IN THE UNITED STATES DISTRICT COURT 

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

THE PHILADELPHIA FLYERS, INC. : CIVIL ACTION

:

v. :

:

TRUSTMARK INSURANCE COMPANY : NO. 04-2322

O R D E R - M E M O R A N D U M

AND NOW, this 6th day of July, 2004, upon consideration of

Defendants’ “Motion to Compel Arbitration and to Stay Legal

Proceedings” (Docket No. 4), Plaintiffs’ response thereto, and the

argument held in open court on June 25, 2004, IT IS HEREBY ORDERED

that the Motion is GRANTED and this matter is STAYED pending

arbitration of the claims raised in Plaintiff's complaint. IT IS

FURTHER ORDERED that the Clerk of Court shall mark this action

CLOSED for statistical purposes and place the matter in the Civil

Suspense File, and it is 

FURTHER ORDERED that the Court shall retain jurisdiction; and,

upon completion of the arbitration proceedings, the prevailing

party shall bring the results of the arbitration to the attention

of the Court so that an appropriate order may be entered.

I. BACKGROUND

The Complaint alleges the following facts. Defendant,

Trustmark Insurance Co. (“Trustmark”), entered into an insurance

contract with the National Hockey League Trust (“NHL Trust”) for

the provision of Temporary Total Disability (“TTD”) coverage for

certain players on NHL teams, including the Plaintiff Philadelphia

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PHILADELPHIA FLYERS, INC. v. TRUSTMARK INSURANCE COMPANY Doc. 10

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Flyers, Inc. (the “Flyers”), for the period of October 2001 through

April 2002 (the “Insurance Contract”). (Compl ¶ 4.) As a member

of the NHL, Plaintiff was compelled to take part in the coverage

and to pay for the coverage provided. (Compl. ¶ 5.) Alternatively,

Plaintiff entered into a contract with Trustmark, through the NHL

Trust, for TTD coverage for certain players on the Flyers for the

period of October 2001 through April 2002. (Compl. ¶ 6.) 

The insurance policy issued to Plaintiff apparently provides

for the reimbursement of an insured player’s salary, subject to

certain limitations, during a period of disability that results in

a player’s inability to play hockey. (Compl. ¶ 8.) In the Fall of

2001, Rick Tocchet (“Tocchet”), one of the insured players, was

injured such that he was incapable of playing hockey. (Compl. ¶

9.) Following his medical treatment for the injury, a period of

time was necessary to permit the injury to fully heal. (Compl. ¶

14.) Tocchet was not permitted to skate from the Fall of 2001

through January 2002. (Compl. ¶ 15.) In mid-February of 2002, he

resumed playing for the Flyers. (Compl. ¶ 18.) 

In light of Tocchet’s injury, Plaintiff made a claim for

reimbursement of his salary for the twenty-seven games that Tocchet

missed between December 16, 2001 and February 12, 2002. (Compl. ¶

20.) Trustmark reimbursed Plaintiff for fifteen games that Tocchet

missed between December 16, 2001 and January 16, 2002, but refused

to reimburse Plaintiff for the twelve games he missed between

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January 17, 2002 and February 12, 2002. (Compl. ¶ 20-21.)

The Complaint asserts claims for breach of contract, alleging

that the Insurance Contract was entered into by Plaintiff, through

the NHL Trust, and Trustmark (Count I); for breach of contract,

alleging that Plaintiff is an intended third party beneficiary of

the Insurance Contract (Count II); and for bad faith, alleging that

Trustmark denied a portion of Plaintiff’s insurance claim without

a good faith basis, in violation of Pennsylvania’s insurance bad

faith statute, 42 Pa. Con. Stat. Ann. § 8371 (Count III). The

Complaint requests monetary damages in an amount in excess of

$300,000, punitive damages, attorney’s fees, interest and costs of

litigation.

There are three documents pertaining to the insurance at issue

in this case which are stapled together: the specimen copy of the

Master Policy, the Certificate of Insurance, and Endorsement No. 1.

(Def.’s Ex. A.) Trustmark has filed a Motion to Compel Arbitration

and to Stay Legal Proceedings based upon an arbitration clause

contained in the Certificate of Insurance. The arbitration clause

states as follows:

Any dispute arising from this contract between

the Policyholder, the NHL, or any club on one

hand, and BWD or Us on the other hand shall be

submitted to binding arbitration. The

Commercial Arbitration Rules of the American

Arbitration Association shall apply, except

with respect to selection of the arbitration

panel and location.

