Opinion
No. 02 Civ. 9926 (LAK)
October 16, 2003
ORDER
Plaintiff National Westminster Bank, Pic ("NatWest") brings this action to recover funds advanced to Grant Prideco, Inc. ("GPI"), a manufacturer of oilfield tubular steel products, as part of a trade barter agreement. GPI in turn has impleaded Nutmeg Insurance Company ("Nutmeg") and seeks a declaration that Nutmeg is obliged to indemnity FPI or to pay NatWest directly for any loss arising from NatWest's cash advance and/or the trade credits issued by Active Media to GPI. Nutmeg moves to dismiss or strike the third party complaint or, alternatively, to stay proceedings thereon pending arbitration.
The factual background of this motion is set forth in the Court's prior published opinion, which is reported at 261 F. Supp.2d 265 (S.D.N.Y. 2003), familiarity with which is assumed. Suffice it to say here that it is undisputed that the insurance policy issued by Reliance was reissued by Nutmeg and that it contained an arbitration clause binding GPI and Nutmeg to arbitrate "[a]ny dispute under this policy of insurance . . ." lorio Decl. Ex. B, Endorsement 4.
In determining arbitrability, the Court looks to whether the parties agreed to arbitrate disputes at all and whether the dispute comes within the scope of the arbitration clause. E.g., Ace Capital Re Overseas Ltd. v. Central United Life Ins. Co., 307 F.3d 24 (2d Cir. 2002). The first of these elements is uncontroversial. GPI, however, contends that this dispute is not "under this policy of insurance" and therefore is not subject to arbitration. Although it is understandable as a matter of practicality that GPI would like to have Nutmeg's liability determined in this action, its attempt to wiggle out of the arbitration clause is utterly unconvincing.
Under the Trade Credit Cash Advance Agreement, NatWest agreed to advance to GPI $3,443,542.33 in consideration for which NatWest was entitled to receive cash payments from GPI generated by GPI's exhaustion of trade credits. The Trade Credit Payment Agreement obliged GPI to pay all amounts designated by Active as trade credit amounts directly to NatWest. The dispute that is the subject of the first party complaint arose, at least in part, because GPI made no purchases through Active and/or its customers, and NatWest received no payments. 261 F. Supp.2d at 267-69. NatWest therefore seeks to recover $4.65 million from GPI in accordance with the parties' agreements. Id. at 269-70.
The third party complaint asserts that Nutmeg is obliged to "indemnify [GPI] . . . for any amount paid in connection with the trade credits or NatWest's cash advance, or alternatively, to pay NatWest directly as loss payee in repayment of its cash advance as provided under the parties' agreements." Third party cpt \para\26. The insurance policy in question obliges Nutmeg "[t]o reimburse the INSURED [GPI] for LOSS resulting from TRADE CREDITS issued to the INSURED and not CONSUMED before the expiration date of the POLICY PERIOD." lorio Decl. Ex. A. Thus, it is perfectly apparent that the third party complaint seeks to require Nutmeg to honor its alleged obligations under the policy.
GPI seeks to avoid this conclusion by asserting that "[t]he third party complaint simply asks . . . that `if and to the extent Active Media is found . . . to have breached its obligations to [GPI],' then the insurer cannot later arbitrate the same issue." GPI Mem. 4. But the questions whether and to what extent Nutmeg would be bound by any determination made in this action as between GPI and Active Media quite plainly would be matters going to Nutmeg's obligations under the policy. They will be for the arbitrators.
Accordingly, Nutmeg's motion to dismiss or strike or for other relief is granted to the extent that the third party action is severed from the balance of this action, all proceedings therein stayed pending arbitration, and the severed third party action transferred to the suspense docket. It is denied in all other respects.
SO ORDERED.