ORDER
AND NOW, this 24th day of February, 2011, upon consideration of the Report and Recommendation of United States Magistrate Judge William T. Prince (Doc. 31), recommending that Lincoln’s motion for summary judgment (Doc. 19) be granted, that GGIS and Acunto’s motion for summary judgment (Doc. 16) be denied, and that the petition to vacate the arbitration award (Doc. 1) be denied, and, following an independent review of the record and noting that it appearing that neither party has objected to the magistrate judge’s report and recommendation, and that there is no clear error on the face of the record,
1
see Nara v. Frank,
1. The Report and Recommendation of Magistrate Judge Prince (Doc. 31) is ADOPTED in its entirety.
2. Lincoln’s motion for summary judgment (Doc. 19) is GRANTED.
3. GGIS and Acunto’s motion for summary judgment (Doc. 16) is DENIED.
4. The petition to vacate the arbitration award (Doc. 1) is DENIED.
5. The Clerk of Court is directed to CLOSE this case.
REPORT AND RECOMMENDATION
Pursuant to an Order entered on November 9, 2010 (Doc. 30), Honorable Judge Christopher C. Conner referred the pending motions for summary judgment (Docs. 16, 19) to the undersigned Magistrate Judge for the purpose of preparing a Report and Recommendation.
I. Background
This case revolves around a written agreement between GGIS Insurance Ser
(A) Facts of the case
The material facts of this case are undisputed, and as related here, are drawn from the parties’ submissions to the Court.
(1) The parties and their contracts
GGIS is a California corporation with its principal place of business in California. (Doc. 20, ¶ 1; Doc. 23, ¶ 1.) Richard Acunto is an adult individual and a resident of California. (Doc. 20, ¶ 2; Doc. 23, ¶ 2.) At all relevant times, Acunto was the principal owner, president, and CEO of GGIS. (Doc. 20, ¶ 3; Doc. 23, ¶ 3.) Lincoln is a Pennsylvania corporation with its principal place of business in Pennsylvania. (Doc. 20, ¶4; Doc.23, ¶4.)
In April 2005, GGIS and Lincoln entered into a written agreement, effective April 19, 2005, entitled the Program Manager Agreement (PMA), under which GGIS agreed to become a general agent for Lincoln. (Doc. 18, ¶ 1; Doc. 25, ¶ 1.) Under the agreement, GGIS acted as Lincoln’s fiduciary in managing insurance brokers selling Lincoln’s insurance policies. (Doc. 18, ¶ 1; Doc. 25, ¶ 1.) Acunto, as CEO of GGIS, executed the PMA on GGIS’s behalf on April 27, 2005; Scott Butler, a VP of Lincoln, executed it on April 29. (Doc. 18, ¶¶2-3; Doc.25, ¶¶2-3.)
Acunto separately executed a “Manager’s Personal Guaranty” in his personal capacity on April 27, 2005. (Doc. 18, ¶ 4; Doc. 25, ¶ 4.) It is disputed whether the Guaranty was “annexed” to the PMA (Doc. 18, ¶ 4) or “incorporated into and made a part of’ the PMA (Doc. 25, ¶ 4.)
(2) Pertinent excerpts from the PMA and the Guaranty
Article XIX of the PMA contains the agreement’s provision for arbitration:
A. Submission to Arbitration. In the event of any dispute between the Company [Lincoln] and the Manager [GGIS] with reference to the interpretation, application, formation, enforcement or validity of this Agreement, or their rights with respect to any transaction involved, whether such dispute arises before or after termination of this Agreement, such dispute, upon written request of either party, shall be submitted to the decision of a board of arbitration .... Notwithstanding the generality of the foregoing, the Company’s right ... to obtain any other legally available injunctive remedies shall not be limited by the submission of any dispute to arbitration. The board of arbitration will have complete jurisdiction over the entire matter in dispute, including any question as to its arbitrability.
J. Procedural Law. The Pennsylvania Arbitration Act shall govern the conduct of arbitrations pursuant to this Agreement.
(Doc. 18-3, at 20-21.) The following Article XX provides that “[t]he rights of the parties to this Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania without regard to Pennsylvania rules on conflict of laws.” (Id. at 21.)
