American Heritage Life Ins. Co. v. Orr

• Citation: 294 F.3d 702
• Decision Date: 14 June 2002
• Docket Number: No. 01-60678.,No. 01-60682.,No. 01-60679.,No. 01-60680.,No. 01-60681.,01-60678.,01-60679.,01-60680.,01-60681.,01-60682.
• Parties: AMERICAN HERITAGE LIFE INSURANCE COMPANY; First Colonial Insurance Company of Florida; Fidelity National Insurance Corporation, doing business as Republic Finance, Inc., Plaintiffs-Appellees, v. John D. ORR, Betty E. Sanford, Frankie L. Moore, Jimmie Martin and Nathaniel Henley, Defendants-Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

294 F.3d 702

AMERICAN HERITAGE LIFE INSURANCE COMPANY; First Colonial Insurance Company of Florida; Fidelity National Insurance Corporation, doing business as Republic Finance, Inc., Plaintiffs-Appellees, v. John D. ORR, Betty E. Sanford, Frankie L. Moore, Jimmie Martin and Nathaniel Henley, Defendants-Appellants.

No. 01-60678.

No. 01-60679.

No. 01-60680.

No. 01-60681.

No. 01-60682.

United States Court of Appeals, Fifth Circuit.

June 14, 2002.

COPYRIGHT MATERIAL OMITTED

Rik Stanford Tozzi (argued), Brian Alan Dodd, W. Michael Atchison, Starnes & Atchison, Birmingham, AL, William Hollis Leech, Beth L. Orlansky, McGlinchey Stafford, Jackson, MS, for American Heritage Life Ins. Co. and First Colonial Ins. Co. of Florida.

James Rodney Chastain, Jr. (argued), Shannan Sweeney Rieger, Kean, Miller, Hawthorne, D'Armond, McGowan & Jarman, Baton Rouge, LA, Robert T. Gordon, Jr., Heidelberg & Woodliff, Jackson, MS, for Fidelity Nat. Corp.

Bennie Lee Jones, Jr. (argued), Law Offices of Bennie L. Jones, Jr. & Associates, West Point, MS, David Shelby VanEvery, Sr., VanEvery Law Firm, Columbus, MS, for Defendants-Appellants.

Appeals from the United States District Court for the Northern District of Mississippi.

Before WIENER and DENNIS, Circuit Judges, and LITTLE, District Judge.^*

LITTLE, District Judge:

Today we consider a consolidated appeal by Defendants-Appellants from the district court's order in favor of Plaintiffs-Appellees, compelling arbitration. Defendants-Appellants include the following parties: John D. Orr, Betty F. Sanford, Frankie L. Moore, Jimmie Martin, and Nathaniel Henley (collectively referred to as the "Appellants"). Plaintiffs-Appellees are: Fidelity National Corporation d/b/a Republic Finance, Inc. ("Republic Finance" or the "Lender"), and American Heritage Life Insurance Company ("American Heritage") and First Colonial Insurance Company of Florida ("Colonial Insurance") (collectively, the "Insurers").¹ The district court granted Plaintiffs-Appellees' petition to compel arbitration under § 4 of the Federal Arbitration Act (the "FAA"), stayed the pending state court proceedings, and ordered the case closed. 9 U.S.C. § 4.

Although the Appellees are the beneficiaries of the district court's ruling that compelled arbitration, they are appellants as to one issue: Whether this court has jurisdiction to entertain Appellants' appeal. This issue will be disposed of first, and consideration of the portions of the district court's order that the Appellants find wanting will follow.

We ultimately hold that, as a matter of law, the district court order compelling arbitration, which also stays the underlying state court proceedings and closes the case in federal court, is an immediately appealable, final decision under the ambit of 9 U.S.C. § 16(a)(3) of the FAA. As such, this court has jurisdiction to entertain the instant appeal. We also conclude that the district court's order should be affirmed.

I. FACTS AND PROCEEDINGS

Over the past several years, Appellants obtained consumer loans from Republic Finance, which included the purchase of credit life and credit disability insurance. Specifically, when Appellants entered into loan transactions with Republic Finance, Republic Finance sold Appellants disability life insurance to insure the credit against the risks of sickness and death. The Insurers wrote and issued the insurance policies that Republic Finance sold to Appellants.

At the loan closings, the borrowing Appellant and Republic Finance signed a document entitled "Arbitration Agreement" (the "Agreement") to which the Insurers were not signatories. Appellants do not contend that Republic Finance failed to prepare the Agreement in clear language and legible print, or that Republic Finance neglected to place the Agreement on a separate page, that is, apart from the loan transaction documents. Each Agreement contains the following language:

[A]ny claim, dispute or controversy between undersigned ... and lender (or the employees, agents or assigns of lender) arising from or relating to the loan or any prior extension of credit by lender to any of the undersigned, insurance written in connection herewith, ... and whether in tort, contract, breach of duty (including but not limited to) any alleged fiduciary, good faith, and fair dealing duties, including but not limited to the applicability of this arbitration agreement, and the validity of the entire agreement shall be resolved by binding arbitration before one arbitrator in accordance with the Federal Arbitration Act, the expedited procedures of the commercial arbitration rules of the American Arbitration Association, and this agreement.

