsurance agreements between Transatlantic and FAIRCO as reinsurers, and numerous insurance companies affiliated with American International Group (the AIG affiliates) as primary insurers (the " AIG-TRC" agreements). Filing 4 at ¶ 46. Like the Transatlantic-Continental Agreement, the AIG-TRC agreements included asbestos-related liabilities. Filing 27-2 at ¶ 11. The AIG-TRC agreements also contained arbitration provisions. Transatlantic and FAIRCO have provided excerpts from many, but not all, of these agreements. Filing 4 at ¶ 47; filing 12-7; filing 12-8; filing 27-2 at 4, 48-171; filing 27-3; filing 27-4 at 1-171.
NICO's involvement began in 2011, when it signed what it characterizes as another reinsurance agreement, this time with Eaglestone Reinsurance Company (Eaglestone). Filing 12-1 at ¶ 23. NICO agreed to reinsure Eaglestone with respect to certain legacy asbestos and environmental liabilities which Eaglestone, in turn, had agreed to reinsure for the AIG affiliates. Filing 4 at ¶ 58; filing 12-1 at ¶ 23. NICO also entered into an administrative services agreement with the AIG affiliates, whereby it agreed to provide certain administrative, claims handling, and reinsurance collection services, including collecting reinsurance from Transatlantic.
Filing 4 at ¶ ¶ 59-61; filing 12-1 at ¶ 23.
Here too, the parties dispute the extent to which NICO has assumed the rights and obligations of the AIG affiliates under the original AIG-TRC agreements. Transatlantic and FAIRCO again claim that NICO seeks to benefit directly from the AIG-TRC agreements and should be estopped from avoiding the corresponding arbitration provisions. And NICO again argues that it has merely been acting on behalf of the AIG affiliates and should not be bound to arbitrate under agreements it never signed or adopted.
On March 3, 2014, Transatlantic and FAIRCO sent NICO two letters, demanding that NICO participate in arbitration with them and the AIG affiliates with respect to the AIG-TRC agreements. Filing 12-1 at ¶ ¶ 15-17; filing 12-7; filing 12-8. Unlike the dispute between Continental and Transatlantic, there was no pre-existing arbitration involving the AIG affiliates. However, under the terms of the AIG-TRC agreements, these demand letters served to initiate the arbitration process. See, e.g., filing ...