Milliman, Inc. v. Roof
353 F. Supp. 3d 588
E.D. Ky.2018Background
- Milliman and KYHC (through its Liquidator) entered into a Consultant Services Agreement (CSA) and a renewed CSA that both contain broad arbitration clauses requiring AAA three‑arbitrator panels.
- Milliman filed a petition to compel arbitration in federal court; the Liquidator moved to dismiss and argued the CSA arbitration clause is unenforceable under Kentucky’s Insurance Rehabilitation and Liquidation Law (IRLL).
- The Liquidator contends the IRLL grants exclusive jurisdiction to Franklin Circuit Court over delinquency proceedings and that McCarran‑Ferguson reverse‑preemption shields the IRLL from the FAA.
- Milliman argues the arbitration clause is valid and covers the breach‑of‑contract dispute; it seeks an order compelling arbitration and staying court proceedings under the FAA.
- The court considered (1) validity and scope of the arbitration agreement, (2) whether McCarran‑Ferguson permits reverse preemption of the FAA by the IRLL, and (3) whether Colorado River abstention warrants staying federal proceedings.
- The court granted Milliman’s petition to compel arbitration, denied the Liquidator’s motion to dismiss, and stayed both federal and overlapping state proceedings as to the Milliman claims pending arbitration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Validity of arbitration agreement | Milliman: signed CSAs create a clear, enforceable arbitration agreement. | Liquidator: disputes enforceability generally (contests agreement validity). | Court: Agreement valid under New York and Kentucky contract principles; Milliman met prima facie burden. |
| Scope — does dispute fall within arbitration clause? | Milliman: clause is broad and covers "any dispute arising out of or relating to the engagement" including breach claims. | Liquidator: argues dispute should be resolved in state delinquency proceedings, not arbitration. | Court: dispute (breach claim) falls within the broad arbitration clause; arbitrable. |
| McCarran‑Ferguson / IRLL reverse preemption of FAA | Liquidator: IRLL was enacted to regulate insurance and grants exclusive state jurisdiction; McCarran‑Ferguson allows reverse preemption so FAA cannot compel arbitration. | Milliman: IRLL provisions at issue do not regulate the business of insurance such that they reverse‑preempt the FAA; arbitration does not impair IRLL purposes. | Court: McCarran‑Ferguson does not apply to reverse‑preempt the FAA here because the challenged IRLL provisions do not regulate the business of insurance in the relevant Pireno/Fabe sense; FAA governs. |
| Colorado River abstention (stay/dismissal) | Liquidator: federal court should stay pending resolution of parallel state insolvency proceedings. | Milliman: federal court should exercise jurisdiction to decide arbitrability; abstention is exceptional and unwarranted. | Court: Colorado River abstention unjustified after balancing factors; federal court retains jurisdiction and compels arbitration. |
Key Cases Cited
- Great Earth Cos., Inc. v. Simons, 288 F.3d 878 (6th Cir.) (arbitration‑opposition standard)
- Green Tree Financial Corp.–Alabama v. Randolph, 531 U.S. 79 (2000) (party resisting arbitration must show agreement invalid; statutory‑claim burden)
- Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991) (arbitrability of statutory claims)
- Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1 (1983) (federal policy favoring arbitration; doubts resolved for arbitration)
- Union Labor Life Insurance Co. v. Pireno, 458 U.S. 119 (1982) (tests for whether practice is part of the business of insurance)
- Humana Inc. v. Forsyth, 525 U.S. 299 (1999) (McCarran‑Ferguson reverse‑preemption framework)
- United States Department of the Treasury v. Fabe, 508 U.S. 491 (1993) (state law enacted to regulate insurance if aimed at protecting/performing insurance contracts)
- Colorado River Water Conservation Dist. v. United States, 424 U.S. 800 (1976) (narrow circumstances for federal abstention)
- Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938) (federal courts apply forum state substantive law in diversity cases)
- Ernst & Young, LLP v. Clark, 323 S.W.3d 682 (Ky. 2010) (Kentucky Supreme Court held IRLL preempted FAA; persuasive but nonbinding in federal court)