Oregon District Court Denies Motion to Compel Arbitration, Finds It Involves Procedural Questions Best Left to Arbitrators

In Sacramento Drilling Inc. v National Casualty Co., the U.S. District Court for the District of Oregon addressed an amended motion to compel arbitration brought by defendant National Casualty Co. seeking to limit arbitration to only certain claims.

The underlying matter involved claims related to alleged losses incurred by plaintiff Sacramento Drilling (a subcontractor) for furnishing labor and materials for defendant White Construction (the general contractor) associated with the construction of two projects. The agreement between Sacramento and White included a mandatory arbitration clause that “mediation and binding arbitration shall be the sole methods of dispute resolution for any dispute arising out of this Subcontract or Subcontractor’s performance of the Subcontract Work.” Sacramento’s equipment accidentally severed an overhead electrical line, and a dispute arose regarding the amount that Sacramento was due for its work after deductions were taken by White for the damages caused by Sacramento. National Casualty had issued insurance policies for the projects naming Sacramento and White as additional insureds, and Sacramento tendered the claim for the loss to National Casualty, which denied a portion of the alleged loss. The insurance policies also contained a mandatory arbitration provision covering all differences arising out of the insurance policies. Sacramento’s state court lawsuit against White, National Casualty, and others was removed by National Casualty to federal court and the parties then filed a joint motion for a stay, which included an agreement that the case should be stayed pending the arbitration between Sacramento, White, and National Casualty. The district court granted the joint motion.

Prior to the arbitration, National Casualty filed an amended motion seeking to limit the arbitration to the contract claims under the insurance policy only. The district court denied the motion, finding that National Casualty’s effort to limit the claims did not present questions of arbitrability that are reserved for judicial determination. The court noted that none of the parties disputed the validity of the arbitration clauses at issue and that the arbitrability of the dispute had already been established in connection with the initial joint motion. Rather, the amended motion involved procedural questions including “how the parties have agreed to arbitrate, not whether the parties agreed to arbitrate.” The court ruled that these types of issues are for the arbitrator to decide and denied National Casualty’s motion.

Sacramento Drilling Inc. v National Casualty Co., No. 3:23-cv-00889 (D. Or. June 20, 2024)