666 F.Supp.3d 604
W.D. La.2023Background
- Next Level Hospitality, LLC owns a commercial property in Lake Charles, Louisiana that was damaged by Hurricanes Laura and Delta in 2020.
- Independent Specialty Insurance Company (ISIC) issued a surplus-lines insurance policy to Next Level that includes a broad arbitration clause requiring disputes be submitted to an arbitration tribunal.
- Next Level sued ISIC for hurricane-related damages on December 9, 2021; ISIC moved to compel arbitration on March 10, 2023; trial was set for October 2, 2023.
- ISIC argued the arbitration clause is enforceable under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards and/or the FAA; Next Level relied on La. R.S. § 22:868 (which bars contractual provisions that deprive Louisiana courts of jurisdiction/venue) to oppose arbitration.
- The court analyzed the 2020 amendment to La. R.S. § 22:868 (adding a Subsection D carving out forum/venue selection clauses for non–Dept. of Insurance–approved policy forms) and concluded the amendment does not convert arbitration clauses into enforceable forum/venue clauses.
- Because there is no foreign signatory/foreign insurer and the arbitration clause is therefore not governed by the Convention, the court held the arbitration clause is reverse-preempted by La. R.S. § 22:868(A)(2) and denied ISIC’s motion to compel arbitration (order entered March 31, 2023).
Issues
| Issue | Plaintiff's Argument (Next Level) | Defendant's Argument (ISIC) | Held |
|---|---|---|---|
| Applicability of Convention / FAA to compel arbitration | Convention does not apply; this is a domestic insurer and La. R.S. § 22:868 bars arbitration | Convention/Freign-arbitration rules apply because surplus-lines policy is exempt from certain state prohibitions | Held: Convention does not apply (no foreign party); FAA arbitration unenforceable because reverse-preempted by La. R.S. § 22:868(A)(2) |
| Effect of 2020 amendment to La. R.S. § 22:868 (Subsec. D) | § 22:868(D) does not authorize arbitration clauses — it only excepts forum/venue selection clauses | § 22:868(D) permits forum/venue clauses in certain surplus-lines policy forms and thus undercuts the statute’s anti-arbitration effect | Held: § 22:868(D) only carves out forum/venue selection clauses, not arbitration clauses; statute still bars arbitration provisions in this context |
| Equitable estoppel (nonsignatory / related-party theory) | N/A (Next Level opposed arbitration) | ISIC contends equitable estoppel might permit enforcement despite lack of foreign signatory | Held: Court declined to apply equitable estoppel here (no foreign signatory or intertwined foreign claims) |
| Waiver by delay in seeking arbitration | Argues ISIC waived arbitration by waiting over a year after suit | Argues no waiver — preservation of arbitration right | Held: Court did not find arbitration appropriate on other grounds (statutory bar); waiver not dispositive in light of § 22:868 analysis |
Key Cases Cited
- Creekstone Juban I, L.L.C. v. XL Ins. Am., Inc., 282 So.3d 1042 (La. 2019) (distinguishes jurisdiction from venue; forum-selection clauses do not deprive Louisiana courts of jurisdiction)
- Safety Nat'l Cas. Corp. v. Certain Underwriters at Lloyd's, London, 587 F.3d 714 (5th Cir. 2009) (Convention is a treaty not subject to McCarran-Ferguson reverse-preemption)
- McDonnel Group, LLC v. Great Lakes Ins. Branch SE, UK Branch, 923 F.3d 427 (5th Cir.) (application of Convention to surplus-lines insurers)
- Am. Bankers Ins. Co. of Fla. v. Inman, 436 F.3d 490 (5th Cir.) (McCarran-Ferguson allows state insurance laws to reverse-preempt federal arbitration rules)
- Freudensprung v. Offshore Tech. Servs., Inc., 379 F.3d 327 (5th Cir.) (framework for FAA/Convention applicability)
- Grigson v. Creative Artists Agency L.L.C., 210 F.3d 524 (5th Cir.) (equitable estoppel / intertwined-claims test for nonsignatory to compel arbitration)
- Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (1983) (FAA's pro-arbitration policy principles)
- Morgan v. Sundance, Inc., 142 S. Ct. 1708 (2022) (FAA makes arbitration agreements on equal footing with other contracts; no special federal rules to favor arbitration)