NOW THEREFORE, to induce LGIC [Lincoln] to enter into the Agreement, a copy of which is attached hereto and incorporated herein as if fully set forth, the undersigned [Acunto in his individual capacity] ... with intent to be legally and personally bound does hereby agree:
1. The recitals heretofore set forth are incorporated herein as if fully set forth.
(Doc. 18-3, at 42.)
On April 24, 2007, Lincoln sent GGIS a letter terminating the PMA, but GGIS remained Lincoln’s agent for the purpose of servicing existing business until its expiration. (Doc. 21, ¶ 11; Doc. 23, ¶ 11.)
(3) Subsequent court actions
On April 27, 2007, Lincoln filed a civil action in California state court in the West District of Los Angeles County, following Lincoln’s “concerns over GGIS’s treatment of escrowed funds held by GGIS in trust.” (Doc. 18, ¶ 8; Doc. 25, ¶ 8; Doc. 20, ¶ 12; Doc. 23, ¶ 12.) The claims in that action arose out of the PMA, upon which Lincoln later based its arbitration claims. (Doc. 18, ¶ 8; Doc. 25, ¶8.) On May 1, 2007, Lincoln filed an ex parte application for an order to show cause why a preliminary injunction and temporary restraining order should not be issued against GGIS; the court denied the application the same day. (Doc. 18-3, at 46-47.) Lincoln voluntarily dismissed the action on July 27, 2007, based on the parties’ intention to negotiate a resolution. (Doc. 18, ¶ 8; Doc. 25, ¶ 8.)
On July 30, 2008, Lincoln demanded arbitration against both GGIS and Acunto in his individual capacity, seeking resolution of matters related to an escrow account and monetary claims arising from contingent commissions allegedly due to Lincoln under the terms of the PMA. (Doc. 18, ¶ 14; Doc. 25, ¶ 14; Doc. 18-3, at 77.) An arbitration panel was assembled. On June 26, 2009, an organizational meeting took place at Lincoln’s offices. An attorney for GGIS, Michael Stoller, participated via teleconference, making a “special appearance” to protest to the panel that arbitration was the improper forum for the dispute in light of the litigation filed in California. (Doc. 18, ¶ 15; Doc. 25, ¶ 15.) On September 11, 2009, the arbitration panel informed all parties that “the Panel currently considers that [the claim asserted by Lincoln in this arbitration against Mr. Acunto in his individual capacity] falls within the purview of the current arbitration and that the presently constituted Panel is the appropriate body to resolve all disputes pertaining to this claim.” (Doc. 18, ¶ 16; Doc. 25, ¶ 16; Arbitral Panel’s Order of Feb. 27, 2010, Doc. 18-3, at 89, 92.) The panel also confirmed a hearing date scheduled for March 1, 2010. (Doc. 18, ¶ 16; Doc. 25, ¶ 16; Doc. 18-3, at 92.)
By letters dated February 24, 25, and 26, 2010, GGIS and Acunto requested an extension of time for the commencement of arbitration proceedings. (Doc. 18, ¶ 17; Doc. 25, ¶ 17.) They explained that the arbitration should not proceed against Acunto because he had never consented to the arbitration and that any arbitration or award would violate his due-process rights. (Doc. 18, ¶ 17; Doc. 25, ¶ 17.) They further stated to the panel that Lincoln had already pursued its claims in California state court, arguing that Lincoln had thereby waived its right to enforce arbitration against GGIS. (Doc. 18, ¶ 17; Doc. 25, ¶ 17.)
On February 27, 2010, the panel issued an order denying GGIS and Acunto’s re
The hearing took place on March 1, 2010. Counsel for GGIS and Acunto argued to the panel that the panel did not have jurisdiction over Acunto and requested a reconsideration of the February 27 order. (Doc. 18, ¶ 20; Doc. 25, ¶ 20.) The panel denied the request. (Doc. 18, ¶ 20; Doc. 25, ¶ 20; Final Arbitration Award, March 30, 2010, Doc. 18-3, at 121, 124.) GGIS and Acunto did not participate in the March 1 hearing, except to the extent that counsel provided a jurisdictional argument on Acunto’s behalf, and they provided no evidence or testimony regarding the merits of Lincoln’s arbitration claim. (Doc. 18, ¶ 21; Doc. 25, ¶ 21.)
