United States District Court, N.D. Alabama, Northeastern Division
MEMORANDUM OPINION AND ORDER
K. KALLON UNITED STATES DISTRICT JUDGE.
Life Insurance Company filed this action seeking recovery of
commissions it paid to Eugene E. Houchins, III, William I.
Davis, and Third Financial, Inc. for the sale of life
insurance policies. Doc. 27. Sagicor alleges that the
defendants earned the commissions by engaging in an illegal
rebating scheme, and asserts claims for breach of contract,
unjust enrichment, and conversion. Id. Presently
before the court is Houchins and Third Financial's motion
to compel arbitration, doc. 54, which is due to be granted.
FACTUAL AND PROCEDURAL BACKGROUND
entered into Producer Agreements with Houchins, Davis, and
Third Financial, which granted the defendants the right to
sell life insurance policies issued by Sagicor and to earn
commissions for the sale of the policies. Docs. 27 at
¶¶ 14-15; 31-1; 32-1. Under the terms of the
agreements, the defendants earned the highest commission in
the year they sell a policy. See doc. 27 at ¶
17. In that first year, the commission could be as much as
125% of the premium. Id. Allegedly, the defendants
engaged in a rebating scheme, whereby they solicited life
insurance applications in Alabama and North Carolina by
offering to pay the insured all or part of the first year
premium for the policies. Id. at ¶¶ 26,
28-29. While purportedly utilizing this scheme, Houchins
submitted six applications to Sagicor, resulting in the
issuance of five policies for which he received over $880,
000 in commissions. Id. at ¶ 27. All five policies
lapsed a year later. Id.
alleged rebating scheme violates Alabama, North Carolina, and
Florida law and Sagicor's policies. Doc. 27 at
¶¶ 25, 30, n.1. In addition, because the Producer
Agreements require the defendants to “solicit
applications in accordance with applicable state laws and
regulations, [and] the rules and regulations of the Company,
” see doc. 31-1 at ¶ 1.1, Sagicor asserts
that the defendants' conduct breached the terms of the
Producer Agreements. Doc. 27 at ¶¶ 31-39. Based on
the defendants' alleged scheme and breach of the Producer
Agreements, Sagicor initiated this action, asserting claims
for breach of contract, unjust enrichment, and conversion.
Doc. 27. For their part, the defendants assert breach of
contract counterclaims based on their allegations that
Sagicor provided them with software that produced inaccurate
projections of returns and future premiums for the policies.
Docs. 44; 45.
and Third Financial move to compel arbitration pursuant to
the Federal Arbitration Act (“FAA”), 9 U.S.C.
§ 1, et seq. Doc. 54. “The FAA embodies a
‘liberal federal policy favoring arbitration
agreements.'” Hill v. Rent-A-Center, Inc.,
398 F.3d 1286, 1288 (11th Cir. 2005) (quoting Moses H.
Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S.
1, 24 (1983)). “By its terms, the Act leaves no place
for the exercise of discretion by a district court, but
instead mandates that district court shall direct
the parties to proceed to arbitration on issues as to which
an arbitration agreement had been signed.” Dean
Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985)
(emphasis in original). And, “as a matter of federal
law, any doubts concerning the scope of arbitrable issues
should be resolved in favor of arbitration . . . .”
Moses H. Cone Mem'l Hosp., 460 U.S. at 24-25.
federal policy favors arbitration agreements, “the
question of whether a contract's arbitration clause
requires arbitration of a given dispute remains a matter of
contract interpretation.” Seaboard Coast Line R.
Co. v. Trailer Train Co., 690 F.2d 1343, 1348 (11th Cir.
1982) (citations omitted). Accordingly, “a party cannot
be required to submit to arbitration any dispute which he has
not agreed to so submit.” Steelworkers v. Warrior
& Gulf Nav. Co., 363 U.S. 574, 582 (1960). Federal
courts generally apply state contract law to determine if the
parties agreed to arbitrate a dispute. First Options of
Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995)
Whether this action is within the scope of the
the court must consider (1) whether a valid written agreement
to arbitrate exists and (2) whether the agreement encompasses
the dispute. See Green Tree Fin. Corp. v. Bazzle,
539 U.S. 444, 452 (2003). Here, however, Sagicor does not
dispute the existence of an arbitration agreement.
