Luna Music, LLC v. Exec. Ins. Servs.
| Decision Date | 01 June 2022 |
| Docket Number | Civil Action 2020-0002 |
| Parties | LUNA MUSIC, LLC d/b/a AQUA SOUNDS STUDIO, INC., Plaintiff, v. EXECUTIVE INSURANCE SERVICES, INC. and CERTAIN UNDERWRITERS AT LLOYD'S OF LONDON, Defendants. |
| Court | U.S. District Court — Virgin Islands |
Lee J Rohn, Esq., St. Croix, U.S.V.I. For Plaintiff
Douglas L. Capdeville, Esq., St. Croix, U.S.V.I. For Defendant Executive Insurance Services, Inc.
Gaylin Vogel, Esq., Kevin F. D'Amour, Esq., St. Thomas, U.S.V.I Gregory Lee Mast, Esq., Atlanta, GA For Defendant Certain Underwriters at Lloyd's of London
THIS MATTER comes before the Court on the “Emergency Motion to Remand” (“Motion to Remand”) (Dkt. No 7) filed by Plaintiff Luna Music, LLC d/b/a/ Aqua Sounds Studio, Inc. (“Plaintiff”); Defendant Certain Underwriters at Lloyd's of London's (“Defendant Underwriters”) Opposition thereto (Dkt. No. 12); and Plaintiff's Reply (Dkt. No. 15). Additionally, before the Court is Plaintiff's Objection and Appeal (Dkt. No. 16) of Magistrate Judge George W. Cannon, Jr.'s Memorandum Opinion and Order (Dkt. No. 14) granting Defendant Underwriters' “Motion to Compel Arbitration and Stay Proceedings Pending Arbitration” (“Motion to Compel Arbitration”) (Dkt. No. 3); Defendant Underwriters' Response to Plaintiff's Objection and Appeal (Dkt. No. 19); and Plaintiff's Reply (Dkt. No. 20). Finally, before the Court is Defendant Underwriters' “Motion to Dismiss Plaintiff's Complaint or, in the Alternative, Motion for More Definite Statement” (“Motion to Dismiss”) (Dkt. No. 2). For the reasons discussed below, the Court will deny Plaintiff's Motion to Remand, affirm the Magistrate Judge's Opinion and Order granting Defendant Underwriters' Motion to Compel Arbitration, and deny as moot Defendant Underwriters' Motion to Dismiss.
Plaintiff filed its Complaint in the Superior Court of the Virgin Islands on September 20, 2019. (Dkt. No. 1-1). The Complaint alleges that in 2008, Plaintiff went to Defendant Executive Insurance Services, Inc. (“Defendant Executive”)-which was acting as Defendant Underwriters' agent-to insure its business located at 22/23 Prince Street on St. Croix. Id. at ¶¶ 18-19. Plaintiff alleges that thereafter, Defendant Underwriters provided Plaintiff with business insurance coverage. Id. at ¶¶ 20-21. After Hurricane Maria caused damage in September 2017, Plaintiff alleges that Defendants committed misconduct with regard to Plaintiff's rights under the insurance policy, including hiring improper and incompetent adjusters, misinterpreting the insurance policy in order to withhold payment, devaluing Plaintiff's claim, failing to pay Plaintiff in accordance with the insurance policy, and misrepresenting the nature and extent of the insurance coverage. Id. at ¶¶ 27-52.
Defendant Underwriters removed the case to this Court on January 10, 2020, pursuant to 9 U.S.C. §§ 203 and 205. (Dkt. No. 1 at 1). Defendant Underwriters states that the action “is removable to this Court under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards . . ., implemented by the United States Congress through 9 U.S.C. §§ 201-208 of the Federal Arbitration Act.” Id. at 3. Plaintiff then filed the instant Motion to Remand. (Dkt. No. 7). While Plaintiff's Motion to Remand was pending, Magistrate Judge Cannon granted Defendant Underwriters' Motion to Compel Arbitration and stayed the case pending the completion of arbitration. (Dkt. No. 14). Plaintiff objected to and appealed the Magistrate Judge's decision. (Dkt. No. 16).
