Martinique Properties, LLC v. Certain Underwriters at Lloyd's London
| Decision Date | 15 October 2021 |
| Docket Number | 8:21-CV-209 |
| Parties | MARTINIQUE PROPERTIES, LLC, Plaintiff, v. CERTAIN UNDERWRITERS AT LLOYD'S LONDON Subscribing to Policy Number W1551E160301, Beazley Lloyd's Syndicate 2623, and Beazley Lloyd's Syndicate 623, Defendants. |
| Court | U.S. District Court — District of Nebraska |
David A. Houghton, Justin D. Eichmann, Houghton, Bradford Law Firm, Omaha, NE, for Plaintiff.
Gregory L. Mast, Stephen A. Kahn, Pro Hac Vice, Fields, Howell Law Firm, Atlanta, GA, John A. Svoboda, Evans, Dixon Law Firm, Omaha, NE, for Defendants.
Martinique Properties, LLC ("Martinique") sued Certain Underwriters at Lloyd's, London Subscribing to Policy Number W1551E160301, Beazley Lloyd's Syndicate 2623, and Beazley Lloyd's Syndicate 623 (hereinafter collectively referred to as "Defendants") seeking declaratory judgment and damages for breach of contract. Filing 1 at 28-29. Before the Court is Defendants' Motion to Dismiss for Failure to State a Claim. Filing 9. For the reasons stated herein, the Court grants Defendants' motion.
Martinique is the owner of the Martinique Apartments in Omaha, Nebraska. Filing 1 at 13. Defendants, who are foreign entities with their principal place of business in the United Kingdom, subscribed to Martinique's insurance policy, No. W1551E160301, which provides coverage for damages to the Martinique Apartments. Filing 1 at 13-14, 48-49, 131-32.1 The policy also includes a provision providing for an "Appraisal" when a disagreement arises over the value of the property or the amount of the loss. Filing 1 at 61. Under the appraisal provision, either party can make a written demand for an appraisal. Filing 1 at 61. Thereafter, each party selects an appraiser. Filing 1 at 61. In turn, these two appraisers select an "umpire." Filing 1 at 61. An agreement on the value of the property or the amount of the loss between two of the three individuals is binding on both parties. Filing 1 at 61. The provision also states that, even if there is an appraisal, Defendants "retain [the] right to deny the claim." Filing 1 at 61.
On May 10, 2016, the Martinique Apartments sustained hail and wind damage, which Martinique's insurance policy covered. Filing 1 at 14. After Martinique made a claim under its insurance policy, a dispute arose between Martinique and Defendants as to the amount owed under the insurance policy. Filing 1 at 15. Due to this disagreement, on September 17, 2019, Martinique demanded an appraisal pursuant to the appraisal provision in the insurance policy. Filing 1 at 15. Martinique appointed Ryan Kinneberg as its appraiser, Defendants appointed Randy Ison, and both Kinneberg and Ison appointed Nicholas Pontillo as umpire. Filing 1 at 15.
On or about June 8, 2020, Pontillo and Ison agreed to an appraisal award. Filing 1 at 15. Pontillo sent Ison and Kinneberg a June 8, 2020, letter recognizing the award.2 Filing 1 at 119-20. The letter stated, "We are in agreement that the cost to repair hail damage to the Martinique Properties buildings in Omaha, Nebraska is $1,688,367.01 (RCV) in addition to $374,258.35 in code-associated costs." Filing 1 at 119. The bottom of the letter included signature blocks for Pontillo, Kinneberg, and Ison. Filing 1 at 119-20. Martinique claims that when it received the letter, Pontillo was the only person who had signed it. Filing 22 at 5; Filing 23-4 at 1-2. The version of the letter Defendants filed with this Court in their notice of removal has both Pontillo's and Ison's signatures, but the letter filed by Martinique with its brief in opposition to Defendants' motion to dismiss contains only Pontillo's signature. Filing 1 at 119-20; Filing 23-4 at 1-2. The parties appear to agree that Kinneberg refused to approve the award or sign the letter. Filing 1 at 16. On June 20, 2020, Defendants sent Martinique a Statement of Loss purportedly pursuant to the appraisal award. Filing 1 at 4. Later, Martinique demanded that Defendants provide reimbursement for repairs in the amount of $1,475,000.00. Filing 1 at 17. According to Martinique, Defendants have paid $1,007,260.16, but refuse to pay any additional money. Filing 1 at 17.
