Court Opinion

ID: 172184
Source: CourtListenerOpinion
Date Created: 2010-08-14 18:46:52+00
Date Added: 2024-06-11T09:14:20.505336
License: Public Domain

FILED
                                                            United States Court of Appeals
                                                                    Tenth Circuit

                                                                    May 22, 2009
                 UNITED STATES COURT OF APPEALS A. Shumaker
                                            Elisabeth
                                                                    Clerk of Court
                                TENTH CIRCUIT

 MID-CONTINENT CASUALTY
 COMPANY, an Oklahoma corporation,

          Plaintiff-Appellee,

 v.

 GENERAL REINSURANCE
                                                          No. 07-5050
 CORPORATION, a Delaware
                                                   (D.C. No. 06-CV-475-EA)
 corporation,
                                                        (N. Dist. Okla.)
      Defendant-Appellant.
 _____________________

 REINSURANCE ASSOCIATION OF
 AMERICA,

          Amicus Curiae.

                           ORDER AND JUDGMENT *

Before MURPHY, SEYMOUR, and BALDOCK, Circuit Judges.

      Mid-Continent Casualty Company (“Mid-Continent”) entered into two

contracts for reinsurance with General Reinsurance Corporation (“GenRe”). After

      *
         This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. It may be cited,
however, for its persuasive value consistent with F ED . R. A PP . P. 32.1 and 10 TH
C IR . R. 32.1.
a dispute arose between the parties, Mid-Continent filed suit against GenRe in

federal court. GenRe moved to compel arbitration under the Federal Arbitration

Act (“FAA”), 9 U.S.C. § 1 et seq. The district court denied the motion, finding

(1) Oklahoma law controlled because the FAA was reverse preempted by the

McCarran-Ferguson Act, 15 U.S.C. § 1012, 1 and (2) the arbitration clauses were

unenforceable under Oklahoma law. GenRe appeals.

      GenRe and Mid-Continent executed two reinsurance contracts (collectively,

the Reinsurance Agreements), the first in 1992 and the second in 2000. 2 Both

contracts contained arbitration clauses. On September 12, 2006, Mid-Continent

brought suit against GenRe, alleging GenRe breached the Reinsurance

Agreements by failing to indemnify Mid-Continent for expenses incurred in the

settling of various claims. GenRe moved to compel arbitration and Mid-

Continent objected, arguing that Oklahoma law prohibited arbitration of

reinsurance contract disputes.

      At the time the Reinsurance Agreements were formed, the Oklahoma

Uniform Arbitration Act (“OUAA”) applied to arbitration clauses in reinsurance

contracts, rendering them presumptively valid and enforceable. The

      1
         The McCarran-Ferguson Act saves state statutes relating to “the business
of insurance” from preemption by federal law, providing instead that state law
governs. 15 U.S.C. § 1012 (b).
      2
       Agreement Number B404 was executed on January 23, 1992, and
Agreement Number 8793 was executed on November 10, 2000.

                                        -2-
OUAA–which made arbitration agreements “valid, enforceable and

irrevocable”–excluded “contracts which reference insurance,” but excepted

“contracts between insurance companies” (i.e., reinsurance contracts) from that

exclusion. 3 Okla. Stat. tit. 15, § 802(A) (1978) (repealed 2005) (“Original Act”).

In Oklahoma, arbitration clauses are invalid unless expressly authorized by

statute. See Rollings v. Thermodyne Indus., 910 P.2d 1030, 1036 (Okla. 1996).

      In 2005, before this suit was filed, the Oklahoma Legislature enacted a

revised version of the OUAA and repealed the previous act. Okla. Stat. tit. 12 ch.

38B (“Revised Act”). 4 Pertinently, the Revised Act no longer excepted

reinsurance contracts from the Act’s exclusion of contracts that reference

insurance. Id. at § 1855(D) (2005) (amended 2008). Also relevant to this appeal

is the Revised Act’s retroactivity provision: “Beginning January 1, 2006, the

Uniform Arbitration Act governs an agreement to arbitrate whenever made.” Id.

      3
        In full, section 802(A) provided,
      This act shall apply to a written agreement to submit any existing
      controversy to arbitration or a provision in a written contract to
      submit to arbitration any controversy thereafter arising between the
      parties. Such agreements are valid, enforceable and irrevocable,
      except upon such grounds as exist at law or in equity for the
      revocation of any contract. This act shall not apply to collective
      bargaining agreements or contracts with reference to insurance
      except for those contracts between insurance companies.
Okla. Stat. tit. 15, § 802(A).
      4
         Because both the 1978 Act and the 2005 Act were entitled “Uniform
Arbitration Act,” we refer to the 1978 Act as the “Original Act” and the 2005 Act
as the “Revised Act.”

                                        -3-
at § 1854(C).

      In May 2008, after oral argument in this case, the legislature amended

section 1855(D), reinserting the provision excepting reinsurance contracts from

the Act’s exclusion of insurance contracts. Thus, section 1855(D) currently

reads, “The [OUAA] shall not apply to collective bargaining agreements and

contracts of insurance, except for those contracts between insurance companies.”

Okla. Stat. tit. 12, § 1855(D) (emphasis added). In short, the Amendment makes

the OUAA applicable to contracts between insurance companies–rendering

arbitration clauses presumptively valid and enforceable–as it was prior to the

adoption of the Revised Act in 2005. The Amendment went into effect on

November 1, 2008.

      In the first round of briefing, GenRe contended that the Original Act

governs, permitting arbitration in reinsurance contracts. GenRe raised three

additional arguments in the alternative: (1) the Revised Act violates the Contracts

Clause because it substantially impairs the obligations of reinsurance contracts;

(2) the Revised Act does not prohibit arbitration clauses in reinsurance contracts

but instead defers to common law; and (3) Oklahoma public policy favors

arbitration and therefore cannot serve as a basis for reverse preemption under the

McCarran-Ferguson Act.