The arbitration panel’s final award of March 30, 2010, reaffirmed its finding that it had jurisdiction over both GGIS and Acunto. (Doc. 18-3, at 122.) The panel found Guardian in default on its obligation to pay contingent commissions due to Lincoln totaling $1,029,432 and its obligation to fund an escrow account for future contingent commissions in the amount of $923,083. (Id) The panel’s order required Guardian and Acunto to pay Lincoln the former sum and deposit the latter sum in an escrow account within 30 days, as well as to reimburse Lincoln $36,402.43 for arbitration costs that it incurred. (Id)
Meanwhile, back on June 24, 2009, GGIS had initiated proceedings against Lincoln in California state court, making a variety of claims arising out of the business dealings between the two entities. (Doc. 18, ¶ 9; Doc. 25, ¶ 9.) GGIS did not serve Lincoln with the suit until January 25, 2010. (Doc. 20, ¶ 17; Doc. 23, ¶ 17.) On February 3, 2010, Lincoln removed the action to the District Court for the Central District of California. (Doc. 18, ¶ 10; Doc. 25, ¶ 10.) On February 11, Lincoln answered the complaint, raising improper venue as an affirmative defense, but did not move to compel arbitration. (Doc. 18, ¶ 11; Doc. 25, ¶ 11.) On March 16, Lincoln filed a motion to dismiss or to transfer venue, which the court granted on May 25; the case was transferred to the Middle District of Pennsylvania, and is one of the three cases consolidated into the matter presently before the Court. (Doc. 20, ¶¶ 20, 21; Doc. 23, ¶¶ 20, 21; Doc. 18, ¶ 13; Doc. 25, ¶ 13.)
(B) Procedural history
The lead case in the consolidated action before the Court originated on April 29, 2010, when GGIS and Acunto filed a petition to vacate or modify the arbitration award. (Doc. 1.) Unlike the other two consolidated cases, this petition was originally filed in federal court in the Middle District of Pennsylvania. (Id.) Lincoln answered the petition on May 21, 2010. (Doc. 8.) Shortly thereafter, on June 7, the Court issued an order (Doc. 10), which, along with a later order of December 1 (Doc. 27), found that GGIS’s petition was one of several cases involving common parties and common questions of fact, and consolidated this case with two others:
• Lincoln Gen. Ins. Co. v. Guardian Gen. Ins. Sews., Inc., No. 10-0932 (the Lincoln state-court action), originallyfiled April 30, 2010 in the Pennsylvania Court of Common Pleas in York County, later removed by GGIS to federal court; in this case, Lincoln petitioned to confirm the arbitration award; and
• Guardian Ins. Servs., Inc. v. Lincoln Gen. Ins. Co., No. 10-1000 (the GGIS state-court action), originally filed June 24, 2009, in California state court, as discussed supra.
Following the June 7 consolidation, GGIS and Acunto filed an answer to the petition in the Lincoln state-court action on June 10,2010. (Doc.12.)
Three months passed, and on September 15, 2010, GGIS and Acunto filed a motion for summary judgment (Doc. 16), along with a brief in support (Doc. 17) and a statement of facts (Doc. 18). That same day, Lincoln filed its own. (Docs. 19-21.) Both sets of parties — GGIS and Acunto on the one hand, and Lincoln on the other— filed briefs in opposition and answers to each others’ statements of facts on October 4. (Docs. 22-25.) Lincoln filed a reply brief on October 21. (Doc. 26.) All filing deadlines having passed for the two motions for summary judgment, the motions are ripe for adjudication.
II. Standard of Review
Federal Rule of Civil Procedure 56(e) requires the court to render summary judgment “forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c). “[TJhis standard provides that the mere existence of
some
alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no
genuine
issue of
material
fact.”
