CENTURY INDEMNITY COMPANY, Appellant v. CERTAIN UNDERWRITERS AT LLOYD'S, LONDON, SUBSCRIBING TO RETROCESSIONAL AGREEMENT NOS. 950548, 950549, and 950646, 584 F.3d 513

OPINION OF THE COURT GREENBERG, Circuit Judge. I. INTRODUCTION.518 II. BACKGROUND.519 A. Insurance, Reinsurance, and Retrocession.519 B. The Dispute .519 III. JURISDICTION AND STANDARD OF REVIEW.521 IV. DISCUSSION.522 A. Whether the District Court Properly Compelled Arbitration Based on the Retrocessional Agreements’ Incorporation of the Reinsurance Treaties.522 1. The Federal Arbitration Act.522 2. Compelling Arbitration.523 3. Whether the Retrocessional Agreements’ Incorporation-by-Reference Language Effected a Valid Agreement to Arbitrate Between Century and Lloyd’s.524 a.

Two Threshold Issues Regarding the Standards That Apply When Determining Whether There Is a Valid Agreement to Arbitrate.525

(1) Whether the Presumption in Favor of Arbitration Applies to the Initial Question Whether the Parties Agreed to Arbitrate .525

(2) The “Express” and “Unequivocal” Standard .527 b. Whether Century and Lloyd’s Agreed to Arbitrate Disputes Arising from the Retrocessional Agreements.532

(1) Choice of Law: Pennsylvania law applies .532

(2) Principles of Pennsylvania Contract Law.533

(3) Binding Nonsignatories Through Incorporation by Reference.533 c. Construing the Retrocessional Agreements Under Pennsylvania Law.534 d. Three Surety Cases in Which General Incorporation Provisions Effectively Incorporate Arbitration Agreements.535 e. Declining to Incorporate Restrictively Worded Arbitration Clauses That Refer to the Immediate Parties.538 f. Questions of Existence and of Scope.544 g. John F. Harkins Co.547 h. Incorporation by Reference for a Limited Purpose.548 i. The Retrocessional Agreements.549

(1) The Agreement’s Language and Structure .549

(2) Construing the Agreement.550

(3) Language Lacking from the Incorporation Clauses .552 (Ip) Century’s Problems.553

(5) The Forum-Selection and Seroice-of-Suit Clause.554

(6) Imprecision in Incorporation by Reference .554 4. Whether This Particular Dispute Falls Within the Scope of Century and Lloyd’s Valid Agreement to Arbitrate.555 5. Whether The District Court Properly Compelled Arbitration.556 B. Whether the Arbitration Award Should Be Vacated Because the Arbitrators Excluded Certain Evidence from Consideration.556 V. CONCLUSION.559 I.

INTRODUCTION This matter comes on before this Court on an appeal by appellant Century Indemnity Company (“Century”) from two orders of the District Court, one entered May 18, 2006, granting a motion of appel-lee Certain Underwriters at Lloyd’s, London (“Lloyd’s”) to compel arbitration of a disputed claim based on a set of reinsurance-of-reinsurance agreements, and one entered May 30, 2008, denying Century’s motion to vacate an arbitration panel’s subsequent award in favor of Lloyd’s.

Inasmuch as we conclude both that there was a valid agreement to arbitrate between Century and Lloyd’s and that the dispute in this case falls within the scope of that agreement, we hold that the District Court properly compelled the parties to submit their dispute to arbitration. Moreover, because we reject Century’s argument that the arbitration panel deprived it of a fair hearing when the panel excluded certain evidence that Century proposed to introduce, we also hold that the District Court properly denied Century’s motion to vacate the arbitration panel’s award. II. BACKGROUND A.

Insurance, Reinsurance, and Re-trocession Insurance, the shifting of risk through contract, may involve multiple layers of shifts. To start the process, insurance companies issue policies under which the insurer assumes certain risks in exchange for premiums that the policyholders pay. The insurance companies then may pass on all or part of the risk through reinsurance agreements, in which another insurance company provides insurance of all or part of the first insurer’s risk by accepting such risk in exchange for a percentage of the original premium.

Reinsurance agreements covering classes or lines of business, rather than a particular policy, are called reinsurance treaties. Subsequently, reinsurers may seek to spread their exposure to risk through further reinsurance. The reinsurance of reinsurance is called a retrocession, and the reinsurers of reinsurers — that is, reinsurers who assume retrocession risk through retroces-sional agreements — are called retrocessio-naires.

This case involves a dispute between Century, the original reinsurer, and Lloyd’s, the retrocessionaire, arising from three retrocessional agreements under which Lloyd’s agreed to reinsure certain reinsurance treaties that Century’s predecessor had formed with Argonaut Insurance Company (“Argonaut”), another insurer that was the original insurer of the insured in the policies underlying the litigation. B. The Dispute The material facts are not in dispute.

Century’s predecessor, the Insurance Company of North America (“INA”), rein-sured Argonaut according to the terms of three excess-of-loss treaties (the “reinsurance treaties”). Argonaut had issued insurance policies to its insureds, Western Asbestos Company and Western MacArthur Company (together “Western”), to cover losses from Western’s distribution of asbestos products.

INA, Century’s predecessor, then entered into three retroces-sional agreements with Lloyd’s (the “retro-cessional agreements”), pursuant to which Lloyd’s agreed to pay 90% of the losses in return for 90% of the premiums that accrued to Century’s predecessor under the corresponding reinsurance treaties. In the late 1970s, Western began receiving injury claims from persons allegedly exposed to asbestos who sought to hold Western responsible for injuries traceable to their exposure.

Western looked to Argonaut for coverage on the insurance policies that Argonaut had issued and that Western believed protected it against those claims, but Argonaut resisted Western’s efforts, a position that led to declaratory judgment litigation between Western and Argonaut over the scope of the policies’ coverage. Argonaut then sought reimbursement for its litigation expenses from Century under its reinsurance treaties with Century.

Century concluded that the reinsur-anee treaties entitled Argonaut to recover those expenses and, accordingly, in 2001 made payments to Argonaut pursuant to the reinsurance treaties. After paying Argonaut, Century turned to Lloyd’s, its retrocessionaire, for Lloyd’s’s 90% share of Century’s payout to Argonaut pursuant to the retrocessional agreements between Century and Lloyd’s. Lloyd’s refused to pay the approximately $2.2 million that Century sought, contending that it did not owe the reimbursement because Century should not have paid Argonaut for the declaratory judgment litigation expenses.

This lawsuit followed. Century sued Lloyd’s in the Court of Common Pleas in Philadelphia County to recover the amount that Century alleged that Lloyd’s owed it under the retrocessional agreements. Lloyd’s answered the complaint filed in state court, asserting that the retroees-sional agreements incorporated the reinsurance treaties’ arbitration clauses and that therefore the dispute should be arbitrated, and then Lloyd’s removed the case to the District Court pursuant to 9 U.S.C. § 205. In the District Court, Century moved to remand the case to the state court and Lloyd’s moved to compel arbitration.

Of course, it was not immediately obvious that Lloyd’s was entitled to arbitrate because the retrocessional agreements did not include arbitration provisions. Lloyd’s nevertheless claimed that Century could be compelled to arbitrate their dispute because the retrocessional agreements incorporated by reference the arbitration clauses contained in the reinsurance treaties. The arbitration clauses in the reinsurance treaties state: “[i]f any dispute shall arise between the Company [Argonaut] and INA [Century] with reference to the

interpretation of this Agreement or their rights with respect to any transaction involved, the dispute shall be referred to [arbitration].” App. at 59-60, 101, 127 (bracketed material added). The retrocessional agreements between Century and Lloyd’s contain language referring to and incorporating “all” of the reinsurance treaties. Lloyd’s contended that the incorporation-by-reference provision in the retro-cessional agreements incorporating “all” of the reinsurance treaties effectively incorporated their arbitration clauses, and thus the District Court could compel Century to arbitrate their dispute.

On May 18, 2006, the District Court denied Century’s motion to remand and granted Lloyd’s’s motion to compel arbitration, ruling that, as Lloyd’s contended, the retrocessional agreements — though themselves lacking arbitration clauses — incorporated by reference the arbitration clauses contained in Century’s reinsurance treaties with Argonaut. Century Indem. Co. v. Certain Underwriters at Lloyd’s, No. 05-CV-6004, 2006 U.S. Dist. LEXIS 34177 (E.D.Pa. May 18, 2006). The parties then pursued the arbitration proceedings. Each party chose an arbitrator, and those two arbitrators chose a third arbitrator or umpire.

