S. Tr. Ins. Co. v. Guidewire Software, Inc.

SOUTHERN TRUST INSURANCE COMPANY, Petitioner, v. GUIDEWIRE SOFTWARE, INC., Respondent.

CIVIL ACTION NO. 5:20-cv-00327-TES

UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF GEORGIA MACON DIVISION

November 23, 2020

ORDER GRANTING MOTION TO COMPEL ARBITRATION

Southern Trust Insurance Company ("STIC") and Guidewire Software, Inc. ("Guidewire") entered into three contracts with one another: the Subscription Order, the Subscription Services Agreement ("SSA"), and the Consulting Services Agreement ("CSA"). [Doc. 1-2, ¶ 7]. Under this arrangement, STIC received a three-year license to use certain Guidewire products and services. [Id.]. The Subscription Order provided that Guidewire would provide access to certain software to STIC. [Doc. 1-2, pp. 17-35]. The SSA [Doc. 1-2, pp. 36-48] and the CSA [Doc. 1-2, pp. 49-44] facilitated the use of that software. Both the SSA and the CSA contained alternative dispute resolution ("ADR") clauses. Section 14(a) of the Subscription Services Agreement provides:

Any and all disputes, controversies or claims arising under or relating to this Agreement or the breach, termination or invalidation thereof shall upon written notice by either party, be referred to a senior management representative from each of the parties who will confer in good faith to attempt to resolve the matter. The party sending the first written notice (the "initial notice") shall (1) set forth in detail all of its claims or issues in dispute and (2) designate its representative. The other party shall have 5 business days to designate its representative and add any other issues or claims for resolution not identified in the initial notice. The representatives shall have 30 days from the date of the initial notice to resolve the issues identified in the notices. If the representatives are unable to resolve the matter, either party may refer the matter to administered mediation, through the rules and auspices of the American Arbitration Association in Atlanta, Georgia. Such mediation shall be started within 30 days from the date of referral, and the mediation process must be concluded within 30 days from the start date. The parties shall share equally the mediator's expenses. If the dispute or claim is not fully resolved pursuant to this section, either party may after 90 days, initiate arbitration pursuant to the Georgia Arbitration Act in Atlanta, Georgia. ln the event the parties are unable to resolve any dispute hereunder through informal negotiations or mediation, and except as otherwise provided herein, arbitration pursuant to the Georgia Arbitration Act shall be the exclusive remedy to resolve any disputes between the parties arising in connection with this Agreement and all Orders hereunder. Notwithstanding, either party may apply to a court of competent jurisdiction for injunctive relief in order to protect its rights pursuant to Section 6 hereof before or during arbitration.

[Doc. 1-2, pp. 45-46]. Section 11.5(b) of the Consulting Services Agreement provides:

Any and all disputes, controversies or claims arising under or relating to this Agreement or the breach, termination or invalidation thereof shall upon written notice by either party, be referred to a senior management representative from each of the parties who will confer in good faith to attempt to resolve the matter. The party sending the first written notice (the "initial notice") shall (1) set forth in detail all of its claims or issues in dispute and (2) designate its representative. The other party shall have 5 business days to designate its representative and add any other issues or claims for resolution not identified in the initial notice. The representatives shall have 30 days from the date of the initial notice to resolve the issues identified in the notices. If the representatives are unable to resolve the matter, either party may refer the matter to administered mediation, through the rules and auspices of the American Arbitration Association inAtlanta, Georgia. Such mediation shall be started within 30 days from the date of referral, and the mediation process must be concluded within 30 days &om the start date. The parties shall share equally the mediator's expenses. If the dispute or claim is not fully resolved pursuant to this section, either party may after 90 days, initiate arbitration pursuant to the Georgia Arbitration Act in Atlanta, Georgia. In the event the parties are unable to resolve any dispute hereunder through informal negotiations or mediation, and except as otherwise provided herein, arbitration pursuant to the Georgia Arbitration Act shall be the exclusive remedy to resolve any disputes between the parties arising in connection with this Agreement and all SOWs hereunder. Notwithstanding, either party may apply to a court of competent jurisdiction for injunctive relief in order to protect its rights hereof before or during arbitration.

