Menorah Insurance Co., Ltd. v. INX Reinsurance Corp.

Israeli company Menorah Insurance Co., Ltd. (Menorah) (plaintiff) was a party to several reinsurance contracts with Puerto Rican company INX Reinsurance Corp. (INX). The contracts provided that all disputes would be settled by arbitration and that the place of arbitration was to be Israel. A dispute arose over how much money INX owed Menorah. In July 1992, Menorah notified INX that it intended to pursue arbitration. INX responded and declined to arbitrate, stating it could not afford to do so. In September 1992, Menorah brought an action against INX in Israel for payments owed. INX did not respond. The Israeli court entered a default judgment against INX for over $800,000, which INX never paid. In September 1993, Menorah filed an exequatur action against INX in Puerto Rico superior court for enforcement of the Israeli judgment. No discovery or other productive actions were taken by INX until it filed a motion to dismiss the Puerto Rico claim, asserting that the dispute had to be arbitrated. The superior court denied the motion to dismiss and held in part that INX had waived arbitration. INX again claimed that arbitration was mandatory and filed a counterclaim against Menorah related to the action for exequatur. INX removed the case to federal district court. The district court found that INX had waived arbitration and that INX had caused substantial prejudice to Menorah by causing Menorah to incur significant expenses. Therefore, the district court remanded the case. INX appealed the district court’s decision, over three years after Menorah’s initial request to arbitrate. INX argued in part that the district court improperly found that INX had waived arbitration and that the yearlong delay between the initial request for arbitration, which INX had declined, and INX’s later demand to arbitrate were not prejudicial.