Once formed, the three-member arbitration panel permitted discovery and briefing, and heard arguments in July 2007. The panel, however, after reviewing the evidence, receiving briefing, and hearing argument on the issue, excluded certain evidence that Century proffered relating to industry custom and the parties’ past course of dealings. The panel predicated this determination on its belief that the evidence was irrelevant because it regarded the agreements as unambiguous and it believed that it could discern their meaning without looking beyond their terms.

On December 12, 2007, over the dissent of the panel member that Century had chosen, a two-person panel majority issued a written opinion finding in Lloyd’s’s favor. Century moved in the District Court to vacate the arbitrators’ award, arguing that it had not agreed to submit its dispute with Lloyd’s to arbitration and that, even if it did, the majority award was subject to vacatur on both procedural and substantive grounds under 9 U.S.C. § 10.

On May 30, 2008, after hearing oral argument, the District Court denied the motion, a result that it reached by applying its prior ruling compelling arbitration, which it refused to revisit, and by concluding that the arbitrators’ decision did not evince a manifest disregard of the law. Century then appealed to this Court from the District Court’s orders compelling arbitration and denying its motion to vacate the arbitrators’ award. III.

JURISDICTION AND STANDARD OF REVIEW The District Court had subject-matter jurisdiction under 9 U.S.C. § 203 to determine whether the removed action related to a commercial arbitration agreement within the purview of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. We exercise jurisdiction pursuant to 28 U.S.C. § 1291 and 9 U.S.C. § 16(a)(3) over this appeal from the District Court’s final decision respecting an arbitration subject to the Federal Arbitration Act.

Our review of a district court’s order compelling arbitration, an order presenting legal questions concerning an arbitration agreement’s existence and scope, is plenary. USW, AFL-CIO-CLC v. Rohm & Haas Co., 522 F.3d 324, 330, 330 n. 7 (3d Cir.2008); Harris v. Green Tree Fin. Corp., 183 F.3d 173, 176 (3d Cir.1999); Pritzker v. Merrill Lynch, Pierce, Fenner & Smith Inc., 7 F.3d 1110, 1113 (3d Cir.1993); John F. Harkins Co. v. Waldinger Corp., 796 F.2d 657, 658-60 (3d Cir.1986).

When reviewing a district court’s order confirming an arbitration award, we review the district court’s findings of fact for clear error and its legal conclusions de novo. China Minmetals Materials Imp. & Exp. Co., Ltd. v. Chi Mei Corp., 334 F.3d 274, 278-79 (3d Cir.2003) (citing First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 947-48, 115 S.Ct. 1920, 1925-26, 131 L.Ed.2d 985 (1995)). IV. DISCUSSION Century raises two fundamental questions on this appeal.

The first question is whether the parties had entered into a valid arbitration agreement such that the District Court properly compelled Century to arbitrate its dispute arising from the retrocessional agreements between Century and Lloyd’s over Lloyd’s’s alleged obligation to reimburse Century for a portion of Century’s payments to Argonaut for declaratory judgment expenses under the reinsurance treaties between Century and Argonaut.

The second question, assuming that the District Court properly compelled arbitration, is whether the Court should have confirmed the arbitration panel’s decision in favor of Lloyd’s, even though the panel excluded the evidence that Century proffered to show past dealings and industry custom. We address each in turn. A.

Whether the District Court Properly Compelled Arbitration Based on the Retrocessional Agreements’ Incorporation of the Reinsurance Treaties In addressing the first fundamental issue, whether the District Court properly compelled arbitration, we first outline the applicable principles of arbitration law, then explain certain standards that we apply, and finally turn to the agreements at issue in this case. 1. The Federal Arbitration Act The Federal Arbitration Act, 9 U.S.C. §§ 1 et seq. (“FAA”), creates a body of federal substantive law establishing and governing the duty to honor agreements to arbitrate disputes.

Green Tree Fin., 183 F.3d at 178-79 (citing Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 25 n. 32, 103 S.Ct. 927, 942 n. 32, 74 L.Ed.2d 765 (1983)). Congress designed the FAA to overrule the judiciary’s longstanding reluctance to enforce agreements to arbitrate and its refusal to put such agreements on the same footing as other contracts, Volt Information Sciences, Inc. v. Bd. of Trustees of Leland Stanford Junior Univ., 489 U.S. 468, 474, 109 S.Ct. 1248, 1253, 103 L.Ed.2d 488 (1989); Buckeye Check Cashing, Inc. v.

Cardegna, 546 U.S. 440, 443, 126 S.Ct. 1204, 1207, 163 L.Ed.2d 1038 (2006), and in the FAA expressed a strong federal policy in favor of resolving disputes through arbitration. E.g., Moses H. Cone, 460 U.S. at 24, 103 S.Ct. at 941; Kirleis v. Dickie, McCamey & Chilcote, P.C., 560 F.3d 156, 160 (3d Cir.2009).

In particular, the FAA provides that as a matter of federal law “[a] written provision” in a maritime or commercial contract showing an agreement to settle disputes by arbitration “shall be valid, irrevocable, and enforceable, save upon such grounds as exist in law or in equity for the revocation of any contract.” 9 U.S.C. § 2.

The FAA’s second chapter, 9 U.S.C. §§ 201-208, implements the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, opened for signature June 10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. 38, reprinted in 9 U.S.C. § 201 (historical and statutory notes) (“New York Convention”). See Scherk v. Alberto-Culver Co., 417 U.S. 506, 520 n. 15, 94 S.Ct. 2449, 2457 n. 15, 41 L.Ed.2d 270 (1974); Standard Bent Glass Corp. v. Glassrobots Oy, 333 F.3d 440, 448-49 (3d Cir.2003); China Minmetals, 334 F.3d at 279.

Pursuant to this chapter, arbitration agreements fall within the New York Convention if they arise from commercial, legal relationships, such as commercial contracts, except when those relationships are entirely between United States citizens and otherwise are domestic in nature. 9 U.S.C. § 202. Actions under the New York Convention are deemed to arise under the laws and treaties of the United States. 9 U.S.C. § 203. The FAA empowers district courts to compel arbitration in accordance with agreements, 9 U.S.C. § 206, and to enforce awards, 9 U.S.C. § 207, falling within the New York Convention.

The domestic FAA applies to actions brought under the New York Convention to the extent that the two are not in conflict. 9 U.S.C. § 208; China Minmetals, 334 F.3d at 280. The strong federal policy favoring arbitration applies with special force in the field of international commerce. Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, 473 U.S. 614, 631, 105 S.Ct. 3346, 3356, 87 L.Ed.2d 444 (1985). 2. Compelling Arbitration The strong federal policy favoring arbitration, however, does not lead automatically to the submission of a dispute to arbitration upon the demand of a party to the dispute.

Before compelling a party to arbitrate pursuant to the FAA, a court must determine that (1) there is an agreement to arbitrate and (2) the dispute at issue falls within the scope of that agreement. Kirleis, 560 F.3d at 160 (citing Trippe Mfg. Co. v. Niles Audio Corp., 401 F.3d 529, 532 (3d Cir.2005)); China Minmetals, 334 F.3d at 281. This determination applies equally in domestic and international arbitration contexts. China Minmetals, 334 F.3d at 282 (citing Gen. Elec. Co. v. Deutz AG, 270 F.3d 144, 152-56 (3d Cir.2001)).

For a court to compel arbitration, it initially must And that there is a valid agreement to arbitrate because the basis for contractual arbitration is consent, not coercion. Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 57, 115 S.Ct. 1212, 1216, 131 L.Ed.2d 76 (1995). Furthermore, the parties might agree to the resolution of some but less than all of their disputes arising out of a particular contract or relationship through arbitration, see Volt Info.

Scis., 489 U.S. at 479, 109 S.Ct. at 1256, and thus even if a court finds that the parties have agreed to arbitrate some disputes it must find, to order arbitration, that the parties have agreed to arbitrate the dispute in issue. Because an arbitrator’s authority derives solely from the parties’ agreement to submit their disputes to arbitration, AT & T Technologies, Inc. v. Comm’ns Workers, 475 U.S. 643, 648-49, 106 S.Ct. 1415, 1418, 89 L.Ed.2d 648 (1986), a party cannot be compelled to submit a dispute to arbitration unless it has agreed to do so. U.S. Small Bus. Admin. v.

Chimicles, 447 F.3d 207, 209 (3d Cir.2006); China Minmetals, 334 F.3d at 289-90. To determine whether the parties have agreed to arbitrate, we apply “ordinary state-law principles that govern the formation of contracts.” First Options, 514 U.S. at 944, 115 S.Ct. at 1924; Perry v. Thomas, 482 U.S. 483, 492 n. 9, 107 S.Ct. 2520, 2527 n. 9, 96 L.Ed.2d 426 (1987); see Deutz AG, 270 F.3d at 154-55 (explaining that principles of First Options apply in international as well as domestic arbitration context).

