American Trucking and Transport Insurance Company v. Nelson et al

Filing 107

ORDER. IT IS ORDERED that 101 MOTION to Lift Stay filed by American Trucking and Transportation Insurance Company is GRANTED in part. The stay is lifted for the limited purpose of issuing this Order. For all other purposes, this case remains S TAYED pending arbitration. 48 MOTION to Compel filed by Westchester Surplus Lines Insurance Company is GRANTED. ATTIC and Westchester shall submit Count XI of the Amended Complaint to arbitration. 95 MOTION to Compel Arbitration as to D efendant Dan Dooley filed by Westchester Surplus Lines Insurance Company is GRANTED. The parties shall file a joint status report on or before February 17, 2020, apprising the Court of the status of the arbitration proceeding. Signed by Judge Dana L. Christensen on 8/15/2019. (NOS)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
MISSOULA DIVISION

FILED
AUG 1 5 2019
Clerk, U.S District Court
District Of Montana

Missoula

AMERICAN TRUCKING AND
TRANSPORTATION INSURANCE
COMPANY, a Risk Retention Group,

CV 16-160- M- DLC

Plaintiff,

ORDER

vs.
RALPH NELSON, ROBERT
GORMAN, SR., BOBBY J.
GORMAN, DAN DOOLEY, and
WESTCHESTER
SURPLUS LINES INSURANCE
COMPANY,
Defendants.
On June 26, 2019, the mandate of the Ninth Circuit Court of Appeals issued.
This matter has been remanded to this Court with instructions to compel
arbitration.

On the day the mandate issued, Plaintiff American Trucking and

Transportation Insurance Company ("ATTIC") filed a motion and supporting brief
asking the Court to lift the stay and to retain jurisdiction in part.
102.)

(Docs. 10 I &

Defendant Westchester Surplus Lines Insurance Company ("Westchester")

opposes the motion.

(Doc. 104.)

ATTIC has modified its request in part,

stipulating to a continued stay of proceedings related to its claims against

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Defendant Dan Dooley.

(Doc. 106.)

See 9 U.S.C. § 3 ("If any suit ... be

brought ... upon any issue referable to arbitration under an agreement in writing
for such arbitration, the court ... shall ... stay the trial of the action until such
arbitration has been had ....").

Thus, there is no longer any dispute that

proceedings should remain stayed pending arbitration.
However, several controversies remain.

The Court must now determine

whether to: (1) retain jurisdiction over any motions to confirm, modify, or vacate
the arbitrators' decision; (2) retain jurisdiction over Counts I through X of the
Complaint; and (3) specify that the only arbitrable issue in this matter is whether
Westchester breached its duty to defend under Montana law.

(Doc. 105.)

The

Court considers each issue in turn. 1
I.

Jurisdiction to confirm, modify, or vacate the arbitrators'
decision

ATTIC asks the Court to retain jurisdiction over any motion to confirm,
modify, or vacate the arbitration decision.
retaining jurisdiction for such purpose.

Westchester does not argue against

Upon conclusion of the arbitration

process, either party may file a motion to confirm, modify, or vacate the arbitration
decision.

9 U.S.C. § 9- 11.

As this Court continues to have jurisdiction over the

1

Because the parties are familiar with the facts and history of this case, the Court will not recite
them here but instead incorporate them as necessary to resolve the pending issues.
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stayed proceedings against Dooley, it will also retain jurisdiction over any postarbitration motions.

II.

Jurisdiction over Counts I through X

A TIIC asks the Court to retain jurisdiction over Counts I through X of the
Amended Complaint.

ATTIC did not bring these counts against Westchester but

against the other named defendants; it has since settled its claims against all of the
individual defendants except Dooley.

ATTIC seeks continuing judicial oversight

"over issues involving the resolution of Counts I through X of the Amended
Complaint, including enforceability and reasonableness of the [stipulated
judgments between ATTIC and the individual defendants other than Dooley]."
(Doc. 102 at 5-6.) Westchester argues that ATTIC is seeking to sidestep arbitration
by construing "Counts I through X, insofar as they involve the reasonableness of
the stipulated settlements, [as] somehow a dispute between it and the settled
defendants rather than between it and Westchester."

(Doc. 104 at 9 n.4.)

Westchester has the better argument.
Counts I through X are not themselves arbitrable, as they are claims between
ATTIC an non-parties to the Westchester insurance contract.

Thus, the Court

retains jurisdiction over ATTIC's claims against Dooley, although proceedings
remain stayed.

