AESC Ins. Grp. of New Mexico v. Aspen Ins. UK, Ltd.

• Decision Date: 06 August 2012
• Docket Number: No. 12-cv-0017 SMV/CG,12-cv-0017 SMV/CG
• Court: U.S. District Court — District of New Mexico
• Parties: AESC INS. GROUP OF NEW MEXICO, Plaintiff, v. ASPEN INS. UK, LTD., Defendant.

AESC INS. GROUP OF NEW MEXICO, Plaintiff,

v.ASPEN INS. UK, LTD., Defendant.

No. 12-cv-0017 SMV/CG

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW MEXICO

Dated: August 6, 2012

ORDER DENYING MOTION TO COMPEL ARBITRATION

AND DENYING SUMMARY JUDGMENT

THIS MATTER is before the Court on Motion of Aspen Insurance UK Limited to Compel Arbitration or, in the Alternative, to Dismiss AESC's Third and Fourth Causes of Action (Each Sounding in Bad Faith), and AESC's Fifth and Sixth Causes of Action (Each Alleging Violations of the Unfair Trade Practices Act) [Doc. 12] and its accompanying Memorandum of Points and Authorities in Support [Doc. 13] (collectively, "Motion"), filed on February 29, 2012. Plaintiff responded in opposition on March 21, 2012. Response of AESC-NM Insurance Group of New Mexico to the [Motion] [Doc. 20] ("Response"). On April 11, 2012, Defendant replied.¹ Reply Memorandum of Points of Aspen Insurance UK, Limited In Support of its [Motion] [Doc. 28] ("Reply"). With leave of Court, Plaintiff filed a surreply on May 30, 2012. Surreply of AESC-NM Insurance Group of New Mexico in Opposition to the [Motion] [Doc. 34] ("Surreply").² Defendant has failed to meet its burden to show that there is no genuine issue ofmaterial fact and that the documents containing the arbitration clause constitute a contract between the parties. Additionally, because genuine issues of material fact exist regarding the nature of the parties' negotiations and contractual relationship, summary judgment is not warranted on claims 3, 4, 5, or 6. Therefore, the Court, being otherwise fully advised in the premises, FINDS that the Motion is not well-taken and should be DENIED.

I. BACKGROUND

Plaintiff is a New Mexican "self-insurance group" as defined in New Mexico's Group Self-Insurance Act at NMSA 1978, § 52-6-2(B). Amended Complaint [Doc. 9] at 2. Defendant is a British "reinsurer." Motion [Doc. 12] at 1. The parties seem to agree that they made or attempted to make an agreement whereby Defendant would provide some type of insurance, reinsurance, or excess insurance service to Plaintiff. See Declaration of Michael Clifton [Doc. 13-1] ("First Clifton Affidavit") at 4; Affidavit of R. Steven Clark [Doc. 22] ("Clark Affidavit") at 2. The parties also agree that two intermediaries were involved in their negotiations: Montlake Holdings ("Montlake") and BMS Group ("BMS"). See First Clifton Affidavit [Doc. 13-1] at 4-6; Clark Affidavit [Doc. 22] at 2-3. However, the parties disagree about the role of BMS. First Clifton Affidavit [Doc. 13-1] at 4 (BMS was Plaintiff's agent); Clark Affidavit [Doc. 22] at 3 (BMS was Defendant's agent). Most importantly, they disagree about circumstances and substance of their negotiations and about the terms of their agreement. First Clifton Affidavit [Doc. 13-1] at 4-7 (describing negotiations); Clark Affidavit [Doc. 22] at 2-3 (describing negotiations). In fact, they even dispute which documents constitute their contract(s). First Clifton Affidavit [Doc. 13-1] at 4-6 (contracts are at [Docs. 13-2 through13-7]); Clark Affidavit [Doc. 22] at 2 (contracts are at [Docs. 9-1 and 9-2]). Plaintiff has presented a set of documents that it contends constitute the agreements, [Docs. 9-1 and 9-2], but Defendant has a completely different set of documents that it contends are the agreements, [Docs. 13-2 through 13-7]. Each party challenges the meaning and legal significance of the other's documents. Declaration of Michael Clifton in Support of Reply to Aspen Insurance UK, Limited [Doc. 28-1] ("Second Clifton Affidavit") at 2 (Plaintiff's purported contracts were presented to affiant by a representative of BMS as nothing more than an administrative step required by the governing authorities in New Mexico that were not intended to replace the actual contract terms being negotiated); Clark Affidavit [Doc. 22] at 3 (Defendant's purported contracts were presented to affiant after catastrophic losses had already occurred and were immediately rejected by affiant).

Defendant moves the Court to compel Plaintiff to arbitrate, under D.N.M.LR-Civ. 7. In the alternative, Defendant asks the Court to dismiss counts 3 and 4 (both for bad faith denial of payment) and counts 5 and 6 (both related to the New Mexico Unfair Practices Act, NMSA 1978, § 57-12-1 through 57-12-26 ("UPA")) under Fed. R. Civ. P. 12(b)(6). Motion [Doc. 9]. In briefing the Motion, both parties submitted evidence beyond the Amended Complaint and requested that the Motion be converted to one for partial summary judgment. Response [Doc. 20] at 9; Reply [Doc. 28] at 10.