These principles must govern contracts generally; a state-law principle that takes its meaning from the fact that an agreement to arbitrate is at issue does not comport with

section 2 of the FAA and therefore is preempted. Doctor’s Assocs., Inc. v. Casarotto, 517 U.S. 681, 686-88, 116 S.Ct. 1652, 1655-56, 134 L.Ed.2d 902 (1996) (citing Perry, 482 U.S. at 492 n. 9, 107 S.Ct. at 2527 n. 9); Gay v. CreditInform, 511 F.3d 369, 394 (3d Cir.2007). Inasmuch as “federal law applies to the

interpretation of arbitration agreements,” once a court has found that there is a valid agreement to arbitrate, regardless of whether the action is in a federal or a state court the determination of whether “a particular dispute is within the class of those disputes governed by the arbitration clause ... is a matter of federal law.” China Minmetals, 334 F.3d at 290 (internal citations and quotation marks omitted). See Gay, 511 F.3d at 388; Green Tree Fin. Corp., 183 F.3d at 178-79.

In determining whether the particular dispute falls within a valid arbitration agreement’s scope, “there is a presumption of arbitrabilityf:] an order to arbitrate the particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an

interpretation that covers the asserted dispute.” AT & T Techs., 475 U.S. at 650, 106 S.Ct. at 1419 (internal quotation marks and citations omitted). See Rohm & Haas, 522 F.3d at 331 (citing AT & T Techs.). 3. Whether the Retrocessional Agreements’ Incorporation-by-Reference Language Effected a Valid Agreement to Arbitrate Between Century and Lloyd’s With these general principles in mind, we turn to the first of the two determinations necessary to decide whether the District Court properly compelled arbitration: is there a valid agreement between Century and Lloyd’s to arbitrate their disputes?

See Kirleis, 560 F.3d at 160. As we have indicated, Lloyd’s does not rely on the retrocessional agreements alone as a basis for contending that there was an agreement to arbitrate for it could not do so inasmuch as those agreements do not include arbitration clauses. Instead, Lloyd’s asserts that Century is bound to arbitrate under an incorporation-by-reference theory, a common device in layered contracts likely to be in use in construction projects in which there are contractors, subcontractors, and sureties and, as here, when insurance companies spread risk among themselves.

According to Lloyd’s, even though it was not a signatory to the original reinsurance treaties, it still may seek to compel Century to arbitrate based on the reinsurance treaties’ arbitration clauses because the retrocessional agreements incorporated all of the provisions of the reinsurance treaties, including their arbitration clauses, thereby creating a valid agreement between Century and Lloyd’s to arbitrate disputes arising from the re-troeessional agreements. a.

Two Threshold Issues Regarding the Standards That Apply When Determining Whether There Is a Valid Agreement to Arbitrate Before we consider Lloyd’s’s ineorpo-ration-by-reference contention, we consider two threshold questions concerning the legal standard that applies when determining whether there is a valid agreement to submit a dispute to arbitration. The first issue is whether the presumption in favor of arbitration applies to both or only the second of the two questions: (1) is there an agreement to arbitrate and (2) does the particular dispute fall within the existing agreement’s scope?

The second issue is whether the “express” and “unequivocal” standard to which courts have referred in arbitration cases requires more of arbitration agreements than it does of other contracts.

(1) Whether the Presumption in Favor of Arbitration Applies to the Initial Question Whether the Parties Agreed to Arbitrate The strong federal policy in favor of arbitration manifests itself in a presumption favoring arbitration. But the parties dispute whether this presumption applies to both or only the latter of the questions (1) whether there is a valid arbitration agreement between the parties and (2) whether a particular merits-based dispute must be arbitrated because it is within the scope of the valid arbitration agreement. See Kirleis, 560 F.3d at 160.

Though Century acknowledges that there is a policy favoring arbitration that results in a presumption that a particular merits-based dispute is arbitrable, it argues that the presumption does not apply to the threshold determination of whether the parties agreed to arbitrate in the first place. Lloyd’s, on the other hand, argues that the presumption applies to both questions. See Trippe, 401 F.3d at 532 (“When determining both the existence and the scope of an arbitration agreement, there is a presumption in favor of arbitrability.”) (emphasis added).

Though we do not agree with the District Court’s approach on this point in which it relied on Trippe to conclude that the presumption applies to both questions, we acknowledge that it was not unreasonable for it to take that approach. In Trippe, we addressed the question whether an audio-equipment company could compel a manufacturer to arbitrate their dispute pursuant to an arbitration clause in a distribution agreement between the audio-equipment company and a third party, even though the manufacturer was not a signatory to that agreement. Id. at 530-32.

The audio-equipment company claimed that it could compel arbitration based on a separate asset-purchase agreement between the manufacturer and the third party under which the manufacturer assumed certain of the third party’s assets and liabilities. Id.

Applying New York contract-law principles, we held that the manufacturer was bound to arbitrate claims arising out of obligations it had assumed expressly through the asset-purchase agreement, but not those claims based on obligations that the manufacturer had not assumed expressly, because under New York law an assignee that has assumed an assignor’s liabilities contained in an underlying agreement is bound by an arbitration clause in that agreement. Id. at 532-33.

Before reaching this conclusion, however, we stated in Trippe that “[w]hen determining both the existence and the scope of an arbitration agreement, there is a presumption in favor of arbitrability.” Id. at 532. We then quoted from AT & T Technologies, 475 U.S. at 650, 106 S.Ct. at 1419: “An order to arbitrate the particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an

interpretation that covers the asserted dispute.” Trippe, 401 F.3d at 532 (internal quotation marks omitted). But, as Century argues, the quotation in Trippe from AT & T Technologies obscures the context of the quotation. There the Supreme Court stated: where the contract contains an arbitration clause, there is a presumption of arbitrability in the sense that an order to arbitrate the particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an

interpretation that covers the asserted dispute. Doubts should be resolved in favor of coverage. AT & T Techs., 475 U.S. at 650, 106 S.Ct. at 1419 (internal citations and quotations omitted). Critically, the presumption of arbitrability that the Supreme Court recognized applies “where the contract contains an arbitration clause”—that is, where it has been determined that there is a valid agreement to arbitrate. Cf. Volt Info.

Scis., 489 U.S. at 475, 109 S.Ct. at 1253 (the federal policy in favor of arbitration requires that “ambiguities as to the scope of the arbitration clause itself [be] resolved in favor of arbitration”). But the question whether this presumption applies to the threshold inquiry which requires a determination whether there is an agreement to arbitrate in the first place is another matter. The FAA does not require parties to arbitrate a dispute when they have not agreed to do so. Id. at 478, 109 S.Ct. at 1255.

The “liberal federal policy favoring arbitration agreements ... is at bottom a policy guaranteeing the enforcement of private contractual arrangements.” Mitsubishi, 473 U.S. at 625, 105 S.Ct. at 3353 (internal citations and quotations omitted). Because “arbitration is a matter of contract[,] a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.” AT & T Techs., 475 U.S. at 648, 106 S.Ct. at 1418 (internal citations and quotations omitted). See China Minmetals, 334 F.3d at 281.

Therefore, some of the language in Trippe may be misleading to the extent it suggests that there is a presumption in favor of arbitration in the absence of an agreement to arbitrate. As we have stated both before Trippe and since, a party cannot be compelled to arbitrate unless that party has entered into a written agreement to arbitrate that covers the dispute. Kirleis, 560 F.3d at 160; Chimicles, 447 F.3d at 209; China Minmetals, 334 F.3d at 289-90.

We determine whether a party has done so by applying “ordinary state-law principles that govern the formation of contracts,” not by applying a presumption in favor of arbitration. First Options, 514 U.S. at 944, 115 S.Ct. at 1924. See Kirleis, 560 F.3d at 160. Several other courts of appeals have made it clear that in their view the presumption in favor of arbitration applies to the question whether a particular dispute falls within an existing agreement’s scope, but not to the threshold question as to the existence of an agreement between the parties to arbitrate. See Sherer v.

Green Tree Servicing LLC, 548 F.3d 379, 381 (5th Cir.2008) (“We apply the federal policy favoring arbitration when addressing ambiguities regarding whether a question falls within an arbitration agreement’s scope, but we do not apply this policy when determining whether a valid agreement exists.”); Dumais v. Am.

Golf Corp., 299 F.3d 1216, 1220 (10th Cir.2002) (“The presumption in favor of arbitration is properly applied in interpreting the scope of an arbitration agreement; however, this presumption disappears when the parties dispute the existence of a valid arbitration agreement.”) (citing First Options, 514 U.S. at 944-45, 115 S.Ct. at 1924); McCarthy v.

