Federal Insurance Company v. McCord

Filing 20

MEMORANDUM OPINION AND ORDER directing as follows: 1) The 13 Motion of Leon Thomas McCord Jr. To Compel Arbitration and Stay Proceedings is GRANTED; 2) The parties are required to present their dispute about the arbitrability of these claims to an arbitrator in accordance with their agreement; 3) It is further ORDERED that pursuant to 9 USC 3, this action is hereby STAYED pending the above ordered arbitration; 4) The parties are hereby ORDERED to file a jointly prepared report on the status of this case. The first such report shall be filed on 1/5/2010, as further set out in order. Signed by Hon. Chief Judge Mark E. Fuller on 10/20/2009. (wcl, )

IN THE UNITED STATES DISTRICT COURT F O R THE MIDDLE DISTRICT OF ALABAMA N O R T H E R N DIVISION F E D E R A L INSURANCE COMPANY, a /s /o THOMPSON TRACTOR C O M P A N Y , INC. d/b/a THE CAT R E N T A L STORE, P la in tif f , v. L E O N THOMAS McCORD, JR., D e f e n d a n t. ) ) ) ) ) ) ) ) ) ) ) )

C A S E NO. 2:09cv564-MEF

M E M O R A N D U M OPINION AND ORDER IN T R O D U C T IO N O n June 15, 2009, Federal Insurance Company ("Federal") filed this lawsuit against L e o n Thomas McCord, Jr. ("McCord"). Federal seeks damages for alleged breach of c o n tra c t and negligence arising out of McCord's use of an excavator he rented from T h o m p s o n Tractor Company Inc. d/b/a The Cat Rental Store ("Thompson") pursuant to a w ritte n rental agreement. Federal insured the excavator under a policy issued to Thompson, a n d Federal brings suit against McCord on the contract between McCord and Thompson by v irtu e of subrogation. This cause is before the Court on the Motion of Leon Thomas McCord J r. To Compel Arbitration and Stay Proceedings (Doc. # 13). Plaintiff Federal Insurance C o m p a n y opposes the motion. The Court has considered the merits of the motion and the a p p lic a b le law and finds that it is due to be GRANTED.

JURISDICTION AND VENUE F e d e ra l invokes this Court's subject matter jurisdiction pursuant to 28 U.S.C. § 1 3 3 2 (a ). The Court is satisfied that the parties are citizens of different states and the amount in controversy exceeds $75,000. FACTS O n June 16, 2008, McCord leased an excavator from Thompson. Pursuant to the lease a g re e m e n t, McCord agreed to be responsible for any loss of, theft of, or damage to the e x c a v a to r and to return the excavator in as good condition as when he received it. McCord u s e d the excavator to lift logs onto a bonfire. The excavator caught fire while McCord was u s in g it, and the fire destroyed the excavator. Thompson made a claim on its insurance p o lic y with Federal. Pursuant to the policy, Federal paid Thompson $94,842.00 for the loss. Federal was subrogated to Thompson's rights of recovery pursuant to the lease agreement w ith McCord. On June 15, 2009, Federal brought suit in this Court against McCord for breach of c o n tra c t and negligence all arising out of the damage McCord caused to the excavator and h is failure to pay for that damage under the lease agreement. McCord filed a motion seeking a stay of all proceedings in this Court and an order compelling Federal to arbitration pursuant to a provision in the lease agreement between Thompson and McCord. That provision p ro v id e s as follows: 1 9 . ARBITRATION/WAIVER OF JURY TRIAL. Customer a n d Rental Store acknowledge and agree that the transaction b e tw e e n them involves "commerce" as that term is used in the F e d e ra l Arbitration Act, 9 U.S.C. [sic] (The "FAA"). Customer 2

and Rental Store agree that except as otherwise provided below, a ll disputes, controversies or claims arising out of or related to (a ) any alleged nonconformity of the equipment or breach of this R e n ta l Agreement by Rental Store, or (b) any alleged false, m is le a d in g , or fraudulent statement by Rental Store, or (c) any p rio r negotiations or dealings between Customer and Rental S to re , or (d) any maintenance or service performed by Rental S to re on the equipment or on any other related or unrelated p ro p e rty before or after the date of this rental agreement, or (f )[ sic ] any relationship resulting from any of the foregoing, w h e th e r based in tort, contract, warranty, or statutory or strict lia b ility shall be settled by binding arbitration under the FAA h e ld in Birmingham, Alabama in accordance with the C o m m e rc ia l Arbitration Rules of the American Arbitration A ss o c ia tio n . Judgment on the arbitrator's award may be entered b y any court of competent jurisdiction. The arbitrator shall be f a m ilia r with the equipment of the type involved in the dispute a n d shall, at the election of either party, be an attorney at law w h o has been licensed to practice at least 10 years. The a rb itra to r shall grant the parties the same relief, if any, that w o u ld be granted by a court of competent jurisdiction applying a p p l i c a b l e rules of law to the relevant facts. Any dispute on w h e th e r a particular dispute, claim or controversy is required to be settled by arbitration shall be decided by the arbitrator. The foregoing does not affect the right of either party to seek a ju d g m e n t in a court against the other on contract claim for b re a c h of an express agreement to pay money and for interest a n d costs of collection or to exercise any right to offset or selfh e lp repossession, or to see a court order for possession of p e rs o n a l property, or to seek injunction or their purely equitable re m e d y other than a stay of arbitration. The parties agree that th e commencement of litigation by either of them pursuant to th e preceding sentence or otherwise shall not operate as a waiver o r estoppel of the right to arbitrate any counterclaim or any s im ila r and that upon the giving of a notice of arbitration of the c o u n te rc la im or similar claim by any party hereto, the litigation o f the counterclaim shall be stayed and the counterclaim shall be s u b m itte d to binding arbitration hereunder. The parties hereby w a iv e the right to trial by jury of all disputes, controversies, and c la im s which they have hereby agreed to resolve by arbitration w h e th e r or not a dispute, claim or controversy is submitted to a rb itra tio n or is decided by a court. 3

