Galilea, LLC v. AGCS Marine Insurance Co.

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
GALILEA, LLC, Nos. 16-35474
Plaintiff-Appellant/ 16-35475
Cross-Appellee,
D.C. No.
v. 1:15-cv-00084-
SPW
AGCS MARINE INSURANCE
COMPANY; LIBERTY MUTUAL
INSURANCE COMPANY; TORUS OPINION
NATIONAL INSURANCE COMPANY,
Defendants-Appellees/
Cross-Appellants.
Appeal from the United States District Court
for the District of Montana
Susan P. Watters, District Judge, Presiding
Argued and Submitted July 13, 2017
Portland, Oregon
Filed January 16, 2018
Before: Marsha S. Berzon, Paul J. Watford,
and John B. Owens, Circuit Judges.
Opinion by Judge Berzon
2 GALILEA V. AGSC MARINE INS. CO.
SUMMARY*
Arbitration / Maritime Law
The panel affirmed in part and reversed in part the district
court’s orders finding enforceable an arbitration clause in a
marine insurance policy and compelling arbitration of two
claims but not others brought against insurance underwriters
that denied coverage for the loss of a sailing yacht.
The panel held that the plaintiff’s insurance application
was not a contract, but the insurance policy was a contract
subject to the Federal Arbitration Act. The policy’s
arbitration clause concerned a maritime transaction falling
under the FAA, and Montana law was inapplicable under
both federal maritime law choice-of-law principles and the
policy itself and therefore did not render the arbitration clause
unenforceable. The panel held that the arbitration agreement
showed a clear and unmistakable intent to resolve
arbitrability questions in arbitration. The panel thus affirmed
the district court’s order finding the policy’s arbitration
clause enforceable, affirmed the district court’s order granting
the defendants’ motion to compel arbitration as to certain
causes of action, reversed the district court’s order denying
the defendants’ motion to compel arbitration as to the
plaintiff’s remaining causes of action, and remanded to the
district court with instructions to grant the defendants’ motion
to compel arbitration in its entirety.
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
GALILEA V. AGSC MARINE INS. CO. 3
COUNSEL
Joseph Gleason (argued), Gleason Law LLC, Atlanta,
Georgia; Ross D. Tillman, Boone Karlberg P.C., Missoula,
Montana; for Plaintiff-Appellant/Cross-Appellee.
Brian P. R. Eisenhower (argued) and Gerard W. White, Hill
Rivkins LLP, New York, New York, for Defendants-
Appellees/Cross-Appellants.
OPINION
BERZON, Circuit Judge:
“The sea, although an agreeable, is a dangerous
companion,” wrote Plato more than two millennia ago. Our
case is about that danger; it concerns “a brave vessel . . .
[d]ash’d all to pieces,” like the ship Prospero hexed in The
Tempest. William Shakespeare, The Tempest act 1, sc. 2.
Although the background has its drama, the primary legal
issues are more mundane: Is an arbitration provision in a
maritime insurance policy enforceable despite law in the
forum state assertedly precluding its application? In
addressing this question, we consider several questions
concerning the intersection of the McCarran-Ferguson Act,
15 U.S.C. § 1012, which shields state insurance laws from
federal preemption, and the Federal Arbitration Act (“FAA”),
9 U.S.C. § 1–16, which provides for enforcement of
arbitration provisions in maritime contracts. After doing so,
we conclude that the arbitration clause should be given effect.
4 GALILEA V. AGSC MARINE INS. CO.
I. BACKGROUND
A. Contracting for Yacht Insurance
Montana residents Taunia and Chris Kittler are the sole
members of Galilea, LLC (“Galilea”), a Nevada limited
liability company. In 2014, Galilea purchased a sixty-foot
yacht (“the Yacht”). This case concerns the scope of the
insurance coverage Galilea bought for the Yacht.
