                                 PRECEDENTIAL

      UNITED STATES COURT OF APPEALS
           FOR THE THIRD CIRCUIT
          __________________________

                  No. 14-4010
          __________________________

SOUTH JERSEY SANITATION COMPANY, INC.

                     v.

  APPLIED UNDERWRITERS CAPTIVE RISK
       ASSURANCE COMPANY, INC.,
                              Appellant
               ______________

APPEAL FROM THE UNITED STATES DISTRICT
 COURT FOR THE DISTRICT OF NEW JERSEY
           (D.C. No. 1-13-cv-06717)
        District Judge: Joseph E. Irenas
                    _____________

             Argued January 20, 2016
                ______________

  Before: JORDAN, HARDIMAN, and GREENAWAY,
              JR., Circuit Judges.

         (Opinion Filed: October 25, 2016)




                          1
      Susan Karlovich, Esq.
      Thomas F. Quinn, Esq. [ARGUED]
      Wilson, Elser, Moskowitz, Edelman & Dicker LLP
      200 Campus Drive
      Florham Park, NJ 07932
            Counsel for Appellant


       Louis M. Barbone, Esq. [ARGUED]
       Jacobs & Barbone, P.A.
       1125 Pacific Avenue
       Atlantic City, NJ 08401
              Counsel for Appellee
                          ______________

                             OPINION
                          ______________

GREENAWAY, JR., Circuit Judge.

I. INTRODUCTION

       Applied Underwriters Captive Risk Assurance
Company, Inc. (“Applied Underwriters”), a Berkshire
Hathaway Company, appeals from the District Court’s denial
of its motion to compel arbitration in its contract-based
dispute with Appellee South Jersey Sanitation Company, Inc.
(“South Jersey”). Because we find that South Jersey’s
purported challenges to the arbitration agreement apply to the
parties’ contract as a whole, rather than to the arbitration
agreement alone, the parties’ dispute is arbitrable and we will
reverse.

II. FACTUAL AND PROCEDURAL BACKGROUND




                                  2
       South Jersey is a trash-removal business with over
eighty employees. On September 3, 2008, as its workers’
compensation insurance policy neared expiration, South
Jersey, through its insurance agent, entered into a
Reinsurance Participation Agreement (“RPA”) with Applied
Underwriters. The stated purpose of the RPA is to establish
South Jersey’s participation “in [Applied Underwriters’s]
segregated protected cell reinsurance program.” 1 (App. 96.)

        The RPA, which has a three-year term, contains a one-
and-one-half-page arbitration provision, according to which
“any disputes arising under [the RPA]” would be arbitrated
either in Tortola or in a location on which the parties agreed.
(App. 98–100.) It also contains a choice-of-law provision,
which indicates that the RPA “shall be exclusively governed
by” Nebraska law. (App. 100.) The RPA and its attached
tables of “Loss Development Factors,” “Exposure Group
Adjustment Factors,” and “Loss Pick Containment Rates and
Estimated Annual Amounts,” total ten pages.

        In its complaint, South Jersey alleges that it entered
into the RPA when its workers’ compensation insurance was
about to expire in the belief that the RPA was a replacement
workers’ compensation insurance policy. South Jersey argues
that Applied Underwriters fraudulently presented the RPA as
such an insurance policy. South Jersey contends that, in
reality, the RPA is a retrospective rating or “retro” insurance
policy pursuant to which South Jersey’s premiums for each
payment policy period would be based on claims paid during

       1
         As noted throughout this opinion, the precise nature
and effect(s) of the RPA are both actively disputed by the
parties and unclear from the face of the document itself.




                                  3
the previous period. South Jersey alleges that it was promised
that it could “realize ‘huge rebates’ at the end of the policy
term in the event that premiums far outweighed the payouts
required for worker’s compensation benefits.” (App. 2.)

        South Jersey also notes in its complaint that Applied
Underwriters is “not an insurer defined under New Jersey
statutes” and therefore cannot issue workers’ compensation
insurance policies in New Jersey. (App. 6.) Nevertheless, in
its appellate brief, South Jersey posits that “the plain language
of the RPA clearly relates to, concerns[,] and actually issues a
workers’ compensation policy to [South Jersey].” 2 (Appellee
Br. 7.)