Each party to the arbitration shall select one

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arbitrator. A third independent arbitrator

shall be selected by the first two

arbitrators. Arbitration shall be held in a

location agreed to by the parties. If no

location can be agreed upon, arbitration shall

be held at the then current main corporate

office of the American Arbitration

Association. If the American Arbitration

Association is not in existence or its offices

are unavailable, arbitration shall be held in

Our home office.

The costs of arbitration shall be borne

equally by all of the parties thereto.

(Def.’s Ex. A, Certification at 10.)

II. LEGAL STANDARD

Trustmark contends that this Court must enforce the

arbitration clause pursuant to the Federal Arbitration Act (“FAA”),

9 U.S.C. §§ 1-16. Section 2 of the FAA provides that:

[a] written provision in any . . . contract

evidencing a transaction involving commerce to

settle by arbitration a controversy thereafter

arising out of such contract . . . or an

agreement in writing to submit to arbitration

an existing controversy arising out of such a

contract . . . shall be valid, irrevocable,

and enforceable, save upon such grounds as

exist at law or in equity for the revocation

of any contract.

9 U.S.C. § 2. Upon application of one of the parties to an action

in federal court which involves an issue which is subject to an

agreement for arbitration, the court must “stay the trial of the

action until such arbitration has been had in accordance with the

terms of the agreement. . . .” 9 U.S.C. § 9. In deciding a motion

to compel arbitration, the Court considers two questions: 1)

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whether the parties are subject to a valid arbitration agreement

and 2) whether their dispute falls within the language of the

arbitration agreement. Dabney v. Option One Mortgage Corp., No.

Civ. A. 00-5831, 2001 WL 410543 at *1 (E.D. Pa. Apr. 19, 2001)

(citing John Hancock Mutual Life Ins. Co. v. Olick, 151 F.3d 132,

137 (3d Cir. 1998)).

III. Discussion

It is undisputed that the claims asserted in the Complaint are

within the scope of the arbitration clause. The issue before the

Court, therefore, is whether the arbitration clause is enforceable

against Plaintiff. Plaintiff opposes enforcement of the

arbitration clause on two grounds. Plaintiff argues that the

arbitration clause is not part of the Insurance Contract. Plaintiff

also contends that it would be unconscionable to enforce the

arbitration clause against it because it was not a party to the

Insurance Contract and, therefore, did not enter into an agreement

to arbitrate disputes with respect to that Insurance Contract. 

Plaintiff claims that Trustmark’s obligation to pay Tocchet’s

salary arises under the Master Policy, but that the agreement to

arbitrate arises only under the Certificate of Insurance.

Plaintiff maintains that the Certificate of Insurance is not part

of the Master Policy and, therefore, does not bind the parties to,

or third-party beneficiaries of, the Master Policy. Plaintiff

relies on the following language regarding Certificates which

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appears on the last page of the Master Policy: “[t]he

Certificate(s) designated below, and any amendments or riders

thereto; are attached to and made part of the Policy.” (Ex. A,

Master Policy at 8.) The portion of the page underneath the

“Certificate(s)” clause of the Master Policy contains approximately

four inches of blank space, and no certificates are designated on

that page. The Certificate of Insurance at issue in this

proceeding begins on the next page. Plaintiff argues that the

Certificate of Insurance is, therefore, not made a part of the

Master Policy because it is not designated “below” or lower on the

page of the Master Policy which contains the “Certificate(s)”

language. However, the dictionary defines “below” as “lower on the

same page or on a following page.” Webster’s Ninth New Collegiate

Dictionary at 143 (1990) (emphasis added). Accordingly, the Court

finds that the Certificate of Insurance is “designated below” and,

therefore, is attached to and made part of the Master Policy.