About a year after purchasing the Yacht, the Kittlers
submitted to Pantaenius America Ltd. (“Pantaenius”) an
online request for an insurance quote. Pantaenius specializes
in obtaining and administering yacht insurance policies,
acting as an agent for insurance underwriters. Following the
quote request, the Kittlers electronically exchanged several
documents with Pantaenius. According to Galilea, the
Kittlers also spoke with a Pantaenius representative over the
phone to discuss the materials needed to complete an
insurance application. The Kittlers say they informed the
Pantaenius representative on one call that it would be difficult
to submit a hand-signed application because the Kittlers were,
at the time, sailing the yacht in the Caribbean, en route from
Florida to San Diego via the Panama Canal. Pantaenius
nonetheless required a hand-signed application, so the Kittlers
docked in Puerto Rico to locate the necessary equipment to
print and scan a signed application.
The application for insurance listed three different
underwriters: AGCS Marine Insurance Company, Liberty
Mutual Insurance Company, and Torus National Insurance
Company (collectively, “Underwriters”). The application
GALILEA V. AGSC MARINE INS. CO. 5
noted that one or more of these Underwriters would “be
assigned at the time of binding [insurance] coverage.”1
The application also included arbitration and choice-of-
law terms. The arbitration term provided, in relevant part:
Any dispute arising out of or relating to the
relationship between Pantaenius America Ltd
and/or our participating underwriters and the
insured shall be settled by arbitration
administered by the American Arbitration
Association [“AAA”] in accordance with its
Commercial Arbitration Rules. . . . The
dispute shall be submitted to one
arbitrator. . . . The place of arbitration shall
be New York, New York.
The application also provided that the “relationship” and the
Agreement “shall be governed by the laws of New York.”
A day after Galilea submitted the signed application,
Pantaenius issued an insurance binder providing preliminary
coverage for up to two weeks from the date of application.2
The binder set a coverage limit of $1,566,500, based on the
“total agreed fixed value” of the Yacht; established a covered
“Cruising Area” that extended south to 30.5 degrees north
latitude; named the three Underwriters as the issuing
insurance companies; incorporated the forthcoming policy’s
1
All three companies are appellees and cross-appellants here.
2
An insurance binder provides preliminary, temporary coverage,
often reflecting the terms of a forthcoming formal insurance policy should
one be issued. See 16 Williston on Contracts § 49:53 (4th ed. 2017).
6 GALILEA V. AGSC MARINE INS. CO.
terms and conditions; and attached a document with those
anticipated terms.
The formal insurance policy issued a day later.
Pantaenius formally signed the insurance policy on behalf of
the three Underwriters. The policy provided that it would be
“effective only when the insured vessel(s) are within the
‘cruising area’ specified.”
The choice-of-law and forum selection provisions in the
policy’s terms and conditions were different from those in the
application. Both the policy and the application called for
arbitration in New York pursuant to AAA rules. But the
scope of the choice-of-law provision and arbitration clause
differed. The policy provided:
This insurance policy shall be governed by
and construed in accordance with well
established and entrenched principles and
precedents of substantive United States
Federal Maritime Law, but where no such
established and entrenched principles and
precedents exist, the policy shall be governed
and construed in accordance with the
substantive laws of the State of New York,
without giving effect to its conflict of laws
principles, and the parties hereto agree that
any and all disputes arising under this policy
shall be resolved exclusively by binding
arbitration to take place within New York
County, in the State of New York, and to be
conducted pursuant to the Rules of the
American Arbitration Association.
GALILEA V. AGSC MARINE INS. CO. 7
The policy thus differed from the application by
(i) identifying federal maritime law and, to fill its gaps, New
York law, as the choice of law applicable to the policy, and
(ii) including different language concerning the scope of
arbitrable disputes—“any and all disputes arising under this
policy,” not “any dispute arising out of or relating to the
relationship.”
