Board of Trustees of the AGMA Health Fund v. AETNA Life Insurance Company

Filing 35

MEMORANDUM OPINION & ORDER re: 17 MOTION to Stay Proceeding Pending Ruling on Petition to Compel Arbitration. filed by AETNA Life Insurance Company. For the reasons stated above, this action is hereby stayed pending the resolution of Aetna's petition to compel arbitration filed in the District of Connecticut. See Aetna Life Ins. Co. v. Bd. Trs. AGMA Health Fund, No. 3:24-cv-1461-VDO (D. Conn. Sept. 11, 2024), ECF No. 1. The parties shall provide a status update to the Court within one week of the District of Connecticut court's ruling on the petition. The Clerk of Court is respectfully directed to terminate the motion pending at ECF No. 17. SO ORDERED. Case stayed. (Signed by Judge Ronnie Abrams on 11/26/2024) (jca)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
BOARD OF TRUSTEES of the AGMA HEALTH
FUND,
Plaintiff,

24-CV-5168 (RA)

v.
AETNA LIFE INSURANCE COMPANY,

MEMORANDUM
OPINION & ORDER

Defendant.
RONNIE ABRAMS, United States District Judge:
On July 9, 2024, Plaintiff Board of Trustees of the AGMA Health Fund (the “Board”), filed
the complaint in this action against Defendant Aetna Life Insurance Company (“Aetna”). ECF
No. 1. Before the Court is Aetna’s motion to stay this case pending a ruling on Aetna’s petition to
compel arbitration of the Board’s claims, which Aetna filed in the District of Connecticut. See
ECF No. 17.
BACKGROUND
The Board administers the AGMA Health Fund (the “Fund”), which is a multi-employer
employee benefit plan that provides self-funded hospital, medical, and prescription drug benefits.
Complaint ¶ 2. By agreement effective January 1, 2021, the Board engaged Aetna to provide
certain third-party administrative services for the Fund. Id. ¶ 14. The terms of that engagement
are set forth in a Master Services Agreement (“MSA”), see id. ¶ 15, in which Aetna agreed to
“observe the standard of care and diligence required of a fiduciary” under Section 404(a)(1)(B) of
the Employee Retirement Income Security Act of 1974 (“ERISA”), id. at ¶ 19; ECF No. 1-4 at 1.
The MSA includes the following arbitration provision:
Any controversy or claim arising out of or relating to this Agreement
or the breach, termination, or validity thereof, except for temporary,

preliminary, or permanent injunctive relief or any other form of
equitable relief, shall be settled by binding arbitration in Hartford,
CT, administered by the American Arbitration Association (‘AAA’)
and conducted by a sole arbitrator in accordance with the AAA’s
Commercial Arbitration Rules (‘Rules’). The arbitration shall be
governed by the Federal Arbitration Act, 9 U.S.C. §§ 1-16[.]
See ECF No. 1-4 at 8.
On July 9, 2024, the Board filed the complaint in this action, alleging that Aetna breached
the MSA and its ERISA fiduciary duties by failing to timely pay benefits claims and thereby
causing the denial of the Fund’s stop-loss insurance coverage. See Complaint ¶¶ 44–81. On
September 11, 2024, prior to filing a response to the Board’s complaint, Aetna initiated a separate
action in the District of Connecticut, where it filed a petition to compel arbitration of the Board’s
claims. See Aetna Life Ins. Co. v. Bd. Trs. AGMA Health Fund, No. 3:24-CV-1461-VDO (D.
Conn. Sept. 11, 2024), ECF No. 1. On October 3, 2024, Aetna filed a motion in this Court seeking
a discretionary stay of this action pending the resolution of the District of Connecticut case. See
ECF No. 17. The Board opposed Aetna’s motion on October 17, 2024. See ECF No. 29. The
Court heard oral argument on the motion on November 21, 2024.
DISCUSSION
Aetna asks the Court to exercise its discretion to stay this case pending the resolution of
the petition to compel arbitration filed in the District of Connecticut. The motion is granted. The
Court concludes that the first-filed rule does not apply, that the Federal Arbitration Act (the
“FAA”) permits Aetna to file a petition to compel arbitration in the District of Connecticut
notwithstanding the pendency of this action, and that a discretionary stay is appropriate under the
applicable five-factor test.
I.

