Consolidated Companies, Inc. v. General Electric Capital Corporation

Filing 133

ORDER AND REASONS granting 28 Motion to Deposit Funds into the Court's Registry; Further Ordered that the 33 Motion to Compel Arbitration; denying 33 Motion to Stay; denying 97 Motion to Compel Arbitration; denying 97 Motion to Stay are denied. Signed by Judge Ivan L.R. Lemelle on 4/30/2014. (ijg)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
CONSOLIDATED COMPANIES, INC.

CIVIL ACTION

VERSUS

NO. 13-4704

GENERAL ELECTRIC CAPITAL, CORP.

SECTION "B"(5)

ORDER AND REASONS
This case arises out of a financing agreement between
Plaintiff Consolidated Companies Inc. (Consolidated) and
Defendant General Electric Capital Corp. (GECC). On March 14,
2014 the Court issued an Order and Reasons denying Consolidated's
Motion for Judgement on the Pleadings. (Rec. Doc. No. 92). Among
other holdings, the Court found that GECC could assert claims as
a third-party beneficiary to the GECC Escrow Agreement. The Court
further ordered supplemental briefing on Consolidated's Motion to
Compel Arbitration (Rec. Doc. No. 33) and Comerica Bank's
(Comerica) competing Motion to institute an interpleader action
with the Court (Rec. Doc. No. 28). All parties have since filed
supplemental memorandums on the issue of arbitration.
Consolidated additionally filed a separate "Supplemental Motion
to Compel Arbitration, Or, In The Alternative To Stay Pending
Arbitration." (Rec. Doc. No. 97). That Motion asks the Court to
stay ruling pending resolution of an arbitration proceeding
initiated prior to the filing of this case by Consolidated
against Reinhart FoodService Louisiana, L.L.C. (Reinhart) and
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Comerica regarding the Escrow Agreement. The arbitration is
styled AAA Arbitration No. 51 467 403 13; Consolidated Companies,
Inc. v. Reinhart Foodservice Louisiana, L.L.C., et al. and
presently pending in Chicago, Illinois. The arbitrator stayed the
arbitration on October 10, 2013 pending rulings from this
Court.(Rec. Doc. No. 54-1).
Accordingly, and for the reasons enumerated below IT IS
ORDERED that Comerica's Motion to Deposit Funds Into the Court's
Registry (Rec. Doc. No. 28) is GRANTED. Comerica, following its
deposit of funds with the Court, is dismissed from the instant
case with the Court maintaining jurisdiction over it for the
limited purpose of considering Comerica's claim for attorneys'
fees.
IT IS FURTHER ORDERED that Consolidated's Motion to Compel
Arbitration (Rec. Doc. No. 33) and Supplemental Motion to Compel
Arbitration or In the Alternative Motion to Stay (Rec. Doc. No.
97) are DENIED.
Law and Analysis
The Fifth Circuit provides a two-step test for determining
whether a district court should compel arbitration. First, the
court must determine whether an agreement to arbitrate exists.
Pers. Sec. & Safety Sys. v. Motorola, Inc., 297 F.3d 388, 392
(5th Cir.2002). Second, the Court must determine whether the
dispute in question falls within the scope of that arbitration
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agreement. Id. Doubts as to whether an agreement expressly
provides for arbitration are usually resolved in favor of
arbitration. Id.
Here, the answer to both inquires is clear from the record.
Although the Escrow Agreement in question does have an
arbitration clause, the clause's scope does not cover the instant
dispute.
The Escrow Agreement arbitration provision reads:
All disputes between the Seller [Consolidated] and/or the
Buyer [Reinhart], on the one hand, and the Escrow Holder
[Comerica] on the other hand, relating to the payment of the
Escrow Funds and/or the Escrow Holders’ [Comerica] rights,
obligations, and liabilities arising from or related to this
Agreement shall be resolved by mandatory binding expedited
arbitration . . . .
Escrow Agreement, Rec. Doc. No. 23-1, Ex. C at ¶ 4.2(a)
As is apparent from a reading of the provision, the
arbitration requirement is limited to certain disputes
–specifically those disputes with Consolidate and/or Reinhart on
one side of the conflict, and Comerica on the other. The case
before the Court is not such a dispute. Rather, the instant
controversy is between GECC as a third-party beneficiary to the
agreement and Consolidated.1
Where a dispute arises as to who is entitled to the Escrow
funds, outside of the seller/buyer versus Escrow Holder scenario

1

Both Reinhart and Comerica have disclaimed any interest in the Escrow
funds, leaving on Consolidated and GECC as claimants. (Rec. Doc. No. 97-1).

