Applied Underwriters Captive Risk Assurance Co. v. Milan Express Co.

APPLIED UNDERWRITERS CAPTIVE RISK ASSURANCE COMPANY, INC., APPELLANT, v. MILAN EXPRESS CO., INC., A TENNESSEE CORPORATION, APPELLEE.

No. A-18-570.

NEBRASKA COURT OF APPEALS

March 17, 2020

MEMORANDUM OPINION AND JUDGMENT ON APPEAL

(Memorandum Web Opinion)

NOTICE: THIS OPINION IS NOT DESIGNATED FOR PERMANENT PUBLICATION AND MAY NOT BE CITED EXCEPT AS PROVIDED BY NEB. CT. R. APP. P. § 2-102(E).

Appeal from the District Court for Douglas County: KIMBERLY MILLER PANKONIN, Judge. Affirmed.

Brian D. Nolan and Leslie S. Stryker Viehman, of Nolan, Olson & Stryker, P.C., L.L.O., and Daniel W. Olivas, of Lewis, Thomason, King, Krieg & Waldrop, P.C., for appellant.

Steven D. Davidson, of Baird Holm, L.L.P., and Scott D. Carey, of Baker, Donelson, Bearman, Caldwell & Berkowitz, P.C., for appellee.

MOORE, Chief Judge, and RIEDMANN and BISHOP, Judges.

BISHOP, Judge.

I. INTRODUCTION

Applied Underwriters Captive Risk Assurance Company, Inc. (AUCRA), and Milan Express Co., Inc., now known as Milan Supply Chain Solutions, Inc. (Milan), have been involved in a dispute for years over amounts AUCRA claims are owed from Milan under the parties' Reinsurance Participation Agreement (RPA). Two documents, the RPA and a Request to Bind Coverages & Services (Binder), were signed on the same day in September 2008, and both relate to Milan's purchase of workers' compensation insurance for its employees in Tennessee and other states. The RPA contained an arbitration clause subjecting any dispute or controversy to be determined in the British Virgin Islands under the provisions of the American Arbitration Association (AAA). It also subjected Milan to the exclusive jurisdiction of Nebraska courts for the purpose of enforcing any arbitration award rendered, and also required the RPA to be exclusively governed by and construed in accordance with Nebraska laws. The Binder also contained an arbitration clause which provided that any dispute or controversy would be resolved by alternative dispute resolution and submitted to and determined exclusively by binding arbitration under the Federal Arbitration Act (FAA) "in conformity with the Arbitration Act of the State of Nebraska." The Binder further provided that arbitration would be "in accordance with JAMS," and would be held in Omaha, Nebraska.

After efforts to resolve the controversy between the parties failed, Milan filed an action against AUCRA in a Tennessee federal district court in February 2013. AUCRA moved to compel arbitration, which was initially denied; AUCRA appealed to the United States Court of Appeals for the Sixth Circuit. The Sixth Circuit reversed the trial court and held that arbitrability under the RPA should be determined by an arbitrator. An AAA arbitration panel subsequently determined that the RPA was a contract concerning or relating to an insurance policy, and therefore based on Neb. Rev. Stat. § 25-2602.01(f)(4) (Reissue 2016) (prohibits enforcement of arbitration clauses in contracts concerning or relating to insurance policies), the panel concluded the RPA's arbitration clause was unenforceable. The "Final Award" from the AAA panel was executed on July 20, 2015. The Tennessee action was subsequently dismissed at AUCRA's request in February 2016.

About a month later, in March 2016, AUCRA filed the present action against Milan in the district court for Douglas County, Nebraska, for amounts allegedly owed to it by Milan pursuant to the terms of the RPA. However, this time in its request to stay the lawsuit pending arbitration, AUCRA claimed a right to arbitrate pursuant to the arbitration clause contained in the Binder rather than the arbitration clause contained in the RPA. Having been denied its right to arbitrate under the RPA as a result of the AAA arbitration panel's decision, it is apparent that AUCRA sought an alternative path to arbitration "in accordance with JAMS" as provided in the Binder. Milan filed a motion to stop arbitration, contending that the AAA arbitration panel's Final Award already addressed the same claims.

The district court determined that issue and claim preclusion barred AUCRA from compelling a second attempt at arbitration. The court granted Milan's motion to stop arbitration and denied AUCRA's motion to stay pending arbitration. AUCRA appeals. We affirm.

II. FACTUAL BACKGROUND

Milan is a Tennessee corporation that provides transportation services. AUCRA is a British Virgin Islands corporation with its principal place of business in Omaha; AUCRA is apparently a subsidiary of Applied Underwriters, Inc. In 2008, Milan executed the Binder regarding a specific "EquityComp Quote." The Binder contemplated that Applied Underwriters, Inc., through its affiliates and/or subsidiaries, would provide to Milan "one or more workers' compensation insurance policies" that were "contingent" on Milan executing the RPA. Milan executed the related RPA with AUCRA, effective October 1. Under the RPA, AUCRA agreed to provide to Milan workers' compensation coverage in a "segregated protected cell reinsurance program." AUCRA had entered into a "Reinsurance Treaty" made up of other "Issuing Insurers" for a poolingarrangement to collectively issue the workers' compensation coverage. AUCRA would "allocate a portion of the premium and losses" under the RPA to Milan's segregated protected cell.

