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PNC Bank, N.A. v. Presbyterian Retirement Corporation, Inc.

United States District Court, S.D. Alabama, Southern Division

April 28, 2015

PNC BANK, N.A., Plaintiff,


WILLIAM H. STEELE, Chief District Judge.

This matter comes before the Court on plaintiff's Motion to Compel Arbitration (doc. 56). The Motion has been extensively briefed, with both participating defendants having filed objections (docs. 58 & 61) and movant having submitted replies (docs. 63 & 64) to each.[1]

I. Background.

A. Nature of the Lawsuit/Causes of Action.

Plaintiff, PNC Bank, N.A., commenced this action against defendants Presbyterian Retirement Corporation, Inc. ("Presbyterian") and The Special Care Facilities Financing Authority of the City of Daphne (the "Authority") back on October 2, 2014.[2] Defendant Infirmary Health System, Inc. ("Infirmary Health") was granted leave to intervene via Order (doc. 33) entered on November 4, 2014. At its core, this litigation is about Presbyterian's default of debt-service obligations owed to PNC Bank. Those obligations were secured by Westminster Village, a not-for-profit retirement community owned and operated by Presbyterian. PNC Bank now asserts various claims against Presbyterian rooted in breach of contract. In those claims, PNC Bank pursues monetary and equitable remedies arising from the alleged default, including money damages in excess of $8.2 million and appointment of a receiver to manage and control Westminster Village in anticipation of a proposed foreclosure sale. Infirmary Health is an interested stakeholder because it is also a creditor of Presbyterian and a mortgagee as to Westminster Village. The rub is that PNC Bank and Infirmary Health appear to have drastically different ideas as to the disposition of that collateral.

Both defendants have asserted counterclaims against PNC Bank. For its part, Presbyterian filed a Counterclaim (doc. 32) on October 31, 2014, through which it interposed claims sounding in conversion, money had and received, negligence, and wantonness, based on allegations that PNC Bank had wrongfully seized over $900, 000 from Presbyterian accounts that could not properly be used to satisfy the defaulted debt because they contained funds that donors had restricted to specific purposes. Infirmary Health filed a Counterclaim (doc. 12) that took effect on November 4, 2014, asserting that PNC Bank had violated an Intercreditor Agreement that PNC Bank's predecessor and Infirmary Health executed in December 2005 to clarify their respective rights and duties with respect to Westminster Village and various related assets in which they each hold interests. Infirmary Health seeks a declaratory judgment that PNC Bank cannot enforce the Intercreditor Agreement against it and that Infirmary Health's mortgage is senior in priority to that of PNC Bank, as well as a money judgment for PNC Bank's alleged breaches of the Intercreditor Agreement.

B. Litigation Activity.

The nature, extent and progress of these legal proceedings are relevant to consideration of the pending Motion to Compel Arbitration. More than six months have passed since PNC Bank commenced this litigation. Contemporaneously with filing the Complaint, PNC Bank requested immediate appointment of a receiver for Westminster Village on an expedited basis. (Docs. 3 & 5.) The Court entered an Order (doc. 9) on October 7, 2014 denying expedited treatment of the motion for appointment of receiver, given PNC Bank's failure to show that Westminster Village was likely to suffer catastrophic harm absent immediate resolution of the receivership question, and PNC Bank's longstanding awareness of the circumstances giving rise to the alleged need for urgent equitable relief. The motion for appointment of receiver was then briefed in full, after which the Court entered an Order (doc. 35) denying PNC Bank's motion. In so doing, the Court reasoned as follows: (i) PNC Bank was not entitled to the extraordinary equitable remedy of appointment of a receiver as a matter of contractual right; (ii) PNC Bank's factual allegations ( i.e., that Westminster Village was being grossly mismanaged, operating in a manner that compromised resident care, and teetering on the brink of financial collapse) were largely unsupported by record facts; and (iii) equitable considerations such as the adequacy of less drastic remedies and the likelihood that a receiver may do more harm than good weighed against granting the requested relief.