(See Lease Agreement at Doc. # 1-2; Doc. # 13; & Doc. # 15-2; emphasis added). Federal c o n te n d s that it should not be compelled to arbitrate its claims because they are outside the s c o p e of the arbitration agreement. DISCUSSION The Federal Arbitration Act ("FAA") explicitly permits the use of arbitration and s p e c if ic a lly authorizes individuals in commercial transactions to contract for arbitration. 9 U .S .C . §§ 1-10. Congress enacted the FAA in 1925 to offset the "hostility of American c o u rts to the enforcement of arbitration agreements." Circuit City Stores, Inc. v. Adams, 532 U .S . 105, 111, 121 S. Ct. 1302, 149 L. Ed. 2d 234 (2001). Because the FAA evinces the " lib e ra l federal policy favoring arbitration," Moses H. Cone Mem'l Hosp. v. Mercury Constr. C o r p ., 460 U.S. 1, 24, 103 S. Ct. 927, 74 L. Ed. 2d 765 (1983), the legislation "compels ju d ic ia l enforcement of a wide range of written arbitration agreements." Circuit City, 532 U .S . at 111, 121 S. Ct. 1302. Pursuant to the FAA, a written arbitration provision in any c o n tra c t evidencing a transaction involving commence is enforceable unless legal or e q u ita b le grounds for the revocation of the contract exist. See 9 U.S.C. § 2. Section 4 of the FAA allows a "party aggrieved by the alleged failure, neglect, or re f u s a l of another to arbitrate under a written agreement" to petition the court "for an order d ire c tin g that such arbitration proceed." 9 U.S.C. § 4. When a court is "satisfied that the m a k in g of the agreement for arbitration or the failure to comply therewith is not in issue," th e court is required to "make an order directing the parties to proceed to arbitration in a c c o rd a n c e with the terms of the agreement." Id.

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There is no dispute that the transaction at issue involved interstate commerce. The F A A "provides for `the enforement of arbitration agreements within the full reach of the C o m m e rc e Clause.'" Citizens Bank v. Alafabco, Inc., 123 S. Ct. 2037, 2040 (2003). The re c o rd before this Court makes it clear that the dealings between the parties affected in te r s t a t e commerce. See, e.g., Pitchford v. AmSouth Bank, 285 F. Supp. 2d 1286, 1290 (M .D . Ala. 2003). Consequently, the arbitration agreement is within the scope of the FAA. T h u s , the issues before this Court are: whether the parties have agreed to arbitrate c la im s of the sort Federal has brought and whether the parties have agreed that an arbitrator, ra th e r than a court, must decide whether claims are within the scope of the arbitration a g re e m e n t. It is well established that arbitration is a creature of contract, and no party can b e compelled to submit a dispute to arbitration without having given prior contractual c o n s e n t to do so. See AT & T Tech., Inc. v. Communications Workers, 475 U.S. 643, 649 (1 9 8 6 ). Although the United States Supreme Court has made it clear that, the courts, not a rb itra to rs , ordinarily will decide whether or not a particular dispute is arbitrable, the parties m a y choose to have arbitrators resolve even the question of arbitrability. Id. at 649 (unless th e parties "clearly and unmistakably" provide otherwise "the question of arbitrabilityw h e th e r ... [an arbitration] agreement creates a duty for the parties to arbitrate the particular g rie v a n c e -is undeniably an issue for judicial determination."). The agreement here includes la n g u a g e which clearly and unmistakably provides that questions of arbitrability shall be d e te rm i n e d by the arbitrator. See Lease Agreement ("Any dispute on whether a particular d is p u te , claim or controversy is required to be settled by arbitration shall be decided by the

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arbitrator."). In the face of this unambiguous agreement, the Court must stay its action and a llo w the arbitrator to determine whether the parties have agreed that claims such as those b ro u g h t by Federal would be resolved by arbitration or if they remain outside the scope of th e parties' arbitration agreement. CONCLUSION F o r the foregoing reasons, this Court will not deny enforcement of the arbitration c la u s e . Accordingly, it is ORDERED as follows: 1 . The Motion of Leon Thomas McCord Jr. To Compel Arbitration and Stay P ro c e e d in g s (Doc. # 13) is GRANTED; 2 . The parties are required to present their dispute about the arbitrability of these c la im s to an arbitrator in accordance with their agreement. 3. It is further ORDERED that pursuant to 9 U.S.C. § 3, this action is hereby S T A Y E D pending the above ordered arbitration. 4. The parties are hereby ORDERED to file a jointly prepared report on the status of th is case. The first such report shall be filed on January 5, 2010, and the parties shall th e re a f te r file a jointly prepared report on the first Tuesday of every month until such time a s the parties jointly stipulate that this action can be dismissed. The jointly prepared report s h a ll indicate the status of the proceedings before the arbitrator, and the expected date th o s e proceedings will be concluded. D O N E this the 20th day of October, 2009. /s/ Mark E. Fuller CHIEF UNITED STATES DISTRICT JUDGE

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