Appeal from the United States District Court for the Central District of California Dale S. Fischer, District Judge, Presiding D.C. No. 2:08-cv-07862-DSF
The opinion of the court was delivered by: Gould, Circuit Judge:
Argued and Submitted August 30, 2011-Pasadena, California
IN MATTER OF THORPE INSULATION CO.
Before: Mary M. Schroeder and Ronald M. Gould, Circuit Judges, and Richard Seeborg, District Judge.*fn1
This appeal involves Continental Insurance Company's ("Continental") pursuit of a breach of contract claim against Thorpe Insulation Company ("Thorpe") in Thorpe's Chapter 11 bankruptcy proceeding. The district court affirmed the bankruptcy court's orders denying Continental's motion to compel arbitration and disallowing its claim. We now affirm.
Thorpe distributed and installed asbestos-containing products from 1948 to 1972. About 12,000 claims for asbestos-related injuries or deaths have been brought against Thorpe. Thorpe's insurers, including Continental, have paid more than $180 million defending and indemnifying Thorpe for these claims. In 1985, Continental and Thorpe entered into the Wellington Agreement, an omnibus insurance coverage and claims handling agreement between asbestos producers and their insurers. The Wellington Agreement provides for binding arbitration of coverage disputes.
In 1998, Continental told Thorpe that Thorpe had exhausted its coverage under Continental's insurance policies and ceased indemnifying Thorpe. Thorpe then sought, for the first time, "non-products" coverage under Continental's policies, asserting that such "non-products" coverage was not subject to the policies' liability limits. Continental disputed Thorpe's coverage claim and initiated arbitration under the Wellington Agreement. The arbitrator rejected Thorpe's claim and found that Thorpe had no remaining coverage rights under Continental's policies. Thorpe appealed, and the parties agreed to settle.
The parties executed an integrated Settlement Agreement and Release ("Settlement Agreement") in April of 2003. Whether there has been a breach of this agreement and whether that should be determined by an arbitrator or by the bankruptcy court are the issues presented by this litigation.
The Settlement Agreement provides for mutual releases, and states in relevant part:
[Thorpe] fully releases and forever discharges [Continental] . . . of and from any and all claims, actions, causes of action, rights, liabilities, obligations and demands of every kind and nature, known and unknown, suspected or unsuspected, past, present, and future, arising out of, related to, or in any way connected with, in whole or in part, any claim of any kind under the Policies or relating to the [arbitration] . . . .
The Settlement Agreement also contains two warranties that are central to this case. First, the "Assignment Warranty" provides:
The parties to this Agreement each represent and warrant that they have not and will not in any manner assign, transfer, convey or sell, or purport to assign, transfer, convey or sell to any entity or person any cause of action, chose in action, or part thereof, arising out of or connected with the matters released herein, and that they are the only persons or entities entitled to recover for damages under such claims, causes of action, actions, and rights.
Second, the "Establishment Warranty" provides:
The parties to this Agreement each further represent and warrant that they will not in any way voluntarily assist any other person or entity in the establishment of any claim, cause of action, action, or right against the other party to this Agreement arising out of, resulting from or in any way relating to the matters released.
Thorpe and Continental agreed to arbitrate disputes regarding the Settlement Agreement and its terms.
The Settlement Agreement released only Thorpe's claims against Continental. It does not refer to the direct action rights of individual asbestos claimants*fn2 or to the contribution, indemnity, or subrogation rights of other insurers. As such, direct action claims and other insurers' claims against Continental were not released under the terms of the Settlement Agreement.
After the 2003 Settlement Agreement, as Thorpe's coverage under other insurers' policies neared its limits, coverage actions commenced in California state court. Thorpe and the insurers began settlement discussions that contemplated Thorpe's filing for bankruptcy. Thorpe's goal was to confirm ...