       Before the District Court, Applied Underwriters
represented that South Jersey purchased a primary workers’
compensation insurance policy from Continental Indemnity
Company (“Continental”).       Like Applied Underwriters,
Continental is a Berkshire Hathaway Company. Continental
then entered into a pooling agreement with California
Insurance Company (“California”), another Berskshire
Hathaway Company.         (App. 142–43.)     This pooling
                                   3
agreement was a reinsurance treaty. Applied Underwriters,

       2
         South Jersey bases this assertion on the following
language from the RPA: “During the Active Term of this
Agreement, Workers’ Compensation Insurance coverage will
be provided to Participant by one or more of the Issuing
Insurers.” (Appellee Br. 7 (quoting App. 97).)


       3
         Reinsurance can be viewed as “‘insurance for
insurance companies,’ . . . whereby a reinsured . . . cedes




                                   4
in turn, provided reinsurance to California and, derivatively,
to Continental.

        According to Applied Underwriters, the RPA was not
a workers’ compensation insurance policy, but rather an
investment instrument. Applied Underwriters argues that the
RPA “is simply not an ‘insurance policy,’ but rather a
contract ‘relating [to] or concerning’ a reinsurance policy.”
(Appellant Br. 30.) Applied Underwriters further contends
that, under the RPA, if South Jersey “had low cost [workers’
compensation] claims, it would receive a profit[-]sharing
distribution under the RPA from its segregated protected cell.
If its losses were high, it enjoyed the cap protection of the
maximum threshold in the RPA.” (Id. at 6.) Essentially, the
RPA would allow South Jersey to speculate as to its future
performance under its actual workers’ compensation policy
with Continental by “financially shar[ing] in the underwriting
results based on actual losses incurred and the size of its
payroll.” (Appellee Br. 6.) Indeed, Paragraph Three of the

some of its risk to a reinsurer . . . and shares its premium with
the reinsurer.” Certain Underwriters at Lloyd’s London v.
Westchester Fire Ins. Co., 489 F.3d 580, 582 n.1 (3d Cir.
2007) (quoting Cont’l Cas. Co. v. Am. Nat’l Ins. Co., 417
F.3d 727, 729 n.1 (7th Cir. 2005)).

       “[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. at
582 (omission in original) (quoting N. River Ins. Co. v.
CIGNA Reins. Co., 52 F.3d 1194, 1199 (3d Cir. 1995)).




                                   5
RPA indicates that “Participant is participating in this
Agreement for purposes of investment only.” (App. 96.)

        For two years and ten months of the RPA’s three-year
period, South Jersey received and paid monthly invoices for
premiums ranging from $40,000 to $50,000, with the
expectation of receiving a rebate at the end of the policy
period. South Jersey based its expected refund on the fact
that it had “paid in excess of $1,200,000 in premiums” over
the term of the RPA and that the workers’ compensation
claims paid on its behalf “totaled the approximate amount of
$355,000 over three years.” 4 (App. 3.) “In July of 2011[,]
however, approximately two months before the calculation of
[South Jersey’s] rebate, [Applied Underwriters] sent a
premium invoice in the amount of $218,887.04.” (Suppl.
App. 23.) South Jersey alleges that, when it contacted
Applied Underwriters about this amount, it was told that the
premium was driven by loss history.

        South Jersey asserts that it paid $60,000 to avoid
cancellation of the RPA, but that Applied Underwriters
nevertheless issued a “Notice of Cancellation effective
August 1, 2011.” (App. 4.) South Jersey then secured a
workers’ compensation insurance policy with a different
carrier, and Applied Underwriters continued to send South
Jersey invoices for fluctuating amounts. Ultimately, Applied

       4
         As the District Court noted, the calculus is, of course,
more complicated than premiums minus claims paid, because
the policy tail would permit claims to continue well beyond
the policy term.




                                   6
Underwriters declared that South Jersey owed $300,632.94 in
an invoice dated September 26, 2012. 5 South Jersey did not
pay, and Applied Underwriters filed a demand for arbitration
with the American Arbitration Association seeking this
amount on September 26, 2013.