[Doc. 1-2, p. 51]. The parties agree that the two ADR provisions are materially similar. [Doc. 4, p. 3]; [Doc. 11, p. 4]. The provisions provide that disputes between the parties will be resolved in three phases. First, if a party provides notice, appointed representatives from each side will discuss the matter and attempt to resolve it. Next, if discussion by the appointed representatives does not work, either party may refer the matter to mediation. If the dispute is not resolved during the first two steps of the ADR process, the parties agreed that "arbitration pursuant to the Georgia Arbitration Act shall be the exclusive remedy to resolve any disputes between the parties arising in connection with this Agreement." [Doc. 1-2, pp. 46, 51].

A dispute arose between STIC and Guidewire. STIC complains that Guidewire's products and services were riddled with shortcomings. [Doc. 11, p. 3]. Guidewire complains that STIC did not pay them as promised. [Doc. 4, p. 3]. Following an initial notice, both parties appointed a representative to discuss the matter as provided in theADR provisions. [Doc. 4, p. 4]. Those representatives could not resolve the dispute, so Guidewire initiated administered mediation with the American Arbitration Association ("AAA"). [Doc. 4, p. 5]. STIC did not participate in the administered mediation. [Id.]. Guidewire then commenced arbitration with the AAA. [Doc. 1-2, pp. 81-89]. After that, STIC agreed to participate in the administered mediation and hold the commenced arbitration in abeyance during the mediation. [Doc. 4-3, p. 2]. The mediation was unsuccessful. [Doc. 4, p. 6]. The arbitration proceeding remains pending. [Id.].

STIC filed a Petition for Declaratory Judgment and Injunctive Relief to Enjoin Arbitration in the Superior Court of Bibb County, Georgia. [Doc. 1-2, pp. 4-15]. Guidewire then removed that action to this Court [Doc. 1, pp. 1-6] and filed a Motion to Compel Arbitration [Doc. 4].

DISCUSSION

Congress enacted the Federal Arbitration Act ("FAA") "[t]o overcome judicial resistance to arbitration." Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 443 (2006). The FAA declares a "liberal federal policy favoring arbitration agreements." Caley v. Gulfstream Aerospace Corp., 428 F.3d 1359, 1367 (11th Cir. 2005). Section 2 of the FAA provides:

A written provision in . . . a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall bevalid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.

9 U.S.C. § 2. Section 3 directs courts to stay proceedings in any case raising a dispute referrable to arbitration. 9 U.S.C. § 3. And Section 4 allows a court to issue an order compelling arbitration when parties do not comply with their arbitration agreement. 9 U.S.C. § 4.

"Arbitration is a matter of contract and consent." JPay, Inc. v. Kobel, 904 F.3d 923, 928 (11th Cir. 2018). "Arbitrators derive their authority to resolve disputes only because the parties have agreed in advance to submit such grievances to arbitration." Id. (quoting AT&T Techs., Inc. v. Commc'ns Workers of Am., 475 U.S. 643, 648-49 (1986)). "Because of the FAA, federal courts are required to place arbitration clauses on equal footing with other contracts." Solymar Inv. v. Banco Santander S.A., 672 F.3d 981, 988 (11th Cir. 2012). Even so, federal courts must interpret arbitration clauses broadly where possible. Id. (citing AT&T Techs., Inc. v. Commn'cs Workers of Am., 475 U.S. 643, 649-50 (1986)).

The main question here centers on arbitrability—whether the parties contracted to have the current dispute resolved at arbitration instead of in this Court. To put a finer point on it, STIC claims that Guidewire abandoned the contracts so that they (the contracts) are no longer applicable. And, STIC argues, if the contracts no longer require arbitration, then it doesn't want to arbitrate. So, the key issue can be quicklysummarized: if the case is arbitrable, then the Court must grant the Motion to Compel Arbitration. If it is not, then the Court must deny the Motion.

But before the Court can consider this critical question, it must consider the threshold matter of whether arbitrability is itself arbitrable. Put another way, the Court must determine whether it should answer the question of arbitrability, or instead send that question to arbitration for the arbitrators to decide.

A. "Who" Gets to Decide Arbitrability

The Supreme Court tells us that "the answer to the 'who' question . . . is fairly simple." First Options of Chicago v. Kaplan, 514 U.S. 938, 943 (1995). "Just as the arbitrability of the merits of a dispute depends upon whether the parties agreed to arbitrate that dispute, . . . so the question 'who has the primary power to decide arbitrability'...