Halliburton Energy Servs., Inc. v. Ironshore Specialty Ins. Co.
Halliburton Energy Servs., Inc. v. Ironshore Specialty Ins. Co.
Opinion
An oil rig caught fire and exploded in Ohio. Statoil USA Onshore Properties operated *528 the rig, Halliburton Energy Services fracked at the rig site, and Ironshore Specialty Insurance Company insured Statoil. Now, all the parties disagree about who is on the financial hook for the damage.
Ironshore paid roughly $12 million to Statoil to cover a portion of the damages, while Halliburton paid nothing. But Ironshore didn't go away quietly-it sent a letter to Halliburton, demanding payment and asserting subrogation rights under the Master Services Agreement ("MSA"), a contract between Statoil and Halliburton. Halliburton responded with this preemptive declaratory judgment action, arguing that it owes nothing under the MSA. Halliburton also tacked on a breach of contract claim, arguing that Ironshore should have indemnified Halliburton. Rather than litigate these issues in federal court, Ironshore sought a private resolution through arbitration.
This case turns on two issues. First, whether the MSA dispute should go to arbitration. And second, whether the court has personal jurisdiction over Ironshore for the remaining breach of contract claim. The district court held that arbitration was not required-Ironshore could not invoke the arbitration clause in the MSA because it waived any subrogation rights. Then, the district court held that it lacked personal jurisdiction over Ironshore and dismissed the case.
We hold that the district court erred when it held that Ironshore waived its subrogation rights under the MSA. We therefore REVERSE its arbitration ruling in appeal No. 17-20678. The district court was correct, however, when it held that it lacked personal jurisdiction over Ironshore. We therefore AFFIRM the district court's personal jurisdiction ruling in appeal No. 18-20239.
I. Factual Background & Procedural History
This case centers on an insurance dispute following an explosion and fire on an oil-and-gas rig in Ohio. 1 The rig at issue was operated by Statoil, which is not a party to this lawsuit; Halliburton fracked at the well; and Ironshore insured Statoil.
Prior to the explosion, Statoil entered into two contracts that form the basis of this dispute. First, Statoil contracted with the plaintiff, Halliburton. While operating the rig, Statoil hired Halliburton to perform fracking operations. They memorialized their relationship in an Onshore Master Services Agreement ("MSA").
The MSA is relevant here because it allocated risk among the parties. It contained various indemnification provisions, which shifted liability for some accidents to Statoil and others to Halliburton. In the event of a dispute about these provisions, the MSA required the parties to submit to binding arbitration in Texas.
The MSA contained multiple references to Texas. The MSA required Halliburton to send invoices to Statoil's Houston address; it contained a Texas-specific indemnity provision; and it required the parties to resolve any disputes in Texas under Texas law. Halliburton and Statoil also both listed their principal places of business as Houston, Texas.
The second relevant contract is an insurance policy-a Site Pollution Incident Legal Liability Select (or "SPILLS") policy-that Statoil entered into with Ironshore. Under this policy, Ironshore agreed to waive subrogation rights as required by written contract. It also agreed to insure *529 Statoil in accordance with Texas surplus lines laws.
On June 28, 2014, the explosion occurred, spurring a flurry of declaratory judgment actions by Statoil's insurers. The primary lawsuit was filed by one of Statoil's other insurers in Texas. Ironshore was named as a defendant in that action. Ironshore responded by filing its own declaratory judgment action in New York.
Eventually, the insurers settled and agreed to reimburse Statoil for $24 million, with Ironshore paying roughly $12 million. The insurers, however, reserved their rights against each other and agreed to litigate the proper allocation of the settlement amount among themselves in the Texas action. Each insurer reserved the right to argue for the application of any state law.
Following the settlement, Ironshore sent a letter to Halliburton requesting indemnification under the MSA. More specifically, Ironshore asked Halliburton to waive arbitration and negotiate Halliburton's potential liability. The request failed-Halliburton rejected the offer and filed this breach of contract and declaratory judgment action, requesting the district court to hold that (1) Halliburton is an "additional insured" under the SPILLS policy and, therefore, not liable for indemnification; (2) Ironshore breached the SPILLS policy by not defending and indemnifying Halliburton as an additional insured; and (3) Ironshore waived its subrogation rights. Ironshore responded by filing (1) a motion to stay pending arbitration under Section 3 of the Federal Arbitration Act ("FAA"),
The district court first addressed Ironshore's motion to stay pending arbitration. The court denied the motion, holding that Ironshore could not compel arbitration because there was no binding arbitration agreement between Ironshore and Halliburton. Ironshore filed an interlocutory appeal of that ruling, which was docketed as case number 17-20678.
