Vinings Insurance Company v Todd Hughes et al

Filing 26

ORDER DENYING 18 Motion to Expedite to Compel Mediation. Signed by Judge David A. Ezra. (aej)

THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
SAN ANTONIO DIVISION
VININGS INSURANCE COMPANY, §
§
Plaintiff,
§
vs.
§
§
TODD HUGHES and PASADERA
§
BUILDERS, LP,
§
§
Defendants.
§

No. 5-16-CV-445-DAE

ORDER DENYING PLAINTIFF’S EXPEDITED MOTION TO COMPEL
DEFENDANT PASADERA TO MEDIATION
Before the Court is an Expedited Motion to Compel Defendant
Pasadera Builders, LP (“Pasadera”) to Mediation, filed by Plaintiff Vinings
Insurance Company (“Vinings”) (Dkt. # 18). Pursuant to Local Rule 7(h), the
Court finds the matter suitable for disposition without a hearing. After careful
consideration of the memoranda in support of and in opposition to the motion, the
Court, for the reasons that follow, DENIES Plaintiff’s Motion to Compel
Mediation (Dkt. # 18).
BACKGROUND
Pasadera is in the business of constructing luxury residential homes.
(“Compl.,” Dkt. # 1 ¶ 10; Dkt. # 9 ¶ 10; Dkt. # 21, Ex. 4 at 3.) Vinings, an
insurance company, issued two consecutive commercial general liability policies to
1

Pasadera, effective from July 18, 2013 through July 18, 2015. (Compl. ¶ 8.)
According to Vinings, these policies state that in the event of a claim or suit, the
insured must “[c]ooperate with [Vinings] in the investigation or settlement of the
claim or defense,” and may not “voluntarily make a payment, assume any
obligation, or incur any expense, other than for first aid, without [Vinings’]
consent.” (Id. ¶ 24.) The policies further state that Vinings will “pay those sums
that the insured becomes legally obligated to pay as damages” to those claims to
which the policy applies, and has the “right and duty to defend the insured against
any ‘suit’ seeking damages” covered under the policy. (Id. ¶ 27). These payments
are limited by certain coverage agreements not before the Court. (Id.)
Mr. Hughes contracted with Pasadera to construct a residence at 25
Bella Collina Road in Boerne, Texas; on November 25, 2015, he sued Pasadera in
state court in Kendall County, Texas, alleging that the residence suffers from
various defects. (Id. ¶¶ 9, 29; Todd Hughes v. Pasadera Builders, LP, No. 15-559CCL.) Pasadera has been represented by private counsel throughout the state court
litigation, and the suit has been compelled to arbitration, which is scheduled to
commence before the American Arbitration Association on August 15, 2016.
(Compl. ¶ 9; Dkt. # 18 at 3.)
On December 3, 2015, Vinings retained defense counsel David Oubre
to represent Pasadera in the arbitration proceedings. (Compl. ¶ 11; Dkt. # 9 ¶ 11.)
2

On December 21, 2015, Vinings issued a reservation of rights—not currently
before the Court—which cited all potentially applicable exclusions affecting
Vinings’ indemnity obligations and memorialized Vinings’ appointment of Mr.
Oubre. (Compl. ¶ 12; Dkt. # 9 ¶ 12.) Pasadera’s personal counsel determined that
Vinings’ reservation of rights created a conflict of interest and asserted that under
Texas law, this conflict allowed Pasadera to select its own defense counsel.
(Compl. ¶ 13; Dkt. # 9 ¶ 16.) Vinings offered Pasadera two additional options for
defense firms, which Pasadera rejected. (Compl. ¶¶ 15–17.) Pasadera
subsequently sought payment from Vinings for at least $215,626.47 incurred in
defense fees. (Id. ¶¶ 15, 17.) Pasadera has allegedly refused to cooperate with
Vinings in investigating or defending the arbitration. (Id. ¶ 16.)
Vinings brought suit before this Court seeking declaratory judgment
that: (1) Pasadera does not have the right to reject the defense counsel provided by
Vinings and select its own counsel (Compl. ¶ 20); (2) Pasadera’s failure to
cooperate with Vinings amounts to a material breach of the insurance Policy (id.
¶ 21); (3) Vinings has no duty to defend Pasadera in the arbitration proceedings or
indemnify Mr. Hughes for the judgment he may obtain in the arbitration (id. ¶ 22);
and (4) Vinings has no duty to compensate Pasadera for the costs of obtaining
independent defense counsel (id. ¶ 23).

