Portland General Electric Co. v. Liberty Mutual Insurance Co., 862 F.3d 981

Background

PGE contracted with a Contractor under a Construction Contract that allowed termination for default; that contract referenced arbitration but did not mandate it and reserved jurisdiction to Oregon federal courts.
The Construction Contract required a performance Bond (issued by Sureties Liberty Mutual and Zurich) that incorporated the Construction Contract and was silent on arbitration; it also required a Guaranty from parent Abengoa.
Abengoa’s Guaranty expressly required ICC arbitration of disputes “in connection with this Guaranty” and allowed impleader of third parties (with consent) for claims “aris[ing] out of or in connection with” the subcontractor or guaranty.
After PGE terminated the Construction Contract, Abengoa filed ICC arbitration against PGE and sought joinder of the Sureties; the Sureties consented to arbitration and denied liability under the Bond.
PGE sued the Sureties in federal court seeking an injunction to stop the Sureties from participating in the ICC arbitration, arguing the Sureties were improperly impleaded and that the dispute must be litigated in Oregon courts.
The district court enjoined arbitration and denied a stay under the FAA; the Sureties appealed and this Court stayed the district-court proceedings pending appeal.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether questions about impleader and scope of arbitration should be decided by court or arbitrator	PGE: Because the Bond lacks an arbitration clause and PGE never agreed with the Sureties to delegate arbitrability, the court should decide whether PGE’s dispute with the Sureties is arbitrable	Sureties: The Guaranty incorporates ICC Rules, which clearly and unmistakably delegate gateway arbitrability questions to the arbitral tribunal	Held: Delegation was clear — incorporation of ICC Rules vests arbitrators with authority to decide arbitrability questions, so tribunal should decide scope and impleader validity
Whether PGE–Sureties dispute is within the Guaranty’s arbitration scope	PGE: The Guaranty’s arbitration covers disputes "in connection with this Guaranty," not disputes under the Bond; SoPGE’s claim should be litigated	Sureties/Abengoa: The Sureties’ liability depends on the same underlying question (Contractor default), so the Sureties’ claim is at least arguably covered by the Guaranty	Held: The Sureties’ claim is at least arguably covered; therefore the arbitrator must determine whether PGE must arbitrate its claim against the Sureties
Whether district court should have stayed or dismissed litigation under FAA § 3	PGE: Court need not stay because arbitrability for this dispute is for the court to decide	Sureties: If arbitrator decides the claim is covered, the FAA mandates a stay or dismissal	Held: District court erred in refusing a stay/enjoining arbitration; if arbitrator finds arbitration covers the dispute, the court must stay or dismiss under the FAA; if not, court may proceed or grant a discretionary stay
Appealability of denial of discretionary stay	N/A	Sureties appealed denial of discretionary stay	Held: Appeal from denial of discretionary stay dismissed for lack of appellate jurisdiction

Key Cases Cited

Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (1983) (resolve doubts about arbitrability in favor of arbitration)
Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (2002) (gateway arbitrability questions may be for arbitrator if parties clearly and unmistakably agreed)
Momot v. Mastro, 652 F.3d 982 (9th Cir. 2011) (standard of review for court deciding arbitrability)
Brennan v. Opus Bank, 796 F.3d 1125 (9th Cir. 2015) (incorporation of AAA rules can be clear delegation to arbitrator)
Shaw Grp. Inc. v. Triplefine Int’l Corp., 322 F.3d 115 (2d Cir. 2003) (incorporation of ICC rules delegates arbitrability to arbitrator)
Apollo Comput., Inc. v. Berg, 886 F.2d 469 (1st Cir. 1989) (same conclusion re: ICC rules)
Reid v. Doe Run Res. Corp., 701 F.3d 840 (8th Cir. 2012) (appealability rules regarding denial of discretionary stay)
Invista S.A.R.L. v. Rhodia, S.A., 625 F.3d 75 (3d Cir. 2010) (same)