Ninth Circuit Joins Second And First Circuits.
In Portland General Electric Company v. Liberty Mutual Insurance Company, et al., No 16-35628 (9th Cir. 7/10/17) an opinion authored by Senior District Judge Jed S. Rakoff, the 9th Circuit joins the 2nd and 1st Circuits to conclude that "incorporation of the rules of the ICC [International Chamber of Commerce] constitutes clear and unmistakable evidence of a delegation of gateway issues to the arbitrator . . . "
The case involves a dispute among Portland General Electric Company (PGE), its Contractor, its Contractor's parent and guarantor (Guarantor) and its Sureties. The construction agreement between PGE and its Contractor, which did not provide for arbitration, required that the Contractor obtain a Guaranty from its parent, and that the Sureties issue a Bond to PGE. The Bond was also silent about arbitration. However, the Guaranty did include a broad arbitration clause covering disputes arising out of the same transaction, and allowing PGE or the Guarantor to implead third parties, provided that the third parties consented to participate in the arbitration.
The Guarantor sought to interplead the Sureties in the ICC arbitration, and the Sureties consented to be impleaded, claiming no obligation to pay under the Bond. However, PGE objected in the district court that it had not initiated the impleader, that the Sureties' Bond did not provide for arbitration, and that the dispute was outside the scope of its arbitration agreement with the Guarantor. The district court agreed with PGE, and entered a preliminary injunction prohibiting the Sureties from pursuing claims against PGE in arbitration and denying a mandatory stay of the judicial proceedings under section 3 of the FAA.
The 9th Circuit vacated the judgment of the district court, and remanded for further proceedings consistent with the opinion. Now, the ICC will need to rule on the scope of the arbitration provision in the Guaranty.
COMMENT: In a footnote, the Court notes that a few circuits have held that delegation to the arbitrator only applies to claims that are at least "arguably" covered by the agreement to arbitrate. Here, however, the Court did not need to take a side in the circuit split, because the arbitration agreement arguably covered the Sureties' claims against PGE.
Comments