543 F.3d 744 | 5th Cir. | 2008
The basis for this interlocutory appeal pursuant to 28 U.S.C. § 1292(b) is the district court’s denial of a motion to compel arbitration of a contractual dispute among three insurers. The district court concluded that because of the McCarran-Ferguson Act,
I
Louisiana Safety Association of Timber-men-Self Insurers Fund (LSAT) is, as its name implies, a self-insurance fund operating in Louisiana. It provided workers’ compensation insurance for its members. Certain Underwriters at Lloyd’s, London (the Underwriters) provided excess insurance to LSAT by reinsuring claims for occupational-injury occurrences that exceeded the amount of LSAT’s self-insurance retention. Each reinsurance agreement contained an arbitration provision.
Safety National Casualty Corporation (Safety National) also provides excess workers’ compensation coverage and alleges that in a loss portfolio transfer agreement, LSAT assigned its rights under the reinsurance agreements with the Underwriters to Safety National. The Underwriters refused to recognize the assignment, contending that LSAT’s obligations were strictly personal and therefore nonassignable.
Safety National sued the Underwriters in federal district court. The Underwriters filed an unopposed motion to stay proceedings and compel arbitration. The district court initially granted that motion and stayed the lawsuit.
The district court ultimately reconsidered its initial decision and granted LSAT’s motion to quash arbitration. The district court concluded that although the Convention would otherwise require arbitration, a Louisiana statute
II
The Louisiana statute at issue provides: A. No insurance contract delivered or issued for delivery in this state and covering subjects located, resident, or to be performed in this state ... shall contain any condition, stipulation, or agreement:
(2) Depriving the courts of this state of the jurisdiction of action against the insurer.
C. Any such condition, stipulation, or agreement in violation of this Section shall be void, but such voiding shall not affect the validity of the other provisions of the contract.5
Although it is not clear from this provision’s text that arbitration agreements are voided, Louisiana courts have held that such agreements are unenforceable because of this statute.
The McCarran-Ferguson Act provides that “Congress hereby declares that the
The Convention does not specifically relate to the business of insurance. Nor do Underwriters challenge the district court’s conclusion that La.Rev.Stat. Ann. § 22:629, when applied to disputes arising under reinsurance agreements between insurers, regulates the business of insurance within the meaning of the McCarran-Ferguson Act.
The Underwriters set forth three issues: whether (1) the Convention on the
Ill
LSAT contends that treaties stand on equal footing with acts of Congress, the Convention was not self-executing and could only have effect in the courts of this country when Congress passed enabling legislation, and therefore, the Convention’s enabling legislation is the equivalent of an “Act of Congress” within the meaning of the McCarran-Ferguson Act. LSAT is correct that an act of Congress is on full parity with a treaty.
It is unclear whether the Convention is self-executing. The Supreme Court’s recent decision in Medellin v. Texas instructs that “[t]he interpretation of a treaty, like the interpretation of a statute, begins with its text.”
The court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed.25
The Convention additionally sets forth at least some procedures to be followed in obtaining enforcement of an arbitration award.
But even if the Convention required legislation to implement it in United States courts, that does not mean that Congress intended an “Act of Congress,” as that phrase is used in the McCarranFerguson Act, to include a treaty. Implementing legislation does not replace or displace a treaty. A treaty remains something more than an act of Congress. It is an international agreement or contract negotiated by the Executive Branch and ratified by the Senate,
The Supreme Court has indicated that the preemptive reach of the MeCarran-Ferguson Act was not intended to extend to the conduct of foreign affairs. The Supreme Court considered in American Insurance Ass’n v. Garamendi whether a state law, aimed at aiding Holocaust victims by requiring insurers to disclose information about insurance policies sold in Europe before and during World War II, interfered with the Federal Government’s conduct of foreign relations.
As the text itself makes clear, the point of MeCarran-Ferguson’s legislative choice of leaving insurance regulation generally to the States was to limit congressional preemption under the commerce power, whether dormant or exercised .... [A] federal statute directed to implied preemption by domestic commerce legislation cannot sensibly be construed to address preemption by executive conduct in foreign affairs.33
We think it unlikely that when Congress crafted the MeCarran-Ferguson Act, it intended any future treaty implemented by an act of Congress to be abrogated to the extent that treaty conflicted in some way with a state law regulating the business of insurance if Congress’s implementing legislation did not expressly save the treaty from reverse preemption by state law. If this had been Congress’s intent, it seems probable that Congress would have included “or any treaty requiring congressional implementation” or similar language following “Act of Congress” and “such Act” when it said, “[n]o Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance ... unless such Act specifically relates to the business of insurance.”