On May 5, 2021, Martinique sued Defendants in Nebraska state court. Filing 1 at 13. Martinique's Complaint sought declaratory judgment finding that the appraisal award is invalid and damages for breach of contract. Filing 1 at 18-19. Defendants removed the action to this Court on June 4, 2021. Filing 1. On June 11, 2021, Defendants moved to dismiss Martinique's complaint for failure to state a claim and for failing to timely challenge the appraisal award. Filing 9.
A complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). In order to satisfy this requirement, a plaintiff must plead "enough facts to state a claim to relief that is plausible on its face."
Corrado v. Life Inv'rs Ins. Co. of Am. , 804 F.3d 915, 917 (8th Cir. 2015) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Barton v. Taber , 820 F.3d 958, 964 (8th Cir. 2016) (quoting Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ).
In analyzing a motion to dismiss, the Court must "accept as true all factual allegations in the complaint and draw all reasonable inferences in favor of the nonmoving party, but [is] not bound to accept as true ‘[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements’ or legal conclusions couched as factual allegations." McDonough v. Anoka Cnty. , 799 F.3d 931, 945 (8th Cir. 2015) (citations omitted) (quoting Iqbal , 556 U.S. at 678, 129 S.Ct. 1937 ). "When considering a Rule 12(b)(6) motion, the court generally must ignore materials outside the pleadings, but it may consider some materials that are part of the public record or do not contradict the complaint, as well as materials that are necessarily embraced by the pleadings." Ashford v. Douglas Cnty. , 880 F.3d 990, 992 (8th Cir. 2018) (quoting Smithrud v. City of St. Paul , 746 F.3d 391, 395 (8th Cir. 2014) ).
Both of Defendants' arguments for dismissal rely upon the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq. , applying in this case. According to Defendants, whenever a written agreement to arbitrate commercial matters is made between two parties, one of which is not a United States citizen, the arbitration is enforced through the Convention on the Recognition and Enforcement of Arbitral Awards. Filing 12 at 10-12. See Convention on the Recognition and Enforcement of Arbitral Awards, June 10, 1958, 21 U.S.T. 2517, T.I.A.S. No. 6997 ; see also Smith/Enron Cogeneration Ltd. P'ship, Inc. v. Smith Cogeneration Int'l, Inc. , 198 F.3d 88, 92 (2d Cir. 1999) ; 9 U.S.C. § 203. The Convention is a "multilateral treaty that addresses international arbitration." GE Energy Power Conversion France SAS, Corp. v. Outokumpu Stainless USA, LLC , ––– U.S. ––––, 140 S. Ct. 1637, 1644, 207 L.Ed.2d 1 (2020) (citing 21 U.S.T. 2517, T.I.A.S. No. 6997 ). It requires signatories, such as the United States, to recognize and enforce arbitral awards of other signatories. 21 U.S.T. 2517, T.I.A.S. No. 6997 at Art. III. Chapter 2 of the FAA implements the Convention in the United States. See 9 U.S.C. §§ 201 - 08. Federal courts have jurisdiction over actions governed by the Convention. See id. at § 203. The FAA also contains a residual clause providing that Chapter 1 of the FAA applies to actions brought under the Convention if there is no conflict with the Convention or its implementing legislation. See id. at § 208.
The Defendants contend that the Convention, and thus the FAA through the residual clause in § 208, governs because the appraisal agreement in this case provides for arbitration of a commercial matter, and at least one party is not a citizen of the United States. Filing 12 at 10-12. An arbitration falls under the convention if (1) there is a written agreement to arbitrate, (2) the arbitration takes place in a signatory to the Convention, (3) the arbitration arises out of "a commercial relationship," and (4) one party to the agreement is not a United States Citizen. See Freudensprung v. Offshore Tech. Servs., Inc. , 379 F.3d 327, 339 (5th Cir. 2004) (listing elements); see also 9 U.S.C. § 202. The Court agrees with Defendants that the appraisal arose out of a commercial relationship and that Defendants are not citizens of the United States.
However, more analysis is required as to whether the appraisal proceeding in this case constituted arbitration under the FAA, such that the appraisal clause in the insurance policy constitutes a written agreement to arbitrate.
The law in the Eighth Circuit is unsettled on the issue of whether an appraisal constitutes arbitration under the FAA. If an appraisal in this instance does not constitute arbitration, the Convention and the FAA do not apply. The Court concludes federal common law should be used to interpret the word "arbitration," the appraisal process in this case constitutes "arbitration," and the FAA and the Convention therefore apply.
The FAA applies to "[a] written provision in ... a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction." 9 U.S.C. § 2. However, the law does not define what constitutes an arbitration. Further, the United States Courts of Appeals are split on whether to use state law or federal common law to define this term. Compare Hartford Lloyd's Ins. Co. v....
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