Whether the First-Filed Rule Applies
The Board contends that this Circuit’s first-filed rule requires the Court to allow this case

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to proceed. See ECF No. 29 at 10. Under the first-filed rule, as a general matter, “where there are
two competing lawsuits, the first suit should have priority.” Emps. Ins. of Wausau v. Fox Ent.
Grp., Inc., 522 F.3d 271, 274–75 (2d Cir. 2008). 1 “This rule embodies considerations of judicial
administration and conservation of resources by avoiding duplicative litigation and honoring the
plaintiff’s choice of forum.” Id. at 275. Accordingly, “where an action is brought in one federal
district court and a later action embracing the same issue is brought in another federal court, the
first court has jurisdiction to enjoin the prosecution of the second action.” Abbott Lab’ys v.
Feinberg, 477 F. Supp. 3d 57, 63 (S.D.N.Y. 2020) (quoting City of New York v. Exxon Corp., 932
F.2d 1020, 1025 (2d Cir. 1991)).
The first-filed rule does not apply here. Although this case and the one in the District of
Connecticut arise out of the same dispute, they do not involve the same issues. This case alleges
breaches of fiduciary duty pursuant to ERISA Section 502, 29 U.S.C. §§ 1132(a)(2) and
1132(a)(3). See Complaint ¶¶ 2, 66–81. By contrast, the District of Connecticut case seeks to
compel arbitration, and therefore does not “embrac[e] the same issue.” Cap Gemini Ernst & Young
U.S. LLC v. Arentowicz, No. 04-CV-0299 (DAB), 2004 WL 1386145, at *2 (S.D.N.Y. June 22,
2004) (holding that the first-filed rule did not apply where a second-filed petition to compel
arbitration and a first-filed action were pending in separate districts); see also Wework Companies
Inc. v. Zoumer, No. 16-CV-457 (PKC), 2016 WL 1337280, at *2 (S.D.N.Y. Apr. 5, 2016) (“While
the parties in the two cases are the same, the issues, although related, are distinct. The California
Action involves substantive claims for which respondent is seeking relief under California labor
laws, whereas the petitioner before this court seeks to compel arbitration of those claims.”); Nat’l
Union Fire Ins. Co. of Pittsburgh, PA v. Las Vegas Pro. Football Ltd. P’ship, No. 09-CV-7490
Unless otherwise indicated, this memorandum opinion and order omits all internal quotation marks, citations,
footnotes, omissions, emphases, and alterations in quoted text.

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(PKC), 2010 WL 286634, at *3–4 (S.D.N.Y. Jan. 15, 2010), aff’d sub nom. Nat'l Union Fire Ins.
Co. of Pittsburg, PA v. Las Vegas Pro. Football Ltd. P’ship, 409 F. App’x 401 (2d Cir. 2010);
Bank of Tokyo-Mitsubishi, Ltd. v. J.A. Jones, Inc., No. 98-CV-2494 (LMM), 1998 WL 283355, at
*2 (S.D.N.Y. May 29, 1998). Accordingly, the Court is not required to follow the first-filed rule
and may exercise its discretion to stay this proceeding, if otherwise appropriate.
II.

Whether Aetna Acted Properly under the Federal Arbitration Act
The Board next argues that Aetna should not have filed the Section 4 petition, but must

instead seek a stay of this action pursuant to Section 3 of the FAA. See ECF No. 29 at 7. Aetna
responds that, pursuant to Section 4 of the FAA, it was required—or at least permitted—to file a
petition to compel arbitration in the District of Connecticut. See ECF No. 17 at 2.
FAA Section 4 “allows a party to an [arbitration] agreement to petition a district court for
an order compelling arbitration where a counterparty fails, neglects, or refuses to arbitrate.”
Schatzmann v. Harris Partners Ltd., No. 21-CV-7301 (KPF), 2024 WL 1255296, at *3 (S.D.N.Y.
Mar. 22, 2024). “Although the Second Circuit has not decided the question of whether Section 4
precludes a district court from compelling arbitration outside of its district,” as one of my
colleagues has noted, “persuasive decisions in this Circuit have routinely held that it does.” L.
Offs. of Joseph L. Manson III v. Keiko Aoki, No. 19-CV-4392 (LTS) (GWG), 2020 WL 767466,
at *4 (S.D.N.Y. Jan. 3, 2020); see also 9 U.S.C. § 4 (“A party aggrieved by the alleged failure,
neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition
any United States district court . . . for an order directing that such arbitration proceed in the
manner provided for in such agreement. . . . The hearing and proceedings, under such agreement,
shall be within the district in which the petition for an order directing such arbitration is filed.”).
Accordingly, because the MSA mandates that any arbitration be held in Hartford, Connecticut, see