Anderson v. Liberty Lobby, Inc.,
A disputed fact is “material” if proof of its existence or nonexistence would affect the outcome of the case under applicable substantive law.
Anderson, 477
U.S. at 248,
When determining whether there is a genuine issue of material fact, the court must view the facts and all reasonable inferences in favor of the nonmoving party.
Moore v. Tartler,
III. Discussion
As mentioned above, there are two major questions that these consolidated cases present on summary judgment: first, whether the language of incorporation in the Guaranty reached the provision in the PMA requiring arbitration for all related disputes, and second, if the Guaranty did incorporate the PMA’s arbitration provision, whether Lincoln waived its right to demand arbitration by initiating litigation related to the agreement. Because a court’s substantive review of arbitral decisions is highly deferential, the success of GGIS and Acunto’s petition to vacate the arbitration award turns on these jurisdictional issues. See 42 Pa. Cons. Stat. Ann. § 7341 (2007) (precluding substantive review of common-law arbitration awards except in cases of, e.g., “fraud, misconduct, corruption or other irregularity”).
(A) Extent of incorporation by reference
(1) Applicable law
Federal law applies to the interpretation of arbitration agreements.
Gen. Elec. Co. v. Deutz,
The PMA, the contractual validity of which is not disputed, states in Article XX that Pennsylvania law applies to disputes related to the PMA. (Doc. 18-3, at 21.) There is also no dispute either that the Guaranty is valid or that it incorporates Article XX. Accordingly, Pennsylvania law applies inasmuch as state law controls in this case; and under Pennsylvania law, “arbitration provisions, like other contractual provisions, may be incorporated by reference through general incorporation provisions.”
Century,
(2) Whether the Guaranty incorporated the arbitration provision of the PMA
Acunto argues that he never agreed to have claims against him submitted to arbitration. He notes that the Guaranty contains no arbitration clause itself, and that the language incorporating the PMA by reference makes no specific reference to incorporating the arbitration clause.
In his briefs filed in connection with the pending motions, Acunto cites two cases on the topic of incorporation by reference. (Doc. 17, at 10; Doc. 22, at 10.) The first establishes that, under Delaware law, a guaranty and the underlying contract are separate contracts.
In re Stone & Webster, Inc.,
Where the guaranty or promise, though collateral to the principal contract, is made at the same time with the principal contract, and becomes an essential ground of the credit given to the principal debtor, the whole is one original and entire transaction, and the consideration extends and sustains the promise of the principal debtor, and also of the guarantor.
Internationale Graniti S.R.L. v. Monticello Granite Ltd.,
No. 07-1790,
The second case that Acunto cites is
Gen. Elec. Co. v. Deutz AG,
The district court emphasized that the contract’s title named only Moteren-Werke Mannheim AG and General Electric, indicating that they, and not Deutz, were parties to the contract. Id. at 153. Those companies initialed every page of the agreement, but Deutz did not. Id. In Section 7 of the contract, which concerned arbitration, General Electric and Moteren-Werke were specifically mentioned in numerous instances, but Deutz is not mentioned at all in that section. Id. Finally, Deutz signed the contract in a separate signature block, “specifying that it was a party ‘for purposes of the obligations set forth in Section 9.08 hereof and Sections 4.05, 4.06, and 4.07 hereof,’ ” where those sections contained the guaranty and provisions regarding confidentiality. Id.
On the basis of these facts, the district court determined that, because of the ambiguity in the arbitration clause, the question of arbitrability should be submitted to a jury, as permitted by the Federal Arbitration Act.
Id.
The jury returned a special verdict finding that General Electric and Deutz had not agreed to arbitration.
Id.
On appeal, the Third Circuit affirmed the trial court’s decision.
Id.
