22-1760-cv Travelers Indem. Co. v. Grapeland Indep. Sch. Dist.

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007 IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING TO A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 11th day of December, two thousand twenty-three.

PRESENT: ROBERT D. SACK, RAYMOND J. LOHIER, JR., MARIA ARAÚJO KAHN, Circuit Judges. ------------------------------------------------------------------ TRAVELERS INDEMNITY COMPANY,

Petitioner-Appellant,

v. No. 22-1760-cv

GRAPELAND INDEPENDENT SCHOOL DISTRICT,

Respondent-Appellee. * ------------------------------------------------------------------

* The Clerk of Court is directed to amend the caption as set forth above. FOR APPELLANT: MATTHEW J. LETTEN (Joseph K. Scully, on the brief), Day Pitney LLP, Hartford, CT

FOR APPELLEE: ADAM Q. VOYLES, Lubel Voyles LLP, Houston, TX

Appeal from a judgment of the United States District Court for the District

of Connecticut (Sarah A. L. Merriam, Judge).

UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED,

AND DECREED that the judgment of the District Court is AFFIRMED.

Petitioner-Appellant Travelers Indemnity Company, a Connecticut

corporation headquartered in Connecticut, appeals from a July 29, 2022

judgment of the United States District Court for the District of Connecticut

(Merriam, J.) denying its petition to compel arbitration. We assume the parties’

familiarity with the underlying facts and the record of prior proceedings, to

which we refer only as necessary to explain our decision to affirm.

Respondent-Appellee, the independent school district (“ISD”) of

Grapeland, Texas (the “Grapeland ISD”), obtained an insurance policy from the

Texas Rural Education Association Risk Management Cooperative (“TREA”).

TREA in turn entered into a reinsurance contract with Travelers under which

2 Travelers provides TREA reinsurance for claims exceeding $500,000 per

occurrence and serves as the designated adjuster for such claims. Due to an

alleged variance between the Grapeland ISD’s losses and the insurance payments

it received in connection with a destructive 2019 storm, the ISD sued TREA and

Travelers in Texas state court.

Relying on the arbitration provision in the reinsurance contract between

Travelers and TREA, Travelers sought to compel arbitration of the ISD’s claims

under a theory of “direct benefits estoppel.” That theory precludes a non-

signatory who seeks or obtains benefits from a contract from avoiding the

arbitration provision of that contract. See Jody James Farms, JV v. Altman Grp.,

(Tex. 2018). The Texas state court rejected Travelers’ direct

benefits estoppel theory in this case. Travelers Indem. Co. v. Grapeland Indep. Sch.

Dist., No. 12-22-00311-CV,

, at *3 (Tex. App. May 10, 2023).

Travelers also filed a petition to compel arbitration before the District

Court in Connecticut. Applying Texas law, which the parties agree governs this

case, the District Court rejected Travelers’ direct benefits estoppel theory on the

merits, denied the petition to compel arbitration, and deemed the Grapeland

3 ISD’s motion to dismiss for lack of personal jurisdiction moot. Travelers Indem.

Co. v. Alto Indep. Sch. Dist., No. 21CV00909,

, at *7 (D. Conn. July

28, 2022).

We agree with the District Court that Travelers has failed to show that it

may avail itself of the direct benefits estoppel theory under Texas law. Every

Texas court to consider the issue has held that the theory does not apply to the

suit between Travelers and the ISD or to suits between Travelers and other ISDs

involved as insureds in this and similar cases. See Travelers Indem. Co. v. Alto

ISD, No. 12-21-00143-CV,

, at *6 (Tex. App. May 25, 2022), review

denied (Jan. 27, 2023); Travelers Indem. Co. v. Gustine Indep. Sch. Dist., No. 11-21-

00229-CV,

, at *8 (Tex. App. May 25, 2023); Grapeland,

, at *3. The Texas Supreme Court has already denied Travelers’ petition

for review in one of those cases. See Travelers Indem. Co. v. Alto Indep. Sch. Dist.,

No. 22-0692,

(Tex. Jan. 27, 2023). The uniform holdings of

the Texas courts on a matter of Texas law persuades us that the matter is settled

and that we can reliably and confidently predict that the Texas Supreme Court,

in agreement with the District Court, would conclude that direct benefits

4 estoppel does not apply to compel the ISD to arbitrate the ISD’s underlying

claims.

We have considered Travelers’ remaining arguments and conclude that

they are without merit. For the foregoing reasons, the judgment of the District

Court is AFFIRMED.

FOR THE COURT: Catherine O’Hagan Wolfe, Clerk of Court

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