Maggard et al v. CCC Information Services, Inc.

Filing 55

MEMORANDUM Opinion: In court ruling held. CCC Information Service Inc.s motion to compel appraisal 35 is granted. Case stayed pending arbitration. Signed by the Honorable Charles P. Kocoras on 3/10/2015. Mailed notice(vcf, )

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
DAVID MAGGARD, JUNE MAGGARD,
and BONITA HESS on their own behalf
and on behalf of all other similarly situated,
Plaintiffs,
v.
CCC INFORMATION SERVICES INC.
d/b/a CCC VALUESOURCE and CCC
VALUESCOPE,
Defendant.

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14 C 2368

MEMORANDUM OPINION
CHARLES P. KOCORAS, District Judge:
This matter comes before the Court on the motion of Defendant CCC
Information Services Inc.’s (“CCC”) to compel the appraisal of the vehicle of
Plaintiffs David and June Maggard (collectively the “Maggards”) and stay the action.
For the following reasons, the motion to compel the appraisal and stay the action is
granted.
BACKGROUND
The Maggards held an automobile insurance policy (the “Policy”) issued by
The Hartford (“The Hartford”), an insurance company. In July 2013, the Maggards,
both residents of West Virginia, were involved in a car accident that resulted in The
Hartford finding that their vehicle was a “total loss.” The Maggards submitted a
claim for their vehicle to The Hartford and CCC provided a valuation report for the

vehicle. The Maggards accepted payment from The Hartford for their vehicle in July
of 2013.
The Policy contains a section entitled “Part D -Coverage For Damage To Your
Auto.” It states:
A. The Appraisal Provision is replaced by the following:
APPRAISAL
1.
If we and you do not agree on the amount of loss, either may demand, in
writing, an appraisal of the loss. In this event, each party will select a
competent and impartial appraiser and notify the other party of the selected
appraiser within twenty days of such demand. The two appraisers will select an
umpire. If the appraisers cannot agree upon an umpire within fifteen days,
either party may request the selection of an umpire [sic] made by a judge of a
court having jurisdiction. The appraisers will state separately the actual cash
value and the amount of loss. If they fail to agree, they will submit their
differences to the umpire. A decision agreed to in writing by any two will be
binding.
Each party will:
a. Pay its chosen appraiser; and
b. Bear the expenses of the appraisal and umpire equally.
2.

We do not waive any of our rights under this policy by agreeing to an
appraisal.

On April 2, 2014, the Maggards, individually and on behalf of a putative class
of similarly situated plaintiffs, filed suit against CCC, alleging that the appraisal
process CCC utilizes purposefully manipulates the value of a vehicle to come in
below the actual fair market value of the car. This underassessment of the fair market
value of a vehicle allows insurance companies that are responsible for the payment of
claims to pay substantial less than is due to their customers. The Maggards allege that
they were insured with The Hartford and, stemming from that relationship, they had
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their vehicle valued by CCC. The Maggards claim that they no longer possess the
vehicle. On July 8, 2014, The Hartford made a written request to the Maggards,
asking that they participate in the appraisal process.
On April 2, 2014, the Maggards filed a six-count complaint, on behalf of
themselves and a putative class, alleging that CCC: (1) violated the Illinois Consumer
Fraud and Deceptive Practices Act (“ICFA”); (2) engaged in negligent
misrepresentation; (3) engaged in fraudulent misrepresentation and/or fraudulent
concealment; (4) was in breach of contract; (5) breached the duty of good faith and
fair dealings; and (6) became unjustly enriched.
DISCUSSION
The applicable section of the Federal Arbitration Act (“FAA”) specifically
provides that a court with jurisdiction “may direct that arbitration be held in
accordance with the agreement at any place therein provided for, whether that place is
within or without the United States. The FAA further provides:
If any suit or proceeding be brought in any of the courts of the United States
upon any issue referable to arbitration under an agreement in writing for such
arbitration, the court in which such suit is pending, upon being satisfied that the
issue involved in such suit or proceeding is referable to arbitration under such
an agreement, shall on application of one of the parties stay the trial of the
action until such arbitration has been had in accordance with the terms of the
agreement, providing the applicant for the stay is not in default in proceeding
with such arbitration.
9 U.S.C. § 3 (“Section 3”). Section 3 of the FAA provides that proceedings must be
stayed, and arbitration be compelled, if an issue is arbitrable by the agreement of the
parties. 9 U.S.C. §§ 3–4. We will use “appraisal” and “arbitration” interchangeably.
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See CenTrust Bank, N.A. v. Montpelier U.S. Ins. Co., 12 C 9233, 2013 WL 1855838,
at *2 (N.D. Ill. May 1, 2013) (“Illinois courts have held that “an appraisal clause is
analogous to an arbitration clause and is enforceable in a court of law in the same
manner as an arbitration clause.”).
A party seeking to compel arbitration “need only show: (1) an agreement to
arbitrate, (2) a dispute within the scope of the arbitration agreement, and (3) a refusal
by the opposing party to proceed to arbitration.” Zurich Am. Ins. Co. v. Watts Indus.,
Inc., 466 F.3d 577, 580 (7th Cir. 2006). The question of whether or not the parties
agreed to arbitrate an issue requires “federal courts apply state-law principles of
contract formation.” Gore v. Alltel Communications, LLC, 666 F.3d 1027, 1032 (7th
Cir. 2012). “Once it is clear, however, that the parties have a contract that provides
for arbitration of some issues between them, any doubt concerning the scope of the
arbitration clause is resolved in favor of arbitration as a matter of federal law.” Id.
The Maggards do not contest that the first and third elements of this test are met, and
the Court finds that they have been sufficiently established. See Zurich, 466 F.3d at
580 (to compel arbitration, the movant must demonstrate that the dispute is within the
scope of the arbitration clause and that the other party refused to arbitrate) (citation
omitted). The issue is the scope of the appraisal clause and whether the theory of
equitable estoppel permits a non-signatory to the Policy, like CCC, to enforce it.
The Maggards entered into the Policy with The Hartford.