B. The Parties’ Dispute and Procedural History
The Yacht ran ashore near Colón, Panama about a month
after the insurance policy issued. Galilea submitted a claim
for insurance coverage, but the Underwriters refused to pay
it. Pantaenius explained that the Yacht had traveled south of
the cruising area set forth in both the application and the
policy. Galilea rejoined that the application and policy do not
reflect the parties’ actual agreement, and that Pantaenius and
the Underwriters misrepresented the scope of the written
policy.
After Galilea requested reconsideration of the coverage
denial, the Underwriters initiated arbitration proceedings in
New York. Galilea submitted objections and counterclaims
in the arbitration proceedings, but also filed a separate action
in federal court in the District of Montana, along with a
motion to stay the arbitration proceedings.
In its Montana complaint, Galilea asserted twelve causes
of action, all of which substantially overlapped with its
arbitration counterclaims. The Underwriters responded with
a motion to dismiss for failure to state a claim and a motion
to compel arbitration. Separately, in federal court in the
Southern District of New York, the Underwriters filed a
petition to compel arbitration.
8 GALILEA V. AGSC MARINE INS. CO.
The Montana district court issued two orders from which
the parties have lodged certified interlocutory cross-appeals.
See 28 U.S.C. § 1292(b). In those orders, the court held:
(1) the arbitration provision in Galilea’s original insurance
application was not relevant, because it was not included in
the Underwriters’ demand for arbitration; (2) claims arising
under the insurance policy come within admiralty
jurisdiction, and under relevant choice-of-law principles,
federal maritime law governs the contract; (3) the FAA
applies and requires enforcing the policy’s arbitration
provision; (4) questions relating to the enforceability and
scope of the arbitration provision are properly determined by
the court, not an arbitrator; and (5) the scope of the policy’s
arbitration clause did not extend to cover ten of Galilea’s
twelve claims. The district court thus granted the
Underwriters’ motion to compel arbitration as to two of
Galilea’s claims but denied it as to the others.
II. DISCUSSION
This case ultimately presents “gateway” arbitrability
questions: whether a valid and enforceable agreement to
arbitrate exists, and, if so, whether particular claims fall
within the scope of the arbitration provision. See Rent-A-Ctr.,
W., Inc. v. Jackson, 561 U.S. 63, 70 (2010). But, before we
reach those questions, we must decide whether there is an
agreement to which the federal law of arbitrability could
apply. See Prima Paint Corp. v. Flood & Conklin Mfg. Co.,
388 U.S. 395, 401 (1967). We conclude the parties’
insurance policy is the governing contract and falls within the
Federal Arbitration Act’s scope.
GALILEA V. AGSC MARINE INS. CO. 9
A. The FAA Applies to the Insurance Policy but Not the
Insurance Application
The FAA cannot compel a party “to arbitrate the
threshold issue of the existence of an agreement to arbitrate”
unless there is an overarching agreement to do so within the
FAA’s scope. Three Valleys Mun. Water Dist. v. E.F. Hutton
& Co., 925 F.2d 1136, 1140–41 (9th Cir. 1991) (emphasis
omitted); see also Granite Rock Co. v. Int’l Bhd. of
Teamsters, 561 U.S. 287, 296–97 (2010). That is, “[a]lthough
challenges to the validity of a contract with an arbitration
clause are to be decided by the arbitrator, challenges to the
very existence of the contract are, in general, properly
directed to the court.” Kum Tat Ltd. v. Linden Ox Pasture,
LLC, 845 F.3d 979, 983 (9th Cir. 2017) (internal citations
omitted). Accordingly, we “must first make a threshold
finding that the document [evidencing an agreement] at least
purports to be . . . a contract.” Republic of Nicaragua v.
Standard Fruit Co., 937 F.2d 469, 476 (9th Cir. 1991).
1. The Insurance Application Is Not a Contract
As noted, Galilea submitted a signed application for
insurance to the Underwriters. Among other terms, the
application included choice-of-law and forum selection
clauses. See p. 5, supra. The Underwriters suggest the
application’s arbitration provision should govern this dispute
under the FAA; Galilea maintains, to the contrary, that the
application does not evidence mutual assent to a contract or
to arbitration.
