Jones et al v. Singing River Health Services Foundation et al

Filing 293

ORDER granting 198 Motion to Stay Proceedings Signed by Chief District Judge Louis Guirola, Jr on 06/15/2016 (Guirola, Louis)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
SOUTHERN DIVISION
THOMAS JONES, et al., on behalf of
themselves and others similarly situated
v.

PLAINTIFFS

CAUSE NO. 1:14CV447-LG-RHW
CONSOLIDATED WITH 1:15CV1-LG-RHW
CONSOLIDATED WITH 1:15CV44-LG-RHW

SINGING RIVER HEALTH SYSTEM, et al.

DEFENDANTS

ORDER GRANTING KPMG’S MOTION TO STAY PROCEEDINGS
BEFORE THE COURT is the Motion to Stay Proceedings [198] filed by the
defendant KPMG, LLP. The Motion has been fully briefed by the parties. After
reviewing the submissions of the parties, the record in this matter, and the
applicable law, the Court finds that the plaintiff Martha Ezell Lowe’s claims
against KPMG should be stayed pending resolution of the arbitration of the claims
filed by Thomas Jones, et al.
BACKGROUND
Two putative class action lawsuits – Jones and Lowe – were filed against
KPMG and others as a result of the alleged underfunding of the Singing River
Health System Employees’ Retirement Plan and Trust.1 KPMG filed Motions to
Compel Arbitration in both of these lawsuits. On June 5, 2015, the Court

1

A more complete discussion of the facts and the claims asserted in these
lawsuits is included in the Memorandum Opinion and Order [161], which is
incorporated herein by reference.

consolidated the lawsuits.2 The Court entered a Memorandum Opinion and Order
[161] compelling arbitration of the Jones plaintiffs’ claims against KPMG on March
29, 2016. The Motion to Compel Arbitration of Lowe’s claims against KPMG was
denied. KPMG appealed the denial of its Motion concerning Lowe’s claims.
KPMG now seeks a stay of Lowe’s claims pending resolution of the Jones
plaintiffs’ claims. In the alternative, it seeks a stay pending the conclusion of its
appeal.
DISCUSSION
KPMG argues that it is entitled to a stay pursuant to Section 3 of the Federal
Arbitration Act, which provides:
If any suit or proceeding be brought in any of the courts of the United
States upon any issue referable to arbitration under an agreement in
writing for such arbitration, the court in which such suit is pending,
upon being satisfied that the issue involved in such suit or proceeding
is referable to arbitration under such an agreement, 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, providing the applicant for the stay is not in default in
proceeding with such arbitration.
9 U.S.C. § 3. Generally, this mandatory stay provision does not apply to those who
did not sign an arbitration agreement and are otherwise not bound by it. Adams v.
Ga. Gulf Corp., 237 F.3d 538, 540 (5th Cir. 2001). Courts have recognized an
exception to this rule, holding that a nonsignatory may obtain a mandatory stay

