Court Opinion

ID: 624319
Source: CourtListenerOpinion
Date Created: 2012-03-05 21:02:40+00
Date Added: 2024-06-11T17:51:07.542992
License: Public Domain

FILED
                              NOT FOR PUBLICATION                             MAR 05 2012

                                                                          MOLLY C. DWYER, CLERK
                       UNITED STATES COURT OF APPEALS                      U .S. C O U R T OF APPE ALS

                              FOR THE NINTH CIRCUIT

ALLIANZ GLOBAL RISK U.S.                           No. 10-55451
INSURANCE COMPANY, as subrogee of
The Los Angeles Department of Water &              D.C. No. 2:09-cv-09033-DDP-
Power,                                             AJW

                Plaintiff - Appellee,
                                                   MEMORANDUM *
    v.

GENERAL ELECTRIC COMPANY,

                Defendant - Appellant.

                      Appeal from the United States District Court
                         for the Central District of California
                      Dean D. Pregerson, District Judge, Presiding

                       Argued and Submitted November 9, 2011
                                Pasadena, California

Before: SCHROEDER, Senior Circuit Judge, REINHARDT and MURGUIA,
Circuit Judges.

         General Electric Co. (“GE”) appeals the district court’s order granting the

motion of Allianz Global Risk U.S. Insurance Co. (“Allianz”) to compel arbitration

          *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
of Allianz’s claim to recover the amount it paid for repairs of an allegedly

defective power generation turbine sold by GE to the Los Angeles Department of

Water and Power (“LADWP”), Allianz’s insured. The contract between GE and

LADWP contained an arbitration clause that GE contends Allianz, as a non-

signatory to the contract, cannot enforce.

      The district court held that GE was equitably estopped from refusing to

arbitrate under its own contractual arbitration clause, where the issues in Allianz’s

claim are intertwined with issues arising out of the manner in which GE performed

its obligations under the GE-LADWP sales contract. The district court applied our

court’s decision in Mundi v. Union Sec. Life Ins. Co., 555 F.3d 1042, 1045–47 (9th

Cir. 2009), while under the Supreme Court’s decision in Arthur Andersen v.

Carlisle, 129 S.Ct. 1896, 1902 (2009), the district court should have applied state

law, not federal common law. The district court’s misstatement of the applicable

law is not material here, however.

      The Federal Arbitration Act ensures that state-law rules do not treat

arbitration clauses differently than other contract provisions. State law applies “if

that law arose to govern issues concerning the validity, revocability, and

enforceability of contracts generally.” Perry v. Thomas, 482 U.S. 483, 492 n.9

(1987). Under California contract and insurance law of general applicability,

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Allianz is entitled to be subrogated to the repair claims of its insured, LADWP, to

recover the loss for which Allianz has paid out compensation. See Crowley Mar.

Corp. v. Boston Old Colony Ins. Co., 70 Cal. Rptr. 3d 605, 609 (Cal. Ct. App.

2008) (“[E]quitable subrogation generally involves the substitution of the insurer

in the position of its insured in order to seek reimbursement from responsible third

parties for the loss paid the insured by the insurer.”). The subrogated insurer

stands in the shoes of its insured, and is entitled to its contractual rights and

remedies, see State Bar of Cal. v. Statile, 86 Cal. Rptr. 3d 72, 81–82 (Cal. Ct. App.

2008), including specific enforcement of a contract provision. See Konda v.

Lamkin, 66 P.2d 164, 167 (Cal. Ct. App. 1937) (rejecting as meritless the argument

that an assignee had no right to seek specific performance).

      As a subrogated insurer, Allianz may therefore pursue its insured’s claims

on a contract with a third party, even where the insurer is not in privity with the

third party. See Am. Auto Ins. Co. v. Seabord Sur. Co., 318 P.2d 84, 87 (Cal. Ct.

App. 1958); cf. Royal Indem. Co. v. Sec. Truck Lines, 27 Cal. Rptr. 858, 860–61

(Cal. Ct. App. 1963). Allianz incurred a loss in paying LA Power to repair the GE-

manufactured turbine. LADWP and LA Power were both insured under the policy.

When Allianz paid for the repairs, thereby compensating LADWP fully for the

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covered loss, Allianz became subrogated. See, e.g., Interstate Fire & Cas. Ins. Co.

v. Cleveland Wrecking Co., 105 Cal. Rptr. 3d 606, 615 (Cal. Ct. App. 2010).

      GE relies on the solitary California Court of Appeals decision in Valley

Casework, Inc. v. Comfort Constr., Inc., 90 Cal. Rptr. 2d 779 (Cal. Ct. App. 1999).

To the extent the court in Valley Casework held that a nonsignatory plaintiff could

not compel arbitration against a signatory defendant, id. at 784–86, that holding

appears to be out of step with controlling California insurance and contract law

because it would treat a subrogee’s entitlement to specific performance of an

arbitration provision differently from other contract provisions. We may not apply

a state-law rule of decision when it “takes its meaning precisely from the fact that a

contract to arbitrate is at issue.” Perry, 482 U.S. at 492 n.9. The court in Valley

Casework was also concerned that the trial court had not decided the subrogation

issue, but left it for the arbitrator to decide. 90 Cal. Rptr. 2d at 784, 786. That

cannot happen here, as we hold Allianz was subrogated.

      The parties’ remaining contentions regarding the statute of limitations,

which go to the enforceability of the contract as a whole, are for the arbitrator to

decide. See Rent-A-Center, West, Inc. v. Jackson, 130 S.Ct. 2772, 2778–79 (2010).

      AFFIRMED.

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