Kronlage Family Limited Partnership v. Independent Specialty Insurance Company et al

Filing 68

ORDER AND REASONS that Defendants' 28 Motion to Compel Arbitration and to Dismiss Claims Against Defendants, or Alternatively, Stay Litigation Pending Arbitration is GRANTED IN PART and DENIED IN PART. The Motion is GRANTED to the extent Defen dants move the Court to compel arbitration and stay this litigation. The Motion is DENIED to the extent Defendants move this Court to dismiss Plaintiffs claims against them. IT IS FURTHER ORDERED that the above-captioned matter is STAYED AND ADMINISTRATIVELY CLOSED pending arbitration. Signed by Chief Judge Nannette Jolivette Brown on 1/17/2023.(jls)

Case 2:22-cv-01013-NJB-MBN Document 68 Filed 01/18/23 Page 1 of 16

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA

KRONLAGE FAMILY LIMITED
PARTNERSHIP

CIVIL ACTION

VERSUS

NO. 22-1013

INDEPENDENT SPECIALTY
INSURANCE CO. et al.

SECTION: “G”(5)

ORDER AND REASONS
Before the Court is Defendants Certain Underwriters at Lloyd’s and other Insurers
Subscribing to Binding Authority Number B604510568622021 (“Underwriters”) and Independent
Specialty Insurance Co.’s (“ISIC”) (collectively, “Defendants”) “Motion to Compel Arbitration
and to Dismiss Claims Against Defendants, or Alternatively, Stay Litigation Pending Arbitration”
(“Motion to Compel Arbitration”). 1 In the motion, Defendants seek an order to compel Plaintiff
Kronlage Family Limited Partnership (“Plaintiff”) to arbitrate and to dismiss the claims against
Defendants or to stay the litigation pending arbitration pursuant to 9 U.S.C. §§ 3, 208. 2 Plaintiff
opposes the motion. 3 Having considered the motion, the memoranda in support and in opposition,
the record, and the applicable law, the Court grants the motion in part and denies it in part. The
motion is granted to the extent Defendants move the Court to compel arbitration and stay this
litigation. The motion is denied to the extent Defendants move this Court to dismiss Plaintiff’s
claims against them.

1

Rec. Doc. 28.

2

Id. at 1.

3

Rec. Doc. 61.

1

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I. Background
This litigation arises out of alleged damage to Plaintiff’s property during Hurricane Ida. 4
Plaintiff filed a petition for damages against Defendants in the Twenty-Fourth Judicial District
Court for the Parish of Jefferson on March 15, 2022. 5 According to the Petition, Plaintiff purchased
an insurance policy from ISIC on April 6, 2021, insuring the properties located at 1801 and 1809
S. Sherwood Forest Blvd., Baton Rouge, LA 70816, against all risks of loss (the “Policy”). 6 In the
Petition, Plaintiff avers that, on August 29, 2021, the property covered by the Policy was severely
damaged by hurricane force winds sustained during Hurricane Ida. 7
On April 14, 2022, Defendants removed the action to this Court, asserting subject matter
jurisdiction based on a federal question under 28 U.S.C. §§ 1441 and 1446. 8 In the Notice of
Removal, Defendants asserted that removal was proper because there is an arbitration provision in
the Policy that falls under the Convention Act, 9 U.S.C. § 201, et seq. (the “Convention Act”). 9
“Congress promulgated the Convention Act in 1970 to establish procedures for our courts to
implement” the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the
“Convention”). 10 The Convention is an international treaty, ratified by Congress in 1970, which
seeks to “encourage the recognition and enforcement of commercial contracts and to unify the
standard by which the agreements to arbitrate are observed, and arbitral awards are enforced in
4

Rec. Doc. 1-1 at 1.

5

Id.

6

Id. at 2.

7

Id. at 3.

8

Rec. Doc. 1 at 3.

9

Id.

10

McDermott Int’l, Inc. v. Lloyds Underwriters of London, 944 F.2d 1199, 1208 (5th Cir. 1991).