After ruling on Ironshore's motion to stay pending arbitration, the district court ruled on Ironshore's motion to dismiss for lack of personal jurisdiction. The court first held that it did not have general jurisdiction over Ironshore because Ironshore did not have any substantial contacts with Texas. It also held that it lacked specific jurisdiction over Ironshore because Ironshore did not have minimum contacts with the forum state. Haliburton appealed, and the appeal was docketed as case number 18-20239. Both cases were then consolidated.
II. The District Court's Arbitration Ruling
The district court first addressed whether there was a binding arbitration clause between Ironshore and Halliburton. The court determined that there was not and denied Ironshore's motion to stay pending arbitration. We disagree.
A. Background Arbitration Law
This court reviews a district court's ruling on a motion to compel arbitration and stay litigation de novo. 2
*530
Hadnot v. Bay, Ltd.
,
Under the FAA, ordinary principles of state contract law determine whether there is a valid agreement to arbitrate.
3
See
Arthur Andersen LLP v. Carlisle
,
Under Texas law, a party can compel arbitration only by establishing: (1) the existence of a valid agreement to arbitrate; and (2) that the claims asserted by the party attempting to compel arbitration are within the scope of the arbitration agreement.
Certain Underwriters at Lloyd's of London v. Celebrity, Inc.
,
A party seeking to compel arbitration must first show that a valid arbitration agreement exists between the parties, a determination governed by traditional state contract principles.
Jody James Farms
,
The parties' intent controls even when a non-signatory to the arbitration agreement seeks to enforce it. Non-signatories sometimes try to enforce an arbitration agreement against a signatory, who will often respond by arguing that the arbitration agreement exists only between the signatories. When parties dispute whether a "non-signatory can compel arbitration pursuant to an arbitration clause," their dispute "questions the existence of a valid arbitration clause between specific parties and is therefore a gateway matter for the court to decide."
In re Rubiola
,
Although arbitration agreements apply to non-signatories "only in rare circumstances," the question of "[w]ho is actually bound by an arbitration agreement
*531
is [ultimately] a function of the intent of the parties, as expressed in the terms of the agreement."
Bridas S.A.P.I.C. v. Gov't of Turkm.
,
After proving that a valid arbitration agreement exists, the party seeking to compel arbitration must show that the dispute falls within the scope of the agreement.
Celebrity
,
If the trial court finds that a valid agreement to arbitrate exists and that the claims asserted fall within that agreement, it is required to compel arbitration.
See
Phillips v. ACS Mun. Brokers, Inc.
,
B. The MSA & Ironshore's Subrogation Rights
The MSA is the only contract here that contains an arbitration agreement. From a high level, the primary issue controlling this dispute is whether the MSA's arbitration agreement is binding between Ironshore and Halliburton. Ironshore was not a signatory to the MSA, so to prove that an arbitration agreement exists between it and Halliburton, Ironshore must rely on another theory to assert rights under the MSA.
See
Arthur Andersen
,
"Subrogation is the substitution of one party for another such that the new party may assert the rights of the substituted party."
Cont'l Cas. Co. v. N. Am. Capacity Ins. Co.
,
From a lower level, the nub of this dispute is whether Ironshore waived its subrogation rights under the MSA. The MSA states that Statoil will "cause its insurer to waive subrogation against [Halliburton] for liabilities [Statoil] assumes ." 5 The contract clearly requires Statoil to force its insurer to waive subrogation. And a full subrogation waiver would preclude Ironshore from enforcing the arbitration clause. But Ironshore only waived subrogation if (1) it is an insurer under the MSA and (2) the asserted claim involves a liability that Statoil assumed under the MSA. If Ironshore shows that either of these elements does not apply, then it retained subrogation rights.
1. Is Ironshore an Insurer?
The first element turns on two main provisions. Under Section 9.1, Statoil agreed that it "[ (1) ] will cause its insurer to waive subrogation against [Halliburton]
*533 for liabilities [Statoil] assumes and [ (2) ] shall maintain, at [its own] expense, insurance coverage as set forth in Enclosure 2 of the same kind and in the same amount as is required of [Halliburton]." The primary difficulty with this provision is whether the second clause, beginning with "and shall maintain," modifies the term "insurer." If it does, then Ironshore does not qualify as an insurer under Section 9.1 simply because it sold Statoil insurance-it must have sold Statoil a particular type of insurance. Those types of insurance are set forth in the second relevant contract provision, Enclosure 2.
