Foresight Energy, LLC v. Ace Am. Ins. Co.

663 F.Supp.3d 980

FORESIGHT ENERGY, LLC, Plaintiff, v. ACE AMERICAN INSURANCE COMPANY, et al., Defendants.

Case No. 4:22-cv-00887-JAR

United States District Court, E.D. Missouri, Eastern Division

Signed March 21, 2023

Alexander D. Hardiman, Pro Hac Vice, Colin M. Davis, Pro Hac Vice, Janine M. Stanisz, Pro Hac Vice, Joseph David Jean, Pro Hac Vice, Pillsbury Winthrop LLP, New York, NY, Jeffrey R. Baron, Mark G. Boyko, Bailey and Glasser LLP, Webster Groves, MO, for Plaintiff.

Christina Marie Lincoln, William A. Webster, Pro Hac Vice, Robins Kaplan LLP, Los Angeles, CA, Sandra Jane Wunderlich, Tucker Ellis LLP, St. Louis, MO, for Defendants Ace American Insurance Company, Argo Re Ltd., Certain Underwriters at Lloyd's London Subscribing to Policy No. B0702PN3014400, Certain Underwriter's at Lloyd's of London Subscribing to Policy No. B0702PN301500o, Certain Underwriter's at Lloyd's London Subscribing to Policy No. B0702PN306460o, Houston Specialty Insurance Company, RSUI Indemnity Company.

Christina Marie Lincoln, William A. Webster, Pro Hac Vice, Robins Kaplan LLP, Los Angeles, CA, Paul Robert

Koepff, Pro Hac Vice, Clyde and Co. U.S. LLP, New York, NY, Timothy J. Wolf, Watters Wolf LLC, St. Louis, MO, Benjamin Stephen McIntosh, St. Louis, MO, Ryan Robert Westerfield, Pro Hac Vice, Clyde and Co. U.S. LLP, Morristown, NJ, for Defendants Allied World Assurance Company AG, Arch Reinsurance Ltd., Markel Bermuda Ltd.

Christina Marie Lincoln, William A. Webster, Pro Hac Vice, Robins Kaplan LLP, Los Angeles, CA, Nolan C. Burkhouse, Pro Hac Vice, Paul Frank Collins PC, Burlington, VT, Timothy J. Wolf, Watters Wolf LLC, St. Louis, MO, Benjamin Stephen McIntosh, St. Louis, MO, for Defendant Oil Casualty Insurance Ltd.

MEMORANDUM AND ORDER

JOHN A. ROSS, UNITED STATES DISTRICT JUDGE

This matter is before the Court on several related motions presenting the same issue of whether insurance policy arbitration clauses falling under the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards are enforceable against a Missouri insured notwithstanding the state's anti-arbitration statute. For the reasons set forth below, the Court concludes that the arbitration clauses are enforceable. As a result, Defendants' motion to dismiss or stay the case will be granted in part, and the case will be stayed pending arbitration. Accordingly, Plaintiff's motion to remand will be denied, and other pending motions will be denied as moot.

BACKGROUND

Plaintiff Foresight Energy, LLC, headquartered in St. Louis, Missouri, is a coal producer that owns and operates mining complexes in southern Illinois. Plaintiff carries all-risk insurance through multiple Defendant insurers whose declarations and endorsements attach to a main policy, pursuant to which Defendants share the risk according to fixed percentages. The main policy and Defendants' respective primary and excess policies contain the same operative coverage terms (e.g., definitions, types and scope of coverage). (Doc. 1-3). As relevant here, the Defendant insurers comprise two sub-groups - those whose polices contain international arbitration clauses (the "Arbitration Defendants) and those whose policies do not contain arbitration clauses (the "Domestic Defendants").¹

In 2021, three of Plaintiff's coal mines sustained fire damage resulting in over $115 million in losses. Defendants denied all but $8.8 million of Plaintiff's claims and invoked the arbitration clauses contained in the Arbitration Defendants' policies. On August 17, 2022, Plaintiff filed a petition in state court asserting claims of breach of contract and vexatious refusal and seeking declarations of availability of coverage and invalidity of the arbitration clauses. (Doc. 3). Plaintiff asserts that the arbitration clauses are unenforceable under Missouri's Uniform Arbitration Act (MUAA) prohibiting mandatory arbitration clauses in insurance contracts. Mo. Rev. Stat. § 435.530. On this basis, Plaintiff sought injunctive relief to prevent the Arbitration Defendants from filing suit in any foreign tribunal to enforce the arbitration clauses. The state court granted a temporary restraining order (TRO), finding that such relief was the only way to prevent irreparable harm in the form of a competing lawsuit in a foreign jurisdiction. (Doc. 4).

