Reliance National Insurance v. Texaco Exploration & Production, Inc. ( 2007 )

United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
April 19, 2007
FOR THE FIFTH CIRCUIT
Charles R. Fulbruge III
Clerk
No. 06-30929
Summary Calendar
RELIANCE NATIONAL INSURANCE COMPANY, (In Liquidation) as Subrogee
of Ener Vest Energy LP and Ener Vest Management Partners, Ltd, Successor in
interest to Ener Vest Management Company,
Plaintiff-Appellant,
versus
TEXACO EXPLORATION AND PRODUCTION, INC.,
Defendant-Appellee.
Appeal from the United States District Court
for the Eastern District of Louisiana
Civil District No.: 2:05-cv-02508-ILRL-SS
Before DeMOSS, STEWART, and PRADO, Circuit Judges.
PER CURIAM:*
This appeal arises from the district court’s grant of summary judgment, dismissing Reliance
National Insurance Company’s (“Reliance”) complaint to vacate an arbitration panel’s judgment. We
affirm the district court’s judgment.
*
Pursuant to 5th Cir. R. 47.5, the Court has determined that this opinion should not be
published and is not precedent except under the limited circumstances set forth in 5th Cir. R. 47.5.4.
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I. FACTUAL AND PROCEDURAL BACKGROUND
In February2000, Enervest Management Company (“Enervest”) purchased the Bateman Lake
Lease in Berwick, Louisiana from Texaco Exploration and Production, Inc. (“Texaco”) pursuant to
a Purchase Sale Agreement (the “Agreement”). The Agreement required the parties to participate
in an arbitration of all disputes arising out of the sale. Texaco also required Enervest to procure
insurance naming Texaco as an additional insured. On April 20, 2000, Enervest discovered a leak
from a pipeline and sought contribution from Texaco for the environment clean-up costs. To cover
the expense, Texaco permitted Enervest to draw on an escrow account funded by Enervest for
Plugging and Abandonment liabilities.
Enervest’s insurer, Reliance, paid a claim for the clean-up costs. In November 2002, Reliance
sought subrogation under its Comprehensive General Liability (“CGL”) policy. Texaco refused to
subrogate the costs. Texaco and Reliant submitted the dispute to an arbitration panel. The parties
requested the panel to determine whether Texaco owed Reliance for the environmental clean-up of
the Bateman Lake property. Both Texaco and Reliance submitted documentary evidence and initial
position papers. Based on the contracts and arguments of the parties, the Panel concluded that
Texaco was an additional insured under the CGL policy. Therefore, Reliance could not recover from
Texaco, and the panel summarily dismissed the matter.
On June 20, 2005, Reliance filed a lawsuit in federal district court to vacate the arbitration
panel’s judgment. Reliance argued that the arbitration panel dismissed the dispute on an issue not
properly before the panel for consideration. Texaco moved for summary judgment based on the lack
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of evidence and the deference given to arbitral judgments. On July 26, 2006, the district court
dismissed the suit with prejudice.
II. STANDARD OF REVIEW
We review de novo the district court’s judgment, applying the same standards as the district
court. Sarofim v. Trust Co. Of the West, 440 F.3d 214, 216 (5th Cir. 2006). In deciding a motion
for summary judgment, the court must determine whether the submissions show that no genuine issue
exists 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); Hart v. Hariston, 343 F.3d 762, 764 (5th Cir. 2003). In deciding whether a
fact issue has been created, the facts and inferences must be reviewed in the light most favorable to
the nonmoving party. Reeves Brokerage Co. v. Sunbelt Fruit & Vegetable Co., 336 F.3d 410, 412
(5th Cir. 2003).
III. DISCUSSION
Reliance argues that the panel substantially prejudiced its rights by deciding an issue not
submitted for determination, denying Reliance the opportunity to address the issue. Moreover, the
panel prohibited Reliance from conducting adequate discovery, which resulted in it refusing to hear
“evidence material to the controversy.” Texaco counters that based on the submitted contracts and
initial position papers, the parties explicitly charged the panel to interpret the Agreement, the CGL
policy, and their respective endorsements and attachments. The arguments and evidence before the
arbitration panel expressly raised the question of Texaco’s status as an additional insured under the
CGL policy. The panel decided the matter based on a contractual provision contained within
documents submitted by Reliance and identified by Texaco in its initial position paper. Moreover,
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despite notice of the panel’s intention to summarilydismiss the dispute, Reliance entered no additional
evidence.
The dispute resolution clause reads as follows:
The Parties agree that an award made by the Panel may be vacated by a court only if
the award was procured by or through fraud or corruption or because the Panel
refused to hear evidence material to the controversy or otherwise so conducted the
hearing as to substantially prejudice the rights of a Party.
On December 8, 2004, the arbitration panel requested that Texaco and Reliance submit a “statement
of the issues in the case, the relevant background, and any other matters deemed to be of importance
in the resolution of the dispute.” On January 3, 2005, Reliance provided an initial position paper
setting forth its legal arguments along with the Agreement and its amendments. Reliance’s “Causes
of Action” section begins with a description of its breach of contract claim and arguing pursuant to
selected provisions. Shortly thereafter, Texaco responded to Reliance’s arguments, relying on the
additional insured provision as a basis for summary dismissal. The relevant passage of Texaco’s
initial position paper reads as follows:
PSA Section 4.2(j) obligates Enervest to procure insurance that waives all rights of
subrogation against Texaco and name[s] Texaco as an additional insured. In
Endorsement CL 641 of the CGL policy (Attached hereto as Exhibit H . . . ), Reliance
expressly waives its right of subrogation. . . . Considering these fundamental
principles of insurance and subrogation law, this matter may be disposed of summarily
before a great deal of time and resources are needlessly consumed.
Texaco’s arguments in its position paper undercut Reliance’s assertion on appeal that the issue was
not before the arbitration panel. Moreover, the panel could not consider in isolation the provisions
cited by Reliance’s position paper. A legal analysis of the issue inherently required a review of the
entire contract.
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After receiving the initial position papers, the arbitration panel invited counsel for Reliance
to “respond to the January 18 position paper by Chevron Texaco at any time within fifteen days from
receipt of this letter, if desired.” The panel received no additional arguments or documentary
evidence from Reliance. In a letter dated March 28, 2005, the panel once again invited Reliance’s
counsel to submit additional information and advised of the panel’s intended course of action. The
March 28 letter stated that
The deadline has now passed to file with the arbitrator further written submissions or
a request for oral argument. The purpose of this letter is to advise that absent any
further submission from you within ten days, the Panel will consider that the matter
has been submitted on the information previously received and it will proceed to
address the preliminary issue in question.
Reliance provided no further argument or evidence in response to this second letter. Based on the
panel’s diligence in providing Reliance the opportunity to respond to Texaco’s arguments, even
extending the deadline, we conclude that a genuine issue of material fact does not exist as to whether
the panel “refused to hear evidence material to the controversy” or “conducted the hearing so as to
substantially prejudice the rights” of either party.
IV. CONCLUSION
For the foregoing reasons, we affirm the district court’s judgment.
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