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Click here for the full text of this decision FACTS:AEGIS issued to Enron its primary liability insurance policy. All parties acknowledge that, as a former director of Enron and Enron’s former chief executive officer, defendant-appellant Kenneth Lay qualified as an insured under the policy. Likewise, they acknowledge that defendant-appellant Jeffrey Skilling qualifies as an insured, having been a former director of Enron and Enron’s former chief financial officer and chief executive officer. Federal also issued to Enron an excess fiduciary policy. Section IV(T) of the primary policy, titled Dispute Resolution and Service of Suit, provides both non-binding and binding procedures for settling policy disputes. Sections IV(T)(1) and IV(T)(2), titled Negotiation and Mediation respectively, provide for nonbinding dispute resolution procedures that must occur before binding arbitration. Once the negotiation and mediation processes are exhausted and binding arbitration is invoked, the parties involved in the dispute must follow the specific binding arbitration procedures set forth in section IV(T)(3). The suit underlying this appeal is a class action breach of fiduciary duty suit brought in 2001 against Enron and its board of directors by various former employees of Enron (the Tittle plaintiffs), alleging breach of fiduciary duties associated with Enron’s collapse in violation of the Employee Retirement Income Security Act. On April 15, 2004, a subset of defendants to the Tittle class action (the settling defendants) reached a proposed settlement agreement with the Tittle Plaintiffs and the U.S. Department of Labor (the partial settlement), requiring that the insurers pay the entire combined $85 million policy liability limits to the Tittle Plaintiffs. The settling defendants did not include Lay, Skilling or Enron. The partial settlement did not affect the $10 million defense costs coverage endorsement, which at the time was still available to the non-settling defendants, including Lay and Skilling. The insurers moved to intervene in the Tittle action and filed an interpleader complaint. The interpleader complaint named as interpleader defendants many of the parties who had submitted or could potentially submit claims against the policies, including the settling defendants, Enron, and Lay and Skilling. Over opposition from Lay and Skilling, the district court granted the Insurers’ motion to intervene and subsequently granted the Insurers permission to tender the entire $85 million in policy proceeds to the district court. Lay and Skilling each filed an answer asserting his right to the payment of all attorneys’ fees and legal costs incurred in their defense of claims asserted against them in the Tittle litigation. Additionally, they demanded that an equitable share of the policies’ proceeds be held in reserve to provide them coverage against a possible judgment or settlement in that litigation. On the same day, along with his answer, Skilling filed a motion to compel arbitration and stay the interpleader action (arbitration motion) pursuant to ��3 and 4 of the Federal Arbitration claims against insureds. The district court granted Lay’s motion to join Skilling’s arbitration motion but denied the arbitration motion itself. The district court found that the arbitration clause applies only to “any controversy or dispute arising out of or relating to” the policy, and a settlement within the policy limits between the insurer and the insureds means that there is no controversy or dispute. Further, the district court found that there can be no arbitrable controversy or dispute within the scope of the arbitration clause in this case because a reading of both policies in their entirety reveals that the arbitration clause was meant to apply only to disputes over coverage between the insureds and the insurers. Because the insurers agreed to pay out the entire $85 million policy limit, tendered the proceeds to the district court, and proclaimed their neutrality as to the allocation of the proceeds, they “no longer [have] an interest in the $85 million”; therefore, there is not a dispute between the insureds and the insurers, only a dispute among the various insureds. Lay and Skilling appealed. HOLDING:Affirmed. The court agrees with the settling defendants and the district court that the scope of the arbitration clause is limited only to disputes, arising out of or related to the policies, that include an insurer and one or more insureds. Because the only present dispute is one among the insureds over the proper allocation of the interpleaded funds, and because the scope of the arbitration clause does not encompass such a dispute, the district court properly denied Lay and Skilling’s arbitration motion. OPINION:King, C.J.; King, Stewart and Dennis, J.J.

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