Defendants removed the case to this Court, where Plaintiff promptly filed a motion to extend the TRO to maintain the status quo while the parties fully briefed the matter. After a video hearing at which all parties were represented and offered argument through counsel, the Court granted Plaintiff's motion to extend the TRO, reasoning that Plaintiff demonstrated a likelihood of success on the merits based on relevant caselaw in this district, and there existed a strong public interest in the proper application and adjudication of Missouri public policy as expressed by statute. (Doc. 17). The Court set a schedule for further briefing and heard oral arguments on November 15, 2022.

Four motions are now before the Court: (1) Plaintiff's motion to remand the case to state court, (2) Plaintiff's alternative motion for preliminary injunction, (3) Defendants' motion to dismiss the case or stay it pending arbitration, and (4) Argo and Markel Defendants' motion to dismiss for lack of personal jurisdiction. The dispositive question is whether the international arbitration clauses contained in the Arbitration Defendants' policies are enforceable or rather preempted by Missouri's anti-arbitration statute.

APPLICABLE LAW

Missouri Law

The MUAA recognizes the validity and enforceability of arbitration agreements except in contracts of insurance and adhesion. Mo. Rev. Stat. § 435.350. Missouri appellate precedent is clear that arbitration clauses in insurance contracts are voidable as against public policy notwithstanding choice of law provisions in the contract. Sturgeon v. Allied Professionals Ins. Co., 344 S.W.3d 205, 210 (Mo. App. E.D. 2011) (holding that Missouri's public policy overrode California choice of law). Accord, Milburn v. Zurich Am. Ins. Co., 478 F. Supp. 3d 789, 792 (E.D. Mo. 2020) ("[P]ublic policy is a matter above and beyond a choice-of-law analysis and can act to override it entirely.").

International Treaty

The United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (also known as the "New York Convention" or, here, simply the "Convention") is a multi-national treaty providing for the reciprocal enforcement of international arbitration agreements by signatory nations. Article II § 3 of the Convention provides that the courts of signatory nations shall refer parties to arbitration unless the court finds that the arbitration agreement is null and void, inoperative, or incapable of being performed.

Federal Arbitration Act

The Federal Arbitration Act (FAA) generally provides for the validity and enforceability of arbitration agreements and authorizes district courts to compel parties to arbitrate and stay proceedings pending the outcome. 9 U.S.C. §§ 2-3. The United States acceded to the Convention in 1970 upon passage of Chapter II of the FAA (the "Convention Act"). 9 U.S.C. §§ 202-208. Section 203 of the Convention Act vests district courts with original jurisdiction over cases falling within the descriptive parameters of the Convention.

McCarran-Ferguson Act

The McCarran-Ferguson Act (MFA) displaces the federal Supremacy Clause in the area of insurance. It states: "No Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance . . . unless such Act specifically relates to the business of insurance." 15 U.S.C. § 1012(b). Thus, by operation of the MFA, state laws specifically regulating the insurance industry "reverse-preempt" - i.e., supersede - more general federal statutes. "The point of McCarran-Ferguson's legislative choice of leaving insurance regulation generally to the States was to limit congressional preemption under the commerce power." Am. Ins. Ass'n v. Garamendi, 539 U.S. 396, 428, 123 S.Ct. 2374, 156 L.Ed.2d 376 (2003).

Self-Executing Treaties

"[W]hile treaties may comprise international commitments . . . they are not domestic law unless Congress has either enacted implementing statutes or the treaty itself conveys an intention that it be 'self-executing' and is ratified on these terms." Medellin v. Texas, 552 U.S. 491, 505, 128 S.Ct. 1346, 170 L.Ed.2d 190 (2008). A treaty is self-executing and has automatic force as domestic law when it "operates of itself without the aid of any legislative provision." Id. By contrast, treaty stipulations are not self-executing when they can only be enforced pursuant to legislation to carry them into effect. Id. In Medellin, the Supreme Court in dicta cited the Convention Act as an example of legislation implementing a non-self-executing treaty. Medellin, 552 U.S. at 521-522, 128 S.Ct. 1346 (stating, "Congress is up to the task of implementing non-self-executing treaties, even those involving complex commercial disputes" and citing 9 U.S.C. §§ 201-208).

Foresight I

This Court previously examined the interplay between the foregoing sources of law in an identical case involving Plaintiff Foresight and some of these same Defendant insurers. Foresight Energy, LLC v. Certain London Mkt. Ins. Companies, 311 F. Supp. 3d 1085 (E.D. Mo. 2018). In Foresight I, Judge Shaw determined that the Convention is not self-executing because it required implementing legislation in the form of the Convention Act and, thus, the MUAA preempts the Convention Act by application of the MFA. Consequently, absent a basis for federal jurisdiction under the FAA, the Court remanded the case to state court as there was no diversity of parties. In arriving at this conclusion, the Court recognized that there is no Supreme Court or Eighth Circuit precedent squarely on point, and there is no uniform rationale among other circuits.

...