Enclosure 2 sets forth the minimum insurance coverages Statoil must carry. Those include "Workers' Compensation and Occupational Disease Insurance," "Commercial General Liability Insurance," "Automobile Liability Insurance," "Excess Liability (Umbrella) Insurance," and "All Risk Property Insurance." (We will call these Enclosure 2 policies.)
The face of the contract and limited record do not shed much light on whether Ironshore qualifies as an "insurer" under the MSA. But Ironshore points to three main ambiguities to prove that it is not. First, by using the singular "insurer," rather than the plural "insurers," the contract suggests that Statoil only needed to cause one insurer to waive subrogation rights.
Second, if Statoil was required to cause more than one insurer to waive subrogation rights, then another ambiguity arises-whether an "insurer" is one that sells Enclosure 2 policies. The parties may have intended that only insurers selling an Enclosure 2 insurance policy waive subrogation rights. For example, the record shows that two other insurers sold Statoil general commercial liability insurance and commercial umbrella insurance, both of which are Enclosure 2 policies. But there is no record of Ironshore selling a type of Enclosure 2 insurance to Statoil. The term "insurer" might only include the other two insurers, but not Ironshore. The record is largely silent on whether Statoil's "insurer" had to be an insurer that offered an Enclosure 2 type of insurance.
Third, the policy between Ironshore and Statoil did not exist until over a year and a half after the MSA became effective. This timing could suggest that Ironshore was not one of the insurers contemplated when the parties drafted the MSA.
Ultimately, these arguments are not persuasive. First, Ironshore is clearly an insurer within the normal meaning of the word. Second, the second phrase, which mentions Enclosure 2, does not appear to modify the term "insurer"-the word "insurer" comes after the verb phrase "will cause," and Enclosure 2 is referenced after a new verb phrase beginning with "shall maintain." It would be odd for a drafter to intend that a direct object of one verb phrase modify the direct object of an entirely different verb phrase without a clear connection.
Third, the parties seemed to contemplate Statoil maintaining insurance policies from multiple insurers since the contract required multiple types of insurance and Statoil did in fact acquire insurance from multiple insurers. Fourth, the very same sentence using the singular "insurer" goes on to use the plural "insurers." Finally, Ironshore's timing argument is undercut by the MSA, which did not require Statoil to acquire its insurance policies before entering the contract. Ironshore has not provided any additional proof that it is not an "insurer" under the MSA. Without a convincing argument or supporting caselaw that it is not an insurer under the MSA, Ironshore has not carried its burden of proving a valid arbitration agreement on this ground.
*534 2. Did Statoil Assume Liability for the Explosion?
Next is the second element-whether damage from the explosion was a liability that Statoil assumed. Statoil and Halliburton divided up liabilities in four primary places in the MSA. First, in Section 12.8 of the MSA, Statoil agreed to "release, defend, hold harmless and indemnify [Halliburton] against any Claims resulting from any blowout, fire, explosion, cratering or any uncontrolled well condition," "notwithstanding anything contained elsewhere" in the MSA. Statoil, therefore, agreed to assume liability for damages resulting from any fire or explosion.
Section 12.8, however, is "subject to" the second section bearing on Statoil's liabilities, Section 12.1. In Section 12.1, Halliburton agreed to "release [Statoil] of any liability for ... all Claims of every kind and character ... arising out of any illness, bodily injury, death or loss or damage to property of any member of [Halliburton]."
The third place where Statoil assumed liability is Section 12.2, which is the mirror image of Section 12.1. In Section 12.2, Statoil agrees to "release [Halliburton] of any liability for ... all Claims of every kind and character ... arising out of any illness, bodily injury, death or loss or damage to property of any member of [Statoil]."
A fourth provision further complicates matters. 6 In Section 12.10, Halliburton agreed to "assume all responsibility for ... Claims of every kind and character arising from pollution and contamination, which originates above the surface of the land or water from items in the possession or control of anyone within [Halliburton]." Later in the same section, Statoil agreed to "assume all responsibility for ... all other pollution or contamination which may occur during or arising from the conduct of Work."
