VCW, Inc v. Mutual Risks Management
| Decision Date | 22 May 2001 |
| Citation | 46 S.W.3d 118 |
| Parties | (Mo.App. S.D. 2001) VCW, Inc., and V. Cheryl Womack, Respondents v. Mutual Risk Management, Ltd., et al., Defendants, Commonwealth Risk Services, Inc., Legion Insurance Company, and Legion Financial Corporation, Appellants. WD58662 0 |
| Court | Missouri Court of Appeals |
Appeal From: Circuit Court of Platte County, Hon. Owens Lee Hull, Jr.
Counsel for Appellant: Leonard B. Rose, Jed D. Reeg and Amy N. Loth
Counsel for Respondent: Kelly C. Tobin and Anthony L. Gosserand
Opinion Summary: Commonwealth Risk Services, Inc., Legion Insurance Company (LIC) and Legion Financial Corporation appeal from the trial court's denial of their motion to stay a lawsuit that had been filed against them by the respondents, Cheryl Womack and VCW, Inc. (VCW), pending the outcome of a state arbitration proceeding. The appellants claim that the trial court erred in denying their motion to stay the underlying litigation until the pending arbitration proceeding concluded.
Division Three holds: This Court first addresses the respondents' motion to dismiss, taken with the case, in which they contend that the trial court's order denying the appellants' motion to stay is not appealable under section 435.440 of Missouri's Uniform Arbitration Act (UAA), depriving this Court of appellate jurisdiction. Nothing in the language of section 435.440 provides for an appeal from a denial of a motion to stay proceedings pending arbitration; thus, this statute provides no jurisdictional basis for the appellants' appeal. However, 9 U.S.C. section 16 does provide for an appeal from "an order . . . refusing a stay of any action under section 3 of this title . . . ." Furthermore, an action under the FAA can be brought in a state court, and the state court, pursuant to the Supremacy Clause, is obliged to apply the FAA in cases involving interstate commerce, and cannot apply state law, substantive or procedural, which is in derogation thereof. Thus, this court, under the FAA, has jurisdiction to hear this appeal, and the respondents' motion to dismiss is overruled.
In their sole point on appeal, the appellants claim that the trial court erred in denying their motion to stay the underlying litigation until such time as the arbitration proceeding currently pending between the parties was concluded. As to the arbitration proceeding on which the appellants were seeking a stay, there is no dispute that it was completed and an award was entered on June 3, 2000, which was amended on June 20, 2000. Thus, the propriety of the court's denial of the appellants' request for a stay pending the outcome of that arbitration proceeding is moot, inasmuch as the appellants specified in their motion that they were seeking a stay only until the arbitration proceeding then pending was concluded, which event has already occurred.
Commonwealth Risk Services, Inc., Legion Insurance Company (LIC), and Legion Financial Corporation appeal from the trial court's denial of their motion to stay a lawsuit that was filed against them by the respondents, Cheryl Womack and VCW, Inc. (VCW),1 pending the outcome of a state arbitration proceeding. In their petition for damages, the respondents alleged fraud and negligence based upon misrepresentations made by the appellants as part of the marketing of their insurance products to the respondents.
In their sole point on appeal, the appellants claim that the trial court erred in denying their motion to stay the underlying litigation, until the pending arbitration proceeding that had been filed had concluded, because 9 U.S.C. section 3 requires both federal and state court actions to be stayed during the pendency of an arbitration proceeding in that the issues raised by the respondents in their underlying lawsuit against the appellants were required to be arbitrated pursuant to the arbitration provision of the management agreement entered into by the parties.
We dismiss for mootness.
The respondents market occupational accident, workers' compensation, and auto-physical damage insurance to approximately 8,000 members of the National Association of Independent Truckers (NAIT). For their services, they receive a commission based on a percentage of the insurance premiums paid by the NAIT members on the insurance policies purchased.
In October of 1993, the respondents were introduced to the appellants, who made a presentation to the respondents concerning a "rent-a-captive" insurance program, which they had developed. The appellants explained to the respondents that this program allowed a company or group of insured participants to establish and operate an insurance subsidiary without capitalization requirements, administrative costs, or the inherent legal problems normally associated with the establishment and operation of an insurance subsidiary. On November 1, 1994, as a result of the appellants' presentation, the respondents agreed to market insurance products of the appellants, and, to consummate the deal, they signed a management agreement, a claims agreement, and a shareholders agreement. The management agreement, signed by LIC and VCW, contained an arbitration provision, as did the claims agreement, signed by LIC and Preferred Administrative Services, Inc. (PAS).2 The shareholders agreement contained no such provision. The appellants then began marketing the respondents' insurance policies to members of NAIT.