Most importantly, there is no apparent reason why Congress would have chosen to distinguish in the MeCarran-Ferguson Act between treaties that are self-executing and those that are not. It is undisputed that if the provisions in the Convention directing courts to enforce international arbitration agreements were self-executing, then the MeCarran-Ferguson Act would have no preemptive effect because self-executing treaties are not an “Act of Congress.” No rationale has been offered by anyone as to why Congress would have intended to include a treaty that requires implementation by Congress within the reach of the MeCarran-Ferguson Act’s reverse preemption provisions but not self-executing treaties.
We are aware that the Second Circuit has held that “the Convention is not self-executing, and therefore, relies upon an Act of Congress for its implementation.”
We agree, of course, that when provisions of a treaty are not self-executing, they cannot be enforced in a court in this country unless and until those provisions are implemented by Congress. But, we submit, this does not answer the question of what Congress intended when it used the terms “[n]o Act of Congress” and “such Act” in 1945 or why Congress would have addressed only treaties that required implementation by Congress. The text of the MeCarran-Ferguson Act does not support the inclusion by implication of “a treaty implemented by an Act of Congress.” Because we give the phrases “Act of Congress” and “such Act” their usual, commonly understood meaning, we conclude that treaties, self-executing or not, are not reverse preempted by the McCarran-Ferguson Act.
The Supreme Court’s decision in Missouri v. Holland,
The Supreme Court recognized a difference between acts of Congress and “a treaty followed by such an act.”
In the present case, as in Holland, the treaty followed by the implementing legislation, must be considered as the sum of its parts, not piecemeal, in determining what Congress meant when it used the words “Act of Congress” and “such Act” in the McCarran-Ferguson Act.
Our focus on congressional intent and the conclusion that referral to arbitration is required in this case is reinforced by the Supreme Court’s analysis in Mitsubishi Motors Corp. v. Soler Chrysler-Ply mouth, Inc.,
Later in the Mitsubishi decision, the Supreme Court observed that “[t]he Convention reserves to each signatory country the right to refuse enforcement of an award where the ‘recognition or enforcement of the award would be contrary to the public policy of that country.’ ”
The question, then, is whether the use of “no Act of Congress” and “such Act” in the McCarran-Ferguson Act is an express direction by Congress that a treaty such as the Convention is preempted to the extent it “invalidate[s], impair[s], or supersede[s]”
The McCarran-Ferguson Act embodies a strong policy that the states have an interest in the regulation of the business of insurance. A reinsurance contract that has the potential to affect policyholders within a state unquestionably relates to the business of insurance. But concerns that a state’s regulatory policies regarding such contracts may not be recognized in an international arbitration are ameliorated by provisions in the Convention and are not a basis for refusing to require that an arbitration go forward. The Supreme Court explained in Mitsubishi, in the context of federal antitrust law, that “[hjaving permitted the arbitration to go forward, the national courts of the United States will have the opportunity at the award-enforcement stage to ensure that the legitimate interest in the enforcement of the antitrust laws has been addressed.”
The Supreme Court emphasized in Mitsubishi that “[a]s international trade has expanded in recent decades, so too has the use of international arbitration to resolve disputes arising in the course of that trade.”
If they are to take a central place in the international legal order, national courts will need to “shake off the old judicial hostility to arbitration,” and also their customary and understandable unwillingness to cede jurisdiction of a claim arising under domestic law to a foreign or transnational tribunal. To this extent, at least, it will be necessary for national courts to subordinate domestic notions of arbitrability to the international policy favoring commercial arbitration.65
We note that as ratified by the United States, the Convention applies “only to differences arising out of legal relationships ... which are considered as commercial under the national law of the State” ratifying or acceding to the Convention.
In sum, the MeCarran-Ferguson Act does not cause La.Rev.Stat. Ann. § 22:629 to reverse preempt the Convention with regard to the dispute before us.
IV
We finally consider Safety National’s request that we affirm the district court’s ruling that the rights under the policies are assignable. The order embodying that ruling, dated August 13, 2003, has not been certified by the district court under 28 U.S.C. § 1292(b). We therefore lack appellate jurisdiction to consider it.
* * *
We REVERSE the district court’s denial of the motion to compel arbitration and remand for further proceedings consistent with this opinion.
