National Union Fire Insurance v. NCR Corp. , 376 F. App'x 70 ( 2010 )

09-2904-cv, 09-2986-cv
National Union Fire Ins. v. NCR Corp.
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUM M ARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUM M ARY ORDER
FILED AFTER JANUARY 1, 2007, IS PERM ITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE
PROCEDURE 32.1. WHEN CITING A SUM M ARY ORDER IN A DOCUM ENT FILED WITH THIS COURT, A PARTY
M UST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION
“SUM M ARY ORDER”). A PARTY CITING A SUM M ARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY
NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit, held at
the Daniel Patrick Moynihan United States Courthouse, 500 Pearl Street, in the City of New
York, on the 7 th day of May, two thousand and ten.
PRESENT: PETER W. HALL,
GERARD E. LYNCH, Circuit Judges,
TIMOTHY C. STANCEU* Judge, U.S. Court of International Trade.
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NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, P.A.,
Petitioner-Appellant,
-v.-
Nos. 09-2904-cv(L);
09-2986-cv(CON)
NCR CORPORATION.
Respondent-Appellee.
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*
The Honorable Timothy C. Stanceu, of the United States Court of International Trade,
sitting by designation.
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APPEARING FOR THE APPELLANT: STEVEN J. AHMUTY , JR., (Christopher Simone and
Juan C. Gonzalez on brief) Shaub, Ahmuty, Citrin
& Spratt, LLP, Lake Success, New York.
APPEARING FOR THE APPELLEE: P. BENJAMIN DUKE , (John G. Buchanan III, Mari K.
Bonthuis, and Charles Fischette on brief),
Covington & Burling LLP, New York, New York.
This is an appeal from the judgment of the United States District Court for the Southern
District of New York (Jones, J.) denying petitioner-appellant’s motion to compel arbitration.
UPON DUE CONSIDERATION, it is hereby ORDERED, ADJUDGED, AND DECREED
that the judgment of the district court is AFFIRMED.
Petitioner-appellant National Union Fire Insurance Company of Pittsburgh, P.A.,
(“National Union”) appeals from the judgment, dated June 11, 2009, of the United States District
Court for the Southern District of New York (Jones, J.), effectuating its May 28, 2009 order
denying petitioner’s motion to compel arbitration. The district court denied the motion on the
ground that National Union waived its right to arbitration. National Union Fire Ins. Co. of
Pittsburgh, P.A. v. NCR Corp., 09-civ-3868 (S.D.N.Y. June 11, 2009). We assume the parties’
familiarity with the facts of the case, its procedural history, and the scope of the issues on appeal.
For the following reasons, we affirm the judgment.
“[A] party waives its right to arbitration when it engages in protracted litigation that
prejudices the opposing party. . . . [I]n determining whether a party has waived its right to
arbitration, we will consider such factors as (1) the time elapsed from commencement of
litigation to the request for arbitration, (2) the amount of litigation (including any substantive
motions and discovery), and (3) proof of prejudice. There is no bright-line rule, however, for
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determining when a party has waived its right to arbitration: the determination of waiver depends
on the particular facts of each case.” In re Crysen/Montenay Energy Co., 226 F.3d 160, 162-63
(2d Cir. 2000) (quoting PPG Industries, Inc. v. Webster Auto Parts Inc., 128 F.3d 103, 107-08
(2d Cir. 1997)) (brackets omitted). “The key to a waiver analysis is prejudice.” Thyssen, Inc. v.
Calypso Shipping Corp., S.A., 310 F.3d 102, 105 (2d Cir. 2002) (per curiam). “Prejudice as
defined by our cases refers to the inherent unfairness—in terms of delay, expense, or damage to a
party’s legal position—that occurs when the party’s opponent forces it to litigate an issue and
later seeks to arbitrate that same issue.” In re Crysen, 226 F.3d at 162-63 (quoting PPG, 128
F.3d at 107) (brackets omitted). This Court reviews de novo a district court’s decision regarding
whether a party has waived its right to arbitrate, but we review for clear error the factual findings
on which the district court relied. PPG, 128 F.3d at 107.
First, we agree with the district court’s finding that the issues National Union seeks to
arbitrate were at the heart of the Wisconsin state court action—an action the parties have been
litigating for more than three years. Notwithstanding its exclusion of issues that have been
previously substantively ruled on by the state court, even National Union’s amended motion to
compel arbitration makes plain that National Union seeks to arbitrate a broad array of issues
including those at issue in the state court action. We also agree with the district court’s finding
that National Union’s three-year delay between the commencement of litigation and filing of the
motion to compel arbitration is significant. The amount of litigation, including, inter alia,
discovery and scheduling conferences, motions addressing choice-of-law and various defenses,
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and several motions for summary judgment, demonstrates a substantial commitment to the
judicial forum.
