Ggis Ins. Serv. Inc. v. Lincoln Gen. Ins. Co.

• Decision Date: 24 February 2011
• Docket Number: Civil Action No. 1:10–CV–932.
• Citation: 773 F.Supp.2d 490
• Parties: GGIS INSURANCE SERVICES, INC., d/b/a Guardian General Insurance Services, and Richard Acunto, Petitionersv.LINCOLN GENERAL INSURANCE COMPANY, Respondent.Lincoln General Insurance Company, Petitionerv.GGIS Insurance Services, Inc., and Richard Acunto, Respondents.
• Court: U.S. District Court — Middle District of Pennsylvania

773 F.Supp.2d 490

GGIS INSURANCE SERVICES, INC., d/b/a Guardian General Insurance Services, and Richard Acunto, Petitioners

v.LINCOLN GENERAL INSURANCE COMPANY, Respondent.Lincoln General Insurance Company, Petitioner

v.GGIS Insurance Services, Inc., and Richard Acunto, Respondents.

Civil Action No. 1:10–CV–932.

United States District Court, M.D. Pennsylvania.

Feb. 24, 2011.

Joseph M. Pastore, III, Fox Rothschild LLP, Stamford, CT, Steven K. Ludwig Fox Rothschild LLP Philadelphia, PA, for Petitioners.Albert B. Miller, Lincoln General Insurance Company, York, PA, for Respondent.

ORDER

CHRISTOPHER C. CONNER, District Judge.

AND NOW, this 24th day of February, 2011, upon consideration of the Report and Recommendation of United States Magistrate Judge William T. Prince (Doc. 31), recommending that Lincoln's motion for summary judgment (Doc. 19) be granted, that GGIS and Acunto's motion for summary judgment (Doc. 16) be denied, and that the petition to vacate the arbitration award (Doc. 1) be denied, and, following an independent review of the record and noting that it appearing that neither party has objected to the magistrate judge's report and recommendation, and that there is no clear error on the face of the record, ¹ see Nara v. Frank, 488 F.3d 187, 194 (3d Cir.2007) (explaining that “failing to timely object to [a report and recommendation] in a civil proceeding may result in forfeiture of de novo review at the district court level”), it is hereby ORDERED that:

1. The Report and Recommendation of Magistrate Judge Prince (Doc. 31) is ADOPTED in its entirety.

2. Lincoln's motion for summary judgment (Doc. 19) is GRANTED.

3. GGIS and Acunto's motion for summary judgment (Doc. 16) is DENIED.

4. The petition to vacate the arbitration award (Doc. 1) is DENIED.

5. The Clerk of Court is directed to CLOSE this case.

REPORT AND RECOMMENDATION

WILLIAM T. PRINCE, United States Magistrate Judge.

Pursuant to an Order entered on November 9, 2010 (Doc. 30), Honorable Judge Christopher C. Conner referred the pending motions for summary judgment (Docs. 16, 19) to the undersigned Magistrate Judge for the purpose of preparing a Report and Recommendation.

I. Background

This case revolves around a written agreement between GGIS Insurance Services, Inc. (GGIS) and Lincoln General Insurance Company (Lincoln) and a personal guaranty of the agreement by Richard Acunto, CEO of GGIS. The central questions are whether the guaranty, which incorporated the GGIS—Lincoln agreement, reached the provision in the agreement requiring mandatory arbitration for all related disputes, and if so, whether Lincoln waived its right to demand arbitration by initiating litigation related to the agreement.

(A) Facts of the case

The material facts of this case are undisputed, and as related here, are drawn from the parties' submissions to the Court.

(1) The parties and their contracts

GGIS is a California corporation with its principal place of business in California. (Doc. 20, ¶ 1; Doc. 23, ¶ 1.) Richard Acunto is an adult individual and a resident of California. (Doc. 20, ¶ 2; Doc. 23, ¶ 2.) At all relevant times, Acunto was the principal owner, president, and CEO of GGIS. (Doc. 20, ¶ 3; Doc. 23, ¶ 3.) Lincoln is a Pennsylvania corporation with its principal place of business in Pennsylvania. (Doc. 20, ¶ 4; Doc. 23, ¶ 4.)

In April 2005, GGIS and Lincoln entered into a written agreement, effective April 19, 2005, entitled the Program Manager Agreement (PMA), under which GGIS agreed to become a general agent for Lincoln. (Doc. 18, ¶ 1; Doc. 25, ¶ 1.) Under the agreement, GGIS acted as Lincoln's fiduciary in managing insurance brokers selling Lincoln's insurance policies. (Doc. 18, ¶ 1; Doc. 25, ¶ 1.) Acunto, as CEO of GGIS, executed the PMA on GGIS's behalf on April 27, 2005; Scott Butler, a VP of Lincoln, executed it on April 29. (Doc. 18, ¶¶ 2–3; Doc. 25, ¶¶ 2–3.)

Acunto separately executed a “Manager's Personal Guaranty” in his personal capacity on April 27, 2005. (Doc. 18, ¶ 4; Doc. 25, ¶ 4.) It is disputed whether the Guaranty was “annexed” to the PMA (Doc. 18, ¶ 4) or “incorporated into and made a part of” the PMA (Doc. 25, ¶ 4.)