II. MOTION TO COMPEL ARBITRATION

Courts, rather than arbitrators, determine the arbitrability of disputes. First Options of Chicago, Inc. v. Kaplan, 541 U.S. 938, 944 (1995); accord Carpenters Dist. Council of Denverand Vicinity v. Brady Corp., 513 F.2d, 1, 3 (10th Cir. 1975); accord NMSA 1978, § 44-7A-7(b).³ State law governs whether contracts—and their arbitration clauses—are valid and enforceable.⁴ First Options, 541 U.S. at 944. In New Mexico, arbitration is a "highly favored" form of dispute resolution because "[i]t promotes both judicial efficiency and conservation of resources by all parties." Santa Fe Techs., Inc. v. Argus Networks, Inc., 2002 NMCA 30, ¶ 51, 131 N.M. 772, 42 P.3d 1221. The party seeking to enforce the arbitration agreement bears the burden of showing its existence. Corum v. Roswell Senior Living, LLC, 2010 NMCA 105, ¶¶ 3, 16, 149 N.M. 287, 248 P.3d 329, cert. denied, 2010 NMCERT 10, 149 N.M. 64, 243 P.3d 1146; see DeArmond v. Halliburton Energy Servs., Inc., 2003 NMCA 148, ¶ 9, 134 N.M. 630, 81 P.3d 573 (party relying on a contract has the burden to prove it is legally valid and enforceable). Moreover, every inference is drawn in favor of the party challenging the existence of the arbitration agreement. Sisneros v. Citadel Braod Co., 2006 NMCA 102, ¶ 12, 140 N.M. 266, 142 P.3d 34. Therefore, "[t]he presumption in favor of arbitration disappears" when the existence of a valid arbitration agreement is disputed. DeArmond, 2003 NMCA 148, ¶ 8 (internal quotation marks omitted).

If a court cannot or does not make findings of fact regarding the existence of an arbitration agreement and, instead, decides its existence as a matter of law, it should apply the summary judgment standard. DeArmond, 2003 NMCA 148, ¶ 4. In other words, "[o]nly when there is no genuine issue of fact concerning the formation of an arbitration agreement should the court decide the existence of the agreement as a matter of law." Id. (internal quotation marks omitted).

For an enforceable contract in New Mexico, offer, acceptance, consideration, and mutual assent are all required. Garcia v. Middle Rio Grande Conservancy Dist., 1996 NMSC 29, ¶ 9, 121 N.M. 728, 918 P.2d 7. "Acceptance must be clear, positive, and unambiguous." DeArmond, 2003 NMCA 148, ¶ 11 (internal quotation marks omitted). New Mexico law provides for a "contextual approach" to contract interpretation. Mark V, Inc. v. Mellekas, 114 N.M. 778, 781, 845 P.2d 1232, 1235 (1993). Thus, courts are not restricted to the four corners of the document and, instead, may consider extrinsic evidence when evaluating whether there is ambiguity in a contract. C.R Anthony Co. v. Loretto Mall Partners, 112 N.M. 504, 508-09, 817 P.2d 238, 242-43 (1991). If there is ambiguity, that ambiguity must be resolved by the fact finder:

An ambiguity exists in an agreement when the parties' expressions of mutual assent lack clarity. The question whether an agreement contains an ambiguity is a matter of law to be decided by the trial court. The court may consider collateral evidence of the circumstances surrounding the execution of the agreement in determining whether the language of the agreement is unclear. If the evidence presented is so plain that no reasonable person could hold any way but one, then the court may interpret the meaning as a matter of law. If the court determines that the contract is reasonably and fairly susceptible of different constructions, an ambiguity exists. At that point, if the proffered evidence of surrounding facts and circumstances is in dispute, turns on witness credibility, or is susceptible of conflicting inferences, the meaning must be resolved by the appropriate fact finder.

Mark V, 114 N.M. at 781, 845 P.2d at 1235 (internal citations omitted).

Here, considering the extrinsic evidence submitted by the parties, the Court finds that each of the three sets of documents on the record—AESC's "Policies," [Docs. 9-1 and 9-2], and Aspen's "Placing Slips" and "I&Ls", [Docs. 13-2 through 13-7]—is ambiguous. The proffered evidence is susceptible to conflicting inferences, and therefore, on the record as it stands at this time, the Court is unable to determine the contours of Plaintiff and Defendant's agreement. Certainly, there are genuine issues of fact concerning whether Plaintiff accepted or assented to the arbitration clauses, or to anything in the documents containing the arbitration clauses. Accordingly, the Court will DENY Defendant's motion to compel arbitration.

II. The Court converts the motion to dismiss to a motion for summary judgment.

Courts are required to convert a motion to dismiss to one for summary judgment where matters outside the pleadings are presented and considered by the court. Fed. R. Civ. P. 12(d). Generally, if a court converts a motion to dismiss into one for summary judgment, it notifies the parties of the conversion and allows them extra time to present all material pertinent to the motion. See id. Advanced notice of the conversion and extra time to submit materials prevents prejudice to the plaintiff. See Nichols v. United States, 796 F.2d 361, 364 (10th Cir. 1986). However, advanced notice of the conversion and extra time is not always necessary. The Tenth Circuit Court of Appeals repeatedly has held that a plaintiff who submits its own evidence in response to a Rule 12(b)(6) motion is not prejudiced by the conversion...