Adopting in part a magistrate judge’s recommendation, a federal court in Maine recently held that the enforceability of an arbitration clause in a reinsurance agreement must be determined by an arbitrator, as opposed to a federal judge. Mountain Valley Property, Inc. and Applied Risk Services, Inc. entered into a reinsurance participation agreement that contained an arbitration clause which provided, among other things, that all disputes between the parties relating “in any way to the execution and delivery, construction, or enforceability” of the agreement be decided by binding arbitration. Applied Risk sought to arbitrate a dispute that arose between the parties. Mountain Valley opposed arbitration on the grounds that the subject clause was invalid under Nebraska law, and argued that the court (and not an arbitrator) should determine the validity of the clause.
Agreeing with the Magistrate Judge’s recommendation, the court found that “[b]y including the ‘enforceability’ of the agreement within the scope of arbitration, the parties clearly and unmistakably agreed to arbitrate the issue of arbitrability.” Therefore, the court held that the parties’ dispute, including the issue concerning the validity of the arbitration clause, must be referred to arbitration, and ordered a stay of the lawsuit. For reasons of judicial economy, the court also ordered a stay of the suit as between Mountain Valley and two other defendants that were not signatories to the operative agreement, pending the outcome of the arbitration between Mountain Valley and Applied Risk. Mountain Valley Property, Inc. v. Applied Risk Services, Inc., No. 15-cv-00187 (USDC D. Me. Feb. 25, 2016).