The remaining question is whether NCR has been prejudiced. See id. at 107-08.
Prejudice is not presumed based on the timing of National Union’s arbitration demand and its
participation in litigation—i.e., the first two prongs of the three-part waiver inquiry—standing
alone. In re Crysen, 226 F.3d at 162-63 (quoting PPG, 128 F.3d at 107-08) (“Incurring legal
expenses inherent in the litigation, without more, is insufficient evidence of prejudice to justify a
finding of waiver.”). This Court has, however, recognized “undue delay and expense” as a factor
to be considered in its prejudice analysis. See e.g., S & R Co. of Kingston v. Latona Trucking,
Inc., 159 F.3d 80, 83, 84 (2d Cir. 1998) (citing Leadertex, Inc. v. Morganton Dyeing & Finishing
Corp., 67 F.3d 20, 25-26 (2d Cir. 1995)); Kramer v. Hammond, 943 F.2d 176, 179 (2d Cir.
1991). We have, additionally, found prejudice where “a party seeking to compel arbitration
engages in discovery procedures not available in arbitration, makes motions going to the merits
of an adversary’s claims, or delays invoking arbitration rights while the adversary incurs
unnecessary delay or expense.” Cotton v. Slone, 4 F.3d 176, 179 (2d Cir.1993) (citations
omitted). Here, defendant has done all three things.
The particular circumstances of this case show sufficient prejudice resulting from
National Union’s late attempt at initiating arbitration to cause us to conclude that National Union
has waived its right to arbitration notwithstanding the non-waiver provision in the contracts at
issue. National Union has litigated and taken pretrial discovery relating to the same contracts it
now seeks to submit to arbitration, having thereby gained tactical advantage with respect to
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issues it seeks to arbitrate. See In re Crysen, 226 F.3d at 162-63 (quoting PPG, 128 F.3d at 107-
08) (“[P]rejudice as defined by our cases refers to the inherent unfairness—in terms of delay,
expense, or damage to a party’s legal position—that occurs when the party’s opponent forces it
to litigate an issue and later seeks to arbitrate that same issue.”) (emphasis added); cf. Louis
Dreyfus Negoce S.A. v. Blystad Shipping & Trading Inc., 252 F.3d 218, 229 (2d Cir. 2001)
(concluding that the right to arbitrate was not waived where only minimal litigation was
undertaken, consisting of a court appearance and a filing of defenses and cross claims). Invoking
the judicial forum’s authority to obtain depositions, National Union has taken depositions that
likely would be unavailable during arbitration, including fact and expert witness depositions and
third-party depositions, some of which relate to issues sought to be arbitrated. See, e.g., Cotton,
4 F.3d at 180. Finally, National Union has invoked arbitration in the face of adverse rulings on
substantive motions. Id. The resulting prejudice to NCR, including in part NCR’s having
incurred at least some unnecessary delay or expense, id. at 179, compels the conclusion that the
right to arbitration has been waived.
Regarding the non-waiver provision in the contracts at issue, under this Court’s
jurisprudence, “the presence of the ‘no waiver’ clause does not alter the ordinary analysis
undertaken to determine if a party has waived its right to arbitration.” S & R, 159 F.3d at 86.
That is to say, such a provision is not dispositive. Addressing National Union’s argument, we are
not convinced on the record before us that the district court erred in its analysis by ignoring the
non-waiver provision in the contracts. Rather, in a clear reference to S & R’s standard, the court
indicated that “[t]he Second Circuit has stated [that] the presence of a no-waiver clause doesn’t
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alter the ordinary analysis that one takes to determine if a party has waived its right to arbitration
. . ..” We read the district court as having concluded that the non-waiver clause did not otherwise
alter its determination that the defendant waived its right to arbitrate.
Regardless, we conclude independently that, notwithstanding the non-waiver provision,
NCR would be prejudiced by National Union’s lengthy participation in multiple aspects of
litigation prior to its demand for arbitration. Cf. id. (observing that “to allow the ‘no waiver’
clause to preclude a finding of waiver would permit parties to waste scarce judicial time and
effort . . .. Further, delay in demanding arbitration until after judicial proceedings are almost
complete permits the losing party to test[ ] the water before taking the swim.”) (internal quotation
marks omitted). We conclude, therefore, that National Union has waived its right to arbitrate
through its repeated, intentional invocation of judicial process, including the use of extensive
discovery likely unavailable in an arbitral proceeding, to resolve questions about the scope of the
insurance policies at issue and the applicability of particular defenses to that insurance coverage.
Accordingly, the judgment of the district court is AFFIRMED.
FOR THE COURT:
Catherine O’Hagan Wolfe, Clerk
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