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FEDERICO v. CHARTERERS MUT. ASSURANCE ASS'N LTD.

June 13, 2001

STEPHEN FEDERICO, PLAINTIFF,
v.
CHARTERERS MUT. ASSURANCE ASS'N LTD., DEFENDANT.



The opinion of the court was delivered by: Yohn, J.

Memorandum and Order

The plaintiff, Stephen Federico ["Federico"], alleges that, under a marine protection and indemnity insurance agreement between the defendant, Charterers Mutual Assurance Association Limited ["Charterers"], and Gulf & Orient Steamship Line ["Gulf & Orient"], Charterers is required to pay a judgment entered in favor of Federico and against Gulf & Orient in a prior lawsuit .

Currently pending before the court is Charterers' motion to dismiss the amended complaint. See Def.'s F.R.C.P. 12(b) Mot. to Dismiss Pl.'s Compl. ["Mot. to Dismiss"] (Doc. No. 7); Am. Compl. (Doc. No. 8); Order of Nov. 27, 2000 (Doc. No. 10) (noting that parties have agreed that defendant's motion to dismiss the complaint shall be considered as a motion to dismiss the amended complaint). After considering Charterers' motion, Federico's response in opposition, Pl.'s Resp. to Def.'s Mot. to Dismiss Compl. Pursuant to F.R.C.P. 12(b) ["Pl.'s Resp."] (Doc. No. 9), Charterers' reply, Def.'s Reply Br. to Pl.'s Resp. to Mot. to Dismiss ["Def.'s Reply"] (Doc. No. 13), and various supplementary filings, I conclude that Federico is obligated to arbitrate his claim and that this action will be stayed pending the conclusion of that arbitration proceeding.

FACTUAL BACKGROUND

On July 4, 1996, the plaintiff, Federico, sustained an injury while he was engaged in his duties as a longshoreman aboard the M/V Xiang Jiang. See Am. Compl ¶ 8. At the time of the injury, the M/V Xiang Jiang was berthed in Eddystone, Pennsylvania and was under charter to Gulf & Orient. See id. ¶¶ 7-8. Also at that time, Charterers, a mutual insurance association with its principal place of business in London, England, provided Gulf & Orient with marine protection and indemnity insurance. See id. ¶¶ 5-6.

In September 1996, Federico filed a federal lawsuit against Gulf & Orient and other defendants in the Eastern District of Pennsylvania. See id. ¶ 9; Compl. (Docket Number 96-CV-6231) (Doc. No. 8, Ex. A). Although Charterers was not a defendant in that case, Charterers participated in the defense of Gulf & Orient "by engaging counsel, paying counsel fees and costs and directing the defense of Gulf & Orient [], including participation in extensive discovery, up to June 16, 1997." Am. Compl. ¶ 10. On June 16, 1997, this court allowed counsel engaged by Charterers to withdraw as counsel for Gulf & Orient. See id. On September 17, 1998, after a trial, this court entered a judgment in favor of Federico and against Gulf & Orient in the amount of $540,671.00. See id. ¶ 11; Order of Sept. 17, 1998 (Docket Number 96-CV-6231) (Doc. No. 8, Ex. B). At the time the judgment was entered, Gulf & Orient was insolvent and defunct, and it remains so today. See Am. Compl. ¶ 12.

STANDARD OF REVIEW

Charterers has filed the instant motion to dismiss under Federal Rule of Civil Procedure 12(b). See Def.'s F.R.C.P. 12(b) Mot. to Dismiss Pl.'s Compl. Charterers states five grounds for dismissal: 1) the insurance agreement between Charterers and Gulf & Orient contained a mandatory arbitration clause; 2) this court does not have subject matter jurisdiction;*fn1 3) this court does not have personal jurisdiction over Charterers; 4) the Eastern District of Pennsylvania is an improper venue for this case;*fn2 and 5) service of process was insufficient. See id. at 1; ¶ 23. As the parties have done, I will treat Charterers' motion as a motion to compel arbitration and stay proceedings pending arbitration or, in the alternative, to dismiss based on lack of personal jurisdiction or improper service of process.