2

These lawsuits were consolidated with a third putative class action lawsuit,
Cobb, but the Cobb plaintiffs have not asserted any claims against KPMG;
therefore, it is not necessary to further discuss the Cobb lawsuit in this opinion.
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against a signatory if the following circumstances are present: “(1) the arbitrated
and litigated disputes must involve the same operative facts; (2) the claims asserted
in the arbitration and litigation must be inherently inseparable; and (3) the
litigation must have a critical impact on the arbitration.” Waste Mgmt., Inc. v.
Residuos Industriales Multiquam, 371 F.3d 339, 343 (5th Cir. 2004). However,
several courts have refused to extend this exception to permit a signatory to obtain
a stay against a nonsignatory. See, e.g., Mendez v. Puerto Rican Int’l Cos., Inc., 553
F.3d 709, 711 (3d Cir. 2009); Vallejo v. Garda CL Sw., Inc., No. H-12-0555, 2013 WL
6190175, at *5 (S.D. Tex. Nov. 26, 2013). In Mendez, the Third Circuit held that
“section 3 was not intended to mandate curtailment of the litigation rights of
anyone who has not agreed to arbitrate any of the issues before the court.” Mendez,
553 F.3d at 711.
Since Lowe did not sign the arbitration agreement and this Court has
previously held that she is not otherwise bound by the arbitration agreement,
KPMG is not entitled to a mandatory stay pursuant to Section 3 of the FAA. This
Court must next consider KPMG’s argument that a discretionary stay should be
imposed.
The United States Supreme Court has explained:
In some cases, of course, it may be advisable to stay litigation among
the non-arbitrating parties pending the outcome of the arbitration.
That decision is one left to the district court . . . as a matter of its
discretion to control its docket.
Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 461 U.S. 1, 20 n.23 (1983).
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The Fifth Circuit has explained: “We have long held that if a suit against a
nonsignatory is based upon the same operative facts and is inherently inseparable
from the claims against a signatory, the trial court has discretion to grant a stay if
the suit would undermine the arbitration proceedings and thwart the federal policy
in favor of arbitration.” Hill v. G E Power Sys., Inc., 282 F.3d 343, 347 (5th Cir.
2002). District courts within the Fifth Circuit have held that it is not absolutely
necessary that the claims be inherently inseparable in order to justify a
discretionary stay; significant overlap of claims is sufficient. Broussard v. First
Tower Loan, LLC, No. 15-1161 c/w 15-2500, 2015 WL 8478573, at *13 (E.D. La.
Dec. 10, 2015); Suzlon Infrastructure, Ltd., No. H-09-2206, 2010 WL 3540951, at *8
(S.D. Tex. Sept. 10, 2010).
As this Court previously held in its Memorandum Opinion and Order
Concerning the Plaintiffs’ Motions to Consolidate Actions and Appoint Lead
Counsel [106], the facts in the Lowe and Jones lawsuits are identical. The Jones
plaintiffs have filed the following claims against KPMG: breach of fiduciary duty,
Section 1983 conspiracy, negligence and professional malpractice, and fraud,
fraudulent misrepresentation, and deceit. Lowe alleges that KPMG aided and
abetted a breach of fiduciary duty. Thus, the claims filed in Jones and Lowe are not
identical, nor are they inherently inseparable.3 Nevertheless, there is significant

3

KPMG incorrectly argues that this Court previously found that the claims
asserted in Lowe and Jones are identical. The Court only noted that the lawsuits
contained one common claim for breach of fiduciary duty against certain
defendants. (Mem. Op. & Order at 7, ECF No. 106). The pertinent inquiry when
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overlap among the claims asserted against KPMG in these lawsuits, because the
same witnesses and evidence will likely be necessary to prove the claims asserted in
Lowe and Jones. Finally, allowing Lowe to litigate her claims would pose a risk of
inconsistent results and may undermine the arbitration of the Jones claims. See
Waste Mgmt., Inc., 372 F.3d at 345 (explaining that the binding effect of federal
judgments would strongly influence an arbitrator to follow the court’s decision,
particularly where the claims asserted are similar). As a result, the Court finds
that a discretionary stay of Lowe’s claims against KPMG pending resolution of the
Jones arbitration is warranted.
IT IS, THEREFORE, ORDERED AND ADJUDGED that the Motion to
Stay Proceedings [198] filed by the defendant KPMG, LLP, is GRANTED. Martha
Ezell Lowe’s claims against KPMG are STAYED pending resolution of the
arbitration of the Jones plaintiffs’ claims against KPMG. The claims filed against
Transamerica in these lawsuits are not affected by this stay.
SO ORDERED AND ADJUDGED this the 15th day of June, 2016.

s/

Louis Guirola, Jr.

LOUIS GUIROLA, JR.
CHIEF U.S. DISTRICT JUDGE

considering consolidation is whether the lawsuits involve “a common question of
law or fact,” not whether they contain completely identical claims. See Fed. R. Civ.
P. 42(a) (emphasis added).
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