Clean Pro Carpet & Upholstery, Inc., et al vs. Upper Pontalba of Old Metairie Condominium Association, Inc.

Filing 116

ORDER AND REASONS: IT IS HEREBY ORDERED that Defendants' 11 Motion to Stay and Compel Arbitration is GRANTED IN PART and DENIED IN PART, as set forth in document. The motion is GRANTED to the extent it requests that the Court compel Clean Pro to arbitrate its claims against Defendants Indian Harbor Insurance Company, QBE Specialty Insurance Company, Steadfast Insurance Company, General Security Indemnity Company, United Specialty Insurance Company, Safety Specialty Insurance Compan y, Old Republic Union Insurance Company, and Cramer, Johnson, Wiggins and Associates, Inc. The motion is DENIED to the extent that it seeks the disqualification of Clean Pro's administrator, Mr. Howarth, and to the extent Defendants request that the Court issue an order enforcing procedural requirements of the arbitration provision. IT IS FURTHER ORDERED that Plaintiffs' claims against Defendants Indian Harbor Insurance Company, QBE Specialty Insurance Company, Steadfast Insuranc e Company, General Security Indemnity Company, United Specialty Insurance Company, Safety Specialty Insurance Company, Old Republic Union Insurance Company, and Cramer, Johnson, Wiggins and Associates, Inc. are STAYED pending arbitration. Signed by Chief Judge Nannette Jolivette Brown on 2/18/2021. (jls)

Case 2:20-cv-01550-NJB-JVM Document 116 Filed 02/18/21 Page 1 of 23

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
CLEAN PRO CARPET & UPHOLSTERY
CARE, INC., et al.

CIVIL ACTION

VERSUS

NO. 20-1550

UPPER PONTALBA OF OLD METAIRIE
CONDOMINIUM ASSOCIATION, INC.,
et al.
ORDER

SECTION: “G”(1)

In this litigation, Plaintiffs Clean Pro Carpet & Upholstery Care, Inc. (“Clean Pro”) and
Southern Cat, Inc. (“Southern Cat”) (collectively, “Plaintiffs”) allege that they contracted with
the Upper Pontalba of Old Metairie Condominium Association, Inc. (the “Association”) to fix
condominium buildings destroyed in a fire. 1 Plaintiffs assert that, despite completing the work,
they did not receive payment under the terms of the contract from the Association or from the
Association’s insurers. 2 Pending before the Court is Indian Harbor Insurance Company, QBE
Specialty Insurance Company, Steadfast Insurance Company, General Security Indemnity
Company, United Specialty Insurance Company, Safety Specialty Insurance Company, and Old
Republic Union Insurance Company (collectively, “Insurance Company Defendants”), and
Cramer, Johnson, Wiggins and Associates, Inc.’s (“CJW”) (together with Insurance Company
Defendants, “Defendants”) “Motion to Stay and Compel Arbitration.” 3 Clean Pro opposes the
motion. 4 Having considered the motion, the memoranda in support and in opposition, the record,

1

Rec. Doc. 1-4; Rec. Doc. 9.

2

Id.

3

Rec. Doc. 11.

4

Rec. Doc. 17.

1

Case 2:20-cv-01550-NJB-JVM Document 116 Filed 02/18/21 Page 2 of 23

and the applicable law, the Court grants the motion in part and denies the motion in part.
I. Background
On February 2, 2019, a fire broke out and allegedly destroyed over thirty (30)
condominiums at the Upper Pontalba of Old Metairie Condominium buildings. 5 After the fire,
the Association hired Clean Pro pursuant to a contract to provide restoration services on the
damaged buildings. 6 Under the contract, the Association agreed to pay Clean Pro for its work and
to assign to Clean Pro proceeds the Association received from Insurance Company Defendants
under the Association’s insurance policy. 7 Defendant CJW served as the Third-Party
Administrator for Insurance Company Defendants, processing claims related to the fire. 8 After
being hired by the Association, Clean Pro entered into a subcontract agreement with Southern
Cat. 9 Plaintiffs allege that they completed all required work under the contract and submitted
invoices according to the rates set out in the contract. 10 Plaintiffs allege that the Association has
failed to pay Plaintiffs as required under the contract and that Insurance Company Defendants
have refused to pay Plaintiffs for a portion of the work completed.11
On February 3, 2020, Plaintiffs filed a petition in the 24th Judicial District Court for the
Parish of Jefferson, naming the Association, Insurance Company Defendants, CJW, and over 50

5

Rec. Doc. 9 at 8.

6

Id.

7

Id. at 9.

8

Id. at 12.

9

Id.

10

Id. at 12–14.

11

Id. at 16–17.