(2) Pertinent excerpts from the PMA and the Guaranty

Article XIX of the PMA contains the agreement's provision for arbitration:

A. Submission to Arbitration. In the event of any dispute between the Company [Lincoln] and the Manager [GGIS] with reference to the interpretation, application, formation, enforcement or validity of this Agreement, or their rights with respect to any transaction involved, whether such dispute arises before or after termination of this Agreement, such dispute, upon written request of either party, shall be submitted to the decision of a board of arbitration .... Notwithstanding the generality of the foregoing, the Company's right ... to obtain any other legally available injunctive remedies shall not be limited by the submission of any dispute to arbitration. The board of arbitration will have complete jurisdiction over the entire matter in dispute, including any question as to its arbitrability.

....

J. Procedural Law. The Pennsylvania Arbitration Act shall govern the conduct of arbitrations pursuant to this Agreement.

(Doc. 18–3, at 20–21.) The following Article XX provides that “[t]he rights of the parties to this Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania without regard to Pennsylvania rules on conflict of laws.” ( Id. at 21.)

The Guaranty, which has a header identifying it as Endorsement G to the PMA, states:

NOW THEREFORE, to induce LGIC [Lincoln] to enter into the Agreement, a copy of which is attached hereto and incorporated herein as if fully set forth, the undersigned [Acunto in his individual capacity] ... with intent to be legally and personally bound does hereby agree:

1. The recitals heretofore set forth are incorporated herein as if fully set forth.

(Doc. 18–3, at 42.)

On April 24, 2007, Lincoln sent GGIS a letter terminating the PMA, but GGIS remained Lincoln's agent for the purpose of servicing existing business until its expiration. (Doc. 21, ¶ 11; Doc. 23, ¶ 11.)

(3) Subsequent court actions

On April 27, 2007, Lincoln filed a civil action in California state court in the West District of Los Angeles County, following Lincoln's “concerns over GGIS's treatment of escrowed funds held by GGIS in trust.” (Doc. 18, ¶ 8; Doc. 25, ¶ 8; Doc. 20, ¶ 12; Doc. 23, ¶ 12.) The claims in that action arose out of the PMA, upon which Lincoln later based its arbitration claims. (Doc. 18, ¶ 8; Doc. 25, ¶ 8.) On May 1, 2007, Lincoln filed an ex parte application for an order to show cause why a preliminary injunction and temporary restraining order should not be issued against GGIS; the court denied the application the same day. (Doc. 18–3, at 46–47.) Lincoln voluntarily dismissed the action on July 27, 2007, based on the parties' intention to negotiate a resolution. (Doc. 18, ¶ 8; Doc. 25, ¶ 8.)

On July 30, 2008, Lincoln demanded arbitration against both GGIS and Acunto in his individual capacity, seeking resolution of matters related to an escrow account and monetary claims arising from contingent commissions allegedly due to Lincoln under the terms of the PMA. (Doc. 18, ¶ 14; Doc. 25, ¶ 14; Doc. 18–3, at 77.) An arbitration panel was assembled. On June 26, 2009, an organizational meeting took place at Lincoln's offices. An attorney for GGIS, Michael Stoller, participated via teleconference, making a “special appearance” to protest to the panel that arbitration was the improper forum for the dispute in light of the litigation filed in California. (Doc. 18, ¶ 15; Doc. 25, ¶ 15.) On September 11, 2009, the arbitration panel informed all parties that “the Panel currently considers that [the claim asserted by Lincoln in this arbitration against Mr. Acunto in his individual capacity] falls within the purview of the current arbitration and that the presently constituted Panel is the appropriate body to resolve all disputes pertaining to this claim.” (Doc. 18, ¶ 16; Doc. 25, ¶ 16; Arbitral Panel's Order of Feb. 27, 2010, Doc. 18–3, at 89, 92.) The panel also confirmed a hearing date scheduled for March 1, 2010. (Doc. 18, ¶ 16; Doc. 25, ¶ 16; Doc. 18–3, at 92.)

By letters dated February 24, 25, and 26, 2010, GGIS and Acunto requested an extension of time for the commencement of arbitration proceedings. (Doc. 18, ¶ 17; Doc. 25, ¶ 17.) They explained that the arbitration should not proceed against Acunto because he had never consented to the arbitration and that any arbitration or award would violate his due-process rights. (Doc. 18, ¶ 17; Doc. 25, ¶ 17.) They further stated to the panel that Lincoln had already pursued its claims in California state court, arguing that Lincoln had thereby waived its right to enforce arbitration against GGIS. (Doc. 18, ¶ 17; Doc. 25, ¶ 17.)

On February 27, 2010, the panel issued an order denying GGIS and Acunto's request for an extension. (Doc. 18, ¶ 18; Doc. 25, ¶ 18.) The panel held that Article XIX of the PMA provided the panel with “complete jurisdiction over the entire matter in dispute, including any question as to arbitrability,” concluding that the parties “wanted the arbitration panel, NOT the Courts, to determine issues pertaining to jurisdiction and arbitrability.” (Doc. 18, ¶ 18; Doc. 25, ¶ 18; Doc. 18–3, at 95 (quoting PMA Art. XIX).) That same day, counsel for GGIS and Acunto sent an email to the panel stating: “We believe that you do not have authority over Mr. Acunto and [GGIS]. We will again present this law to you at the hearing.” (Doc. 18, ¶ 19; Doc. 25, ¶ 19.)

The hearing took place on March 1, 2010. Counsel for GGIS and Acunto argued to the panel that the panel did not have jurisdiction over Acunto and requested a reconsideration of the February 27 order. (Doc. 18, ¶ 20; Doc. 25, ¶ 20.) The panel denied the request. (Doc. 18, ¶ 20; Doc. 25, ¶ 20; Final Arbitration Award, ...