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Portland General Electric Co. v. Liberty Mutual Insurance Company

United States Court of Appeals, Ninth Circuit

July 10, 2017

Portland General Electric Company, Plaintiff-Appellee,
v.
Liberty Mutual Insurance Company; Zurich American Insurance Company, Defendants-Appellants.

          Argued and Submitted May 8, 2017

         Appeal from the United States District Court for the District of Oregon Marco A. Hernandez, District Judge, Presiding D.C. No. 3:16-cv-00495-HZ

          Eric D. Miller (argued), Perkins Coie LLP, Seattle, Washington; David Bledsoe, Perkins Coie LLP, Portland, Oregon; for Plaintiff-Appellee.

          John Spencer Stewart (argued), Mario R. Nicholas, Thomas Ardell Larkin, and Jan D. Sokol, Stewart Sokol & Larkin LLC, Portland, Oregon, for Defendant-Appellants.

          Nathan D. O'Malley (argued) and Sara H. Kornblatt, Gibbs Giden Locher Turner Senet & Wittbrodt LLP, Los Angeles, California, for Amicus Curiae Abengoa.

          Before: Jay S. Bybee and Andrew D. Hurwitz, Circuit Judges, and Jed S. Rakoff, [*] Senior District Judge.

         SUMMARY[**]

         Arbitration

         The panel vacated the district court's judgment entering a preliminary injunction prohibiting sureties from pursuing claims against Portland General Electric Company ("PGE") in arbitration and denying a mandatory stay of the judicial proceedings under § 3 of the Federal Arbitration Act, and remanded for further proceedings; and dismissed for lack of appellate jurisdiction the sureties' appeal from the order denying their motion for a discretionary stay.

         The appeal involves the interplay of three related contracts: a Construction Contract entered by PGE and several contracting companies to build an Oregon power plant; a performance Bond in which appellants/sureties Liberty Mutual Insurance Company and Zurich American Insurance Company issued a bond to PGE as required by the Construction Contract; and a Guaranty of performance issued to PGE by its parent company, Abengoa S.A. The Guaranty provided that the parties submit any disputes to binding arbitration to be conducted by the International Chamber of Commerce ("ICC") under its procedural rules and Oregon substantive law.

         PGE filed this diversity action against the sureties, alleging breach of the Bond and bad faith; and PGE sought a preliminary injunction prohibiting the sureties from arbitrating their claims against PGE.

         The panel held that the incorporation of the ICC Rules into an arbitration agreement constituted clear and unmistakable evidence of a delegation of gateway issues of arbitrability to the arbitrator.

         The panel rejected PGE's contention that the ICC Rules did not govern the present dispute because the Bond lacked an arbitration clause. The panel held that the following were questions of the scope of the arbitration agreement in the Guaranty, and delegated to the arbitrators: whether Abengoa properly joined the sureties to the arbitration pursuant to the Guaranty and the ICC Rules; whether the sureties' claim against PGE met the Guaranty's test of "aris[ing] out of or in connection with an agreement with a subcontractor or [the] Guaranty, " and whether PGE had therefore agreed to arbitrate its disputes against the sureties. The panel concluded that the district court erred in enjoining the sureties from participating in the ICC arbitration, and preventing the arbitral tribunal from addressing the scope of the arbitration.

          OPINION

          RAKOFF, ...


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