Nat'l Freight, Inc. v. Consol. Container Co.

• Decision Date: 26 January 2015
• Docket Number: CIVIL ACTION NO. 1:14-CV-03429-AT
• Citation: 166 F.Supp.3d 1320
• Parties: National Freight, Inc., Plaintiff, v. Consolidated Container Company, LP, et al., Defendants.
• Court: U.S. District Court — Northern District of Georgia

166 F.Supp.3d 1320

National Freight, Inc., Plaintiff,

v.Consolidated Container Company, LP, et al., Defendants.

CIVIL ACTION NO. 1:14-CV-03429-AT

United States District Court, N.D. Georgia, Atlanta Division.

Signed January 26, 2015

J. Stephen Berry, James Randolph Evans, Dentons U.S., LLP, Robin A. Besaw, McKenna Long & Aldridge, LLP, Atlanta, GA, for Plaintiff.

Jackson Anthony Dial, Frederick Newman Sager, Jr., Michael Alan Holcomb, Richard H. Hill, II, Jackson Anthony Dial, Weinberg Wheeler Hudgins Gunn & Dial, LLC, Atlanta, GA, for Defendants.

ORDER

Amy Totenberg, United States District Judge

At its heart, this declaratory judgment action is about indemnity. Plaintiff National Freight, Inc. (“NFI”) and Defendant Consolidated Container Company, LP (“CCC”) were defendants in a tort action in Florida. CCC's insurers, Defendants American Home Assurance Company and AIG Assurance Company (together, “Insurer Defendants”), paid for CCC to defend and settle that action. Insurer Defendants are now parties to a pending arbitration in which they seek contractual indemnification against NFI for the money they spent doing so. Plaintiff seeks multiple declarations about who owes what to whom, as well as who has the ability to collect any such money. At this stage of litigation, however, the sole issue before the Court is whether any or all of these issues should be arbitrated. The Court finds that they should be, and therefore GRANTS Defendants' respective Motions to Compel Arbitration [Docs. 16, 20].

I. Factual Background

Plaintiff NFI is a trucking company. Defendant CCC is a container company. The relationship between the two is governed by the Consolidated Container Company Motor Carrier Transportation Agreement (the “Transportation Agreement” or “Agreement”). (Doc. 1–1) The “nature” of that agreement is that CCC tenders “shipments of goods,” i.e., containers, to NFI, and NFI renders “transportation services for such shipments.” (Id. ¶ 1.)

The Transportation Agreement comprised other provisions that are relevant here. One required NFI to indemnify CCC “from any and all liability resulting from any claims, demands, or judgments resulting from” injury to persons “arising from, or as a consequence of” NFI's performance under the Agreement. (Id. ¶ 12.) A subsequent provision creates an exception to this indemnity for “claims, loss, damage, or expense ... attributable solely to the negligence ... of CCC, its employees or agents.” (Id. ¶ 14.) Finally, the Transportation Agreement also provides that “[a]ny dispute arising out of this Agreement shall be submitted to the American Arbitration Association under its rules then enforced.” (Id. ¶ 15.) The Agreement was executed in October 2004. (Id. ¶ 5.)

In June 2007, CCC tendered a container, and NFI rendered shipment. (Compl. ¶¶ 18–20.) The load did not fill the container, so, before the CCC container was hitched to an NFI tractor, a CCC “agent/employee” installed two “load bars” to secure the load. (Id. ¶ 19.) The container was transported, unhitched, and moved around the destination facility. (Id. ¶¶ 20–21.) When Anthony Hurge, an employee at the destination facility, opened the door to unload the container, one of the load bars fell forward out of the container and struck him in the head. (Id. ¶ 21–22.)

Mr. Hurge and his kin sued NFI and CCC in Orange County, Florida (the “Hurge Action”). (Id. ¶ 23–24.) The Hurges alleged, among other things, negligence on the part of both NFI and CCC. (Id. ¶¶ 25–26.) At trial, NFI obtained a directed verdict in its favor, at which point CCC settled the case.

Prior to the trial in the Hurge Action, CCC demanded that NFI provide it indemnification pursuant to the Transportation Agreement. (Id. ¶ 34.) CCC never followed up by seeking contractual indemnification from NFI, but, subsequent to the filing of the original complaint in this action, its insurers did—via a demand for arbitration. Those insurers, the Insurer Defendants, were added as defendants in Plaintiff's Amended Complaint. (Doc. 8.)

Plaintiff seeks the following declarations:

• Count 1 : That CCC's indemnity claim arising from the Hurge Action is not subject to the arbitration clause in the Transportation Agreement. (Id. ¶¶ 38–42.)

• Count 2 : That CCC is not entitled to indemnification for its sole negligence. (Id. ¶¶ 43–46.)

• Count 3 : That CCC is not entitled to indemnification for acts that did not arise out of NFI's performance under the Transportation Agreement. (Id. ¶¶ 47–54.)

• Count 5 : That Insurer Defendants' subrogation clauses in their respective contracts with CCC do not provide them with standing to bring any direct action against NFI. (Id. ¶¶ 60–64.)

• Count 6 : That Insurer Defendants' subrogation clauses in their respective contracts with CCC do not provide them with standing to force NFI to arbitration. (Id. ¶¶ 65–70.)