We agree with Galilea on this point. Under the law made
applicable by the policy and application, the application was
not a contract.
10 GALILEA V. AGSC MARINE INS. CO.
New York state law is made applicable under Galilea’s
insurance application, and also, if no established substantive
principle or precedent of federal maritime law applies, under
the insurance policy’s choice-of-law provision. We have not
uncovered any established federal maritime law rule on this
issue, and so we proceed to the law of New York.
Under New York law, language from an application may
be incorporated into an insurance policy only if the
application was attached to the policy at the time of delivery.
See Smith v. Pruco Life Ins. Co. of N.J., 710 F.3d 476,
479–80 (2d Cir. 2013) (per curiam) (citing N.Y. Ins. Law
§ 3204(a)); Cutler v. Hartford Life Ins. Co., 22 N.Y.2d 245,
250–52 (1968); Berkshire Life Ins. Co. v. Weinig, 290 N.Y.
6, 10 (1943); see also 16 Williston on Contracts at § 49:41
(4th ed. 2017); 2 Couch on Insurance § 18:6 (3d ed. 2017).
The insurance policy “shall contain the entire contract
between the parties,” and no document may be incorporated
by reference into the insurance contract unless a true copy is
“endorsed upon or attached to the policy or contract when
issued.” Smith, 710 F.3d at 479–80 (quoting N.Y. Ins. Law
§ 3204(a)(1)).
Here, it does not appear that the application was attached
to the policy when issued. Instead, some of the information
provided in the application was reprinted in the policy, but
the forum-selection and choice-of-law provisions were not
incorporated. Even if attached to the policy, the application
is not named in the policy as an incorporated document.
Thus, because the application was not a contractual
GALILEA V. AGSC MARINE INS. CO. 11
agreement under New York law, the federal law of
arbitrability cannot apply to its arbitration clause.3
2. The Insurance Policy Is a Contract Subject to the
FAA
We now turn to whether the policy is subject to the FAA.
Policies that insure maritime interests against maritime risks
are contracts subject to admiralty jurisdiction and to federal
maritime law. La Reunion Francaise SA v. Barnes, 247 F.3d
1022, 1025 (9th Cir. 2001). The insurance policy here is a
maritime insurance contract and so would seem to be subject
to federal maritime law.
Galilea asserts to the contrary—that under federal
maritime law, the FAA does not apply to this contract,
because Montana public policy overrides its arbitration
provision and Montana law, preserved from federal
preemption by the federal McCarran-Ferguson Act, precludes
the FAA’s application. We disagree, and hold that the FAA
does apply.
a. The Federal Arbitration Act Constitutes Established
Federal Maritime Law for “Maritime Transactions”
The Supreme Court long ago established that where an
“insurance policy . . . is a maritime contract the Admiralty
Clause of the Constitution brings it within federal
jurisdiction.” Wilburn Boat Co. v. Fireman’s Fund Ins. Co.,
348 U.S. 310, 313 (1955). At the same time, Wilburn Boat
3
We do not consider the extent to which other representations made
in the application are incorporated into the policy or may otherwise be
considered when interpreting or enforcing the policy.
12 GALILEA V. AGSC MARINE INS. CO.
instructed, “it does not follow . . . that every term in every
maritime contract can only be controlled by some federally
defined admiralty rule.” Id. Rather, held Wilburn Boat, as
insurance is traditionally an area of state regulation, federal
maritime law leaves room for state insurance regulation if
there is no established federal maritime law rule or need for
federal uniformity. Id. at 316, 321; see also id. at 323–24
(Frankfurter, J., concurring in the judgment).
After Wilburn Boat, “the initial inquiry of the courts in
interpreting a policy of marine insurance [is] to determine
whether there is an established federal maritime law rule.”
