GILMAN et al v. WALTERS et al

Filing 108

ORDER ON PENDING MOTIONS - The Court DENIES Plaintiffs' Motion for Order of Clarification for the AAA [Docket No. 104 ]; GRANTS Plaintiffs' Motion for Court to Consider Responsive Exhibits [Docket No. 98 ]; GRANTS Defendants' Motio n to Compel Arbitration [Docket No. 88 ]; and STAYS the Magistrate Judge's discovery order pending completion of the arbitration proceedings. Defendants' objection to the Magistrate Judge's discovery order [Docket No. 83 ] is DENIED with permission to refile if necessary following the arbitration. Signed by Judge Sarah Evans Barker on 11/27/2013. (JD)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
EVANSVILLE DIVISION

LARRY GILMAN,
et al.

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Plaintiffs,
vs.
MANNON L. WALTERS individually,
et al.
Defendants.

No. 3:12-cv-00114-SEB-WGH

ORDER ON PENDING MOTIONS
[Docket Nos. 83, 88, 98, and 104]
This cause is now before the Court on Defendants’ Objection to Discovery Order
[Docket No. 83] filed on August 23, 2013; Defendant’s Motion to Dismiss for Lack of
Prosecution or, in the Alternative, Motion to Compel Arbitration [Docket No. 88] filed on
September 5, 2013; and Plaintiffs’ Motion for Order of Clarification [Docket No. 104]
filed on October 10, 2013.1 Before delving into the merits of these motions, a reprise of
the timeline of events leading up to their filing is necessary.
Procedural Background
On January 7, 2012, Plaintiffs filed a consolidated arbitration claim with the
American Arbitration Association (“AAA”). On January 27, 2012, after Defendants
failed to file a responsive statement with the AAA, Plaintiffs filed the instant lawsuit in

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On September 25, 2013, Plaintiffs filed a Motion for Court to Consider Responsive Exhibits
[Docket No. 98]. Because Defendants do not oppose the Court’s consideration of Plaintiffs’
exhibits, we GRANT Plaintiffs’ motion.
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order to “toll the statute of limitations and seek a declaratory judgment that the matters
contained herein should be properly decided by arbitration.” Compl. ¶ 55; Am. Compl. ¶
56.
After being granted several extensions of time by the AAA, on March 20, 2012,
Defendants (finally) objected to Plaintiffs’ consolidated arbitration claim. In an email
dated April 10, 2012, the AAA responded to Defendants’ objection, stating in relevant
part as follows:
[T]he Claimants[] have filed for arbitration on a consolidated basis pursuant
to a number of contracts containing arbitration clauses. Inasmuch as there
is no agreement by the parties to proceed with the arbitration on a
consolidated basis, Claimants are requested to amend their demand so that
only the signatories to a single contract are identified as parties in the case.
Claimants will need to file separate arbitrations for their claims arising
under each of the contracts containing arbitration clauses.
Once the amended demand is filed for this case, the parties may submit
their jurisdictional or arbitrability arguments to the arbitration panel for
determination. If additional cases are filed, the parties may also raise their
contentions regarding these issues to the panels in those cases.
Upon receipt of an amended demand for this matter consistent with the
requirements outlined above, the AAA will proceed with continued
administration of this matter.
The AAA will also abide by any order issued by the courts. We note that
Claimants[] have filed a Motion to Stay Federal Proceedings and Compel
Arbitration. The parties are requested to keep us informed as to the
outcome.
If either party desires a conference call to discuss this issue, please let us
know your availability and we will schedule a call with both parties.
Docket No. 85-2.

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As referenced in the AAA’s email, Plaintiffs filed a Motion to Stay Federal
Proceedings and Compel Arbitration with this Court on March 20, 2012 (the same day
that Defendants filed their objection with the AAA). On April 24, 2012, Defendants filed
with the Court their first motion to dismiss for lack of jurisdiction and failure to state a
claim. On June 28, 2012, Defendants filed a second motion to dismiss asserting a lack of
jurisdiction and failure to state a claim (Defendants’ first motion to dismiss became moot
with the filing of Plaintiffs’ amended complaint) as well as a motion that was
subsequently granted for intra-district transfer of venue from the Indianapolis Division to
the Evansville Division. Three months later, on September 17, 2012, Plaintiffs filed a
Motion to Appoint Receiver.
On January 31, 2013, the Magistrate Judge issued his report and recommendation
on Plaintiffs’ Motion to Stay Federal Proceedings and Compel Arbitration,
recommending in relevant part as follows:
Defendants have appeared in the AAA proceeding, filed a response, and
that matter may proceed upon the filing of an “amended demand.” Because
the Defendants have not failed, neglected, or refused to arbitrate under
written agreement, Plaintiffs are not entitled to relief under 9 U.S.C. § 4.
…
a.

So long as the arbitration currently before the AAA has not been
dismissed, this court should deny the Motion to Compel Arbitration
because that arbitration continues.

b.

