Pilkington North America, Inc. v. Mitsui Sumitomo Insurance Company of America

Background

Pilkington sought insurance compensation for an approximately $60 million to $100 million loss after a tornado struck its glass manufacturing factory in Ottawa, Illinois, on or around February 28, 2017. Pilkington alleged that Mitsui Sumitomo Insurance Company of America issued a policy with reduced windstorm coverage and that Aon Risk Services Central, Inc., which brokered the policy, failed to explain the changes and included the revised terms in the next policy.

Aon asserted one cross-claim against Mitsui for contribution, seeking payment if Aon became liable to Pilkington. Mitsui asserted five cross-claims against Aon: breach of contract, breach of the implied covenant of good faith and fair dealing, contractual indemnification, negligent misrepresentation, and contribution. Mitsui alleged that Aon failed to communicate Mitsui’s proposed coverage changes accurately and improperly applied for the policy that included the $15 million windstorm sublimit.

The cross-claims concerned a 2005 agency agreement between Aon and Mitsui. The agreement contained a broad arbitration clause covering claims of every kind and nature between the parties, including contract, tort, fraud, counterclaims, cross-claims, and third-party claims. It provided that arbitration would take place in Warren, New Jersey, unless the parties agreed to another location.

Aon’s Motion to Dismiss

Aon moved under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal for failure to state a legally sufficient claim. Aon argued that Mitsui’s cross-claims had to be arbitrated and also argued that Mitsui had not adequately alleged the elements of its claims. Mitsui argued that Aon should not be permitted to seek arbitration of Mitsui’s claims while continuing to pursue its own related contribution claim in court.

Judge Keenan rejected Mitsui’s argument that Aon had waived its right to invoke arbitration. The court found that Aon raised arbitration at the earliest opportunity, had not yet answered Mitsui’s cross-claims, and had not engaged in conduct establishing waiver.

The court held that Mitsui’s cross-claims fell within the broad arbitration clause. Because Mitsui requested a stay rather than dismissal, however, the court denied Aon’s request to dismiss those claims and stayed them pending arbitration. The court did not decide whether Mitsui had adequately pleaded the elements of its individual claims.

Mitsui’s Motion to Compel Arbitration

Mitsui moved to compel arbitration of Aon’s contribution cross-claim. The court agreed that Aon’s claim was covered by the agency agreement’s broad arbitration clause. But the Federal Arbitration Act requires a court ordering arbitration to direct that the arbitration take place within the district where the motion to compel was filed. The motion was filed in the Southern District of New York, while the parties’ agreement designated New Jersey as the arbitration location.

Judge Keenan therefore denied Mitsui’s motion to compel arbitration because this court could not order arbitration in either New York contrary to the agreement or New Jersey outside the court’s district. The court nevertheless found that Aon’s cross-claim was referable to arbitration and, at Mitsui’s request, stayed that claim as well.

Disposition

The court granted in part and denied in part Aon’s motion to dismiss. It granted in part and denied in part Mitsui’s motion to compel arbitration. The court stayed the litigation of both parties’ cross-claims so they could pursue their contractual rights and remedies in the appropriate venue. The trial of Pilkington’s claims against Aon and Mitsui was to proceed without interruption. The clerk was directed to terminate the two motions.