PNC Bank, N.A. v. Presbyterian Retirement Corporation, Inc. et al

Filing 68

Order granting in part denying in part 56 MOTION to Compel Arbitration. This case is STAYED pending arbitration. PNC is ordered to file a Status Report by 5/26/2015 and on or before the 4th Tuesday of each month.The 65 MOTION to Stay Deadlines is moot. Signed by Chief Judge William H. Steele on 4/28/2015. (tgw)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
PNC BANK, N.A.,
Plaintiff,
v.
PRESBYTERIAN RETIREMENT
CORPORATION, INC., et al.,
Defendants.

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CIVIL ACTION 14-0461-WS-B

ORDER
This matter comes before the Court on plaintiff’s Motion to Compel Arbitration (doc.
56). The Motion has been extensively briefed, with both participating defendants having filed
objections (docs. 58 & 61) and movant having submitted replies (docs. 63 & 64) to each.1
I.

Background.
A.

Nature of the Lawsuit / Causes of Action.

Plaintiff, PNC Bank, N.A., commenced this action against defendants Presbyterian
Retirement Corporation, Inc. (“Presbyterian”) and The Special Care Facilities Financing
Authority of the City of Daphne (the “Authority”) back on October 2, 2014.2 Defendant
Infirmary Health System, Inc. (“Infirmary Health”) was granted leave to intervene via Order
(doc. 33) entered on November 4, 2014. At its core, this litigation is about Presbyterian’s default
1

In light of the issuance of this Order, plaintiff’s Motion to Stay Deadlines (doc.

65) is moot.
2

To date, the Authority has neither appeared nor defended in this action, even
though service of process was purportedly perfected on October 10, 2014. (See doc. 25.)
Notwithstanding the Authority’s failure to appear, PNC Bank has not applied for clerk’s entry of
default, perhaps because of plaintiff’s explanation in the pleadings that “[t]he Authority is named
as a defendant primarily to make sure that PNC Bank can obtain the complete relief it seeks
herein,” in that the Authority is a joint mortgagor for the subject real estate collateral. (Doc. 1, ¶
3.)

of debt-service obligations owed to PNC Bank. Those obligations were secured by Westminster
Village, a not-for-profit retirement community owned and operated by Presbyterian. PNC Bank
now asserts various claims against Presbyterian rooted in breach of contract. In those claims,
PNC Bank pursues monetary and equitable remedies arising from the alleged default, including
money damages in excess of $8.2 million and appointment of a receiver to manage and control
Westminster Village in anticipation of a proposed foreclosure sale. Infirmary Health is an
interested stakeholder because it is also a creditor of Presbyterian and a mortgagee as to
Westminster Village. The rub is that PNC Bank and Infirmary Health appear to have drastically
different ideas as to the disposition of that collateral.
Both defendants have asserted counterclaims against PNC Bank. For its part,
Presbyterian filed a Counterclaim (doc. 32) on October 31, 2014, through which it interposed
claims sounding in conversion, money had and received, negligence, and wantonness, based on
allegations that PNC Bank had wrongfully seized over $900,000 from Presbyterian accounts that
could not properly be used to satisfy the defaulted debt because they contained funds that donors
had restricted to specific purposes. Infirmary Health filed a Counterclaim (doc. 12) that took
effect on November 4, 2014, asserting that PNC Bank had violated an Intercreditor Agreement
that PNC Bank’s predecessor and Infirmary Health executed in December 2005 to clarify their
respective rights and duties with respect to Westminster Village and various related assets in
which they each hold interests. Infirmary Health seeks a declaratory judgment that PNC Bank
cannot enforce the Intercreditor Agreement against it and that Infirmary Health’s mortgage is
senior in priority to that of PNC Bank, as well as a money judgment for PNC Bank’s alleged
breaches of the Intercreditor Agreement.
B.

Litigation Activity.

The nature, extent and progress of these legal proceedings are relevant to consideration of
the pending Motion to Compel Arbitration. More than six months have passed since PNC Bank
commenced this litigation. Contemporaneously with filing the Complaint, PNC Bank requested
immediate appointment of a receiver for Westminster Village on an expedited basis. (Docs. 3 &
5.) The Court entered an Order (doc. 9) on October 7, 2014 denying expedited treatment of the
motion for appointment of receiver, given PNC Bank’s failure to show that Westminster Village
was likely to suffer catastrophic harm absent immediate resolution of the receivership question,
and PNC Bank’s longstanding awareness of the circumstances giving rise to the alleged need for

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urgent equitable relief. The motion for appointment of receiver was then briefed in full, after
which the Court entered an Order (doc. 35) denying PNC Bank’s motion. In so doing, the Court
reasoned as follows: (i) PNC Bank was not entitled to the extraordinary equitable remedy of
appointment of a receiver as a matter of contractual right; (ii) PNC Bank’s factual allegations
(i.e., that Westminster Village was being grossly mismanaged, operating in a manner that
compromised resident care, and teetering on the brink of financial collapse) were largely
unsupported by record facts; and (iii) equitable considerations such as the adequacy of less
drastic remedies and the likelihood that a receiver may do more harm than good weighed against
granting the requested relief.
In the wake of denial of the motion for appointment of receiver, this action proceeded for
several months along a normal federal civil litigation track. A motion for preliminary injunction
filed by Infirmary Health to block a contemplated March 2015 foreclosure sale of Westminster
Village was amicably resolved by consent of the parties. (See doc. 55.) The parties submitted
their Rule 26(f) Report (doc. 43) on December 29, 2014, after which Magistrate Judge Bivins
entered a comprehensive Rule 16(b) Scheduling Order (doc. 46). That Scheduling Order fixed a
discovery cutoff date of July 1, 2015, and set this matter for jury trial during November 2015.
On January 29, 2015, and apparently prior to any discovery having been taken by any
party, PNC Bank filed its Motion to Compel Arbitration, invoking arbitration clauses set forth in
Financing Agreements into which it had entered with Presbyterian in 2005 and 2006, as well as
an arbitration clause in the Intercreditor Agreement between PNC Bank and Infirmary Health.3
Presbyterian and Infirmary Health oppose the Motion on several theories, including chiefly that,
through its conduct in bringing and litigating this federal lawsuit, PNC Bank has waived its right
to enforce the arbitration agreements. Defendants also argue that the Motion should be denied
because, by violating the Intercreditor Agreement in multiple respects, PNC Bank has repudiated
that document, precluding it from enforcing the arbitration provision.