2

Case 2:20-cv-01550-NJB-JVM Document 116 Filed 02/18/21 Page 3 of 23

individual condominium unit owners as defendants.12 Plaintiffs bring claims for breach of
contract against the Association, breach of contract and breach of duty of good faith claims
handling against Insurance Company Defendants, and negligence and bad faith claims handling
against CJW. 13 Plaintiffs also claim that they are valid lienholders and are entitled to institute and
pursue all legal remedies against the Association and the individual unit owners, including
enforcement of Plaintiffs’ Statements of Claim and Privilege, for the total unpaid amount of
$2,367,296.68, plus interest, costs, and attorneys’ fees.14
On April 22, 2020, Defendants demanded that Plaintiffs submit to arbitration pursuant to
the arbitration provision contained in the insurance policy Insurance Company Defendants issued
to the Association, under which the Association then assigned proceeds to Clean Pro. 15 On May
28, 2020, Defendants removed the case to this Court, asserting jurisdiction under the Convention
on the Recognition and Enforcement of Foreign Arbitral Awards (the “Convention”), which
Congress has implemented at 9 U.S.C. § 201, et seq. (the “Convention Act”). 16
Clean Pro wrote to Defendants on May 29, 2020, likewise invoking the arbitration clause
between Plaintiffs and Insurance Company Defendants and naming Chuck Howarth as its
appointed arbitrator.17 On July 9, 2020, Plaintiffs filed a First Amended Complaint adding Certain
Underwriters at Lloyds of London and International Insurance Company of Hannover SE as
12

Rec. Doc. 1-4.

13

Id. at 11–14.

14

Id. at 14–15.

15

Rec. Doc. 11-3 at 3.

Rec. Doc. 1 at 2. See Acosta v. Master Maint. & Const. Inc., 452 F.3d 373, 375 (5th Cir. 2006) (“Among
the Convention Act's provisions are jurisdictional grants giving the federal district courts original and
removal jurisdiction over cases related to arbitration agreements falling under the Convention.”).

16

17

Rec. Doc. 17 at 3.

3

Case 2:20-cv-01550-NJB-JVM Document 116 Filed 02/18/21 Page 4 of 23

defendants.18
Defendants thereafter filed the instant motion on July 24, 2020, seeking to compel
arbitration of Plaintiffs’ claims against Insurance Company Defendants and CJW and to remove
Howarth as Clean Pro’s arbitrator. 19 Clean Pro filed an opposition to the instant motion on August
18, 2020. 20 With leave of Court, Defendants filed a reply to Clean Pro’s opposition on August
24, 2020. 21 With leave of Court, Clean Pro filed a sur-reply on August 28, 2020.22
II. Parties’ Arguments
A.

Defendants’ Arguments in Support of the Motion
Defendants argue four main points in the instant motion. First, Defendants argue that there

is a valid arbitration agreement under the Convention Act. 23 Next, Defendants assert that the
dispute at hand falls within the scope of this valid arbitration agreement. 24 Third, Defendants
allege that Clean Pro’s appointed arbitrator must be disqualified. 25 Fourth, and finally,
Defendants urge the Court to enforce the arbitration agreement according to its terms. 26
Defendants begin by arguing that the arbitration provision included in the insurance policy

Rec. Doc. 9. The First Amended Complaint also removed Plaintiffs’ claims against several individual
unit owners.

18

19

Rec. Doc. 11.

20

Rec. Doc. 17.

21

Rec. Doc. 21.

22

Rec. Doc. 24.

23

Rec. Doc. 11-3 at 4–5.

24

Id. at 6.

25

Id. at 7–8.

26

Id. at 8.

4

Case 2:20-cv-01550-NJB-JVM Document 116 Filed 02/18/21 Page 5 of 23

between Defendants and the Association, applied here to the dispute between Defendants and
Clean Pro, satisfies the requirements for an arbitration agreement under the Convention Act.27
Defendants assert that the Act defines a valid arbitration agreement using four factors: (i) a written
agreement to arbitrate; (ii) an agreement that provides for arbitration in a convention signatory
nation; (iii) an agreement that arises out of a commercial legal relationship; and (iv) an agreement
to which a party is not an American citizen. 28 Defendants allege that all four factors are present
in the instant dispute. 29 First, the insurance policy between the Association and Insurance
Company Defendants contains a written arbitration provision. 30 Second, the agreement provides
for arbitration in New York, a signatory state to the Convention Act. 31 Third, the agreement arises
out of a commercial legal relationship between Insurance Company Defendants and the
Association. 32 Fourth, non-American citizen insurers, Certain Underwriters at Lloyds of London
and International Insurance Company of Hannover SE, are parties to the agreement. 33
Defendants next argue that Clean Pro’s claims fall within this arbitration agreement.34
Defendants assert that the arbitration agreement between Insurance Company Defendants and the
Association applies broadly to all disputes between the parties. 35 Defendants argue that an

27

Id. at 4.

28

Id.

29

Id. at 5.

30

Id.

31

Id.

32

Id.

33

Id.

34

Id. at 6.

35

Id.

5

Case 2:20-cv-01550-NJB-JVM Document 116 Filed 02/18/21 Page 6 of 23

agreement that permits arbitration in a broad array of instances has been upheld by federal courts
previously and should be upheld in the instant case as well. 36
Defendants’ third argument is that Clean Pro’s appointed arbitrator must be disqualified.37
Defendants allege that Clean Pro’s appointed arbitrator, who is also it’s hired expert, is not
disinterested, has a conflict of interest, and, accordingly, is not a permissible arbitrator. 38
Finally, Defendants argue that the arbitration agreement must be enforced according to its
terms. 39 Defendants urge the Court to require the arbitration panel to consist of senior employees
engaging in insurance underwriting or claims, to take place in New York, to apply New York
law, and to refuse to impose punitive damages. 40
B.

