289 F.Supp.3d 457
S.D.N.Y.2018Background
- National Union (insurer) holds Payment Agreements with ANSE, which include broad arbitration and delegation clauses and require successors/affiliates to be jointly liable.
- ANSE (stucco company) experienced decline, reorganized, and between 2008–2009 ANSE officers left or retired; Schuster formed Stucco Systems, LLC in 2008 and employed former ANSE staff and leased former ANSE premises.
- National Union alleges Stucco is a successor-in-interest/alter-ego of ANSE and filed an Amended Demand for Arbitration in New York (July 2017); Stucco sued to stay arbitration in Arizona (denied).
- Bankruptcy proceedings for ANSE included a Trustee adversary proceeding and settlement with Stucco; Bankruptcy Court approved the Trustee's settlement but did not decide National Union’s successor-liability claim or lift the stay on National Union’s motion.
- National Union petitioned this court to compel arbitration and obtain a preliminary injunction enjoining Stucco from continuing Arizona litigation; court found disputed facts about successor liability and whether Stucco is bound by the Payment Agreements.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether collateral estoppel bars National Union from relitigating successor liability | Bankruptcy action and settlement resolved successor liability against Stucco | Bankruptcy Court did not decide successor liability; settlement cannot preclude National Union | Court: No collateral estoppel — prior proceedings did not decide successor liability |
| Who decides arbitrability (court vs. arbitrator) when non-signatory is alleged successor | Delegation clause gives arbitrators exclusive jurisdiction, including arbitrability | Stucco is a non-signatory; no clear and unmistakable agreement by Stucco to arbitrate arbitrability | Court: Because Stucco is a non-signatory and not expressly referenced, court must decide whether Stucco is bound before sending arbitrability to arbitrators |
| Whether Stucco is a successor-in-interest/alter-ego of ANSE under Arizona law | Facts show continuity (ownership, employees, assets, location) supporting successor/alter-ego theories | Stucco is a distinct LLC; factual disputes (consideration for asset transfers, management identity) negate successor finding without further evidence | Court: Successor liability is a disputed factual question requiring an evidentiary hearing |
| Whether preliminary injunction to enjoin Arizona litigation should issue now | National Union needs injunction to preserve arbitration rights and prevent parallel litigation | Stucco opposes; factual disputes and threshold arbitrability issue unresolved | Court: Denied without prejudice pending evidentiary hearing to resolve material facts |
Key Cases Cited
- Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (1983) (establishes federal policy favoring arbitration)
- Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S. 63 (2010) (delegation clauses can commit arbitrability questions to arbitrators)
- Contee Corp. v. Remote Sol., Co., 398 F.3d 205 (2d Cir. 2005) (successor signatory context where non-signatory successor compelled signatory to arbitrate)
- Bensadoun v. Jobe-Riat, 316 F.3d 171 (2d Cir. 2003) (motions to compel arbitration apply a summary-judgment-like standard; factual disputes require trial)
- A/S Custodia v. Lessin Int'l, Inc., 503 F.2d 318 (2d Cir. 1974) (district court must hold evidentiary hearing when facts are disputed on whether a non-signatory can be compelled to arbitrate)