Certain Underwriters at Lloyds, London v. Inlet Fisheries
Inc., 518 F.3d 645, 649–50 (9th Cir. 2008) (quoting Thomas
J. Schoenbaum, Admiralty and Maritime Law § 17–6 (4th ed.
2004)) (internal quotation marks omitted). If so, “federal
admiralty law [will] govern[]. . . .” Suma Fruit Int’l v.
Albany Ins. Co., 122 F.3d 34, 35 (9th Cir. 1997). “[S]tate law
will control . . . only in the absence of a federal statute, a
judicially fashioned admiralty rule, or a need for uniformity
in admiralty practice.” Id. (internal quotation marks omitted).
Here, there is an established federal maritime law rule
concerning the enforcement of arbitration provisions in
insurance policies, namely, the Federal Arbitration Act. The
FAA specifically applies to “maritime transaction[s].”
9 U.S.C. § 2. “Maritime transactions” include, among other
types of agreements, “agreements relating to . . . repairs to
vessels, collisions, or any other matters in foreign commerce
which, if the subject of controversy, would be embraced
within admiralty jurisdiction.” Id. § 1.4 The parties’
4
“[C]ontracts of employment of seamen” are excepted from the
FAA’s coverage. 9 U.S.C. § 1.
GALILEA V. AGSC MARINE INS. CO. 13
insurance policy relates both to collisions and to repairs to the
Yacht, and, as Wilburn Boat holds, 348 U.S. at 313, a dispute
concerning a maritime insurance policy comes within federal
admiralty jurisdiction. As the parties’ dispute falls within the
scope of the FAA and the FAA includes an applicable,
specific federal maritime law rule, under Wilburn Boat,
Montana state law does not govern the validity of the
agreement’s arbitration provision.
b. Federal Maritime Law Is Not Precluded by Montana
Law under the McCarran-Ferguson Act
Galilea first attempts to navigate around Wilburn Boat
with the McCarran-Ferguson Act, 15 U.S.C. § 1011 et seq.,
which precludes the application of federal statutes if (1) a
state law is “enacted . . . for the purpose of regulating the
business of insurance;” (2) the federal law does not
“specifically relat[e] to the business of insurance;” and (3) the
federal statute’s application would “invalidate, impair, or
supersede” state insurance law. Humana Inc. v. Forsyth,
525 U.S. 299, 307 (1999) (internal quotation marks omitted).
Galilea points to Montana’s Uniform Arbitration Act, which
renders unenforceable arbitration clauses in “insurance
polices or annuity contracts except for those contracts
between insurance companies,” Mont. Code Ann. § 27-5-
114(2)(c), and asserts that the McCarran-Ferguson Act
requires that, notwithstanding Wilburn Boat, the Montana
rule precluding arbitration of consumer insurance disputes
applies here. Galilea also cites to non-maritime insurance
cases holding arbitration agreements unenforceable under
state anti-arbitration laws saved by the McCarran-Ferguson
Act. See Am. Bankers Ins. Co. of Fla. v. Inman, 436 F.3d
490, 492 (5th Cir. 2006); McKnight v. Chicago Title Ins. Co.,
358 F.3d 854, 855 (11th Cir. 2004) (per curiam); Standard
14 GALILEA V. AGSC MARINE INS. CO.
Sec. Life Ins. Co. of N.Y. v. West, 267 F.3d 821, 823–24 (8th
Cir. 2001); Mut. Reinsurance Bureau v. Great Plains Mut.
Ins. Co., 969 F.2d 931, 931–32 (10th Cir. 1992).
This McCarran-Ferguson-based argument sails too far
ahead too fast. Slowing down the analysis, it becomes
apparent that there is no route for Montana law to apply as a
competitor to the FAA here.
Under Wilburn Boat, Galilea’s maritime insurance policy
is within federal admiralty jurisdiction and governed by
applicable maritime law if such law exists. Applying an
established federal maritime law rule—such as the provision
of the FAA directly mandating the enforcement of arbitration
clauses in maritime transactions—thus does not “invalidate,
impair, or supersede any law enacted by any State for the
purpose of regulating the business of insurance.” 15 U.S.C.