In Count 4, Plaintiff seeks common law indemnity from CCC for amounts NFI spent in defending the Hurge Action, (id. ¶¶ 55–59), and in Count 7, Plaintiff seeks to preliminarily enjoin Insurer Defendants from proceeding with the ongoing arbitration.¹ (Id. ¶¶ 71–78.)

II. Legal Standard

Defendants have asked the Court to compel arbitration under Section 3 of the FAA. (Docs. 16–1 at 1, 20–1 at 1.) As a starting place, the Court is “mindful of the Supreme Court's instruction that “arbitration is simply a matter of contract.' ” Dasher v. RBC Bank (USA), 745 F.3d 1111, 1116 (11th Cir.2014), cert. denied, ––– U.S. ––––, 135 S.Ct. 144, 190 L.Ed.2d 231 (2014) (citing First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 943, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995) ). As a result, gateway issues of arbitrability—including “whether [an arbitration] agreement covers a particular controversy”—are typically for a court to decide. Martinez v. Carnival Corp., 744 F.3d 1240, 1246 (11th Cir.2014) (internal quotation and citation omitted).

However, a court may determine that parties agreed to arbitrate “the very issue of arbitrability where there is clear and unmistakable evidence that they did so.” Id. For example, “when parties incorporate the rules of the [American Arbitration] Association into their contract, they ‘clearly and unmistakably agree[ ] that the arbitrator should decide whether the arbitration clause [applies].’ ” U.S. Nutraceuticals, LLC v. Cyanotech Corp., 769 F.3d 1308, 1311 (11th Cir.2014) (quoting Terminix Int'l Co. v. Palmer Ranch Ltd. P'ship, 432 F.3d 1327, 1332 (11th Cir.2005) ).

III. Discussion

As described above, CCC has a contract with Plaintiff whereas Insurer Defendants do not. Based on this significant difference, the motions to compel are properly treated separately.

A. Claims against CCC

CCC argues that all four of NFI's claims against it should either be compelled to arbitration or dismissed on the merits. With regard to the declarations sought by NFI (Counts 1–3), CCC contends that the Transportation Agreement evidences the parties' “clear and unmistakable” agreement to arbitrate the issue of arbitrability. (Doc. 16–1 at 8.) As a backup argument, CCC asserts that the Court should determine the dispute is arbitrable and then compel arbitration. (Id. at 10.) With regard to the common law indemnity claim in Count 4, CCC urges the Court to dismiss it with prejudice because it fails to state a claim. (Id. at 16.) Alternatively, CCC asserts that the Court should compel arbitration on this claim as well because it “arises out of” the Transportation Agreement and is therefore covered by the arbitration provision. (Id. at 22.)

NFI responds by pointing out the many ways in which the events giving rise to both CCC's potential indemnity claim and NFI's indemnity claim do not, in fact, arise out of the Transportation Agreement. (Doc. 19 at 5–20.) NFI's arguments, however, require the Court to make the preliminary determination that it, and not an arbitrator, should decide the arbitrability of NFI's claims.

The Court will not do so, because Terminix and its progeny require the Court to compel arbitration of all claims between NFI and CCC. NFI and CCC contracted to submit “[a]ny dispute arising out of” the Transportation Agreement to the American Arbitration Association (“AAA”) under its rules. (Doc. 1–1 ¶ 15.) AAA Rule 7(a) dictates that an arbitrator has the “power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope , or validity of the arbitration agreement or to the arbitrability of any claim or counterclaim.” Am. Arbitration Ass'n, Commercial Arbitration Rules, Rule 7(a), https://www.adr.org/aaa/faces/?doc=ADRSTG_004130 (emphasis added). Both Terminix and Nutraceuticals decided the same issue based on the same AAA rule² and almost exactly the same arbitration clause language and held that “[w]hen the parties incorporated into [their] contract the rules of the [American Arbitration] Association, they clearly and unmistakably contracted to submit questions of arbitrability to an arbitrator.” Nutraceuticals, 769 F.3d at 1311 ; see also Terminix, 432 F.3d at 1332 ; Regal Lager, Inc. v. The Baby Club on Am., Inc., No. 1:06–CV–0962–JEC, 2006 WL 3388435, at *4 (N.D.Ga. Nov. 21, 2006) (holding that arbitrator must determine whether arbitration clause should be enforced because contract incorporated AAA rules). One of those question—the “substantive” issue of arbitrability—is “whether a particular dispute falls within the scope of an arbitration clause.” Klay v. United Healthgroup, Inc., 376 F.3d 1092, 1109 (11th Cir.2004).

Accordingly, the parties have clearly and unmistakably agreed to let an arbitrator decide the scope of the arbitration agreement. As the arbitrator may find the Agreement covers all claims made in Counts 1–4, the Court has “no business weighing the merits” of any of those claims. AT & T Technologies, Inc. v. Commc'ns Workers of Am., 475 U.S. 643, 650, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986) (quoting United Steelworkers of Am. v. Am. Mfg. Co., 363 U.S. 564, 568, 80 S.Ct. 1343, 4 L.Ed.2d 1403 (1960) ). Defenda...