Condensing these four sections, Statoil agreed to assume all liability resulting from a fire or explosion (§ 12.8); Halliburton assumed liability for any claims arising out of damage to its property (§ 12.1); Statoil assumed liability for any claims arising out of damage to its property (§ 12.2); and Halliburton assumed liability for pollution or contamination claims that arise from work or items in Halliburton's possession or control (§ 12.10). So, putting these sections together, Statoil did not assume liability for damage to Halliburton's property, even if a fire or explosion caused the damage; Statoil assumed liability for all damage to its own property and property of third parties, unless that damage qualifies as pollution or contamination caused by property in Halliburton's possession or control. 7
The district court determined that Ironshore made a roughly $12 million payment to Statoil for damage caused by the fire. But the court did not determine whose property was damaged in the fire. 8 Nor *535 did it determine what damage the $12 million payment covered. If Halliburton's property was damaged, then Ironshore did not waive subrogation rights, since Statoil did not assume liability for damage to Halliburton's property. If, however, Statoil's or a third party's property was damaged, then Ironshore did waive its subrogation rights and the claim fell outside of the MSA's arbitration agreement. Without determining what damage Ironshore reimbursed with its roughly $12 million payment, the district court could not determine whether Statoil or Halliburton should be liable for the damage.
The district court also did not determine what kind of damage Ironshore's payment was meant to remediate-pollution, contamination, or otherwise. While the district court stated that the explosion caused "significant environmental damage," it did not relate this statement to Section 12.10. Meanwhile, Ironshore argues, with some support, that the explosion occurred above ground and started with Halliburton's equipment. Ironshore further argues that some of the damage resulted from chemical runoff at the drilling site, which caused environmental harm unrelated to the fire and explosion. 9 If those contentions are true, then Ironshore likely has a strong claim that it did not waive subrogation rights to an indemnification claim. In short, Ironshore waived some subrogation rights, but not all. The district court's opinion, however, incorrectly held that Ironshore waived them all.
Ken Petroleum Corporation v. Questor Drilling Corporation
supports this position.
Sections 13 and 14.9 of the drilling contract require [plaintiff] to cause its insurers to waive their subrogation rights only with regard to [plaintiff's] agreement to indemnify [defendant] for the death of or injury to [plaintiff's] employees and certain others. The drilling contract does not require [plaintiff] to cause its insurers to waive subrogation rights when they pay amounts that [defendant] should have paid under its agreement to indemnify [plaintiff]. If [plaintiff] is not contractually obligated to [defendant] to enforce a waiver of subrogation, [defendant] cannot insist that [plaintiff] assert a waiver of subrogation when [plaintiff] and the Underwriters both agree that the Underwriters stepped into [plaintiff's] shoes by paying $450,000 to settle the [other] litigation.
Similarly, in
Exxon Mobil Corp. v. Insurance Company of State
, the insured caused its insurer to waive subrogation rights against the defendant for any bodily injuries sustained by the insured's employees arising out of operations at Texas plants. No. 17-0200,
Here, like in
Ken Petroleum
and the hypothetical contract in
Exxon Mobil
, it is unclear that Statoil assumed liability-and therefore was required to cause Ironshore to waive subrogation rights-for
all
damage at the drilling site. Some of the damage might have been to Halliburton's equipment, and some of it might have been environmental. It is therefore possible that Ironshore paid "amounts that [Halliburton] should have paid under its agreement to indemnify [Statoil]."
Ken Petroleum
,
The point is that Ironshore did not waive all of its subrogation rights. Ironshore only waived its subrogation rights to the extent required by the MSA. Under the MSA, Ironshore maintained subrogation rights for damages under MSA sections 12.1 for damage to Halliburton's property and 12.10 for environmental damage. Because the damages here might involve damage to Halliburton's property or environmental damage, and therefore implicate sections 12.1 and 12.10, Ironshore did not waive its subrogation rights. Critically, this lack of waiver points to the existence of an arbitration agreement. If Ironshore decides to assert claims not covered by sections 12.1 or 12.10, or it asserts claims for a liability that Statoil did not assume under the MSA, those claims will implicate the scope of the arbitration agreement, not its existence.
We hold that the district court erred. We therefore REVERSE and hold that there is a binding arbitration agreement between Ironshore, as subrogee, and Halliburton.
C. Is This Dispute Arbitrable?
Having determined that there is a valid arbitration agreement between Ironshore, as subrogee, and Halliburton, the next question is whether this dispute-whether
*537
Ironshore can enforce its subrogation rights through arbitration-is arbitrable.
See
Jody James Farms
,
When a court determines whether a particular dispute falls within the scope of an arbitration provision, it answers a question of "substantive arbitrability, which concern[s] the existence, enforceability and scope of an agreement to arbitrate."
