Wanamaker Nursery, Inc. v. John Deere Risk Prot., Inc.

364 F.Supp.3d 839

WANAMAKER NURSERY, INC. ; Timothy Wanamaker, Individually and d/b/a Wanamaker Nursery, Inc. and d/b/a Tennessee Bush Farm ; Ashley Wanamaker, Individually and d/b/a Wanamaker Nursery, Inc. ; Andrea Wanamaker, Individually and d/b/a Wanamaker Nursery, Inc. ; and William Wanamaker, Individually and d/b/a Wanamaker Nursery, Inc., Plaintiffs,

v.JOHN DEERE RISK PROTECTION, INC., d/b/a FMH Risk Protection, Inc., Defendants.

Case No. 4:17-cv-77

United States District Court, E.D. Tennessee, Winchester Division, at Winchester.

February 27, 2019

Stephen E. Neal, White Peck Carrington, LLP, Mt. Sterling, KY, for Plaintiffs.

David A. Changas, Lewis, Thomason, King, Krieg & Waldrop, P.C., Nashville, TN, Jeffrey S. Dilley, Pro Hac Vice, Clarksdale, MS, for Defendants.

ORDER

Christopher H. Steger, UNITED STATES MAGISTRATE JUDGE

With an estimated population of 10 quintillion,¹ insects are all around us. Equally at home in cities, forests and fields, they pollinate our plants and compete with us for the food we eat. At times beautiful and benign—at other times annoying, loathsome and destructive—we share with them our homes, workplaces, recreational spaces, and conveyances—in short, our world. By and large, our relationship with our six-legged co-habitants is unwittingly (at least for most of us) symbiotic; however, there are times when humans and insects compete directly. And, at such times, we are reminded that the age-old curse—"plague of locusts"² —is not just apocryphal.

The Plaintiffs herein—the Wanamakers—experienced such a "plague" first hand when hungry insects devoured the plants in their nursery in 2009. This disaster prompted them to file claims against their insurer, FMH Risk Protection, Inc. ("FMH"), under seven different insurance policies. FMH initially denied payment under all of seven policies. The parties then submitted the claims to arbitration, where the arbitrator, through a conditional award, required the Wanamakers to submit additional documentation to FMH. Following receipt of such documentation, the arbitrator directed FMH to re-open its claims process and reconsider the Wanamakers' claims in light of the new documents. FMH determined that the Wanamakers were entitled to recover under one of the seven policies, so FMH paid that claim. The arbitrator then made his final award, finding that FMH paid all amounts properly owed under the policies.

Following the arbitrator's final decision, the Wanamakers filed suit, seeking judicial review of the decision [Doc. 1]. In response, FMH filed a motion for summary judgment, contending that the Court must uphold the arbitrator's final award under the Federal Arbitration Act [Doc. 19].

I. Factual Summary

The Wanamakers operate several ornamental plant nurseries in Warren County and Grundy County, Tennessee. To protect their crops, they purchased several crop-insurance policies from FMH, identified as follows:

Policy No. Insured Location
48111-09     Wanamaker Nursery, Inc.    Grundy County
48124-09     Timothy Wanamaker          Warren County
48125-09     Timothy Wanamaker          Grundy County
48128-09      Andrea Wanamaker          Grundy County
48129-09      Andrea Wanamaker          Warren County
48130-09      Ashley Wanamaker          Warren County
48133-09      Wanamaker Nursery, Inc.   Warren County

The Federal Crop Insurance Act, 7 U.S.C. § 1501 et seq. , and corresponding regulations under Title VII, Chapter IV of the Code of Federal Regulations, govern the insurance policies in this case. Such policies are written on standardized contracts promulgated and regulated by the Federal Crop Insurance Corporation ("FCIC"), a wholly owned government corporation managed by the Risk Management Agency of the U.S. Department of Agriculture.

In 2009, the Wanamakers submitted claims to their insurer, FMH, under the above-referenced policies for losses occasioned by insect infestation. When FMH received those claims, FMH was obligated—under the insurance policies and applicable regulations—to verify that the total inventory value for each category of nursery plants was within 110% of either the actual inventory value of those plants at the time insurance attached or the highest dollar amount of sales of that category of plants over the previous three years. FMH found that the Wanamakers' policies failed to meet either of those threshold requirements, so it denied all of their claims. Each insurance policy contained an arbitration clause. The Wanamakers initiated arbitration to contest FMH's determination that it would not indemnify them for their losses.

