The opinion of the court was delivered by: VIRGINIA A. Phillips United States District Judge
AMENDED ORDER (1) DENYING DEFENDANTS' MOTION TO DISMISS RE: INSUFFICIENT SERVICE; (2) GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS RE: FAILURE TO ARBITRATE; AND (3) STAYING ACTION [Motions filed on March 24 and March 25, 2011]
Defendants ACE American Insurance Company ("ACE") and ESIS, Incorporated ("ESIS") (collectively, "Defendants") filed a motion to dismiss for insufficient service ("Motion re: Insufficient Service") and a motion to dismiss for failure to arbitrate, or in the alternative, stay the action ("Motion re: Failure to Arbitrate"). (Doc. Nos. 15, 17.) Plaintiff RCR Plumbing and Mechanical, Incorporated ("Plaintiff") opposes both motions. (Doc. Nos. 23, 24.) The parties came before the Court for a hearing on April 29, 2011. Having considered the arguments put forth in support of, and against, the Motions, the Court DENIES the Motion re: Insufficient Service, DENIES in part and GRANTS in part the Motion re: Failure to Arbitrate, and STAYS the action.
The following claims arise out of a series of commercial general liability policies (the "Policies") and implementing documents held by Plaintiff with Defendants between November 1, 2003, and November 1, 2007. (First Amended Complaint ("FAC") ¶¶ 8-12.)
1. Plaintiff's Factual Allegations
On August 2, 2004, a Bankruptcy Court entered an order (the "Bankruptcy Order") with respect to Plaintiff's predecessor, AMPAM RCR Companies ("AMPAM"), discharging AMPAM's obligations in bankruptcy, including certain obligations arising out of construction defect lawsuits and deductible obligations under the Policies. (FAC ¶ 13.) The discharge included all occurrences giving rise to property damage for work completed by Plaintiff on or before August 2, 2004. (Id. ¶ 14.)
Despite the prohibition in the Bankruptcy Order, ACE continued to accept tenders and pay claims from additional insureds on claims that had been discharged. (FAC ¶¶ 15-16, 18.) Plaintiff petitioned the Bankruptcy Court to clarify the Bankruptcy Order, and on July 11, 2008, the Bankruptcy Court issued another order (the "Enforcement Order") finding ACE should not have accepted the pre-2004 claims. (Id. ¶ 21.) Plaintiff expended over $500,000.00 seeking legal counsel and obtaining the Enforcement Order. (Id. ¶ 24.)
As a condition of issuing the Policies, ACE demanded Plaintiff commit to a collateral obligation agreement, with ACE as a beneficiary. (FAC ¶ 36.) Defendants set the amount of the collateral obligation "grossly in excess of that reasonably required" -- the current amount is over $5.4 million -- and has repeatedly refused Plaintiff's requests to reduce the amount. (Id. ¶¶ 38-39.) ACE's action in requiring Plaintiff to commit to the collateral obligation agreement was part of a scheme to secure payment on the Policies' high deductibles. (Id. ¶ 40.)
Upon tender of a claim to them, Defendants should have investigated what portion of the defense of a claim was not covered under the Policies in order to minimize Plaintiff's share of the loss. (Id. ¶¶ 50-54.)
Defendants failed to do so, and further did not pursue contribution or subrogation from other liable carriers, nor did they provide Plaintiff with sufficient information to seek recourse against additional insured carriers itself. (Id. ¶¶ 55-58.)
ACE also charged Plaintiff the full deductible for a number of state court actions where ACE was not responsible for full coverage of Plaintiff, and where imposition of the deductible violated California law. (FAC ¶¶ 59-64.) ACE has also imposed a deductible on Plaintiff in other declaratory relief actions where the deductible provisions were not triggered. (Id. ¶ 68.)
Finally, starting in 2006, and most recently in 2009, Plaintiff agreed orally with Defendants that Plaintiff would conduct its own "claims handling, investigation, expense, defense and indemnity claims" within the deductible under the Policies. (FAC ¶ 69.) Between 2006 and 2008, "ACE's course of conduct has been inconsistent with the mutual understanding of the parties that Plaintiff was to handle its own defense of general liability claims" within the deductible. (Id. ¶ 73.)