Azure, 22 F.3d 351, 355 (1st Cir.1994) (Once agreement between parties has been proven, “the federal policy favoring arbitration requires that any doubts concerning the scope of an arbitrable issue be resolved in favor of arbitration,” but this policy “does not extend to situations in which the identity of the parties who have agreed to arbitrate is unclear.”) (internal quotation marks omitted) (citing Moses H. Cone, 460 U.S. at 24-25, 103 S.Ct. at 941-42, and PaineWebber, Inc. v. Hartmann, 921 F.2d 507, 511 (3d Cir.1990)); Grundstad v.

Ritt, 106 F.3d 201, 205 n. 5 (7th Cir.1997) (“[T]he federal policy favoring arbitration applies to issues concerning the scope of an arbitration agreement entered into consensually by contracting parties; it does not serve to extend the reach of an arbitration provision to parties who never agreed to arbitrate in the first place.”) (citing McCarthy, 22 F.3d at 355).

We are satisfied that to decide whether a party may be compelled to arbitrate a dispute with another party, we must determine (1) whether there is a valid agreement to arbitrate between the parties and, if so, (2) whether the merits-based dispute in question falls within the scope of that valid agreement. Kirleis, 560 F.3d at 160. The presumption in favor of arbitration applies to the second question but probably does not apply to the first question. Id.; Chimicles, 447 F.3d at 209; see China Minmetals, 334 F.3d at 280-81.

Though we have addressed the question of the applicability vel non of the presumption in determining if there is a valid agreement to arbitrate, we have done so because the District Court addressed the point and the law as we have set it forth on the point in various cases is unclear. We, however, need not reach a definitive conclusion on the breadth of the presumption in favor of arbitration, because even without applying the presumption in this case we conclude that the parties entered into a valid agreement to arbitrate.

(2) The “Express” and “Unequivocal” Standard A second issue that we address is the standard applied to determine whether there is an agreement to arbitrate. Century asserts that we have required arbitration agreements to be “express” and “unequivocal” before compelling arbitration, this standard “has prevailed for decades,” Appellant’s opening br. at 21, and the purported agreement here is unenforceable because it fails to meet that standard. See Kaplan v.

First Options, 19 F.3d 1503, 1512 (3d Cir.1994) (stating the rule that an arbitration agreement “must be ‘express’ and ‘unequivocal’ ”) (quoting Par-Knit Mills, Inc. v. Stockbridge Fabrics Co., 636 F.2d 51, 54 (3d Cir.1980)), aff'd on other grounds, 514 U.S. 938, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995). In Par-Knit Mills, we considered whether a distributor could compel a manufacturer to arbitrate their dispute over a series of oral sales contracts pursuant to a related, written sales contract’s arbitration clause signed by, one of the manufacturer’s production managers.

The manufacturer denied ever agreeing to arbitrate, claiming, instead, that its production manager had signed the contracts intending to confirm the goods’ delivery dates but not to obligate the corporation to the written contracts’ various terms, including the arbitration clause. Par-Knit Mills, 636 F.2d at 53. The manufacturer supported this claim with an affidavit. Id.

We held that the district court erred in compelling arbitration because the manufacturer’s unequivocal denial that it had agreed to arbitrate, accompanied by a supporting affidavit, created a genuine issue of fact requiring a jury determination of whether there in fact had been a “meeting of the minds” resulting in the formation of an agreement to arbitrate. Id. at 54-55.

We explained that the genuine issue of fact as to the parties’ intent prevented the court from finding, as a matter of law, that the parties had formed an agreement to arbitrate, and therefore also prevented the court from compelling arbitration on that basis: Before a party to a lawsuit can be ordered to arbitrate and thus be deprived of a day in court, there should be an express, unequivocal agreement to that effect. If there is doubt as to whether such an agreement exists, the matter, upon a proper and timely demand, should be submitted to a jury.

Only when there is no genuine issue of fact concerning the formation of the agreement should the court decide as a matter of law that the parties did or did not enter into such an agreement. The district court, when considering a motion to compel arbitration which is opposed on the ground that no agreement to arbitrate had been made between the parties, should give to the opposing party the benefit of all reasonable doubts and inferences that may arise. Par-Knit Mills, 636 F.2d at 54 (citations and footnotes omitted).

In Par-Knit Mills, there was a genuine issue of fact as to whether the production manager was authorized to execute agreements to arbitrate on behalf of the corporation, and so the court, upon the manufacturer’s proper and timely demand, was required to submit the question of the agreement’s existence to a jury. Id. at 54-55. As we noted, this is the familiar

summary judgment standard, see Fed.R.Civ.P. 56(c), and it applies in cases such as Par-Knit Mills because the district court’s order compelling arbitration is “in effect a

summary disposition of the issue of whether or not there had been a meeting of the minds on the agreement to arbitrate.” Par-Knit Mills, 636 F.2d at 54 n. 9; see 9 U.S.C. § 4 (district court should not order arbitration unless it is “satisfied that the making of arbitration agreement ... is not in issue”).

Following Par-Knit Mills, we have referred to the requirement that an agreement be “express” and “unequivocal” before a court may compel a party to arbitrate in the context of emphasizing that a genuine issue of fact regarding the arbitration agreement’s existence — such as where the contract language is ambiguous or where one party claims that it never received the terms of an agreement, that the agreement was forged, or that the agreement was signed by a person lacking authority to execute the contract — prevents a district court from summarily compelling arbitration.

E.g., Kirleis, 560 F.3d at 159 (citing Par-Knit Mills); Standard Bent Glass, 333 F.3d at 446 (“Arbitration clauses must be clear and unequivocal. Genuine issues of fact will preclude an order to arbitrate.”); cf. Emerson Radio Corp. v. Orion Sales, Inc., 253 F.3d 159, 163-64 (3d Cir.2001) (discussing determination of a contract’s ambiguity).

Our cases, however, seem inconsistent in this respect: we sometimes have regarded Par-Knit Mills’ “express” and “unequivocal” language as stating a substantive standard required of arbitration agreements to be enforceable, seemingly without regard to the procedural posture of the case. In particular, in First Options, 19 F.3d at 1512, we stated that no party can be compelled to arbitrate unless that party has entered into an agreement to do so, and we relied on Par-Knit Mills in stating that “[t]hat agreement must be ‘express’ and ‘unequivocal.’” First Options, 19 F.3d at 1512 (quoting Par-Knit Mills).

Notably, this statement can be read to treat the “express” and “unequivocal” standard as a substantive requirement that a purported arbitration agreement must meet before a party may be compelled to submit a dispute to arbitration regardless of whether there is a disputed issue of fact as to the agreement’s existence.

Some of our cases have relied on this view of Par-Knit Mills’ “express” and “unequivocal” language as a substantive -requirement to explain how parties may be bound by arbitration agreements, even if they are not signatories to those particular agreements: [t]he identification of the parties bound by the agreement to arbitrate need not be confined to the limited inquiry of identifying the signatories to the arbitration agreement. Rather, the disposi-tive finding is an ‘express’ and ‘unequivocal’ agreement between parties to arbitrate their disputes. In re Prudential Ins.

Co., 133 F.3d 225, 229 (3d Cir.1998) (internal quotation marks partially omitted) (quoting First Options, 19 F.3d at 1512). See also First Liberty Inv. Group v. Nicholsberg, 145 F.3d 647, 650 (3d Cir.1998) (quoting the above from In re Prudential, 133 F.3d at 229); cf. Allstate Settlement Corp. v. Rapid Settlements Ltd., 559 F.3d 164, 170 (3d Cir.2009) (citing Trippe, 401 F.3d at 532) (discussing theories under which arbitration agreement may bind nonsignatory). We therefore have used the “express” and “unequivocal” language in two different ways when considering whether there is an agreement to arbitrate.

On the one hand, we have stated the “express” and “unequivocal” requirement to explain that genuine issues of fact as to whether there is an agreement to arbitrate preclude compelling a party to submit to arbitration; on the other, we have used this language to state a substantive standard that applies to the determination of an arbitration agreement’s enforceability as a general matter.

Turning to the facts at hand, application of the “express” and “unequivocal standard” cannot be in issue in this case because there is “no genuine issue of fact concerning the formation of the agreement” — Century and Lloyd’s instead dispute the legal effect of the uncontested contractual language — and thus if the “express” and “unequivocal” requirement can be in issue here it only can be if that standard is a substantive requisite for an enforceable arbitration agreement. See Appellant’s opening br. at 15; Appellee’s br. at 16.

