LaMarr Womack & Associates, L.P.et al v. Lexington Insurance Company
2:18-cv-00348
| S.D. Tex. | Feb 1, 2019Background
- Architects Lamarr Womack & Associates, LP (LWA), Albert Soto, and Rene White (collectively, the Architects) face claims alleging negligence, breach of contract, and fraud arising from a gymnasium project.
- Architects demanded defense and indemnity from their insurer, Lexington Insurance Company, under LWA’s professional liability policy.
- Lexington tendered a defense under a reservation of rights and initiated arbitration seeking a declaration that it owes no defense or indemnity, asserting the Architects failed to disclose a pre-existing claim in their application.
- Architects filed this federal action seeking a judicial declaration and breach-of-contract relief; Lexington moved to dismiss or stay, invoking the policy’s arbitration clause.
- The policy contains an arbitration clause incorporating the AAA Commercial Arbitration Rules; the clause’s existence was undisputed and its scope was contested.
- The district court concluded the arbitration clause delegates arbitrability to the arbitrator and, accordingly, stayed the federal case pending arbitration, ordering periodic status reports.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Existence of an arbitration agreement | Agreement is not disputed; Plaintiff did not contest existence | Agreement exists in the policy | Existence of a valid arbitration agreement is undisputed and upheld |
| Who decides arbitrability (scope) | Architects: scope is for the court to decide; incorporation limited to procedural rules | Lexington: incorporation of AAA rules delegates arbitrability to arbitrator | Court held incorporation of AAA rules constitutes clear and unmistakable delegation of arbitrability to arbitrator |
| Whether claims fall within arbitration scope | Claims (coverage dispute, breach) are for the court to resolve | Claims fall within arbitration per the policy and AAA rules | Whether claims are arbitrable is for arbitrator to decide; court may not override delegation (Henry Schein) |
| Appropriate remedy (dismiss vs stay) | Architects sought judicial relief on merits | Lexington sought dismissal or stay pending arbitration | Court stayed the action under 9 U.S.C. § 3 (dismissal not required); ordered periodic status reports |
Key Cases Cited
- Fleetwood Enterprises, Inc. v. Gaskamp, 280 F.3d 1069 (5th Cir. 2002) (two-step inquiry on existence and scope of arbitration agreement)
- J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223 (Tex. 2003) (presumption favoring arbitration arises only after a valid agreement is shown)
- Crawford Prof'l Drugs, Inc. v. CVS Caremark Corp., 748 F.3d 249 (5th Cir. 2014) (incorporation of arbitration rules can show clear delegation of arbitrability)
- Petrofac, Inc. v. DynMcDermott Petroleum Operations Co., 687 F.3d 671 (5th Cir. 2012) (analysis of delegation to arbitrator when rules are incorporated)
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995) (principles governing who decides arbitrability)
- Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S. Ct. 524 (2019) (when contract delegates arbitrability to arbitrator, courts must defer even if delegation argument seems frivolous)
- Hous. Ref., L.P. v. United Steel, Paper & Forestry, Rubber, Mfg., Energy, Allied Indus. & Serv. Workers Int'l Union, 765 F.3d 396 (5th Cir. 2014) (arbitration clause need not explicitly state delegation to arbitrate arbitrability)
- Fedmet Corp. v. M/V Buyalyk, 194 F.3d 674 (5th Cir. 1999) (stay is required under FAA when issues are referable to arbitration; dismissal appropriate in some cases)