3

While briefing was underway on the Motion to Compel Arbitration, Infirmary
Health filed a Motion for Summary Judgment (doc. 59) on the issue of whether PNC Bank has
repudiated the Intercreditor Agrement; however, this Court stayed briefing on the Rule 56
motion pending resolution of the motion to compel arbitration. (See doc. 62.)

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C.

Relevant Contractual Terms.

PNC Bank points to three contracts containing arbitration clauses, to-wit: a 2005
Financing Agreement between PNC Bank’s predecessor and Presbyterian, a 2006 Financing
Agreement between the same parties, and the Intercreditor Agreement between PNC Bank’s
predecessor and Infirmary Health. These are the arbitration provisions that PNC Bank now
seeks to enforce via its request that this entire matter be referred to arbitration.
The two Financing Agreements contain virtually identical arbitration clauses providing
that “any action, dispute, claim, counterclaim or controversy … between or among [PNC Bank],
the Authority, and [Presbyterian], including any claim based on or arising from an alleged tort,
shall be resolved by arbitration.” (Doc. 56, Exh. B, at 1.) Covered disputes are defined as
encompassing “all actions, disputes, claims, counterclaims or controversies arising in connection
with the … Bond and Note, … any collection of any indebtedness owed to [PNC Bank], any
security or collateral given to [PNC Bank], [and] any action taken (or any omission to take any
action) in connection with any of the foregoing.” (Id.) Pursuant to the Financing Agreements,
all such disputes “shall be resolved by binding arbitration in accordance with Title 9 of the U.S.
Code and the Commercial Arbitration Rules of the American Arbitration Association.” (Id.)
Two other features of the arbitration clauses in the Financing Agreements warrant mention.
First, those provisions specify that “[i]f [Presbyterian] asserts a claim against [PNC Bank] in
arbitration or otherwise during the pendency of a claim brought by [PNC Bank] in a court of law,
the court action shall be stayed and the parties shall submit to arbitration all claims.” (Id. at 2.)
Second, they provide that “institution or maintenance of an action for judicial relief or pursuit of
provisional or ancillary remedies [such as appointment of a receiver] shall not constitute a waiver
of the right of any party, including the plaintiff in such an action, to submit the Dispute to
arbitration.” (Id.)
As for the Intercreditor Agreement entered into by PNC Bank’s predecessor and
Infirmary Health, a detailed arbitration provision may be found at Section 22. That clause
provides that “[a]ny controversy, claim or dispute or issue related to or arising from … the
interpretation, negotiation, execution, assignment, administration, repayment, modification, or
extension of this Agreement; … [or] any breach of any provision of this Agreement, shall be
settled by arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association.” (Doc. 56, Exh. A at Exh. 44, § 22(a).) The signatories further agreed

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that “[a]ny disagreement as to whether a particular dispute or claim is subject to arbitration under
this Section shall be decided by arbitration,” and that “[c]ommencement of litigation by any
person entitled to demand arbitration under this Section shall not waive any right that person has
to demand arbitration with respect to any counterclaim or other claim that may be made against
that person.” (Id.) Finally, with respect to provisional remedies (“such as replevin, injunctive
relief, attachment, or appointment of a receiver from a court having jurisdiction”), Section 22
establishes that “[t]he exercise of a remedy shall not waive the right of either Mortgagee to resort
to arbitration.” (Id. at § 22(c).)
II.

Analysis.
A.

Governing Legal Standard.

The Federal Arbitration Act (“FAA”), which governs plaintiff’s Motion, provides that
written agreements to arbitrate “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. In
conformity with the FAA, “courts must place arbitration agreements on an equal footing with
other contracts, and enforce them according to their terms.” Inetianbor v. CashCall, Inc., 768
F.3d 1346, 1349 (11th Cir. 2014) (citations omitted). “Arbitration is a matter of contract” and
“interpretation of an arbitration agreement is generally a matter of state law.” In re Checking
Account Overdraft Litigation MDL No. 2036, 674 F.3d 1252, 1255 (11th Cir. 2012). “We must
interpret the agreement by reading the words of the contract in the context of the entire contract
and construing the contract to effectuate the parties’ intent.” Inetianbor, 768 F.3d at 1353
(citation and internal quotation marks omitted); see also Stolt-Nielsen S.A. v. AnimalFeeds Int’l
Corp., 559 U.S. 662, 682, 130 S.Ct. 1758, 176 L.Ed.2d 605 (2010) (“Whether enforcing an
agreement to arbitrate or construing an arbitration clause, courts and arbitrators must give effect
to the contractual rights and expectations of the parties.”) (citation and internal quotation marks
omitted).
Significantly, the FAA creates a strong federal policy favoring enforcement of arbitration
agreements. Indeed, “federal courts interpret arbitration clauses broadly where possible,” such
that “any doubts concerning the scope of arbitral issues should be resolved in favor of
arbitration.” Solymar Investments, Ltd. v. Banco Santander S.A., 672 F.3d 981, 988 (11th Cir.
2012) (citations omitted). “When interpreting an arbitration agreement, due regard must be
given to the federal policy favoring arbitration, and ambiguities to the scope of the arbitration

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clause itself resolved in favor of arbitration.” Inetienbor, 768 F.3d at 1353 (citation and internal
quotation marks omitted). Of course, “the FAA’s strong proarbitration policy only applies to
disputes that the parties have agreed to arbitrate.” Klay v. All Defendants, 389 F.3d 1191, 1200
(11th Cir. 2004).
B.

