First United Methodist Church of Houma v. Underwriters at Lloyds of London et al
Filing
18
ORDER AND REASONS granting 9 Motion to Compel Arbitration; ORDERED that the matter is STAYED and ADMINISTRATIVELY CLOSED pending the resolution of the arbitration proceedings. Signed by Judge Jane Triche Milazzo on 2/7/2024. (lag)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
FIRST UNITED METHODIST
CHURCH OF HOUMA
CIVIL ACTION
VERSUS
NO: 23-610
UNDERWRITERS AT LLOYDS
OF LONDON ET AL.
SECTION: “H”
ORDER AND REASONS
Before the Court is Defendants’ Motion to Compel Arbitration (Doc. 9).
For the following reasons, the Motion is GRANTED.
BACKGROUND
This case arises out of an insurance contract dispute following
Hurricane Ida. Plaintiff First United Methodist Church of Houma alleges that
Defendants
StarStone
Specialty
Insurance
Company
and
Certain
Underwriters at Lloyd’s, London Subscribing to Policy No. AMAA0002777
(collectively “Defendants”) issued a policy of surplus lines insurance to Plaintiff
that is alleged to cover the damage. Defendants jointly subscribe to Policy No.
AMAA0002777 (“the Policy”), which provides commercial property insurance
to Plaintiff for two buildings located at 193 Lake Long Drive in Houma,
Louisiana; and 158 Evangeline Heights Street in Houma Louisiana. Plaintiff
asserts breach of contract claims and entitlement to bad faith damages under
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Louisiana Revised Statutes §§ 22:1892 and 22:1973 for Defendant’s alleged
failure to adequately compensate it for its losses covered under the Policy.
On May 31, 2022, Plaintiff filed suit in the 32nd Judicial District Court
for the Parish of Terrebonne. On February 16, 2023, the case was removed to
this Court. Now before this Court is Defendants’ Motion to Compel Arbitration
and Stay Litigation. Defendants request this Court to order arbitration and
stay Plaintiff’s claims pursuant to a valid and enforceable arbitration clause in
the Policy. Plaintiff opposes.1
LEGAL STANDARD
The Convention on the Recognition and Enforcement of Foreign Arbitral
Awards (“the Convention”) governs the recognition and enforcement of
arbitration agreements between citizens of nations that are signatories to the
Convention.2 The United States joined the Convention in 1970, with a goal 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.”3 The Convention is implemented by the Federal
Doc. 11.
See Sedco, Inc. v. Petroleos Mexicanos Mexican Nat’l Oil Co., 767 F.2d 1140, 1144 (5th Cir.
1985).
3 Authenment v. Ingram Barge Co., 878 F. Supp. 2d 672, 676 (E.D. La. 2012) (quoting Scherk
v. Alberto-Culver Co., 417 U.S. 506, 520 n.15 (1974)); Todd Steamship Mut. Underwriting
Ass’n (Bermuda) Ltd., 601 F.3d 329, 332 n.4 (5th Cir. 2010). Where applicable, the
Convention supersedes state law. See McDonnel Grp., LLC v. Great Lakes Ins. Se., 923
F.3d 427, 431–32 (5th Cir. 2019); Aggarao v. MOL Ship Mgmt. Co., Ltd., 675 F.3d 355, 366
(4th Cir. 2012).
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Arbitration Act (FAA), which provides for enforcement in United States
courts.4
“In determining whether the Convention requires compelling arbitration
in a given case, courts conduct only a very limited inquiry.”5 Courts “should
compel arbitration if (1) there is an agreement in writing to arbitrate the
dispute, (2) the agreement provides for arbitration in the territory of a
Convention signatory, (3) the agreement arises out of a commercial legal
relationship, and (4) a party to the agreement is not an American citizen.” 6 If
these four requirements are met, “arbitration agreements and clauses are to
be enforced unless they are invalid under principles of state law that govern
all contracts.”7
Alternatively, Defendants request that this Court order arbitration
pursuant to the Federal Arbitration Act (“FAA”).8 The FAA broadly applies to
any written provision in “a contract evidencing a transaction involving
commerce to settle by arbitration a controversy thereafter arising out of such
contract or transaction.”9 A two-step analysis governs whether parties should
be compelled to arbitrate a dispute.10 The Court must first determine whether
the parties agreed to arbitrate the dispute.11 This determination involves two
separate inquiries: (1) whether there is a valid agreement to arbitrate between
9 U.S.C. §§ 201–208.
Freudensprung v. Offshore Technical Servs., Inc., 379 F.3d 327, 339 (5th Cir. 2004).