CCC was not

involved whatsoever as a signatory. However, the mere fact of a party not being a

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signatory to an agreement does not defeat the right to compel arbitration. Wachovia
Bank, N.A. Ass’n v. Schmidt, 445 F.3d 762, 769 (4th Cir. 2006); see also Hoffman v.
Deloitte & Touche, LLP, 143 F. Supp. 2d 995, 1004 (N.D. Ill. 2001). There are five
doctrines through which a non-signatory can be bound by arbitration agreements
entered into by others, including estoppel . Zurich Am. Ins. Co. v. Watts Indus., Inc.,
417 F.3d 682, 687 (7th Cir. 2005). Equitable estoppel allows a non-signatory to
compel arbitration and an agreement containing an arbitration clause covers nonsignatories under common-law contract and agency principles. Hoffman, 143 F.
Supp. 2d at 1004. Estoppel may apply when the signatory “[m]ust rely on the terms
of the written agreement in asserting its claim against a non-signatory. Thus, when
each of a signatory’s claims against a nonsignatory ‘makes reference to’ or ‘presumes
the existence of the written agreement, the signatory’s claims arise out of and relate
directly to the written agreement and arbitration is appropriate.” Id. at 1004-1005
(citations omitted).
The parties quarrel over which state’s law applies to the equitable estoppel
analysis. CCC argues that West Virginia law applies and insists that state law should
govern the issue of equitable estoppel and the ability of the third parties to compel
appraisal “unless application of state-law rules would stand as an obstacle to the
accomplishment of the FAA’s objectives.” In re Apple iPhone Antitrust Litig., 874 F.
Supp. 2d 889, 896 n. 14 (N.D. Cal. 2012) (emphasis in original). CCC also highlights
the repeated references to West Virginia law in the Policy itself. The Maggards

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request that the Court use decisions from Illinois courts, which the Maggards find
have “rejected the expanded equitable estoppel doctrine from federal courts that
allows a non-signatory to compel arbitration of claims that rely upon a contract
containing the arbitration clause.” See Ervin v. Nokia, Inc., 349 Ill. App. 3d 508, 516
(2004) (“We decline “to follow federal decisions that adopt this expanded
interpretation of equitable estoppel.”).
For choice of law issues involving insurance contracts, “the Court considers the
contacts that are most significant to [the contract], including the location of the subject
matter, the place of delivery of the contract, the domicile of the insured or of the
insurer, the place of the last act to give rise to a valid contract, the place of
performance, or other place bearing a rational relationship to the general contract.”
Perma-Pipe v. Liberty Surplus, 2014 WL 1600570, at *3 (N.D. Ill. Apr. 21, 2014).
The Maggards do not provide a choice-of-law analysis for why Illinois law applies,
but CCC does and it vehemently argues 1 that West Virginia law prevails.
In the instant matter, the Maggards are domiciled in West Virginia, they
allegedly executed the Policy with The Hartford in West Virginia, and the location of
the vehicle is unknown. The presence of CCC, which is incorporated in Illinois, is not
enough to establish that Illinois has the most significant contacts. Based on the facts
provided, the Court concludes that West Virginia law applies as to the issue of

1

Both parties’ incessant footnotes throughout the briefs are not appreciated by the Court.

