                                                                                                                           Opinions of the United
2007 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


6-12-2007

Certain Underwriters v. W Chester Fire Ins
Precedential or Non-Precedential: Precedential

Docket No. 06-1457




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                                          PRECEDENTIAL

       UNITED STATES COURT OF APPEALS
            FOR THE THIRD CIRCUIT


                      No. 06-1457



            CERTAIN UNDERWRITERS
      AT LLOYD’S LONDON SUBSCRIBING
        TO REINSURANCE AGREEMENTS
              R69342, RE2238, RE1240,
RE1249, RE6934, RE2239, RE1250, Third Comprehensive
        Catastrophe Liability Excess and Fourth
     Comprehensive Catastrophe Liability Excess,
                                              Appellants
                           v.

   WESTCHESTER FIRE INSURANCE COMPANY

              (N.J. Civil No. 05-cv-03024)

           CERTAIN UNDERWRITERS
       AT LLOYD’S LONDON SUBSCRIBING
        TO REINSURANCE AGREEMENTS
            RE71365, RE2241 A AND B,
     AND RE1253F (Special Casualty Contingency),
                                           Appellants
                        v.

   WESTCHESTER FIRE INSURANCE COMPANY

              (N.J. Civil No. 05-cv-03025)



     On Appeal from the United States District Court
              for the District of New Jersey
         (D.C. Nos. 05-cv-03024, 05-cv-03025)
      District Judge: Honorable William H. Walls
                  Argued January 9, 2007
    Before: SLOVITER and RENDELL, Circuit Judges, and
                  RUFE,* District Judge

                      (Filed: June 12, 2007)



Mary Ann 'Amato (Argued)
Mendes & Mount
New York, NY 10019

William S. Wachenfeld
Mendes & Mount
Newark, NJ 07102

       Attorneys for Appellants

Carter G. Phillips (Argued)
Sidley Austin
Washington, DC 20005

Daniel J. Neppl
Sidley Austin
Chicago, IL 60603

Seth G. Park
Siegal, Napierkowski & Park
Mount Laurel, NJ 08054

       Attorneys for Appellee




       *
        Honorable Cynthia M. Rufe, Judge of the United States
District Court for the Eastern District of Pennsylvania, sitting by
designation.

                                  2
                   OPINION OF THE COURT


SLOVITER, Circuit Judge.

        At issue in this appeal is whether an arbitrator or a court
should decide whether coverage disputes under essentially
identical insurance contracts should be arbitrated separately on a
contract-by-contract basis or collectively in a consolidated
arbitration. The District Court held that the issue of
consolidation should be decided by an arbitrator. We believe
that decision comports with the direction provided by two
Supreme Court decisions and will affirm.

                                  I.

       The underlying dispute in this matter regards the payment
of asbestos claims under reinsurance coverage1 that Westchester
Fire Insurance Company (“Westchester Fire”) purchased from
certain Lloyd’s of London reinsurers (the “Underwriters”). The
parties disagree as to how to characterize the coverage at issue.
Westchester Fire argues that we are dealing with two reinsurance
programs: one being the Comprehensive Catastrophe Treaty,
which was made up of six essentially identical contracts
covering different time periods in effect from 1972-1985
inclusive, and the other, the Special Contingency Treaty, made
up of two essentially identical contracts in effect from 1974-
1982 inclusive.

       By way of brief introduction to the industry terminology,
“[t]here are two types of reinsurance contract: treaty and
facultative.” North River Ins. Co. v. CIGNA Reinsurance Co.,
52 F.3d 1194, 1199 (3d Cir. 1995). Unlike facultative


       1
          “In essence, reinsurance is insurance for insurance
companies,” Cont’l Cas. Co. v. American Nat’l Ins. Co., 417 F.3d
727, 729 n.1 (7th Cir. 2005) (internal citation and quotation marks
omitted), whereby a reinsured (here, Westchester Fire), cedes some
of its risk to a reinsurer (in this case, the Underwriters), and shares
its premium with the reinsurer.

                                  3
reinsurance, which “entails the ceding of a particular risk or
policy[,]” a reinsurance treaty involves an agreement by a
reinsurer “to accept an entire block of business from the
reinsured. . . . Because a treaty reinsurer accepts an entire block
of business, it does not assess the individual risks being
reinsured; rather, it evaluates the overall risk pool.” Id.