In its review of relevant federal jurisprudence, the appellate court remarked that although federal policy favors arbitration, and that “any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration,” this presumption does not apply to the question of arbitrability
vel non. Id.
at 154 (quoting
Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp.,
Acunto argues that, based on the parallels he finds between the present case and Detitz, that whether the Guaranty effectively incorporated Article XIX of the PMA is ambiguous — and given that ambiguity in matters of arbitrability means that a court decides the matter, the arbitral panel should not have decided arbitrability. Yet in making this argument, Acunto overlooks critical factual distinctions. Unlike in Deutz, it is not true that the signatories to the underlying contract, in this case Lincoln and GGIS, initialed each page of the contract whereas Acunto did not. Rather, no one initialed the contract page by page. Even more significantly, the part of the contract in Deutz that Deutz signed specifically stated that Deutz was a signatory only for the purposes of certain specified provisions, among which was not the provision that provided for arbitration. Instead, the Guaranty that Acunto signed explicitly incorporated the whole of the PMA “as if fully set forth.” (Doc. 18-3, at 42.) The broad, unconditional language of the Guaranty bears no resemblance to the specifically limited language of the contract that Deutz signed. Deutz does not support Acunto’s argument that there is ambiguity in the matter of whether the Guaranty incorporate the arbitration provision of the PMA.
The primary case that Lincoln cites in support of its position is
Century Indem. Co. v. Certain Underwriters at Lloyd’s, London,
Century involved a set of three substantially similar reinsurance treaties (between Argonaut, an insurer, and Century, a reinsurer) and three corresponding retrocessional agreements (between Century and their retrocessionaire, Lloyd’s). 1 Id. at 519, 550. The reinsurance treaties between Argonaut and Century each contained an arbitration clause as follows: “If any dispute shall arise between the Company [Argonaut] and INA [Century] with reference to the interpretation of this Agreement or their rights with respect to any transaction involved, the dispute shall be referred to three arbitrators ....” Id. at 550 (alterations in original). The corresponding retrocessional agreements between Century and Lloyd’s had language of incorporation. Id.
A dispute over coverage between Argonaut and some of its insureds that began in the late 1970s led Argonaut to seek reimbursement from Century for litigation expenses.
Id.
at 519. Century paid out, then sought from Lloyd’s its share of the costs.
Id.
at 520. Lloyd’s refused to pay, so Century sued Lloyd’s in a case filed first in state court and then removed to federal court.
Id.
Lloyd’s moved to compel arbitration, arguing that the retrocessional agreements’ incorporation language rendered the arbitration provisions in the
Exercising plenary review, the Third Circuit conducted a painstaking analysis of relevant precedent in this and other circuits, ultimately concluding that the incorporation clause of the retrocessional agreements did reach the arbitration clauses of the reinsurance treaties.
Id.
at 555. In reaching this conclusion, the court distinguished cases in which incorporation provisions were found not to reach arbitration clauses in the underlying contracts, but discussed with apparent approval several eases “in harmony with the principle that a general incorporation clause effectively can incorporate an arbitration agreement.”
Id.
at 538.
Compare id.
at 541-2 (citing
World Rentals & Sales, LLC v. Volvo Constr. Equip. Rents, Inc.,
In discussing the specific facts of the case, the
Century
court found it especially convincing that the retrocessional agreements each had “dual” integration clauses.
Id.
at 550. Paragraph 1 of the agreements allocated risks and payments, then incorporated the pertinent reinsurance treaty, stating that a copy of the treaty is attached and “made a part hereof.”
Id.
Paragraph 2 provided: “Subject to the ... allocation in the preceding paragraph, all terms and provisions of the [reinsurance treaty] shall be applied to this agreement as if contained herein....”
Id.
(alteration in original). The Third Circuit observed that this “reiterative incorporation clause” was phrased “more strongly and expansively” than in many of the cases in which incorporation clauses were held to reach the arbitration clause.
Id.
at 551-52 (citing
Progressive Cas. Ins. Co. v. C.A. Reaseguradora Nacional De Venezuela,
The absence of certain sorts of language from the incorporation clauses lent further support to the Third Circuit’s conclusion. For instance, there was no provision in any of the contracts at issue in
Century
that limited the applicability of the incorporated arbitration clause.
