TECHNICAL SECURITY INTEGRATION, INC., a Washington corporation v. Philadelphia Indemnity Insurance Company, a Pennsylvania corporation

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
TECHNICAL SECURITY
INTEGRATION, INC., a Washington
corporation,
Plaintiff-Appellee,
v.
PHILADELPHIA INDEMNITY
INSURANCE COMPANY, a
Pennsylvania corporation,
Defendant-Appellant.
No. 15-35683
D.C. No. 3:14-cv-01895-SB
MEMORANDUM*
Appeal from the United States District Court
for the District of Oregon
Michael H. Simon, District Judge, Presiding
Submitted November 9, 2017**
Portland, Oregon
FILED
FEB 01 2018
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
* This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
** The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).

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Before: TASHIMA and W. FLETCHER, Circuit Judges, and LASNIK,*** District
Judge.
This case concerns a coverage dispute between Technical Security
Integration Inc. (TSI) and Philadelphia Indemnity Insurance Co. (“Philadelphia”).
Philadelphia appeals from the district court’s order denying its motion to compel
arbitration. We have jurisdiction under 9 U.S.C. § 16(a)(1)(B), and we affirm.
Philadelphia first challenges the district court’s conclusion that Washington
law governs this dispute. We review a district court’s choice of law ruling de novo.
Paulsen v. CNF Inc., 559 F.3d 1061, 1072 (9th Cir. 2009). Because this suit was
filed in the District of Oregon, we apply Oregon’s choice of law rules in
determining the controlling substantive law. Klaxon v. Stentor Elec. Mfg. Co., 313
U.S. 487, 496 (1941); Coneff v. AT&T Corp., 673 F.3d 1155, 1161 (9th Cir. 2012).
The district court did not err in determining that Washington law governs
this dispute. For contract disputes, Oregon has a multi-factor test for determining
“the most appropriate” law in the absence of an effective choice of law provision.
Or. Rev. Stat. § 15.360. These factors weigh in favor of applying Washington law.
TSI, a Washington corporation, negotiated the contract using a Washington broker.
Philadelphia sent policy declarations to TSI’s Washington address. While the
*** The Honorable Robert S. Lasnik, United States District Judge for the
Western District of Washington, sitting by designation.
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contract lacks a forum selection clause, it provides that arbitration will take place
in Washington, and that the proceedings are governed by the local rules and
procedures of Snohomish County, Washington. The Oregon rules also require
courts to “identify[ ] the policies underlying any apparently conflicting laws” of
the proposed forums, and to consider “the relative strength and pertinence of those
policies.” A Washington statute prohibits mandatory arbitration agreements in
insurance contracts, while Oregon lacks any analogous provision. Wash. Rev.
Code § 48.18.200(1)(b); State Dep’t of Transp. v. James River Ins. Co., 176 Wash.
2d 390, 400 (2013) (en banc).
Philadelphia next contends that the district court erred in denying its motion
to compel arbitration after finding the arbitration clause invalid under Washington
law. We review this question de novo. Cox v. Ocean View Hotel Corp., 533 F.3d
1114, 1119 (9th Cir. 2008). The district court did not err. Section 48.18.200(1)(b)
of the Revised Code of Washington prohibits contracts that deprive Washington
courts of “jurisdiction of action” against an insurer. In James River, the
Washington Supreme Court interpreted the statute as prohibiting mandatory
arbitration clauses in insurance contracts. 176 Wash. 2d at 400. Further, the
McCarran-Ferguson Act shields § 48.18.200(1)(b) from preemption by the Federal
Arbitration Act. The McCarran-Ferguson Act provides that federal laws “shall not
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be construed to invalidate, impair, or supersede any law enacted by any State for
the purpose of regulating the business of insurance.” 15 U.S.C. § 1012(b). Because
§ 48.18.200(1)(b) regulates “the business of insurance,” it “reverse-preempts” the
Federal Arbitration Act, rather than being preempted by it.
Philadelphia argues that the district court improperly deferred to the
Washington Supreme Court’s McCarran-Ferguson analysis in James River. We
disagree. The district court conducted an independent McCarran-Ferguson analysis
and accorded only persuasive authority to the Washington Supreme Court’s
reasoning. Philadelphia also argues that the reasoning of James River should not
control where a plaintiff moves to compel arbitration in federal court, rather than in
a state court, and that James River was incorrectly decided. However, we are
bound by the Washington Supreme Court’s rulings on Washington law issues.
Ticknor v. Choice Hotels, Inc., 265 F.3d 931, 939 (9th Cir. 2001).
AFFIRMED.
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