Court Opinion

ID: 183988
Source: CourtListenerOpinion
Date Created: 2011-02-02 01:00:52+00
Date Added: 2024-06-11T17:26:05.967143
License: Public Domain

NOT PRECEDENTIAL

                    UNITED STATES COURT OF APPEALS
                         FOR THE THIRD CIRCUIT
                              _____________

                                  No. 10-2329
                                 _____________

           NATIONWIDE MUTUAL FIRE INSURANCE COMPANY

                                         v.

                           GEO. V. HAMILTON, INC.,

                                            Appellant
                                 _____________

                 On Appeal from the United States District Court
                     for the Western District of Pennsylvania
                         District Court No. 2-08-cv-00646
                 District Judge: The Honorable Gary L. Lancaster

                Submitted Pursuant to Third Circuit L.A.R. 34.1(a)
                               January 27, 2011

            Before: McKEE, Chief Judge, and SMITH, Circuit Judges,
                       and STEARNS, District Judge*

                            (Filed: February 1, 2011)

                                     OPINION

STEARNS, District Judge.

      *
       The Honorable Richard G. Stearns, United States District Judge for the United
States District Court of Massachusetts, sitting by designation.
      George V. Hamilton, Inc. (GVH) appeals from the District Court’s denial of its

motion for summary judgment and the allowance of Nationwide Mutual Life

Insurance Company’s (Nationwide) motion to compel arbitration.1 The underlying

facts of this appeal are set out in a previous Third Circuit opinion in this case and

need not be repeated here at any length. See Nationwide Mut. Fire Ins. Co. v. George

V. Hamilton, Inc., 571 F.3d 299 (3d Cir. 2009). The court iterates only those facts

that directly pertain to the issues on appeal.

      Nationwide issued GVH, an installer of commercial and industrial insulation,

a policy of liability insurance against claims of asbestos-related injuries arising from

GVH’s installations between January 30, 1985, and January 30, 1986. On June 12,

1992, GVH, Nationwide, and three other of GVH’s insurers, American Insurance

Company, American States Insurance Company (ASIC), and Pennsylvania

Manufacturers’ Association Insurance Company (PMA), entered into an Interim

Claims Handling and Settlement Agreement (Agreement) intended to resolve disputes

over the processing of claims and the allocation of defense and indemnity resources

under their various policies. The Agreement included the following arbitration

      1
         The District Court’s April 9, 2010 Order is a “final decision with respect to
an arbitration that is subject to [the Federal Arbitration Act].” See 9 U.S.C. §
16(a)(3). A District Court’s granting of a motion to compel arbitration that “ends the
litigation on the merits” is a final order over which we have appellate jurisdiction.
See Green Tree Fin. Corp. v. Randolph, 531 U.S. 79, 86-89 (2000); Spinetti v. Serv.
Corp. Int’l, 324 F.3d 212, 215 (3d Cir. 2003).
                                           2
provision:

      The PARTIES agree that any and all disputes arising out of, or relating
      to this Agreement, or breach thereof, shall be decided by nonjudicial
      arbitration which shall be binding on the PARTIES in accordance with
      42 Pa, U.P.S.A. section 7341. Notice of the demand for arbitration
      shall be served in writing upon all other PARTIES to this Agreement.

App. at 72a-73a.

       The Agreement also provided that an insurer’s obligation to pay defense and

indemnity costs continued until the insurer could establish that it had exhausted its

policy limits. Nationwide participated in the Agreement through 1995, when it

notified GVH that the limits of its policy were nearing exhaustion. In 1996, the

policy limits were reached. On May 5, 1997, GVH informed Nationwide that it was

“willing to accept” Nationwide’s evidence of exhaustion. Nationwide did not provide

GVH with a defense or indemnify the payment of asbestos claims after 1997.

      In 2005, PMA and ACE Property & Casualty Insurance Company (ACE) –

PMA was a party to the Agreement, ACE was not – filed separate lawsuits in the

Pennsylvania state courts requesting a declaration of their rights and obligations

under the policies they had issued to GVH. Nationwide was not a party to either

lawsuit.