Swearingen v. Swearingen
, No. 05-15-01199-CV,
When determining the scope of an arbitration clause, courts typically "indulge every reasonable presumption in favor of arbitration, and [resolve] all doubts as to the arbitrability of an issue ... in favor of arbitration."
Fridl v. Cook
,
One way parties can provide such clear and unmistakable evidence of their intent to delegate these issues is by "expressly incorporat[ing] rules empowering the arbitrator to decide substantive arbitrability."
Swearingen
,
Another way that parties can provide clear and unmistakable evidence that they intended an arbitrator to decide substantive arbitrability issues is by crafting a broad arbitration clause. For example, the parties can draft "[a] broad arbitration clause, purporting to cover all claims, disputes, and other matters relating to the contract or its breach, creat[ing] a presumption of arbitrability."
Am. Realty Tr., Inc. v. JDN Real Estate-McKinney, L.P.
,
Here, two MSA provisions show that the parties' intended to submit questions of substantive arbitrability to an arbitrator.
12
First, the parties incorporated the AAA's rules, including Rule 7(a), into its arbitration provision. The Rule 7(a) inclusion and arbitration provision here are indistinguishable from those in other cases where courts gave substantive arbitrability questions to the arbitrator.
13
See, e.g.
,
Super Starr Int'l, LLC
,
We hold that Ironshore has produced clear and unmistakable evidence that Statoil and Halliburton agreed to submit issues of substantive arbitrability, which include *539 this dispute, to the arbitrator. 14 We therefore REMAND to the district court to stay the case pending arbitration.
III. The District Court's Personal Jurisdiction Ruling
After ruling on Ironshore's arbitration motion, the court turned to Ironshore's motion to dismiss for lack of personal jurisdiction. The court granted the motion, holding that it did not have specific jurisdiction over Ironshore because Ironshore lacked minimum contacts with the forum state. We agree.
A. Background Personal Jurisdiction Law
This court reviews de novo a district court's decision to grant a motion to dismiss for lack of personal jurisdiction.
ICEE Distribs., Inc. v. J&J Snack Foods Corp.
,
A "federal court sitting in diversity may assert jurisdiction if (1) the state's long-arm statute" allows it; and (2) exercising jurisdiction would not violate the Due Process Clause of the Fourteenth Amendment.
Cycles, Ltd. v. W.J. Digby, Inc.
,
Federal due process requires a plaintiff to prove two things. First, the plaintiff must show that the non-resident defendant "purposely availed himself of the benefits and protections of the forum state by establishing minimum contacts with the state."
Walk Haydel & Assocs., Inc. v. Coastal Power Prod. Co.
,
"There are two types of 'minimum contacts': those that give rise to specific personal jurisdiction and those that give rise to general personal jurisdiction," which is not at issue here.
Lewis v. Fresne
,
*540
Panda Brandywine Corp. v. Potomac Elec. Power Co.
,
B. Personal Jurisdiction over Ironshore
Halliburton argues that three sets of facts establish Ironshore's minimum contacts with the state of Texas. First, Ironshore voluntarily pursued forum-state litigation by seeking to draw Halliburton into the initial Texas lawsuit filed by Statoil. Second, Ironshore seeks to assert subrogated rights against Halliburton under the MSA. Third, Ironshore sold the SPILLS policy to Statoil, a Texas resident. We will address these three arguments in turn.
1. Participating in State-Court Litigation
Four facts are relevant to analyzing this argument. First, Ironshore participated, as a defendant, in a Texas state court action with Statoil's other insurers and attempted to involve Halliburton. Second, Ironshore attempted to arbitrate in Texas with Halliburton. Third, Ironshore sent letters threatening to invoke the benefits of Texas arbitration. Finally, Ironshore settled the litigation with Statoil's insurers, and the settlement agreement included a forum selection clause with Texas as the forum state. Ultimately, Halliburton's arguments are unconvincing.
a. Ironshore's Participation in Texas Litigation
This court has long held that a non-resident defendant may participate in litigation without submitting to the court's jurisdiction so long as it maintains its objection to personal jurisdiction.
PaineWebber Inc.
, 260 F.3d at 461. Relatedly, this court has also held that filing a counterclaim or "third-party claim does not, without more, waive an objection to personal jurisdiction."
15
Id.