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ECF No. 1-4 at 3, only the District of Connecticut has authority to compel arbitration “in the
manner provided” by the parties’ agreement. 9 U.S.C. § 4; see also Champion Auto Sales, LLC v.
Polaris Sales Inc., 943 F. Supp. 2d 346, 356 (E.D.N.Y. 2013).
Although Section 4 precludes a court from compelling arbitration in a foreign district, “the
court may still determine that the dispute nonetheless remains ‘referable to arbitration’” pursuant
to Section 3, and “must then order a stay instead.” DaPuzzo v. Globalvest Mgmt. Co., L.P., 263
F. Supp. 2d 714, 739 (S.D.N.Y. 2003); see also Champion Auto Sales, 943 F. Supp. 2d at 356
(collecting cases). To determine whether a dispute is referable to arbitration, a district court must
consider (i) whether the parties agreed to arbitrate, and, if so, (ii) whether the scope of that
agreement encompasses the claims at issue. See Schatzmann, 2024 WL 1255296, at *4 (citing
Holick v. Cellular Sales of N.Y., LLC, 802 F.3d 391, 394 (2d Cir. 2015)). Where those criteria are
met, the court will order a stay, “thereby leaving the parties free to pursue their contractual rights
and remedies in the appropriate venue.” DaPuzzo, 263 F. Supp. 2d at 739.
Where a pending action involves potentially arbitrable claims, the party seeking to arbitrate
those claims will typically move in that action either to compel arbitration pursuant to 9 U.S.C.
§ 4 or to stay the action pursuant to 9 U.S.C. § 3. See, e.g., Schatzmann, 2024 WL 1255296, at
*2–3; Champion Auto Sales, 943 F. Supp. 2d at 350–51; DaPuzzo, 263 F. Supp. 2d at 716–18.
Here, in lieu of moving before this Court to stay the action pursuant to Section 3, Aetna filed a
petition to compel arbitration in the District of Connecticut. Aetna therefore asks the Court to stay
this case on a discretionary basis without determining whether the Board’s claims are arbitrable.
See ECF No. 17 at 2.
While Aetna’s decision to initiate a separate action to compel arbitration appears to be
unusual, it is not improper. Section 4 permits a party to an arbitration agreement to “petition any

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United States district court . . . for an order directing that such arbitration proceed in the manner
provided for in such agreement.” 9 U.S.C. § 4 (emphasis added). Nothing in the statute requires
that a petition be filed in the court where the related action is already pending. Nor is Section 3
the only basis upon which the Court may stay this litigation—it has the inherent power to do so.
See DaPuzzo, 263 F. Supp. 2d at 741–42 (collecting cases). Indeed, courts in this district and
elsewhere have similarly stayed litigation without first determining arbitrability. See Bank of
Tokyo-Mitsubishi, Ltd. 1998 WL 283355, at *2–3; see also Doctor’s Assocs., Inc. v. Alemayehu,
934 F.3d 245, 249 n.4 (2d Cir. 2019); Amtex Sec., Inc. v. 3M Co., No. CIV.A. 07-171, 2007 WL
2176977, at *1 (S.D. Tex. July 27, 2007); Lummus Co. v. Commonwealth Oil Ref. Co., 280 F.2d
915, 933 (1st Cir. 1960) (“The stay that we indicated i[s] not the equivalent of the stay which
would be entered upon a motion for a stay of the action under an arbitration statute[,] . . . [which
would] settle all questions of arbitrability.”). Accordingly, because Aetna was not required to
move for a stay pursuant to Section 3, the Court need not consider arbitrability and may exercise
its discretion to stay this proceeding.
III.