. 15 U.S.C. § 1011.
. June 10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. 3.
. La.Rev.Stat Ann. § 22:629.
. See generally U.S. Dept. of Treasury v. Fabe, 508 U.S. 491, 507, 113 S.Ct. 2202, 124 L.Ed.2d 449 (1993) ("Ordinarily, a federal law supersedes any inconsistent state law. The first clause of [§ 1012(b)] reverses this by imposing what is, in effect, a clear-statement rule, a rule that state laws enacted 'for the purpose of regulating the business of insurance’ do not yield to conflicting federal statutes unless a federal statute specifically requires otherwise.”).
. La.Rev.Stat. Ann. § 22:629.
. See Doucet v. Dental Health Plans Mgmt. Corp., 412 So.2d 1383, 1384 (La.1982) ("Classification of the contract at issue as an insurance contract renders the arbitration provisions of that contract unenforceable under R.S. 22:629.”); see also McDermott Int’l, Inc. v. Lloyds Underwriters of London, 120 F.3d 583, 586 (5th Cir.1997) ("Compulsory arbitration clauses in certain insurance contracts are unenforceable in Louisiana because of La. R.S. 22:629....”); W. of Eng. Ship Owners Mut. Ins. Ass'n (Luxembourg) v. Am. Marine Corp., 981 F.2d 749, 750 n. 5 (5th Cir.1993) ("Louisiana has prohibited arbitration clauses in insurance policies” (citing LaRevStat. Ann. § 22:629; Doucet, 412 So.2d at 1384)).
. 15 U.S.C. § 1011.
. Id. § 1012(b); see also id. § 1101; Fabe, 508 U.S. at 507, 113 S.Ct. 2202 (explaining that the first clause of [§ 1012(b)] mandates that state statutes "regulating the business of insurance” do not yield to conflicting federal statutes unless a federal statute specifically requires otherwise).
. 15 U.S.C. § 1012(b).
. See Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119, 129, 102 S.Ct. 3002, 73 L.Ed.2d 647 (1982) (explaining that “three criteria relevant in determining whether a particular practice is part of the 'business of insurance' " include "whether the practice has the effect of transferring or spreading a policyholder’s risk,” although "[n]one of these three criteria is necessarily determinative in itself”); cf. Ky. Ass’n of Health Plans, Inc. v. Miller, 538 U.S. 329, 338, 123 S.Ct. 1471, 155 L.Ed.2d 468 (2003) (explaining, albeit in the context of ERISA, “that conditions on the right to engage in the business of insurance must also substantially affect the risk pooling arrangement between the insurer and the insured”).
. See, e. g., Preston v. Ferrer, -U.S. -, 128 S.Ct. 978, 987, 169 L.Ed.2d 917 (2008) ("By agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights afforded by the statute; it only submits to their resolution in an arbitral ... forum.” (omission in original) (quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985))).
. 9 U.S.C. § 1 etseq.
. See 436 F.3d 490, 494 (5th Cir.2006) (holding that a state law prohibiting "required arbitration of disputes stemming from the uninsured motorist coverage provisions ... regulates risk by subjecting all [such] policy disputes ... to the possibility of a jury trial”).
. 15 U.S.C. § 1012(b) ("No Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance
. Reid v. Covert, 354 U.S. 1, 18, 77 S.Ct. 1222, 1 L.Ed.2d 1148 (1957) (plurality opinion) (“[An] Act of Congress ... is on a full parity with a treaty .... ”); Breard v. Greene, 523 U.S. 371, 376, 118 S.Ct. 1352, 140 L.Ed.2d 529 (1998) (per curiam) (same) (quoting Reid, 354 U.S. at 18, 77 S.Ct. 1222); see also Egle v. Egle, 715 F.2d 999, 1013 (5th Cir.1983) (“Under our Constitution, treaties and statutes are equal in dignity. If a treaty and a statute are inconsistent, 'the one last in date will control the other ....'“ (omission in original) (quoting Whitney v. Robertson, 124 U.S. 190, 194, 8 S.Ct. 456, 31 L.Ed. 386 (1888))).
. Breard, 523 U.S. at 376, 118 S.Ct. 1352 (quoting Reid, 354 U.S. at 18, 77 S.Ct. 1222); see also Medellin v. Texas,-U.S.-, n. 6, 128 S.Ct. 1346, 1359 n. 6, 170 L.Ed.2d 190 (2008) ("[A] later-in-time federal statute supersedes inconsistent treaty provisions.”).