       On October 31, 2013, South Jersey filed a complaint in
the New Jersey Superior Court, Chancery Division, seeking
declaratory relief as to the arbitration provision and rescission
of the RPA (Counts One and Two), as well as damages for
breach of contract (Count 3); fraud, intentional
misrepresentation, and illegality (Count 4); and negligent
misrepresentation (Count 5).

       On November 4, 2013, Applied Underwriters removed
the case to federal court on the basis of diversity jurisdiction.
South Jersey moved to remand the case to state court one
month later. Applied Underwriters responded by filing a
motion to dismiss and to compel arbitration in lieu of an
answer.

       The District Court heard arguments on these motions
on May 5, 2014, and denied South Jersey’s motion to remand
that day. On August 25, 2014, the Court denied the motion to
compel arbitration and ordered Applied Underwriters to file
an Answer. The District Court based its denial on the
following findings: (1) Nebraska law governs the dispute
pursuant to the RPA’s choice-of-law clause; (2) Section 25-
2602.01 of the Nebraska Revised Statutes (“the Nebraska

       5
         The District Court asked counsel how that amount
was calculated but never received an explanation, and the
record remains obscure on this point.




                                   7
Statute”) “sets forth that all arbitration provisions ‘concerning
or relating to an insurance policy,’ except those ‘between
insurance companies,’ are unenforceable” (App. 33); (3) “the
RPA is not a contract between insurance companies” (App.
34); (4) the Nebraska Statute preempts the Federal Arbitration
Act (“FAA”), 9 U.S.C. §§ 1–16, 6 through the McCarran-
Ferguson Act (“M-FA”), 15 U.S.C. §§ 1011–1015; 7 and (5)
the arbitration provision is therefore unenforceable.


       6
           Section 2 of the FAA provides:

       A written provision in any maritime transaction
       or a contract evidencing a transaction involving
       commerce to settle by arbitration a controversy
       thereafter arising out of such contract or
       transaction, or the refusal to perform the whole
       or any part thereof, or an agreement in writing
       to submit to arbitration an existing controversy
       arising out of such a contract, transaction, or
       refusal, shall be valid, irrevocable, and
       enforceable, save upon such grounds as exist at
       law or in equity for the revocation of any
       contract.

9 U.S.C. § 2.
       7
         The M-FA provides in relevant part that “[n]o Act of
Congress shall be construed to invalidate, impair, or
supersede any law enacted by any State for the purpose of
regulating the business of insurance, or which imposes a fee
or tax upon such business, unless such Act specifically relates
to the business of insurance[.]” 15 U.S.C. § 1012. Thus,
“[u]nder [the M-FA], state laws reverse[-]preempt federal




                                   8
        Applied Underwriters filed a notice of appeal on
September 19, 2014. It argues that the District Court erred in
reaching the issue of reverse-preemption without first
considering whether arbitrability is a question for the courts
or the arbitrator; that arbitrability is, in fact, a question for the
arbitrator under the terms of the RPA; that the Nebraska
statute does not reverse-preempt the FAA; and that, even if it
did, the Nebraska Statute is inapposite, inasmuch as the RPA
does not fall within its purview.

        South Jersey counters that the District Court properly
determined that the RPA falls within the scope of the
Nebraska Statute, that the Nebraska Statute reverse-preempts
the FAA, and that the RPA’s arbitration provision is therefore
unenforceable. South Jersey adds that Count Four of its
Complaint, entitled “Fraud, Intentional Misrepresentation and
Illegality” (App. 12.), “serves as an additional basis to
invalidate the arbitration agreement, or the contract as a
whole, without contravening the FAA” (Appellee Br. 5).




laws if (1) the state statute was enacted ‘for the purpose of
regulating the business of insurance,’ (2) the federal statute
does not ‘specifically relate to the business of insurance,’ and
(3) the federal statute would ‘invalidate, impair, or supersede’
the state statute.” Suter v. Munich Reins. Co., 223 F.3d 150,
160 (3d Cir. 2000).