6 Francisco v. Stolt Achievement MT, 293 F.3d 270, 273 (5th Cir. 2002) (citing Sedco, 767
F.2d at 1144–45).
7 Iberia Credit Bureau, Inc. v. Cingular Wireless, LLC, 379 F.3d 159, 166 (5th Cir. 2004).
Thus, the Court must enforce the arbitration clause “unless it finds that the said agreement
is null and void, inoperative or incapable of being performed.” Freudensprung, 379 F.3d at
339 (citing Sedco, 767 F.2d at 1146).
8 9 U.S.C. § 1 et seq.
9 Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983).
10 JP Morgan Chase & Co. v. Conegie ex rel. Lee, 492 F.3d 596, 598 (5th Cir. 2007).
11 Banc One Acceptance Corp. v. Hill, 367 F.3d 426, 429 (5th Cir. 2004).
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the parties, and if so, (2) whether the dispute in question falls within the scope
of that agreement.12 Both inquiries are generally guided by ordinary principles
of state contract law.13 The strong public policy favoring arbitration applies
“when addressing ambiguities regarding whether a question falls within an
arbitration agreement’s scope,” but it does not apply “when determining
whether a valid agreement exists.”14 If the Court finds the parties agreed to
arbitrate, it must then proceed to the second step of the analysis and consider
whether any federal statute or policy renders the claims non-arbitrable.15
“Nevertheless, the right to arbitration, like any contractual right, may
be waived.”16 The Supreme Court has held that waiver “is the intentional
relinquishment of a known right.”17 “Waiver of arbitration is not a favored
finding, and there is a presumption against it.”18 The party seeking to show
waiver bears the heavy burden of proof.19
LAW AND ANALYSIS
Defendants assert that all requirements for application of the
Convention are met. Plaintiff fails to contest applicability of the Convention or
FAA in this case, but instead, responds that Defendants have waived their
Sherer v. Green Tree Servicing LLC, 548 F.3d 379, 381 (5th Cir. 2008).
See First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 944 (1985).
14 Sherer, 548 F.3d at 381.
15 Primerica Life Ins. Co. v. Brown, 304 F.3d 469, 471 (5th Cir. 2002).
16 Price v. Drexel Burnham Lambert, Inc., 791 F.2d 1156, 1158 (5th Cir. 1986).
17 United States v. Olano, 507 U.S. 725, 733 (1993); Morgan v. Sundance, 142 S. Ct. 1708,
1714 (2022) (holding that as the “federal rule of waiver does not include a prejudice
requirement . . . [s]ection 6 instructs that prejudice is not a condition of finding that a party,
by litigating too long, waived its right to stay litigation to compel arbitration under the
FAA”).
18 Id.
19 Broussard v. First Tower Loan, LLC, 150 F. Supp. 3d 709, 725 (E.D. La. 2015).
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rights to invoke arbitration. This Court now considers Plaintiff’s arguments as
to waiver.
Courts must determine what constitutes substantial invocation of the
judicial process on a case-by-case basis.20 “To invoke the judicial process, a
party must, at the very least, engage in some overt act in court that evinces a
desire to resolve the arbitrable dispute through litigation rather than
arbitration.”21 “The burden on one seeking to prove a waiver of arbitration is a
heavy one.”22 Moreover, as a matter of federal law, any doubts concerning the
scope of arbitrable issues, such as an allegation of waiver, should be resolved
in favor of arbitration.23
Plaintiff argues that the following acts amount to a waiver of Defendants’
right to arbitrate: “admitting” venue and jurisdiction were proper in
Defendants’ answer; raising affirmative defenses yet not raising the issue of
arbitration;
conducting
discovery
and
providing
initial
disclosures;24
participating in a joint mediation with Plaintiff; and the passage of significant
time since Plaintiff filed its petition in state court. Even accepting Plaintiff’s
contentions as true, the Court finds that these actions do not evince a desire to
resolve the dispute through litigation rather than arbitration.