Id.
at 552 (citing
U.S. Small Bus. Admin, v. Chimicles,
Arguing against the relevance of
Century,
Acunto insists that he never agreed to arbitrate claims against him and reminds the Court that the Guaranty itself neither contains an arbitration clause nor specifically incorporates one by reference. (Doc. 22, at 10.) Whether Acunto agreed to arbitration is, of course, exactly what is in issue in this case. As for the Guaranty’s lack of specific reference to arbitration, such lack is not outcome determinative. Neither
Century
nor other pertinent case law requires explicit reference to an arbitration clause in order for language of incorporation to incorporate an arbitration provision. To the contrary, since arbitration agreements are subject to the same standard of review as any other contract, no “express” or “unequivocal” reference to an arbitration clause is required.
Century,
(3) The “what” and “who” of arbitrability
The term “arbitrability” is, by, itself, ambiguous. A question of arbitrability may relate, on the one hand, to whether a particular merits-based issue is subject to arbitration; or on the other, it may relate to the matter of who — the court or the arbitrator — is empowered to decide what is arbitrable.
See First Options of Chi., Inc. v. Kaplan,
Given the discussion in Part III.A.2 and its conclusion, that the Guaranty did incorporate Article XIX of the PMA and render its arbitration provision binding against Acunto, there is no question that any matter relating to the merits of a dispute arising under the PMA is subject to arbitration. Over and above the presumption of a broad scope of arbitrability, paragraph A of Article XIX states: “The board of arbitration will have complete jurisdiction over the entire matter in dispute .... ” (Doc. 18-3, at 20.) Acunto has presented no argument or evidence to suggest that the merits of his dispute with Lincoln are not within the scope of the PMA’s arbitration clause, and the general presumption favoring arbitration, as well as the explicit language of Article XIX, conclude the matter: the dispute is subject to arbitration. Acunto’s dispute is whether the arbitral panel had the authority to determine its own jurisdiction. Acunto argues that he did not agree to arbitrate arbitrability, that is, the “who” of arbitrability; and Lincoln argues that he did.
A federal court always has jurisdiction to determine its own jurisdiction.
See United States v. United Mine Workers,
The last sentence of PMA Article XIX at issue reads: “The board of arbitration will have complete jurisdiction over the entire matter in dispute, including any question as to its arbitrability.” (Doc. 18-3, at 20.) The parties in this case devote little discussion to the wording of this provision. Acunto generally states that the arbitral panel “improperly usurped this Court’s role by making the initial and critical determination of arbitrability, i.e., whether the parties agreed to arbitrate” (Doc. 17, at 8); Lincoln summarily proclaims that it “is beyond dispute that Acunto agreed to arbitrate the issue of arbitrability,” and that “[t]o suggest otherwise is illogical” (Doc. 24, at 12.) Although the parties’ superficial treatment of the matter suggests otherwise, the language of Article XIX requires closer attention.
Both GGIS and Lincoln, the parties to the PMA, are sophisticated entities that can be assumed to have chosen the language of their contract carefully, with full awareness of the import of the words they used.
Century Indem. Co. v. Certain Underwriters at Lloyd’s,
The sentence of Article XIX in question can be broken down into two parts. There is first the general statement: “The board of arbitration will have complete jurisdiction over the entire matter in dispute ____” As discussed above, this statement is a clear reference to the scope of issues subject to arbitration. But the sentence continues, giving the board jurisdiction over the entire matter “including any question as to its arbitrability.” If this second clause referred only to the
So, then, the second part of the closing sentence of Article XIX, Paragraph A represents the parties’ intention to arbitrate arbitrability. Far from being silent or ambiguous on the matter of who should decide arbitrability, Article XIX contains language that, unless it were rendered meaningless, must be read as reserving to the arbitral board the power to decide whether a particular dispute is arbitrable.
See First Options of Chi., Inc. v. Kaplan,
Because the questions regarding both the “what” and “who” of arbitrability were properly before the arbitral panel, the Court cannot disturb their conclusions in the absence of exceptional circumstances like fraud, corruption or evident partiality. 9 U.S.C. § 10 (2009); 42 Pa. Cons. Stat. Ann. § 7341 (1980). Since no party has presented any evidence or argument of such exceptional circumstances, it is recommended that the panel’s decision be held to have been properly rendered within its contractually appointed power.
