Sagicor Life Insurance Company v. Houchins et al
MEMORANDUM OPINION AND ORDER Based on the foregoing, Houchins and Third Financial's motion to compel arbitration 54 is GRANTED.. Signed by Judge Abdul K Kallon on 12/6/2018. (AFS)
2018 Dec-06 AM 08:59
U.S. DISTRICT COURT
N.D. OF ALABAMA
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
SAGICOR LIFE INSURANCE
EUGENE E. HOUCHINS, III, et al.,
Civil Action Number
MEMORANDUM OPINION AND ORDER
Sagicor Life Insurance Company filed this action seeking recovery of
commissions it paid to Eugene E. Houchins, III, William I. Davis, and Third
Financial, Inc. for the sale of life insurance policies. Doc. 27. Sagicor alleges that
the defendants earned the commissions by engaging in an illegal rebating scheme,
and asserts claims for breach of contract, unjust enrichment, and conversion. Id.
Presently before the court is Houchins and Third Financial’s motion to compel
arbitration, doc. 54, which is due to be granted.
FACTUAL AND PROCEDURAL BACKGROUND
Sagicor entered into Producer Agreements with Houchins, Davis, and Third
Financial, which granted the defendants the right to sell life insurance policies
issued by Sagicor and to earn commissions for the sale of the policies. Docs. 27 at
¶¶ 14-15; 31-1; 32-1. Under the terms of the agreements, the defendants earned
the highest commission in the year they sell a policy. See doc. 27 at ¶ 17. In that
first year, the commission could be as much as 125% of the premium.
Allegedly, the defendants engaged in a rebating scheme, whereby they solicited
life insurance applications in Alabama and North Carolina by offering to pay the
insured all or part of the first year premium for the policies. Id. at ¶¶ 26, 28-29.
While purportedly utilizing this scheme, Houchins submitted six applications to
Sagicor, resulting in the issuance of five policies for which he received over
$880,000 in commissions. Id. at ¶ 27.1 All five policies lapsed a year later. Id.
The alleged rebating scheme violates Alabama, North Carolina, and Florida
law 2 and Sagicor’s policies. Doc. 27 at ¶¶ 25, 30, n.1. In addition, because the
Producer Agreements require the defendants to “solicit applications in accordance
with applicable state laws and regulations, [and] the rules and regulations of the
Company,” see doc. 31-1 at ¶ 1.1, Sagicor asserts that the defendants’ conduct
breached the terms of the Producer Agreements. Doc. 27 at ¶¶ 31-39. Based on
the defendants’ alleged scheme and breach of the Producer Agreements, Sagicor
initiated this action, asserting claims for breach of contract, unjust enrichment, and
conversion. Doc. 27. For their part, the defendants assert breach of contract
Houchins shared a portion of his commissions with Davis and assigned his portion to
Third Financial. Doc. 27 at ¶¶ 5, 16.
The Producer Agreements provide that they “shall be interpreted and enforced under the
laws of Florida . . . .” Docs. 31-1 at ¶ 16; 32-1 at ¶ 16.
counterclaims based on their allegations that Sagicor provided them with software
that produced inaccurate projections of returns and future premiums for the
policies. Docs. 44; 45.
Houchins and Third Financial move to compel arbitration pursuant to the
Federal Arbitration Act (“FAA”), 9 U.S.C. § 1, et seq. Doc. 54. “The FAA
embodies a ‘liberal federal policy favoring arbitration agreements.’” Hill v. RentA-Center, Inc., 398 F.3d 1286, 1288 (11th Cir. 2005) (quoting Moses H. Cone
Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983)). “By its terms, the
Act leaves no place for the exercise of discretion by a district court, but instead
mandates that district court shall direct the parties to proceed to arbitration on
issues as to which an arbitration agreement had been signed.”
Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985) (emphasis in original). And, “as
a matter of federal law, any doubts concerning the scope of arbitrable issues should
be resolved in favor of arbitration . . . .” Moses H. Cone Mem’l Hosp., 460 U.S. at
Although federal policy favors arbitration agreements, “the question of
whether a contract’s arbitration clause requires arbitration of a given dispute
remains a matter of contract interpretation.” Seaboard Coast Line R. Co. v. Trailer
Train Co., 690 F.2d 1343, 1348 (11th Cir. 1982) (citations omitted). Accordingly,
“a party cannot be required to submit to arbitration any dispute which he has not
agreed to so submit.” Steelworkers v. Warrior & Gulf Nav. Co., 363 U.S. 574, 582
(1960). Federal courts generally apply state contract law to determine if the parties
agreed to arbitrate a dispute. First Options of Chicago, Inc. v. Kaplan, 514 U.S.
938, 944 (1995) (citations omitted).
Whether this action is within the scope of the arbitration agreement
Generally, the court must consider (1) whether a valid written agreement to
arbitrate exists and (2) whether the agreement encompasses the dispute. See Green
Tree Fin. Corp. v. Bazzle, 539 U.S. 444, 452 (2003). Here, however, Sagicor does
not dispute the existence of an arbitration agreement. See doc. 62. See also docs.
31-1 at ¶ 15; 32-1 at ¶ 15 (the Producer Agreements stating “[i]f any dispute or
disagreement shall arise in connection with any interpretation of this agreement, . .