Whether Waiver Issue is for Court or Arbitrator to Decide.

Presbyterian and Infirmary Health take the position that the claims joined herein are not
arbitrable because PNC Bank has waived its arbitration rights through its conduct in this
litigation. Notwithstanding the federal policy favoring arbitration, it is well-settled that
“[a]rbitration should not be compelled when the party who seeks to compel arbitration has
waived that right.” In re Checking Account Overdraft Litigation, 754 F.3d 1290, 1294 (11th Cir.
2014) (citation omitted). A critical threshold dispute presented in the parties’ briefs concerns
whether a court or an arbitrator should decide whether such a waiver has occurred. Via
unambiguous holding, the Eleventh Circuit has instructed “that it is presumptively for the courts
to adjudicate disputes about whether a party, by earlier litigating in court, has waived the right to
arbitrate.” Grigsby & Associates, Inc. v. M Securities Inv., 664 F.3d 1350, 1353 (11th Cir. 2011);
see also Plaintiff’s Shareholders Corp. v. Southern Farm Bureau Life Ins. Co., 486 Fed.Appx.
786, 789 (11th Cir. Aug. 10, 2012) (“questions regarding waiver based on litigation conduct are
presumptively for the courts – and not the arbitrators – to decide”). “This presumption leaves the
waiver issue to the decisionmaker with greater expertise in recognizing and controlling abusive
forum-shopping.” Grigsby, 664 F.3d at 1354 (citations omitted). “Thus, absent ‘clear and
unmistakable’ evidence of an agreement to the contrary, disputes regarding conduct-based
waiver are left to the courts to decide.” Plaintiff’s Shareholders, 486 Fed.Appx. at 789.4
Notwithstanding the Grigsby presumption, PNC Bank maintains that the conduct-based
waiver question is properly submitted to an arbitrator in this case because there is just such “clear
and unmistakable” evidence that the parties agreed to arbitrate waiver issues. The evidence upon
which PNC Bank relies consists of the following: (i) the language in Section 22 of the
Intercreditor Agreement that “[a]ny disagreement as to whether a particular dispute or claim is
4

Alabama law is consistent with these principles. Indeed, the Alabama Supreme
Court has held “that the issue whether a party has waived the right to arbitration by its conduct
during litigation is a question for the court and not the arbitrator.” Ocwen Loan Servicing, LLC
v. Washington, 939 So.2d 6, 14 (Ala. 2006).

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subject to arbitration under this Section shall be decided by arbitration;” (ii) the language in the
Financing Agreements that if Presbyterian brings a claim against PNC Bank during the pendency
of a claim brought by PNC Bank in court, “the parties shall submit to arbitration all claims;” and
(iii) references in all three agreements to the Commercial Arbitration Rules of the American
Arbitration Association (“AAA”). (See doc. 56, at 11-14.)5
The Court agrees with Infirmary Health and Presbyterian that PNC Bank has not made
the necessary showing to overcome the Grigsby presumption. The provisions on which PNC
Bank relies are general, not specific. They do not reference waiver issues, much less conductbased waiver issues. Language that the parties agree to arbitrate “all claims” is insufficient
because a waiver issue is not a “claim.” Similarly, a contractual provision that “[a]ny
disagreement as to whether a particular dispute or claim is subject to arbitration” will be
submitted to arbitration appears to contemplate arbitrability in its more general sense (e.g.,
whether a particular claim lies within the scope of the agreed arbitration provision),6 rather than
the very specific context of waiver. And a AAA rule empowering the arbitrator to decide
“arbitrability of any claim” likewise appears to refer to a different species of arbitrability, distinct
from the specialized question of waiver. Under these circumstances, the undersigned concludes
that PNC Bank has not come forward with clear and unmistakable evidence of an agreement by
the parties that conduct-based waiver questions were to be decided by the arbitrator; therefore,
the Grigsby presumption carries the day, and those waiver issues will be decided by this Court.
See, e.g., Plaintiff’s Shareholders, 486 Fed.Appx. at 790 (finding that conduct-based waiver
issue is not within scope of AAA Rule 7(a) because it is not an objection to validity of agreement
5

PNC Bank does not identify which of those Commercial Arbitration Rules it
deems relevant; however, Rule 7 specifies that “[t]he arbitrator shall have the power to rule on
his or her own jurisdiction, including any objections with respect to the existence, scope, or
validity of the arbitration agreement or to the arbitrability of any claim or counterclaim.” That
same rule provides that “[t]he arbitrator shall have the power to determine the existence or
validity of a contract of which an arbitration clause forms a part.”
6

See Marie v. Allied Home Mortgage Corp., 402 F.3d 1, 15 (1st Cir. 2005)
(explaining that the term “arbitrability” is one that “encompasses a wide variety of possible
meanings, but the most obvious meaning focuses on … whether a particular kind of dispute at
issue falls within the scope of the arbitration clause,” and that “[m]ost cases that discuss
arbitrability focus on these substantive issues”).

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and that “[m]oreover, Southern Farm is unable to point to (and we are unable to find) any other
contractual language that would constitute clear and unmistakable evidence of an agreement to
arbitrate issues of conduct-based waiver”).7
In light of the foregoing, this Court (and not an arbitrator) will decide whether PNC
Bank, via its litigation conduct herein, has waived its right to compel arbitration of this action.
C.

Waiver and the Intercreditor Agreement Arbitration Clause.