Defendants first invoked their right to arbitrate this dispute in a demand
letter dated December 21, 2022.25 The case was removed to this Court on
February 16, 2023, and Defendants filed their motion to compel arbitration on
Ryan v. Thunder Restorations, Inc., No. 09-3261, 2011 WL 2680482, at *5 (E.D. La. July 8,
2011).
21 Petroleum Pipe Ams. Corp. v. Jindal Saw, Ltd., 575 F.2d 476, 480 (5th Cir. 2009) (citations
and internal quotation marks omitted).
22 Sibley v. Tandy Corp., 543 F.2d 540, 542 (5th Cir. 1976).
23 Moses H. Cone Mem’l Hosp., 460 U.S. at 24.
24 Defendants dispute whether this has occurred. Doc. 16 at 2.
25 Doc. 1-4.
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September 21, 2023.26 While Defendants waited more than seven months
before moving this Court to stay judicial proceedings and compel arbitration,
this does not support a conclusion that Defendants “substantially utilized the
legal process before moving for a stay.”27 Even so, the parties were subject to
the Streamlined Settlement Program during this seven-month period, which
stays various discovery and requires mediation.28 The Court also notes that
Plaintiff has also invoked arbitration and appointed an arbitrator for this
dispute.29 Courts in similar circumstances have allowed for longer delays and
more participation in litigation without finding waiver of the right to
arbitrate.30 Accordingly, this Court finds that Plaintiff has not carried its
heavy burden to prove that Defendants waived their rights to arbitrate.
Defendants brought the arbitration clause to the Court’s attention in their Notice of
Removal.
27 See Tenneco Resins, Inc. v. Davy Int’l, AG, 770 F.2d 416, 420–21 (5th Cir. 1985) (discussing
whether a party substantially invoked the judicial process).
28 Docs. 4 & 8. Plaintiff argues that engaging in mediation and participating in this Court’s
Streamlined Settlement Program result in waiver of arbitration rights, but Plaintiff fails
to cite any case supporting these arguments. Moreover, these attempts at alternative
dispute resolution do not “evince[] a desire to resolve the arbitrable dispute through
litigation.” See Petroleum Pipe Ams. Corp., 575 F.2d at 480 (emphasis added).
29 See Doc. 9-2. In its letter invoking arbitration and appointing an arbitrator, Plaintiff also
“reserve[d] any and all arguments regarding the lack of enforceability and/or scope of these
provisions.” Doc. 9-2. Plaintiff, however, fails to raise any such arguments regarding
enforceability or scope in its opposition memorandum. See Doc. 11.
30 See Tenneco Resins, 770 F.2d 416 (holding that a party did not waive its right to move for
a stay pending arbitration when it waited eight months to invoke its right to arbitration
and participated in discovery by answering interrogatories, moving for a protective order,
and requesting document production in the interim); Walker v. J.C. Bradford & Co., 938
F.2d 575, 578 (5th Cir. 1991) (holding that where a party invoked arbitration thirteen
months after suit was filed and engaged in discovery “its actions in federal court were not
so substantial as to . . . overcome the legal presumption that parties who contracted for
arbitration should be allowed to arbitrate”). See also AJ’s Shoes Outlet, LLC v. Indep.
Specialty Ins. Co., No 22-1148, 2023 WL 358779, at *3 (E.D. La. Jan. 23, 2023) (holding
that defendants did not waive their arbitration rights by waiting six months after removal
to move for arbitration and participating in initial discovery).
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Because Plaintiff fails to contest applicability of the Convention in this
case and there has been no suggestion that the “agreement is null and void,
inoperative or incapable of being performed,” the Court must order arbitration.
Defendants have asked the Court to stay this matter pending arbitration.
Pursuant to 9 U.S.C. § 3, 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.” Accordingly, this matter must be stayed
pending resolution of the arbitration proceedings.
CONCLUSION
For the foregoing reasons, Defendants’ Motion is GRANTED. IT IS
ORDERED that the matter is STAYED and ADMINISTRATIVELY
CLOSED pending the resolution of the arbitration proceedings.
New Orleans, Louisiana this 7th day of February, 2024.
____________________________________
JANE TRICHE MILAZZO
UNITED STATES DISTRICT JUDGE
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