        On May 13, 2005, Westchester Fire sent two arbitration
demand letters to the Underwriters, each based upon one of the
two treaties. Westchester Fire captioned one demand as
referencing the “Comprehensive Catastrophe Excess of Loss –
All Layers” treaty, effective “7/1/72 – 6/30/85 Inclusive,” App.
at 169, and the other as referencing the “Special Casualty
Contingency Excess of Loss” treaty, effective “7/1/74 –
6/30/82.” App. at 220. Each letter stated that Westchester Fire
“hereby demands and initiates arbitration under the above
captioned Treaty . . . . [Underwriters] are requested and required
in accordance with pertinent treaty provisions to name their
arbitrator.” App. at 169-70; 220-21.

        In response to each demand, the Underwriters filed a
Verified Petition to Compel Arbitration and Stay Arbitration in
the District of New Jersey. Their petition in response to the
Comprehensive Catastrophe arbitration demand argued that the
Comprehensive Catastrophe Treaty consists of at least six
separate contracts, each with its own arbitration clause, and that
“[n]one of the agreements provide for the consolidation of
arbitration proceedings, let alone consolidation with proceedings
under other contracts.” App. at 36. They asked that the demand
be stayed. Likewise, the petition in response to the Special
Casualty Contingency arbitration demand argued that the
demand should be stayed, as it was an effort to consolidate a
dispute arising under at least two separate reinsurance contracts,
each having its own arbitration clause.

        The Underwriters’ petitions also requested that the court
order eight arbitrations in conjunction with the eight contracts
the Underwriters had identified – i.e., six separate arbitrations in
response to Westchester Fire’s demand under the
Comprehensive Catastrophe program and two separate
arbitrations under the Special Contingency program. The

                                 4
Underwriters asked as well that Westchester Fire “produce all
reinsurance agreements within the scope of its arbitration
demand[,]” as there may exist “other agreements not presently
known to petitioners[,]” App. at 40; 176-77, and sought a
declaration that “Westchester may not consolidate proceedings
without the consent of all parties to the agreements[.]” Id.

        As the basis for its request for arbitration, Westchester
Fire argues that the Underwriters have imposed onerous
documentation and claim procedures before payment of asbestos
claims that they had reinsured, and that these requirements differ
from the parties’ prior course of dealing. It complains that the
Underwriters have subjected it to repetitive audits and requests
for information, and have not paid the billings that Westchester
Fire submitted. It seeks an award enforcing the payment
requirement and confirming that it is under no obligation to meet
the extra-contractual documentation or claim procedures that the
Underwriters have asserted.

       In response to each Underwriters’ petition, Westchester
Fire cross-moved to compel arbitration. In regard to the Special
Contingency petition, Westchester Fire argued that, “[a]lthough
the contract wording for the Reinsurance Program varied in
certain respects over the years, the contract wording for the
Reinsurance Program provides that the contract between the
parties is continuous, even though it changes in certain respects
over time. Disputes under the Reinsurance Program are to be
resolved by arbitration in Morristown, New Jersey.” App. at
248. Westchester Fire responded similarly to the Underwriters’
Comprehensive Catastrophe petition, arguing that, while “[t]he
Reinsurance Program consisted of several layers over the
years[,]” the agreement between the parties was continuous and,
similarly, called for arbitration in Morristown, New Jersey.
App. at 228.

       Following consolidation of the two actions, the District
Court observed that it was “not presented with the question of
whether a valid arbitration agreement exists[,]” but, rather, the
question of whether the parties had contractually agreed to
“separate arbitrations under the various contractual layers to the
reinsurance program or [to] a single consolidated arbitration”

                                 5
with respect to each petition. App. at 23. This, the District
Court concluded, was an issue “for the arbitrators not the courts
to decide.” Id. It issued an order denying the Underwriters’
petitions and granting Westchester Fire’s cross-motions to
compel arbitration. The order directed the Underwriters to
appoint a single arbitrator in response to each of Westchester
Fire’s arbitration demands, and “proceed promptly with
Westchester Fire Insurance Company to identify a single umpire
in response” to each arbitration demand. App. at 4. The order
also instructed that the “relief granted herein shall not, in any
matter, preclude” the Underwriters from applying to the
arbitration panel “for the same or similar relief sought in this
proceeding nor in any way limit [the] Panel’s authority to grant
such relief.” App. at 5.

                                II.