§ 1012(b). Rather, given Wilburn Boat and its progeny, any
applicable maritime law rule is primary, and state law applies
only if maritime law does not. Given the interstitial,
contingent nature of state law in this setting, state insurance
law is not “invalidate[d], impair[ed], or supersede[d],” id., by
applying a maritime law rule when, as here, there is one.
Alternatively, one reaches the same conclusion if one
applies established maritime choice-of-law principles to the
insurance policy’s choice-of-law provisions. The parties here
agreed to a choice-of-law term in the insurance
policy—federal maritime law and, as needed, New York law.
“[W]here the parties specify in their contractual agreement
which law will apply, admiralty courts will generally give
effect to that choice,” Chan v. Soc’y Expeditions, Inc.,
123 F.3d 1287, 1296–97 (9th Cir. 1997), absent, as relevant
here, “a state which has a materially greater interest than the
GALILEA V. AGSC MARINE INS. CO. 15
chosen state . . . and which . . . would be the state of the
applicable law in the absence of an effective choice of law,”
Flores v. Am. Seafoods Co., 335 F.3d 904, 917 (9th Cir.
2003) (quoting Restatement (Second) of Conflict of Laws
§ 187(2) (1991)).
Montana does not have a materially greater interest than
federal maritime (or New York) law. There is no question
that Montana law has relatively little to do with this dispute.
Galilea is a Nevada limited liability corporation, and the
Insurers have principal places of business or are incorporated
under the laws of Delaware, New Jersey, Illinois, and
Massachusetts. Although Galilea’s members are Montana
residents, they were in Florida, Puerto Rico, and the
Caribbean Sea at the time of contracting, and the insured
property appears never to have been in Montana. Moreover,
landlocked Montana has relatively weak interests in maritime
insurance law, particularly as compared to coastal states with
more developed maritime law, including New York.
But, again—there is a federal maritime law rule here
applicable, the FAA. Under the FAA, the arbitration
provision is enforceable. The McCarran-Ferguson Act thus
has no pertinence, as no state’s law is applicable in the first
instance.
c. Federal Maritime Law Is Not Precluded by Montana
Law under The Bremen
Galilea also argues that the policy’s choice-of-law
provision is unenforceable under M/S Bremen v. Zapata Off-
Shore Co. (The Bremen), 407 U.S. 1 (1972). We are not
persuaded.
16 GALILEA V. AGSC MARINE INS. CO.
The Bremen held that federal maritime law makes forum
selection clauses presumptively enforceable. Id. at 13–14. At
the same time, “[u]nder the directives of the Supreme Court
in [The] Bremen, we will determine a forum selection clause
is unenforceable ‘if enforcement would contravene a strong
public policy of the forum in which suit is brought, whether
declared by statute or by judicial decision.’” Doe 1 v. AOL
LLC, 552 F.3d 1077, 1083 (9th Cir. 2009) (per curiam)
(quoting The Bremen, 407 U.S. at 15) (emphasis omitted).
Galilea points to the strong public policy of Montana against
enforcement of arbitration agreements in the context of this
dispute, and argues that enforcement of the policy’s
arbitration agreement would contravene the policy of the state
in which Galilea brought suit.
There are two critical problems with Galilea’s reliance on
The Bremen. First, that case did not discuss federal maritime
law rules about choice-of-law clauses, but rather about forum
selection clauses. See The Bremen, 407 U.S. at 2, 17–19. By
contrast, Galilea and the Underwriters agreed to a kind of
forum selection provision—arbitration5—and also to a
separate choice-of-law provision—federal maritime law, and
where that law has gaps, New York law. And as we have
already established, here there is no gap in federal maritime
law to fill with law from any state, Montana included, as the
FAA supplies the governing arbitration law for maritime
transactions.
