Morga & Medlin Ins. Agency v. QBE Ins. Corp., 1:12cv0773 AWI DLB
| Decision Date | 27 June 2012 |
| Docket Number | 1:12cv0773 AWI DLB |
| Court | U.S. District Court — Eastern District of California |
| Parties | MORGA & MEDLIN INSURANCE AGENCY, Plaintiff, v. QBE INSURANCE CORPORATION, and DOES 1 to 100, inclusive, Defendants. |
REGARDING MOTION TO STAY
LITIGATION AND TO COMPEL
ARBITRATION
(Document 7)
Defendant QBE Insurance Corporation ("QBE") filed the instant motion to stay litigation and to compel arbitration on May 17, 2012. The motion was heard on June 22, 2012, before the Honorable Dennis L. Beck, United States Magistrate Judge. Kendall Harrison and Dustin Brown appeared telephonically on behalf of QBE. Richard Crossman appeared on behalf of Plaintiff Morga & Medlin Insurance Agency ("Morga & Medlin").
Morga & Medlin filed a breach of contract action against QBE and Does 1 to 100 on March 22, 2012, in Fresno County Superior Court. QBE removed the action to this Court on May 10, 2012, based on diversity jurisdiction.
On May 17, 2012, QBE answered the complaint and filed the instant motion for stay and to compel arbitration.1 On June 8, 2012, Morga & Medlin opposed the motion, and QBE replied on June 15, 2012.
The motion was referred to the undersigned pursuant to 28 U.S.C. § 636(b)(1) for Findings and Recommendations to the District Court.
On or about September 1, 2008, Morga & Medlin and QBE entered into a written "Agency Agreement." Complaint ¶ 7. Under the Agency Agreement, QBE granted Morga & Medlin authority to act as an agent for QBE to solicit, receive, accept, bind or endorse insurance coverage to the extent authorized by QBE's underwriting guidelines. Complaint ¶ 8. The Agency Agreement provided for Morga & Medlin to be compensated by commissions. Complaint ¶ 9.
The Agency Agreement contained an arbitration provision, which stated in relevant part:
If any dispute or disagreement shall arise in connection with any interpretation of this Agreement, its performance or nonperformance, the parties shall make every effort to meet and settle their dispute in good faith informally. If the parties cannot agree on a written settlement to the dispute within thirty (30) days after it arises, or within a longer period agreed upon by the parties, then the matter in controversy shall be settled by binding arbitration, in accordance with the rules of the American Arbitration Association, and judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction . . . .
Exhibit A to Complaint, Article VIII, p. 7. The Agency Agreement also provided that it would "be governed by and construed in accordance with the laws of the State of Wisconsin without giving effect to principle of conflicts of laws." Exhibit A to Complaint, Article XXII, p. 16.
On November 11, 2011, QBE gave Morga & Medlin written notice that the Agency Agreement would be terminated within 120 days, effective March 19, 2012. Complaint ¶¶ 13-14. On November 22, 2011, Morga & Medlin's counsel responded to the notice, arguing that the withdrawal of Morga & Medlin's agency authority during the 120-day notice period effectuatedan immediate termination in breach of the Agency Agreement and that Morga & Medlin was entitled to a $150,000 bonus. Declaration of Susan Stephen ("Stephen Dec.") ¶ 3 and Exhibit A. Morga & Medlin's counsel also stated that Morga & Medlin "could immediately file a lawsuit and seek substantial damages," but "hope[d] that the dispute [could] be resolved amicably within the next two weeks." Exhibit A to Stephen Dec.
On December 1, 2011, Susan Stephen, QBE's branch manager for Fresno, replied to the arguments raised in the letter from Morga & Medlin's counsel. Stephen Dec. ¶ 4 and Exhibit B. After receiving this letter, Morga & Medlin's counsel, Michael Renberg, asked to speak with QBE's in-house counsel. Declaration of Michael Renberg ("Renberg Dec.") ¶ 4. QBE complied with the request by having its in-house counsel, Brendan Malley, contact Mr. Renberg. Renberg Dec. ¶ 4. The two men spoke on or about December 12, 2011. Renberg Dec. ¶ 5.
The parties disagree about the substance of the conversation. Mr. Renberg declares:
On or about December 12, 2011, I had a brief telephone conversation with Mr. Malley. I advised Mr. Malley that statements in the notice of termination were in breach of the contract and that my client was entitled to a bonus due in January because the effective date of the termination was not until March 2012. [Mr.] Malley disagreed and simply asked that we send a courtesy copy of the demand for arbitration to his attention. There was no settlement offer from QBE and I believe that QBE did not engage in a good faith attempt to informally resolve the matter.
