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Benson v. Casa De Capri Enterprises LLC

United States District Court, D. Arizona

July 30, 2019

Jacob Benson, et al., Plaintiffs,
Casa De Capri Enterprises LLC, et al., Defendants.


          Dominic W. Lanza, United Slates District Judge.

         Pending before the Court is Defendant Continuing Care Risk Retention Group Incorporated's (“CCRRG”) renewed motion to compel arbitration. (Doc. 63.) The Court requested supplemental briefing on this motion, which the parties have provided. (Docs. 81, 82.) The Court also held oral argument on July 25, 2019. For the following reasons, the Court grants the motion to the extent CCRRG requests dismissal without prejudice.


         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.)

         Casa De Capri had purchased a number of successive annual “claims-paid” insurance policies from CCRRG. The policies for the 2012-2013 and 2013-2014 periods contained arbitration provisions. (Doc. 13-1 at 41-42; Doc. 56-1 at 30.) Casa De Capri and CCRRG had also entered into a Subscription Agreement (Doc. 13-1 at 53-73) in September 2009 containing an arbitration provision (id. at 72), which was incorporated into the policies (id. at 6; Doc. 56-1 at 37). These arbitration provisions provided that arbitration would take place in Sonoma County, California. (Doc. 13-1 at 41-42, 72; Doc. 56-1 at 30.)

         Casa De Capri canceled its policy with CCRRG effective August 1, 2013 (Doc. 13-1 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 November 29, 2017, Plaintiffs obtained a $1, 501, 069.90 judgment against Casa De Capri. (Doc. 1-2 at 231-32.) On December 18, 2017, Plaintiffs sought a writ of garnishment against CCRRG. (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; (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 issued an order denying CCRRG's motion. (Doc. 27.)[1] 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.)

         After that order was issued, Plaintiffs 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 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 argued 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 an amended complaint, and (3) “mov[ing] for summary judgment seeking to void certain provisions in the CCRRG Policy.” (Id. at 1-4, 6-9, 11.)

         In response, Plaintiffs made the same main argument they made in response to the initial motion: the garnishment action is not premised on an assignment of Casa De Capri's claims under the insurance contract, and therefore Plaintiffs, as non-signatories to the contracts between Casa De Capri and CCRRG, cannot be compelled to arbitrate the garnishment claim. (Doc. 70.) In a similar vein, Plaintiffs argued that CCRRG's renewed motion was a “repeat” of its previous motion to compel arbitration that Judge Logan denied, and “the law of the case doctrine applies to preclude a rehash of same.” (Id. at 2.)

         On May 31, 2019, the Court requested supplemental briefing regarding the applicability of equitable estoppel under Arizona law in the circumstances of this case. (Doc. 79.) The parties have since submitted their briefs. (Docs. 81, 82.) Plaintiffs have also withdrawn their motion to amend the complaint to add new claims. (Doc. 80.)


         In response to the Court's order requesting supplemental briefing, Plaintiffs made three arguments: (1) Judge Logan's order should be treated as law of the case, thus preventing reconsideration of the arbitration issue; (2) equitable estoppel does not apply here because Plaintiffs have not obtained “direct benefits” under the contract during the life of the contract and CCRRG has not detrimentally relied on Plaintiffs' conduct; and (3) the right of a judgment creditor to garnish the debts of a judgment debtor in a garnishment proceeding is statutorily guaranteed and is a judicial remedy not subject to private arbitration. (Doc. 81.) Plaintiffs also “renewed and incorporated” the arguments contained in their earlier arbitration-related briefs (id. at 1), and Plaintiffs clarified during oral argument that this incorporation effort was intended to preserve their earlier arguments concerning unconscionability.

         I. Law Of The Case

         The Court has already addressed the law-of-the-case argument in the order requesting supplemental briefing. (Doc. 79 at 4.) As noted in that order, the law of the case “doctrine expresses only the practice of courts generally to refuse to reopen questions formerly decided, and is not a limitation of their power.” United States v. Maybusher, 735 F.2d 366, 370 ...

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