Clean Pro’s Arguments in Opposition to the Motion
In response, Clean Pro makes two main arguments. First, Clean Pro states that it does not

object to arbitrate its claims against Insurance Company Defendants but objects to Defendants’
assertion that the claims against CJW are also subject to arbitration. 41 Second, Clean Pro argues
that its arbitrator, Chuck Howarth, should not be disqualified.42
First, Clean Pro asserts that it agrees to arbitrate its claims against Insurance Company
Defendants and agrees with Defendants that the arbitration provision exists in the insurance
policy between Insurance Company Defendants and the Association, is valid, and is applicable
36

Id.

37

Id. at 7.

38

Id.

39

Id. at 8.

40

Id.

41

Rec. Doc. 17 at 4.

42

Id at 5.

6

Case 2:20-cv-01550-NJB-JVM Document 116 Filed 02/18/21 Page 7 of 23

in the instant case. 43 Clean Pro does not dispute that it should be considered a signatory to the
arbitration provision since it was assigned proceeds by the Association under the insurance
policy. 44 Clean Pro argues, however, that this arbitration agreement does not extend to its claims
against CJW. 45 Clean Pro argues that CJW is not a party to the policy containing the provision
and, as such, Clean Pro has not agreed to arbitrate its dispute with CJW. 46
Clean Pro’s second argument concerns the use of its appointed arbitrator, Chuck
Howarth. 47 Clean Pro argues that Mr. Howarth should not be disqualified as its arbitrator for
several reasons.48 Clean Pro asserts that this Court lacks authority to disqualify Mr. Howarth prearbitration and that this is a matter instead for the arbitration panel, with Court review after the
panel’s decision. 49 Moreover, even if this Court does consider Defendants’ motion to disqualify
Mr. Howarth, Clean Pro asserts that the motion should be denied. 50 Under the arbitration
provision at hand, Clean Pro contends that it had the right to select an arbitrator and that this
arbitrator is not required to be disinterested. 51 Instead, Clean Pro asserts that arbitrators are meant
to advocate for the party that appointed them. 52

43

Id. at 4.

44

Id.

45

Id.

46

Id. at 4–5.

47

Id at 5.

48

Id. at 5–11.

49

Id. at 5–7

50

Id. at 7–11.

51

Id.

52

Id. at 7.

7

Case 2:20-cv-01550-NJB-JVM Document 116 Filed 02/18/21 Page 8 of 23

C.

Defendants’ Arguments in Further Support of the Motion
In the reply brief, Defendants again argue that Mr. Howarth should be disqualified as

Clean Pro’s arbitrator. 53 Defendants refute Clean Pro’s argument that this Court cannot disqualify
an arbitrator pre-arbitration and assert that this Court has the power to disqualify an arbitrator if
the arbitrator is biased. 54 Defendants claim that such bias exists here because Mr. Howarth is
Clean Pro’s hired expert and will be called as a witness during the arbitration. 55 While arbitrators
are not required to be neutral, Defendants argue that they still must be disqualified when they are
clearly not impartial. 56 Defendants argue that Clean Pro has provided no support for the notion
that a hired expert can serve as an arbitrator. 57
Defendants again assert that the arbitration provision should be enforced as written.58
Defendants state that Clean Pro did not refute this argument and, as such, the arbitration provision
should be applied in full. 59
Finally, Defendants argue that Clean Pro is required to arbitrate its claims against CJW.60
Defendants assert that non-signatories to an arbitration provision can still be bound––and bind
others––to the provision under general principles of contract law including incorporation by

53

Rec. Doc. 21 at 1.

54

Id. at 2.

55

Id.

56

Id. at 2–3.

57

Id. at 3–6.

58

Id. at 6.

59

Id. at 6–7.

60

Id. at 7.

8

Case 2:20-cv-01550-NJB-JVM Document 116 Filed 02/18/21 Page 9 of 23

reference, assumption, agency, veil-piercing, and estoppel.61 Defendants assert that Clean Pro is
a signatory to the provision because Clean Pro was assigned all rights afforded to the Association
under the terms of the insurance policy. 62 Because Clean Pro is a signatory to the arbitration
provision through assignment, Defendants assert that Clean Pro should be estopped from avoiding
arbitration against CJW. 63 Moreover, Defendants argue that the claims against CJW are so related
to those against Insurance Company Defendants that it would make little sense to adjudicate the
claims against CJW separately. 64
D.

Clean Pro’s Arguments in Further Opposition to the Motion
In the sur-reply brief, Clean Pro reiterates its argument that its arbitrator should not be

disqualified.65 Clean Pro asserts that the arbitration provision at issue does not specifically require
an impartial arbitrator, undermining Defendants’ argument that case law supports disqualifying
Clean Pro’s arbitrator. 66 To the contrary, Clean Pro argues that case law supports Clean Pro’s
position that a witness is also permitted to be an arbitrator. 67
Clean Pro responds to Defendants’ argument regarding the enforceability of the terms of
the arbitration agreement by asserting that any matters relating to the substance of the agreement
must be decided by the arbitration panel, not this Court. 68 Clean Pro reiterates that it agrees to

61

Id.

62

Id.

63

Id. at 7–8.

64

Id. at 8.

65

Rec. Doc. 24 at 1.

66

Id. at 2.

67

Id.

68

Id. at 3–4.

