In the
United States Court of Appeals For the Seventh Circuit ____________________ No. 23-3373 NATIONAL CASUALTY COMPANY and NATIONWIDE MUTUAL INSURANCE COMPANY, Plaintiffs-Appellants,
v.
CONTINENTAL INSURANCE COMPANY, Defendant-Appellee. ____________________
Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 1:23-cv-03143 — Lindsay C. Jenkins, Judge. ____________________
ARGUED NOVEMBER 5, 2024 — DECIDED NOVEMBER 22, 2024 ____________________
Before SCUDDER, ST. EVE, and JACKSON-AKIWUMI, Circuit Judges. SCUDDER, Circuit Judge. National Casualty Company and Nationwide Mutual Insurance Company agreed many years ago to reinsure Continental Insurance Company against cer- tain risks. Those reinsurance agreements each contain an ar- bitration clause. A billing dispute arose in recent years, lead- ing Continental to demand arbitration. National Casualty and 2 No. 23-3373
Nationwide responded by filing a lawsuit in federal court. The lawsuit alleged that prior arbitral awards resolved the billing dispute and precluded the new arbitration proceeding. National Casualty and Nationwide now appeal the district court’s order granting Continental’s motion to compel arbi- tration under the Federal Arbitration Act. Because our prece- dent required that outcome, we affirm. I
Continental, National Casualty, and Nationwide are par- ties to three reinsurance agreements that were in effect be- tween 1969 and 1975. The agreements contain identical provi- sions requiring arbitration for “any dispute [that] shall arise between [the parties] with reference to the interpretation of [the agreement] or their rights with respect to any transaction involved.” The agreements further provide that arbitral awards are “final and binding on both parties.” In 2017 a dispute arose between the parties over whether Continental’s billing methodology complied with a “Loss Oc- currence” provision in the reinsurance agreements. To resolve the dispute, Continental initiated separate arbitration pro- ceedings against National Casualty and Nationwide. Both ar- bitration panels adopted National Casualty and Nationwide’s interpretation of the reinsurance agreements and issued final awards. Two federal district courts later entered orders con- firming those awards. Another billing dispute between the parties arose in 2023. And again the parties disagreed over whether Continental’s billing methodology was consistent with the “Loss Occur- rence” provision. This time, however, National Casualty and Nationwide maintained that the prior arbitration proceedings No. 23-3373 3
(and, specifically, the 2017 arbitral awards) resolved the dis- pute. Continental disagreed and demanded that the new dis- pute go to arbitration. Rather than submit to arbitration, National Casualty and Nationwide initiated this action in federal court. They as- serted that the prior arbitral awards precluded a new arbitra- tion proceeding and sought declaratory and injunctive relief on that basis. Invoking the reinsurance agreements’ arbitra- tion clauses, Continental moved to compel arbitration and dismiss the action, contending that the claim preclusion ques- tion itself must go to arbitration. The district court granted that motion. National Casualty and Nationwide now appeal. II
We begin with a motion that Continental filed in our court. Continental urges us to vacate the district court’s dismissal order and entry of judgment with instructions to stay the ac- tion pending arbitration. We decline the invitation. The mo- tion is not properly before us and, in any case, lacks merit. Recall that Continental prevailed in the district court, win- ning a full dismissal in favor of arbitration of National Casu- alty and Nationwide’s claims. It is not often that we see a party win a dismissal in the district court and then move to vacate that dismissal. In any event, a motion to dismiss an ap- peal is not the appropriate vehicle for Continental’s requested relief. “[A] party who wishes to seek an alteration of the judg- ment of the district court is obliged to file a notice of appeal.” Chowaniec v. Arlington Park Race Track, Ltd., 934 F.2d 128, 130 (7th Cir. 1991). “Only an appellant or cross-appellant may re- ceive relief.” Id. Continental did not file a notice of appeal or 4 No. 23-3373
cross-appeal, so it cannot now seek to alter the district court’s judgment. Regardless, Continental’s motion fails. The motion relies on Smith v. Spizzirri, a recent Supreme Court decision holding that “[w]hen a district court finds that a lawsuit involves an arbitrable dispute, and a party requests a stay pending arbi- tration, § 3 of the FAA compels the court to stay the proceed- ing.” 601 U.S. 472, 478 (2024). By its terms, Spizzirri requires a district court to stay a case pending arbitration only when one of the parties has requested such a stay. But, as Continental concedes, neither party did so here. Spizzirri therefore does not require our vacating the district court’s dismissal order, nor does it have any bearing on our jurisdiction over an ap- peal of that order. With our appellate jurisdiction secure, we can proceed to the merits. III
This is not our first encounter with issues of preclusion in the arbitration context. Our case law establishes that the pre- clusive effect of an arbitral award is an issue for the arbitrator to decide, not a federal court. In no uncertain terms, we have held that “[a]rbitrators are entitled to decide for themselves those procedural questions that arise on the way to a final dis- position, including the preclusive effect (if any) of an earlier award.” Trustmark Ins. Co. v. John Hancock Life Ins. Co., 631 F.3d 869, 874 (7th Cir. 2011); accord, e.g., Consolidation Coal Co. v. United Mine Workers of Am., 213 F.3d 404, 407 (7th Cir. 2000) (“[T]he question of the preclusive force of the first arbitration is, like any other defense, itself an issue for a subsequent arbi- trator to decide.”); Indep. Lift Truck Builders Union v. NACCO No. 23-3373 5
Materials Handling Grp., Inc., 202 F.3d 965, 968 (7th Cir. 2000) (“[I]t … is well-established that ‘the preclusive effect of the first arbitrator’s decision is an issue for a later arbitrator to consider.’” (quoting Bhd. of Maint. of Way Emps. v. Burlington N. R.R. Co., 24 F.3d 937, 940 (7th Cir. 1994))). These cases align with Supreme Court precedent. Indeed, the Court has repeatedly instructed that, under the FAA, ar- bitrators presumptively decide procedural issues that “grow out” of an arbitrable dispute and “bear on its final disposi- tion.” Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 84 (2002) (quoting John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 557 (1964)). Preclusion is one such procedural issue that can grow out of an arbitrable dispute. See Trustmark Ins. Co., 631 F.3d at 874 (“Arbitrators who have been appointed to re- solve a commercial dispute are entitled to resolve ancillary questions that affect their task.” (citing Howsam, 537 U.S. at 84)).