2

Case 2:22-cv-01013-NJB-MBN Document 68 Filed 01/18/23 Page 3 of 16

signatory countries.” 11 Therefore, Defendants averred in the Notice of Removal that, because
Underwriters are a foreign corporation with its principle place of business in the United Kingdom,
and because the United Kingdom signed the Convention, this Court has original jurisdiction under
the Convention Act. 12
Plaintiff then filed a motion to remand, arguing that removal was improper because it was
based on an invalid arbitration provision and relied on the incorrect assumption that the
Convention Act preempts Louisiana insurance law. 13 Plaintiff also filed a motion to invalidate the
arbitration provision in the Policy. 14 In its August 17, 2022 Order and Reasons, the Court denied
both motions. 15 The Court explained that removal was proper pursuant to the Convention Act
because the dispute relates to the arbitration agreement and, given that Underwriters are citizens
of the United Kingdom, which is a signatory to the Convention, the arbitration agreement falls
under the Convention. 16 The Court also explained that Louisiana law does not reverse-preempt the
Convention Act. 17

11

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

Id. at 3–5. 9 U.S.C. § 205 states that “where a subject matter of an action or proceeding pending in State
court relates to an arbitration agreement or award falling under the Convention, … the defendants may, at any time
before the trial thereof, remove such action or proceeding to the district court of the United States and division
embracing the place where the action or proceeding is pending.”
12

13

See Rec. Docs. 7, 7-1.

14

Rec. Doc. 20.

15

Rec. Doc. 25.

16

See id. at 13–15.

17

See id. at 16.

3

Case 2:22-cv-01013-NJB-MBN Document 68 Filed 01/18/23 Page 4 of 16

On August 24, 2022, Defendants filed the instant Motion to Compel Arbitration. 18 On
September 1, 2022, Plaintiff filed a Motion to Dismiss Underwriters 19 and, on September 2, 2022,
a “Motion to Reconsider Remand of Remaining Claims Against [ISIC] to State Court” (“Motion
to Reconsider Remand”) (collectively, “Plaintiff’s Motions”). 20 These motions were originally set
for submission on September 21, 2022. On September 8, 2022, Plaintiff filed a motion to expedite
Plaintiff’s Motions 21 and a motion to stay the Motion to Compel Arbitration. 22 That same day,
Defendants filed a motion for extension of time to respond to Plaintiff’s Motions. 23 On September
9, 2022, the Court reset the submission dates for Plaintiff’s Motions to October 5, 2022, and the
submission date for the Motion to Compel Arbitration to November 2, 2022. 24
On October 18, 2022, the Court denied Plaintiff’s Motion to Dismiss Underwriters, finding
that the motion was an attempt to circumvent the Court’s previous ruling denying remand and to
avoid arbitration, thereby prejudicing ISIC. 25 October 19, 2022, the Court also denied Plaintiff’s
Motion to Reconsider Remand as moot. 26 On October 25, 2022, Plaintiff opposed the Motion to
Compel Arbitration. 27

18

Rec. Doc. 28.

19

Rec. Doc. 31.

20

Rec. Doc. 32.

21

Rec. Doc. 33.

22

Rec. Doc. 34.

23

Rec. Doc. 35.

24

Rec. Doc. 36.

25

See Rec. Doc. 59.

26

Rec. Doc. 60.

27

Rec. Doc. 61.

4

Case 2:22-cv-01013-NJB-MBN Document 68 Filed 01/18/23 Page 5 of 16

II. Parties’ Arguments
A.

Defendants’ Arguments in Support of the Motion to Compel Arbitration
In support of the Motion to Compel Arbitration, Defendants argue that all four

requirements necessary for a court to compel an arbitration under a provision governed by the
Convention Act are satisfied. 28 Defendants argue that the first criteria—whether there is a written
agreement to arbitrate the matter—is met because “an arbitration clause contained in an insurance
policy constitutes an enforceable written agreement.” 29 Defendants assert that the second
criteria—whether the agreement provides for arbitration in a Convention signatory nation—is
satisfied because the Policy provides for arbitration in the United States, which ratified the
Convention in 1970. 30 Defendants contend that the third criteria—whether the arbitration
agreement arises from a commercial legal relationship—is satisfied because “[t]his District has
consistently held that an arbitration clause in an insurance agreement satisfies the requirement that
the arbitration agreement arises from a commercial legal relationship.” 31 Finally, Defendants aver
that the fourth criteria—whether any party to the agreement is not an American citizen—is satisfied
because Underwriters is a citizen of the United Kingdom comprised partially of syndicates that are
also citizens of the United Kingdom. 32 Thus, Plaintiff concludes that, because these four

28

See Rec. Doc. 28-1 at 5.