Plaintiff also asserts that enforcement of the

arbitration clause against it in this case would be unconscionable

because it did not enter into an agreement to arbitrate. In

Painewebber, Inc. v. Hartmann, the United States Court of Appeals

for the Third Circuit (“Third Circuit”) stated that “[a]s a matter

of contract, no party can be forced to arbitrate unless that party

has entered into an agreement to do so.” 921 F.2d 507, 511 (3d

Cir. 1990) (citing AT&T Technologies v. Communications Workers of

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America, 475 U.S. 643 (1986)). In deciding whether an arbitration

agreement can be enforced against a non-signatory, the courts “ask

whether he or she is bound by that agreement under traditional

principles of contract and agency law.” Bel-Ray Co., Inc. v.

Chemrit (Pty) Ltd., 181 F.3d 435, 444 (3d Cir. 1999) (citations

omitted). The courts have recognized “six theories for binding a

non-signatory to an arbitration agreement: (a) incorporation by

reference; (b) assumption; (c) agency; (d) veil-piercing/alter ego;

(e) estoppel; and (f) third party beneficiary.” Bridas S.A.P.I.C.

v. Government of Turkmenistan, 345 F.3d 347, 356 (5th Cir. 2003).

The third party beneficiary and estoppel theories apply to the

instant dispute.

The Complaint alleges that the Flyers “are an intended third

party beneficiary of the Contract between Defendant Trustmark and

the National Hockey League Trust.” (Compl. ¶ 32.) The Third

Circuit has recognized that a third party beneficiary of a contract

is bound by contract terms requiring arbitration “where its claim

arises out of the underlying contract to which it was an intended

third party beneficiary.” E.I. DuPont de Nemours and Co. v. Rhone

Poulenc Fiber and Resin Intermediates, S.A.S., 269 F.3d 187, 195

(3d Cir. 2001). Plaintiff’s claim for breach of the Insurance

Contract clearly arises under the Insurance Contract between

Trustmark and the NHL Trust. The Court finds that the arbitration

clause of the Insurance Contract requires arbitration of the claims

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brought by the Flyers as a third party beneficiary of that

contract.

The Third Circuit has also recognized that principles of

equitable estoppel may require a non-signatory to be bound by an

arbitration clause. “[C]ourts have held non-signatories to an

arbitration clause when the non-signatory knowingly exploits the

agreement containing the arbitration clause despite having never

signed the agreement.” Id. at 199 (citing Thomson-CSF, S.A. v.

American Arbitration Assoc., 64 F.3d 773, 778 (2d Cir. 1995)). The

doctrine of equitable estoppel means, in an arbitration context,

that:

a party may be estopped from asserting that

the lack of his signature on a written

contract precludes enforcement of the

contract's arbitration clause when he has

consistently maintained that other provisions

of the same contract should be enforced to

benefit him. "To allow [a plaintiff] to claim

the benefit of the contract and simultaneously

avoid its burdens would both disregard equity

and contravene the purposes underlying

enactment of the Arbitration Act." 

International Paper Co. v. Schwabedissen Maschinen & Anlagen GMBH,

206 F.3d 411, 413-14 (4th Cir. 2000) (quoting Avila Group, Inc. v.

Norma J. of California, 426 F. Supp. 537, 542 (S.D.N.Y. 1977)); see

also E.I. DuPont, 269 F.3d at 200 (noting that, under the theory of

equitable estoppel, “courts prevent a non-signatory from embracing

a contract, and then turning its back on the portions of that

contract, such as an arbitration clause, that it finds

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distasteful.”) (citations omitted). In this case, the Flyers have

embraced, and seek to enforce, the Insurance Contract between

Trustmark and the NHL Trust to the extent that it provides hundreds

of thousands of dollars in TTD benefits in reimbursement of

Tocchet’s salary. Indeed, Plaintiff has accepted payment from

Trustmark pursuant to the Insurance Contract for reimbursement of

Tocchet’s salary for 15 games he missed between December 16, 2001

and January 16, 2002. (Complaint ¶ 20.) In fact, the only portion

of the Insurance Contract which Plaintiff appears to reject is the

arbitration clause. The Court finds that the doctrine of equitable

estoppel applies to prevent Plaintiff from avoiding its obligation

to engage in arbitration in this case.

For the reasons stated above, the Court finds that the

arbitration clause is enforceable against the Flyers as a thirdparty beneficiary of the Insurance Contract; that the doctrine of

equitable estoppel requires the enforcement of the arbitration

clause in this case; and that enforcement of the arbitration clause

against the Flyers would not be unconscionable.

BY THE COURT:

 

John R. Padova, J.

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