Alex Silverman

A Mississippi federal court granted a motion to compel arbitration of a claim for reimbursement of medical expenses from the defendant, a company that provides health care sharing plan alternatives to those of Christian faith. The plaintiff had signed a membership agreement stating that he would abide by the defendant’s guidelines, under which members, such as the plaintiff, were required to exhaust an “appeals” process for challenging bill-sharing decisions before resorting to any sort of legal procedures against the defendant. If the appeals process did not resolve the dispute, a “biblically-based mediation and arbitration” clause in the guidelines stated that any and all disputes arising out of the membership agreement shall be settled by “biblically-based mediation.” If that mediation fails, the member may submit the dispute to an independent and objective arbitrator for binding arbitration but otherwise waives his or her right to file a lawsuit.

Addressing the defendant’s motion, the court first held that the provision above constituted a valid arbitration agreement and that the subject dispute fell within the scope thereof. The court noted that the plaintiff had indeed agreed that he “will bring no suit, legal claim or demand of any sort … in the civil court system, with the sole exception of enforcing any favorable arbitration award or mediated agreement.” As such, the court explained that arbitration was required unless a federal statute or policy rendered the plaintiff’s claim non-arbitrable. Because the plaintiff failed to identify any such statute or policy, the court granted the defendant’s motion to compel arbitration.

Pettey v. Medi Share, No. 2:19-cv-00059 (S.D. Miss. Oct. 1, 2019).

The defendants moved to compel arbitration of a complex dispute concerning the parties’ investment in medical marijuana companies. The plaintiff claimed that the defendants breached a non-compete agreement and fiduciary obligations by taking virtually all the business belonging to the parties’ mutual holding company and transferring it to a competing company in which the plaintiff held a substantially smaller interest. The holding company’s operating agreement contained a broad arbitration clause requiring that all disputes, claims, rights, and obligations between the parties arising out of the agreement be resolved by final and binding arbitration. The plaintiff brought suit in New York state court seeking to compensate the holding company for its loss of business. The defendants argued that the plaintiff’s claims were barred by the statute of limitations and laches, and moved to dismiss and/or compel arbitration under the operating agreement.

While agreeing that the defendants had potentially strong affirmative defenses, including a statute of limitations and laches, the court held that the merits of these claims and defenses must be decided by an arbitrator. Although New York law allows courts to rule on “gateway” issues, such as a statute of limitations and laches defenses, the court held that the Federal Arbitration Act (FAA) applied here because the matter involved interstate commerce. Under the FAA, the court explained, threshold questions of these kinds are presumptively reserved for the arbitrator. The arbitration clause in this case also expressly incorporated the American Arbitration Association rules. New York courts generally defer arbitrability questions to the arbitrators in such cases. The court also held that the defendants did not waive their right to move to compel arbitration. Because the defendants insisted throughout the case that it belonged in arbitration, the court held that the plaintiff could not now claim to be prejudiced by the defendants’ request for that relief.

Broumand v. Abbot, No. 655954/2018 (N.Y. Sup. Ct. N.Y. Cty. Oct. 4, 2019).

The plaintiff’s property sustained fire damage, for which the plaintiff sought coverage under an insurance policy issued by the defendants. After a dispute arose, the plaintiff sued the defendants in Mississippi state court. The defendants, foreign insurance companies, removed the action to Mississippi federal court pursuant to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. The defendants then moved to compel arbitration based on an arbitration clause in the insurance policy, which stated that the parties would arbitrate any dispute if they failed to agree on any aspect of the policy. The plaintiff opposed and moved to remand the case to state court, citing language in the policy’s cover note conferring U.S. courts with “exclusive jurisdiction” over any dispute under the policy. The sole issue was whether the plaintiff’s claim was arbitrable.

Applying a four-factor test used in the Fifth Circuit to analyze arbitrability under the Convention, the court found the first factor – whether there is a written agreement to arbitration – to be decisive here. The court rejected the plaintiff’s argument that the policy’s arbitration and exclusive jurisdiction clauses conflicted, finding that any such conflict was resolved by the policy’s “service-of-suit” provision. That provision addressed service of process in the event of litigation but also expressly provided that it “will not be read to conflict with or override the obligations of the parties to arbitrate their disputes as provided for in any Arbitration clause within this Policy” and that it is solely “intended as an aid to compelling arbitration or enforcing such arbitral award, not as an alternative to such Arbitration clause for resolving disputes arising out of this contract of insurance.” Finding that this language clearly demonstrated the parties’ intent to arbitrate, and that the three other factors in the four-factor test were undisputed, the court granted the defendants’ motion to compel arbitration and denied the plaintiff’s motion to remand.

First United Methodist Church of Corinth, Inc. v. Certain Underwriters at Lloyds Subscribing to Policy No. PG197716, No. 1:19-cv-00120 (N.D. Miss. Sept. 4, 2019).