       The District Court had jurisdiction under 9 U.S.C. § 203
because, as the parties agree, these actions between domestic
Westchester Fire and foreign Underwriters fall within the
Convention on the Recognition and Enforcement of Foreign
Arbitral Awards, 9 U.S.C. §§ 201-208. Bel-Ray Co., Inc. v.
Chemrite Ltd., 181 F.3d 435, 439-40 (3d Cir. 1999); see also
China Minmetals Materials Imp. & Exp. Co., Ltd. v. Chi Mei
Corp., 334 F.3d 274, 280 (3d Cir. 2003) (explaining, in regard to
the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1 et seq., that
“the domestic FAA (chapter 1 of the FAA) is applicable to
actions brought under the Convention (chapter 2 of the FAA) to
the extent they are not in conflict [pursuant to] 9 U.S.C. § 208”).

       We have jurisdiction over the Underwriters’ appeal under
28 U.S.C. § 1291 and section 16 of the FAA, 9 U.S.C. § 16.
Sandvik AB v. Advent Int’l Corp., 220 F.3d 99, 102 (3d Cir.
2000). This court exercises “plenary review over the legal
questions concerning the applicability and scope of an arbitration
agreement.” Medtronic AVE, Inc. v. Advanced Cardiovascular
Sys., Inc., 247 F.3d 44, 53 (3d Cir. 2001).

                               III.

       The Underwriters (the reinsurers) argue that the District

                                 6
Court had no authority to order the parties to submit to an
arbitral determination of the question of whether future
arbitrations on the underlying merits issue would occur in
consolidated or contract-by-contract fashion. The Underwriters
argue that the arbitration clause in each agreement calls for an
arbitration of all issues pertaining to that specific reinsurance
contract, which they believe requires an “individually-convened”
arbitration. Appellants’ Br. at 27. Therefore, they continue,
forcing all parties into a unified threshold proceeding in
connection with each demand is beyond the scope of what the
parties agreed to arbitrate. The issue of consolidated arbitration,
they insist, should be presented to individual arbitration panels
convened in accordance with each contract.

        In contrast to the Underwriters, Westchester Fire argues
that the question of whether the contracts should be arbitrated
collectively or individually is itself a determination that must be
made by an arbitrator. In the alternative, Westchester Fire
argues that, were we to decide that it is the District Court that
must make the consolidation decision, New Jersey law
“authorizes court-ordered consolidation of multiple arbitrations
under multiple contracts[.]” Appellee’s Br. at 39. In light of our
determination, we need not reach this issue.

        “[A]rbitration is a creature of contract, and an arbitration
panel has the authority to decide only the issues that have been
submitted for arbitration by the parties.” Metromedia Energy,
Inc. v. Enserch Energy Servs., Inc., 409 F.3d 574, 578 (3d Cir.
2005); Medtronic, 247 F.3d at 54 (noting that “arbitrators have
the authority to resolve disputes only if the parties have agreed
to submit to arbitration” and that “there must be sufficient
evidence that the parties consented to arbitration in an express
agreement”).

       In two recent cases, the Supreme Court has provided
guidance on the sometimes vexing issue of the respective roles
of the court and the arbitrators. In Howsam v. Dean Witter
Reynolds, Inc., 537 U.S. 79 (2002), an investor (Howsam),
complaining that her broker (Dean Witter) had made
misrepresentations in its investment advice, sought arbitration
before the National Association of Securities Dealers (“NASD”).

                                  7
Id. at 82. Dean Witter filed suit in federal court seeking a
declaration that Howsam’s suit was untimely. Id. The district
court dismissed the action, holding that the NASD arbitrator
should decide the issue. Id.

        The Court of Appeals for the Tenth Circuit reversed on
the ground that the question of whether Howsam’s claim was
time-barred under a NASD arbitration rule presented a question
of arbitrability for the court to decide. Id. The Supreme Court
reversed. It noted that although it had long recognized the
liberal federal policy in favor of arbitration, the question of
“whether the parties have submitted a particular dispute to
arbitration, i.e., the ‘question of arbitrability,’ is an issue for
judicial determination unless the parties clearly and
unmistakably provide otherwise.” Id. at 83 (emphasis in
original) (internal citations and quotation marks omitted). The
Court stated that whereas one might call any potentially
dispositive gateway question a “question of arbitrability,” “the
phrase ‘question of arbitrability’ has a far more limited scope.”
Id. Such questions of arbitrability are raised only in “narrow
circumstance[s]” where courts must determine “gateway
matter[s],” such as a dispute about “whether the parties are
bound by a given arbitration clause” or whether “a disagreement
about whether an arbitration clause in a concededly binding
contract applies to a particular type of controversy.” Id. at
83-84. In contrast, the Court explained, “‘procedural’ questions
which grow out of the dispute and bear on its final disposition
are presumptively not for the judge, but for an arbitrator, to
decide.” Id. at 84 (emphasis in original) (internal citation and
quotation marks omitted).