The Eleventh Circuit applies a two-part test to determine whether a party has waived its
right to arbitration. “First, we decide if, under the totality of the circumstances, the party has
acted inconsistently with the arbitration right,” such as by “substantially invok[ing] the litigation
machinery prior to demanding arbitration.” Garcia v. Wachovia Corp., 699 F.3d 1273, 1277
(11th Cir. 2012) (citations omitted). Second, the court examines whether those inconsistent
actions by the movant have “in some way prejudiced the other party,” based on such factors as
“the length of delay in demanding arbitration and the expense incurred by that party from
participating in the litigation process.” Id. (citations omitted).8 That said, “mere delay in
asserting a right to arbitrate, without more, does not require a finding of waiver.” Joca-Roca
Real Estate, LLC v. Brennan, 772 F.3d 945, 950 (1st Cir. 2014). “Because federal policy
strongly favors arbitration, the party who argues waiver ‘bears a heavy burden of proof’ under
this two-part test.” Krinsk v. SunTrust Banks, Inc., 654 F.3d 1194, 1200 n.17 (11th Cir. 2011)
7

See also Ehleiter v. Grapetree Shores, Inc., 482 F.3d 207, 222 (3rd Cir. 2007)
(“There are no references to waiver of arbitration in this or any other provision of the
Agreement. We cannot interpret the Agreement’s silence regarding who decides the waiver
issue here as giving the arbitrators that power, for doing so would force an unwilling party to
arbitrate a matter he reasonably would have thought a judge, not an arbitrator, would decide.”)
(citation and internal marks omitted); Marie, 402 F.3d at 15 (agreement that arbitrator is to
decide “the arbitrability of any such controversy or claim” does not constitute “clear and
unmistakable evidence” of intent to have arbitrator decide conduct-based waiver issue, because
“[t]here are no references to waiver or similar terms anywhere in the arbitration agreement” and
“[n]either party should be forced to arbitrate the issue of waiver by conduct without a clearer
indication in the agreement that they have agreed to do so”).
8

See also Joca-Roca Real Estate, LLC v. Brennan, 772 F.3d 945, 948 (1st Cir.
2014) (“In determining whether a conduct-based waiver has occurred, we ask whether there has
been an undue delay in the assertion of arbitral rights and whether, if arbitration supplanted
litigation, the other party would suffer unfair prejudice.”); Campbell v. Verizon Wireless, LLC,
2015 WL 416484, *7 (S.D. Ala. Jan. 29, 2015) (similar).

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(citations omitted). To vindicate this federal policy favoring arbitration, “waiver is not to be
lightly inferred, and will normally be found only where the demand for arbitration came long
after the suit commenced and when both parties had engaged in extensive discovery.” In re
Pharmacy Ben. Managers Antitrust Litigation, 700 F.3d 109, 117 (3rd Cir. 2012) (citations and
internal quotation marks omitted).
Application of the two-part Garcia test in this case is informed by the language of the
parties’ agreement; indeed, the Court looks to the contracts in the first instance to ascertain what
arrangements the parties may have made as to when a conduct-based waiver may occur. The
reason is simple: Arbitration is a matter of contract. See Checking Account, 674 F.3d at 1255.
Pursuant to the Federal Arbitration Act, those contracts are – and must be – rigorously enforced
according to their terms. See, e.g., Walthour v. Chipio Windshield Repair, LLC, 745 F.3d 1326,
1329 (11th Cir. 2014) (“Consistent with the FAA’s text, courts must rigorously enforce
arbitration agreements according to their terms.”) (citation and internal quotation marks omitted);
Cat Charter, LLC v. Schurtenberger, 646 F.3d 836, 843 (11th Cir. 2011) (“The FAA requires
courts to enforce privately negotiated agreements to arbitrate, like other contracts, in accordance
with their terms.”) (citation and internal quotation marks omitted). Federal courts are not free to
rewrite or disregard particular terms of an arbitration agreement to suit their purposes. See, e.g.,
Checking Account, 674 F.3d at 1256 (where party asked court to modify provision in arbitration
agreement, responding “[t]hat is something we cannot do”).9 Besides, given that one element of
9

See also BP Exploration Libya Ltd. v. ExxonMobil Libya Ltd., 689 F.3d 481, 496
(5 Cir. 2012) (“for the district court to substitute its own notion of fairness in place of the
explicit terms of the parties’ agreement would deprive them of the benefit of their bargain just as
surely as if the district court refused to enforce their decision to arbitrate”) (citation and internal
markings omitted); Williams v. E.F. Hutton & Co., 753 F.2d 117, 119 (D.C. Cir. 1985) (“The
arbitration agreement is a contract and the court will not rewrite it for the parties.”); Antonio
Leonard TNT Productions, LLC v. Goossen-Tutor Promotions, LLC, 2015 WL 269147, *7 (S.D.
Tex. Jan. 21, 2015) (“A court may not rewrite the parties’ arbitration agreements.”); Baran
Telecom, Inc. v. The Travelers Companies, Inc., 2010 WL 1141374, *3 (W.D. Okla. Mar. 22,
2010) (“The court will not rewrite the terms of a contract or arbitration clause to include more
favorable terms than the parties included for themselves.”); Ex parte Johnson, 993 So.2d 875,
885 (Ala. 2008) (where party asked court to decide issue that arbitration agreement reserved for
arbitrator, declining “to rewrite the agreements to suit the preference of one of the parties for an
immediate judicial determination” because “[s]uch indifference to the unambiguous terms of a
written agreement is contradictory to settled principles of Alabama contract law” and “[w]e
cannot create unique rules of contract law applicable only to arbitration agreements”).
th