The Binder and RPA each had arbitration clauses. At issue in this appeal is the Binder's arbitration clause, which states:

[Milan] understands that AUCRA engages in alternative dispute resolution of conflicts. [Milan] further agrees that any claims, disputes and/or controversies between the parties involving the [Worker's Compensation Program Proposal & Rate Quotation (Proposal)] or any part thereof (including but not limited to the [RPA] and Policies [(workers' compensation policies identified in the Proposal)]) shall be resolved by alternative dispute resolution and submitted to and determined exclusively by binding arbitration under the Federal Arbitration Act in conformity with the Arbitration Act of the State of Nebraska. Arbitration shall be in accordance with JAMS by a single arbitrator, with the arbitration held in Omaha, Nebraska. . . .

This acknowledgement and disclosure is intended to confirm receipt of the Proposal and [Milan's] acceptance of the Proposal along with certain additional terms and conditions. Only the [RPA] and Policies [(workers' compensation policies identified in the Proposal)] contain the actual operative provisions. . . . The agreement to arbitrate, as set forth herein, is enforceable independent of any other [RPA and/or Policies in the Proposal] between AUCRA, its affiliates and [Milan].

Milan procured its workers' compensation insurance in accordance with the RPA and apparently made monthly payments from November 2008 until its last payment in May 2011. Litigation followed.

III. PROCEDURAL BACKGROUND

1. INITIAL FEDERAL COURT AND ARBITRATION PROCEEDINGS

AUCRA filed a formal demand for arbitration with the AAA in 2012. Although not in our record, the parties direct us to other prior proceedings related to this case. In 2013, Milan filed a complaint in the U.S. District Court for the Western District of Tennessee, seeking similar relief to that requested in its present counterclaim concerning the RPA. See Milan Express Co., Inc. v. Applied Underwriters Captive Risk Assurance Company, Inc., No. 1:13-cv-01069-JDB-egb, 2013 WL 12009699 (W.D. Tenn. Oct. 3, 2013). Among other things, in that case a federal magistrate judge granted Milan's motion to stop arbitration, finding the arbitration clause invalid under Nebraska law. The federal district court adopted that decision, analyzing, in part, that the court rather than an arbitrator had to determine the issue of arbitrability. See Milan Exp. Co. v. AUCRA, 993 F. Supp. 2d 846 (W.D. Tenn. 2014). AUCRA appealed to the U.S. Court of Appeals for the Sixth Circuit, which found that the parties manifestly intended to submit the threshold question of arbitrability to the arbitrator; thus, it vacated the order granting Milan's motion to stop arbitration and remanded the case for further proceedings. See Milan Exp. Co., Inc. v. Applied Underwriters Captive Risk Assur. Co., Inc., 590 Fed. Appx. 482 (6th Cir. 2014).

The AAA's Final Award from July 2015, sets forth that the arbitration proceeded on the sole issue of whether the parties had an enforceable agreement to arbitrate disputes arising underthe RPA. The AAA panel found that the RPA was a contract concerning or relating to an insurance policy, and that Nebraska law, specifically § 25-2602.01(f)(4), prohibits enforcement of arbitration clauses in contracts concerning or relating to insurance policies. It therefore found that the RPA's arbitration clause was unenforceable under Nebraska law. Thereafter, AUCRA moved to vacate that award and to dismiss the case for forum non conveniens. See Milan Express Co., Inc. v. Applied Underwriters Captive Risk Assurance Company, Inc., No. 13-1069-JDB, 2016 WL 407317 (W.D. Tenn. Feb. 2, 2016). The Tennessee federal district court, without comment on the arbitration award, granted AUCRA's motion to dismiss, finding that the matter could have only been brought in Nebraska state court. AUCRA appealed insofar as there was no ruling on the arbitration award's validity; we discuss the resolution of that appeal below, chronologically.

2. AUCRA INITIATES PROCEEDINGS IN DOUGLAS COUNTY DISTRICT COURT

AUCRA filed a complaint against Milan on March 7, 2016, in the Douglas County District Court, claiming Milan executed the RPA as part of acquiring workers' compensation insurance through AUCRA. Milan made monthly payments under the RPA, and its last payment was in 2011. AUCRA sought a judgment against Milan for money ($2,953,722.20 plus costs) that it claimed was owed under the RPA. A copy of the RPA was attached to and incorporated into the complaint. AUCRA simultaneously filed a "Request for Stay," asking that pursuant to the FAA, the district court...