29
Id. (citing Gulledge v. Certain Underwriters at Lloyd’s, London, No. 18-6657, 2018 WL 4627387, at *3
(E.D. La. Sept. 27, 2018)).
30

Id. at 6.

Id. (citing Gulledge, 2018 WL 4627387, at *3; Viator v. Dauterive Contractors, Inc., 638 F. Supp. 2d 641,
646 (E.D. La. 2009)).
31

32

See id. at 6–7.

5

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requirements are satisfied, the Convention requires that the Court compel arbitration absent a
finding that the agreement is “null and void, inoperative or incapable of being performed.” 33
Defendants argue that the “null and void exception” is very narrow and does not apply to
the instant arbitration provision because there is no evidence of fraud duress, or mistake. 34
Defendants further argue that the Policy’s arbitration provision “contains a broad delegation clause
that requires that the Arbitration Panel, not the Court, resolve all questions regarding whether
specific issues fall within [its] scope.” 35 Defendants assert that the Fifth Circuit has held that “[i]f
an arbitration agreement contains a delegation clause, ‘the motion to compel should be granted in
almost all cases.’” 36 Thus, Defendants conclude that, because the delegation clause in question
includes “all matters of difference,” it “refers all disputes, including Plaintiff’s bad faith claims, to
arbitration.” 37
Defendants make two further arguments in support of the Motion to Compel Arbitration.
First, Defendants argue that “Plaintiff is equitably estopped from objecting to arbitration [because]
all insurers have acted in concert in evaluating and adjusting Plaintiff's insurance claims.” 38
Defendants assert that another court in the Eastern District of Louisiana has held in that, in a case
involving many of the same parties “and a substantially identical arbitration provision,” the
plaintiff was equitably estopped from avoiding arbitration where it “ alleged interdependent and

33

Id. at 7 (quoting Freudensprung, 379 F.3d at 339).

34

Id. (quoting Johnson v. NCL (Bah.) Ltd., 163 F. Supp. 3d 338, 361 (E.D. La. 2016)).

35

Id. at 8.

36

Id. (quoting Kubala v. Supreme Prod. Sers., 830 F.3d 199, 202 (5th Cir. 2016)).

Id. at 8–9 (quoting Georgetown Home Owners Ass’n v. Certain Underwriters at Lloyd’s, No. 20-102, 2021
2021 WL 359735, at *15 (M.D. La. Feb. 2, 2021)).
37

38

Id. at 9 (quoting Grigson v. Creative Artists Agency, L.L.C., 210 F.3d 524, 537 (5th Cir. 2000)).

6

Case 2:22-cv-01013-NJB-MBN Document 68 Filed 01/18/23 Page 7 of 16

concerted misconduct.” 39 Defendants aver that, likewise, “Plaintiff fails to differentiate between
the alleged actions of any defendant insurer” because it reported the alleged loss to both
Defendants, assigned the loss to a single claim, and asserted a breach of a single contract. 40 Thus,
Defendants conclude that “the claims against the defendant insurers are considered to be concerted
and interdependent” and so the doctrine of equitable estoppel applies. 41
Second, Defendants argue that Louisiana law does not prevent the enforcement of the
arbitration clause. 42 Defendants assert that the Fifth Circuit has made clear that the Convention
Act supersedes state law. 43 Thus, Defendants conclude that the Court should grant the Motion to
Compel Arbitration. 44
B.

Plaintiff’s Arguments in Opposition to the Motion to Compel Arbitration
In opposition to Defendants’ Motion to Compel Arbitration, Plaintiff advances three

arguments. First, Plaintiff argues that the arbitration provision should be null and void because
“Louisiana considers arbitration agreements in property insurance contracts to be a nullity.”45
Second, Plaintiff argues that the contract should be null and void because it “never
intentionally agreed to arbitrate any insurance claims.” 46 Plaintiff asserts that, upon receiving the

Id. at 9–10 (quoting Clean Pro Carpet & Upholstery Care Inc. v. Upper Pontalba of Metairie Condo Ass'n,
No. 20-1550, 2021 WL 638117, at *6 (E.D. La. Feb. 18, 2021)).
39

40

Id. at 10–11.