      In a Complaint filed on March 1, 2005, in the Court of Common Pleas of

Allegheny County, PMA sought a declaration that it had exhausted its policy limits

and had no further obligation to GVH. Five days after instituting suit, PMA served

                                         3
GVH with an arbitration demand invoking the arbitration clause of the Agreement.

GVH rejected the demand and filed counterclaims and a separate lawsuit against

PMA asserting breach of contract, bad faith, and a breach of the duty to indemnify

and defend. In March of 2005, PMA filed preliminary objections arguing that

GVH’s counterclaims were also subject to arbitration.

      On December 7, 2005, ACE filed a largely identical lawsuit in the Court of

Common Pleas of Philadelphia County, which provoked a similar response from

GVH. On July 25, 2006, the PMA and ACE actions were consolidated before the

Court of Common Pleas of Allegheny County.

      On May 20, 2007, the Court of Common Pleas of Allegheny County granted

PMA’s arbitration demand. In its Order, the Court noted that it would “vacate [its]

. . . order and overrule the preliminary objections within ten (10) days . . . [if GVH]

sends a notice of withdrawal from the [Settlement] [A]greement.” On May 30, 2007,

GVH sent notice of its withdrawal from the Agreement to all of the signatories

(including Nationwide). On June 22, 2007, as it had promised it would, the state

court vacated its May 20, 2007 Order, and overruled PMA’s preliminary objections.

In its Order, the Court of Common Pleas found that the Agreement had terminated on

GVH’s filing of its withdrawal notice, and that GVH was no longer bound by the

arbitration clause.

      On June 7, 2007, American Guarantee and Liability Insurance Co. (AGLIC),

                                          4
another non-party to the Agreement and a defendant in the ACE state court litigation,

filed a third-party Complaint against Nationwide for declaratory judgment and for

contribution with respect to the defense and indemnification of GVH under its policy.

Nationwide answered on August 10, 2007.2

      On October 19, 2007, GVH tendered new asbestos-related claims to

Nationwide (the first since it had accepted Nationwide’s assertion of exhaustion in

1997). On February 4, 2008, GVH filed amended cross-claims in the ACE action

including, for the first time, claims against Nationwide. In its response to GVH’s

amended cross-claims, Nationwide invoked the arbitration clause of the Agreement

as an affirmative defense. On April 1, 2008, Nationwide sent GVH a letter

demanding arbitration under the Agreement. On May 7, 2008, GVH rejected the

demand.

      On May 13, 2008, Nationwide brought this action in the United States District

Court for the District of Western Pennsylvania styled as a Petition to Compel

Arbitration. On July, 10, 2008, GVH moved for summary judgment requesting that

the District Court abstain from exercising jurisdiction in light of the pending state

court actions. On November 8, 2008, Chief Judge Lancaster granted GVH’s motion

finding that Nationwide was in privity with PMA with which it shared an “identity

      2
       Although Nationwide listed the right to arbitration among its affirmative
defenses, the Agreement did not apply to AGLIC as a non-party.
                                         5
of interest in enforcing the arbitration agreement.” The District Court further found

that Nationwide was collaterally estopped from invoking the arbitration clause

because GVH had been permitted by the Court of Common Pleas to withdraw from

the Agreement. As an alternative ground, the District Court cited to the abstention

doctrine of Colorado River Water Conservation Dist. v. United States, 424 U.S. 800

(1976).3 Nationwide appealed the decision to this Court.

      This Court reversed. See Nationwide, 571 F.3d at 314. We found that contrary

to the District Court’s determination, Nationwide and PMA were not in privity and

“at the time of the state court’s ruling in the PMA Action, Nationwide’s interests were

not even adverse to [GVH] and so cannot rightly be said to have been aligned with

PMA’s.” Id. at 307. We noted that “[a]t that juncture, [GVH] had not even submitted

a claim to Nationwide, and there was no arbitrable dispute between the two.” Id. at

313. With regard to abstention, we found “[t]he circumstances presented in Moses

H. Cone analogous.” Id. at 309. Accordingly, we hewed to its holding that the policy

favoring arbitration takes precedence even when parties will be required to resolve

related disputes in other forums “because the relevant federal law requires piecemeal

