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SDNY Grants Motion to Compel Arbitration, Directs Arbitrability Issue to Arbitrators
June 11, 2020

PB Life and Annuity Co. Ltd. sought a judgment that its dispute with Universal Life Insurance Co. was subject to litigation, not arbitration. In response, Universal Life moved to compel arbitration, and PB Life sought a permanent injunction. The motions required interpreting two related agreements - a coinsurance reinsurance agreement, and a trust agreement created pursuant to the reinsurance agreement. An arbitration clause in the reinsurance agreement applied to "all disputes ... arising under or relating" to the reinsurance agreement. The trust agreement contained a forum-selection clause requiring the parties to litigate disputes in New York City. PB Life claimed that the underlying dispute was governed solely by the trust agreement and its forum-selection clause.

The court first addressed whether a valid arbitration agreement existed in the first instance and concluded there was. In doing so, it rejected PB Life's contention that the trust agreement superseded the reinsurance agreement and its arbitration clause because, among other reasons, the very operation of the trust agreement depended on the continued existence of the reinsurance agreement. Any contrary interpretation, the court ruled, would produce a result that is "absurd, commercially unreasonable, or contrary to the reasonable expectation of the parties." In addition, while the substance of the parties' dispute was contemplated by both the reinsurance agreement and the trust agreement, the court found that the question of "arbitrability" - whether the dispute was governed by the arbitration clause or the forum-selection clause - was for the arbitrators to decide based on the relevant contract language. Accordingly, the court granted Universal Life's motion to compel, denied PB Life's motion for a permanent injunction, and stayed the action pursuant to section 3 of the Federal Arbitration Act.

PB Life & Annuity Co. Ltd. v. Universal Life Ins. Co., No. 1:20-cv-02284 (S.D.N.Y. May 12, 2020).
Authored By
Image: Alex B. Silverman
Alex B. Silverman
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