Id. at 10–12 (quoting Holts v. TNT Cable Contractors, Inc., No. 19013546, 2020 WL 1046337, at *4 (E.D.
La. Mar. 4, 2020)).
41

42

See id. at 13.

43

Id. (citing McDonnel Grp., L.L.C. v. Great Lakes Ins. Se, 923 F.3d 427 (5th Cir. 2019)).

44

Id. at 14.

45

Rec. Doc. 61 at 3.

46

Id. at 1.

7

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Policy, it told its “insurance agent that the arbitration clause was not acceptable . . . [and] needed
to be taken out of the policy or a different policy [would need to be] obtained.” 47 Plaintiff avers
that “[t]he insurance agent said he would handle it, but he apparently did [not].” 48 Thus, Plaintiff
concludes that the contract should be null and void because Plaintiff clearly never intended to
receive an insurance policy that required arbitration. 49 Plaintiff also concludes that the contract
should be null and void based on the internationally recognized defense of mistake because it never
willingly accepted having an arbitration agreement in the Policy, requested that the insurance agent
fix the problem, and “has now sued [its] insurance agent for this mistake.” 50
Third, Plaintiff argues that the doctrine of equitable estoppel does not apply because the
Policy makes clear that it be treated as “several liability contracts” and because,“[a]t every turn of
this case,” Plaintiff has sought to treat ISIC differently than Underwriters. 51 Plaintiff avers that it
“sought court approval for voluntary dismissal of [Underwriters] with prejudice” and has “offered
to settle with [Underwriters] for nothing because [it] does not want to arbitrate.” 52 Plaintiff asserts
that, even though it has not settled its claims against Underwriters yet, “we can expect that they
will” such that “there will no longer be any legal justification for an arbitration which, under
Louisiana law, is unenforceable.” 53 Regardless, Plaintiff argues that “the several liability aspect of

47

Id. at 2.

48

Id.

49

See id. at 3–4.

50

Id. at 6.

51

Id.

52

Id.

53

Id. at 6–7.

8

Case 2:22-cv-01013-NJB-MBN Document 68 Filed 01/18/23 Page 9 of 16

the [Policy] means that [Plaintiff’s] rights against [ISIC] are against a domestic insurer” such that
the claims against ISIC should not be subject to arbitration. 54
III. Legal Standard
Agreements arising under the Convention are subject to the provisions of the FAA unless
the FAA is in “conflict” with the Convention. 55 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.” 56 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.” 57 The Fifth Circuit further explained that “Section 2 of the
FAA puts arbitration agreements on the same footing as other contracts.” 58 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.” 59
Under the FAA, there is a “strong federal policy in favor of enforcing arbitration
agreements.” 60 Section 3 of the FAA provides:
If any suit or proceeding be brought in any of the courts of the United States upon
54

Id. at 7.

55

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

(2020).

Volt Info. Scis., Inc. v. Bd. of Trustees of Leland Stanford Junior Univ., 489 U.S. 468, 474 (1989) (internal
quotation marks omitted).
56

57

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

58

Id.

59

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)).
60

9

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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. . . . 61
“[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.” 62
IV. Analysis
A.

Whether there is a Valid Agreement to Arbitrate Plaintiff’s Claims
As the Court explained in its August 17, 2022 Order and Reasons, the Convention Act, and

not Louisiana law, governs the Policy’s arbitration provision. 63 The Convention Act incorporates
the Federal Arbitration Act (“FAA”) except for the few provisions where the two laws conflict. 64
The Supreme Court has noted the “emphatic federal policy in favor of arbitral dispute resolution,”
which “applies with special force in the field of international commerce.” 65 Thus, the Fifth Circuit
has explained that, “[i]n determining whether the Convention requires compelling arbitration in a
given case, courts conduct only a very limited inquiry.” 66 Therefore, absent a finding that the
subject “agreement is null and void, inoperative, or incapable of being performed,” a court must
grant a motion to compel arbitration if the following requirements are met: “(1) there is a written