3

On July 19, 2016, Vinings filed the instant expedited motion to
compel Pasadera to attend mediation. (Dkt. # 18.) Pasadera filed a response on
July 25, 2016. (Dkt. # 21.) The following day, Pasadera filed a Supplemental
Response, without first seeking leave of Court, in an effort to demonstrate that it
notified Vinings of the claims set to proceed in arbitration, and gave Vinings an
opportunity to settle the claims before the litigation began. (Dkt. # 23.) These
documents do not evidence a previous agreement to mediate, and are ultimately
irrelevant to the analysis below. Vinings filed a Reply on June 27, 2016. (Dkt.
# 24.)
ANALYSIS
Vinings argues that it will suffer irreparable and significant harm if
the case proceeds to arbitration before the parties engage in pre-arbitration
mediation, because Pasadera will demand that Vinings satisfy any arbitration
award with Mr. Hughes, and will also require Vinings to pay its private attorneys’
fees. (Dkt. # 18 at 4.) Further, Vinings states that Mr. Hughes agreed to mediate
the case with mediator Lee Shidlofsky before engaging in arbitration. (Dkt. # 18 at
4.) Vinings does not state that Pasadera ever agreed to participate in mediation.
Pasadera argues that it should not be compelled to mediation less than three weeks
before the commencement of arbitration; it also argues that Vinings does not
appreciate the significance of Mr. Hughes’ claim in the context of the Cordillera
4

Ranch community where Pasadera has constructed many luxury homes. (Dkt. # 21
¶ 8, 6.)
A court may refer a case to mediation prior to considering any
pleading on the merits where the parties previously entered into an agreement to
mediate, or where the parties are otherwise required to mediate by law. See
Dickey’s Barbeque Restaurants, Inc. v. Mathieu, No. 3:12–cv–5119, 2013 WL
526896, at *5 (N.D. Tex. Sept. 18, 2013) (turning to agreement between parties to
determine whether mediation should be required); Barr v. Frannet, LLC, No. 3:07–
CV–1222–M, 2008 WL 59295, at *3 (N.D. Tex. Jan. 3, 2008) (referring case to
mediation after determining the agreement at issue expressly required certain
disputes to be heard by a mediator prior to court proceedings); Woods v. Holy
Cross Hosp., 591 F.2d 1164 (5th Cir. 1979) (upholding Florida Statute section
768.44, which requires individuals pursuing a medical malpractice claim to
participate in mediation before bringing an action in court). Pursuant to the local
rules, a court may refer a case to mediation or other form of alternative dispute
resolution “only with the consent of the parties.” W.D. Tex. Civ. R. 88(c).
Vinings cites only one federal case, Ohio Willow Wood Co. v.
Thermo-Ply, Inc., in support of its argument that the case should be referred to
mediation prior to arbitration. 769 F. Supp. 2d 1065 (E.D. Tex. 2011); (Dkt. # 18
at 6). However, Ohio Willow addresses Federal Rule of Appellate Procedure 33,
5

which grants appellate courts the authority to compel parties to participate in
mediation. See Ohio Willow, 769 F. Supp. 2d at 1067–69. Specifically, the case
addresses the Federal Circuit’s Appellate Mediation Program, particularly with
regard to patent litigation. See id. These specific rules are inapplicable in this
case, which is, at root, a contract suit not currently before a federal appellate court.
Vining has not presented any evidence or argument that a mediation
agreement exists between itself and Pasadera, that Pasadera agreed to mediation, or
that any relevant law exists that would require the parties to mediate before
proceeding to arbitration. (See Dkt. # 18.) Further, Vinings’ argument focuses on
an insurer’s contractual right to select counsel and control the defense in litigation
against one of its insured. (Id. at 4–6.) This argument may potentially form a
defense, should Pasadera seek to indemnify an award made to Mr. Hughes during
arbitration, or reimbursement of private attorney’s fees. However, these arguments
do not support compelling the parties to mediation, where no contractual or legal
authority obligates this Court to do so. Accordingly, Vining’s Motion to Compel
Mediation is DENIED.
CONCLUSION
For the reasons stated above, Vinings has presented nothing to the
Court to justify compelling the parties to mediation before arbitration.
Accordingly, its Motion to Compel Mediation is DENIED (Dkt. # 18).
6

IT IS SO ORDERED.
DATED: July 28, 2016. San Antonio, Texas.

7