In view of the absence of a dispute of facts, this case involves contract construction and therefore requires a legal determination. We reiterate that there is not a disputed issue of fact here as Century does not make an assertion such as that the retrocessional agreements were forged, the signatory lacked authority to bind Century, or the actual words of the contracts are ambiguous. Thus, it is not surprising that Century does not seek a jury trial to determine the parties’ intent with respect to the obligation to arbitrate and does not ask us to remand for that purpose.

Inasmuch as this case involves contract construction, i.e., determining the legal effect of the retrocessional agreements’ incorporation-by-reference language, we reiterate that the “express” and “unequivocal” standard we recognized in Par-Knit Mills is inapposite here to the extent that the standard requires that there not be a genuine issue of material fact as to an arbitration agreement’s existence before a district court may determine whether the agreement exists as a matter of law and then, if it does, to compel arbitration based on the agreement.

Century nevertheless presses the “express” and “unequivocal” language as a substantive standard. Accordingly, Century relies on the rule that we stated in First Options, 19 F.3d at 1512. E.g., Appellant’s opening br. at 21 (“The written agreement to arbitrate must be ‘express’ and ‘unequivocal.’ ”) (quoting First Options, 19 F.3d at 1512). But there are two problems with this position. First, the Supreme Court implicitly may have rejected the “express” and “unequivocal” standard as a substantive rule.

Upon reviewing our opinion in First Options, after granting certiorari as to two issues presented in our Court, the Supreme Court affirmed but did so without approving a substantive “express” and “unequivocal” standard. Instead, the Supreme Court set forth the following guidelines with regard to determining whether there is an arbitration agreement between the parties: When deciding whether the parties agreed to arbitrate a certain matter (including arbitrability), courts generally (though with a qualification we discuss below) should apply ordinary state-law principles that govern the formation of contracts.

The relevant state law here, for example, would require the court to see whether the parties objectively revealed an intent to submit the arbitrability issue to arbitration. First Options, 514 U.S. at 944, 115 S.Ct. at 1924 (internal citations omitted); cf. First Options, 19 F.3d at 1512 (quoting Par-Knit Mills for the rule that to be valid an arbitration agreement “must be ‘express’ and ‘unequivocal’ ”).

The “qualification” that the Supreme Court mentioned relates to the question of who has the primary power to decide the question of arbitrability, an issue not presented in the dispute between Century and Lloyd’s. First Options, 514 U.S. at 944-45, 115 S.Ct. at 1925-26; see id. at 942, 115 S.Ct. at 1923 (distinguishing between disagreements over (1) a dispute’s merits, (2) the arbitra-bility of the dispute, and (3) who should have the primary power to decide the arbi-trability of the dispute).

But a study of the two opinions suggests that the Supreme Court, far from adopting the substantive requirement that arbitration provisions must be “express” and “unequivocal” to be valid, in fact rejected it.

See First Options, 514 U.S. at 944, 115 S.Ct. at 1924; Blair, 283 F.3d at 603 (citing First Options, 514 U.S. at 944, 115 S.Ct. at 1924) (“A federal court must generally look to the relevant state law on the formation of contracts to determine whether there is a valid agreement to arbitrate under the FAA.”); Kirleis, 560 F.3d at 160 (citing First Options, 514 U.S. at 944, 115 S.Ct. at 1924, and Blair, 283 F.3d at 603). And there is a second problem with Century’s position.

Even if the Supreme Court in First Options did not reject the “express” and “unequivocal” standard outright to the extent that it is substantive— i.e., the burden of persuasion applied to whether arbitration agreements exist generally, rather than the

summary judgment standard applied in the arbitration context — the applicable statutory language and other Supreme Court precedent preclude us from requiring arbitration agreements to be “express” and “unequivocal” in order to be enforced.

Section 2 of the FAA declares that written arbitration agreements “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2 (emphasis added). It is therefore not surprising that the Supreme Court has explained that threshold limitations placed specifically and solely on arbitration provisions are antithetical to the goals and policies of the FAA. Doctor’s Assocs., 517 U.S. at 687-88, 116 S.Ct. at 1656; see Gay, 511 F.3d at 394.

It thus follows that requiring arbitration clauses to meet more exacting standards than those imposed by the applicable state-law principles on contracts generally would offend Congress’s purpose in enacting the FAA: to put arbitration provisions “upon the same footing as other contracts.” Doctor’s Assocs., 517 U.S. at 687, 116 S.Ct. at 1656 (citing Scherk, 417 U.S. at 511, 94 S.Ct. at 2453 (internal quotation marks omitted) (stating that FAA’s purpose is to “revers[e] centuries of judicial hostility to arbitration agreements”)); Perry, 482 U.S. at 492 n. 9, 107 S.Ct. at 2527 n. 9; cf. Progressive Cas. Ins.

Co. v. C.A. Reaseguradora Nacional De Venezuela, 991 F.2d 42, 46 (2d Cir.1993) (holding that FAA preempted state law requiring that there be an “express, unequivocal agreement” to arbitrate before parties would be compelled to arbitrate dispute — a higher standard than that which applied to contracts generally — because “[a] court may not, in assessing the rights of litigants to enforce an arbitration agreement, construe that agreement in a manner different from that in which it otherwise construes nonarbitration agreements under state law”).

A substantive “express” and “unequivocal” standard impermissibly would require more of arbitration agreements than of contracts generally to be enforced whenever the standard differed from the applicable state-law principles of contract law. See Progressive Cas., 991 F.2d at 46. Of course, application of the standard in practice always or almost always would differ from ordinary state-law contract principles, as courts enforce contracts that are something less than “express” and “unequivocal.” Indeed, sometimes courts enforce contracts that rather than being “express” and “unequivocal” simply are implied in law.

In sum, when determining whether there is a valid agreement to arbitrate between the parties, the first part of the two-step inquiry, we apply ordinary state-law principles of contract law. First Options, 514 U.S. at 944, 115 S.Ct. at 1924.

Because the FAA requires us to place arbitration agreements on an equal footing with other contracts when determining whether the parties have agreed to arbitrate, we cannot subject a purported arbitration agreement otherwise within the scope of the FAA and satisfying its requirements to a standard more demanding than that which we would apply to other agreements under the applicable state law. To be sure, genuine issues of fact preclude

summary judgment when determining whether there is an agreement to arbitrate, just as they do when determining the existence of any other contract. See Fed.R.Civ.P. 56(c). But the FAA and Supreme Court precedent forbid us from placing more stringent requirements on arbitration agreements otherwise satisfying the criteria of the FAA than on other contracts, such as a substantive requirement that an arbitration agreement be “express” and “unequivocal” to be enforceable, rather than the standard that applies to contracts generally. b.

Whether Century and Lloyd’s Agreed to Arbitrate Disputes Arising from the Retrocessional Agreements Having addressed these two preliminary issues — whether the presumption in favor of arbitration applies to the initial question whether the parties agreed to arbitrate (it probably does not), and whether in answering this question we apply the substantive requirement based on our caselaw that an agreement to arbitrate be “express” and “unequivocal” to be valid and enforceable (we cannot) — we return to the initial question: whether Century and Lloyd’s agreed to arbitrate certain disputes, for if they did not do so this case should not have been arbitrated.

As we have stated, to determine whether the parties agreed to submit any disputes to arbitration, we apply “ordinary state-law principles that govern the formation of contracts.” First Options, 514 U.S. at 944, 115 S.Ct. at 1924; see also Perry, 482 U.S. at 492 n. 9, 107 S.Ct. at 2527 n. 9; Kirleis, 560 F.3d at 160.

(1) Choice of Law: Pennsylvania Law Applies The question whether the parties agreed to arbitrate certain disputes raises a choice-of-law issue. Though neither party explicitly states that Pennsylvania law applies to the question whether there is a valid arbitration agreement, they seem to agree that Pennsylvania law does apply, because, apart from federal cases, each predominantly cites Pennsylvania state court cases on the issues in this case.

Moreover, the retrocessional agreements’ service-of-suit clause contains a choice-of-law provision stating that “all matters arising [from disputes brought pursuant to the service-of-suit clause] shall be determined in accordance with the law and practice of [the] Court” where the action is brought. App. at 32. This provision suggests that to the extent that federal law does not control this action, we should resolve this dispute over payments under the retroces-sional agreements in accordance with the substantive law of Pennsylvania, the state in which Century filed suit.

Moreover, under that law the law of the state in which an insurance contract is made governs the contract. Crawford v. Manhattan Life Ins. Co., 208 Pa.Super. 150, 221 A.2d 877, 880 (1966). The retrocessional agreements were signed in duplicate in Pennsylvania and in England. So even if the provision dictated only that Pennsylvania’s choice-of-law rules applied, under those rules Pennsylvania substantive law still would govern.