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equitable estoppel. However, the Court must still determine if the appraisal clause
should be enforced in this particular lawsuit.
CCC contends that the language in the insurance policy requires the Maggards
to submit to an appraisal because it is clear that the valuation of the Maggards’ vehicle
falls squarely within the appraisal clause in the Policy. Also, CCC submits that
individual issues may be subject to appraisal even if the entire case or dispute is not
arbitrable.

In its reply, the Court holds CCC true to its word that: (i) it is “simply

requesting that the Maggards be compelled to participate in the appraisal process to
which they previously agreed so that the actual cash value of their vehicle can be
determined; (ii) CCC has not asked this Court to dismiss the complaint due to the
presence of an appraisal clause; and (iii) CCC has not asked that the appraisers be
allowed to decide class certification or interpret the contract between CCC and The
Hartford.
The Maggards respond, stating that CCC has not shown any reasonable reliance
to satisfy the theory of equitable estoppel.

The Maggards argue that this is much

more than a simple disagreement over the actual value of the vehicle, especially
because a putative class is involved. Thus, they aver that these issues cannot be
resolved through the appraisal process.
In West Virginia:
equitable estoppel allows a nonsignatory to compel arbitration [] when
the signatory to a written agreement containing an arbitration clause
must rely on the terms of the written agreement in asserting its claims
against the nonsignatory[.]
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Blevins v. Flagstar, 2013 WL 3365252, at *14 (N.D. W. Va. July 3, 2013). There are
two circumstances when equitable estoppel allows a nonsignatory to compel
arbitration: (1) “when the signatory to a written agreement containing an arbitration
clause must rely on the terms of the written agreement in asserting its claims against
the nonsignatory” and (2) “when the signatory raises allegations of substantially
interdependent and concerted misconduct by both the nonsignatory and one or more
of the signatories to the contract.” Brantley v. Republic Mortg. Ins. Co., 424 F.3d
392, 395–96 (4th Cir. 2005) (internal quotations and citation omitted).
When reviewing the Maggards’ claims, it is evident that the existence of their
claims depends on the Policy. CCC is correct that the reliance on the Policy is
reflected in the more than a dozen times that the Maggards reference the Policy in
their complaint. For instance, their claim for breach of the duty of good faith and fair
dealings in the performance of CCC’s appraisal services flows directly out of the
Policy because without the Policy, CCC would have never provided an alleged undervaluation of the Maggards’ vehicle to The Hartford. Additionally, their breach of
contract claim is predicated on the theory that The Hartford’s contract with CCC is
paid for “through insurance premiums” outlined in the Policy. If it was not for the
existence of the Policy, the negligent and fraudulent misrepresentations and the
violation of the ICFA would not exist. The manner in which CCC allegedly “falsely
misrepresented material facts” to the Maggards, as stated in their complaint, was
through the implementation of the Policy itself. These claims directly rely upon the
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Maggards’ relationship with The Hartford and the subsequent agency relationship that
The Hartford shared with CCC when they entered a contract to provide valuation
reports for The Hartford’s insured. Therefore, the Court finds that the Maggards’
claims against the non-signatory, CCC, directly hinge on the Policy.
Indeed, the Maggards’ complaint presents much more than a disagreement
between them and the Hartford concerning actual cash value of their vehicle, however
each of the Maggards’ causes of action stems from the Policy itself. The Court finds
that the second element necessary to compel the appraisal, a dispute within the scope
of the appraisal clause, is satisfied.

We conclude that the issues raised in the

complaint are subject to the appraisal clause based on the intertwined nature of the
Maggards’ claims against CCC with the Policy.
CONCLUSION
For the aforementioned reasons, the Court grants the motion to compel the
appraisal and stay the action.

_____________________________________
Charles P. Kocoras
United States District Judge
Dated: 3/10/2015

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