        In Howsam, the Court observed the inherent logic and
efficiency of such a presumption. “[F]or the law to assume an
expectation that aligns (1) decisionmaker with (2) comparative
expertise will help better to secure a fair and expeditious
resolution of the underlying controversy — a goal of arbitration
systems and judicial systems alike.” Id. at 85. Thus, “only when
there is a question regarding whether the parties should be
arbitrating at all” is a question of arbitrability raised for the court
to resolve. Dockser v. Schwartzberg, 433 F.3d 421, 426 (4th
Cir. 2006). “In other circumstances, resolution by the arbitrator

                                  8
remains the presumptive rule.” Id.

        The Court’s plurality decision in Green Tree Financial
Corp. v. Bazzle, 539 U.S. 444 (2003), provides further guidance
as to the distinction between questions of arbitrability (for the
court) and questions of arbitral procedure (for the arbitrator).
Two sets of South Carolina customers who had contracted with
Green Tree Financial Corp. for loans for either home
improvement or home purchase filed separate actions claiming
that Green Tree failed to provide them with the form legally
required under South Carolina law advising that they had a right
to name their own lawyers and insurance agents. Id. at 448-49.
Their contracts with Green Tree provided for mandatory
arbitration, and they filed separate actions in South Carolina
state courts. Id. at 449. One set of plaintiffs, the Bazzles, asked
the court to certify a class action, which the court did and
compelled arbitration. Id. The arbitrator, proceeding with the
arbitration as a class arbitration, awarded $10,935,000 in
statutory damages plus attorney’s fees. Id. In the other
proceeding, the arbitrator certified a class in arbitration and
ultimately awarded $9,200,000 in statutory damages in addition
to attorney’s fees. Id.

        Green Tree appealed to the South Carolina Court of
Appeals claiming that class arbitration was legally
impermissible. Id. The South Carolina Supreme Court assumed
jurisdiction and held that, if an arbitration provision is silent on
the question, then class-wide arbitration is permissible. Id. at
450. The United States Supreme Court granted certiorari to
consider whether the South Carolina Supreme Court’s holding
was consistent with the FAA. Id. In its decision, the Court held
that the resolution of the threshold question of contract
interpretation — “Are the contracts in fact silent, or do they
forbid class arbitration as petitioner Green Tree Financial Corp.
contends?” — should be “resolved in arbitration.” Id. at 447.

       Drawing on Howsam, the plurality reasoned that unless
one finds “clear and unmistakable evidence to the contrary” in
an arbitration clause, only in certain “gateway matters” will a
court “assume that the parties intended courts, not arbitrators, to
decide a particular arbitration-related matter.” Id. at 452

                                 9
(internal quotation marks and citation omitted). Matters that
concern “neither the validity of the arbitration clause nor its
applicability to the underlying dispute between the parties” will
not fall within this “narrow exception.” Id.; see also PacifiCare
Health Sys., Inc. v. Book, 538 U.S. 401, 407 n.2 (2003)
(rejecting argument that preliminary question of “whether the
[contractual] remedial limitations at issue here prohibit an award
of RICO treble damages” raised question of arbitrability for
court to resolve, and concluding it presented question of contract
interpretation to be resolved in arbitration); Buckeye Check
Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006) (under the FAA,
whether a contract is void for illegality is generally an issue for
arbitrator, not court, to decide); Ehleiter v. Grapetree Shores,
Inc., 482 F.3d 207, 217 (3d Cir. 2007) (concluding that Green
Tree reaffirms “the general division of labor” between arbitrator
and judge as “articulated in Howsam”). The Green Tree
plurality therefore vacated the decision of the South Carolina
Supreme Court and remanded the case “so that the arbitrator
may decide the question of contract interpretation — thereby
enforcing the parties’ arbitration agreements according to their
terms.” 539 U.S. at 454.2