(2) Principles of Pennsylvania Contract Law We thus apply Pennsylvania contract-law principles to determine whether the parties formed an agreement to arbitrate. First Options, 514 U.S. at 944, 115 S.Ct. at 1924; Perry, 482 U.S. at 492 n. 9, 107 S.Ct. at 2527 n. 9; Kirleis, 560 F.3d at 160 (internal citations omitted); see Murphy v. Duquesne Univ. of the Holy Ghost, 565 Pa. 571, 777 A.2d 418, 429-30 (2001) (discussing fundamental principles of contract

interpretation under Pennsylvania law); Quiles v. Fin. Exch. Co., 879 A.2d 281, 285 (2005) (equating principles for interpreting agreements to arbitrate with general principles of contract

interpretation). In general, to determine whether a contract was formed under Pennsylvania law, a court must look to: (1) whether both parties manifested an intention to be bound by the agreement; (2) whether the terms of the agreement are sufficiently definite to be enforced; and (3) whether there was consideration. Blair, 283 F.3d at 603; Shovel Transfer & Storage, Inc. v. Pa. Liquor Control Bd., 559 Pa. 56, 739 A.2d 133, 136 (1999); Quiles, 879 A.2d at 285. The Pennsylvania Superior Court has explained that “[i]n determining whether the parties agreed to arbitrate, courts should apply rules of contractual construction, adopting an

interpretation that gives paramount importance to the intent of the parties and ascribes the most reasonable, probable, and natural conduct to the parties.” Id. at 287-88.

(3) Binding Nonsignatories Through Incorporation by Reference We reiterate that even though the retrocessional agreements do not include an arbitration provision, Lloyd’s asserts that they incorporated the arbitration provision from the reinsurance treaties between Argonaut and Century and therefore Century and Lloyd’s agreed to arbitrate their disputes.

Pennsylvania courts have recognized the incorporation-by-reference theory generally. “As a matter of contract law, incorporation by reference is generally effective to accomplish its intended purpose where ... the provision to which reference is made has a reasonably clear and ascertainable meaning.” Bernotas v. Super Fresh Food Mkts., Inc., 816 A.2d 225, 231 (2002) (internal quotation marks omitted), rev’d on other grounds, 581 Pa. 12, 863 A.2d 478 (2004). See Roman Mosaic & Tile Co. v. Thomas P.

Carney, Inc., 729 A.2d 73, 77-78 (1999) (subcontractor bound by terms of general contract incorporated by reference into subcontract). As is significant here, Pennsylvania courts have recognized incorporation-by-reference provisions in an arbitration context. Integrated Project Servs. v.

HMS Interiors, Inc., 931 A.2d 724, 734-36 (2007) (discussing Bemotas and distinguishing between enforceable incorporation or “pass-through” clauses, such as those incorporating general contract’s arbitration clause into subcontract, from unenforceable pass-through clauses purporting to hold indemnitor liable for indemnitee’s negligence); Cumberland-Perry Area Vocational-Technical Sch. Auth. v. Bogar & Bink, 261 Pa.Super. 350, 396 A.2d 433, 435 n. 1 (1978) (subcontractor bound by general contract’s arbitration provision incorporated into subcontract to which subcontractor was a party).

We note that the Pennsylvania Supreme Court in Bemotas held that a contract’s general incorporation clause will not incorporate another contract’s indemnification provisions absent express and specific contract language to that effect because of the longstanding policy to construe indemnification provisions narrowly.

Bernotas, 863 A.2d at 484 (concluding that, because courts traditionally construe indemnification provisions narrowly, subcontract’s standard incorporation clause was insufficient to incorporate general contract’s indemnification clause against subcontractor to hold subcontractor liable for general contractor’s negligence). But we see no reason to apply that reasoning to the very different question of whether an agreement’s incorporation-by-reference provision applies so as to incorporate an arbitration clause, because such a clause is quite different from an indemnification clause.

In sum, under Pennsylvania law, arbitration provisions, like other contractual provisions, may be incorporated by reference through general incorporation provisions. We note that, like the Pennsylvania courts, we have recognized incorporation by reference as one theory for binding nonsignatories to arbitration agreements. Allstate Settlement, 559 F.3d at 170 (citing Trippe, 401 F.3d at 532).

At bottom, the question remains one of the effect of the parties’ action in incorporating the reinsurance agreements, including their arbitration clause, as embodied in the agreements themselves, to be determined by reference solely to the contents of the agreements. c. Construing the Retrocessional Agreements Under Pennsylvania Law There can be no question that the terms of the written, signed retrocessional agreements are quite definite. See Blair, 283 F.3d at 603.

There is no dispute that the reinsurance treaties and the retrocessional agreements are valid contracts and that they are mutually supported by consideration. Id. (“When both parties have agreed to be bound by arbitration, adequate consideration exists and the arbitration agreement should be enforced.”). Our task, therefore, is to construe the contracts to determine the effect of the parties’ inclusion of the incorporation-by-reference provision solely by examining the agreements’ contents.

The question is limited to contract construction: does the retro-cessional agreements’ incorporation language result in an agreement between the parties to arbitrate their disputes? See Appellant’s opening br. at 15; Appellee’s br. at 16. Lloyd’s emphasizes the retro-cessional agreements’ expansive incorporation clause and argues that we. should construe the retrocessional agreements to have incorporated “all” of the reinsurance treaties’ provisions, including the arbitration clause, because that is precisely what the incorporation clause says.

On the other hand, Century emphasizes the phrasing of the reinsurance treaties’ arbitration clause and argues that we should not construe the retrocessional agreements to have incorporated the arbitration agreement because the incorporated arbitration clause specifies that it applies only to Century and Argonaut, see Progressive Casualty, 991 F.2d at 45-48, and the purpose of the incorporation was to clarify the parties’ obligations under the reinsurance agreements, not to agree to a procedure for the resolution of disputes. See AgGrow Oils, L.L.C. v. Nat’l Union Fire Ins.

Co., 242 F.3d 777, 780-82 (8th Cir.2001). We address each position in turn. d. Three Surety Cases in Which General Incorporation Provisions Effectively Incorporate Arbitration Agreements Lloyd’s argues that because the retro-cessional agreements provide that “all” terms and provisions of the reinsurance treaties apply to the retrocessional agreements, the parties must have provided for all of the treaties’ terms, including the arbitration clause, to apply to the retroces-sional agreements.

In support of this contention Lloyd’s relies for the most part on a set of surety cases in the federal courts to argue that a contract’s general incorporation clause effectively can incorporate the underlying contract’s provisions, including its arbitration clause. United States Fidelity & Guaranty Co. v. West Point Constr. Co., 837 F.2d 1507 (11th Cir.1988) (per curiam); Exchange Mut. Ins. Co. v. Haskell Co., 742 F.2d 274 (6th Cir.1984) (per curiam); Commercial Un ion Ins. Co. v. Gilbane Bldg. Co., 992 F.2d 386 (1st Cir.1993).

Lloyd’s contends that we should follow these cases to hold that a party to a contract containing an arbitration clause, such as the reinsurance treaties in this case, may be compelled pursuant to that contract’s arbitration clause to arbitrate a dispute with a third party arising under a second contract, such as the retrocessional agreements in this case, where the second contract incorporated the first contract’s terms through a general incorporation-by-reference clause.

In West Point Construction the general contractor sought to compel a subcontractor’s surety to arbitrate a dispute pursuant to a performance bond that incorporated by reference a subcontract between the general contractor and a subcontractor. There were three relevant agreements. The first agreement was the general contract between a county as the owner and the general contractor to build a county justice center. This general contract contained an arbitration clause. The second agreement was the subcontract between the general contractor and the subcontractor.

This subcontract contained its own arbitration clause as well as a separate provision modifying that clause by referring to the general contract’s arbitration clause. The third agreement was the performance bond that the surety issued to the general contractor on behalf of the subcontractor. This performance bond incorporated the subcontract by reference and made the subcontractor’s performance under the subcontract a condition of the bond. After the subcontractor defaulted, the general contractor sought to recover against the surety and moved to compel arbitration.

The surety argued that the performance bond’s incorporation-by-reference clause did not incorporate the arbitration clause from either the subcontract or the general contract. The Court of Appeals for the Eleventh Circuit disagreed, holding that because the subcontract was referred to in and made part of the bond, disputes arising under the bond — including disputes concerning the adequacy of the subcontractor’s performance under the subcontract, a condition of the performance bond — were subject to arbitration pursuant to the arbitration provisions of the subcontract. West Point Constr., 837 F.2d at 1508.

