United States District Court, D. Arizona
ORDER
Dominic W. Lanza United Slates District Judge
Pending
before the Court are six motions: (1) Defendant Continuing
Care Risk Retention Group Incorporated's
(“CCRRG”) motion for judgment on the pleadings
(Doc. 38); (2) Plaintiffs' motion to allow repleading and
joinder of new claims (Doc. 40); (3) Plaintiffs' motion
for summary judgment (Doc. 55); (4) CCRRG's renewed
motion to compel arbitration (Doc. 63); (5) third-party
National Risk Retention Association's motion to file
amicus curiae brief (Doc. 66); and (6) CCRRG's motion to
strike Plaintiffs' statement of facts in support of their
summary judgment motion (Doc. 75). The Court will first
address CCRRG's renewed motion to compel arbitration
(Doc. 63) to assure itself that Plaintiffs' claims are
not required to be arbitrated before expending judicial
resources addressing the other pending motions.
CCRRG
renewed its motion to compel arbitration in light of new
circumstances that arose after Judge Logan ruled on the
original motion.[1] Those new circumstances, as well as new
case law the Court has uncovered in researching the issues
presented in the renewed motion, have potentially called into
question the conclusion reached in Judge Logan's order.
Accordingly, the Court will give the parties the opportunity
to submit supplemental briefing responding to the case law
presented below.
I.
Factual Background
In
December 2012, Jacob Benson, his parents, and his son
(together, “Plaintiffs”) filed suit in Maricopa
County Superior Court against Casa De Capri Enterprises LLC
(“Casa De Capri”), a skilled nursing facility.
(Doc. 1-1 at 5-15.)
At the
time the suit was filed, Casa De Capri had a
“claims-paid” professional liability and general
liability insurance policy with CCRRG. The policy covered the
period between January 1, 2012 and December 31, 2012, and
Casa De Capri later renewed the policy to cover the period
between January 1, 2013 and December 31, 2013 (Doc. 13-1 at
5-47).
As
relevant here, Casa De Capri and CCRRG had entered into two
agreements with arbitration provisions. First, the parties
entered into a Subscription Agreement (Doc. 13-1 53-73) in
September 2009 containing an arbitration provision
(id. at 72). Second, the 2013-2014 policy agreement
contained an arbitration provision. (Id. at 41-42.)
Casa De
Capri canceled its policy with CCRRG effective August 1, 2013
(id. at 49) and then filed for bankruptcy on August
19, 2013 (2:13-bk-14269-EPB). Upon Casa De Capri's
cancellation of the policy, CCRRG withdrew from defending
Casa De Capri in Plaintiffs' lawsuit.
On
December 1, 2013, Plaintiffs obtained a judgment against Casa
De Capri. (Doc. 1-2 at 231-32.) On December 18, 2013,
Plaintiffs sought a writ of garnishment against CCRRG for the
judgment amount plus interest. Id. at 233-35. On
January 2, 2018, the garnishment action was removed to this
Court. (Doc. 1.)
II.
Procedural Background
On
January 9, 2018, CCRRG moved to dismiss, or, alternatively,
to stay litigation and compel arbitration. (Doc. 13.)
CCRRG's motion was premised on three main contentions:
(1) the arbitration agreements were valid; (2)
Plaintiffs' “claims [were] fully encompassed within
the scope of the agreement[s]”; and (3) Plaintiffs
“are claiming rights that Casa de Capri had under the
CCRRG Policy as assignees of Casa de Capri, thus they stand
in the shoes of Casa de Capri and are subject to the
arbitration agreement[s] between CCRRG and Casa de
Capri.” Id. Plaintiffs responded on January
20, 2018, contending that (1) they were strangers to the
arbitration clauses and therefore could not be bound, given
that they had never been assigned Casa De Capri's claims;
(2) the clauses were contrary to Casa De Capri's
reasonable expectations; and (3) the clauses were
procedurally and substantively unconscionable. (Doc. 17.)
CCRRG filed its reply on January 29, 2018. (Doc. 22.)
On
August 17, 2018, Judge Logan denied CCRRG's motion. (Doc.
27.) That order reasoned that “no circumstances appear
to suggest that any of the contract or agency principles that
would provide an exception binding the Plaintiffs to
arbitration per the terms of the insurance agreement
apply.” (Doc. 27 at 4.) Specifically, it found that
“Plaintiffs never assumed the insurance contract
between the Defendant and Casa de Capri, and the Defendant
does not set forth any evidence that the Plaintiffs received
any benefit from the agreement between the
Co-Defendants.” (Id.) Additionally, the last
paragraph cited an Arizona Court of Appeals opinion, Able
Distributing Co., Inc. v. James Lampe, General
Contractor, 773 P.2d 504 (Ariz.Ct.App. 1989), for the
proposition that “it is well settled under Arizona law
that actions for garnishment do not bind a non-signatory
garnishing creditor to the terms of an agreement with an
arbitration clause.” (Id. at 4-5.)
Since
that order was issued, Plaintiffs have moved to amend their
complaint to add claims for (1) a declaratory judgment
regarding coverage for the underlying judgment and (2)
insurance bad faith. (Doc. 40-1 at 8-10.) Plaintiffs have
also moved for summary judgment on their garnishment claim.
(Doc. 55.)
On
April 18, 2019, CCRRG filed a renewed motion to compel
arbitration. (Doc. 63.) CCRRG argues that, although
Plaintiffs asserted in their response to the initial motion
to compel arbitration that they weren't seeking to
collect from CCRRG as an assignee of Casa De Capri's
contract, Plaintiffs have since made clear their
“intent to pursue claims as assignees” by (1)
seeking “broad discovery on issues related to the
proposed breach of contract and bad faith claims, ” (2)
seeking to add breach of contract and bad faith claims in ...