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described above, the Escrow Agreement provides for a different
procedure. In that circumstance, if there is "any disagreement or
[] presentation of any adverse claim or demand in connection with
the disbursement of the Escrow Funds, except as otherwise
provided herein" then "the Escrow Holder [Comerica] may, but is
not required to, file a suit in interpleader and obtain an order
from the court requiring the parties to interplead and litigate
in such court adverse claims or demands raised . . ." Escrow
Agreement at ¶ 3.3 (b). That is exactly the set of facts before
the Court at this time. Comerica, presented with competing claims
by GECC and Consolidated, instituted the instant interpleader
action to resolve those claims.
Consolidated, in its four separate briefings on this issue,
offers no competing interpretation of the Interpleader Clause.
Instead, Consolidated simply chooses to ignore it. Because the
Court may not merely disregard provisions of a contract, but
instead must give effect to all provisions agreed to by the
parties, see 5A Mich. Civ. Jur. Contracts § 1522, the Court
cannot accept Consolidated's argument that the Escrow Agreement
contemplates all disputes being resolved through arbitration.
Rather, the circumstances in the instant case are precisely the
facts that the Escrow Agreement provides may be subject to an

2

The Court previously held that the Escrow Agreement, per its terms, is
governed by Michigan law. (Rec. Doc. No. 92 at 16-17).

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interpleader action.
In place of an argument on what the Interpleader Clause
could mean other than to allow an interpleader claim given the
facts of the instant case, Consolidated instead asserts that the
Interpleader Clause renders the Escrow Agreement ambiguous,
therefore requiring arbitration. See Moses H. Cone Mem'l Hosp. v.
Mercury Const. Corp., 460 U.S. 1, 24-25 (1983) ("[A]ny doubts
concerning the scope of arbitrable issues should be resolved in
favor of arbitration."); Pers. Sec. & Safety Sys. v. Motorola,
Inc., 297 F.3d 388, 392 (5th Cir.2002). Contrary to
Consolidated's reading of the Agreement, the Interpleader Clause
and the Arbitration Clause are not ambiguous or in conflict.
Rather, as already recognized, the Arbitration clause only covers
disputes exclusively between Consolidated and/or Reinhart against
Comerica. Once another party seeks to claim the funds, an
interpleader action is proper – leading to no conflicting or
ambiguous results.
Consolidated next argues that the Court should stay ruling
in the instant case, to allow resolution of Consolidated's
pending arbitration with Comerica. This argument fails. The party
entitled to the Escrow Funds is directly dependant on the instant
litigation. That is precisely the reason that the arbitrator in
the pending arbitration stayed arbitration pending this action.
See Order on Respondent's Expedited Request to Stay Arbitration
(Order #3) (Rec. Doc. No. 54-1 at 2). The Court finds no cause to
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postpone the pending case, given that all claims are properly
before the Court at this time.3
Accordingly, and for the reasons enumerated above IT IS
ORDERED that Comerica's Motion to Deposit Funds Into the Court's
Registry (Rec. Doc. No. 28) is GRANTED.4 Comerica, following its
deposit of funds with the Court, is dismissed from the instant
case with the Court maintaining jurisdiction over it for the
limited purpose of considering Comerica's claim for attorneys'
fees.
IT IS FURTHER ORDERED that Consolidated's Motion to Compel
Arbitration (Rec. Doc. No. 33) and Supplemental Motion to Compel
Arbitration or In the Alternative Motion to Stay (Rec. Doc. No.
97) are DENIED.
New Orleans, Louisiana, this 30th day of April, 2014.

___________________________
UNITED STATES DISTRICT JUDGE

3
This case is distinguished from the cases cited by Consolidated in
favor of stay. See Harvey v. Joyce, 199 F.3d 790 (5th Cir. 2000); In re
Hornbeck Offshore (1984) Corp., 981 F.2d 752 (5th Cir. 1993). Here, unlike in
those cases, the parties specifically contemplated an interpleader action in
lieu of arbitration. As the Court has already held, the action brought by
Comerica falls squarely within that interpleader provision. Accordingly, the
Court is not forced to chose between arbitration or stay. Rather, giving
effect to the parties' clear intentions, interpleader is the type of action
contemplated by the agreement in these circumstances.
4
The Court maintains jurisdiction to hear the interpleader under FED R.
CIV. PROC. 22 and 28 U.S.C. § 1335. No party has challenged that grant of
jurisdiction.

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