Free access — add to your briefcase to read the full text and ask questions with AI
In the
United States Court of Appeals For the Seventh Circuit ____________________ No. 23-3373 NATIONAL CASUALTY COMPANY and NATIONWIDE MUTUAL INSURANCE COMPANY, Plaintiffs-Appellants,
v.
CONTINENTAL INSURANCE COMPANY, Defendant-Appellee. ____________________
Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 1:23-cv-03143 — Lindsay C. Jenkins, Judge. ____________________
ARGUED NOVEMBER 5, 2024 — DECIDED NOVEMBER 22, 2024 ____________________
Before SCUDDER, ST. EVE, and JACKSON-AKIWUMI, Circuit Judges. SCUDDER, Circuit Judge. National Casualty Company and Nationwide Mutual Insurance Company agreed many years ago to reinsure Continental Insurance Company against cer- tain risks. Those reinsurance agreements each contain an ar- bitration clause. A billing dispute arose in recent years, lead- ing Continental to demand arbitration. National Casualty and 2 No. 23-3373
Nationwide responded by filing a lawsuit in federal court. The lawsuit alleged that prior arbitral awards resolved the billing dispute and precluded the new arbitration proceeding. National Casualty and Nationwide now appeal the district court’s order granting Continental’s motion to compel arbi- tration under the Federal Arbitration Act. Because our prece- dent required that outcome, we affirm. I
Continental, National Casualty, and Nationwide are par- ties to three reinsurance agreements that were in effect be- tween 1969 and 1975. The agreements contain identical provi- sions requiring arbitration for “any dispute [that] shall arise between [the parties] with reference to the interpretation of [the agreement] or their rights with respect to any transaction involved.” The agreements further provide that arbitral awards are “final and binding on both parties.” In 2017 a dispute arose between the parties over whether Continental’s billing methodology complied with a “Loss Oc- currence” provision in the reinsurance agreements. To resolve the dispute, Continental initiated separate arbitration pro- ceedings against National Casualty and Nationwide. Both ar- bitration panels adopted National Casualty and Nationwide’s interpretation of the reinsurance agreements and issued final awards. Two federal district courts later entered orders con- firming those awards. Another billing dispute between the parties arose in 2023. And again the parties disagreed over whether Continental’s billing methodology was consistent with the “Loss Occur- rence” provision. This time, however, National Casualty and Nationwide maintained that the prior arbitration proceedings No. 23-3373 3
(and, specifically, the 2017 arbitral awards) resolved the dis- pute. Continental disagreed and demanded that the new dis- pute go to arbitration. Rather than submit to arbitration, National Casualty and Nationwide initiated this action in federal court. They as- serted that the prior arbitral awards precluded a new arbitra- tion proceeding and sought declaratory and injunctive relief on that basis. Invoking the reinsurance agreements’ arbitra- tion clauses, Continental moved to compel arbitration and dismiss the action, contending that the claim preclusion ques- tion itself must go to arbitration. The district court granted that motion. National Casualty and Nationwide now appeal. II
We begin with a motion that Continental filed in our court. Continental urges us to vacate the district court’s dismissal order and entry of judgment with instructions to stay the ac- tion pending arbitration. We decline the invitation. The mo- tion is not properly before us and, in any case, lacks merit. Recall that Continental prevailed in the district court, win- ning a full dismissal in favor of arbitration of National Casu- alty and Nationwide’s claims. It is not often that we see a party win a dismissal in the district court and then move to vacate that dismissal. In any event, a motion to dismiss an ap- peal is not the appropriate vehicle for Continental’s requested relief. “[A] party who wishes to seek an alteration of the judg- ment of the district court is obliged to file a notice of appeal.” Chowaniec v. Arlington Park Race Track, Ltd., 934 F.2d 128, 130 (7th Cir. 1991). “Only an appellant or cross-appellant may re- ceive relief.” Id. Continental did not file a notice of appeal or 4 No. 23-3373
