Continental Casualty Co. v. Hartford Steam Boiler Inspection & Insurance

270 F. Supp. 2d 1015 (2003)

CONTINENTAL CASUALTY COMPANY, Petitioner,
v.
HARTFORD STEAM BOILER INSPECTION AND INSURANCE COMPANY, Respondent.

No. 03 C 1441.

United States District Court, N.D. Illinois, Eastern Division.

July 7, 2003.

H. Wesley Sunu, Jennifer Helen Kay, Tribler Orpett and Meyer, P.C., Chicago, IL, for Petitioner.

Thomas E. Birsic, Sunshine R. Fellows [phv], Kirkpatrick and Lockhart, Pittsburgh, PA, Edward William Gleason, Laterza & Loftren, P.C., Thomas Bernard Keegan, Keegan, Laterza, Lofgren & Gleason PC, Chicago, IL, for Respondent.

MEMORANDUM OPINION AND ORDER

BUCKLO, District Judge.

Petitioner Continental Casualty Company ("CNA") and respondent Hartford Steam Boiler Inspection and Insurance Company ("HSB") entered into various reinsurance agreements that contained arbitration clauses. Under the arbitration agreements, disputes between CNA and HSB were to be submitted to a panel of three arbitrators. Each party would select one arbitrator, with those two arbitrators selecting the third. The arbitration agreements also provided, however, that if one party failed to timely select its arbitrator, the other party would be allowed to select two arbitrators.

A dispute arose between CNA and HSB involving the reinsurance agreements, and CNA initiated arbitration. It allegedly sent a letter to HSB demanding arbitration and naming its arbitrator. HSB claims that it never received this letter, and consequently, it failed to timely select an arbitrator. As a result CNA announced that it was selecting the second arbitrator. HSB objected and attempted to name an arbitrator. Based on the dispute over the selection of arbitrators, both sides sought relief in federal court. CNA filed in this court a petition to enforce the arbitration agreement. The next day, HSB filed a claim for declaratory relief in the District of Connecticut. HSB seeks to transfer this action to the District of Connecticut pursuant to 28 U.S.C. § 1404. I deny the motion.

28 U.S.C. § 1404 provides that "[f]or the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought." Thus, a threshold question is whether CNA's petition "might have been brought" in the District of Connecticut. Astonishingly, neither party cites to the case that most quickly answers this question, Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Lauer, 49 F.3d 323, 326 (7th Cir.1995). CNA's petition was brought pursuant to section 4 of the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq., which permits a district court to compel arbitration according to the terms of the parties' agreement.^[1]Lauer held that "where the arbitration agreement contains a forum selection clause, only the district court in that forum can issue a § 4 order compelling arbitration." 49 F.3d at 327 (emphasis in original).^[2] Here, the parties agree that the arbitration agreements provide that arbitration is to take place in Chicago. Under Lauer, the District Court for the District of Connecticut has no authority to issue an order under section four regarding the arbitration here. CNA's motion thus could not have been brought before that court, and transfer under section 1404 is therefore not available.

The opinion in Lauer is well-reasoned and clear,^[3] and I see no reason to discuss it in detail here. The only issue that needs to be addressed is whether Lauer remains good law following the Supreme Court's decision in Cortez Byrd Chips, Inc. v. Bill Harbert Construction Co., 529 U.S. 193, 120 S. Ct. 1331, 146 L. Ed. 2d 171 (2000). In Cortez Byrd Chips, the Court held that the venue provisions of sections 9, 10, and 11 of the FAA were permissive, allowing parties to bring motions to confirm, vacate, or modify arbitration awards in any district, not just the district where the arbitration took place. Id. at 195, 120 S. Ct. 1331. This was already the rule in the Seventh Circuit when it decided Lauer, however, and the court explained how its restrictive reading of section 4 is consistent with a permissive reading of sections 9, 10, and 11. Lauer, 49 F.3d at 329-30 (explaining that in postarbitration litigation, the location of the now-completed arbitration is immaterial, while in pre-arbitration litigation, judicial economy favors the district where arbitration will occur). With the exception of a single sentence of dicta, Cortez Byrd Chips fails to address section 4 at all, and presents no reason to think that Lauer is not good law. I find that Lauer is good law, is directly on point, and instructs that CNA's motion could not have been brought in the District of Connecticut.

Respondent's motion to transfer is DENIED.

NOTES

[1] Because the FAA does not create federal question subject matter jurisdiction, there must be an independent ground for federal jurisdiction. Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 25 n. 32, 103 S. Ct. 927, 74 L. Ed. 2d 765 (1983). Here, the parties are of diverse citizenship and satisfy the amount in controversy requirement.

[2] Although the express terms of section 4 cover only the situation where one party refuses to arbitrate at all, case law has interpreted section 4 to cover the situation where a party agrees to arbitrate a dispute, but fails to abide by the terms of the arbitration agreement. Lauer, 49 F.3d at 327. Indeed, Lauer itself was a case where both parties agreed that arbitration was appropriate: there was simply a dispute over procedural issues. Id.

[3] And followed by a majority of courts. See Roe v. Gray, 165 F. Supp. 2d 1164, 1171-72 (D.Colo.2001) (collecting cases).