In contrast, Mr. Malley declares:
On or around December 12, 2011, I called and spoke with Mr. Renberg. During our phone conversation, I tried to discuss the merits of the dispute with Mr. Renberg, but he did not appear interested in doing so. Mr. Renberg had very little to say about the matter and did not make a settlement proposal. Mr. Renberg threatened to file a lawsuit and I told him that the relevant contract had an arbitration clause. I asked him to send me a courtesy copy of any arbitration demand he might make.
Declaration of Brendan J. Malley ("Malley Dec.") ¶¶ 3-6.
After the telephone conversation, Mr. Malley sent Mr. Renberg an e-mail, providing his contact information should Mr. Renberg "wish to further discuss and/or provide a courtesy copy of any arbitration demand." Exhibit A to Malley Dec. Mr. Malley did not receive any furtherphone calls or correspondence from Mr. Renberg before the lawsuit was filed on March 22, 2012. Malley Dec. ¶ 8. Mr. Renberg reportedly filed the lawsuit in state court because he did not believe the arbitration provision was enforceable. Renberg Dec. ¶ 6.
QBE moves to compel arbitration pursuant to the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq. and the Wisconsin Arbitration Act, Wis. Stat. §§ 788.01-788.18. QBE provides no basis to apply the Wisconsin Arbitration Act rules for arbitration, and not the FAA, in this action. Presumably, QBE believes that state law supplies the rules for arbitration based on a general choice of law provision in the Agency Agreement. However, both parties agree that the Agency Agreement falls within the scope of the FAA.
"When an agreement falls within the purview of the FAA, there is a strong default presumption . . . that the FAA, not state law, supplies the rules for arbitration." Johnson v. Gruma Corp., 614 F.3d 1062, 1066 (9th Cir. 2010); Fidelity Fed. Bank, FSB v. Durga Ma Corp., 386 F.3d 1306, 1311 (9th Cir. 2004); Sovak v. Chugai Pharm. Co., 280 F.3d 1266, 1269 (9th Cir. 2002). "A general choice of law clause will not defeat the strong presumption in favor of the FAA's applicability." Kim-C1, LLC v. Valent Biosciences Corp., 756 F.Supp.2d 1258 (E.D. Cal. 2010) (); Chloe Z Fishing Co., Inc. v. Odyssey Re (London) Ltd., 109 F.Supp.2d 1236, 1252–54 (S.D. Cal. 2000) (). Accordingly, the Court applies the FAA, not state law, rules for arbitration.
In relevant part, the FAA provides:
A party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition any United States district court which, save for such agreement, would have jurisdiction under Title 28, in a civil action or in admiralty of the subject matter of a suit arising out of thecontroversy between the parties, for an order directing that such arbitration proceed in the manner provided for in such agreement. . . .The 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. . . .
9 U.S.C. § 4.
The FAA creates "a body of federal substantive law of arbitrability." Moses H. Cone Mem. Hosp. v. Mercury Const. Corp., 460 U.S. 1, 24 (1983). Unless the agreement provides otherwise, all questions regarding interpretation of arbitration agreements are determined by federal standards. Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 445 (2006); Moses H. Cone Mem. Hosp., 460 U.S. at 22-24. Any question concerning arbitrability must be addressed with a healthy regard for the federal policy favoring arbitration. Simula, Inc. v. Autoliv, Inc., 175 F.3d 716, 719 (9th Cir. 1999).
"[A]rbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit." AT & T Techs., Inc. v. Commc'ns Workers of America, 475 U.S. 643, 648 (1986) (citations omitted); Three Valleys Mun. Water Dist. v. E.F. Hutton & Co., Inc., 925 F.2d 1136, 1139 (9th Cir. 1991). As with any contract, the parties' intentions control. Three Valleys Mun. Water Dist., 925 F.2d at 1139. However, the parties' intentions are generously construed as to issues of arbitrability. Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626 (1985).
The FAA "leaves no place for the exercise of discretion by a district court, but instead mandates that district courts shall direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed." Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985) (emphasis in original). The court's role is limited to determining: "(1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at issue." Chiron Corp. v. Ortho Diagnostic Systems, Inc., 207 F.3d 1126, 1130 (9th Cir. 2001). If both questions are answered in the...
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