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the Garcia test is whether the party seeking arbitration has behaved inconsistently with that right,
the parameters of conduct authorized in the underlying arbitration agreement are instructive as to
whether the movant’s conduct was consistent with the arbitration right.
Accordingly, the waiver inquiry as to the arbitration provision in the Intercreditor
Agreement properly begins with the relevant contract language. In that Intercreditor Agreement,
PNC Bank and Infirmary Health mutually agreed that “[c]ommencement of litigation by any
person entitled to demand arbitration under this Section shall not waive any right that person
has to demand arbitration with respect to any counterclaim or other claim that may be made
against that person.” (Doc. 56, Exh. A at Exh. 44, § 22(a) (emphasis added).) PNC Bank and
Infirmary Health likewise agreed that a party’s exercise of a provisional remedy (such as
applying to a court for appointment of receiver) “shall not waive the right of either Mortgagee to
resort to arbitration.” (Id. at § 22(c).)
Again, Infirmary Health bears the heavy burden of establishing that PNC Bank waived its
right to demand arbitration. The centerpiece of its argument is that PNC Bank filed suit, moved
for appointment of a receiver, and pursued other provisional remedies, all of which activities
Infirmary Health insists are inconsistent with the right to arbitrate. In floating such a theory,
Infirmary Health would have the Court disregard the plain language of the Intercreditor
Agreement, wherein Infirmary Health agreed that it was not a waiver (i) for PNC Bank to
commence litigation only to demand arbitration when another party asserted claims against it, or
(ii) for PNC Bank to exercise its rights to provisional remedies such as petitioning a court for
appointment of a receiver. For the reasons stated supra, this Court can neither ignore nor
effectively erase those terms from the Intercreditor Agreement simply because Infirmary Health
now regrets their inclusion. Having agreed that it was not inconsistent with PNC Bank’s right to
arbitrate Infirmary Health counterclaims for PNC Bank to commence litigation or to ask a court
to impose a provisional remedy such as appointment of a receiver, Infirmary Health cannot
persuasively be heard to argue otherwise.
Notwithstanding the foregoing, Infirmary Health seeks to minimize the debilitating
effects of Sections 22(a) and 22(c) on its waiver argument. In particular, Infirmary Health seizes
on the word “commencement” from Section 22(a), suggesting that the parties agreed only that
filing suit would not constitute a waiver, while remaining silent as to whether actually pursuing
said lawsuit after filing it would constitute a waiver. Applicable precedent highlights the

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unreasonableness of construing the arbitration provision as hinging on a filing / pursuing
distinction. See Conseco Finance Corp.-Alabama v. Salter, 846 So.2d 1077, 1082 (Ala. 2002)
(“It would be meaningless for Salter to agree that Conseco could file such an action in the trial
court without waiving its right to compel arbitration, but that Conseco could not pursue that
action without waiving its right to compel arbitration.”). As for Section 22(c), Infirmary Health
contends that this provision was intended solely to “ensure[] the process of arbitration itself
would not extinguish legal remedies.” (Doc. 58, at 18.) The text of Section 22(c) belies such a
crabbed, unreasonably narrow construction. To be sure, subsection (c) begins by specifying that
the arbitration clause does not limit a party’s ability to seek a provisional remedy such as
appointment of a receiver “before, during or after the pendency of any arbitration proceeding.”
Had subsection (c) ended there, Infirmary Health might have a point; however, Section 22(c)
goes on to clarify that “[t]he exercise of a remedy shall not waive the right of either Mortgagee to
resort to arbitration.” That sentence could not be a clearer refutation of Infirmary Health’s
position that the purpose of Section 22(c) was merely to prevent arbitration proceedings from
snuffing out legal remedies.10
What all of this means for purposes of the two-part test for waiver of the contractual right
to arbitrate is that PNC Bank has not acted inconsistently with the right to arbitrate counterclaims
brought by Infirmary Health (which are the only claims directly involving that party, as PNC
Bank has asserted no causes of action in law or equity against Infirmary Health). Again,
Infirmary Health and PNC Bank agreed that PNC Bank’s act of filing suit would not waive its
right to demand arbitration of subsequent counterclaims brought by Infirmary Health. And
Infirmary Health and PNC Bank further agreed that PNC Bank’s act of pursuing a provisional
remedy like judicial appointment of a receiver would not waive PNC Bank’s right to demand
arbitration. By the terms of the Intercreditor Agreement, PNC Bank’s conduct in this litigation is
not inconsistent with its right to arbitrate the counterclaims brought by Infirmary Health. Nor
has the litigation of Infirmary Health’s counterclaims (as to which there has been no discovery
10

Infirmary Health offers no rejoinder or interpretation of the last sentence of
Section 22(c) that might help its cause. Instead, Infirmary Health asserts that “nowhere in
Section 22(c) does ‘waiver’ appear.” (Doc. 56, at 18.) Perhaps the word “waiver” does not
appear in that subsection, but the word “waive” certainly does, in a manner that is both directly
on-point and wholly inconsistent with the “waiver” argument propounded by Infirmary Health.

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and no motion practice other than Infirmary Health’s Motion for Preliminary Injunction that was
resolved amicably without judicial involvement) progressed so far as to warrant a finding that
PNC Bank unduly delayed after the Infirmary Health counterclaims were filed before moving to
compel arbitration.11
In sum, the Court is of the opinion that Infirmary Health has failed to meet its heavy
burden to establish a conduct-based waiver of PNC Bank’s arbitration rights with respect to the
Infirmary Health counterclaims. The parties specifically agreed that PNC Bank could file a
lawsuit without waiving its rights to arbitrate any counterclaims that Infirmary Health might
bring, and that PNC Bank could ask a court to appoint a receiver without waiving its arbitration
rights. The Court will neither rewrite nor disregard that prior agreement and understanding
between the parties, particularly in the absence of excessive or unreasonable delay by PNC Bank
in asserting such arbitration rights after the filing of the Infirmary Health counterclaims.12
11

On this point, the court file reflects that Infirmary Health was granted leave to
intervene on November 4, 2014 (see doc. 33), such that its counterclaims first came into play on
that date. While PNC Bank did not move for arbitration until January 29, 2015, there appears to
have been minimal activity as to the counterclaims in the interim. It is undisputed that no
discovery occurred; furthermore, there was no motion practice related to the counterclaims other
than Infirmary Health’s request for preliminary injunction that was resolved by agreement of the
parties. There is simply no indication that PNC Bank allowed Infirmary Health’s counterclaims
to proceed in court to such a degree that PNC Bank could reasonably be deemed to have
substantially invoked the litigation process as to those counterclaims prior to exercising its
arbitration rights. Nor has there been any adjudication of Infirmary Health’s counterclaims in
these judicial proceedings, such that Infirmary Health’s characterization of the Motion to
Compel Arbitration as a game of “heads I win, tails you lose” or blatant forum-shopping is
inaccurate.
12