In the wake of denial of the motion for appointment of receiver, this action proceeded for several months along a normal federal civil litigation track. A motion for preliminary injunction filed by Infirmary Health to block a contemplated March 2015 foreclosure sale of Westminster Village was amicably resolved by consent of the parties. ( See doc. 55.) The parties submitted their Rule 26(f) Report (doc. 43) on December 29, 2014, after which Magistrate Judge Bivins entered a comprehensive Rule 16(b) Scheduling Order (doc. 46). That Scheduling Order fixed a discovery cutoff date of July 1, 2015, and set this matter for jury trial during November 2015.

On January 29, 2015, and apparently prior to any discovery having been taken by any party, PNC Bank filed its Motion to Compel Arbitration, invoking arbitration clauses set forth in Financing Agreements into which it had entered with Presbyterian in 2005 and 2006, as well as an arbitration clause in the Intercreditor Agreement between PNC Bank and Infirmary Health.[3] Presbyterian and Infirmary Health oppose the Motion on several theories, including chiefly that, through its conduct in bringing and litigating this federal lawsuit, PNC Bank has waived its right to enforce the arbitration agreements. Defendants also argue that the Motion should be denied because, by violating the Intercreditor Agreement in multiple respects, PNC Bank has repudiated that document, precluding it from enforcing the arbitration provision.

C. Relevant Contractual Terms.

PNC Bank points to three contracts containing arbitration clauses, to-wit: a 2005 Financing Agreement between PNC Bank's predecessor and Presbyterian, a 2006 Financing Agreement between the same parties, and the Intercreditor Agreement between PNC Bank's predecessor and Infirmary Health. These are the arbitration provisions that PNC Bank now seeks to enforce via its request that this entire matter be referred to arbitration.

The two Financing Agreements contain virtually identical arbitration clauses providing that "any action, dispute, claim, counterclaim or controversy... between or among [PNC Bank], the Authority, and [Presbyterian], including any claim based on or arising from an alleged tort, shall be resolved by arbitration." (Doc. 56, Exh. B, at 1.) Covered disputes are defined as encompassing "all actions, disputes, claims, counterclaims or controversies arising in connection with the... Bond and Note, ... any collection of any indebtedness owed to [PNC Bank], any security or collateral given to [PNC Bank], [and] any action taken (or any omission to take any action) in connection with any of the foregoing." (Id. ) Pursuant to the Financing Agreements, all such disputes "shall be resolved by binding arbitration in accordance with Title 9 of the U.S. Code and the Commercial Arbitration Rules of the American Arbitration Association." (Id. ) Two other features of the arbitration clauses in the Financing Agreements warrant mention. First, those provisions specify that "[i]f [Presbyterian] asserts a claim against [PNC Bank] in arbitration or otherwise during the pendency of a claim brought by [PNC Bank] in a court of law, the court action shall be stayed and the parties shall submit to arbitration all claims." (Id. at 2.) Second, they provide that "institution or maintenance of an action for judicial relief or pursuit of provisional or ancillary remedies [such as appointment of a receiver] shall not constitute a waiver of the right of any party, including the plaintiff in such an action, to submit the Dispute to arbitration." (Id. )

As for the Intercreditor Agreement entered into by PNC Bank's predecessor and Infirmary Health, a detailed arbitration provision may be found at Section 22. That clause provides that "[a]ny controversy, claim or dispute or issue related to or arising from... the interpretation, negotiation, execution, assignment, administration, repayment, modification, or extension of this Agreement;... [or] any breach of any provision of this Agreement, shall be settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association." (Doc. 56, Exh. A at Exh. 44, ยง 22(a).) The signatories further agreed that "[a]ny disagreement as to whether a particular dispute or claim is subject to arbitration under this Section shall be decided by arbitration, " and that "[c]ommencement of litigation by any person entitled to demand arbitration under this Section shall not waive any right that person has to demand arbitration with respect to any counterclaim or other claim that may be made against that person." (Id. ) Finally, with respect to ...

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