A motion to compel arbitration is treated like a motion for summary judgment. See, e.g., Wilson v. Darden Rests., Inc., CIV.A. No. 99-5020, 2000 WL 150872, at *2 (E.D.Pa. Feb. 11, 2000); Childs v. Meadowlands Basketball Assoc., 954 F. Supp. 994, 998 n. 3 (D.N.J. 1997) (citing Par-Knit Mills, Inc. v. Stockbridge Fabrics Co., Ltd., 636 F.2d 51, 54 (3d Cir. 1980)). Either party to a lawsuit may file a motion for summary judgment, and it will be granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The moving party bears the initial burden of showing that there is no genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Where the nonmovant bears the burden of persuasion at trial, the moving party may meet its initial burden and shift the burden of production to the nonmoving party "by `showing' — that is, pointing out to the district court — that there is an absence of evidence to support the nonmoving party's case." Id. at 325. Once the movant has carried its initial burden, the nonmoving party must come forward with specific facts showing that there is a genuine issue for trial. The nonmovant must present concrete evidence supporting each essential element of its claim. See Ideal Dairy Farms, Inc. v. John Labatt, Ltd., 90 F.3d 737, 743 (3d Cir. 1996). Thus, summary judgment will be entered "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp., 477 U.S. at 322.

When a court evaluates a motion for summary judgment, "[t]he evidence of the non-movant is to be believed." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). Additionally, "all justifiable inferences are to be drawn in [the nonmovant's] favor." Id. At the same time, "an inference based upon a speculation or conjecture does not create a material factual dispute sufficient to defeat entry of summary judgment." Robertson v. Allied Signal, Inc., 914 F.2d 360, 382 n. 12 (3d Cir. 1990). The nonmovant must show more than "[t]he mere existence of a scintilla of evidence" for elements on which he bears the burden of production. Anderson, 477 U.S. at 252. Thus, "[w]here the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no `genuine issue for trial.'" Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (citations omitted).

In the alternative to compelling arbitration, Charterers states two grounds for dismissal. First, Charterers argues that this case should be dismissed for lack of personal jurisdiction. See Fed.R.Civ.P. 12(b)(2). Once a defendant has raised a jurisdictional defense, the burden shifts to the plaintiff to demonstrate that the relevant jurisdictional requirements are met. See Mellon Bank (East) PSFS, Nat'l Ass'n v. Farino, 960 F.2d 1217, 1223 (3d Cir. 1992). The plaintiff must support this burden through "sworn affidavits or other competent evidence." North Penn Gas Co. v. Corning Natural Gas Corp., 897 F.2d 687, 689 (3d Cir. 1990) (quotation omitted). If the plaintiff relies on the complaint and affidavits to satisfy its burden, then the plaintiff meets its burden by making a prima facie showing that jurisdiction exists. See Farino, 960 F.2d at 1223; Friedman v. Israel Labour Party, 957 F. Supp. 701, 706 (E.D.Pa. 1997).

Second, Charterers claims that Federico's service of process was insufficient. See Fed.R.Civ.P. 12(b)(5). If process is not served within 120 days of the filing of the complaint, the court shall dismiss the complaint. See Fed. R .Civ. P. 4(m). However, a court should not dismiss a complaint for failure to effect service properly if the plaintiff shows "good cause" for the failure. See id. The plaintiff bears the burden of establishing that he properly served the defendant. See Grand Entm't Group, Ltd. v. Star Media Sales, Inc., 988 F.2d 476, 488 (3d Cir. 1993).

DISCUSSION

Federico alleges that, under a marine protection and indemnity insurance agreement between Charterers and Gulf & Orient, Charterers is required to pay a judgment entered in a prior lawsuit in favor of Federico and against Gulf & Orient. See Am. Compl. ¶ 13. Federico also claims that Charterers is obligated under the laws of the Commonwealth of Pennsylvania to pay the judgment entered in favor of Federico and against Gulf & Orient. See id. ¶ 14.

As noted above, I will treat Charterers' motion as a motion to compel arbitration and stay proceedings pending arbitration or, in the alternative, to dismiss. Therefore, before assessing the motion to dismiss, I will determine whether the arbitration clause contained in the marine protection and indemnity insurance agreement is applicable to the current proceedings.

The Arbitration Clause

Another court faced with a similar maritime insurance case ably explained the nature of maritime insurance:

[T]he insurer is an association of shipowners who engage in providing insurance. The association is referred to as the club, and the insured is the member. To obtain coverage, the member enrolls a vessel with the club. The rules of the club and the quotation are the contract of insurance. The member's fee for obtaining the coverage is the fee plus assessments (calls) that the club makes if the claims exceed the pool accumulated through the annual assessments. A member's assessment is based on the size and nature of its fleet. Because a call is possible, the wealth of the members is of crucial importance to the club and its members.

Triton Lines, Inc. v. Steamship Mut. Underwriting Ass'n, 707 F. Supp. 277, 278 (S.D.Tex. 1989).

Rule 43 of the 1996 Rules is a mandatory arbitration provision. Rule 43 reads as follows:

(A) Any claim by the Association against a Member in respect of Contributions due to the Association shall be referred to the arbitration in London of a sole Legal Arbitrator in ...


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