The Court recognizes, of course, that Infirmary Health has presented an
alternative argument that the Motion to Compel Arbitration should be denied because PNC Bank
effectively repudiated and abandoned the Intercreditor Agreement. The argument, as the Court
understands it, is that PNC Bank has repeatedly engaged in material breaches of its obligations
under the Intercreditor Agreement, and that “[t]he Court should not allow PNC Bank to cherry
pick the provisions of the Intercreditor Agreement that it would like to enforce.” (Doc. 58, at 2.)
So, Infirmary Health reasons, PNC Bank’s breaches of the Intercreditor Agreement disqualify it
from being able to enforce any aspect of that agreement (including the arbitration clause set forth
in Section 22) against Infirmary Health. This argument amounts to a direct attack against the
validity of the arbitration provision (i.e., that PNC Bank has breached the Intercreditor
Agreement, rendering the arbitration provision in that Agreement invalid and unenforceable).
That, however, is a question for the arbitrator to decide, per the parties’ agreement. As noted,
Section 22(a) of the Intercreditor Agreement adopted the AAA’s Commercial Arbitration Rules.
(Continued)
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D.

Waiver and the Financing Agreement Arbitration Clauses.

Having addressed the Motion to Compel Arbitration as it pertains to the Intercreditor
Agreement and the counterclaims of Infirmary Health, the Court now turns to the Financing
Agreements and the claims joined herein between PNC Bank and Presbyterian. Recall that in the
October 2014 Complaint, PNC Bank asserted claims against Presbyterian for breach of contract
and the like, alleging that Presbyterian was in default of certain loan repayment obligations owed
to PNC Bank. As part and parcel of those claims, PNC Bank sought immediate appointment of a
receiver to take control of the mortgaged real property, Westminster Village. That motion was
litigated and ultimately denied via Order entered on November 13, 2014. During the pendency
of that motion to appoint receiver, on October 31, 2014, Presbyterian brought counterclaims
against PNC Bank on grounds such as conversion, money had and received, negligence and
wantonness, all arising from PNC Bank’s allegedly improper seizure of financial accounts
belonging to Presbyterian. Thus, at present, PNC Bank and Presbyterian have asserted claims
against each other for money damages, with PNC Bank also continuing to claim entitlement to
appointment of a receiver. PNC Bank now seeks to have all claims and issues joined between it
and Presbyterian referred to arbitration in accordance with substantively identical arbitration
provisions contained in a pair of underlying Financing Agreements entered into between
Presbyterian and PNC Bank’s predecessor some years ago.

In Rule 7, those Commercial Arbitration Rules specify that “[t]he arbitrator shall have the power
to determine the existence or validity of a contract of which an arbitration clause forms a part.”
Pursuant to the rules expressly adopted by the parties, then, questions going to the validity of the
Intercreditor Agreement (which is precisely what Infirmary Health is challenging via its
contention that PNC Bank has repudiated / abandoned that entire agreement) are properly
submitted to the arbitrator for resolution. The Court therefore expresses no opinion as to whether
the arbitration agreement has been invalidated by PNC Bank’s alleged breaches, but instead
refers that question to arbitration. See generally Martinez v. Carnival Corp., 744 F.3d 1240,
1246 (11th Cir. 2014) (“a court may conclude that the parties agreed to arbitrate the very issue of
arbitrability where there is clear and unmistakable evidence that they did so”) (citation and
internal quotation marks omitted); Terminix Int’l Co. v. Palmer Ranch Ltd. Partnership, 432
F.3d 1327, 1332 (11th Cir. 2005) (“By incorporating the AAA Rules, including Rule 8, into their
agreement, the parties clearly and unmistakably agreed that the arbitrator should decide whether
the arbitration clause is valid.”) (citations omitted).

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Presbyterian does not challenge the existence of the arbitration agreement, the
applicability of the FAA, or the premise that PNC Bank’s claims against it are covered by the
arbitration agreement. Instead, just as Infirmary Health did in arguing about the arbitration
clause set forth in the Intercreditor Agreement, Presbyterian maintains that PNC Bank, through
its conduct in this litigation, has waived the right to demand arbitration under the Financing
Agreements.13 Once again, the parties agree that this argument is properly evaluated by
reference to the two-pronged test set forth in Garcia v. Wachovia Corp., 699 F.3d 1273, 1277
(11th Cir. 2012), to-wit: (i) whether PNC Bank has acted inconsistently with the right to arbitrate;
and (ii) if so, whether PNC Bank’s conduct in this litigation has prejudiced Presbyterian.
As with the Infirmary Health waiver objection, the appropriate analytical starting point is
the contract language regarding arbitration and waiver issues. One cannot evaluate whether PNC
Bank acted inconsistently with its right to arbitration unless one knows the contractual contours
of that right (i.e., the provisions stating what PNC Bank could and could not do). Significantly,
the Financing Agreements specify that if PNC Bank brings a claim against Presbyterian in a
court of law, and Presbyterian subsequently brings a claim against PNC Bank, then “the court
13

