## Facts

- ESAB Group, Inc., a welding-consumables manufacturer, faced numerous personal-injury products-liability suits across U.S. state and federal courts.
- ESAB sought defense and indemnity from several insurers; Zurich Insurance PLC (ZIP), an Irish insurer, denied coverage.
- ESAB sued its insurers in South Carolina state court.
- ZIP’s policies contained a clause requiring arbitration in London under the New York Convention.
- ESAB argued South Carolina’s insurance anti-arbitration statute, S.C. Code § 15-48-10(b)(4), invalidated the arbitration clause and, via the McCarran–Ferguson Act, displaced the Convention and related federal law.
- ZIP removed the case to federal court under 9 U.S.C. § 205 (Convention-related removal).
- The district court compelled arbitration of Convention-governed claims, found personal jurisdiction over ZIP, and remanded remaining non-arbitrable claims after declining supplemental jurisdiction.

## Issues

1. Whether McCarran–Ferguson permitted South Carolina’s insurance anti-arbitration statute to “reverse preempt” the New York Convention and its implementing legislation, making the arbitration clause unenforceable.
2. Whether removal and subject-matter jurisdiction were proper under the Convention and 9 U.S.C. § 205.
3. Whether South Carolina courts could exercise personal jurisdiction over ZIP consistent with due process.
4. Whether the district court could decline supplemental jurisdiction and remand non-arbitrable claims after compelling arbitration of the claims providing an independent basis for federal jurisdiction.

## Decision

- The Fourth Circuit affirmed the judgment in full.
- The court held McCarran–Ferguson did not permit South Carolina law to displace the Convention and its implementing legislation; the arbitration clause was enforceable and arbitration was properly compelled.
- The court upheld removal and subject-matter jurisdiction under 9 U.S.C. § 205 because the action related to an arbitration agreement falling under the Convention.
- The court affirmed personal jurisdiction over ZIP based on minimum contacts and overall reasonableness.
- The court upheld the remand of non-arbitrable claims after the district court declined supplemental jurisdiction once the jurisdiction-supporting claims were referred to arbitration.

## Legal Principles

- McCarran–Ferguson’s protection of state insurance regulation against “Acts of Congress” does not authorize a state to negate U.S. treaty-based commitments to enforce international arbitration agreements under the New York Convention.
- An action may be removed under 9 U.S.C. § 205 when it “relates to” an arbitration agreement governed by the Convention, supporting federal jurisdiction to compel arbitration.
- A foreign insurer may be subject to personal jurisdiction where it has purposeful, forum-directed contacts connected to the insurance relationship and the dispute, and exercising jurisdiction is fair and reasonable.
- After compelling arbitration of claims supplying an independent federal jurisdictional basis, a federal court may decline supplemental jurisdiction over remaining claims and remand those non-arbitrable claims to state court.

## Conclusion

The Fourth Circuit held that South Carolina’s insurance anti-arbitration statute could not, through McCarran–Ferguson, defeat a Convention-governed foreign arbitration clause; it also affirmed Convention-based removal, personal jurisdiction over the foreign insurer, and the remand of residual non-arbitrable claims after arbitration was ordered.


ESAB Grp., Inc. v. Zurich Ins. PLC, 685 F.3d 376 (4th Cir. 2012)