9

Case 2:20-cv-01550-NJB-JVM Document 116 Filed 02/18/21 Page 10 of 23

arbitrate its claims against Insurance Company Defendants but argues that any issues surrounding
enforceability of specific terms of the arbitration provision should be left to the arbitration panel
to interpret. 69
Finally, Clean Pro responds to Defendants’ argument regarding the applicability of the
arbitration provision to its claims against CJW. 70 Clean Pro argues that its claims against CJW
are not, as Defendants argue, intertwined with Clean Pro’s claims against Insurance Company
Defendants. 71 Clean Pro asserts that CJW is a third-party administrator, not an insurer, and that
Clean Pro’s claims against CJW relate not to the insurance policies between the Association and
Insurance Company Defendants but instead to CJW’s alleged negligence and bad faith claims
practices as third-party administrator. 72
III. Legal Standard
In 1958, the United Nations Economic and Social Council adopted the Convention on the
Recognition and Enforcement of Foreign Arbitral Awards (the “Convention”).73 In 1970, the
United States acceded to the treaty.74 The Convention was subsequently incorporated by Chapter
2 of the Federal Arbitration Act (“FAA”), 9 U.S.C. § 201 et seq., which is also known as the
Convention Act. 75 Section 201 of the FAA provides that the Convention shall be enforced in

69

Id. at 4.

70

Id.

71

Id.

72

Id. at 4–5.

73

Lindo v. NCL (Bahamas), Ltd., 652 F.3d 1257, 1262 (11th Cir. 2011).

74

Id.

75

Acosta., 452 F.3d at 375.

10

Case 2:20-cv-01550-NJB-JVM Document 116 Filed 02/18/21 Page 11 of 23

United States courts. 76 The Supreme Court has stated that “[t]he goal of the Convention, and the
principal purpose underlying American adoption and implementation of it, was to encourage the
recognition and enforcement of commercial arbitration agreements in international contracts and
to unify the standards by which agreements to arbitrate are observed and arbitral awards are
enforced in the signatory countries.”77
Agreements arising under the Convention are subject to the provisions of the FAA unless
the FAA is in “conflict” with the Convention.78 The FAA was enacted in order to “allow[] a party
to . . . an arbitration agreement to petition any United States district court for an order directing
that such arbitration proceed in the manner provided for in such agreement.” 79 In Iberia Credit
Bureau, Inc. v. Cingular Wireless LLC, the United States Court of Appeals for the Fifth Circuit
explained that the FAA was “in large part motivated by the goal of eliminating the courts’ historic
hostility to arbitration agreements.” 80 The Fifth Circuit further explained that “Section 2 of the
FAA puts arbitration agreements on the same footing as other contracts.”81 This means that, “as
a matter of federal law, arbitration agreements and clauses are to be enforced unless they are
invalid under principles of state law that govern all contracts.” 82

9 U.S.C. § 201 (“The Convention on the Recognition and Enforcement of Foreign Arbitral Awards of
June 10, 1958, shall be enforced in United States courts in accordance with this chapter.”).

76

77

Scherk v. Alberto–Culver Co., 417 U.S. 506, 520 n.15 (1974).

GE Energy Power Conversion France SAS, Corp. v. Outokumpu Stainless USA, LLC, 140 S.Ct. 1637,
1644 (2020).

78

Volt Info. Scis., Inc. v. Bd. of Trustees of Leland Stanford Junior Univ., 489 U.S. 468, 474 (1989) (internal
quotation marks omitted).

79

80

379 F.3d 159, 166 (5th Cir. 2004).

81

Id.

82

Id.

11

Case 2:20-cv-01550-NJB-JVM Document 116 Filed 02/18/21 Page 12 of 23

Under the FAA, there is a “strong federal policy in favor of enforcing arbitration
agreements.” 83 Section 3 of the FAA provides:
If any suit or proceeding be brought in any of the courts of the United States upon
any issue referable to arbitration . . . the court . . . 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. . . . 84
“[I]f the issues in a case are within the reach of that [arbitration] agreement, the district court has
no discretion under section 3 to deny the stay.” 85
IV. Analysis
Defendants argue four main points in the instant motion. First, Defendants argue that there
is a valid arbitration provision under the requirements of the Convention Act. 86 Next, Defendants
assert that the dispute at hand falls within the scope of this valid arbitration provision. 87 Third,
Defendants allege that Clean Pro’s appointed arbitrator must be disqualified.88 Fourth, and
finally, Defendants urge the Court to enforce the arbitration provision according to its terms.89
Notably, Clean Pro concedes that there is a valid and enforceable arbitration provision in the
insurance policy Insurance Company Defendants issued to the Association and that Clean Pro’s

Texaco Expl. & Prod. Co. v. AmClyde Engineered Prod. Co., 243 F.3d 906, 909 (5th Cir. 2001) (citing
Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 217 (1985)).

83

84

9 U.S.C. § 3.

Texaco Expl. & Prod. Co., 243 F.3d at 909 (citing Hornbeck Offshore Corp. v. Coastal Carriers Corp.,
981 F.2d 752, 754 (5th Cir. 1993)).

85

86

Rec. Doc. 11-3 at 4–5.

87

Id. at 6.

88

Id. at 7–8.

89

Id. at 8.

12

Case 2:20-cv-01550-NJB-JVM Document 116 Filed 02/18/21 Page 13 of 23

claims against Insurance Company Defendants fall within the scope of this provision. 90 Clean Pro
disputes only: (1) whether Plaintiffs’ claims against CJW are subject to arbitration; (2) whether
Clean Pro’s appointed arbitrator must be disqualified; and (3) whether the Court should enforce
the “terms” of the arbitration provision. 91 Accordingly, the Court addresses each of these issues
in turn.
A.

Whether Clean Pro Must Arbitrate Its Claims with CJW
Traditionally, federal courts applied the FAA only to signatory parties of an arbitration

agreement. 92 However, this principle was modified by the Supreme Court in Arthur Anderson
LLP v. Carlisle. 93 In Carlisle, the Supreme Court held that the FAA requires federal courts to
apply state contract law to determine the “scope” of arbitration agreements, “including the
question of who is bound by them.” 94 Under state contract law, the Supreme Court held that
nonsignatories to a contract could enforce an arbitration provision “because ‘traditional
principles’ of state law allow a contract to be enforced by or against nonparties to the contract
through assumption, piercing the corporate veil, alter ego, incorporation by reference, third-party
beneficiary theories, waiver, and estoppel . . . .” 95 As such, “whenever the relevant state law
would make a contract to arbitrate a particular dispute enforceable by a nonsignatory, that
nonsignatory is entitled to request and obtain a stay under [Section 3 of the FAA] and an order to
90

Rec. Doc. 17 at 4.

91

Id. at 4–11.

Adams v, Georgia Gulf Corp., 237 F.3d 538, 540 (5th Cir. 2001); see also Matter of Talbott Big Foot,
Inc., 887 F.2d 611,614 (5th Cir. 1989).

92

93

556 U.S. 624, 631 (2009).

94

Id. at 630.

Id. at 631 (quoting 21 R. Lord, Williston on Contracts § 57:19, p. 183 (4th ed. 2001)) (internal quotation
marks omitted).

95

13

Case 2:20-cv-01550-NJB-JVM Document 116 Filed 02/18/21 Page 14 of 23

compel arbitration under [Section 4 of the FAA] . . . .” 96 In the context of estoppel claims
specifically, courts have recognized that “[e]quitable estoppel is [] more likely to apply when the
party resisting arbitration is a signatory [], as opposed to when the resisting party is a nonsignatory.” 97
The Supreme Court has made clear that state law contract principles apply to agreements
arising under the Convention as well, stating that “[g]iven that the Convention was drafted against
the backdrop of domestic law, it would be unnatural to read Article II(3) [of the Convention] to
displace domestic doctrines. . . .” and “[f]ar from displacing domestic law, the provisions of
Article II contemplate the use of domestic doctrines to fill gaps in the Convention.”98 Therefore,
the Court must apply state contract law to determine whether Clean Pro’s claims against CJW are
subject to arbitration.
As to which state’s law to apply in the instant case, the parties present arguments under
the laws of multiple states. Clean Pro invokes New York state law to support its argument that it
cannot be compelled to arbitrate with CJW. 99 Defendants include arguments under New York
state law and Louisiana state law to supports its claims in favor of arbitration.100 The arbitration
provision between Insurance Company Defendants and the Association mandates that New York
law applies to interpretation of the insurance policy. 101 Accordingly, the Court applies New York
96

Crawford Prof'l Drugs, Inc. v. CVS Caremark Corp., 748 F.3d 249, 257 (5th Cir. 2014).

In re Apple iPhone 3G & 3GS MMS Mktg. & Sales Practices Litig., 864 F. Supp. 2d 451, 459 (E.D. La.
2012) (citing Bridas S.A.P.I.C. v. Gov't of Turkmenistan, 345 F.3d 347, 361 (5th Cir. 2003); Amisil Holdings
Ltd. v. Clarium Capital Mgmt., 622 F.Supp.2d 825, 831 (N.D. Cal. 2007)).

97

98

GE Energy, 140 S.Ct. at 1645.

99

Rec. Doc. 17 at 5.

100

Rec. Doc. 21 at 7.

101

Rec. Doc. 17-1 at 6.

14

Case 2:20-cv-01550-NJB-JVM Document 116 Filed 02/18/21 Page 15 of 23

law to resolve this issue. 102
Under New York law, “the general rule is that only a party to an arbitration agreement is
bound by or may enforce the agreement” 103 because “[a]rbitration is a matter of contract
‘grounded in agreement of the parties.’” 104 New York courts have deviated from this general
principle under “limited circumstances”105 when “relevant state contract law allows the non-party
to enforce the arbitration agreement.”106 Such a deviation is appropriate, for example, in cases of
estoppel, through which a court can “estop a signatory from avoiding arbitration with a
nonsignatory when the issues the nonsignatory is seeking to resolve in arbitration are intertwined
with the agreement that the estopped party has signed.” 107 This form of estoppel applies in two
different scenarios: (1) when the “signatory to the contract containing the arbitration clause raises
allegations of substantially interdependent and concerted misconduct by both the nonsignatory
and one or more of the signatories to the contract,” or (2) “when each of a signatory’s claims
against a nonsignatory makes reference to or presumes the existence of the written agreement,

See, e.g., Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 59 (1995) (“The choice-of-law
provision, when viewed in isolation, may reasonably be read as merely a substitute for the conflict-of-laws
analysis that otherwise would determine what law to apply to disputes arising out of the contractual
relationship.”); see also Halliburton Energy Servs., Inc. v. Ironshore Specialty Ins. Co., 921 F.3d 522, 528–
30 (5th Cir. 2019) (applying Texas law to a dispute under an agreement containing “multiple references to
Texas.”); Crawford, 748 F.3d at 255 (determining that Arizona law was “made controlling by the Provider
Agreement's choice-of-law clause”). Even if this Court were to apply Louisiana law, New York law would
still apply, as “Louisiana courts have held that the validity of an arbitration agreement is determined by the
law selected in the agreement itself.” Story v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 427 F. Supp. 3d
822, 828 (E.D. La. 2019) (citing Prescott v. Northlake Christian Sch., 369 F.3d 491, 496 (5th Cir. 2004)).

102

103

Degraw Const. Grp., Inc. v. McGowan Builders, Inc., 58 N.Y.S.3d 152, 154 (N.Y. Sup. Ct. 2017).

104

Matter of Long Island Power Auth. Hurricane Sandy Litig., 87 N.Y.S.3d 576, 582 (N.Y. Sup. Ct. 2018).

105

Id.

106

Degraw, 58 N.Y.S.3d at 155.

Story, 427 F. Supp. 3d at 828 (quoting Hoffman v. Finger Lakes Instrumentation, LLC, 789 N.Y.S.2d
410, 414 (N.Y. Sup. Ct. 2005)).

107

15

Case 2:20-cv-01550-NJB-JVM Document 116 Filed 02/18/21 Page 16 of 23

the signatory’s claims arise out of and relate directly to the written agreement, and arbitration is
appropriate.”108
Under the first scenario, it is unclear whether Clean Pro is alleging that CJW and Insurance
Company Defendants engaged in concerted misconduct. Clean Pro repeatedly refers to CJW as
the “agent” of Insurance Company Defendants109 who was “acting on behalf of” Insurance
Company Defendants. 110 Clean Pro further alleges that both Insurance Company Defendants and
CJW failed to pay Clean Pro. 111 Clean Pro does not, however, explicitly allege joint misconduct
between all Defendants.
Regardless, Clean Pro’s claims against CJW should proceed to arbitration under the
second scenario. While CJW is a non-signatory to the arbitration provision at issue, Clean Pro’s
claims against CJW relate directly to the arbitration provision between Insurance Company
Defendants and the Association. Clean Pro’s claims repeatedly refer to CJW as “acting on behalf
of [Insurance Company Defendants] to handle the claims processing for the UPCA claim.”112
Clean Pro sent “daily executive summaries detailing the progress of completion” to both
Insurance Company Defendants and CJW, after which CJW was in charge of determining what
was owed to Clean Pro by Insurance Company Defendants. 113 CJW undertook this analysis
subject to the terms of the insurance policy containing the arbitration provision now at issue. 114
108

Id. (quoting Hoffman, 789 N.Y.S. at 415).

109

See, e.g., Rec. Doc. 1-2 at 9–10, 13.

110

Rec. Doc. 9 at 12.

111

See, e.g., Rec. Doc. 1-2 at 12–13.

112

See, e.g., id. at 9–10, 13; Rec. Doc. 9 at 19, 21.

113

Rec. Doc. 9 at 12, 20.

114

Id.

16

Case 2:20-cv-01550-NJB-JVM Document 116 Filed 02/18/21 Page 17 of 23

The existence of the insurance policy is essential to Clean Pro’s claims that CJW allegedly failed
to “resolve Clean Pro’s claim in a timely manner” and “improperly denied Clean Pro’s claim.”115
Accordingly, Clean Pro’s claims against CJW “arise out of and relate directly” to the insurance
policy containing the arbitration provision and CJW can enforce the arbitration provision against
Clean Pro under the doctrine of estoppel. Therefore, the Court grants Defendants’ motion to the
extent it seeks to compel arbitration between Clean Pro and CJW.
B.

Whether Clean Pro’s Arbitrator Must Be Disqualified
The parties both apply New York state law, as well as the FAA, to the issue of whether

Clean Pro’s appointed arbitrator, Chuck Howarth, should be disqualified.116 This Court will apply
the FAA, along with consistent New York state law, because “for cases that fall within its reach,
the FAA governs all aspects of arbitration procedure and pre-empts inconsistent state law.” 117
Under the FAA, courts have “only limited powers to modify the dispute resolution chosen
by the parties.” 118 Courts should resist involvement in an arbitral proceeding “prior to the issuance
of an arbitral award” with the exception of “the determination as to whether an agreement to
arbitrate exists and enforcement of that agreement by compelled arbitration of claims that fall
within the scope of the agreement . . . .” 119 Any claim that “essentially goes to the procedure of
arbitration” is best left for the arbitration panel itself, not a court.120
115

Id. at 19.

116

Rec. Doc. 10-2 at 7; Rec. Doc. 17 at 5.

Aviall, Inc. v. Ryder Sys., Inc., 913 F. Supp. 826, 830 (S.D.N.Y. 1996), aff'd, 110 F.3d 892 (2d Cir. 1997).

117

Id. at 833–34; see also Gulf Guar. Life Ins. Co. v. Connecticut Gen. Life Ins. Co., 304 F.3d 476, 486 (5th
Cir. 2002) (“Under the FAA, jurisdiction by the courts to intervene into the arbitral process prior to issuance
of an award is very limited.”).

118

119

Gulf, 304 F.3d at 487.

120

Adam Techs. Int'l S.A. de C.V. v. Sutherland Glob. Servs., Inc., 729 F.3d 443, 452 (5th Cir. 2013).

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A claim concerning the appropriateness of an appointed arbitrator falls within the ambit
of a procedural challenge. 121 The FAA does not permit courts to intervene to “remove an
arbitrator from service prior to award . . . .” 122 This includes intervening as to matters of bias as
“fairness objections should generally be made to the arbitrator subject only to limited postarbitration judicial review . . . .” 123 Any recusal decision is “best left to the discretion and good
judgment of the individual arbitrator and not to the court, at least before an award is rendered,”
because “allowing courts to review before the fact the partiality of arbitrators would spawn
endless litigation and unnecessarily delay the resolution of disputes.” 124 This result would run
counter to the purpose of the FAA, which is “to move the parties to an arbitrable dispute out of
court and into arbitration as quickly and as easily as possible.” 125 Succinctly stated, “there is no
authorization under the FAA’s express terms for a court to remove an arbitrator from service” but
instead the FAA provides only for “potential vacatur of any award.”126 For this reason, “the FAA
appears not to endorse court power to remove an arbitrator for any reason prior to issuance of an
arbitral award.” 127 As there has been no final decision made in this case, this Court will not
intervene to remove Clean Pro’s appointed arbitrator.
Even if this Court were to consider Defendants’ request under New York state law,

Turner Indus. Grp., LLC v. Rain CII Carbon LLC, No. CIV.A. 14-1031, 2014 WL 1870622, at *2 (E.D.
La. May 8, 2014) (Morgan, J.).

121

122

Id.

123

Id. (quoting Hooters of Am., Inc. v. Phillips, 173 F.3d 933, 940–41 (4th Cir. 1999)).

124

Aviall, 913 F. Supp. at 833–34.

125

Gulf, 304 F.3d at 489.

126

Id. at 490.

127

Id.

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Defendants’ arguments for disqualifying Mr. Howarth are unpersuasive. New York courts have
not required appointed arbitrators to be neutral. Instead, New York courts have said the exact
opposite, clearly stating that “each party’s arbitrator is not expected to be neutral.”128 New York
courts recognize that “the very reason each of the parties contracts for the choice of his own
arbitrator is to make certain that his ‘side’ will, in a sense, be represented in the tribunal,” and
have hesitated to question an appointed arbitrator because “the choice of an arbitrator [is] a
valuable’ contractual right not lightly to be disregarded.” 129
New York state law does permit courts to remove an arbitrator prior to a final arbitration
decision. 130 However, New York courts recognize that such power should not be utilized unless
there is “a real possibility that injustice will result.” 131 Removal is not warranted simply because
an arbitrator has a “fully known relationship” with one of the parties. 132 Instead a court should
only remove an arbitrator where there is evidence of: (1) dishonesty, (2) overt acts of misconduct,
and (3) “an arbitrator’s failure to ‘faithfully and fairly hear and examine the matters in
controversy’ by revealing ‘evident partiality or corruption.’” 133 “Evident partiality,” however, is
only sufficient for removal under New York law when neutral arbitrators are required in the
applicable arbitration agreement. 134 Otherwise, a disqualification claim must be “based on

Astoria Med. Grp. v. Health Ins. Plan of Greater New York, 182 N.E.2d 85, 87 (N.Y. 1962) (quoting
Second Preliminary Report of Advisory Committee on Practice and Procedure (N.Y. Legis. Doc., 1958, No.
13) p. 146) (internal quotation marks omitted).

128

129

Id. at 88 (quoting Matter of Lipschutz (Gurwirth), 106 N.E.2d 8, 11 (N.Y. 1952)).

130

Rabinowitz v. Olewski, 473 N.Y.S.2d 232, 234 (N.Y. App. Div. 1984).

131

Matter of Siegel (Lewis), 358 N.E.2d 484, 487 (N.Y. 1976).

132

Id. at 486.

133

Matter of Excelsior 57th Corp. (Kern), 630 N.Y.S.2d 492, 495 (N.Y. App. Div. 1995).

134

Patrolmen's Benevolent Ass'n v. New York State Pub. Employment Relations Bd., 110 N.Y.S.3d 81, 89

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something overt, some misconduct on the part of an arbitrator, and not simply on his or her interest
in the subject matter of the controversy or the arbitrator’s relationship to the party who selected
him or her.” 135
Here, the arbitration agreement states:
Unless the parties agree upon a single Arbitrator within thirty days of one receiving
a written request from the other for Arbitration, the Claimant (the party requesting
Arbitration) shall appoint his Arbitrator and give written notice thereof to the
Respondent. Within thirty days of receiving such notice, the Respondent shall
appoint his Arbitrator and give written notice thereof to the Claimant, failing which
the Claimant may nominate an Arbitrator on behalf of the Respondent.136
The arbitration agreement at issue contains no requirement for a neutral arbitrator. Accordingly,
“evident partiality” alone is insufficient to remove Mr. Howarth.
Defendants fail to allege facts of dishonesty or overt acts of misconduct by Mr. Howarth
such that removal would be appropriate under New York law. Defendants urge this Court to adopt
the holding in Excelsior, 137 in which the Supreme Court of New York held that an arbitrator, who
had made comments on a previous arbitration, should be disqualified.138 However, Excelsior is
distinguishable from the instant case for two reasons. First, the arbitration agreement at issue in
Excelsior required an impartial arbitrator whereas the provision in the instant case has no such
requirement. 139
Second, the arbitrator in Excelsior made comments, prior to the arbitration at issue, about

(N.Y. App. Div. 2019) (referencing the enactment of CPLR 7511(b)(1)(ii)) (emphasis added).
135

Id.

136

Rec. Doc. 17 at 3.

137

Rec. Doc. 21 at 3.

138

Excelsior, 630 N.Y.S.2d at 495.

139

Id. at 492; Rec. Doc. 17 at 3.

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previous arbitration concerning the parties, leading the court to believe that he would be unable
to “participate in the arbitration process in a fair, honest, and good-faith manner.”140 By contrast,
Defendants have provided no evidence to show that Mr. Howarth is unable to be a fair arbitrator.
Defendants provide no evidence of any overt misconduct or dishonesty by Mr. Howarth but
instead allege partiality based solely on Mr. Howarth’s status as a testifying, expert witness.141
This argument fails. As to testifying, New York courts have previously determined that “the
giving of testimony by an arbitrator” does not constitute misconduct. 142 Moreover, Mr. Howarth’s
status as an expert is similarly non-disqualifying but instead could be a source of “assistance to
the neutral member, who is not in a position to appreciate the problem and the fine points of its
setting.” 143 Because Defendants have failed to provide information supporting removal of Clean
Pro’s arbitrator, this Court will deny Defendants motion to remove Mr. Howarth.
C.

Whether the Court Should Enforce the “Terms” of the Arbitration Provision
The FAA requires federal courts to “respect and enforce agreements to arbitrate.”144 This

includes enforcing provisions among parties who “agree to limit the issues they choose to
arbitrate,” “agree on rules under which any arbitration will proceed,” or “specify with whom they
choose to arbitrate their disputes.” 145 A court’s role includes deciding whether a valid arbitration
provisions exists, who is bound by such a provision, and what issues are to be decided in

140

Excelsior, 630 N.Y.S.2d at 492, 495.

141

Rec. Doc. 11-3 at 7; Rec. Doc. 21 at 3.

142

Meehan v. Nassau Cmty. Coll., 676 N.Y.S.2d 178 (N.Y. App. Div. 1998).

143

Patrolmen's Benevolent Ass'n, 110 N.Y.S.3d at 88.

144

Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612, 1621 (2018).

145

Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 559 U.S. 662, 683 (2010).

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arbitration. 146
However, this involvement by a court is “limited” and ends when a decision is made over
“whether the parties agreed to submit the subject matter of the grievance to arbitration.”147 Once
parties agree to arbitrate, they “implicitly authorize the arbitrator to adopt such procedures as are
necessary to give effect to the parties’ agreement.” 148 Questions surrounding procedural issues
are “presumptively not for the judge, but for an arbitrator, to decide.” 149 The only exception to
this rule under which courts may involve themselves with questions of procedure is when a claim
“should operate to bar arbitration altogether.”150
Here, Defendants ask this Court to enforce the terms of the arbitration provision at issue,
including the requirements for the makeup of the arbitration panel, the seat of the arbitration
panel, the law used by the arbitration panel, and the permissible damages. 151 These matters are
procedural and best left to the arbitration panel itself. Because a finding on any of these terms
would not operate to bar arbitration altogether, the Court has no role in enforcing these procedural
requirements.
V. Conclusion
The Court grants the motion in part to the extent Defendants request that the Court compel
Clean Pro to arbitrate its claims against all Defendants, including CJW, and stay the matter

146

John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543 547 (1964).

Gen. Warehousemen & Helpers Union Local 767 v. Albertson's Distribution, Inc., 331 F.3d 485, 487
(5th Cir. 2003).

147

148

Stolt-Nielsen, 559 U.S. at 684–85 (emphasis added).

149

Id. at 685 (citing Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 84 (2002)).

150

Id. at 488 (citing John Wiley, 376 U.S. at 557–58).

151

Rec. Doc. 11-3 at 8.

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pending arbitration. The Court denies the motion in part to the extent Defendants request
disqualification of Clean Pro’s appointed arbitrator and to the extent Defendants request that the
Court issue an order enforcing procedural requirements of the arbitration provision.
Accordingly,
IT IS HEREBY ORDERED that Defendants’ “Motion to Stay and Compel
Arbitration” 152 is GRANTED IN PART and DENIED IN PART. The motion is GRANTED to
the extent it requests that the Court compel Clean Pro to arbitrate its claims against Defendants
Indian Harbor Insurance Company, QBE Specialty Insurance Company, Steadfast Insurance
Company, General Security Indemnity Company, United Specialty Insurance Company, Safety
Specialty Insurance Company, Old Republic Union Insurance Company, and Cramer, Johnson,
Wiggins and Associates, Inc. The motion is DENIED to the extent that it seeks the
disqualification of Clean Pro’s administrator, Mr. Howarth, and to the extent Defendants request
that the Court issue an order enforcing procedural requirements of the arbitration provision.
IT IS FURTHER ORDERED that Plaintiffs’ claims against Defendants Indian Harbor
Insurance Company, QBE Specialty Insurance Company, Steadfast Insurance Company, General
Security Indemnity Company, United Specialty Insurance Company, Safety Specialty Insurance
Company, Old Republic Union Insurance Company, and Cramer, Johnson, Wiggins and
Associates, Inc. are STAYED pending arbitration.

18th

NEW ORLEANS, LOUISIANA, this ______ day of February, 2021.

_________________________________________
NANNETTE JOLIVETTE BROWN
CHIEF JUDGE
UNITED STATES DISTRICT COURT
152

Rec. Doc. 11.

23