The Federal Arbitration Act (“FAA”) “creates a body of federal substantive law establishing and governing the duty to honor agreements to arbitrate disputes.” Century Indem. Co. v. Certain Underwriters at Lloyd's, subscribing to Retrocessional Agreement Nos. 950548, 950549, and 950646, 584 F.3d 513, 522 (3d Cir. 2009). The FAA was designed to counteract “the traditional judicial hostility” toward enforcing arbitration agreements and paved the way toward today's “strong federal policy in favor of arbitration.” In re Pharmacy Ben. Managers Antitrust Litig., 700 F.3d 109, 116 (3d Cir. 2012) (quoting Alexander v. Anthony Intern., L.P., 341 F.3d 256, 263 (3d Cir. 2003)) (internal quotation marks omitted). Where a party petitions to enforce an arbitration agreement, “[t]he court shall hear the parties, and upon being satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue, the court shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement.” Sandvik AB v. Advent Int'l Corp., 220 F.3d 99, 104 (3d Cir. 2000) (quoting 9 U.S.C. § 4) (internal quotation marks omitted).
“An arbitration provision in an international commercial agreement is governed by the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards.” Std. Bent Glass Corp. v. Glassrobots Oy, 333 F.3d 440, 448-49 (3d Cir. 2003). In 1970, the United States acceded to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. 38 (“the Convention”).[1] Scherk v. Alberto-Culver Co., 417 U.S. 506, 520 n.15 (1974). Thereafter, “Congress passed Chapter 2 of the United States Arbitration Act, 9 U.S.C. [§] 201 et seq., in order to implement the Convention.” Id. See also Ario v. Underwriting Members of Syndicate 53 at Lloyds for 1998 Year of Acct., 618 F.3d 277, 288 (3d Cir. 2010), as amended, (Dec. 7, 2010) ( that Chapter 1 of the FAA, 9 U.S.C. §§ 1-16, is the “domestic FAA” and Chapter 2, 9 U.S.C. §§ 201-208, is “the Convention's implementing legislation”).[2] “[T]he principal purpose for acceding to the Convention was to ‘encourage the recognition and enforcement of commercial arbitration agreements in international contracts and to unify the standards by which agreements to arbitrate are observed and arbitral awards are enforced in the signatory countries.'” Admart AG v. Stephen & Mary Birch Found., Inc., 457 F.3d 302, 307 (3d Cir. 2006), as amended on reh 'g, (Sept. 28, 2006) (quoting Scherk, 417 U.S. at 520 n.15); accord Suter v. Munich Reinsurance Co., 223 F.3d 150, 155 (3d Cir. 2000). “The domestic FAA applies to actions brought under the [Convention] to the extent that the two are not in conflict.” Century Indem. Co., 584 F.3d at 523 (citing 9 U.S.C. § 208 and China Minmetals Materials Imp. & Exp. Co., Ltd v. Chi Mei Corp., 334 F.3d 274, 280 (3d Cir. 2003)).
With regard to removal, 9 U.S.C. § 205 provides in pertinent part:
Where the subject matter of an action or proceeding pending in a State court relates to an arbitration agreement or award falling under the Convention, the defendant or the defendants may, at any time before the trial thereof, remove such action or proceeding to the district court of the United States for the district and division embracing the place where the action or proceeding is pending. . . .
See also GE Energy Power Conversion France SAS, Corp. v. Outokumpu Stainless USA, LLC, 140 S.Ct. 1637, 1642 (2020) ().[3]
The McCarran - Ferguson Act of 1945, 15 U.S.C. §§ 1011 -1015, “was enacted in response to [the Supreme Court's] decision in United States v. South-Eastern Underwriters Assn., 322 U.S. 533, 64 S.Ct. 1162, 88 L.Ed. 1440 (1944)” where the Court held that “an insurance company that conducted a substantial part of its business across state lines was engaged in interstate commerce and thereby was subject to the antitrust laws.” U.S. Dep't of Treasury v. Fabe, 508 U.S. 491, 499 (1993). The McCarran - Ferguson Act was intended to “restore the supremacy of the States in the realm of insurance regulation.” Id. at 500; see also Group Life & Health Ins. Co. v. Royal Drug Co., 440 U.S. 205, 218 n.18 (1979) ( ).
With those issues in mind, in enacting the McCarran - Ferguson Act, Congress “declare[d] that the continued regulation and taxation by the several States of the business of insurance is in the public interest, and that silence on the part of the Congress shall not be construed to impose any barrier to the regulation or taxation of such business by the several States.” 15 U.S.C. § 1011. Further, 15 U.S.C. § 1012(b) provides in pertinent part that “[n]o Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance, or which imposes a fee or tax upon such business, unless such Act specifically relates to the business of insurance.” Thus, the Act creates a system of “reverse preemption”:
Ordinarily, a federal law supersedes any inconsistent state law. The first clause of [15 U.S.C. § 1012(b)] . . . reverses this by imposing what is, in effect, a clear-statement rule, a rule that state laws enacted “for the...
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