                                     9
III. JURISDICTION & STANDARD OF REVIEW

      The District Court had jurisdiction pursuant to 28
U.S.C. § 1332(a); this Court has jurisdiction pursuant to 9
U.S.C. § 16(a)(1)(C) and 28 U.S.C. § 1292(a)(1).

        Our review of all facets of this appeal is plenary. First,
“[w]e exercise plenary review over questions regarding the
validity and enforceability of an agreement to arbitrate.”
Puleo v. Chase Bank USA, N.A., 605 F.3d 172, 177 (3d Cir.
2010) (en banc). Second, because preemption determinations
are questions of law, we review such determinations de novo.
Horn v. Thoratec Corp., 376 F.3d 163, 166 (3d Cir. 2004)
(citations omitted). Finally, to the extent that this appeal
requires construction of statutory or contractual provisions,
our review is also plenary. Viera v. Life Ins. Co. of N. Am.,
642 F.3d 407, 413 (3d Cir. 2011) (contracts); Seamans v.
Temple Univ., 744 F.3d 853, 859 (3d Cir. 2014) (statutes).

IV. ANALYSIS

        “Congress enacted the [FAA] ‘to reverse the
longstanding judicial hostility to arbitration agreements . . .
and to place arbitration agreements upon the same footing as
other contracts.’” Puleo, 605 F.3d at 177–78 (second
alteration in original) (quoting Spinetti v. Serv. Corp.
Int’l, 324 F.3d 212, 218 (3d Cir. 2003)). Although the FAA
favors arbitration and limits the involvement of the court
system in contracts that provide for arbitration, “[l]ike other
contracts, [arbitration agreements] may be invalidated by
‘generally applicable contract defenses, such as fraud, duress,
or unconscionability.’” Rent-A-Ctr., W., Inc. v. Jackson, 561
U.S. 63, 68 (2010) (quoting Doctor’s Assocs., Inc. v.
Casarotto, 517 U.S. 681, 687 (1996)). Accordingly, where a




                                   10
party challenges the validity of an otherwise controlling
arbitration clause, courts hear that challenge. See id. at 71
(“If a party challenges the validity under [FAA] § 2 of the
precise agreement to arbitrate at issue, the federal court must
consider the challenge before ordering compliance with that
agreement under [FAA] § 4.”).

        The challenge, however, must focus exclusively on the
arbitration provision, rather on than the contract as a whole.
As the Supreme Court stressed in Rent-A-Center, “only [an
arbitration provision-specific] challenge is relevant to a
court’s determination whether the arbitration agreement at
issue is enforceable.” Id. at 70. If the challenge encompasses
the contract as a whole, the validity of that contract, like all
other disputes arising under the contract, is a matter for the
arbitrator to decide. See id.

        The RPA’s arbitration provision, like the
comprehensive arbitration agreement at issue in Rent-A-
Center, applies to “[a]ll disputes arising with respect to any
provision of” the RPA and confers “binding and conclusive”
authority on the arbitrator. (App. 99.) Thus, unless South
Jersey specifically challenges the legal validity of the RPA’s
arbitration provision, the parties’ present dispute, which arises
out of the RPA, is subject to arbitration.

       We find that neither of South Jersey’s challenges focus
on the arbitration provision alone, and we therefore reverse
the District Court’s denial of Applied Underwriters’s motion
to compel arbitration.




                                  11
A.     Fraud, Intentional Misrepresentation, and Illegality

       In its complaint, South Jersey sets forth its fraud-based
challenge in the following terms:

       35. Defendant Applied Underwriters did at all
       times relevant hereto factually misrepresent the
       terms and conditions of its contract, so as to
       induce plaintiff to pay premiums totaling in
       excess of $1,200,000 while at the same time
       contracting with an insurer to pay worker’s
       compensation losses of approximately one-third
       of those premiums. Defendant did by its false
       factual representations induce plaintiff’s
       reasonable expectation and reliance upon a
       term-end rebate given its employment and loss
       history in worker’s compensation. Defendant’s
       factual representations were false, as
       demonstrated by the defendant’s admission that
       its premiums were “inflated[.”] Defendant
       knew that it had represented and induced
       plaintiff’s participation in its contract of
       reinsurance     by     representing   plaintiff’s
       entitlement to a rebate, and by further, over a
       period of thirty-four months[,] consistently
       billing the plaintiff for policy premiums of
       between $40,000 and $50,000. Ultimately,
       when plaintiff was to realize its substantial
       rebate given premiums paid in comparison to its
       loss history, defendant manipulated its
       “estimates” and fictitious formulas to avoid
       payment of that rebate and to instead threaten
       plaintiff with cancellation if the inflated and
       fictitious premiums were not paid.