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However, any legal issue a court would consider in deciding the insurance
coverage dispute between ATTIC and Westchester falls under the purview of the
arbitrator.

The Westchester policy provides that "[t]he Insureds and the Insurer

shall submit any dispute or controversy arising out of or relating to this Policy or
the breach, termination, or invalidity thereof' to arbitration.

(Doc. 49-1 at 1 J.)

Broad on its face, the arbitration provision also must be "construed broadly."

Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1131 (9th Cir. 2000).
The reasonableness of the settlements may give rise to a "dispute or controversy
. .. relating to [the] Policy."

Accordingly, to the degree that the reasonableness

of the settlements bears on Westchester's indemnification or defense of the settled
defendants, such reasonableness falls under Count XI of the Amended Complaint.
If, after arbitration has concluded, an issue remains as to the settlement of Counts I
through X, the Court will consider it at that time.

III.

Choice of Law

A TIIC seeks a declaration that Montana law be applied in the arbitration.
However, the Ninth Circuit squarely held that the Court ought to have granted
Westchester's motion to compel arbitration.

The Court will not sidestep the clear

ruling of the Ninth Circuit by limiting the arbitrator to the question of whether
Westchester breached its duty to defend the individual defendants under Montana

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law.
Here, the arbitration provision encompasses choice of law.

The Court

cannot limit the scope of the arbitration without ignoring the policy's broad
arbitration provision and the Federal Arbitration "liberal federal policy favoring
arbitration."

Moses H Cone Mem 'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1,

24 ( 1983 ).

Legal issues regarding the scope of arbitrability are themselves

arbitrable.

Id. at 24-25.

Choice of law is one such arbitrable issue.

See Vimar

Dequros y Reasequros, S.A. v. M/V Sky Reefer, 515 U .S. 528,541 (1995).

In this

instance, the parties must raise in arbitration their arguments regarding the
appropriate state law, and the Court will not reserve exclusive jurisdiction over the
measure of damages.

If the arbitrator "exceed[s] [her] powers, or so imperfectly

execute[s] them that a mutual, final and definite award upon the subject matter
submitted was not made," the parties may challenge the arbitrator' s decision in this
9 U.S.C. § 10; see also 9 U .S.C. § 11 (allowing modification of an award

Court.

under limited circumstances).
Moreover, ATTIC misstates Count XI of the Amended Complaint, through
which it sought more than a declaration that Westchester breached its duty to
defend.

In Count XI, ATTIC "s[ought] a judicial declaration of Westchester' s

obligations under the Policy, the Settlement Agreement, and Stipulated Judgment

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and ... a declaration that Westchester is liable for the [$3,121,758.45] Stipulated
Judgment, without regards to the merits of the underlying action."

(Doc. 32 at

Resolution of Count XI requires determinations of: (1) what state law

42.)

applies; (2) whether Westchester violated that law; and (3) if so, the appropriate
financial remedy.

These determinations may be made by an arbitrator in the first

instance.
IV.

Motion to Compel Arbitration as to Defendant Dan Dooley

On September 13, 2018, Westchester filed its motion to compel arbitration
as to Dooley's cross-claim against Westchester.

(Doc. 95.)

The parties agree

that arbitrability of Dooley's cross-claim is legally indistinguishable from that of
Westchester's motion.

(See Docs. 95-97.)

Additionally, Westchester represents

that "Dooley has agreed to arbitrate his claim against Westchester.
3.)

(Doc. 104 at

Thus, the Court will grant the motion.
Accordingly, IT IS ORDERED that:
( 1) Plaintiff American Trucking and Transportation Insurance Company' s

Motion to Lift Stay and to Enter Orders to Comply with the Mandate (Doc. 101) is
GRANTED in part.
Order.

The stay is lifted for the limited purpose of issuing this

For all other purposes, this case remains STAYED pending arbitration.
(2) Defendant Westchester Surplus Lines Insurance Company's Motion to

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Compel Arbitration (Doc. 48) is GRANTED.

ATTIC and Westchester shall

submit Count XI of the Amended Complaint to arbitration.
(3) Defendant Westchester Surplus Lines Insurance Company' s Motion to
Compel Arbitration as to Defendant Dan Dooley (Doc. 95) is GRANTED.
(4) The parties shall file a joint status report on or before February 17, 2020,
apprising the Court of the status of the arbitration proceeding.
DATED this ~ day of August, 2019.

Dana L. Christensen, Chief Judge
United States District Court

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