So long as the current arbitration has not been dismissed by the
parties, the court should grant the Motion to stay the trial of these
proceedings until completion of arbitration.

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Docket No. 68 at 4, 6 (emphasis omitted). The Magistrate Judge further concluded that,
“[a]lthough the court must ‘stay’ the trial of the action, [9 U.S.C. § 4] does not provide
that the court loses jurisdiction over all aspects of the case before the court.” Id. at 5.
Thus, the Magistrate Judge recommended that the court retain jurisdiction to determine
whether to appoint a receiver while the arbitration process continued. On March 29,
2013, the Magistrate Judge’s report and recommendation was accepted by the
undersigned judge as to Plaintiffs’ motion to stay federal proceedings and compel
arbitration.
The Magistrate Judge issued his reports and recommendations on Defendants’
Second Motion to Dismiss and Plaintiffs’ Motion to Appoint a Receiver on April 26,
2013 and April 29, 2013, respectively, recommending that both motions be denied. On
August 22, 2013, those reports and recommendations were adopted and both motions
were denied.
On August 14, 2013, approximately one week before the Court denied
Defendants’ second motion to dismiss, the Magistrate Judge conducted a settlement
conference with the parties. On August 15, 2013, the Magistrate Judge ordered that,
despite the stay of the trial pending completion of arbitration, given the court’s
continuing jurisdiction over some aspects of the matter, it would be “beneficial to the
resolution of the dispute between the parties if limited discovery, which includes the use
of interrogatories, requests for production, and requests for admissions only” were
undertaken. Docket No. 81. The Magistrate Judge limited the scope of discovery “as
closely as possible to conform to the AAA rules that are likely to apply if this matter is
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resolved my arbitration.” Id. The Magistrate Judge further ordered the parties to execute
an agreed protective agreement.
On August 23, 2013, Defendants filed the instant objection to the Magistrate
Judge’s order contending that, given Plaintiffs’ failure to file an amended demand for
arbitration per the AAA’s instructions, despite an opportunity to do so beginning on April
10, 2012, the Magistrate Judge’s discovery order serves only to incent Plaintiffs to
engage in further delay in terms of their filing an amended demand. Defendants further
argue that, without an amended demand, it is impossible for the parties to know what
discovery is likely to be relevant to the arbitration. On October 3, 2013, Judge Hussmann
stayed his prior discovery order pending a ruling on Defendants’ objection.
Prior to the October 3 stay of discovery, on September 5, 2013, Defendants filed a
Motion to Dismiss for Lack of Prosecution or, in the Alternative, Motion to Compel
Arbitration, arguing that this cause of action should be dismissed given Plaintiffs’ failure
to file an amended demand for arbitration. In response, for the first time Plaintiffs assert
that the AAA never expressly ordered them to amend their demand, instead merely
requesting that they do so. Despite this contention by Plaintiffs, on September 6, 2013 –
the day following the filing by Defendants of their motion to dismiss for lack of
prosecution – Plaintiffs filed an “amended” demand for arbitration with the AAA.
However, their “amended” claim is essentially identical to the consolidated claim they
filed originally with the AAA. The similarity between the demands by Plaintiffs
prompted Defendants to file an identical jurisdictional challenge to the “amended” claim
with the AAA to that which it had filed in response to Plaintiffs’ first claim.
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In response to Defendants’ renewed objection, the AAA emailed the parties on
October 2, 2013, stating in relevant part as follows:
Referring to the AAA’s April 4, 2012 e-mail, while Claimant has met the
filing requirements contained in the AAA’s rules, due to the consolidated
nature of the claims asserted, Claimant was requested to file an amended
demand so that only the signatories to a single contract were identified as
parties in the case. Claimant must file separate demands for their claims
arising under each of the contracts containing arbitration clauses.
While the AAA indicated that we will abide by any order issued by the
courts, after careful review of the parties’ recent submissions, we are unable
to identify any order specifically requiring that the administration of this
matter proceed on a consolidated basis. Therefore, we are unable to
proceed with the continued administration of the case as currently filed.
Once an amended demand is filed, the parties will have the opportunity to
submit any jurisdiction or arbitrability arguments to the arbitration panel for
a determination.
Docket No. 104-3.
In response to this email directive from the AAA, Plaintiffs filed with us a Motion
for Order of Clarification for the AAA on October 10, 2013, interpreting it as the AAA
case manager’s request “for a Court order to interpret the arbitration provision to allow
the appointment of an arbitrator on a consolidated basis.” Pls.’ Reply at 8. Plaintiffs
therefore seek from us an order referring Plaintiffs’ claims “to a single arbitration panel
to proceed with arbitration, as currently filed.” Id. (emphasis in original). In response,
according to Plaintiffs, Defendants would be “free to bring their motion to sever to the
Arbitration Panel, so long as it is provided for by AAA rules.” Id. We address this
request below.