Sometime around November 1, 1995, disputes began to arise between the parties, concerning, inter alia, responsibility for purchasing reinsurance and the amount of the letters of credit which the respondents were required to maintain as part of their various agreements with the appellants. As a result of these disputes, Womack, VCW, and PAS filed a demand for arbitration on November 12, 1996, against LIC, Mutual Holding Bermuda, Ltd. (MHB), Mutual Risk Management, Ltd. (MRM), Mutual Indemnity, Ltd., Mutual Indemnity (Bermuda), Ltd. (MIB), Mutual Finance (Bermuda), Ltd. (MFB), and Mutual Indemnity (US). In their demand they alleged, inter alia, that LIC and its affiliates had breached both the management agreement and the claims agreement. In connection with the arbitration proceeding, the parties conducted extensive discovery. Sometime in early 1999, the arbitration panel docketed the week of October 4, 1999, for a final hearing. Womack, VCW, and PAS presented their case to the arbitration panel first. LIC began its case later that same week, but was not able to conclude by week's end. Accordingly, the hearing was continued to the week of January 17, 2000. On December 8, 1999, Womack and VCW filed their petition for damages against MRM, Commonwealth Risk Services, Inc., LIC, Legion Financial Corp., MHB, MFB, and MIB in the Circuit Court of Platte County, Missouri. On January 17, 2000, the arbitration proceeding was resumed. The hearing concluded without the arbitration panel issuing an award.
On January 31, 2000, the appellants responded to the respondents' petition by filing a "Motion to Dismiss and Stay Proceedings Pending the Outcome of Arbitration." Pursuant to their motion, MRM, MFB, MHB, and MIB asked the court to dismiss them as parties for a lack of personal jurisdiction. In addition, MHB asked the court to dismiss it based on lack of subject matter jurisdiction over any dispute arising between it and VCW. The remaining party defendants asked that the lawsuit be stayed pursuant to 9 U.S.C. section 3 because the outcome of the pending arbitration proceeding would affect the outcome of the lawsuit that had been filed. On April 5, 2000, the respondents filed suggestions in opposition to the appellants' motion, contending that the arbitration proceeding had effectively concluded; that the claims in the case before the trial court were not the same as those raised in arbitration and were not subject to the arbitration, such that there would be no collateral estoppel and res judicata implications; and that in any event, the appellants had waived their right to arbitrate the matters raised in the lawsuit by refusing to address them in arbitration.
A hearing was held on the appellants' motion before the Honorable Owens Lee Hull, Jr., on May 5, 2000, during which the appellants advised the court that the arbitration proceeding had been submitted and a ruling was expected within 60 days. On May 17, 2000, before the arbitration panel had issued its final decision, the circuit court issued its order dismissing MRM, MFB, MHB, and MIB for lack of personal jurisdiction and denying the appellants' motion to stay.
This appeal follows.
Before we address the merits of the appellants' claim of error, we first must address the respondents' motion to dismiss, which was taken with the case and in which they allege that the trial court's order denying their motion to stay is not an appealable order or judgment as provided in section 435.440,3 governing appeals from proceedings under Missouri's Uniform Arbitration Act (UAA), sections 435.350 -- 435.470, depriving us of appellate jurisdiction.
The appellants contend that we do have jurisdiction to decide this appeal, citing section 435.440 and 9 U.S.C. section 16(a)(1)(A) of the Federal Arbitration Act (FAA). Section 435.440 provides, in pertinent part:
1. An appeal may be taken from:
(1) An order denying an application to compel arbitration made under section 435.355;
(2) An order granting an application to stay arbitration made under subsection 2 of section 435.355[.]
Although conceding that this statute does not expressly provide for an appeal from the denial of a motion to stay the underlying litigation pending the outcome of arbitration, the appellants argue that their motion for a stay is the functional equivalent of an order denying a motion to compel arbitration, which is appealable under section 435.440.1(1). The respondents contend, however, that because section 435.440...
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