Bopp v. Indep. Specialty Ins. Co.

657 F.Supp.3d 859

Patricia S. BOPP, et al. v. INDEPENDENT SPECIALTY INSURANCE COMPANY, et al.

CIVIL ACTION NO. 23-18

United States District Court, E.D. Louisiana

Signed February 23, 2023

Walter R. Woodruff, Jacob D. Young, Meredith E. Chehardy, Chehardy, Sherman, Williams, Murray, Recile, Stakelum & Hayes, LLC, Metairie, LA, for Patricia S. Bopp, et al.

Chaunda Brooks, Rolfes Henry LLP, Baton Rouge, LA, Rebecca J. Mansell, Pro Hac Vice, Rolfes Henry, Ocean Springs, MS, for Independent Specialty Insurance Company, et al.

SECTION M (4)

ORDER & REASONS

BARRY W. ASHE, UNITED STATES DISTRICT JUDGE

Before the Court is a motion to compel arbitration and dismiss or stay the litigation filed by defendants Independent Specialty Insurance Company ("ISIC") and Certain Underwriters at Lloyd's and other insurers subscribing to binding authority B604510568622021 ("Certain Underwriters") (collectively, "Defendants").¹ Plaintiffs Patricia S. Bopp, Edward S. Bopp, Dr. Felix Bopp, Sydney Perez, Kelly Weiss, and Contesta Apartments (collectively, "Plaintiffs") respond in opposition.² Having considered the parties' memoranda, the record, and the applicable law, the Court issues this Order & Reasons granting Defendants' motion and staying this litigation while the parties pursue arbitration.

I. BACKGROUND

This case arises from an insurance coverage dispute following Hurricane Ida, which made landfall on August 29, 2021. Plaintiffs maintain surplus lines insurance with Defendants who jointly subscribe to the coverages, terms, and conditions set forth in the insurance policy no. 2021-803643-01 (the "insurance policy").³ Plaintiffs made claims with Defendants after several of their properties were damaged by the storm.⁴ On August 29, 2022, Plaintiffs filed this suit against Defendants in state court seeking insurance proceeds and asserting that the insurers acted in bad faith with respect to their joint adjustment of the loss.⁵ Defendants removed the suit based on diversity subject-matter jurisdiction under 28 U.S.C. § 1332.⁶ Defendants also based their removal on the ground that there is a valid arbitration agreement in the insurance policy to which they both subscribe that falls under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the "Convention"), opened for signature June 10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. 38, because one of the insurers - Certain Underwriters - is a foreign citizen, thus giving this Court original jurisdiction pursuant to 9 U.S.C. §§ 202, 203, and 205.⁷

The insurance policy to which Defendants subscribe (i.e., the governing document for each of the underlying insurance policies) contains the following arbitration clause:

All matters in dispute between you and us . . . in relation to this insurance, including this policy's formation and validity, and whether arising during or after the period of this insurance, shall be referred to an Arbitration Tribunal in the manner described below.

. . . .

Any Arbitration hearing shall take place in Nashville, Tennessee, unless some other locale is agreed by the Arbitrator or Arbitration Tribunal.

The Arbitration Tribunal may not award exemplary, punitive, multiple or other damages of a similar nature.⁸

The insurance policy also contains a claims settlement clause providing that the amount of loss, if disputed, is to be determined in arbitration.⁹

II. PENDING MOTION

Defendants seek to compel arbitration and stay the litigation, arguing that, because Certain Underwriters is a foreign citizen, the Convention applies and the criteria for compelling arbitration are satisfied.¹⁰ Defendants also argue that both of them, even the domestic insurer (ISIC), are entitled to compel arbitration and Plaintiffs are equitably estopped from objecting because they allege interdependent and concerted conduct by the Defendants in the claims handling.¹¹ Further, Defendants argue that Louisiana law does not prevent the enforcement of the arbitration clause because it cannot reverse-preempt the Convention.¹²

In opposition, Plaintiffs argue that the arbitration clause is invalid because it is adhesionary.¹³ Plaintiffs also argue that they have separate and distinct insurance policies with each of the Defendants, the Convention does not apply to the domestic insurer (ISIC), and, consequently, the claims against ISIC are not subject to arbitration.¹⁴

III. LAW & ANALYSIS

There is a strong federal policy favoring arbitration. Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). The Convention is an international treaty that provides citizens of the signatory countries with the right to enforce arbitration agreements. The purpose of the Convention is "to encourage the recognition and enforcement of commercial arbitration agreements in international contracts and to unify the standards by which agreements to arbitrate are observed and arbitral awards are enforced in the signatory countries."¹⁵ Scherk v. Alberto-Culver Co., 417 U.S. 506, 520 n.15, 94 S.Ct. 2449, 41 L.Ed.2d 270 (1974). The Federal Arbitration Act (the "FAA"), 9 U.S.C. §§ 201-208, codifies the Convention and provides for its enforcement in United States courts. See id. § 201 ("The Convention . . . shall be enforced in United States courts in accordance with this chapter."); see also id. § 206 ("A court having jurisdiction under this chapter may direct that arbitration be held in accordance with the agreement at any place therein provided for, whether that place is within or without the United States.").