61

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)).
62

Rec. Doc. 25 at 12–16. Therefore, the Court rejects Plaintiff’s argument that the Policy’s arbitration
provision is null and void because “Louisiana considers arbitration agreements in property insurance contracts to be a
nullity.” Rec. Doc. 61 at 3.
63

64
McDermott Int’l., Inc. v. Lloyds Underwriters of London, 944 F.2d 1199, 1208 (5th Cir. 1991) (“The
Convention Act incorporates the FAA except where the FAA conflicts with the Convention Act’s few specific
provisions.”) (citing 9 U.S.C. § 208).
65

Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 631 (1985).

Freudensprung v. Offshore Tech. Servs., Inc., 379, F.3d 327, 339 (5th Cir. 2004) (citing Francisco v.
STOLT ACHIEVEMENT MT, 293 F.3d 270, 273 (5th Cir. 2002)).
66

10

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agreement to arbitrate the matter; (2) the agreement provides for arbitration in a Convention
signatory nation; (3) the agreement arises out of a commercial legal relationship; and (4) a party
to the agreement is not an American citizen.’” 67
Plaintiff does not contest that these requirements are satisfied. Furthermore, the Court
already explained that they are easily met in its August 17, 2022 Order and Reasons. 68 Plaintiff
also does not question that its claims are within the scope of the Policy’s arbitration provision.69
Thus, the main dispute is whether the arbitration provision is valid. The Court must compel the
parties to arbitrate unless the agreement “is null and void, inoperative or incapable of being
performed.” 70 However, this “null and void” defense, which is set forth in Article II(3) of the
Convention, “‘limits the bases upon which an international arbitration agreement may be
challenged to standard breach-of-contract defenses’ such as fraud, mistake, and duress.” 71 “In light
of the strong presumption favoring arbitration, ‘a party seeking to invalidate an arbitration
agreement bears the burden of establishing its invalidity.’” 72
Plaintiff asserts that its insurance broker’s failure to remove the arbitration provision from
the Policy constitutes a mistake sufficient to void the arbitration clause. The Fifth Circuit explained

Id. (quoting Sedco, Inc. v. Petroleos Mexicanos Mexican Nat’l Oil Co., 767 F.2d 1140, 1146 (5th Cir.
1985); Francisco, 293 F.3d at 273).
67

68

See Rec. Doc. 25 at 13–14.

See Sedco, 767 F.2d at 1145 (“Whenever the scope of an arbitration clause is in question, the court should
construe the clause in favor of arbitration.”) (emphasis added).
69

70

Id. at 1146.

Johnson v. NCL (Bahamas) Ltd. 163 F.Supp.3d 338, 361 (E.D. La. 2016) (Brown J.) (quoting DiMercurio
v. Sphere Drake Ins. PLC, 202 F.3d 71, 79–80 (1st Cir. 2000)).
71

1010 Common, LLC v. Certain Underwriters at Lloyd’s, London, No. 20-2326, 2020 WL 7342752, at *9
(E.D. La. Dec. 14, 2020) (quoting Carter v. Countrywide Credit Indus., Inc., 362 F.3d 294, 297 (5th Cir. 2004)).
72

11

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that the Convention supersedes state law “unless there are defenses set forth in the Convention.” 73
The Supreme Court has also made clear that state law contract principles apply to agreements
arising under the Convention, stating that “[f]ar from displacing domestic law, the provisions of
Article II [of the Convention] contemplate the use of domestic doctrines to fill gaps in the
Convention.” Thus, the question of whether the agreement to arbitrate is null and void is analyzed
under state law. As to which state law to apply here, Plaintiff has consistently argued that the
Policy is subject to Louisiana law. 74
However, the alleged mistake does not void the arbitration clause under Louisiana law.
Pursuant to Louisiana Civil Code article 1949, a mistake “vitiates consent only when it concerns
a cause without which the obligation would not have been incurred and that cause was known or
should have been known to the other party.” 75 As the Louisiana Supreme Court has explained,
“both parties can individually be mistaken . . . vitiating the consent of both parties; or one party
can be mistaken and that mistake will vitiate consent if the other party knows or should have known
[that the error was the reason for consent].” 76 The policy underpinning this rule is the
understanding that “[w]hen one party is in error, . . . there is theoretically no meeting of the minds,
but granting relief to the party in error will unjustly injure the interest of the other party if he is