;
see also
Bayou Steel Corp. v. M/V Amstelvoorn
,
*541 Here, Ironshore never initiated an original action in Texas, which would have subjected it to personal jurisdiction. Ironshore participated as a defendant in the only two relevant actions: the action initiated by Statoil's insurers and this action initiated by Halliburton. In both actions, Ironshore continuously objected to the court's personal jurisdiction. While it did file a counterclaim in the insurer action and sought to involve Halliburton-though it did not file an official third-party claim-as discussed above, counterclaims and third-party claims do not subject non-resident defendants to jurisdiction. 16
b. Ironshore's Attempts to Arbitrate
Ironshore's efforts to force arbitration do not change this analysis. This court has definitively held that a defendant's "agreement to arbitrate in Texas does not necessarily constitute consent to the personal jurisdiction of Texas courts to adjudicate its claims in the first instance."
Int'l Energy Ventures
, 818 F.3d at 212. When a party agrees to arbitrate, it subjects itself to the court's jurisdiction for "the limited purpose of compelling arbitration."
Id.
(quoting
Armstrong v. Assocs. Int'l Holdings Corp.
,
Here, Ironshore submitted to the court's jurisdiction for the sole purpose of compelling arbitration. By submitting to the court's power for this limited purpose and maintaining its personal jurisdiction motion to dismiss, Ironshore continued to object to "the power of the court" and did not waive its personal jurisdiction defense. PaineWebber , 260 F.3d at 460.
Nor does an agreement to arbitrate necessarily provide minimum contacts with the arbitration forum. In International Energy , this court further held that an agreement to arbitrate also did not provide sufficient minimum contacts where the defendant, much like here, (1) "did not negotiate the agreement in Texas, (2) ... did not travel to Texas because of that agreement, and (3) the unwritten agreement did not require performance in Texas." 818 F.3d at 213. Notably, the defendant in that case was a party to the agreement at issue, unlike here, where Ironshore was not a party to the MSA. 17
*542 c. Ironshore's Demand Letters to Halliburton
Ironshore's letters to Halliburton also fail to confer personal jurisdiction. Many other circuits have addressed similar scenarios in which a potential plaintiff sends a cease-and-desist letter threatening litigation to a potential defendant. None of these courts held that sending a letter amounts to purposeful availment. 18 In-circuit district courts have reached the same conclusion. 19 Ironshore's letters, even if they threatened litigation, are not enough to show minimum contacts with Texas. 20
d. Ironshore's Settlement Agreement & Forum Selection Clause
The final fact Halliburton highlights in favor of personal jurisdiction is a forum selection clause that specifies Harris County as the desired forum for future litigation. The clause is located in the settlement agreement Ironshore entered to end its prior litigation with Statoil's insurers.
Choice-of-law provisions and forum-selection clauses are relevant to this minimum-contacts analysis, but they are not dispositive.
See
Pervasive Software v. Lexware GmbH & Co. KG
,
*543
Am. Gen. Life Ins. Co. v. Rasche
,
As noted above and below, Ironshore has virtually no connections to the state other than as a defendant in litigation. There are no allegations of suit-related contact between Ironshore and Texas other than Ironshore's participation as a defendant in litigation and the forum-selection clause in the settlement agreement; the conduct underlying that suit, as well as this one, occurred outside the forum state; this suit does not arise under the settlement agreement; and the settlement agreement did not shift Ironshore from defendant to plaintiff-it simply released Statoil from the litigation. And Ironshore still participates as a defendant.
See
Hazim v. Schiel & Denver Pub. Ltd.
, No. CIV-A-H-12-1286,
2. Asserting Subrogated Rights
Halliburton next argues that Ironshore has minimum contacts with Texas based on the MSA. According to Halliburton, two facts support this argument. First, the MSA is a Texas-centric contract. Second, Ironshore attempted to assert subrogated rights to binding arbitration under the MSA.
Halliburton's first argument is unconvincing for two basic reasons. First, a non-resident defendant can only develop minimum contacts with a forum state through "actions by the defendant himself that create a 'substantial connection' with the forum State."
Burger King Corp. v. Rudzewicz
,
Here, Ironshore was not a party to the MSA, had no connection to the MSA, and never agreed to be bound by the MSA. The MSA, therefore, does not bear on Ironshore's contacts with the state. Nor can Statoil's contacts be imputed to Ironshore. While this court has imputed the contacts of one party to another,
21
it has not done so in a scenario where the non-resident defendant is so detached from the contract in dispute. Nor has any other court.
See, e.g.