See doc. 62. See also docs. 31-1 at ¶
15; 32-1 at ¶ 15 (the Producer Agreements stating
“[i]f any dispute or disagreement shall arise in
connection with any interpretation of this agreement, . . .
[and] the parties cannot agree on a written settlement within
(90) ninety days after it arises, . . . then the matter in
controversy shall be settled by arbitration, in accordance
with the rules of the American Arbitration Association . . .
.”). Sagicor challenges the second prong instead,
arguing that its claims “do not arise solely from the
contract” and are based also on the defendants'
alleged statutory violations. Doc. 62 at 6. This contention
is unavailing because assessing whether parties agreed to
arbitrate a claim is not dependent on whether the claim
arises solely from the contract containing the arbitration
agreement. Rather, the analysis hinges on whether the claims
“raise some issue the resolution of which requires
reference to or construction of some portion of the contract
itself.” See Seifert v. U.S. Home Corporation,
750 So.2d 633, 638 (Fla. 1999) (citations omitted).
here, it is undisputed that this case involves breach of
contract claims and counterclaims, which will require
reference to the Producer Agreements. Similarly,
Sagicor's unjust enrichment and conversion claims seeking
recovery of the allegedly ill-gotten commissions,
see doc. 27 at 11-12, also require reference to the
Agreements to determine whether the defendants were entitled
to the commissions. In that respect, the presence of
additional alleged statutory violations do not nullify the
parties' agreement to arbitrate their disputes. As for
the cases Sagicor cites in opposition to arbitration, none
involves breach of contract claims, or claims that require
reference to a contract between the parties. See
Seifert, 750 So.2d at 635 (involving a wrongful death
claim); King Motor Co. of Fort Lauderdale v. Jones,
901 So.2d 1017, 1017 (Fla. Ct. App. 2005) (involving
negligence, gross negligence, unfair and deceptive trade
practices, and violation of the Credit Services Organization
Act claims); Terminix Int'l Co. v. Michaels, 668
So.2d 1013 (Fla. Ct. App. 1996) (involving negligence and
strict liability claims). Thus, Sagicor's reliance on
those cases for its contention that the arbitration agreement
does not apply to this dispute is misplaced. Therefore,
because the claims and counterclaims in this action relate to
the parties' performance under the Producer Agreements,
see docs. 27; 44; 45, and the resolution of the
claims and counterclaims will require reference to the
Producer Agreements, see Seifert, 750 So.2d at 638,
the arbitration agreement encompasses this dispute.
Whether the defendants waived their right to
argues alternatively that the defendants waived their right
to arbitrate by initially responding to Sagicor's
complaint with a letter requesting that the parties make a
good faith attempt to amicably resolve the dispute, and by
substantially invoking the litigation process in this case.
Doc. 62 at 8-10. See also doc. 62-1. Whether a party
waived its right to arbitrate is a question of federal law.
S&H Contractors, Inc. v. A.J. Taft Coal Co., 906
F.2d 1507, 1514 (11th Cir. 1990) (citations omitted). In this
Circuit, the analysis requires that the court decide: (1) if
“‘under the totality of the circumstances, the
party has acted inconsistently with the arbitration
right;'” and (2) whether by so acting,
“‘that party has in some way prejudiced the other
party.'” Garcia v. Wachovia Corp., 699
F.3d 1273, 1277 (11th Cir. 2012) (quoting Ivax Corp. v.
B. Braun of Am., Inc., 286 F.3d 1309, 1315-16 (11th Cir.
analysis of these two factors favors arbitration. First, that
the defendants expressed an intent to resolve the dispute is
not evidence of a waiver because the agreement requires the
parties to “make every effort to meet and settle their
disputes in good faith informally” before proceeding to
arbitration. Doc. 31-1 at ¶ 15. Similarly, that Houchins
and Third Financial waited almost seven months to file their
motion to compel arbitration is not dispositive on the waiver
issue because the answer they filed raised arbitration as an
affirmative defense by contending that Sagicor “failed
to perform necessary conditions precedent prior to
filing” suit. See doc. 32 at 8-9. Moreover,
Sagicor does not assert that the defendants' delay in
filing their motion prejudiced it, see ...