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Morga & Medlin Insurance Agency v. Qbe Insurance Corporation

June 27, 2012

MORGA & MEDLIN INSURANCE AGENCY,
PLAINTIFF,
v.
QBE INSURANCE CORPORATION, AND DOES 1 TO 100, INCLUSIVE,
DEFENDANTS.



The opinion of the court was delivered by: Dennis L. Beck United States Magistrate Judge

FINDINGS AND RECOMMENDATIONS REGARDING MOTION TO STAY LITIGATION AND TO COMPEL ARBITRATION (Document 7)

Defendant QBE Insurance Corporation ("QBE") filed the instant motion to stay litigation and to compel arbitration on May 17, 2012. The motion was heard on June 22, 2012, before the Honorable Dennis L. Beck, United States Magistrate Judge. Kendall Harrison and Dustin Brown appeared telephonically on behalf of QBE. Richard Crossman appeared on behalf of Plaintiff Morga & Medlin Insurance Agency ("Morga & Medlin").

PROCEDURAL BACKGROUND

Morga & Medlin filed a breach of contract action against QBE and Does 1 to 100 on March 22, 2012, in Fresno County Superior Court. QBE removed the action to this Court on May 10, 2012, based on diversity jurisdiction.

On May 17, 2012, QBE answered the complaint and filed the instant motion for stay and to compel arbitration.*fn1 On June 8, 2012, Morga & Medlin opposed the motion, and QBE replied on June 15, 2012.

The motion was referred to the undersigned pursuant to 28 U.S.C. § 636(b)(1) for Findings and Recommendations to the District Court.

FACTUAL BACKGROUND

On or about September 1, 2008, Morga & Medlin and QBE entered into a written "Agency Agreement." