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

Filing 140

ORDER AND REASONS: IT IS HEREBY ORDERED that UPCA's 130 Motion to Stay Claims Pending Arbitration is GRANTED. IT IS FURTHER ORDERED that the above-captioned matter is STAYED and ADMINISTRATIVELY CLOSED to be reopened upon motion of a party at the conclusion of the arbitration proceedings. Signed by Chief Judge Nannette Jolivette Brown on 7/14/2021. (pp)

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.

SECTION: “G”

ORDER AND REASONS
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. (“UPCA”) to fix
condominium buildings destroyed in a fire. 1 Plaintiffs claim that under the terms of the contract,
UPCA assigned to Clean Pro insurance proceeds UPCA received from its insurers, 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”).2 Plaintiffs assert that, despite completing the work, they did not receive payment
under the terms of the contract from UPCA or from Insurance Company Defendants.3
Plaintiffs brought claims against UPCA, Insurance Company Defendants, and the Third-

1

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

2

Rec. Doc. 9 at 9.

3

Id. at 13–15.

1

Party Administrator, Cramer, Johnson, Wiggins and Associates, Inc.’s (“CJW”). 4 On February
18, 2021, the Court ordered Plaintiffs to arbitrate their claims against Insurance Company
Defendants and CJW, leaving Plaintiffs’ claims against UPCA as the sole claims in this Court.5
Pending before the Court is UPCA’s “Motion to Stay Claims Pending Arbitration.” 6 Clean Pro
opposes the motion. 7 Having considered the motion, the memoranda in support and in opposition,
the record, and the applicable law, the Court grants the motion.
I. Background
On February 3, 2020, Plaintiffs filed a petition in the 24th Judicial District Court for the
Parish of Jefferson, naming UPCA, Insurance Company Defendants, and CJW. 8 On May 28,
2020, Insurance Company Defendants and CJW removed the case to this Court. 9 On July 9, 2020,
Plaintiffs filed an amended complaint.10
This matter arises from the alleged destruction of over thirty (30) condominiums at the
Upper Pontalba of Old Metairie Condominium buildings after a fire broke out on February 2,
2019. 11 After the fire, UPCA hired Clean Pro pursuant to a contract to provide restoration services

Rec. Doc. 9. Plaintiffs originally named over 50 individual unit owners as defendants as well, but those
claims were later dismissed with prejudice on motion of Plaintiffs. Rec. Doc. 119; Rec. Doc. 121.

4

5

Rec. Doc. 116.

6

Rec. Doc. 130.

7

Rec. Doc. 135.

8

Rec. Doc. 1-4. See supra text accompanying note 4.

9

Rec. Doc. 1.

10

Rec. Doc. 9.

11

Id. at 8.

2

on the damaged buildings. 12 Under the contract, UPCA agreed to pay Clean Pro for its work and
to assign to Clean Pro proceeds UPCA received from its insurers, Insurance Company
Defendants. 13 Defendant CJW served as the Third-Party Administrator for Insurance Company
Defendants, processing claims related to the fire. 14 After being hired by UPCA, Clean Pro entered
into a subcontract agreement with Southern Cat. 15 Plaintiffs allege that they completed all
required work under the contract and submitted invoices according to the rates set out in the
contract. 16 Plaintiffs allege that UPCA 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. 17
In this suit, Plaintiffs bring claims for breach of contract against UPCA, 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. 18 Plaintiffs also claim that they are valid
lienholders and are entitled to institute and pursue all legal remedies against UPCA, 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.19
On February 18, 2021, the Court ordered Plaintiffs to submit to arbitration with Insurance

12

Id.

13

Id. at 9.

14

Id. at 12.

15

Id.

16

Id. at 12–14.

17

Id. at 12–16.

18

Id. at 16–21.

19

Id. at 21.

3

Company Defendants and CJW pursuant to the arbitration provision contained in the insurance
policies Insurance Company Defendants issued to UPCA, under which UPCA then assigned
proceeds to Clean Pro. 20 On May 4, 2021, UPCA filed the instant motion, seeking to stay
Plaintiffs’ claims against UPCA pending the arbitration between Plaintiffs, Insurance Company
Defendants, and CJW. 21 On March 25, 2021, Clean Pro filed an opposition. 22 On June 1, 2021,
with leave of Court, UPCA filed a reply brief in further support of the motion to stay. 23
II. Parties’ Arguments
A.

UPCA’s Arguments in Support of the Motion to Stay
UPCA makes several arguments in favor of a stay. 24 First, UPCA contends that a stay is

mandatory under the Federal Arbitration Act (“FAA”) because Plaintiffs’ claims against UPCA
involve the same facts as those at issue in the arbitration between Plaintiffs, Insurance Company
Defendants, and CJW. 25 UPCA alleges that when deciding whether non-arbitrable claims must
be stayed pending ongoing arbitration, courts apply factors set forth by the Fifth Circuit in Waste
Management, Inc. v. Residuos Industriales Multiquim, S.A. de C.V., 26 including (i) whether the
same operative facts are at issue in the arbitration and the litigation, (ii) if the claims are inherently
inseparable, and (iii) if litigation will affect the arbitration.27 UPCA alleges that under these three

20

Rec. Doc. 116.

21

Rec. Doc. 130.

22

Rec. Doc. 135.

23

Rec. Doc. 139.

24

Rec. Doc. 130-1.

25

Id. at 3.

26

372 F.3d 339, 342 (5th Cir. 2004).

27

Rec. Doc. 130-1 at 4.

4

factors, a stay is necessary because the same facts are involved in the arbitration and the instant
litigation, the claims are inherently inseparable, and continuing with this matter would affect the
arbitration. 28
Second, UPCA argues that even if a stay is not mandatory, this Court should exercise its
discretion to stay the claims against UPCA for purposes of judicial economy. 29 UPCA argues that
a discretionary stay is warranted because of the overlap between the arbitration claims and the
claims against UPCA. 30 UPCA also contends that the outcome of the arbitration may benefit the
parties to this litigation. 31
B.

Clean Pro’s Arguments in Opposition to the Motion to Stay
In opposition, Clean Pro argues that it did not agree to arbitrate its claims against

UPCA. 32 Clean Pro cites the contract between UPCA and Clean Pro, which “provides that the
UPCA acknowledged that it is responsible for all amounts to be paid to Clean Pro and no lack of
insurance coverage or failure on the part of the UPCA to receive insurance proceeds will relieve
the UPCA of this responsibility.” 33 Thus, Clean Pro argues, UPCA is “contractually bound to
make payment to Clean Pro regardless of the outcome in [the] arbitration.” 34
Clean Pro further contends that the FAA’s mandatory stay provision does not apply to
non-signatories to an arbitration agreement except in certain circumstances that do not apply to
28

Id. at 4–5.

29

Id. at 5–6.

30

Id. at 6–7.

31

Id.

32

Rec. Doc. 135 at 1.

33

Id. at 1–2.

34

Id. at 3.

5

Plaintiffs’ claims against UPCA. 35 Instead, Clean Pro argues that Plaintiffs’ claims against UPCA
arise from the contract between Plaintiffs and UPCA, not out of the insurance policies which
contain the arbitration provision. 36 Accordingly, Clean Pro contends that “UPCA’s liability to
Clean Pro under the Contract does not derive from the Insurers’ or CJW’s conduct or liability
under the policy” and UPCA is not entitled to a stay of the present litigation. 37
Clean Pro does concede that “it would prefer to recover the amounts due to it from the
Insurers,” not UPCA. 38 While Clean Pro argues that this litigation should nevertheless proceed,
Clean Pro asserts that it “is not opposed to extending the deadlines in this litigation so that the
arbitration is resolved before a trial on merits takes place in the litigation.” 39
C.

UPCA’s Arguments in Further Support of the Motion to Stay
UPCA argues in reply that “the FAA’s mandatory stay provision can be invoked by non-

signatories” to an arbitration agreement. 40 UPCA re-asserts that a stay is warranted in this case
under the Waste Management factors, as the facts involved in arbitration and litigation are the
same, the claims are inseparable, and ongoing litigation will affect the arbitration. 41 UPCA argues
that it is irrelevant that Plaintiffs’ claims against UPCA arise under the contract between the two
parties and not the insurance policy containing the arbitration provision in this matter because
Clean Pro put “both contracts at issue in both proceedings by alleging that its contract with UPCA
35

Id.

36

Id. at 3–4.

37

Id. at 4.

38

Id.

39

Id.

40

Rec. Doc. 139 at 2.

41

Id. at 2–3.

6

assigned to Clean Pro the proceeds of any insurance coverage under UPCA’s insurance
contract.” 42
III. Legal Standard & Analysis
The Federal Arbitration Act 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.” 43 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.” 44 The Fifth Circuit further explained that “Section 2 of the FAA puts
arbitration agreements on the same footing as other contracts.” 45 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.”46
Under the FAA, there is a “strong federal policy in favor of enforcing arbitration
agreements.” 47 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. . . . 48
42

Id. at 4.

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

43

44

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

45

Id.

46

Id.

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)).

47

48

9 U.S.C. § 3.

7

“[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.” 49
Traditionally, federal courts applied the FAA only to parties to an arbitration agreement.50
However, Section 3 of the FAA provides parties not subject to an arbitration agreement with “the
right to ask the court for a mandatory stay of litigation, in favor of pending arbitration to which
they are not a party.” 51 A stay of non-arbitrable claims is appropriate in very limited
circumstances.52 The Fifth Circuit instructs courts to consider three factors in determining
whether to stay non-arbitrable claims: (i) whether the same operative facts are involved in the
litigation and arbitration; (ii) whether the claims are inseparable; and (iii) whether allowing
litigation to proceed would affect arbitration.53 “The question is not ultimately one of weighing
potential harm to the interests of the [parties not subject to arbitration], but of determining whether
proceeding with litigation will destroy the . . . right to a meaningful arbitration.” 54
Applying these factors, the Court determines that a stay of Plaintiffs’ claims against
UPCA is warranted pending the ongoing arbitration between Plaintiffs, Insurance Company
Defendants, and CJW. Under the first Waste Management factor, Plaintiffs’ claims against
UPCA, Insurance Company Defendants, and CJW all arise out of the same event—the fire that

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)).

49

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).

50

51

Waste Mgmt., 372 F.3d at 342.

52

Id.

53

Id. at 343–45; Hill v. G E Power Sys., Inc., 282 F.3d 343, 347 (5th Cir. 2002).

54

Waste Mgmt., 372 F.3d at 343.

8

destroyed over thirty condominiums at the Upper Pontalba of Old Metairie Condominium
buildings—and were originally brought by Plaintiffs in one lawsuit. 55 Plaintiffs claim that they
were not properly compensated for the work they performed after the fire. Defendants dispute
“the amount and quality of work the Plaintiffs allegedly performed, the accuracy of their invoices,
and the reasonableness of their charges.” 56 Therefore, the same operative facts are involved in
this litigation and in the arbitration.
As to the second Waste Management factor, Plaintiffs claims against Insurance Company
Defendants and UPCA are inseparable. Insurance Company Defendants issued insurance policies
to UPCA. After UPCA entered a contract with Plaintiffs to perform fire remediation, UPCA
“irrevocably assigned to Clean Pro that portion of the proceeds of any insurance coverage which
relates to the work performed by Clean Pro.” 57 Therefore, Plaintiffs’ claims against Insurance
Company Defendants are contingent upon a finding that UPCA owes Plaintiffs money for the
work Plaintiffs allegedly performed. Plaintiffs suffered “one alleged harm, so the resulting
litigation and arbitration are inherently inseparable from the instant litigation.” 58
Finally, continuing with the instant litigation against UPCA could substantially impact
the ongoing arbitration. Permitting the instant suit to proceed against UPCA “would undermine
the arbitration proceedings” between Plaintiffs and Insurance Company Defendants, “thereby
thwarting the federal policy in favor of arbitration.”59 Moreover, were a judgment issued in this

55

See generally Rec. Doc. 9.

56

Rec. Doc. 130-1 at 4.

57

Rec. Doc. 9 at 17.

58

Waste Mgmt., 372 F.3d at 345.

59

Hill, 282 F.3d at 348.

9

case, “[g]iven the binding effect of a federal judgment, as well as the factual similarities in [the]
asserted claims, the . . . arbitrator would necessarily be strongly influenced to follow the court’s
determination.”60 Therefore, the third Waste Management factor also weighs in favor of staying
the instant litigation.
Given that all three Waste Management factors support a stay, the Court will stay
Plaintiffs’ claims against UPCA pending the ongoing arbitration between Plaintiffs, Insurance
Company Defendants, and CJW.
V. Conclusion
Based on the foregoing,
IT IS HEREBY ORDERED that UPCA’s “Motion to Stay Claims Pending
Arbitration” 61 is GRANTED.
IT IS FURTHER ORDERED that the above-captioned matter is STAYED and
ADMINISTRATIVELY CLOSED to be reopened upon motion of a party at the conclusion
of the arbitration proceedings.

14th
NEW ORLEANS, LOUISIANA, this _____ day of July, 2021.

_________________________________
NANNETTE JOLIVETTE BROWN
CHIEF JUDGE
UNITED STATES DISTRICT COURT

60

Id.

61

Rec. Doc. 130.

10