Murphy Oil Loses Preliminary Injunction and Will Likely Have to Arbitrate in England
The Western District of Arkansas denied a preliminary injunction in Murphy Oil USA, Inc. v. SR Intern. Business Ins. Co., Ltd., 2007 WL 2752366 (W.D. Ark. 9/20/07).
Murphy Oil purchased insurance from the defendants. The policies were negotiated and prepared in Switzerland and delivered to Murphy Oil's broker in London, England. The policies contained arbitration provisions that required arbitration in London and also selected New York law to govern any disputes. Murphy Oil filed this action in Arkansas for damages incurred from Hurricane Katrina and asked for a preliminary injunction to prevent arbitration in London.
Several conflicting laws form the basis of this action. Arkansas law prohibits arbitration clauses for insurance contracts, New York law does not. The McCarran-Ferguson Act, 15 U.S.C. § 1101, et seq, preserves state statutes regulating insurance and gives these statutes precedence over federal laws. Meanwhile, the New York Convention, a treaty entered into by the United States, directs courts to honor arbitration agreements between international merchants.
The court held that the New York Convention supersedes the McCarran-Ferguson Act because the McCarran-Ferguson Act only applies to domestic commerce. The court denied the preliminary injunction but did not have a motion before it to dismiss the complaint. The language of the opinion implies that the court will dismiss the complaint once the defendants file their motion.