,
Allied Prof'ls Ins. Co. v. Harmon
, No. 8:16-CV-1864-JLS-KESX,
Halliburton's second argument is also unconvincing because, as noted above, a party's decision to submit to arbitration in the forum state does not result in either (1) minimum contacts or (2) waiver of the personal jurisdiction defense.
*544 3. Insurance Contract with a Texas Resident
Halliburton next argues that Ironshore has minimum contacts with the state of Texas because (1) it sold the SPILLS policy to Statoil, a Texas resident and (2) Ironshore is subject to Texas regulation as a lines insurer.
The first argument is not persuasive. The Supreme Court has long held that "an individual's contract with an out-of-state party
alone
[cannot] automatically establish sufficient minimum contacts in the other party's home forum."
Burger King
,
Nor does the SPILLS policy establish minimum contacts under the test developed in
Burger King
. That test requires courts to evaluate "prior negotiations and contemplated future consequences, along with the terms of the contract and the parties' actual course of dealing ... in determining whether the defendant purposefully established minimum contacts within the forum."
Gulf Coast Bank
,
The parties negotiated the SPILLS policy in Oklahoma. Ironshore underwrote the policy in Louisiana. Ironshore did not underwrite any policies in Texas. A surplus lines broker in Oklahoma procured the policy. And the policy is governed by New York law and provides for dispute resolution in New York.
This case falls far below other cases in which courts found insufficient minimum contacts.
See, e.g.
,
Int'l Energy Ventures
, 818 F.3d at 213 (finding no minimum contacts where "(1) [the defendant] did not negotiate the agreement in Texas, (2) [it] did not travel to Texas because of that agreement, and (3) the unwritten agreement did not require performance in Texas");
Freudensprung v. Offshore Tech. Servs., Inc.
,
Halliburton's second argument is also unconvincing. Texas's decision to regulate the lines insurance market has nothing to do with Ironshore's minimum contacts with Texas. A state's decision to regulate an industry is relevant to the second prong of the personal jurisdiction test: whether the assertion of personal jurisdiction would comport with "fair play and substantial justice."
23
And courts only
*545
reach this prong after establishing the defendant's minimum contacts with the forum state. While it is true that "[t]hese considerations sometimes serve to establish the reasonableness of jurisdiction upon a lesser showing of minimum contacts than would otherwise be required,"
Burger King
,
We therefore AFFIRM and hold the district court was correct in concluding that Ironshore lacks minimum contacts with Texas and dismissing Halliburton's breach of contract claims.
IV. Conclusion
For appeal No. 17-20678, we REVERSE the district court's decision that Ironshore waived all of its subrogation rights under the MSA. We REVERSE the district court's decision that Ironshore, as subrogee, and Halliburton do not have a binding arbitration agreement. As a result, we REMAND for the district court to stay the case pending arbitration.
For appeal No. 18-20239, we AFFIRM the district court's decision that it lacked personal jurisdiction over Ironshore for the remaining breach of contract claims.
On June 28, 2014, a hydraulic line broke at a well pad, and fluid in the line sprayed onto some nearby hot equipment, causing the explosion.
We address the arbitration question before turning to personal jurisdiction because Ironshore submitted to the court's personal jurisdiction for the limited purpose of compelling arbitration. This court has definitively held that a defendant can subject itself to the court's jurisdiction for "the limited purpose of compelling arbitration" without waiving challenges to personal jurisdiction for other purposes.
Int'l Energy Ventures Mgmt., L.L.C. v. United Energy Grp., Ltd.
,
Section 3 of the FAA permits litigants already in federal court to invoke arbitration agreements.
In part of its briefing, Ironshore argues that determining whether Ironshore has subrogation rights is a merits question and, therefore, the district court erred in deciding it. That argument is wrong. This court must determine whether Ironshore has subrogation rights in order to determine whether an arbitration agreement exists.
Ironshore waived subrogation rights in the SPILLS policy it sold to Statoil. But the subrogation waiver only applied "[t]o the extent required by written contract." The only relevant written contract is the MSA, so Ironshore only waived subrogation rights to the extent required by the MSA.
The district court did not discuss this provision.
The district court held that Section 12.1 controlled over Section 12.8 because Section 12.1 seems to cover nearly all possible harm. But Section 12.1 only covers "damage to property of any member of [Halliburton]." It does not say anything about damage to property owned by Statoil or a third party, damage that is covered by Section 12.8. This limiting language is important because, without it, Section 12.8 is meaningless. And Texas law requires courts to "read all provisions of an agreement together, interpreting the agreement so as to give each provision its intended effect."