. . . .

The parties agree that Lender is engaged in interstate commerce, and the transaction is governed by the Federal Arbitration Act, 9 U.S.C. Section 1-16.

. . . .

In the event either party files a suit of any kind in any court against the other, or if a counter or cross-claim is filed therein, the defendant or counter-defendant can have the suit stayed and the other party required to arbitrate under this agreement.

Directly above the date and signature lines, in bold, capital, readily legible letters, is the following language.

THE PARTIES UNDERSTAND THAT BY SIGNING THIS ARBITRATION AGREEMENT, THEY ARE LIMITING ANY RIGHT TO PUNITIVE DAMAGES AND GIVING UP THE RIGHT TO A TRIAL IN COURT, BOTH WITH AND WITHOUT A JURY.

Despite the clear language of the Agreements' provisions mandating arbitration under the FAA and the commercial rules of the American Arbitration Association ("AAA"), Appellants commenced a civil action against Appellees in the Circuit Court of Clay County, Mississippi. Appellants sought monetary damages for, among other alleged transgressions, fraudulent misrepresentation in connection with the loan transaction, conspiracy to "sell credit life, credit disability, property and/or collateral protection insurance ... that was unnecessary and at an exorbitant premium far in excess of the market rate," breach of implied covenants of good faith and fair dealing, breach of fiduciary duties, and allegations that the Insurers conspired with agents of Republic Finance to sell unnecessary insurance at inflated rates.

Appellees initiated independent actions in the United States District Court, Northern District of Mississippi, only seeking orders of the court to compel arbitration under the FAA, 9 U.S.C. § 1 et seq. and to stay the state court proceedings. After an appropriate analysis of the Appellants' demands and the Appellees' oppositions to them, the district court issued an order compelling arbitration in accordance with the Agreements, staying all related, state court proceedings, and closing the case. The district court determined that Appellants' claims implicated substantially interdependent and concerted misconduct by both the non-signatory Insurers and the signatory Lender. The district court also concluded that: (1) the McCarran-Ferguson Insurance Regulation Act, 15 U.S.C. §§ 1011-1015 (1999) (the "McCarran-Ferguson Act") did not reverse-preempt the FAA because Appellants failed to identify a Mississippi state law or statute that the FAA had invalidated, impaired, or superseded; (2) Appellees' petition to compel arbitration in the district court did not amount to a compulsory counterclaim under rule 13(a) of the Federal Rules of Civil Procedure (the "FRCP"), which would have required Appellees to file the motion to compel arbitration in state court, and that § 4 of the FAA plainly authorized a party against whom litigation has been initiated to commence a separate, original action in federal district court to enforce an arbitration agreement; and (3) Appellants did not proffer sufficient evidence to support a jury trial demand for resolution of the factual issues surrounding the adoption of the Agreements. Of particular importance in the instant dispute is the fact that, in addition to compelling arbitration and staying the pending state court proceedings, the district court ordered the case closed but did not dismiss the action. The final, substantive paragraph of the district court's order provides as follows "[T]his case is CLOSED." Appellants timely filed notices of appeal.

II. JURISDICTION

A District Court Order That Compels Arbitration, Stays the Underlying State Court Proceedings, and Closes the Case is an Immediately Appealable, Final Decision Within the Contemplation of § 16(a)(3) of the FAA.

Section 16(a)(3) of the FAA provides as follows: "An appeal may be taken from a final decision with respect to an arbitration that is subject to this title." 9 U.S.C. § 16(a)(3). That section preserves immediate appeal of any "`final decision' with respect to arbitration," regardless of whether the decision is favorable or hostile to arbitration. Id. The FAA does not, however, expressly define the term "final decision." Appellees argue that this court lacks appellate jurisdiction because the district court did not issue an immediately appealable "final decision." Specifically, Appellees maintain that because the district court's order compelled arbitration and "closed" the case instead of compelling arbitration and "dismissing" the case, this court lacks jurisdiction to hear the appeal of the ruling of the district court. Appellees cite Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000) for the proposition that "closing" a case neither ends the litigation on the merits nor terminates the district court's involvement in the matter, thereby precluding this court's appellate jurisdiction over the dispute. 531 U.S. at 85, 121 S.Ct. at 519. Conversely, Appellants also rely on Green Tree, but for the proposition that, in the instant dispute, "closing" a case is the functional equivalent of "dismissing" it. Appellants argue that by compelling arbitration and "closing" the case, the district court issued an immediately appealable, final decision under §...