       2
         The Green Tree plurality was written by Justice Breyer,
joined by Justices Scalia, Souter and Ginsberg. Justice Stevens
authored a short concurrence, providing the fifth vote for the
plurality’s judgment. “When a fragmented Court decides a case
and no single rationale explaining the result enjoys the assent of
five Justices, the holding of the Court may be viewed as that
position taken by those Members who concurred in the judgments
on the narrowest grounds.” Marks v. United States, 430 U.S. 188,
193 (1977) (internal quotation marks and citation omitted). Justice
Stevens did not join because he concluded that, since (a) the South
Carolina Supreme Court’s decision as to the availability of class
arbitration was correct, and (b) petitioner Green Tree “merely
challenged the merits of that decision without claiming it was made
by the wrong decisionmaker,” there was no need for remand. 539
U.S. at 455. He would have simply affirmed the judgment of the
South Carolina Supreme Court. Id.

       Justice Stevens also noted that the “[plurality] opinion

                                10
        Thus, Howsam and Green Tree together explain why no
“question of arbitrability,” as the Supreme Court has recently —
and narrowly — defined that phrase, has been raised here.
Under section 4 of the FAA, federal courts, “upon being satisfied
that the making of the agreement for arbitration or the failure to
comply therewith is not in issue,” are authorized to “make an
order summarily directing the parties to proceed to arbitration in
accordance with the terms thereof.” 9 U.S.C. § 4; see also 9
U.S.C. § 206 (“A court having jurisdiction under this chapter
may direct that arbitration be held in accordance with the
agreement . . . .”). This, the District Court has done.

       As in Green Tree, the question here is “not whether the
parties wanted a judge or an arbitrator to decide whether they
agreed to arbitrate a matter,” but rather “what kind of arbitration


expresses a view of the case close to my own,” and stated his
agreement with the plurality that Howsam, “[a]rguably[,]” compels
the conclusion that “the interpretation of the parties’ agreement
should have been made in the first instance by the arbitrator, rather
than the court.” Id. Based on this language, therefore, we
conclude that a “common denominator . . . implicitly” runs through
the reasoning of the “five Justices who support the judgment” in
the Green Tree decision. Rappa v. New Castle County, 18 F.3d
1043, 1057-58 (3d Cir. 1994) (internal quotation to King v. Palmer,
950 F.2d 771, 781 (D.C. Cir. 1991) (en banc) omitted); see also
Pedcor Mgmt. Co. Welfare Benefit Plan v. Nations Pers. of Texas,
Inc., 343 F.3d 355, 358-59 (5th Cir. 2003) (“Justice Stevens did
express his agreement, however, with the principle laid down by
the plurality that arbitrators should be the first ones to interpret the
parties’ agreement. As a result, the plurality’s governing rationale
in conjunction with Justice Stevens’s support of that rationale
substantially guides our consideration of this dispute.”). We
recognize that the Seventh Circuit, concluding that it was only
“likely,” rather than certain, “that Justice Stevens agreed with the
plurality that an arbitrator should be the first to interpret the
agreements,” has decided that identification of “a controlling
rationale” in Green Tree would be too presumptuous, Employers
Ins. Co. of Wausau v. Century Indem. Co., 443 F.3d 573, 581 (7th
Cir. 2006), but we decline to adopt that conclusion.

                                  11
proceeding the parties agreed to.” 539 U.S. at 452 (emphasis in
original). In this case, the parties agree that they agreed to
arbitrate the matter — the question is merely whether they
agreed to individualized or consolidated proceedings as a matter
of procedure. Therefore, “any doubt” here about the “scope of
arbitrable issues should be resolved in favor of arbitration.” Id.
at 445 (internal quotation marks and citation omitted).3
        The Underwriters protest that there is no contractual
authority for a threshold proceeding before an arbitrator on
consolidation under each program. Yet, Westchester Fire’s
demands for arbitration under the Comprehensive Catastrophe
and Special Contingency treaties are based on express


       3
        The Underwriters rely in part on Certain Underwriters at
Lloyd’s v. Century Indem. Co., 2005 WL 1941652, at *1 (E.D. Pa.
Aug. 1, 2005), where a district court denied an insurance
company’s request to order one arbitration panel for each
reinsurance program between the parties, concluding that “none of
the reinsurance contracts provide for consolidation of arbitration
proceedings, and that [the reinsurers have] not consented to the
[consolidated arrangement.]”