Mustang Tractor & Equip. Co. v. Liberty Mut. Ins. Co.
,
In one of Ironshore's letters to Halliburton, Ironshore pointed out that Halliburton "was responsible for providing, possessing, and controlling most of the equipment and materials" at the oil rig. The equipment included "over 40 tanks, trucks, totes, and drums," most of which were "compromised in the fire."
In one of Ironshore's letters to Halliburton, it made clear that the EPA observed "uncontrolled runoff of liquids from" the oil rig platform, and this runoff "entered an unnamed tributary ... which discharges to the Ohio River." The letter also noted other sources of chemical runoff. It is unclear whether all the runoff began before the fire, because of the fire, or during the cleanup operations.
See, e.g.
,
Liberty Mut. Fire Ins. Co. v. Axis Surplus Ins. Co.
, No. A-16-CA-00870-SS,
See also
Super Starr Int'l, LLC v. Fresh Tex Produce, LLC
, No. 13-17-00184-CV,
Here, the MSA's arbitration provision-Section 13.2-provides that "[a]ny controversy between the Parties ... related to this [MSA] involving the construction or application of any of the terms, covenants, or conditions of this [MSA] ... shall ... be submitted to binding arbitration in Houston, Texas." Section 13.2 further specifies that the American Arbitration Association's ("AAA") "commercial arbitration rules" will govern any disputes.
One wrinkle is that the Texas Supreme Court recently held that Rule 7 only provides clear and unmistakable evidence of the parties' intent to delegate an issue when the signatories to the contract are in a dispute. When a non-signatory is involved, however, incorporating the AAA rules does not provide clear "intent to arbitrate arbitrability."
Jody James Farms
,
This holding is inapposite here because the non-signatory, Ironshore, assumed the position of a signatory, Statoil. As noted above, Texas has a robust view of subrogation rights, "allowing the insurer to assert any claims or rights held by the insured against a third party."
Associated Int'l Ins.
,
The arbitrability of the underlying merits dispute is not at issue in this case. The only issues are (1) whether an arbitration agreement exists between Ironshore and Halliburton and (2) whether Statoil and Halliburton intended an arbitrator to determine substantive arbitrability questions. The merits of the dispute, as articulated in Ironshore's motion to stay, concern several questions related to the MSA, including whether Halliburton is "obligated to indemnify Ironshore" and "whether Statoil is obligated to indemnify Halliburton," as well as other MSA-related questions. The court need not address whether these fall within the arbitration agreement's scope.
This rule has one exception: "When a defendant seeks to bring into an action new claims against new parties, such as counterclaims, cross-claims, or third-party claims, and these claims do not arise out of the same transaction or occurrence as the original action , the attempted joinder constitutes a waiver of personal jurisdiction defense." 4 Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure § 1067.3 (4th ed. 2018) (emphasis added). This case does not implicate this exception because (1) Ironshore never officially filed a third-party claim and (2) even if it had, the claim would arise out of the same transaction or occurrence as the original action.
Although the above cases discuss waiver, rather than minimum contacts, responding to a lawsuit is not the type of purposeful availment required to find minimum contacts.
Dell Mktg., L.P. v. Incompass IT, Inc.
,
In our own research, we found two cases in which district courts imputed the actions of an insured party to the subrogee-insurer for personal jurisdiction purposes.
In re M/V MSC FLAMINIA
,
See e.g.
,
Genetic Implant Sys., Inc. v. Core-Vent Corp.
,
See e.g.
,
Xtera Communs., Inc. v. TPACK A/S
,
Halliburton's cited cases do not help. In
General Contracting & Trading Co., LLC v. Interpole, Inc.
, the party challenging personal jurisdiction filed its own lawsuit in the forum state.
This court has held that courts can impute forum contacts of a predecessor company to the successor corporation, but only because the successor corporation is a "mere continuation" of the predecessor.
Patin v. Thoroughbred Power Boats Inc.
,
See also
Freudensprung
,
When making the "fair play and substantial justice" assessment, courts look to a variety of factors, one of which is "the forum State's interest in adjudicating the dispute."
Burger King
,
Reference
- Full Case Name
- HALLIBURTON ENERGY SERVICES, INCORPORATED, Plaintiff - Appellee v. IRONSHORE SPECIALTY INSURANCE COMPANY, Defendant - Appellant Halliburton Energy Services, Incorporated, Plaintiff - Appellant v. Ironshore Specialty Insurance Company, Defendant - Appellee
- Cited By
- 168 cases
- Status
- Published