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Discussion
The frustrating fact before us in this case is that arbitration has been at a standstill
since April 2012, when the AAA case manager requested that Plaintiffs file an amended
demand based on the signatories to each separate contract. For some reason, Plaintiffs
have chosen not to comply with that request. Plaintiffs’ illusory “amended demand”
which it filed the day after Defendants filed their motion to dismiss for failure to
prosecute was more gamesmanship since their amended filing was essentially identical to
their initial demand. The AAA case manager’s directive to file an amended demand was
the condition precedent to arbitration. The Magistrate Judge clearly recognized this in his
report and recommendation on Plaintiffs’ Motion to Stay/Compel Arbitration denying the
motion to compel arbitration. Citing the AAA’s April 2012 order, our order stated that
Plaintiffs would be entitled to proceed with arbitration “upon the filing [with the AAA] of
an Amended Demand.”
In what appears to us to be primarily just one more delaying tactic, Plaintiffs seek
an order of clarification authorizing the AAA to conduct the arbitration of their claims on
a consolidated basis. It is undisputed, however, that the arbitration clauses at issue
include no provision relating to consolidation, never mind an explicit authorization of
consolidated proceedings. In addition, under controlling Seventh Circuit precedent, “the
question of whether an arbitration agreement forbids consolidated arbitration is a
procedural one, which the arbitrator should resolve.” Employers Ins. Co. of Wausau v.
Century Indem. Co., 443 F.3d 573, 577 (7th Cir. 2006) (citations omitted); see also Blue
Cross Blue Shield of Mass., Inc. v. BCS Ins. Co., 671 F.3d 635, 640 (7th Cir. 2011)
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(recognizing that the arbitrator has the discretion to interpret an arbitration clause to
analyze whether it allows consolidated arbitration). Given the absence of any specific
reference(s) to consolidation of cases in the arbitration clauses at issue here, including
any requirement that the court rather than the arbitrator resolve the issue, it becomes a
procedural issue for the arbitrator to decide. Accordingly, we shall leave the matter there,
expressing no view as to whether arbitrating the five limited partnership agreements in
one arbitration conflicts with the terms of the arbitration clauses. That said, Plaintiffs’
motion seeking an order directing that the matter proceed with consolidated arbitration is
not well taken. See Blue Cross Blue Shield, 671 F.3d at 639 (“The only question that a
court should address before arbitration starts is whether the parties have agreed to
arbitrate at all.”) (citation omitted). Thus, Plaintiffs’ Motion for Order of Clarification
for the AAA is DENIED.
Plaintiffs’ failure to file an appropriate amended demand with the AAA, despite
having been instructed to do so some nineteen months ago, sets the stage for us to
GRANT Defendants’ Motion to Compel Arbitration, pursuant to 9 U.S.C. § 4. The
arbitrator, once assigned, shall determine whether the arbitration will proceed on an
individual case or a consolidated basis. Plaintiffs are hereby ordered to file an amended
demand for arbitration that conforms to the requirements set out in the AAA’s email
communications dated April 10, 2012 and October 2, 2013 within thirty (30) days
following the issuance of this order.2 The Court will retain jurisdiction over this
litigation pending arbitration. The parties accordingly are ordered to file a joint stipulated
2

We can foresee Plaintiffs choosing to identify a test case to pursue arbitration.
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status report within forty (40) days following the issuance of this order. If arbitration is
not promptly pursued, this action will be subject to dismissal. The Magistrate Judge’s
discovery order is also STAYED.
Conclusion
For the foregoing reasons, we DENY Plaintiffs’ Motion for Order of Clarification
for the AAA; GRANT Plaintiffs’ Motion for Court to Consider Responsive Exhibits;
GRANT Defendants’ Motion to Compel Arbitration; and STAY the Magistrate Judge’s
discovery order pending completion of the arbitration proceedings.3 Defendants’
objection to the Magistrate Judge’s discovery order is DENIED with permission to refile
if necessary following the arbitration.
IT IS SO ORDERED.

11/27/2013
Date: ___________________

_______________________________
SARAH EVANS BARKER, JUDGE
United States District Court
Southern District of Indiana

3

Both parties have requested attorneys’ fees for the preparation of certain motions that they
contend were frivolous. However, we DENY both requests.
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Distribution:
Mark E. Maddox
MADDOX HARGETT & CARUSO, PC
[e-mail]
Thomas K. Caldwell
MADDOX HARGETT & CARUSO, PC
[e-mail]
Timothy John Kirk
MADDOX HARGETT & CARUSO, PC
[e-mail]
Edwin L. Sisam
SISAM & ASSOCIATES, LLP
[e-mail]
Joshua H. Sisam
SISAM & ASSOCIATES, LLP
[e-mail]
Patrick A. Shoulders
ZIEMER STAYMAN WEITZEL & SHOULDERS
[e-mail]
Robert L. Burkart
ZIEMER STAYMAN WEITZEL & SHOULDERS
[e-mail]
Clay W. Havill
ZIEMER STAYMAN WEITZEL & SHOULDERS LLP
[e-mail]
Jean Marie Blanton
ZIEMER STAYMAN WEITZEL & SHOULDERS LLP
[e-mail]

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