The court found that, in these circumstances, “the incorporation of the subcontract into the bond expresses an intention of the parties, including [the surety], to arbitrate disputes.” Id. Similarly, in Haskell, a case involving the construction of a shopping center, the Court of Appeals for the Sixth Circuit considered whether to enjoin arbitration between a surety and the prime contractor. One of the relevant agreements was the general contract between the general contractor and the owner-developer to build the shopping center.

The general contract contained an arbitration clause stating: All claims, disputes and other matters in question arising out of, or relating to this contract or the breach thereof ... which cannot be settled by negotiation between the Contractor and the Owner, shall be decided in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association. Haskell, 742 F.2d at 275. The second agreement was the subcontract between the general contractor and the subcontractor, pursuant to which the subcontractor was to install the parking lot.

This subcontract incorporated by reference the general contract’s obligations and responsibilities: Subcontractor hereby assumes the same obligations and responsibilities with respect to his performance under this Subcontract, that Contractor assumes towards Owner with respect to his performance on the General Contract. If the General Contract, which is hereby incorporated by reference, fails or conflicts with any provision of this Subcontract, or any modification hereof, this Subcontract shall govern. Id.

The third agreement was the performance bond that an insurance company as surety to the subcontractor issued in favor of the general contractor.

The performance bond referred to the general contract, was conditioned on the subcontractor’s performance under the subcontract, indemnified the general contractor for losses sustained due to the subcontractor’s failure to perform, and incorporated the subcontract: KNOW ALL MEN BY THESE PRESENTS, That [the subcontractor], as principal and [the insurance company] as Surety, are ... bound unto [the general contractor], in the sum of ... ($108,000) Dollars ..., jointly and severally, firmly by these presents.

WHEREAS, [the general contractor] has been awarded [the General Contract] by [the owner-developer] for [the shopping center], and; WHEREAS, the principal has entered into a written Subcontract with [the general contractor] to perform ... certain portions of the work in connection with said [General Contract], consisting of ... as stated in Subcontract No. 4284-06 ... which Subcontract is hereby referred to and made a part hereof. Id. at 276.

When a dispute arose over the subcontractor’s performance, the general contractor made a claim under the performance bond against the surety and sought to arbitrate the claim. The surety resisted and sought an injunction precluding the arbitration. The district court, however, compelled arbitration, and the Court of Appeals for the Sixth Circuit affirmed the district court on appeal.

The court of appeals held that even though the performance bond did not contain an arbitration clause, a court nevertheless could compel the surety to arbitrate by reason of the arbitration clause contained in the general contract because the performance bond specifically incorporated by reference the terms of the subcontract, and the subcontract in turn incorporated the general contract’s obligations, including the general contract’s duty to arbitrate. Id. at 276-77.

The court of appeals explained that “a party does not have to be a signatory to the contract [containing the arbitration clause] when the contract is specifically incorporated by reference in the surety bond.” Id. at 276. Finally, in Gilbane Building the Court of Appeals for the First Circuit also compelled arbitration based on an incorporated arbitration clause. In that case, a surety sought to compel arbitration of a dispute over one of several separate but related construction projects.

The particular dispute that the surety sought to arbitrate involved three agreements structured in a column similar to those in West Point Construction and Haskell: a prime contract, a subcontract, and a performance bond. The prime contract between the general contractor and the project’s owner contained an arbitration clause stating that “[a]ll claims, disputes and other matters in question arising out of, or relating to this Agreement or the breach thereof, ... shall be decided by arbitration ... unless the parties mutually agree otherwise.” Gilbane Bldg., 992 F.2d at 388.

The subcontract between the general contractor and a structural-steel subcontractor incorporated the terms of the prime contract: [The general contractor] shall be bound to [the subcontractor] by the terms of this agreement, to the extent that the provisions of the contract documents between the owner and [the general contractor] apply to the work of [the subcontractor] as defined in this agreement[.] [The general contractor] shall assume toward [the subcontractor] all the obligations and responsibilities that the owner, by those documents, assumes toward [the general contractor]. [The general contractor] shall have the benefit of all rights, remedies, and redress against [the subcontractor] which the owner, by those documents, has against [the general contractor].

Id. The subcontract defined “the contract documents” as the prime contract, the conditions of that contract, and several other related conditions. Id. at 388 n. 2. The performance bond incorporated the subcontract by reference: “Whereas, [the subcontractor] has by written agreement ... entered into a Subcontract with [the general contractor] ... which Subcontract is by reference made a part hereof.” Id. at 388.

After the subcontractor ceased operations and defaulted on its subcontracts, litigation ensued in which the surety sought to compel arbitration of claims pursuant to the arbitration clause contained in the prime contract. Though the surety was not a signatory to the prime contract, it relied on the incorporation-by-reference theory to justify its action in seeking arbitration. Citing Haskell, the court of appeals agreed with the surety and upheld the district court’s order compelling arbitration. Id. at 388-89.

Because the subcontract incorporated the prime contract’s obligations — with the general contractor assuming towards the subcontractor all obligations that the owner had assumed towards the general contractor under the prime contract, and the subcontractor likewise assuming towards the general contractor all obligations that the general contractor had assumed towards the owner under the prime contract — including the obligation to arbitrate disputes arising from the contract, the court of appeals held that the subcontract obligated the general contractor to arbitrate disputes with the subcontractor arising from the subcontract.

Id. And because the performance bond had referred explicitly to the terms of the subcontract, the contractor was bound to arbitrate its claim against the surety under the performance bond as well. Id. e. Declining to Incorporate Restrictively Worded Arbitration Clauses That Refer to the Immediate Parties The foregoing opinions of three courts of appeals are in harmony with the principle that a general incorporation clause effectively can incorporate an arbitration agreement.

Nevertheless, Century argues that these cases are of limited use in this case because in its view when an arbitration agreement between one set of parties is incorporated by reference into another agreement involving parties not bound by the original agreement, a determination whether the parties to the second agreement are bound to arbitrate depends on the original arbitration agreement’s narrowness or breadth.

Focusing on whether an arbitration clause’s language is “narrow” or “broad,” Century asserts that “the widely accepted rule is that arbitration clauses that reference the specific parties to which they apply — even if incorporated by reference — are narrow clauses that do not support arbitration of disputes beyond those between the specific parties identified in the clause.” Appellant’s opening br. at 29. In support, Century cites to Import Export Steel Corp. v. Mississippi Valley Barge Line Co., 351 F.2d 503, 506 (2d Cir.1965), and Progressive Casualty, 991 F.2d at 45.

Import Export Steel involved maritime law, steel, and the high seas but nonetheless resembles this reinsurance and retro-cession case because its result turned on an interrelated set of contracts. There, a steel company signed a subcharter agreement with a ship’s disponent owner to transport steel coils from Germany to Louisiana. This subcharter agreement, later amended, between the charterer-steel company and the disponent owner contained an arbitration clause that applied to “any dispute ... between the Owners and the Charterers.” Imp. Exp. Steel, 351 F.2d at 504-05.

Later, a third party and the disponent owner executed an agreement under which the third party assumed the disponent owner’s obligations and privileges under the subcharter agreement, and, in exchange, the disponent owner agreed to issue certain bills of lading. These bills of lading were issued and designated the charterer-steel company as the holder of each bill, the disponent owner as the shipper, and the charterer-steel company’s affiliate as the notify party, i.e., the party to receive notice of delivery. The bills of lading also incorporated by reference the subcharter agreement. Id.

The ship foundered before delivery, and both the charterer-steel company and its affiliate sought to invoke the subcharter agreement’s arbitration clause against the third party to compel arbitration of liability for the lost cargo. Id.

The Court of Appeals for the Second Circuit ruled that the charterer-steel company could enforce the arbitration clause against the third party because the third party had assumed the disponent owner’s obligations and privileges under the subcharter agreement, to which the charterer-steel company was a party, and also because the charterer-steel company held the bills of lading that had incorporated by reference the arbitration clause.

Id. at 506 (explaining that holder of bill of lading specifically referring to charter agreement and incorporating charter agreement’s arbitration provision can compel party to charter agreement to arbitrate dispute within provision’s scope). The court of appeals, however, refused to permit the charterer-steel company’s affiliate to compel arbitration because the affiliate was neither a party to the sub-charter agreement nor a holder, shipper, or cosignee under the bills of lading.

Id. at 505 (stating that nonparty claimant that is not holder, shipper, or cosignee of bill of lading cannot use charter agreement’s arbitration provision, even if agreement’s terms are incorporated into bill of lading). In addition, the court of appeals stated that the terms of a bill of lading “should be carefully if not restrictively construed” because a bill of lading is the only document regulating the relations of the bill’s transferees and owner. Id. at 505-06.