In addition to asserting a conduct-based waiver defense to the Motion to Compel
Arbitration, Presbyterian references the Intercreditor Agreement and states that “PNC Bank has
repudiated the arbitration clause it seeks to enforce.” (Doc. 61, at 2, 7.) This argument is a nonstarter for Presbyterian, which was not a party to the Intercreditor Agreement. PNC Bank is not
seeking to enforce the Intercreditor Agreement’s arbitration clause as to the claims and issues
joined between PNC Bank and Presbyterian; rather, as to those claims, PNC Bank seeks to
enforce the arbitration provisions in the Financing Agreements entered into between PNC Bank
and Presbyterian. Presbyterian does not suggest that PNC Bank has repudiated the Financing
Agreements; therefore, its repudiation argument is misplaced. Presbyterian’s reasoning is,
apparently, that the claims between PNC Bank and Presbyterian and those between PNC Bank
and Infirmary Health are “inextricably intertwined,” such that all of these claims must travel
together, whether in arbitration or in litigation. (See doc. 61, at 8-9.) As an initial matter, it is far
from obvious that all claims and causes of action joined herein are inextricably intertwined with
each other. Besides, arbitration need not be an all-or-nothing proposition, given the variation in
both the claims presented and the arbitration clauses governing particular claims and issues.
More generally, if Presbyterian intends to hitch its wagon to Infirmary Health on the arbitration
question by insisting that all claims travel together, then this argument would actually undercut
Presbyterian’s opposition to the Motion to Compel Arbitration because, as discussed supra, the
Court has already referred the PNC Bank / Infirmary Health claims to arbitration, subject to the
arbitrator making a threshold determination about the validity of Section 22 of the Intercreditor
Agreement (i.e., the repudiation / abandonment argument).

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action shall be stayed and the parties shall submit to arbitration all claims.” (Doc. 56, Exh. B, at
2.) Furthermore, the Financing Agreements include a provision under which PNC Bank and
Presbyterian agreed that “institution or maintenance of an action for judicial relief or pursuit of
provisional or ancillary remedies shall not constitute a waiver of the right of any party, including
the plaintiff in such an action, to submit the Dispute to arbitration.” (Id.)
These contractual terms undermine Presbyterian’s position on the Motion to Compel
Arbitration. For example, Presbyterian posits that “PNC Bank sealed its choice to reject
arbitration by filing this litigation, waiving any right to compel arbitration” and that “PNC Bank
waived arbitration by filing the PNC Bank Complaint.” (Doc. 61, at 10-12.) But Presbyterian
had previously agreed that PNC Bank’s institution of litigation against it or pursuit of provisional
remedies such as appointment of a receiver would not constitute a waiver. Similarly,
Presbyterian balks that PNC Bank sought “extraordinary judicial relief from this Court, and then
revert[ed] to the cover of arbitration when it dislike[d] the results.” (Id. at 3.) Once again, the
relevant arbitration provisions (to which Presbyterian assented) authorized PNC Bank to seek
extraordinary judicial relief in court, without waiving its rights to demand arbitration. More
broadly, by moving to compel arbitration now, PNC Bank is doing precisely what the arbitration
provisions in the Financing Agreements contemplated. The parties’ agreement specified that if
PNC Bank were to sue Presbyterian, and if Presbyterian were subsequently to bring claims
against PNC Bank, then the court action was to be stayed and “all claims” were to be referred to
arbitration. Thus, PNC Bank’s Motion to Compel Arbitration would merely effectuate that
which the parties’ agreement said was supposed to happen.
The point is straightforward. Applicable law requires Presbyterian (as the party seeking a
determination of waiver of the arbitration provisions) to establish that PNC Bank acted
inconsistently with its right of arbitration. The relevant contract terms establish the opposite.
Presybterian and PNC Bank agreed that PNC Bank could bring a court action for judicial relief
and/or provisional remedies such as appointment of a receiver without waiving its right to
arbitrate. They further agreed that if Presbyterian brought claims against PNC Bank during the
pendency of such a court action, the entire court action should be stayed at that point and all

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claims should be referred to arbitration. PNC Bank’s conduct is fully consistent with these
arbitration provisions and, hence, with its right to arbitrate.14

14

Presbyterian offers several arguments to the contrary, none of which resonate.
First, Presbyterian urges the Court to “reject PNC Bank’s construction of the arbitration
language” (doc. 61, at 8) as being inequitable. In so advocating, Presbyterian likens this
situation to the undersigned’s decision to override contract language by declining to appoint a
receiver. The analogy is ill fitting. Appointment of a receiver is an extraordinary, disfavored
equitable remedy; meanwhile, referral of disputes to arbitration is backed by a broad federal
policy of enforcing arbitration agreements. Unlike in the case of agreements consenting to
receivership, courts rigorously enforce arbitration agreements in accordance with their terms.
Compare F.D.I.C. v. Vernon Real Estate Investments, Ltd., 798 F. Supp. 1009, 1012 (S.D.N.Y.
1992) (“the court has the discretion to deny appointment of a receiver under the appropriate
circumstances even though the mortgage provides the mortgagee a specific right to an
appointment”) with Walthour v. Chipio Windshield Repair, LLC, 745 F.3d 1326, 1329 (11th Cir.
2014) (“courts must rigorously enforce arbitration agreements according to their terms”).
Second, Presbyterian argues that PNC Bank did not demand arbitration at the earliest possible
moment after Presbyterian’s counterclaims were filed, but instead waited until after preparing the
report of parties’ planning meeting, exchanging initial disclosures, and so on. (Doc. 61, at 3, 1213.) However, decisional authorities emphasize that “[t]here are no per se rules as to the length
of delay necessary to amount to waiver” and that “[t]he length of delay must be evaluated in the
context of litigation activities engaged in during that time.” Restoration Preservation Masonry,
Inc. v. Grove Europe Ltd., 325 F.3d 54, 61 (1st Cir. 2003); see also Joca-Roca, 772 F.3d at 950
(“mere delay in asserting a right to arbitrate, without more, does not require a finding of
waiver”). From the time that Presbyterian filed counterclaims on October 31, 2014 (thereby
triggering the contractual provision that the court action should be stayed and the matter referred
to arbitration) until PNC Bank moved to compel arbitration on January 29, 2015, PNC Bank did
little to invoke the machinery of litigation. During that interval, PNC Bank merely participated
in the parties’ planning meeting, contributed to the Rule 26(f) report, filed a brief in opposition to
a motion for preliminary injunction, and agreed to a consent resolution of said motion. That’s
all. Such activities are insufficient to constitute substantial invocation of litigation, as necessary
to overcome the presumption against waiver. See, e.g., Coca-Cola Bottling Co. of New York,
Inc. v. Soft Drink and Brewery Workers Union Local 812, 242 F.3d 52, 57-58 (2nd Cir. 2001)
(“neither filing an answer nor waiting four months to seek arbitration was sufficient to constitute
a waiver”); Subway Equipment Leasing Corp. v. Forte, 169 F.3d 324, 326 (5th Cir. 1999) (noting
“strong presumption against waiver of arbitration”). Third, Presbyterian argues that PNC Bank
failed to list the arbitration clause as an affirmative defense to any counterclaims; however, such
an omission does not mandate a finding of waiver. See Hill v. Ricoh Americas Corp., 603 F.3d
766, 771 (10th Cir. 2010) (rejecting argument that movant “forfeited its right to demand
arbitration by not asserting that right as an affirmative defense in its answer”); Forrester v. Penn
Lyon Homes, Inc., 553 F.3d 340, 343 (4th Cir. 2009) (“simply failing to assert arbitration as an
affirmative defense does not constitute default of a right to arbitration”).