Safety Nat. Cas. Corp. v. Certain Underwriters at Lloyd’s, London, 587 F.3d 714, 725 (5th Cir. 2009)
(“The Convention itself contains defenses to the enforceability of an arbitration agreement . . . Accordingly, it is by
reference to the Convention that we have a command—a judicially enforceable remedy—that we ‘supersede’
Louisiana law unless there are defenses set forth in the Convention that counteract that command.”); see also
Fleetwood Enters., Inc. v. Gaskamp, 280 F.3d 1069, 1073 (5th Cir. 2002) (holding that the question of whether there
is a valid agreement to arbitrate under the FAA is governed by ordinary state law principles).
73

74

See Rec. Doc. 61 at 4–6.

75

La. Civ. Code art. 1949.

76

Peironnet v. Matador Res. Co., 2012-2292 (La. 6/28/13); 144 So. 3d 791, 807.

12

Case 2:22-cv-01013-NJB-MBN Document 68 Filed 01/18/23 Page 13 of 16

innocent of the error.” 77 Plaintiff has stated no facts to suggest that Defendants should have known
that Plaintiff would not have agreed to purchase the Policy containing an arbitration clause. On the
contrary, property insurance contracts regularly include arbitration clauses. Thus, voiding the
arbitration clause would unjustly injure Defendants, who appear innocent of the alleged mistake.
Accordingly, Plaintiff has failed to overcome the substantial burden of establishing the invalidity
of the Policy’s arbitration clause, especially given the strong presumption in favor of arbitration
that applies with “special force” to arbitration clauses falling under the Convention. 78
B.

Whether Equitable Estoppel is Warranted
Plaintiff also argues that the instant motion should be denied because the Policy states that

it should be treated as two different contracts—one between Plaintiff and Underwriters and one
between Plaintiff and ISIC. Defendants do not contest that they are severally liable such that the
Policy should be treated as two separate contracts; however, Defendants assert that Plaintiff is
equitably estopped from objecting to arbitration because Plaintiff fails to differentiate between the
actions of ISIC and Underwriters.
Even if Plaintiff’s agreement with ISIC is a separate contract not covered by the
Convention, the Fifth Circuit has held that “in certain limited instances, pursuant to an equitable
estoppel doctrine, a nonsignatory-to-an-arbitration-agreement-defendant can nevertheless compel
arbitration against a signatory-plaintiff.” 79 This form of estoppel applies “when the signatory to
the contract containing an arbitration clause raises allegations of substantially interdependent and
concerted misconduct by both the nonsignatory and one or more of the signatories to the

77

Id.

78

See Mitsubishi Motors Corp., 473 U.S. at 638–40; see also Carter, 362 F.3d at 297.

79

Grigson v. Creative Artists Agency L.L.C., 210 F.3d 524, 526 (5th Cir. 2000).

13

Case 2:22-cv-01013-NJB-MBN Document 68 Filed 01/18/23 Page 14 of 16

contract.” 80 The Fifth Circuit explained that “[o]therwise the arbitration proceedings between the
two signatories would be rendered meaningless and the federal policy in favor of arbitration
effectively thwarted.” 81
Defendants argue that the doctrine of equitable estoppel should apply to the agreement
between Plaintiff and ISIC because Plaintiff fails to differentiate between ISIC and Underwriters’
conduct but rather assigns its loss to both Defendants through a single claim. Plaintiff argues that
it has differentiated between the two Defendants throughout this litigation by offering to settle or
voluntarily dismiss its claims against Underwriters. Plaintiff’s argument demonstrates a
misunderstanding of the law. Whether Plaintiff alleges “substantially interdependent and
concerted misconduct” by ISIC and Underwriters is determined by looking to the Petition, which
sets forth “the operative facts for purposes of the motion to compel arbitration.” 82 Plaintiff’s
treatment of Defendants after commencing litigation is irrelevant to the conduct alleged in the
Petition.
Here, the Petition not only contains repeated allegations of substantially interdependent
and concerted misconduct, but refers to ISIC and Underwriters collectively 83 and makes all
allegations against both Defendants. 84 In City of Kenner v. Certain Underwriters at Lloyd’s,
London, another court in the Eastern District of Louisiana applied the doctrine of equitable
estoppel where the plaintiff alleged that the defendants “‘collectively’ insured the property . . .

