Steadfast Insurance Company v. Frost Bank

Filing 12

ORDER GRANTING 9 Motion to Stay Case Signed by Judge Xavier Rodriguez. (mgr)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
SAN ANTONIO DIVISION
STEADFAST INSURANCE CO.,
Plaintiff,
v.
FROST BANK,
Defendant.

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Civil Action No. SA-17-CV-1222-XR

ORDER
On this date, the Court considered the status of this case. On April 24, 2018, this Court
granted the Joint Motion to Extend Deadlines and to Enforce Arbitration Agreement, ordered
the parties to proceed to arbitration, and ordered the parties to submit their briefing on whether
the case should be stayed or dismissed pending arbitration. Thereafter, Plaintiff timely filed its
Opposed Motion to Stay Pending Arbitration (docket no. 9). After careful consideration, the
Court grants the motion.
Plaintiff Steadfast Insurance Company filed this lawsuit on November 30, 2017,
asserting claims for breach of contract and impairment of subrogation rights. Defendant Frost
Bank answered on March 26, 2018. On April 24, 2018, the parties filed a Joint Motion to
Enforce Arbitration Agreement, noting that the insurance policy provides that any dispute,
controversy, or claim arising out of, or relating to, or in connection with the insurance policy
would be settled by arbitration. The parties agreed that all claims were subject to arbitration,
but they disagreed as to whether the case should be stayed or dismissed pending completion of
the arbitration. Steadfast seeks a stay, while Frost Bank contends that dismissal is appropriate.

Defendant Frost Bank cites to Alford v. Dean Witter Reynolds, Inc., 975 F.2d 1161 (5th
Cir. 1992), in which the Fifth Circuit acknowledged that the FAA states that the “court shall
stay the trial of the action until the arbitration is complete,” but held that this rule was not
intended to prohibit dismissal of a case in the proper circumstance. Id. at 1164. The Court
held that “[t]he weight of authority clearly supports dismissal of the case when all of the issues
raised in the district court must be submitted to arbitration.” Id. In such circumstances, the
Court reasoned, “retaining jurisdiction and staying the action will serve no purpose.” Id. Thus,
the Court held that the district court acted within its discretion when it dismissed the case. Id.
However, Steadfast cites to Fonseca v. USG Insurance Services, Inc., 467 F. App’x
260, 261 (5th Cir. 2012), an opinion affirming a grant of summary judgment based on
limitations after an arbitration failed to reach a conclusion. The plaintiff had filed a demand
for arbitration, but the AAA later declined to serve as arbitrator because the defendant failed to
pay the required fees, and the plaintiff then filed suit beyond the limitations period. The
plaintiff argued that the statute of limitations should have been tolled during the period that the
AAA considered her arbitration demand. The Court disagreed, noting that a demand for
arbitration does not toll the statute of limitations and reasoned that the plaintiff “could have
(and should have) filed her suit within the statute of limitations and, thereafter, sought a stay
of the action pending arbitration.” Such a course, the Court noted, “would have guaranteed
that the lawsuit was brought within the limitations period without waiving any right to
arbitration which may have existed.” Id.
Steadfast further notes that Judge Sparks of the Western District has followed Fonseca

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and stayed a case based on the plaintiffs’ concern “that if arbitration does not proceed for any
reason, the allowable time to file suit possibly will have passed.” Valdez v. Tex. Taco Cabana,
L.P., No. A-14-CA-389-SS, 2014 WL 2980270, at *2 (W.D. Tex. July 1, 2014). Although the
plaintiffs admitted the risk was slight, they asserted it was tangible and would divest them of
any forum in which to seek redress. Judge Sparks stayed the case, as was within his discretion,
and required periodic status reports.
Frost Bank contends that it is unclear what unforeseen events Steadfast anticipates that
might thwart the arbitration and that Steadfast “is not entitled to maintain multiple actions in
an attempt to hedge against its own delay or error it might have committed in prosecuting its
alleged causes of action” and should not have waited until the eleventh hour to file suit. In
reply, Steadfast notes that there is no mandate to dismiss, the Court has discretion to enter a
stay instead when limitations is a concern, as endorsed by the Fifth Circuit in Fonseca, and
there is no prejudice to Frost Bank.
Following Fonseca, the Court will exercise its discretion to stay this case to preserve a
forum for redress in the event that the arbitration fails to resolve the claims. Although both
parties agree that it is unlikely that the arbitration will fail to resolve the claims, Fonseca
indicates that a plaintiff may properly request a stay to address such concerns.
The Court will GRANT Steadfast’s motion to stay this case pending arbitration (docket
no. 9). However, rather than a general stay, the Court finds that this case is appropriate for
administrative closure. Mire v. Full Spectrum Lending, Inc., 389 F.3d 163, 167 (5th Cir. 2004)
(“District courts frequently make use of this device to remove from their pending cases suits
which are temporarily active elsewhere (such as before an arbitration panel) or stayed (such as

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where a bankruptcy is pending). The effect of an administrative closure is no different from a
simple stay . . . .”)); see also CitiFinancial Corp. v. Harrison, 453 F.3d 245, 250 (5th Cir.
2006). The Clerk shall administratively close this case. The case may be reopened upon the
motion of any party or upon the Court’s own motion.
Steadfast shall file a status report every 90 days beginning November 1, 2018, and will
promptly notify the Court upon the completion of the arbitration.
It is so ORDERED.
SIGNED this 14th day of August, 2018.

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XAVIER RODRIGUEZ
UNITED STATES DISTRICT JUDGE

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