Whether a Discretionary Stay is Warranted
A court’s power to stay litigation is incidental to “the power inherent in every court to

control the disposition of the cases on its docket with economy of time and effort for itself, for
counsel, and for litigants.” WorldCrisa Corp. v. Armstrong, 129 F.3d 71, 76 (2d Cir. 1997). “The
decision whether to issue a stay is therefore firmly within a district court’s discretion.” Catskill
Mountains Chapter of Trout Unlimited, Inc. v. U.S. E.P.A., 630 F. Supp. 2d 295, 304 (S.D.N.Y.
2009). In deciding whether to stay proceedings, courts in the Second Circuit examine the
following five factors: (1) the private interests of the plaintiffs in proceeding expeditiously with
the civil litigation as balanced against the prejudice to the plaintiffs if delayed; (2) the private

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interests of and burden on the defendants; (3) the interests of the courts; (4) the interests of persons
not parties to the civil litigation; and (5) the public interest. Id.
Here, the interests of the courts outweigh the remaining factors. Courts in this district
routinely issue stays when “awaiting the outcome of proceedings which bear upon the case, even
if such proceedings are not necessarily controlling of the action to be stayed.” Royal Park Invs.
SA/NV v. Deutsche Bank Nat’l Tr. Co., No. 17-CV-5916 (AJN), 2018 WL 3849840, at *2
(S.D.N.Y. Aug. 10, 2018). This approach “promot[es] judicial efficiency and minimiz[es] the
possibility of conflicts between different courts.” Catskill Mountains Chapter of Trout Unlimited,
Inc., 630 F. Supp. 2d at 304. If the Court does not stay this action, Aetna has indicated its intention
to instead seek a stay pursuant to Section 3, see ECF No. 17 at 2 n.2, which would require the
Court to determine arbitrability—the very issue before the District of Connecticut court. The
possibility of overlapping or duplicative litigation therefore weighs heavily in favor of the Court
exercising its discretion to stay this case. See Royal Park Invs. SA/NV v. U.S. Bank Nat’l Ass’n,
356 F. Supp. 3d 287, 299 (S.D.N.Y. 2018); SST Glob. Tech., LLC v. Chapman, 270 F. Supp. 2d
444, 455 (S.D.N.Y. 2003) (“The [five-factor] test . . . has been applied to stay a federal action in
light of a concurrently pending federal action (either because the claim arises from the same
nucleus of facts or because the pending action would resolve a controlling point of law)[.]”).
Conversely, neither the Board, the nonparty Fund plan participants, nor the public would
be significantly prejudiced by a stay. The threshold question of arbitrability must be resolved
before the Board’s claims may proceed, and staying this proceeding in favor of the District of
Connecticut case does not delay resolution of that issue. If the District of Connecticut court denies
Aetna’s petition, the Board may return to this Court to pursue its claims. Moreover, were Aetna
to move for a stay pursuant to Section 3—as the Board contends it must—the Court would likely

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stay discovery pending its resolution of that motion. See Alvarez v. Experian Info. Sols., Inc., No.
19-CV-03343 (JS) (JMW), 2021 WL 2349370, at *2 (E.D.N.Y. June 7, 2021) (collecting cases)
(“A stay pending a motion to compel arbitration should be granted absent compelling reasons to
deny it.”). Accordingly, even if the Court were to deny Aetna’s motion for a discretionary stay, it
is unlikely that this case would proceed far beyond its current stage. Any delay caused by the stay
is therefore outweighed by the efficiency and resource-conservation considerations discussed
above. See Ferguson & Katzmann Photography, Inc, v. Key Food Stores Co-Operative, Inc., et
al., No. 20-CV-8854 (VM), 2021 WL 3036069, at *2 (S.D.N.Y. July 14, 2021).
CONCLUSION
For the reasons stated above, this action is hereby stayed pending the resolution of Aetna’s
petition to compel arbitration filed in the District of Connecticut. See Aetna Life Ins. Co. v. Bd.
Trs. AGMA Health Fund, No. 3:24-cv-1461-VDO (D. Conn. Sept. 11, 2024), ECF No. 1. The
parties shall provide a status update to the Court within one week of the District of Connecticut
court’s ruling on the petition.
The Clerk of Court is respectfully directed to terminate the motion pending at ECF No. 17.
SO ORDERED.
Dated:

November 26, 2024
New York, New York

________________________________
Ronnie Abrams
United States District Judge

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