Joanne Kong v. Allied Professional Insurance Company
2014 U.S. App. LEXIS 8762
11th Cir.2014Background
- In 2005 Joanne Kong was injured by Patricia Costello (Costello’s massage) and obtained a stipulated Florida judgment for $1,150,000 against Costello; Costello assigned to Kong any present/future claims against her insurer, Allied Professional Insurance Company (Allied).
- Kong sued Allied in Florida state court to collect on the judgment after Allied denied coverage; Allied removed to federal court asserting diversity jurisdiction (Allied: Arizona corp.; Kong: Florida citizen).
- Kong moved to remand, arguing her suit is a "direct action" under 28 U.S.C. § 1332(c) (which would impute Costello’s Florida citizenship to Allied); the district court denied remand.
- Allied moved to compel arbitration under an arbitration clause in the Allied–Costello policy; the district court compelled arbitration in California and administratively closed the case; an arbitrator and then the Ninth Circuit found no coverage.
- Kong appealed the denial of remand and the arbitration order; the Eleventh Circuit considered whether Kong’s claim is a § 1332(c) direct action and whether the FAA governs the arbitration clause.
Issues
| Issue | Plaintiff's Argument (Kong) | Defendant's Argument (Allied) | Held |
|---|---|---|---|
| Whether Kong’s suit is a § 1332(c) "direct action" defeating diversity | Kong: This is a direct action because she seeks recovery from insurer on tort judgment against insured; insurer’s citizenship should be that of insured (Florida) | Allied: Not a direct action — Florida requires judgment against or joinder of insured first, so § 1332(c) exception does not apply; parties are diverse | Held: Not a direct action; Florida law requires judgment/joinder first, so diversity exists and remand denied |
| Whether the district court properly compelled arbitration | Kong: Florida law should control (diversity case) and under Florida law she isn’t bound, venue must be Florida, and coverage issues aren’t arbitrable | Allied: FAA governs (policy involves interstate commerce) and assignment binds assignee to remedial arbitration clause; policy permits arbitration of coverage in California | Held: FAA applies; under Florida contract/assignment law Kong is bound as assignee; arbitration in California and coverage issues are arbitrable per the policy |
| Whether McCarran–Ferguson doctrine displaces FAA | Kong: McCarran–Ferguson should preserve Florida insurance rules (thus displacing FAA) | Allied: Kong fails to identify any Florida insurance statute that would be invalidated by FAA; McCarran–Ferguson does not apply | Held: McCarran–Ferguson does not displace FAA here; no state insurance statute would be impaired by applying FAA |
| Whether appellate review includes arbitration order | Kong: Appeal from final judgment brings prior orders (including arbitration) into review | Allied: Notice of appeal specified only remand denial, not arbitration order | Held: Appeal from final judgment draws in prior non-final orders; arbitration order properly before court |
Key Cases Cited
- Fortson v. St. Paul Fire & Marine Ins. Co., 751 F.2d 1157 (11th Cir. 1985) (defines § 1332(c) "direct action" as suits allowing claimants to sue insurer without joinder/judgment against insured)
- Powers v. Continental Ins. Co., 753 F.2d 1574 (11th Cir. 1985) (emphasizes direct action allows plaintiff to "skip suing the tortfeasor and sue directly his insurance carrier")
- Lumbermen's Mut. Cas. Co. v. Elbert, 348 U.S. 48 (1954) (Justice Frankfurter concurrence criticizing forum-shopping caused by Louisiana direct-action statute)
- Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (1983) (FAA creates federal policy favoring arbitration)
- Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265 (1995) (FAA applies in diversity cases when contract involves interstate commerce)
- Arthur Andersen LLP v. Carlisle, 556 U.S. 624 (2009) (state contract-law background principles determine who is bound by arbitration agreements)
- Volt Information Sciences, Inc. v. Board of Trustees, 489 U.S. 468 (1989) (parties may specify contractual arbitration terms; courts should enforce those terms)
- Cone Constructors, Inc. v. Drummond Community Bank, 754 So.2d 779 (Fla. Dist. Ct. App. 2000) (Florida treats arbitration as a remedial mechanism and binds assignees to arbitration provisions)