. Medellin, 128 S.Ct. at 1364 (citing Cook v. United States, 288 U.S. 102, 119, 53 S.Ct. 305, 77 L.Ed. 641 (1933)).
. Id. at 1357.
. Apr. 24, 1963, 1970 21 U.S.T. 77, 596 U.N.T.S. 261.
. Apr. 24, 1963, 1970 21 U.S.T. 325, 596 U.N.T.S. 487.
. Medellin, 128 S.Ct. at 1353.
. Id. at 1358.
. Id.
. Id.
. Art. 11(3), June 10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. 38.
. See id. arts. Ill, IV.
. See Medellin, 128 S.Ct. at 1366 ("Congress is up to the task of implementing non-self-executing treaties, even those involving complex commercial disputes. The judgments of a number of international tribunals enjoy a different status because of implementing legislation enacted by Congress, [citing 9 U.S.C. §§ 201-08] ... Such language demonstrates that Congress knows how to accord domestic effect to international obligations when it desires such a result.” (citation omitted)); see also Scherk v. Alberto-Culver Co., 417 U.S. 506, 520 n. 15, 94 S.Ct. 2449, 41 L.Ed.2d 270 (1974) (observing, although not in the context of whether the Convention was self-executing, "Congress passed Chapter 2 of the United States Arbitration Act in order to implement the Convention” (citation omitted)).
.See U.S. Const, art. II § 2 ("[The President] shall have Power, by and with the Advice and Consent of the Senate, to make Treaties, provided two thirds of the Senators present concur ....”).
. Am. Ins. Ass’n v. Garamendi, 539 U.S. 396, 401, 123 S.Ct. 2374, 156 L.Ed.2d 376 (2003).
. Id. at 406.
. Id. at 416-17, 123 S.Ct. 2374.
. Id. at 420-26, 123 S.Ct. 2374.
. Id. at 427-28, 123 S.Ct. 2374.
. 15 U.S.C. § 1012(b).
. Stephens v. Am. Int'l Ins. Co., 66 F.3d 41, 45 (2d Cir.1995).
. Id.
. Id. at 43.
. Id. at 45.
. Id.
. 252 U.S. 416, 40 S.Ct. 382, 64 L.Ed. 641 (1920).
. Id. at 431, 40 S.Ct. 382.
. Id. at 431-32, 40 S.Ct. 382.
. Id. at 430-31, 40 S.Ct. 382.
. Id. at 433, 40 S.Ct. 382.
. Id. at 432, 40 S.Ct. 382.
. Id. at 433, 40 S.Ct. 382.
. Id.
. Id. at 435, 40 S.Ct. 382.
. 473 U.S. 614, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985).
. Id. at 616, 105 S.Ct. 3346 (citations omitted).
. Id. at 626-27, 105 S.Ct. 3346.
. Id. at 627, 105 S.Ct. 3346.
. Id. (emphasis added).
. Id. at 628, 105 S.Ct. 3346.
. Id. at 638, 105 S.Ct. 3346 (quoting Convention on Recognition and Enforcement of Foreign Arbitral Awards art. V(2)(b), June 10, 1958, 21 U.S.T 2517, 330 U.N.T.S. 3).
. Id. at 639 n. 21, 105 S.Ct. 3346 ("And it appears that before acceding to the Convention the Senate was advised by a State Department memorandum that the Convention provided for such exceptions.").
. Id.
. Id.
. Id. (emphasis added).
. 15U.S.C. § 1012(b).
. Mitsubishi, 473 U.S. at 638, 105 S.Ct. 3346.
. Id. (quoting Convention on Recognition and Enforcement of Foreign Arbitral Awards art. V(2)(b), June 10, 1958, 21 U.S.T 2517, 330 U.N.T.S. 3).
. Id.
. Id.
. Id. at 638-39, 105 S.Ct. 3346 (quoting Kulukundis Shipping Co. v. Amtorg Trading Corp., 126 F.2d 978, 985 (2d Cir.1942)).
. Art. 1(3), 21 U.S.T., at 2561 n.3.
. See Yamaha Motor Corp., U.S.A. v. Calhoun, 516 U.S. 199, 205, 116 S.Ct. 619, 133 L.Ed.2d 578 (1996) (“The court of appeals may not reach beyond the certified order to address other orders made in the case.”).