With this consideration in mind, and noting that the arbitration clause “was restrictive in scope in that it is limited to disputes ‘between the Disponent Owners and the Charters,’ ” the court of appeals concluded that “[i]t would be unduly stretching the language of this arbitration clause to say that [the affiliate], a mere notify party ... is one of the ‘Disponent Owners’ or ‘Charterers’ ” to which the clause applied. Id. Almost 30 years later, the same court of appeals distinguished Import Export Steel in Progressive Casualty.

In Progressive Casualty, a group of insurance companies insured an oil company and then obtained reinsurance of that coverage from a Venezuelan reinsurance company, RNV, which, in turn, reached corresponding annual retrocessional agreements with various retrocessio-naires. 991 F.2d at 44. One retroces-sional agreement contained a provision stating that it was “[s]ubject to” the underlying reinsurance contract. Id. at 45. The reinsurance contract, in turn, included an arbitration clause providing that “[a]ny question or dispute arising between the contracting parties concerning the

interpretation of this Reinsurance Agreement ... shall be settled by arbitration.” Id. When a dispute arose, the reinsurance company sought to compel its retrocessionaires to arbitrate the dispute under the retrocessional agreement by arguing that the retrocessional agreement through its “subject to” clause incorporated the reinsurance agreement’s arbitration clause. Id. at 45-46.

Applying New York law, the court of appeals held that the retrocessional agreement contained a valid agreement to arbitrate between the reinsurer and the retrocessionaire because it effectively incorporated the reinsurance agreement’s arbitration clause and the clause itself was not worded so restrictively that it did not bind the retrocessionaires. Id. at 45-48.

Distinguishing Import Export Steel, the court explained that while it previously had held that “an arbitration agreement restricted to the immediate parties does not bind a non-party, notwithstanding words of incorporation or reference in a separate contract by which that non-party is bound,” it also had held that “a broadly-worded arbitration clause which is not restricted to the immediate parties may be effectively incorporated by reference into another agreement.” Id. at 47-48.

The court concluded that the arbitration clause in question, which called for arbitration of disputes “between the contracting parties” without specifying by proper name the identity of those parties, was worded broadly enough to allow its effective incorporation into other contracts: Unlike the clause in Import Export, the [reinsurance agreement’s arbitration clause] is not restrictively worded by referring to the immediate parties to that contract by name.

Rather, the [reinsurance agreement] merely provides for arbitration of disputes between ‘the contracting parties.’ We do not think it would be ‘unduly stretching’ the language of the clause to term the American Reinsurers and RNV ‘contracting parties.’ Id. at 48 (internal citation omitted). Century argues that we should adopt the principle of Progressive Casualty and base our decision on whether the arbitration provision is restrictively or broadly worded.

Inasmuch as the reinsurance treaties’ arbitration clause provides for arbitration of disputes “between the Company [Argonaut] and INA [Century],” Century contends that the retrocessional agreements, in incorporating that clause, cannot include an agreement to arbitrate disputes between Century and Lloyd’s. Century supports its argument with World Rentals & Sales, LLC v.

Volvo Construction Equipment Rents, Inc., 517 F.3d 1240 (11th Cir.2008), a case in which the Court of Appeals for the Eleventh Circuit addressed two separate sets of agreements, one containing an arbitration clause and the other incorporating it, related to franchising the sale and leasing of construction equipment. In the first set, World Rentals, the franchisee, entered into franchise agreements with Volvo Rents, the franchisor, to sell and lease construction equipment.

These franchise agreements each contained an arbitration provision stating that “all disputes ... arising between Franchisee and Franchisor shall be finally resolved by arbitration.” Id. at 1242. The franchise agreements also defined “Franchisor” as referring only to Volvo Rents and specifically “not [to Volvo Rents’] corporate parents or affiliates.” Id. at 1242-32. In the second set of agreements, World Rentals contracted with Volvo Finance, an affiliate of Volvo Rents, for loans related to World Rentals’ franchise operations.

These loan agreements contained an incorporation provision stating that “[a]ll schedules, exhibits, and other documents ... referred [to] in this Agreement ... are hereby incorporated in this Agreement by reference in their entirety as if fully restated in this Agreement.” Id. at 1243. Elsewhere, the loan agreements referred to the franchise agreements in defining World Rentals’ failure to make payments under the loan agreements and its default on the franchise agreements between World Rentals and Volvo Rents as events of default under the loan agreements.

After its business failed and World Rentals defaulted on the loan agreements, it brought tort and contract claims against both Volvo Rents and Volvo Finance in a district court, and eventually moved to compel both Volvo units to arbitrate. The district court denied World Rental’s motion as to Volvo Finance.

On appeal, addressing World Rentals’ argument that Volvo Finance could be compelled to arbitrate because the World Rentals-Volvo Finance loan agreements incorporated by reference the franchise agreements and thus their arbitration clause, the court of appeals considered two questions: first, was the arbitration clause incorporated? And second, did the dispute fall within the terms of that arbitration clause?

Regarding the first question, the court concluded that the loan agreements between World Rentals and Volvo Finance unambiguously incorporated the franchise agreements, including those agreements’ arbitration clauses. Id. at 1245 (“[A]n arbitration clause can be incorporated even if the relevant incorporation language does not specifically refer to it.”) (citing J.S. & H. Constr. Co. v. Richmond County Hosp. Auth., 473 F.2d 212, 215 (5th Cir.1973)). As for the second question, however, the court of appeals held that the dispute fell outside the scope of the arbitration clause. Id. at 1246.

Noting the proposition in Progressive Casualty that “an arbitration agreement restricted to the immediate parties does not bind a non-party, notwithstanding words of incorporation or reference in a separate contract by which that non-party is bound,” the court of appeals explained that while there is a liberal policy favoring arbitration agreements, “[t]here is no federal policy favoring arbitration of disputes that the parties have unambiguously excluded from their arbitration agreements.” Id. at 1247 (citing Progressive Cas., 991 F.2d at 47, and Volt Info. Scis., 489 U.S. at 479, 109 S.Ct. at 1256).

In World Rentals, the arbitration clause that was incorporated into the loan agreements between World Rentals and Volvo Finance unambiguously limited its application to disputes between the franchisee, defined as World Rentals, and the franchisor, defined as Volvo Rents, and expressly excluded any disputes between World Rentals and Volvo affiliates such as Volvo Finance. Id.

In these circumstances, the court of appeals concluded that Volvo Finance could not be compelled to arbitrate its dispute with World Rentals because an order compelling it to do so would “not only ‘unduly stretch,’ but completely rewrite the arbitration clause, and compel a nonparty to arbitrate in the absence of ever having agreed to do so in the first place.” Id. (quoting Imp. Exp. Steel, 351 F.2d at 506). Century offers World Rentals in support of its claim that restrictively phrased arbitration clauses cannot be incorporated effectively through general incorporation-by-reference clauses.

But the cases we just discussed do not reveal a widely observed, bright line rule. As the court of appeals in World Rentals noted, an arbitration agreement limited to the immediate parties effectively may be incorporated by reference, despite its restrictive phrasing, through different or additional incorporation language. Id. at 1247 n. 6 (citing J.S. & H. Constr., 473 F.2d at 214 n. 3). And the reluctance to incorporate restrictively phrased arbitration clauses that refer to the immediate parties did not preclude the court in Haskell from recognizing that there was such an incorporation.

See Haskell, 742 F.2d at 275-76 (finding that arbitration clause providing for arbitration of disputes “which cannot be settled by negotiation between the Contractor and the Owner” effectively incorporated by reference into subcontract, and then to performance bond). To support its claim that a “narrowly drafted” arbitration clause incorporated by reference into a separate contract, without more, cannot serve to bind parties not specified in the original clause, Century also cites to Rice Co. v.

Precious Flowers Ltd., 523 F.3d 528 (5th Cir.2008), claiming that in Precious Flowers the Court of Appeals for the Fifth Circuit applied Century’s proposed rule. A question in Precious Flowers, an international-shipping case reminiscent of Import Export Steel, was whether the shipper, by relying on theories of agency and incorporation by reference, could compel the vessel owner to arbitrate a dispute over liability under a bill of lading, even though the vessel owner was not a signatory to an agreement containing an arbitration provision with the shipper.

Precious Flowers involved three interrelated contracts among a vessel owner, Precious Flowers; a time-charterer and dis-ponent owner, IBN; and a shipper and voyage-charterer, the Rice Company. The first agreement was a time-charter agreement between vessel owner Precious Flowers and IBN, pursuant to which IBN obtained the vessel and became its disponent owner for a period of time. Id. at 532. This time-charter agreement between Precious Flowers and IBN contained an arbitratio

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