ARBITRATION OF BAD FAITH CLAIMS DENIED, INJUNCTION AGAINST ARBITRATING GRANTED.

In Portland Gen. Elec. Co. v. Liberty Mut. Ins. Co., No. 3:16-cv-00495-HZ, 2016 WL 4059658 (D. Or. July 27, 2016), two agreements were involved.

First, Portland General Electric ("PGE") had an agreement with a Contractor to build a power plant.  That construction contract has an arbitration provision.  However, PGE did not sue the Contractor.

PGE also required the Contractor to obtain a Performance Bond from Sureties to indemnify PGE in the event the Contractor defaulted.  The Bond is the second agreement at issue here.

PGE made a claim under the Bond.  The Sureties refused to pay.  PGE sued the Sureties for alleged bad faith, among other things.

The Bond expressly authorized suit against the Sureties in Court.  "There is no agreement between PGE and Sureties to submit any proceeding to arbitration."  Portland Gen. Elec. Co. v. Liberty Mut. Ins. Co., No. 3:16-cv-00495-HZ, 2016 WL 4059658, at *2 (D. Or. July 27, 2016).

However, the Sureties filed a motion in PGE's case against them, to request arbitration under the Contractor's Construction Contract and to stay PGE's bad faith lawsuit against them.  The Contractor quickly claimed against PGE under the Construction Contract and demanded arbitration under the Rules of the International Chamber of Commerce.  The Chamber swiftly instituted arbitration proceedings.

To say again, there was no arbitration provision in the Bond issued by the Sureties and PGE did not sue the Contractor.  PGE sued the Sureties and filed its own motion to enjoin the Sureties from arbitrating PGE's bad faith claim and other claims against the Sureties.

To the Court, this was a simple case based on the language in the agreements alone:  There was an arbitration provision in the Contractor's agreement with PGE, but not in the Sureties' Performance Bond under which PGE made its claims (except for PGE's bad faith claim, of course, which was not under the Bond so much as a result of the Sureties' refusal to perform).  "The Court concludes it is not required to stay the case, and it declines to exercise its discretion to impose a stay. Furthermore, the Court enjoins Sureties from participating in [the Contractor's] ICC arbitration."  Portland Gen. Elec. Co. v. Liberty Mut. Ins. Co., No. 3:16-cv-00495-HZ, 2016 WL 4059658, at *4 (D. Or. July 27, 2016).   

So much for pulling a fast one, at least in this case.

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