A federal court heard a title company and its escrow agent’s motion to reconsider its order granting the company’s motion to compel arbitration, but not the agent’s motion to compel arbitration because the agent was not a party to the policy itself.
The case is Rosa DiTucci, et al., v. Christopher Ashby, et al., (U.S. District Court for the District of Utah, No. 2:19-cv-277-TC-JCB).
On March 1, 2021, the court issued an order granting in part and denying in part the motion to compel arbitration filed by First American Title Insurance Co. and Kirsten Parkin. The court held that First American had the right to compel arbitration but Parkin, a First American employee, did not. In the order, the court found that the plaintiffs were bound by an arbitration clause set forth in the title policy that each plaintiff purchased from First American In connection with their purchase of interests in a property in Indiana. Parkin worked on each plaintiff’s title policy, though she was not a party to the policy itself. She and First American relied on the policy’s’ arbitration clause to assert their respective rights to compel the plaintiffs to arbitrate.
The court then asked the parties to file supplemental briefs addressing whether the court should stay claims against Parkin while the plaintiffs arbitrated their claims against First American.
The First American defendants filed a supplemental brief as well as a motion to reconsider the March 2021. It reasserted its belief that the court should find that Parkin, as well as First American, had a right to compel arbitration. Alternatively, they asked the court to stay the plaintiffs’ litigation of claims against Parkin pending resolution of the arbitration between the plaintiffs and First American. The plaintiffs argued the court should allow them to litigate their claims against Parkin at the same time they arbitrate their claims against First American.
U.S. District Court Judge Tena Campbell declined to modify its March 2021 order and concluded that the possibility of preclusive effect and considerations of judicial efficiency warrant a stay of the plaintiffs’ litigation against Parkin.
Campbell noted that in their original motion to compel, First American and Parkin asserted that Indiana law required the plaintiffs to arbitrate not only against First American, but also Parkin even though she was not a party to the agreement. The court denied Parkin’s motion to compel based on a 2021 intervening decision by the Indiana Supreme Court. The defendants complained in its motion for reconsideration that they should have had an opportunity to address the intervening decision before the court ruled on the motion to compel.
The defendants argued that the Indiana Supreme Court’s January 2021 decision in Doe 1 v. Carmel Operator LLC (known as Doe II), requires the court to reconsider and reverse its decision that the plaintiffs are not required to arbitrate their claims against Parkin.
“According to the First American defendants, Doe II announced an intervening change in controlling law justifying reconsideration of their arguments that Parkin may compel arbitration based on the traditional elements of equitable estoppel and privity,” Campbell stated. “The court disagrees. Doe II did not announce a new rule for either theory. Moreover, the First American defendants could have, but did not, raise those issues in their original motion to compel.”
The First American defendants specifically argued that Doe II provided a new, previously unavailable, rule applying traditional equitable estoppel principles in the context of a non-signatory’s motion to compel signatories to arbitrate.
“The Indiana Supreme Court did not announce a previously unavailable ground to argue that a signatory is estopped from avoiding arbitration of its claims against a non-signatory,” Campbell stated. “The court simply found that record did not support a finding of equitable estoppel. It discussed the traditional elements of equitable estoppel that courts have applied for years (lack of knowledge, reliance and prejudicial effect). And it did not apply those elements in a novel or unanticipated situation.
“The First American defendants could have anticipated and subsequently raised that argument in their motion to compel, but they did not,” Campbell continued. “The court will not reconsider its decision that ‘nothing in the record suggests that Parkin would be able to establish the three elements of equitable estoppel.’”
The defendants also argued for the first time that Parkin could compel arbitration under the policy because she is in privity with First American and therefore entitled to the rights First American had under the policy, citing Doe II.
“The argument was available to them at the time they filed their motion to compel,” Campbell stated. “They cite to the newly issued Doe II decision, but that case did not announce a new rule regarding privity. In fact, the Doe II court cited to a 1996 decision to support its statement that ‘ordinarily, only contracting parties, or those in privity with them, have rights under an arbitration agreement. A motion for reconsideration is an inappropriate vehicle to reargue an issue previously addressed by the court when the motion merely advances new arguments or supporting facts which were available at the time of the original motion. Absent extraordinary circumstances, the basis for the second motion must not have been available at the time the first motion was filed. Because they could have raised this issue in their original motion to compel arbitration, and because they have not shown extraordinary circumstances excusing their failure to do so, the court will not consider it.”
First American alternatively argued the court erred when it overlooked its argument that Medical Realty Associates LLC v. D.A. Dodd Inc., gives First American an independent right to compel the plaintiffs to arbitrate their claims against Parkin, a non-signatory. Campbell found this case does not support First American’s position.
“The situation here is not analogous because the nature of the contract at issue is different,” Campbell stated. “Although the court in Medical Realty addressed a broad arbitration clause, the court based its decision first and foremost on the specific language in the subcontract, which concerned not only the arbitration clause but also the notice provision incorporating mechanic’s lien claims against the owner of the hospital. And the court’s language about the ‘broad sweeping phrases’ of the subcontract’s arbitration provision was not an independent basis for its holding.
“Here, the policy does not contain additional language having the same effect the subcontract’s notice provision did in Medical Realty,” Campbell continued. “The wrinkle that made a difference in Medical Realty—that is, the notice provision—does not have an analogue here. In fact, the policy’s arbitration clause arguably forecloses the result reached in Medical Realty: ‘Except as provided in the title insurance arbitration rules of the American Land Title Association, there shall be no joinder or consolidation with claims or controversies of other persons.’ Given the distinguishing facts in Medical Realty, the decision does not support First American’s claimed right to compel the plaintiffs to arbitrate their claims against Parkin.
Campbell then determined whether the court should stay the claims against Parkin pending arbitration.
“The court finds that the factors weigh in favor of a stay,” Campbell stated. “Allowing the actions to proceed side by side would waste the court’s and the parties’ resources. Because the arbitrable and non-arbitrable claims arise out of the same series of events, many of the witnesses and much of the documentary evidence, for both sides, will likely be the same. A stay would avoid the scenario in which two different adjudicating bodies are simultaneously reviewing similar evidence, resolving similar factual issues, and deciding similar questions of law. Also, if the court proceeds with the non-arbitrable claims at this time, it risks reaching results inconsistent with the arbitration’s results.
“The plaintiffs contend a stay will substantially harm them, whereas, they say, the First American defendants will not be harmed absent a stay,” Campbell continued. “Under the circumstances, the court disagrees. Regardless of the forum, the plaintiffs will have a full opportunity to litigate the issues. Resolution of common issues means the parties can more efficiently use this court’s resources after arbitration concludes. As for Plaintiffs’ contention that a stay will hinder their ability to litigate their conspiracy claim against other defendants, they do not elaborate. In addition, although Plaintiffs offer scenarios where they may be ‘forced to abandon their non-arbitrable claims,’ their strategic concern does not outweigh concerns about waste of resources and inconsistent results.”