80
Id. at 527 (quoting MS Dealer Serv. Corp. v. Franklin, 177 F.3d 942, 947 (11th Cir.1999)) (“We agree
with the intertwined-claims test formulated by the Eleventh Circuit.”).
81

Id.

82

Id. at 527, 529.

83

See Rec. Doc. 1-1 at 2.

84

See generally Rec. Doc. 1-1.

14

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[and] received proof of loss but [] failed to pay out on the damage,” thus breaching their duty of
good faith. 85 Likewise, Plaintiff alleges that Defendants collectively insured the policy, received
Plaintiff’s insurance claim, refused to tender any payment for the damage, and, in doing so,
breached the Policy in bad faith. 86 Therefore, Plaintiff fails to differentiate between the conduct of
ISIC and Underwriters. Accordingly, application of equitable estoppel is warranted.
C.

Whether This Action Should be Dismissed Pending Arbitration
Defendants ask the Court to dismiss or, in the alternative, stay this action pending

arbitration. 87 Thus, having determined that Plaintiff’s claims must be submitted to arbitration, the
Court must next determine whether to dismiss or stay this action pending arbitration. Defendants
provide no support for their request for dismissal and Plaintiff does not address the issue.
Section 3 of the FAA provides that, when claims are properly referable to arbitration, the
court shall stay the trial of the action until the arbitration is complete upon application of one of
the parties. 88 Thus, “because the Convention Act incorporates the FAA, ‘parties whose agreements
fall under the Convention have had to seek authority for stays under [Section 3].’” 89 Accordingly,
a court may not deny a stay when a valid arbitration agreement falls under the Convention. Where
all of Plaintiff’s claims are subject to arbitration, the Fifth Circuit has clarified that, although

85

No. 21-2064, 2022 WL 307295, at *3 (E.D. La. Feb. 2, 2022) (internal citations omitted).

86

Rec. Doc. 1-1 at 2–4.

87

Rec. Doc. 28 at 2.

88

9 U.S.C. § 3.

1010 Common, LLC, 2020 WL 7342752, at *12 (quoting Todd v. Steamship Mut. Underwriting Ass'n, Ltd.,
No. 08-1195, 2011 WL 1226464, at *2 (E.D. La. March 28, 2011)).
89

15

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dismissal is not an abuse of discretion, it is not mandatory. 90 Therefore, the Court exercises its
discretion to stay this litigation pending arbitration rather than dismiss Plaintiff’s claims because
Defendants have not explained why dismissal is warranted.
V. Conclusion
Based on the foregoing,
IT IS HEREBY ORDERED that Defendants’ “Motion to Compel Arbitration and to
Dismiss Claims Against Defendants, or Alternatively, Stay Litigation Pending Arbitration” 91 is
GRANTED IN PART and DENIED IN PART. The Motion is GRANTED to the extent
Defendants move the Court to compel arbitration and stay this litigation. The Motion is DENIED
to the extent Defendants move this Court to dismiss Plaintiff’s claims against them.
IT IS FURTHER ORDERED that the above-captioned matter is STAYED AND
ADMINISTRATIVELY CLOSED pending arbitration.
NEW ORLEANS, LOUISIANA, this _____
17th day of January, 2023.

_________________________________
NANNETTE JOLIVETTE BROWN
CHIEF JUDGE
UNITED STATES DISTRICT COURT

See Apache Bohai Corp. LDC v. Texaco China, B.V., 330 F.3d 307, 311 n.9 (5th Cir. 2003); see also
Fedmet Corp. v. M/V Buyalyk, 194 F.3d 674, 676 (5th Cir. 1999) (stating that “district courts have discretion to dismiss
cases in favor of arbitration,” but not implying any obligation to do so).
90

91

Rec. Doc. 28.

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