5
In the context of international arbitration, the Supreme Court has
noted, “An agreement to arbitrate before a specified tribunal is, in effect,
a specialized kind of forum-selection clause.” Scherk v. Alberto-Culver
Co., 417 U.S. 506, 519 (1974); see also Polimaster Ltd. v. RAE Sys., Inc.,
623 F.3d 832, 837 (9th Cir. 2010).
GALILEA V. AGSC MARINE INS. CO. 17
Second, and more foundationally, The Bremen considered
whether the public policy of the forum where suit was
brought—there, federal public policy as supplied by federal
maritime law—outweighed the application of the law of other
countries. Id. at 17–18. In other words, under the rule of The
Bremen and its progeny, courts consider the application of the
laws of otherwise equally situated fora in light of the
“concerns of international comity, respect for the capacities
of foreign and transnational tribunals, and sensitivity to the
need of the international commercial system for
predictability.” Mitsubishi Motors Corp. v. Soler Chrysler-
Plymouth, Inc., 473 U.S. 614, 629 (1985). But here we
encounter an unequal, hierarchical relationship between
federal maritime law and state law; again, “[s]tate law
governs disputes arising under marine insurance contracts
only ‘in the absence of a federal statute, a judicially fashioned
admiralty rule, or a need for uniformity in admiralty
practice.’” Kiernan v. Zurich Cos., 150 F.3d 1120, 1121 (9th
Cir. 1998) (citations omitted).
It does not make sense to apply the federal maritime
choice-of-forum rule of The Bremen to invalidate another
established federal maritime rule specifically addressing the
appropriate forum—here, arbitration—because of a conflict
with a forum state’s public policy. Within federal admiralty
jurisdiction, conflicting state policy cannot override squarely
applicable federal maritime law. Applying The Bremen in the
way Galilea requests would distort the basic, gap-filling
principles underlying federal maritime law’s limited
recognition of state insurance law. “[S]ince the effect of the
application of [state] law here would be to invalidate the
contract, this case can hardly be analogized to cases . . .
where state law had the effect of supplementing the remedies
available in admiralty for the vindication of maritime rights.”
18 GALILEA V. AGSC MARINE INS. CO.
Kossick v. United Fruit Co., 365 U.S. 731, 741–42 (1961)
(citations omitted).6 We thus conclude that Galilea’s reliance
on Montana law under The Bremen is misplaced.
For the foregoing reasons, Montana’s law simply does not
apply to the dispute here. So it cannot act, through The
Bremen or any other avenue, to trump the FAA as an
established federal maritime law rule.
B. The Parties Have Delegated Arbitrability Issues to an
Arbitrator
We conclude by addressing whether arbitrability issues
have been delegated to an arbitrator under the parties’
agreement. Because the parties here are sophisticated, and
because they incorporated AAA rules into their arbitration
agreement, they have clearly and unmistakably indicated their
intent to submit arbitrability questions to an arbitrator.
Under the FAA, “the usual presumption that exists in
favor of the arbitrability of merits-based disputes is replaced
by a presumption against the arbitrability of arbitrability.”
Cape Flattery Ltd. v. Titan Maritime, LLC, 647 F.3d 914, 920
(9th Cir. 2011) (citing First Options of Chi., Inc. v. Kaplan,
514 U.S. 938, 944 (1995)); see also BG Group PLC v.
Republic of Argentina, 134 S. Ct. 1198, 1206–07 (2014)
(summarizing the presumptions that guide “‘threshold’
6
More generally, applying The Bremen in the manner Galilea
requests—which could invalidate FAA-covered arbitration clauses,
insurance-related or not, inconsistent with a state’s public policy against
arbitration—would not be compatible with the contemporary law of
domestic arbitration, which ordinarily disallows giving force to state law
rules that “single[] out arbitration agreements for disfavored treatment.”
Kindred Nursing Ctrs. Ltd. P’ship v. Clark, 137 S. Ct. 1421, 1425 (2017).
