ESAB Group, Incorporated v. Zurich Insurance PLC
685 F.3d 376
| 4th Cir. | 2012Background
- ESAB Group, SC-based, insured by ZIP; ZIP policies were issued worldwide with some arbitration clauses (1989-1993) and others lacking arbitration (1994-1995).
- Trygg-Hansa initially insured ESAB and later transferred obligations to ZIP; ZIP is Irish, not SC-based, with ESAB as a South Carolina company.
- ESAB Group faces numerous products-liability suits in the U.S.; ESAB sues insurers in SC state court seeking defense and indemnity; insurers remove to federal court under the Convention and Convention Act.
- District court followed Safety National approach, holding the Convention directs enforcement of foreign arbitration and that McCarran-Ferguson cannot reverse-preempt the Convention Act.
- ZIP challenges personal jurisdiction; ESAB seeks arbitration of 1989-1993 ZIP Policies in Sweden; district court finds minimum contacts and refers those claims to arbitration, remanding 1994-1995 claims to state court.
- ESAB and ZIP both appeal: ESAB challenging jurisdiction rationale and arbitration linkage; ZIP challenging personal jurisdiction and the remand authority.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether McCarran-Ferguson reverse preemption applies to the Convention Act. | ESAB: McCarran-Ferguson could reverse-preempt the Convention Act. | ZIP: McCarran-Ferguson covers all Acts of Congress, including the Convention Act, negating Convention Act effect. | Convention Act not subject to reverse preemption; jurisdiction affirmed. |
| Whether Article II of the Convention is self-executing and its status affects preemption. | Article II directive to enforce foreign arbitral agreements suggests self-execution. | Treaty self-execution status uncertain; Convention Act implementing legislation governs. | Even if non-self-executing, Convention Act falls outside McCarran-Ferguson’s reach; no reversal of Convention Act. |
| Whether the district court had personal jurisdiction over ZIP. | ZIP targeted South Carolina; policy territory includes SC; ZIP benefited from coverage; sufficient contacts. | ZIP lacks SC offices, license, or property; contracts formed abroad; insufficient per 4(k) due process. | SC long-arm/ due process satisfied; personal jurisdiction affirmed. |
| Whether the district court could remand nonarbitrable claims to state court after sending arbitrable claims to Sweden. | All claims arise under Convention; district court should keep them; remand improper. | §1367(c) permits remand of nonarbitrable claims after arbitration of related matters. | District court had authority to remand; discretionary, and no abuse of discretion. |
Key Cases Cited
- Michelin Tire Corp. v. Wages, 423 U.S. 276 (Supreme Court 1976) (federal voice in regulating foreign commerce)
- Japan Line, Ltd. v. Cnty. of L.A., 441 U.S. 434 (Supreme Court 1979) (uniform international trade policy)
- American Ins. Ass’n v. Garamendi, 539 U.S. 396 (Supreme Court 2003) (McCarran-Ferguson limits on preemption of international agreements)
- Safety National Cas. Corp. v. Certain Underwriters at Lloyd’s, London, 587 F.3d 714 (5th Cir. 2009) (reverse preemption; treaty vs. statute distinction)
- United States v. S.-E. Underwriters Ass’n, 322 U.S. 533 (Supreme Court 1944) (insurance regulated under commerce clause)
- Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (Supreme Court 1985) (international arbitration policy favors arbitration)
- Garamendi (cited as Garamendi, American Ins. Ass’n v. Garamendi), 539 U.S. 396 (Supreme Court 2003) (McCarran-Ferguson and international agreements)
- Medellin v. Texas, 552 U.S. 491 (Supreme Court 2008) (treaties self-executing status and implementing legislation)