-16-

Ultimately, PNC Bank has done nothing more than what Presbyterian agreed in the
Financing Agreements that PNC Bank could do. It came to federal court requesting appointment
of a receiver as a provisional remedy which, according to the parties’ contract, does not
constitute a waiver of arbitration rights. Later, when Presbyterian asserted counterclaims against
it, PNC Bank within a reasonable time invoked the contractual provision that the federal
litigation should be stayed and all claims referred to arbitration. PNC Bank has acted
consistently with the arbitration provisions of the Financing Agreements; therefore, it cannot be
said to have conducted itself inconsistently with its right to arbitration. On that basis, the Court
concludes that Presbyterian has not satisfied its heavy burden of establishing that PNC Bank has
waived its right to arbitrate the claims and issues joined herein between PNC Bank and
Presbyterian. All such claims and issues will be referred to arbitration.15
III.

Conclusion.
The Federal Arbitration Act “embodies a liberal federal policy favoring arbitration

agreements.” Hill v. Rent-a-Center, Inc., 398 F.3d 1286, 1288 (11th Cir. 2005) (citation and
internal quotation marks omitted). While such arbitration rights may be waived, the party
seeking to establish such a waiver bears a heavy burden. Here, the parties opposing arbitration –
Infirmary Health and Presbyterian – cannot satisfy that burden. They are sharply critical of PNC
Bank’s litigation conduct; however, PNC Bank did exactly what its arbitration agreements with
15

In so concluding, the Court considers and rejects Presbyterian’s cursory
contention that its “counterclaims (the conversion of donor or otherwise restricted funds) lie
outside the scope of [Presbyterian]’s contracts with PNC Bank and are not subject to any
arbitration provision.” (Doc. 61, at 2.) The arbitration provisions in the Financing Agreements
expressly cover “all actions … arising in connection with the … Bond and Note, … any
collection of any indebtedness owed to [PNC Bank], … [and] any action taken … in connection
with any of the foregoing.” (Doc. 56, Exh. B, at 1.) Presbyterian’s counterclaims – alleging that
PNC Bank wrongfully converted its assets to collect on the outstanding indebtedness – fit
comfortably within that defined range of claims the parties agreed to submit to arbitration.
Likewise, Presbyterian’s purported “substantive defense” that it “demanded a jury trial on its
counterclaims” is unavailing. (Doc. 61, at 7.) Where a party has agreed to submit its claims to
arbitration, the right to a jury trial must yield. See, e.g., Caley v. Gulfstream Aerospace Corp.,
428 F.3d 1359, 1371 (11th Cir. 2005) (“where a party enters into a valid agreement to arbitrate,
the party is not entitled to a jury trial or to a judicial forum for covered disputes”); American
Heritage Life Ins. Co. v. Orr, 294 F.3d 702, 711 (5th Cir. 2002) (“The Seventh Amendment right
to a trial by jury is limited by a valid arbitration provision that waives the right to resolve a
dispute through litigation in a judicial forum.”).

-17-

these parties allowed it to do. The Court cannot rewrite or refashion the terms of those
arbitration agreements, which were negotiated and entered into by sophisticated business entities,
merely because certain parties now dislike the foreseeable consequences of same.
For all of the foregoing reasons, it is ordered as follows:
1.

PNC Bank’s Motion to Compel Arbitration (doc. 56) is granted in part, and
denied in part;

2.

PNC Bank’s request to have the question of litigation conduct-based waiver be
referred to the arbitrator is denied;

3.

In all other respects, the Motion to Compel Arbitration is granted;

4.

The Court finds that PNC Bank, through its litigation conduct, has not waived its
right to arbitrate all disputes joined in this litigation with Presbyterian and
Infirmary Health, and that (subject to paragraph 5, below) all such disputes are
properly referred to arbitration at this time in accordance with the written
arbitration agreements;

5.

The Court finds that the threshold questions of whether PNC Bank has repudiated
or abandoned the Intercreditor Agreement through its alleged violations of same,
and whether any such violations invalidate the arbitration provision found at
Section 22, are properly referred to arbitration pursuant to Rule 7 of the
Commercial Arbitration Rules of the AAA, to which all parties agreed;

6.

The issues identified in paragraphs 4 and 5 are hereby referred to binding
arbitration in accordance with the parties’ agreements;

7.

There being no remaining issues for litigation in these court proceedings, this
action is stayed pending arbitration. To keep the Court apprised of developments
in the arbitral proceedings, PNC Bank is ordered to file, on or before the fourth
Tuesday of each month, a written report reflecting the status of the arbitration
proceedings. The first such report is due on or before May 26, 2015; and

8.

Plaintiff’s Motion to Stay Deadlines (doc. 65) is moot.

DONE and ORDERED this 28th day of April, 2015.
s/ WILLIAM H. STEELE
CHIEF UNITED STATES DISTRICT JUDGE
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