      3
        The Supreme Court in Colorado River established narrow grounds for district
courts to stay or dismiss federal lawsuits in deference to parallel state proceedings.
The Court cautioned that “[a]bstention . . . is the exception, not the rule. . . .
[D]ismissal [here] was proper [based] on considerations of ‘[w]ise judicial
administration, giving regard to conservation of judicial resources and comprehensive
disposition of litigation.’” Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp.,
460 U.S. 1, 15 (1983) (quoting Colorado River, 424 U.S. at 817).
                                          6
resolution when necessary to give effect to an arbitration agreement.” Id. (quoting

Moses H. Cone, 460 U.S. at 20-21). Ultimately, we held “that the ruling of the Court

of Common Pleas denying arbitration in the PMA action does not serve as a viable

basis for the District Court’s preclusion order against Nationwide,” and remanded the

case to the District Court for consideration of the merits of Nationwide’s Petition to

Compel Arbitration. Nationwide, 571 F.3d at 314.

      In a comprehensive opinion dated April 9, 2010, Chief Judge Lancaster denied

GVH’s motion for summary judgment and allowed Nationwide’s petition for

arbitration. The District Court found that the arbitration demand had been timely

filed, and that Nationwide had not waived its right to arbitration by participating in

the state court litigation. In this regard, the District Court noted that the bulk of

Nationwide’s discovery and motion practice had been confined to nonarbitrable

matters. GVH then took this appeal.

      Our review of a decision on summary judgment is plenary. See Biliski v. Red

Clay Consol. Sch. Dist. Bd. of Educ., 574 F.3d 214, 218 (3d Cir. 2009). Similarly,

plenary review is given to the District Court’s determination of a waiver of the right

to arbitration. See Nino v. Jewelry Exch., Inc., 609 F.3d 191, 199-200 (3d Cir. 2010).

We review the court’s factual findings for clear error. Id. at 200, citing Zimmer v.

CooperNeff Advisors, Inc., 523 F.3d 224, 228 (3d Cir. 2008).

      In its appeal, GVH focuses on the waiver arguments rejected by the District

                                          7
Court, that Nationwide by “participating extensively” in the state court litigation

waived its right to arbitration, and that the demand for arbitration in any event was

untimely and prejudicial causing GVH “unnecessary delay” and “unnecessary

expense.” GVH contends that had Nationwide truly intended to pursue arbitration

from the beginning, its recourse was to seek a stay of the proceedings in the Court of

Common Pleas.

      We disagree essentially for the reasons stated in the District Court’s opinion.

There is a strong presumption in the federal law favoring arbitration. Moses H. Cone,

460 U.S. at 24-25; Ehleiter v. Grapetree Shores, Inc., 482 F.3d 207, 219 n.10 (3d Cir.

2007). There is an equally strong presumption against an implied waiver of

arbitration rights. PaineWebber, Inc. v. Faragalli, 61 F.3d 1063, 1068 (3d Cir. 1995).

GVH’s argument that the arbitration demand was untimely and caused it prejudice

appears to be based more on a rote recitation of the legal standard governing a waiver

of arbitration rights than on the actual facts. See Hoxworth v. Blinder, Robinson &

Co., Inc., 980 F.2d 912, 925-926 (3d Cir. 1992). Nationwide’s petition was filed less

that two months after GVH brought it into the ACE litigation as a third-party

defendant. It instituted this action under the Federal Arbitration Act within seven

days of GVH’s formal rejection of the arbitration demand. And, as the District Court

observed, most of the litigation conduct about which GVH complains occurred after

the arbitration demand was made.

                                          8
       We have even less sympathy for GVH’s plaints of prejudice. The District

Court had it right. Almost all of Nationwide’s discovery involved nonarbitrable

matters and the blame for any “unnecessary expense” is to be laid at the feet of PMA

and AGLIC, the instigators of the state court litigation, and not Nationwide.

      For these reasons, we will affirm the judgment of the District Court.

                                         9