      In its supplementary briefing filed after the enactment of the 2008

Amendment, GenRe concedes that the Revised Act applies to “pre-existing

                                         -4-
agreements” and contends that the Amendment governs contracts as of its

effective date. It re-asserts its other arguments, pointing to the Amendment’s

passage as further proof that state public policy favors arbitration provisions in

reinsurance contracts.

      We review the denial of a motion to compel arbitration de novo. See

Ansari v. Qwest Commc’ns, Corp., 414 F.3d 1214, 1218 (10th Cir. 2005). As an

initial matter, we note that resolution of this appeal is complicated by the 2008

Amendment, which changed the applicable law after the district court issued its

decision. The question presented is thus whether the Revised Act as amended

makes effective the arbitration clauses contained in the Reinsurance Agreements.

We must first determine whether the Amendment to the Revised Act applies to

the Reinsurance Agreements, and, if so, whether the statute as amended expressly

authorizes arbitration agreements in reinsurance contracts. See Williams v. W.D.

Sports, N.M., Inc., 497 F.3d 1079, 1086 n.5 (10th Cir. 2007) (“[A]n appellate

court must apply the law in effect at the time it renders its decision.”).

      The 2008 Amendment was approved May 2, 2008, and contained an

effective date of November 1, 2008. The bill did not specify whether the

Amendment would apply retroactively to contracts executed before November 1,

2008, and the parties did not address this issue in their supplementary briefing. 5

      5
        While GenRe did note that the Amendment would govern the
Reinsurance Agreements once it became effective, it did not provide any analysis

                                          -5-
However, because the new law merely amended one provision of the Act, we look

to the Revised Act itself to determine whether it is retroactive as amended.

      This question is easily resolved, as the Revised Act is clearly retroactive,

both by its express terms and as interpreted by the Oklahoma Supreme Court.

Section 1854(C) of the Revised Act makes it applicable to “agreement[s] to

arbitrate whenever made,” Okla. Stat. tit. 12, § 1854(C), and the Oklahoma

Supreme Court has held that it applies retroactively to agreements made prior to

its effective date. Sooner Builders & Invs., Inc. v. Nolan Hatcher Const. Servs.,

L.L.C., 164 P.3d 1063, 1070 (Okla. 2007). We therefore conclude that the 2008

Amendment is governed by the Revised Act’s retroactivity provision and applies

to the contracts at issue here.

      A counter-holding–i.e., the Revised Act is retroactively applicable but the

2008 Amendment is not–would be at odds with legislative intent. It would also

conflict with the presumption under Oklahoma law that procedural laws are

immediately effective. 6 See id. (“[A]rbitration is a form of procedure, and

or support for that proposition.
      6
         This rule functions as an exception to the general rule that laws are
presumptively prospective. See Thomas v. Cumberland Operating Co., 569 P.2d
974, 976 (Okla. 1977) (“As a general rule statutes are construed to operate
prospectively, unless the legislature clearly expresses an intent that it operate
retrospectively. However, legislation which is general in its terms and affects
only procedural matters is presumed to have been intended to be applicable to all
actions, whether pending or not, absent any expressed intention to the contrary.”).

                                         -6-
procedural law is presumed to be applicable to pending cases absent an express

legislative intent to the contrary.”). In sum, Sooner Builders placed the Revised

Act in the category of procedural statutes presumed to be applicable to pending

cases, and we can see no reason why the 2008 Amendment should be treated any

differently.

      Having determined that the Amendment applies retroactively to contracts

executed before its effective date, the only remaining question is whether the

Amendment renders the arbitration clauses in the Reinsurance Agreements valid

and enforceable. In the supplemental briefing filed following the Amendment’s

enactment, neither party addressed what effect the 2008 Amendment would have

if we were to decide the case after its effective date of November 1, 2008.

Resolution of this question is straightforward, however.

      Under Oklahoma law, “agreements to submit future controversies to

arbitration are contrary to public policy” and therefore unenforceable. Cannon v.

Lane, 867 P.2d 1235, 1238 (Okla. 1994) (holding arbitration clause unenforceable

where contract was expressly excluded from the OUAA’s reach). But “the

common law rule prohibiting arbitration does not apply when there is specific

legislative approval.” Rollings, 910 P.2d at 1036 (Okla. 1996) (holding voluntary

arbitration provision enforceable). Section 1857 of the Revised Act provides:

      An agreement contained in a record to submit to arbitration any
      existing or subsequent controversy arising between the parties to the
      agreement is valid, enforceable, and irrevocable except upon a

                                         -7-
      ground that exists at law or in equity for the revocation of a contract.

Okla. Stat. tit. 12, § 1857(A) (emphasis added). As the Oklahoma Supreme Court

concluded in Rollings, this provision constitutes express legislative approval of

arbitration clauses. 910 P.2d at 1033. 7 The 2008 Amendment, which restored the

language of the Original Act permitting arbitration in reinsurance contract

disputes, brings reinsurance contracts within the scope of the Revised Act. Okla.

Stat. tit. 12, § 1855(D). We therefore hold that the Revised Act as amended

renders the Reinsurance Agreements valid and enforceable.

      The case is REVERSED and REMANDED for proceedings consistent with

this opinion.

                                        ENTERED FOR THE COURT

                                        Stephanie K. Seymour
                                        Circuit Judge

      7
           Rollings was analyzing the parallel provision of the Original Act, Okla.
Stat. tit. 15, § 802(A), which contained substantively similar language. See 910
P.2d at 1033 n.3.

                                         -8-