2. The Program Agreements
In conjunction with the Policies, AMPAM and Plaintiff entered into a series of program agreements (the "Program Agreements") with ACE to confirm some details of the insurance program, including Plaintiff's agreement to maintain a collateral obligation to cover its deductibles. (See Mot. re: Failure to Arbitrate, Gordon Decl., Ex. A.*fn1 ) The Program Agreements contain an arbitration clause which states:
Any controversy, dispute, claim or question arising out of or relating to this Agreement, including without limitation its interpretation, performance, or non-performance by any party, or any breach thereof (hereinafter, collectively, Controversy) shall be referred to, and resolved exclusively by three arbitrators though private, confidential arbitration conducted in Philadelphia, PA. (Id. at 8.)*fn2
3. The Risk Management Services Agreements
Plaintiff also entered into a series of risk management services agreements (the "RMSAs") with ESIS explaining the services, terms, and conditions of ESIS's work. (See Mot. re: Failure to Arbitrate, Gordon Decl., Ex. C.*fn3 ) The RMSAs contain an arbitration clause which states that "[i]n the event that a dispute arises concerning the meaning, interpretation or performance of this Agreement, such dispute shall be resolved consensually if possible and, if not possible, by binding arbitration of the dispute[.]" (Id. at 6.) The RMSAs go on to state that, "[n]otwithstanding this provision, it is not the parties' intention to resolve by arbitration the rights and obligations of the parties or any other person pursuant to any policy of insurance, either directly or indirectly." (Id. at 7.)
On July 7, 2010, Plaintiff filed an initial complaint ("Complaint") against Defendants. (Doc. No. 1.) On November 17, 2010, Plaintiff filed a motion to extend the time period for service of the Complaint. (Doc. No. 5.) The Court granted Plaintiff's motion and gave Plaintiff until March 4, 2011, to serve Defendants. (Doc. No. 6.)
On March 3, 2011, Plaintiff filed a First Amended Complaint ("FAC"), alleging breach of written contract, breach of oral contract, and breach of the implied covenant of good faith and fair dealing, and seeking declaratory relief. (Doc. No. 11.) As explained in greater detail above, Plaintiff asserts it suffered damages as a result of Defendants' violation of the Policies, the Bankruptcy Order, and the Enforcement Order. (FAC ¶¶ 75-95.) Plaintiff also asserts it suffered damages as a result of Defendants breach of the oral agreement that Plaintiff would control its own defense of claims with the deductible under the Policies. (Id. ¶¶ 96-107.) Finally, Plaintiff asserts it suffered damages caused by ACE's breach of the implied covenant of good faith and fair dealing in the Policies as described above. (Id. ¶¶ 108-120.) Plaintiff seeks a series of declaratory judgments based upon its claims. (Id. at 28-30.)
Defendants filed the Motion re: Insufficient Service on March 24, 2011. (Doc. No. 15.) In support of this motion, Defendants filed: (1) a declaration from Nancy Flores ("N. Flores Decl."), the corporate operations manger at CT Corporation ("CT"), Defendants' authorized agent for service of process; and (2) a declaration from Defendant's counsel Andrew Gordon ("Gordon Decl."). (Doc. Nos. 15-1, 15-7.) Submitted with the N. Flores Declaration are a number of logs from CT regarding Plaintiff's service of process on Defendants. (N. Flores Decl., Exs. A-E.)
Plaintiff filed an opposition to the Motion re: Insufficient Service ("Opp'n to Mot. re: Insufficient Service") on April 4, 2011. (Doc. No. 23.) In support of this Opposition, Plaintiff filed: (1) a declaration from Plaintiff's counsel Matthew L. Cookson ("Cookson Decl."); (2) a declaration from process server Henry Flores ("H. Flores Decl."); and (3) a declaration from Plaintiff's personal insurance broker Senior Vice President Mark Pastorius ("Pastorius Decl."). (Doc. Nos. 23-1-23-3.) Submitted with the H. Flores Declaration are copies of the proofs of service upon ACE and ESIS (H. Flores Decl., Exs. A, B), electronic mail messages ("emails") between counsel for the parties (id., Exs. C, F, H-K), pleadings or orders from this action (id., Exs. D, E, G), and printouts from the California Secretary of State website of the business entity details for ACE and ESIS (id., Exs. L, M).
Defendants filed a reply in support of the Motion re: Insufficient Service ("Reply for Mot. re: Insufficient Service") on April 11, 2011. (Doc. No. 26.) In support of this Reply, Defendants filed another declaration from Nancy Flores ("N. Flores Decl.") attaching documents from CT, and a declaration from CT process specialist Margaret Wilson ("Wilson Decl."). (Doc. Nos. 26-1, 26-2.)
Defendants filed the Motion re: Failure to Arbitrate on March 25, 2011. (Doc. No. 17.) In support of this motion, Defendants filed a declaration from Defendants' counsel Andrew Gordon ("Gordon Decl.") and a number of supporting exhibits. (Doc. No. 17-1.) The exhibits are:
(1) a copy of one of the Program Agreements (Gordon Decl., Ex. A); (2) a copy of one of the Collateral Agreements (id., Ex. B); (3) a copy of one of the RMSAs (id., Ex. C); (4) a copy of the assumption of insurance obligations between Plaintiff, AMPAM, and ACE (id., Ex. D); a demand for arbitration ("Arbitration Demand") by Defendants on Plaintiff, dated March 21, 2011 (id., Ex. H), as well as a number of documents from the AMPAM's bankruptcy proceedings, emails between ...