Anadarko E&P v. California Union Ins ( 2022 )

Case: 21-20548 Document: 00516352369 Page: 1 Date Filed: 06/10/2022
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
June 10, 2022
No. 21-20548
Lyle W. Cayce
Clerk
Anadarko E&P Onshore, L.L.C.,
Plaintiff—Appellant,
versus
California Union Insurance Company;
Century Indemnity Company, solely as successor-in-
interest to CIGNA Specialty Insurance Company,
formerly known as California Union Insurance
Company,
Defendants—Appellees.
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:21-CV-1743
Before Jones, Southwick, and Oldham, Circuit Judges.
Per Curiam:*
This insurance case poses questions about removal, contract
interpretation, and arbitration. We have carefully considered the appeal in
*
Pursuant to 5th Circuit Rule 47.5, the court has determined that this
opinion should not be published and is not precedent except under the limited
circumstances set forth in 5th Circuit Rule 47.5.4.
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No. 21-20548
light of the briefs, oral argument, and the record and AFFIRM for
essentially the reasons stated by the district court.
California Union Insurance Company, now Century Indemnity
Company, (“Insurers”) issued excess umbrella liability insurance policies to
the corporate predecessor of Anadarko E&P Onshore LLC. The first policy
was effective from April 1, 1979 to April 1, 1980 while the second had effect
from April 1, 1980 to April 1, 1981. Both provide that “[i]f limits of liability
of the underlying insurance are exhausted because of . . . property
damage, . . . [the Insurers] have the right and duty to defend any suit against
the Insured seeking damages on account of such . . . property damage.”
They also contain a service-of-suit provision that states:
[I]n the event of the failure of [the Insurers] to pay any amount
claimed to be due hereunder, [the Insurers] hereon, at the
request of the Insured, will submit to the jurisdiction of any
court of competent jurisdiction within the United States of
America and will comply with all requirements necessary to
give such Court jurisdiction . . . .
In 2007, Anadarko and its Insurers entered into a settlement
agreement that, in relevant part, covered “private action claims” involving
“property damage, bodily injury, sickness, disease, or death resulting
therefrom allegedly caused from exposure to environmental conditions
stemming from Anadarko’s facilities, operations, or products prior to
January 1, 1986.” With respect to these claims, the Insurers agreed to “pay
Anadarko a portion of . . . future defense costs that [it] incurr[ed] following
the effective date of [the] agreement.” Future defense costs are defined,
without limitation, as “the reasonable and necessary fees, costs, and
expenses incurred in the investigation and defense of . . . private action
claims.” Critically, the parties also agreed that:
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No. 21-20548
Any controversy or claim between [them] relating to the
payment, non-payment, or reimbursement by either party of
any . . . future defense costs . . . , and any controversy or claim
concerning this agreement, shall be settled by arbitration . . . .”
The settlement and defense costs agreements “contain the entire agreement
between the parties as respects their subject matter.”
Ten years later, the parties entered into an addendum to the
settlement agreement to resolve Anadarko’s claims for defense costs
associated with the “Louisiana Parish lawsuits,” which alleged that
Anadarko caused property damage during the policy periods. The 2017
addendum “incorporated [the 2007 agreement’s terms] by reference, except
as otherwise provided . . . .” Anadarko did not, however, “release or
discharge [its Insurers] from any claim, demand, cause of action, damage, or
liability . . . relating to or arising out of any defense costs or indemnity costs
relating to the Louisiana Parish Lawsuits not expressly included in the
definition of past defense costs provided in this addendum[.]” Thus, post-
September 2016 defense costs lie outside the addendum’s scope.
In 2021, Anadarko brought this action against its Insurers in Texas
state court, asserting that they breached the policies and violated the Texas
Insurance Code by failing to “pay any defense expenses incurred by
Anadarko from September 2016 forward[.]” The Insurers removed the
action before moving to dismiss and compel arbitration. Anadarko then
moved to remand.
The district court denied the motion to remand, granted the motion
to compel, and dismissed the action without prejudice. In doing so, the court
made three dispositive determinations. 1 We review each de novo. See
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Aside from the merits, the district court ruled that Anadarko had standing to bring
its breach of contract claim and that diversity jurisdiction exists because the parties are
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Halliburton Energy Servs. v. Ironshore Specialty Ins. Co., 921 F.3d 522, 529-30
(5th Cir. 2019).
First, the district court found that the 2007 agreement superseded the
original policies. We agree. Anadarko presently seeks “future defense
costs” as defined by the 2007 agreement because they are associated with
“private action claims” pursuing redress for alleged property damage. The
2007 agreement therefore mandates arbitration. The policies’ service of suit
provisions, by contrast, broadly allow Anadarko to select any forum to
adjudicate this dispute. These provisions point in opposite directions. Such
an irreconcilable inconsistency gives rise to “a presumption that the second
superseded the first.” IP Petroleum Co., Inc. v. Wevanco Energy, L.L.C.,
116 S.W.3d 888, 899 (Tex. App.—Houston [1st Dist.] 2003, pet. denied)
(citing Willeke v. Bailey, 189 S.W.2d 477, 479 (Tex. 1945)). And Anadarko
has not overcome that presumption, so Anadarko cannot rely on the service-
of-suit clause to contest removal. Further, the 2007 agreement’s merger
clause only reinforces its eclipse of the policies in this regard. See Rieder v.
Woods, 603 S.W.3d 86, 94 (Tex. 2020) (quoting Fort Worth Indep. Sch. Dist.
v. City of Fort Worth, 22 S.W.3d 831, 840 (Tex. 2000)).
Second, the district court ruled that the 2017 addendum to the 2007
agreement did not supersede the latter’s arbitration clause. That is correct.
The 2017 addendum expressly incorporated by reference all the defined
terms from the 2007 agreement except as otherwise provided. As to the
arbitration clause, it did not affect the application of the 2007 agreement to
post-September 2016 defense costs incurred by Anadarko. Such costs are at
issue here and remain subject to the 2007 agreement’s arbitration clause.
completely diverse. No party challenges these rulings on appeal, and after supplemental
briefing we conclude that this controversy is justiciable in federal court.
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Moreover, any attempt by Anadarko to choose the forum for future defense
cost disputes under the 2017 addendum was a nullity because it had already
relinquished that right in 2007 and incorporated that relinquishment into the
addendum.
Third, the district court found that the 2007 agreement’s arbitration
clause was valid and that this dispute fell within its scope. It was right to do
so. A two-step analysis determines whether to compel parties to arbitrate.
Kubala v. Supreme Prod. Servs., Inc., 830 F.3d 199, 201 (5th Cir. 2016).
“First, the court asks whether there is a valid agreement to arbitrate and,
second, whether the current dispute falls within the scope of a valid
agreement.” Edwards v. Doordash, Inc., 888 F.3d 738, 743 (5th Cir. 2018)
(citation omitted). Anadarko does not dispute that it entered a valid
agreement to arbitrate with its Insurers. And, for reasons already explained,
this dispute falls within the scope of the 2007 agreement. That determination
is further warranted because “as a matter of federal law, any doubts
concerning the scope of arbitrable issues should be resolved in favor of
arbitration[.]” Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S.
1, 24-25, 103 S. Ct. 927, 941 (1983).
AFFIRMED.
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