cross-appeal, so it cannot now seek to alter the district court’s judgment. Regardless, Continental’s motion fails. The motion relies on Smith v. Spizzirri, a recent Supreme Court decision holding that “[w]hen a district court finds that a lawsuit involves an arbitrable dispute, and a party requests a stay pending arbi- tration, § 3 of the FAA compels the court to stay the proceed- ing.” 601 U.S. 472, 478 (2024). By its terms, Spizzirri requires a district court to stay a case pending arbitration only when one of the parties has requested such a stay. But, as Continental concedes, neither party did so here. Spizzirri therefore does not require our vacating the district court’s dismissal order, nor does it have any bearing on our jurisdiction over an ap- peal of that order. With our appellate jurisdiction secure, we can proceed to the merits. III
This is not our first encounter with issues of preclusion in the arbitration context. Our case law establishes that the pre- clusive effect of an arbitral award is an issue for the arbitrator to decide, not a federal court. In no uncertain terms, we have held that “[a]rbitrators are entitled to decide for themselves those procedural questions that arise on the way to a final dis- position, including the preclusive effect (if any) of an earlier award.” Trustmark Ins. Co. v. John Hancock Life Ins. Co., 631 F.3d 869, 874 (7th Cir. 2011); accord, e.g., Consolidation Coal Co. v. United Mine Workers of Am., 213 F.3d 404, 407 (7th Cir. 2000) (“[T]he question of the preclusive force of the first arbitration is, like any other defense, itself an issue for a subsequent arbi- trator to decide.”); Indep. Lift Truck Builders Union v. NACCO No. 23-3373 5
Materials Handling Grp., Inc., 202 F.3d 965, 968 (7th Cir. 2000) (“[I]t … is well-established that ‘the preclusive effect of the first arbitrator’s decision is an issue for a later arbitrator to consider.’” (quoting Bhd. of Maint. of Way Emps. v. Burlington N. R.R. Co., 24 F.3d 937, 940 (7th Cir. 1994))). These cases align with Supreme Court precedent. Indeed, the Court has repeatedly instructed that, under the FAA, ar- bitrators presumptively decide procedural issues that “grow out” of an arbitrable dispute and “bear on its final disposi- tion.” Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 84 (2002) (quoting John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 557 (1964)). Preclusion is one such procedural issue that can grow out of an arbitrable dispute. See Trustmark Ins. Co., 631 F.3d at 874 (“Arbitrators who have been appointed to re- solve a commercial dispute are entitled to resolve ancillary questions that affect their task.” (citing Howsam, 537 U.S. at 84)). To their credit, National Casualty and Nationwide acknowledge that our precedent addresses and resolves the preclusion issue. They can ask our full court to revisit our po- sition or seek Supreme Court review. But, as a panel, our only course is to affirm the district court’s conclusion that the pre- clusive effect of the prior arbitral awards is itself an arbitrable issue. The Supreme Court’s decision in Morgan v. Sundance, Inc. does not, as National Casualty and Nationwide suggest, call our precedent into question. See 596 U.S. 411 (2022). Morgan simply explains that “the FAA’s ‘policy favoring arbitration’ … make[s] ‘arbitration agreements as enforceable as other contracts, but not more so.’” Id. at 418 (first quoting Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983); 6 No. 23-3373
and then quoting Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 404 n.12 (1967)). The Court did not address the relevant presumption here—that procedural questions grow- ing out of arbitrable disputes are themselves arbitrable. See id. That presumption is itself “grounded in background princi- ple[s]” of contract law. Stolt-Nielsen v. AnimalFeeds Int’l Corp., 559 U.S. 662, 685 (2010) (citing Restatement (Second) of Con- tracts § 204 (Am. L. Inst. 1979)). In short, Morgan reinforces the importance of contract principles in FAA cases and supplies no reason to revisit precedent with a solid basis in contract law. Section 13 of the FAA likewise gives us no reason to doubt our precedent. That provision, by its terms, clarifies that a dis- trict court’s order confirming an arbitral award “shall have the same force and effect, in all respects as, and be subject to all the provisions of law relating to, a judgment in an action.” 9 U.S.C. § 13. As other circuits have explained, § 13 “says nothing about which forum or who determines the effect of the judgment.” Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1133 (9th Cir. 2000) (emphasis in original); see Emps. Ins. Co. v. OneBeacon Am. Ins. Co., 744 F.3d 25, 29 (1st Cir. 2014) (explaining that § 13 “simply means that the federal court will protect its judgments within their proper bounds”). To our knowledge, no court has ever interpreted § 13 to re- quire federal courts to determine the preclusive effect of arbi- tral awards. For these reasons, we AFFIRM.