GALILEA V. AGSC MARINE INS. CO. 19
questions about arbitration”). Because the question of who
should decide arbitrability issues “is rather arcane,”
ambiguity on this question cuts in favor of deciding the
parties did not delegate these questions to an arbitrator. First
Options, 514 U.S. at 945 (citation omitted). Presuming
otherwise “might too often force unwilling parties to arbitrate
a matter they reasonably would have thought a judge, not an
arbitrator, would decide.” Id. (citation omitted).
Accordingly, the court maintains jurisdiction over these
gateway arbitrability questions unless there is “‘clear and
unmistakable’ evidence that the parties intended to delegate
the arbitrability question to an arbitrator.” Brennan v. Opus
Bank, 796 F.3d 1125, 1130 (9th Cir. 2015).
In Brennan, we decided that, at least in a contract between
sophisticated parties, the “incorporation of the AAA rules
[into an arbitration agreement] constitutes clear and
unmistakable evidence that contracting parties agreed to
arbitrate arbitrability.” Id. That is because the American
Arbitration Association’s rules provide that “[t]he arbitrator
shall have the power to rule on his or her own jurisdiction,
including any objections with respect to the existence, scope,
or validity of the arbitration agreement or to the arbitrability
of any claim or counterclaim.” American Arbitration
Association Commercial Arbitration Rule 7; accord
American Arbitration Association Consumer Arbitration Rule
14.7
Here, the policy’s arbitration provision states, in relevant
part, that “the parties hereto agree that any and all disputes
7
Galilea contends that it is unclear which set of American Arbitration
Association rules apply here. But the same result obtains as to
arbitrability under either potentially applicable set of rules.
20 GALILEA V. AGSC MARINE INS. CO.
arising under this policy shall be resolved exclusively by
binding arbitration . . . conducted pursuant to the Rules of the
American Arbitration Association.” This policy language is
comparable to that in the provision in Brennan. See 796 F.3d
at 1128 (quoting agreement that relevant disputes “‘be settled
by binding arbitration in accordance with the Rules of the
American Arbitration Association’”).
As in Brennan itself, we need not decide whether the
Brennan rule applies when one or more party is
unsophisticated. Both parties here are sophisticated with
respect to contracting for insurance policies. The
Underwriters are, obviously, sophisticated parties; they
underwrite maritime insurance policies. But so are Galilea
and the Kittlers. Although they are Montana residents,
Taunia and Chris Kittler formed a limited liability company
under Nevada law to own and maintain a yacht worth more
than a million dollars. In addition, Chris Kittler owns and
operates a financial services company, also incorporated
under Nevada law. In light of Galilea’s and the
Underwriters’ sophistication, the agreement to arbitrate
according to AAA rules is sufficient to show clear and
unmistakable intent to resolve arbitrability questions in
arbitration, rather than federal court. The district court
therefore erred by declining to send those questions to
arbitration and instead construing the scope of the parties’
arbitration agreement itself.
III. CONCLUSION
The Underwriters’ argument that the insurance
application supplies an enforceable arbitration agreement
fails. The parties’ insurance policy’s arbitration clause
concerns a maritime transaction falling under the FAA, and
GALILEA V. AGSC MARINE INS. CO. 21
Montana law is inapplicable under both federal maritime law
choice-of-law principles and the policy itself, so it does not
render the arbitration clause unenforceable. We further agree
with the Underwriters that the arbitration agreement shows a
clear and unmistakable intent to resolve arbitrability
questions in arbitration. We thus affirm the district court’s
order finding the policy’s arbitration clause enforceable,
affirm the district court’s order granting the Underwriters’
motion to compel arbitration as to certain causes of action,
reverse the district court’s order denying the Underwriters’
motion to compel arbitration as to Galilea’s remaining causes
of action, and remand to the district court with instructions to
grant the Underwriters’ motion to compel arbitration in its
entirety.
AFFIRMED IN PART, REVERSED IN PART, and
REMANDED.