                                  12
       36. Defendant has[,] by virtue of the aforenoted
       conduct, committed fraud upon the plaintiff
       pursuant to unconscionable contractual terms
       and conditions in violation of New Jersey law
       and public policy.

(App. 12–13.)

        It is plain from these paragraphs that South Jersey
alleges no arbitration provision-specific fraud, but rather
challenges the arbitration provision only as part of its general
challenge of the contract. Indeed, South Jersey states in its
brief that “[f]raud is a defense that is generally applicable to
all contracts and can invalidate a whole contract or certain
portions thereof, including arbitrations [sic] agreements.”
(Appellee Br. 4 (citation omitted).)

        Even before Rent-A-Center, however, it was plain that
a wholesale fraud defense could not defeat a clear arbitration
provision. Almost fifty years ago, the Supreme Court
confronted “the question whether the federal court or an
arbitrator is to resolve a claim of ‘fraud in the inducement,’
under a contract governed by the [FAA], where there is no
evidence that the contracting parties intended to withhold that
issue from arbitration.” Prima Paint Corp. v. Flood &
Conklin Mfg. Co., 388 U.S. 395, 396–97 (1967). The Court
held that, “if the claim is fraud in the inducement of the
arbitration clause itself—an issue which goes to the ‘making’
of the agreement to arbitrate—the federal court may proceed
to adjudicate it.” Id. at 403–04. “But,” the Court added, “the
[FAA] does not permit the federal court to consider claims of
fraud in the inducement of the contract generally.” Id. at 404;
accord Rent-A-Ctr., 561 U.S. at 70–72 (noting that challenges
to a contract as a whole are not relevant to a court’s




                                  13
determination of the enforceability of the arbitration clause,
which is treated as severable).

        In light of this clear and longstanding precedent, we
conclude that South Jersey’s claim of fraud should be left for
the arbitrator’s consideration. We accordingly turn to South
Jersey’s second argument in favor of invalidating the
arbitration provision—that the provision is unenforceable
under Nebraska law.

B. The Effect of the Nebraska Statute

        On its face, South Jersey’s contention that the RPA’s
arbitration provision is rendered unenforceable by the
Nebraska Statute appears to target the arbitration provision
alone, rather than the contract as a whole. This argument,
however, suffers from the same defect as South Jersey’s fraud
argument because—regardless of whether the Nebraska
Statute reverse-preempts the FAA 8—that statute must first be
shown to apply to the arbitration provision at issue. We
determine that it is not clear that the short but obscure RPA
falls within the ambit of the Nebraska Statute.

        South Jersey, as the party seeking to avoid the
arbitration provision, bears the burden of showing that it falls

       8
         We do not decide here whether the Nebraska Statute
reverse-preempts the FAA because South Jersey has not
persuaded us that the Nebraska Statute is applicable to the
contract at issue. To determine its applicability, the precise
function and contours of the RPA must be elucidated, and that
is a matter for the arbitrator under the parties’ clear and
expansive arbitration agreement.




                                  14
within Subsection (f)(4) of the Nebraska Statute. See, e.g.,
Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 92
(2000) (“[T]he party seeking to avoid arbitration bears the
burden of establishing that Congress intended to preclude
arbitration of the statutory claims at issue.” (citation
omitted)).

       The Nebraska Statute provides in relevant part:

         (b) A provision in a written contract to submit
       to arbitration any controversy thereafter arising
       between the parties is valid, enforceable, and
       irrevocable, except upon such grounds as exist
       at law or in equity for the revocation of any
       contract, if the provision is entered into
       voluntarily and willingly.