(B) Waiver
GGIS argues that the arbitration award against it should be set aside because Lincoln waived its right to arbitration when it litigated arbitrable matters. Additionally, GGIS urges, Lincoln should have filed a motion to compel arbitration, but it did not. According to GGIS, waiver through litigation deprived the arbitrable panel of its jurisdiction over the dispute, meaning the panel exceeded its powers by issuing an award.
One of the problems with GGIS’s argument lies in the different treatment accorded substantive and procedural arbitration questions. Although “substantive arbitrability” — the question of whether the parties agreed to arbitrate — is usually left to a court’s determination, matters of “procedural arbitrability,” which include “allegation[s] of waiver, delay, or a like defense to arbitrability,” are presumptively left to the arbitrator.
Ross Dev. Co. v. Advanced Bldg. Dev., Inc.,
GGIS also argues that Lincoln effected an implicit waiver of its right to arbitration. Even if this were not a procedural question that is within the arbitrators’ jurisdiction to answer, GGIS’s argument would founder here. Implicit waiver can be inferred from “acts or language so inconsistent with a purpose to stand on the contract provisions as to leave no opportunity for a reasonable inference to the contrary.”
Goral v. Fox Ridge, Inc.,
Effective waiver of a right to arbitration thus requires two things: (1) acts or language inconsistent with the intention to seek arbitration and (2) undue advantage or prejudice to the opposing party. Each will be addressed in turn.
Before demanding arbitration against GGIS in late July 2008, Lincoln filed a civil action in California state court against GGIS on April 27, 2007. GGIS argues that this behavior was inconsistent with an intention to pursue arbitration. Significantly, though, this civil action was live only briefly and did not proceed far. On May 1, 2007, Lincoln applied for a temporary restraining order and a preliminary injunction; the application was denied the same day. (Doc. 18-3, at 46, 47.) There was no further development in the case until Lincoln sought voluntary dismissal on July 24, 2007, which was granted on August 1. (Id. at 47.) This state-court case comprised the only litigation related to arbitrable matters before Lincoln demanded arbitration on July 30, 2008.
GGIS has cited no cases, and the Court has found none, that suggest that a party waives the right to arbitration by seeking injunctive relief before initiating arbitration proceedings. A review of the relevant jurisprudence in fact suggests the opposite: that allowing a court to consider requests for injunctive relief “reinforces rather than detracts from the policy” favoring arbitration, because pro-arbitration policy “would frequently be frustrated if
An arbitration agreement should not force a party to endure possibly damaging conduct that only injunctive relief could halt. With this consideration in mind, seeking a temporary restraining order and preliminary injunction, as Lincoln did, is not inconsistent with the intention to later seek arbitration. That Lincoln was unsuccessful in its pursuit of a temporary restraining order and a preliminary injunction is not significant.
As for the matter of undue advantage or prejudice, there is no evidence of either. In fact, GGIS refers in its brief opposing Lincoln’s motion for summary judgment to the matter of prejudice (Doc. 22, at 14), but goes on to discuss only the St. Clair factors regarding acceptance of the judicial process. There is no mention of anything unduly advantageous or prejudicial in Lincoln’s conduct, and consequently no grounds for a finding of either.
It is therefore recommended that it be held that the question of waiver was properly presented to and considered by the arbitral panel, and that to the extent that the matter may be considered here, there are no grounds for finding waiver or for disturbing the panel’s findings in this respect.
IV. Conclusion
Based on the foregoing discussion, it is recommended that Lincoln’s motion for summary judgment be GRANTED; that GGIS and Acunto’s motion for summary judgment be DENIED, and their petition to vacate the arbitration award be DENIED; and that Lincoln’s motion to affirm the arbitration award be GRANTED.
Notes
. When parties fail to file timely objections to a magistrate judge’s report and recommendation, the Federal Magistrates Act does not require a district court to review the report before accepting it.
Thomas v. Arn,
. Reinsurance contracts covering classes of risk rather than particular policies are called reinsurance treaties. Retrocessional agreements are contracts for reinsurance of reinsurance. A reinsurer of reinsurance is called a retrocessionaire.