The arbitrator conducted a hearing and issued a conditional award [Doc. 19-5] instructing the Wanamakers to provide FMH with additional documents and directing FMH to re-evaluate the claims after receipt such documentation. After the Wanamakers provided the requisite documents, FMH determined that one of the insurance policies—Policy 48125-09—met the 110% threshold requirement, resulting in a payout to the Wanamakers of $ 133,650. FMH determined that the remaining six policies still did not meet the threshold requirements under the insurance policies.

The arbitrator then issued his final award [Doc. 19-6] concluding that FMH "has paid all claim amounts that are proper and no additional indemnity related to the 2009 claim on any policy is owed to the [Wanamakers]. The [Wanamakers'] claims asserted herein ... are hereby denied in their entirety, and dismissed with prejudice." [Id. at PageID #: 105].

The Wanamakers then filed suit³ to contest the arbitrator's findings [See Doc. 1]. They point to Section 20(c) of their insurance policies' Basic Provisions, which states that: "Any decision rendered in arbitration is binding on you and us unless judicial review is sought ...." [Doc. 19-2 at PageID #: 78]. Based on that provision, the Wanamakers' claim that Section 20(c) grants the court authority to perform a de novo review of the arbitrator's decision. The Wanamakers also brought a bad-faith claim against FMH under Tennessee law.

FMH responded with a summary judgment motion [Doc. 19] asserting that the Court's review is limited under the Federal Arbitration Act; collateral estoppel precludes the Wanamakers' claims; and federal law preempts their bad-faith claim. The Wanamakers countered that they are entitled to vacatur even if the Federal Arbitration Act applies and their bad-faith claim is legally viable.

II. Analysis

A. Summary Judgment Standard

Summary judgment is appropriate if the pleadings, depositions, answers to interrogatories, and admissions on file, together with any affidavits "show that there is no genuine issue as to any material fact and that the movant is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). As the moving party, FMH bears the burden of showing the absence of a genuine issue of material fact as to at least one essential element of the Wanamakers' claim. See Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The Wanamakers, as the non-moving party, must respond with sufficient evidence from which a jury could reasonably find for them. See Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Based on the evidence, the Court must then determine "whether ... a sufficient disagreement [exists] to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Id. at 251–52, 106 S.Ct. 2505. In making this determination, the Court must draw all reasonable inferences in favor of the Wanamakers. See Nat'l Enters., Inc. v. Smith , 114 F.3d 561, 563 (6th Cir. 1997). Entry of summary judgment is appropriate "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex , 477 U.S. at 322, 106 S.Ct. 2548.

B. Applicability of Federal Crop Insurance Act

The Wanamakers' crop insurance policies were issued subject to the Federal Crop Insurance Act ("FCIA"), 7 U.S.C. § 1501 et seq. Congress enacted the FCIA in 1938 "to promote the national welfare by improving the economic stability of agriculture through a sound system of crop insurance and providing the means for the research and experience helpful in devising and establishing such insurance." Williams Farms of Homestead, Inc. v. Rain and Hail Insurance Services, Inc. , 121 F.3d 630, 633 (11th Cir. 1997) (quoting 7 U.S.C. § 1502 ); Kansas ex rel. Todd v. United States , 995 F.2d 1505, 1507 (10th Cir. 1993). The Act promotes stability by encouraging farmers to purchase multiple peril crop insurance that protects them against loss from natural disasters. Meyer v. Conlon , 162 F.3d 1264, 1266 (10th Cir. 1998).

Under the original scheme of the FCIA, only the Federal Crop Insurance Corporation issued crop-insurance policies and handled claims on those policies; however, that changed in 1980 when Congress amended the FCIA to, among other things, permit the FCIC to utilize private-insurance companies to provide crop insurance. Id. These private insurers could sell and service crop insurance policies, and the FCIC re-insured those policies. See Farmers Crop Ins. All. v. Laux , 442 F.Supp.2d 488, 491 (S.D. Ohio 2006) (noting that "private insurance companies sell and service crop insurance policies and are reinsured by the FCIC"). "[T]o qualify for re[-]insurance through the FCIC, the policies written by approved private insurers must comply with the FCIA and its accompanying regulations." Davis v. Producers Agr. Ins. Co. , 762 F.3d 1276, 1284 (11th Cir. 2014).

C. The Federal Arbitration Act Controls.

While some general background on the FCIA and crop insurance policies is necessary to an understanding of the dispute pending before the Court, it is ultimately the Federal Arbitration Act ("FAA") that governs the outcome in this case. Congress enacted the FAA to create a federal policy favoring...