        The district court in that case did not address the reasoning
of Howsam and Green Tree, and relied in its decision on an
unpublished, pre-Green Tree decision of this court. Moreover, the
matter before the district court in that case — competing requests,
where one party sought to compel arbitration as it was provided for
in each reinsurance contract, while the other sought to group each
arbitration by the reinsurance program — is distinguishable from
the instant case, in which we consider a request to have the
decision of whether or not to consolidate be heard by an arbitrator.
See In re Allstate Ins. Co. and Global Reinsurance Corp., 2006 WL
2289999, at *1 (S.D.N.Y. Aug. 8, 2006) (acknowledging Second
Circuit precedent holding that a district court cannot consolidate
arbitration proceedings arising from separate agreements to
arbitrate absent the parties’ agreement to allow such consolidation,
but observing that “Petitioner is not asking the Court to compel
consolidation. Rather, Petitioner wants to require an arbitration
panel to determine whether the two disputes shall be
consolidated[,]” and so selecting such a panel).

                                 12
contractual language between the parties that calls for tri-partite
arbitration. Whether requiring the Underwriters to select an
arbitrator for each program is consistent with the contractual
language will be appropriately resolved by the arbitrators once
the panels are convened. Such disputes on arbitral procedure are
“[i]ncluded within the scope of [the] default rule” in favor of
arbitral resolution, along with “the merits of the underlying
dispute.” Dockser, 433 F.3d at 425, 427 (noting that, in the face
of contractual silence, arbitral resolution of procedural issues is
presumed, and “the onus is on the party seeking litigation on a
procedural issue to show that the agreement somehow excludes
that issue from arbitration”).

        Moreover, such an argument — that, even absent any
doubt about whether a matter is arbitrable, a court must examine
the contractual language for conflict with the threshold
arbitration’s procedure — has been rejected by a number of our
sister circuits. In Employers Ins. Co. of Wausau v. Century
Indemnity Co., 443 F.3d 573 (7th Cir. 2006), the Court of
Appeals for the Seventh Circuit refused to accept a reinsurer’s
argument that “no mention of consolidation” in the agreements
at issue between the parties necessarily meant that the reinsurer,
Wausau, was “entitled to two separate arbitrations for the two
reinsurance agreements it has with [the insured insurance
company,] Century.” Id. at 581, 574. The court stated that the
“question of whether an arbitration agreement forbids
consolidated arbitration is a procedural one, which the arbitrator
should resolve.” Id. at 577.

        On the question of how the parties were then to proceed
with the mechanics of the arbitration, the Wausau court
acknowledged that the district court had crafted an order that
required “Wausau to appoint one arbitrator and proceed to one
arbitration, covering both Agreements.” Id. at 581. It then
considered the reinsurer’s argument that the act of “ordering it to
arbitrate both Agreements in one arbitration would conflict with
the terms of the arbitration clauses, for example by not allowing
‘each party to appoint its arbitrator.’” Id. at 581-82. The Court
of Appeals soundly rejected any suggestion that the district
court’s order was in error. Citing both Howsam and Green Tree,
the court stated,

                                13
       We should not and will not consider this argument. The
       question before us is whether the parties’ Agreements
       specify who is to decide whether consolidated arbitration
       is allowed — the court or the arbitrator. We have
       determined that the Agreements do not specify and that
       questions regarding consolidation are presumptively for
       the arbitrator. Wausau is free to argue at the arbitration
       that separate arbitrations for the First Excess Agreement
       and Second Excess Agreement are required under the
       contracts’ terms. If the arbitration panel agrees, it can
       require the parties to proceed as it deems appropriate.

Id. at 582 (emphasis in original).

         Similarly, in Dockser, the Court of Appeals for the
Fourth Circuit rejected what it called a “chicken [or] egg”
argument about the legitimacy of initial arbitral decisionmaking
regarding procedure. In Dockser, the defendant, Schwartzberg,
had filed a demand with the American Arbitration Association
(“AAA”) alleging breach of a settlement agreement he had
entered into with plaintiffs regarding their real estate business.
Dockser, 433 F.3d at 427. The settlement agreement stated that
if the parties could not agree on an arbitrator, the arbitrator
should be chosen pursuant to AAA rules. Id. at 423.
Schwartzberg, in his cover letter to the AAA, requested that the
dispute be arbitrated by a panel of three arbitrators pursuant to
an AAA rule. Id. In response, plaintiffs filed suit, arguing that a
clause of the parties’ settlement agreement “expressly specif[ied]
that a single arbitrator should hear the dispute[,]” and sought a
declaratory judgment to that effect; it also requested that the
court appoint a single arbitrator under section 5 of the FAA,
which allows a court to designate an arbitrator or arbitrators if a
party fails to avail himself of a method of appointment as
specified in the parties’ agreement. Id. at 424. Schwartzberg
filed a motion to dismiss, arguing that the number-of-arbitrators
question was inappropriate for judicial resolution, and the
district court granted the motion. Id.