"In determining whether the Convention requires compelling arbitration in a given case, courts conduct only a very limited inquiry." Freudensprung v. Offshore Tech. Servs., Inc., 379 F.3d 327, 339 (5th Cir. 2004). The Fifth Circuit has held that "a court should compel arbitration if (1) there is a written agreement to arbitrate the matter; (2) the agreement provides for arbitration in a Convention signatory nation; (3) the agreement arises out of a commercial legal relationship; and (4) a party to the agreement is not an American citizen." Id. (quotation omitted). Once these factors have been found to exist in a given case, a district court must order arbitration "unless it finds that the [arbitration] agreement is null and void, inoperative or incapable of being performed." Id. (quotation omitted).

All four factors are satisfied in this case. The insurance policy contains a written arbitration agreement that provides for arbitration in the United States and arises out of a commercial legal relationship (namely, a contract of insurance). Further, as Plaintiffs concede,¹⁶ one party to the policy - Certain Underwriters - is not an American citizen. Plaintiffs argue that its claims against the domestic insurer - ISIC - are not subject to the arbitration agreement because they are based on a separate insurance contract, which does not fall under the Convention, and equitable estoppel should not apply.¹⁷ Although Plaintiffs may have separate insurance contracts with each insurer, this Court and others in this district have held that equitable estoppel prevents a plaintiff from objecting to arbitration with a domestic insurer when the claims against all defendants, foreign and domestic, are inextricably intertwined - that is, when a plaintiff has alleged substantially interdependent and concerted misconduct (here, improper claims handling) on the part of both the domestic insurer (here, ISIC, the nonsignatory to the contract containing the enforceable arbitration clause) and the foreign insurer (here, Certain Underwriters, the signatory). Par. of St. Charles v. HDI Glob. Specialty SE, 2023 WL 1419937, at *4 (E.D. La. Jan. 31, 2023) (discussing and applying GE Energy Power Conversion France SAS, Corp. v. Outokumpu Stainless USA, LLC, — U.S. —, 140 S. Ct. 1637, 1645, 207 L.Ed.2d 1 (2020) (observing that "nothing in the text of the Convention could be read to otherwise prohibit the application of domestic equitable estoppel doctrines" that permit the enforcement of arbitration agreements by nonsignatories); Grigson v. Creative Artists Agency, L.L.C., 210 F.3d 524, 527 (5th Cir. 2000) (holding that "equitable estoppel is warranted when [a] signatory to the contract containing an arbitration clause raises allegations of substantially interdependent and concerted misconduct by both nonsignator[ies] and one or more of the signatories to the contract"); Acad. of the Sacred Heart of New Orleans v. Certain Underwriters at Lloyd's London, 651 F.Supp.3d 822, 828-31 (E.D. La. Jan. 18, 2023) (applying Grigson to hold that equitable estoppel compels the arbitration of claims made without differentiation among the insurer defendants alleged to have acted interdependently and in concert in the adjustment and evaluation of plaintiff's insurance claims); Kronlage Family Ltd. P'ship v. Indep. Specialty Ins. Co., 651 F.Supp.3d 832, 841-42 (E.D. La. Jan 17, 2023) (applying equitable estoppel to compel arbitration when plaintiff did not differentiate between conduct of foreign and domestic insurers); City of Kenner v. Certain Underwriters at Lloyd's London, 2022 WL 16961130, at *3 (E.D. La. Nov. 16, 2022) ("City of Kenner II") (applying Grigson to hold that equitable estoppel compels the arbitration of claims made "without differentiation among the insurer defendants" alleged to "have acted interdependently and in concert in the adjustment and evaluation of plaintiff's insurance claims"); City of Kenner v. Certain Underwriters at Lloyd's, London, 2022 WL 307295, at *3 (E.D. La. Feb. 2, 2022) (applying Grigson to hold that equitable estoppel was warranted to compel arbitration when the plaintiff alleged that defendants collectively insured the property and, without differentiation, received proof of loss but failed to pay out on the damage in bad faith); Port Cargo Serv., LLC v. Certain Underwriters at Lloyd's London, 2018 WL 4042874, at *7 (E.D. La. Aug. 24, 2018) (applying Grigson to hold...