       ....

       (f) Subsection (b) of this section does not apply
       to:

       ....

       (4) Except as provided in section 44-811, any
       agreement concerning or relating to an
       insurance policy other than a contract between
       insurance companies including a reinsurance
       contract.

Neb. Rev. Stat. § 25-2602.01 (emphases added).

        In Kremer v. Rural Community Insurance Co., 788
N.W.2d 538, 550 (Neb. 2010), the Nebraska Supreme Court
stated that, “under § 25–2602.01(f)(4), agreements to arbitrate




                                 15
future controversies concerning an insurance policy are
invalid.” Noting that “[e]very federal appellate court to
address this issue has held that state laws restricting
arbitration provisions in insurance contracts regulate the
business of insurance and are not preempted by the FAA,” id.
at 552 (citations omitted), the Nebraska Supreme Court
“conclude[d] that a statute precluding the parties to an
insurance contract from including an arbitration agreement
for future controversies regulates the insurer-insured
contractual relationship,” id. at 553. In reaching this
conclusion, the court noted that it did not consider dispositive
“whether statutes restricting arbitration agreements in
insurance policies affect the transfer of risk.” Id. at 552. This
language, while dicta, strongly suggests that Subsection (f)(4)
of the Nebraska Statute applies only to insurance policies
themselves, and that “any agreement” must be read as an
arbitration agreement or provision within such a policy, rather
than a derivative investment contract. 9

       South Jersey’s assertion that “the RPA clearly relates
to, concerns and actually issues a workers’ compensation
policy to [South Jersey]” (Appellant Br. 7) is not sufficient to
carry South Jersey’s burden of demonstrating that the RPA is
an “agreement concerning or relating to an insurance policy”

       9
          We note that this construction of the Nebraska
Statute, which reads the phrase “any agreement concerning or
relating to an insurance policy” narrowly, comports with the
M-FA, which permits reverse-preemption only by those state
statutes “regulating the business of insurance.” 15 U.S.C.
§ 1012.




                                  16
within the meaning of the Nebraska Statute. First, the
argument fails to address what degree of “concern” or
“relation” to an insurance contract is necessary to bring an
agreement under Subsection (f)(4). Second, that assertion is
at odds with South Jersey’s own argument that Applied
Underwriters is not an insurer, as well as with Applied
Underwriters’s contention that the RPA is an investment
instrument. Finally, the District Court never found that the
RPA falls within the ambit of the Nebraska Statute, despite
repeatedly expressing concern as to the indecipherability of
the RPA. (See App. 139, 141, 148, 151, 167, 176.)

        Faced with a disputed agreement whose fundamental
nature remains obscure, we conclude that, by the clear and
comprehensive arbitration provision in the RPA, it is for the
arbitrator to determine what the precise nature of the RPA is
and whether the RPA falls within Subsection (f)(4). This
challenge, like the fraud challenge, implicates the RPA as a
whole; like the fraud challenge, therefore, the question of
whether the RPA’s arbitration provision is enforceable under
Nebraska law is a question for the arbitrator.

IV. CONCLUSION

       For the foregoing reasons we will vacate the judgment
of the District Court and remand the matter. If the District
Court determines that the parties agree to arbitrate this dispute
in New Jersey, 10 we direct that the District Court refer the


       10
           Paragraph 13(I) of the agreement provides: “All
arbitration proceedings shall be conducted in the English
language in accordance with the rules of the American
Arbitration Association and shall take place in Tortola,




                                  17
matter to arbitration. On the other hand, if the District Court
determines that there is no such agreement, then the District
Court shall decide, in the first instance, how to proceed in
light of its inability to compel arbitration in the default
location provided for in the contract. See Econo-Car Int’l,
Inc. v. Antilles Car Rentals, Inc., 499 F.2d 1391, 1394 (3d
Cir. 1974) (noting the requirement that “arbitration ‘shall be
within the district in which the petition for an order directing
such arbitration is filed’” (quoting 9 U.S.C. § 4)).




British Virgin Islands or at some other location agreed to by
the parties.” (App. 99.)




                                  18
