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Foresight Energy, LLC v. Certain London Market Insurance Companies

United States District Court, E.D. Missouri, Eastern Division

April 25, 2018




         This matter is before the Court on plaintiff Foresight Energy, LLC's (“Foresight”) motion to remand the case to the Circuit Court for the City of St. Louis, State of Missouri. The motion is opposed by the nine remaining defendants, Certain London Market Insurance Companies (“London Market Insurers”), National Indemnity Company (“National Indemnity”), Westchester Surplus Lines Insurance Company (“Westchester”), Certain Underwriters at Lloyd's of London (“Lloyd's”), ACE American Insurance Company (“ACE American”), AXIS Surplus Insurance Company (US) (“AXIS”), Lloyd's Syndicate 0382 HDU (“Syndicate 382”), Aspen Specialty Insurance Company (“Aspen”), and Landmark American Insurance Company (“Landmark”) (collectively the “Nine Insurers”). The motion is fully briefed and ready for review. For the following reasons, the Court concludes that it lacks subject matter jurisdiction over this action, and therefore must grant Foresight's motion to remand.

         I. Background

         This action was filed in the Circuit Court of the City of St. Louis on August 4, 2017. The plaintiff is Foresight, a limited liability company organized under the laws of the State of Delaware with a principal place of business in the City of St. Louis, Missouri. Foresight, through wholly-owned subsidiaries, owns the Deer Run Mine, a “longwall” coal mine located in Hillsboro, Illinois (the “Hillsboro mine”). On or about March 26, 2015, the Hillsboro mine was evacuated due to a spontaneous combustion event. Mining operations have been suspended since that time pursuant to an order issued by the Mine Safety and Health Administration.

         Foresight purchased insurance coverage for the Hillsboro mine in a complex arrangement involving a “Quota Share Property Damage / Time Element Policy” (the “Main Policy”) with multiple layers of coverage. Fourteen separate insurers each issued a policy with unique market reference and/or policy numbers. Five of the insurers, including remaining defendants Lloyd's, Westchester, ACE American, and AXIS, provided insurance policies to Foresight in the primary layer, which attach to the Main Policy. Four insurers, including remaining defendants London Market Insurers and National Indemnity, subscribed to the Main Policy and issued quota share primary policies, sharing a portion of the risk according to a fixed percentage. Five insurers, including remaining defendants Syndicate 0382, Aspen, and Landmark, issued quota share policies in the excess layer.

         At the time of the spontaneous combustion event, the Hillsboro mine was insured for “all perils” of “direct physical loss of or direct physical damage to the Property Insured” resulting from an “Occurrence, ” as well as business interruption costs. Foresight claims that as a result of the spontaneous combustion event, it has incurred in excess of $300 million in direct property losses or damage, business interruption, and other losses and costs. The insurers have provided advances to Foresight in the amount of $43, 331, 773.

         On August 15, 2017, Foresight filed a Corrected Petition in the Circuit Court for the City of St. Louis, asserting state law claims for declaratory judgment, breach of contract, and statutory vexatious refusal to pay a claim against all fourteen of the Hillsboro mine's insurers: Chubb Bermuda Insurance Ltd. (formerly known as ACE Bermuda Insurance Ltd.) (“Chubb”), Ironshore Insurance Limited, Markel Bermuda Limited, Allied World Assurance Company Ltd., Montpelier Reinsurance Ltd., London Market Insurers, National Indemnity, Lloyd's, Westchester, ACE American, AXIS, Syndicate 0382, Aspen, and Landmark.

         On August 18, 2017, defendant Chubb removed the action to this Court asserting that federal question jurisdiction exists pursuant to the Federal Arbitration Act, 9 U.S.C. §§ 202 and 205 (2012) (“FAA”), as the insurance policy it issued to Foresight contained an arbitration provision mandating that any disputes or controversies arising under the policy be arbitrated in London, England under the Arbitration Act of 1996 of the United Kingdom. Chubb asserted that its policy's arbitration provision is an international arbitration agreement subject to a multinational treaty, the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “Convention”), 21 U.S.T. 2517, adopted June 10, 1958 (entered into force with respect to the United States Dec. 29, 1970).

