Kulpa v. Om Financial Life Ins. Co., Civil Action No. 1:07cv1136HSO-JMR.

• Decision Date: 28 April 2008
• Docket Number: Civil Action No. 1:07cv1136HSO-JMR.
• Citation: 558 F.Supp.2d 676
• Parties: Janus KULPA, M.D. and Medical Care Center, P.L.L.C., Plaintiffs v. OM FINANCIAL LIFE INSURANCE COMPANY f/k/a Fidelity & Guaranty Life Insurance Co., et al, Defendants.
• Court: U.S. District Court — Southern District of Mississippi

558 F.Supp.2d 676

Janus KULPA, M.D. and Medical Care Center, P.L.L.C., Plaintiffs v. OM FINANCIAL LIFE INSURANCE COMPANY f/k/a Fidelity & Guaranty Life Insurance Co., et al, Defendants.

Civil Action No. 1:07cv1136HSO-JMR.

United States District Court, S.D. Mississippi, Southern Division.

April 28, 2008.

Ben F. Galloway, III, Owen & Galloway, PLLC, Gulfport, MS, for Plaintiffs.

Kelly D. Simpkins, Joseph Spencer Young, Jr., Wells, Marble & Hurst, PLLC, Jackson, MS, Lara Ashley Coleman, Richard D. Gamblin, Barfield & Associates, Madison, MS, for Defendants.

ORDER AND REASONS GRANTING MOTIONS OF DEFENDANTS OM FINANCIAL LIFE INSURANCE COMPANY AND PROFESSIONAL BUSINESS SERVICES, LLC, TO COMPEL ARBITRATION, AND GRANTING DEFENDANT PROFESSIONAL BUSINESS SERVICES, LLC, MOTION TO STAY PROCEEDINGS

HALIL SULEYMAN OZERDEN, District Judge.

BEFORE THE COURT is the Motion [21] of Defendant OM Financial Life Insurance Company ("OM Financial"), to Compel Arbitration of Plaintiffs' Claims, filed in the above captioned cause on or about December 31, 2007. Plaintiffs Janus Kulpa, M.D., and Medical Care Center, P.L.L.C., filed a Response [32] on or about February 6, 2008. Defendant OM Financial filed a Reply [39] on or about February 19, 2008.

Also before the Court is the Motion [27] of Defendant Professional Benefit Company, LLC, d/b/a Professional Business Services, LLC ("PBS"), to Compel Arbitration of Plaintiffs' Claims, and its Motion [30] to Stay Further Proceedings, filed in the above captioned cause on or about January 22, 2008, and January 23, 2008, respectively. Defendants Vance Syphers ("Syphers") and Wealth Preservation Group, LLC ("Wealth Preservation Group") filed a Joinder [29] on or about January 22, 2008. Plaintiffs filed a Response [34] to PBS' Motions and a Response [36] to Sypher and Wealth Preservation Group's Joinder on or about February 6, 2008. Defendants PBS, Syphers, and Wealth Preservation Group filed a Reply [40] on or about February 22, 2008.

After careful consideration of the parties' submissions, the record in this case, and the relevant legal authorities, and for the reasons discussed below, the Court finds that the Motions to Compel Arbitration should be granted and that the Motion to Stay Further Proceedings should be granted.

I. FACTUAL AND PROCEDURAL HISTORY

Plaintiffs assert that Defendants Agilis Benefit Services of Texas ("Agilis") and PBS developed a prototype life insurance plan to be marketed to medical practitioners throughout the country. Defendants Syphers and Wealth Preservation Group in turn marketed this plan to Plaintiffs sometime in 2006. See PL's Compl. ¶¶ 12-13; see also Mem. in Supp. of PBS' Mot. to Compel at p. 2. This plan, known as the "ExTRA" program, was an allegedly patent-pending technique that offered an asset-protected, financed executive benefit for key executives through a license fee arrangement. See Mem. in Supp. of PBS' Mot. to Compel at p. 2.

There is no serious dispute that in December 2006, Plaintiff Medical Care Center entered into an Intellectual Property License Agreement with PBS wherein Plaintiff was granted rights to the "Ex-TRA" program. See id. at p. 3; see also PBS Intellectual Property License Agreement, attached as Ex. "F" to OM Financial's Mot. to Compel and as Ex. "A" to PBS' Mot. to Compel. Section 10.4 of this Intellectual Property License Agreement states that:

10.4 Arbitration. All disputes arising between the parties under this Agreement will be settled by arbitration conducted in the English language in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The parties will cooperate with each other in causing the arbitration to be held in as efficient and expeditious a manner as practicable. Any arbitration proceeding instituted under this Agreement will be brought in a mutually agreeable neutral territory. Any award rendered by the arbitrators will be final and binding upon the parties hereto. Judgment upon the award may be entered in any court of record of competent jurisdiction. Each party will pay its own expenses of arbitration and the expenses of the arbitrators will be final and binding upon the parties hereto. Judgment upon the award may be entered in any court of record of competent jurisdiction. Each party will pay its own expenses of arbitration and the expenses of the arbitrators will be equally shared unless the arbitrators assess as part of their award all or any part of the arbitration expenses of one party (including reasonable attorneys' fees) against the other party. Each party irrevocably and unconditionally consents to the jurisdiction of any such proceeding and waives any objection that it may have to personal jurisdiction of the laying of venue of any such proceeding.

