Foresight Energy, LLC (“Foresight”) brought an action in Missouri state court against various domestic and Bermuda and London market insurers for declaratory judgment, breach of contract and statutory vexatious refusal to pay a claim related to an event at a coal mine in Hillsboro, Illinois. The policies at issue provided for an arbitration in London and that the policies were to be governed by Missouri law. One of the insurers removed the action to Missouri federal court, asserting that federal subject matter jurisdiction existed under Chapter 2 of the Federal Arbitration Act (the “New York Convention”) because the agreement did not arise out of a relationship “entirely between citizens of the United States,” given the involvement of the non-U.S. insurers/defendants. Foresight then moved in Missouri federal court to remand the action back to state court because the federal court lacked subject matter jurisdiction, arguing that Missouri law, the law governing the policies, prohibits mandatory arbitration clauses in insurance policies and that Missouri law “reverse preempts” the New York Convention in light of the McCarran-Ferguson Act.
The Missouri federal court noted that McCarran-Ferguson states that “[n]o act of Congress shall be construed to invalidate, impair or supersede any law enacted by any State for the purpose of regulating the business of insurance.” The court then found that the New York Convention, an act of Congress, was not a self-executing treaty and could not itself provide the rule of decision, and that the Missouri anti-arbitration statute was a state law regulating the business of insurance. The court also found that application of the New York Convention to enforce the arbitration agreement in the policies at issue would “invalidate, impair or supersede” the Missouri anti-arbitration statute. The court then held that because the New York Convention was an act of Congress and was not self-executing, McCarran-Ferguson “reverse preempted” the New York Convention, which thus eliminated the basis for federal subject matter jurisdiction. Thus, the Missouri federal court granted Foresight’s motion to remand the action to state court.
Foresight Energy, LLC. v. Certain London Market Ins. Cos., No. 17-CV-2266 (USDC E.D. Mo. Apr. 25, 2018).
This post written by Jeanne Kohler.
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