        In light of Howsam and Green Tree, the Court of Appeals
affirmed the dismissal. It concluded that the number-of-
arbitrators question was not a “question of arbitrability,” as the

                                14
parties did not “dispute that their arbitration clause is binding.”
Id. at 426. It also noted that, considering the relevance of AAA
rules to resolution of the dispute, “[i]t is therefore not only
legally proper, but eminently sensible, that the dispute here is
presumptively one for the arbitral forum to resolve.” Id. at 427.

       The Dockser court also firmly rejected any suggestion
that convening an arbitral panel arguably in violation of
contractual language would be per se illegitimate:

       Plaintiffs . . . [raise] the novel argument that arbitrating
       the question here would present an absurd ‘chicken and
       egg’ problem. They claim that if x number of arbitrators
       decide that there ought to be y number of arbitrators, the
       decision becomes ipso facto invalid. But many
       procedural questions exhibit this supposed bootstrapping
       problem, and accepting plaintiffs’ argument would nullify
       the rule that these questions are arbitrable. Under
       plaintiffs’ view, an arbitrator could not, for example,
       determine whether an arbitration agreement required
       arbitration in Boston instead of California, without
       succumbing to paralysis as to where to hold the
       proceedings necessary to decide the issue. A similar
       conundrum would arise regarding whether the
       permissibility of consolidating separate arbitration
       proceedings is an issue for a single arbitrator or a host of
       different ones. We need not countenance such a result,
       which would defy both the Supreme Court and the
       congressional policy favoring arbitration. By
       presumptively remitting procedural questions to the
       arbitral body, the FAA necessarily recognizes that
       decisionmaker’s authority to answer them.

Id. at 427 (emphasis added) (internal quotation marks and
citations omitted).

       Other courts have held similarly. See Shaw’s
Supermarkets, Inc. v. United Food and Commercial Workers
Union, 321 F.3d 251, 254 (1st Cir. 2003) (“The issue before us is
who should make the determination as to whether to consolidate
the three grievances [under three separate collective bargaining

                                 15
agreements] into a single arbitration: the arbitrator or a federal
court. Since each of the three grievances is itself concededly
arbitrable, we think the answer is clear. Under Howsam . . . this
is a procedural matter for the arbitrator.”); Pedcor Mgmt. Co.
Welfare Benefit Plan, 343 F.3d at 363 (noting, in dictum, that
“[t]o the extent that the issue of consolidation in arbitration is
analogous to class arbitration, Green Tree’s holding that
arbitrators, not courts, decide whether an agreement provides for
class arbitration would appear to overrule [a prior Fifth Circuit
case holding that a court should determine whether a contract
provides for consolidated arbitration]”); Blimpie Int’l Inc. v.
Blimpie of the Keys, 371 F. Supp. 2d 469, 473-74 (S.D.N.Y.
2005) (“Whether an arbitration proceeding should be
consolidated with one or more other arbitration proceedings is a
question . . . . properly addressed by the arbitrator. . . . Like the
question of class arbitration in Green Tree, the question of
consolidated arbitration here concerns the nature of the
arbitration proceeding agreed to, not whether the parties agreed
to arbitrate. . . . [C]onsolidation is a procedural issue.”).

        Finally, we note that Westchester Fire has raised an
argument that, because of certain “continuity” clauses appearing
in the different wordings and layers of each treaty, each treaty is
in essence one contract. The Underwriters, of course, disagree.
We note that full consideration of this issue by this court would
be inappropriate. According to the Underwriters, the complete
universe of reinsurance writings relevant to the parties’ disputes
may not be before this court. In any event, this “disputed issue
of contract interpretation” is one which expert “[a]rbitrators are
well situated to answer.” Green Tree, 539 U.S. at 450, 453.

                                IV.

        In light of the above authority, the parties’ agreement to
arbitrate their disputes, contractual silence as to the
consolidation issue, and the longstanding federal policy favoring
arbitration, we see no reason why this procedural issue should
not be resolved in arbitration. Accordingly, we will affirm the
District Court’s order.



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