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Benson v. Casa De Capri Enterprises LLC

United States District Court, D. Arizona

May 31, 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 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 ...

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