PBS Intellectual Property License Agreement, attached as Ex. "F" to OM Financial's Mot. to Compel and as Ex. "A" to PBS' Mot. to Compel.

Plaintiffs maintain that Defendants Agilis, PBS, Syphers, and Wealth Preservation Group next advised Medical Care Center, as part of the wealth protection/tax sheltering plan, to form a limited liability company, which was to be wholly funded through an insurance policy on the life of Plaintiff Kulpa. See id. ¶ 14-18. As a result, Plaintiffs established Toros Holdings, LLC ("Toros Holdings"), in December 2006. See id. ¶ 18. The Toros Holdings Operating Agreement was adopted by its two members, Dr. Kulpa, the managing, non-preferred member, and Executive Benefit Group, LP, the non-managing, preferred member. It states in relevant part as follows:

15.2 Arbitration

Any controversy, claim or dispute of whatever nature arising between the parties, including but not limited to those arising out of or relating to this Agreement or the construction, interpretation, performance, breach, termination, enforceability or validity of this Agreement or the arbitration provisions contained in this Agreement, whether the claim existed before or arises on or after the date of this Agreement, including the determination of the scope of this Agreement to arbitrate, which is not settled through mediation under Section 15.1 must be determined by arbitration in accordance with the Commercial Arbitration Rules of the American Association and its Supplementary Procedures for Large, Complex Disputes.

Toros Holdings Operating Agreement, attached as Ex. "E" to OM Financial's Mot. to Compel and as Ex. "B" to PBS' Mot. to Compel.

Plaintiffs claim that, in an effort to fund the plan, Defendants Syphers, Wealth Preservation Group, Agilis and PBS acted as agents for OM Financial and promoted certain types and amounts of insurance. See id. ¶ 16. On or about December 12, 2006, OM Financial issued a life insurance policy identified as No. L0778436 ("the Policy") to Toros Holdings on the life of Kulpa. See id. ¶ 18. The Policy contains an Arbitration Clause Endorsement stating that:

ANY CONTROVERSY ARISING UNDER THIS POLICY, OR ANY AMENDMENTS TO OR BREACH OF THIS POLICY, WILL BE DETERMINED AND SETTLED EXCLUSIVELY BY FINAL AND BINDING ARBITRATION HELD IN YOUR COUNTY OF RESIDENCE UNLESS ANOTHER LOCATION IS MUTUALLY AGREED UPON BY BOTH PARTIES, IN ACCORDING WITH THE

ARBITRATION RULES AND PROCEDURES OF JAMS/ENDISPUTE OR ITS SUCCESSOR. ARBITRATION PROCEEDINGS SHALL COMMENCE WITHIN A FIXED PERIOD OF TIME FOLLOWING THE FIRST NOTIFICATION OF ONE PARTY BY THE OTHER OF THEIR ELECTION TO ARBITRATE A DISPUTE REGARDING THE POLICY. THE ARBITRATORS WILL BE SELECTED FROM JAMS/ENDISPUTE'S PANEL OF RETIRED JUDGES. ALL ARBITRATION PROCEEDINGS SHALL BE PAID BY US, WITH THE EXCEPTION OF THE COST OF REPRESENTATION OF THE POLICY OWNER. SHOULD THE ARBITRATOR FIND THAT THE DISPUTE IS WITHOUT SUBSTANTIAL JUSTIFICATION, THE ARBITRATOR SHALL HAVE THE AUTHORITY TO ORDER THAT THE COST OF THE ARBITRATION PROCEEDINGS BE PAID BY THE POLICY OWNER. ANY AWARD RENDERED THROUGH ARBITRATION WILL BE FINAL AND BINDING ON EACH AND ALL PARTIES INVOLVED, AND JUDGMENT MAY BE ENTERED THEREON IN ANY COURT OF COMPETENT JURISDICTION.

OM Financial Insurance Policy, attached as Ex. "C" to OM Financial's Mot. to Compel.

The OM Financial application for life insurance also contains an "Important Notice" and "Acknowledgment of Arbitration Agreement," which Plaintiff Kulpa signed. It states:

Important Notice About the Policy of Insurance for Which You Have Applied

THIS DOCUMENT AFFECTS YOUR LEGAL RIGHTS

Read the following information carefully.

1. The policy for which you have applied includes a binding arbitration agreement.

2. The arbitration agreement requires that any dispute related to this policy must be resolved by arbitration and not a court of law.

3. The results of the arbitration are final and binding on you and the insurance company.

4. In an arbitration, one or more arbitrators, who are independent, neutral decision makers, render a decision after hearing the positions of the parties.

5. When you accept this insurance policy, you agree to resolve any dispute related to the policy by binding arbitration instead of a trial in court, including a trial by jury.

6. Binding arbitration generally takes the place of resolving disputes by a judge and jury.

7. Should you need additional information regarding the binding arbitration provision in the policy, you may contact our toll free assistance line for F & G Life at (888)573-8797; and for Americom Life & Annuity at (866)746-2624.

Acknowledgment of Arbitration Agreement

I have read this statement. I understand that I am voluntarily surrendering my right to have any dispute between the insurance company and myself resolved in court. This means I am waiving my right to a trial by jury.

I understand that upon receipt of the policy, I should read the arbitration clause contained in the policy and that I have the right to reject this policy within five (5) days of the date of delivery if I do not want to accept the requirement for arbitration.

I understand that this same type of insurance may...