         Specifically, Chubb's Notice of Removal cited Section 202 of the FAA, which provides that “[a]n arbitration agreement or arbitral award arising out of a legal relationship, whether contractual or not, which is considered as commercial . . . falls under the Convention” unless the agreement arises out of a relationship “entirely between citizens of the United States.” 9 U.S.C. § 202. Section 205 of the FAA authorizes the removal to federal court of state court actions involving an arbitration agreement that falls under the Convention, as follows:

Where the subject matter of an action or proceeding pending in a State court relates to an arbitration agreement or award falling under the Convention, the defendant or the defendants may, at any time before the trial thereof, remove such action or proceeding to the district court of the United States for the district and division embracing the place where the action or proceeding is pending. The procedure for removal of causes otherwise provided by law shall apply, except that the ground for removal provided in this section need not appear on the face of the complaint but may be shown in the petition for removal.

9 U.S.C. § 205. No. other defendant joined in Chubb's Notice of Removal or filed a separate notice of removal, and the Notice of Removal asserted that the consent of other defendants was not required under the Convention. (Doc. 1 at 4, ¶ 15.)

         Foresight filed the instant motion to remand on September 18, 2017. On September 26, 2017, Foresight, Chubb, Ironshore Insurance Limited, Markel Bermuda Limited, Allied World Assurance Company Ltd., and Montpelier Reinsurance Ltd. filed a Joint Motion to Stay or Defer Plaintiff's Motion to Remand (Doc. 30), after these defendants obtained an ex parte anti-suit injunction from the High Court of Justice, Queen's Bench Division, Commercial Court in London, England, prohibiting Foresight from litigating this action any further against those five defendants based on the London arbitration agreement in their policies. On January 16, 2018, Foresight dismissed with prejudice all claims against these five defendants. Foresight did not dismiss its claims against the Nine Insurers, and the motion to remand remains pending as to them.

         II. Legal Standard

         The party invoking jurisdiction bears the burden of proof that all prerequisites to jurisdiction are satisfied. Green v. Ameritrade, Inc., 279 F.3d 590, 596 (8th Cir. 2002). Removal statutes are strictly construed, and any doubts about the propriety of removal are resolved in favor of state court jurisdiction and remand. Central Iowa Power Co-op. v. Midwest Indep. Trans. Sys. Operator, Inc., 561 F.3d 904, 912 (8th Cir. 2009). In determining whether a claim “arises under” federal law, courts must be “mindful that the nature of federal removal jurisdiction-restricting as it does the power of the states to resolve controversies in their own courts-requires strict construction of the legislation permitting removal.” Nichols v. Harbor Venture, Inc., 284 F.3d 857, 861 (8th Cir. 2002) (citing Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108-09 (1941)). The burden of proof is therefore on the Nine Insurers to establish that the Court has subject matter jurisdiction over this action.

         III. Policy Language

         Each of the insurance policies between Foresight and the Nine Insurers (collectively the “Policies”) contain identical language regarding arbitration in all material respects and provide that the polices are governed by Missouri law. (Doc. 26 at 6.) Relevant to the present issue is Clause K of the General Insuring Conditions of the Policies, which provides:

K. Dispute Resolution and Governing Law and Jurisdiction
It is understood and agreed that this Insurance shall be governed by and construed in accordance with the law and practice of the country or state specified in Item H of the Declarations or such other country or State as may otherwise be agreed with the Insurers and endorsed to this Policy.
In the event that any provision of this Policy is unenforceable under the law governing this Policy because of non-compliance with any statute or other legislation, then this Policy shall be deemed to be enforceable with the same effect as if it complied with such statute or legislation.
Any controversy or dispute arising out of or relating to this Insurance, or the breach, termination formation or validity of this Insurance, shall be resolved in accordance with the procedures specified in this Clause K, which shall be the sole and exclusive procedures for the resolution of any such controversy or dispute.
(1) Negotiation

It is understood that the Insured and the Insurers shall first attempt in good faith to promptly resolve any dispute, controversy or claim arising out of or relating to the Policy by informal negotiations between executives who have authority to settle it.
If the dispute, controversy or claim is not resolved by such good faith means within 60 days of either party first giving the other party notice of such dispute, controversy or claim, either party may then initiate Mediation as provided in Clause K(2) below.
(2) Mediation

If the dispute, controversy or claim has not been resolved by Negotiation in accordance with Clause K(1) above, the parties will try to settle the dispute, controversy or claim by mediation under the then current CPR Institute for Dispute Resolution mediation procedure. The neutral third party will be selected from the CPR Institute Panel of Neutrals with the assistance of the CPR Institute.
(3) Arbitration

Any controversy or dispute arising out of or relating to this insurance, or the breach, termination formation or validity of this insurance, which has not been resolved by Negotiation under Clause K(1) above or Mediation under Clause K(2) above, shall be settled by binding arbitration in accordance with the then current CPR Institute for Dispute Resolution Rules for Non-Administered Arbitration of Business Disputes or, if both parties ...

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