. [and] the parties cannot agree on a written settlement within (90) ninety days after
it arises, . . . then the matter in controversy shall be settled by arbitration, in
accordance with the rules of the American Arbitration Association . . . .”). Sagicor
challenges the second prong instead, arguing that its claims “do not arise solely
from the contract” and are based also on the defendants’ alleged statutory
violations. Doc. 62 at 6. This contention is unavailing because assessing whether
parties agreed to arbitrate a claim is not dependent on whether the claim arises
solely from the contract containing the arbitration agreement. Rather, the analysis
hinges on whether the claims “raise some issue the resolution of which requires
reference to or construction of some portion of the contract itself.” See Seifert v.
U.S. Home Corporation, 750 So. 2d 633, 638 (Fla. 1999) (citations omitted).
Relevant here, it is undisputed that this case involves breach of contract
claims and counterclaims, which will require reference to the Producer
Similarly, Sagicor’s unjust enrichment and conversion claims
seeking recovery of the allegedly ill-gotten commissions, see doc. 27 at 11-12, also
require reference to the Agreements to determine whether the defendants were
entitled to the commissions. In that respect, the presence of additional alleged
statutory violations do not nullify the parties’ agreement to arbitrate their disputes.
As for the cases Sagicor cites in opposition to arbitration, none involves breach of
contract claims, or claims that require reference to a contract between the parties.
See Seifert, 750 So. 2d at 635 (involving a wrongful death claim); King Motor Co.
of Fort Lauderdale v. Jones, 901 So. 2d 1017, 1017 (Fla. Ct. App. 2005)
(involving negligence, gross negligence, unfair and deceptive trade practices, and
violation of the Credit Services Organization Act claims); Terminix Int’l Co. v.
Michaels, 668 So. 2d 1013 (Fla. Ct. App. 1996) (involving negligence and strict
liability claims). Thus, Sagicor’s reliance on those cases for its contention that the
arbitration agreement does not apply to this dispute is misplaced. Therefore,
because the claims and counterclaims in this action relate to the parties’
performance under the Producer Agreements, see docs. 27; 44; 45, and the
resolution of the claims and counterclaims will require reference to the Producer
Agreements, see Seifert, 750 So. 2d at 638, the arbitration agreement encompasses
Whether the defendants waived their right to arbitrate
Sagicor argues alternatively that the defendants waived their right to
arbitrate by initially responding to Sagicor’s complaint with a letter requesting that
the parties make a good faith attempt to amicably resolve the dispute, and by
substantially invoking the litigation process in this case. Doc. 62 at 8-10. See also
doc. 62-1. Whether a party waived its right to arbitrate is a question of federal law.
S&H Contractors, Inc. v. A.J. Taft Coal Co., 906 F.2d 1507, 1514 (11th Cir. 1990)
(citations omitted). In this Circuit, the analysis requires that the court decide:
(1) if “‘under the totality of the circumstances, the party has acted inconsistently
with the arbitration right;’” and (2) whether by so acting, “‘that party has in some
way prejudiced the other party.’” Garcia v. Wachovia Corp., 699 F.3d 1273, 1277
(11th Cir. 2012) (quoting Ivax Corp. v. B. Braun of Am., Inc., 286 F.3d 1309,
1315-16 (11th Cir. 2002)).
An analysis of these two factors favors arbitration. First, that the defendants
expressed an intent to resolve the dispute is not evidence of a waiver because the
agreement requires the parties to “make every effort to meet and settle their
disputes in good faith informally” before proceeding to arbitration. Doc. 31-1 at
¶ 15. Similarly, that Houchins and Third Financial waited almost seven months to
file their motion to compel arbitration is not dispositive on the waiver issue
because the answer they filed raised arbitration as an affirmative defense by
contending that Sagicor “failed to perform necessary conditions precedent prior to
filing” suit. See doc. 32 at 8-9. Moreover, Sagicor does not assert that the
defendants’ delay in filing their motion prejudiced it, see doc. 62, which is a
required element in this circuit on the waiver issue, see Garcia, 699 F.3d at 1277.
In short, Sagicor has not demonstrated that the defendants waived their right to
arbitrate this dispute.
CONCLUSION AND ORDER
Based on the foregoing, Houchins and Third Financial’s motion to compel
arbitration, doc. 54, is hereby GRANTED. Consistent with the discussion held
during the discovery conference, and with the parties’ agreement, see doc. 66, the
court will retain jurisdiction over this matter for the purposes of discovery, which
is slated to end on April 5, 2019, see doc. 65. Thereafter, the court will order the
parties to proceed to arbitration and will dismiss the case without prejudice to the
parties moving to reopen to enforce or vacate the arbitration award. 3
See, e.g., Bercovitch v. Baldwin Sch., Inc., 133 F.3d 141, 156 n.21 (1st Cir. 1998) (“[A]
court may dismiss, rather than stay, a case when all of the issues before the court are
arbitrable.”); see also L.E.A. Dynatech, Inc. v. Allina, 49 F.3d 1527, 1530 (Fed. Cir. 1995)
DONE the 6th day of December, 2018.
ABDUL K. KALLON
UNITED STATES DISTRICT JUDGE
(“[D]ismissal without prejudice may operate as an alternative to a stay of proceedings.”); Caley
v. Gulfstream Aerospace Corp., 333 F. Supp. 2d 1367, 1379 (N.D. Ga. 2004) (compelling
arbitration and dismissing the case, stating that “[t]he weight of the authority clearly supports
dismissal of the case when all of the issues raised in the district court must be submitted to
arbitration”) (emphasis in original), aff’d 428 F.3d 1359 (11th Cir. 2005).
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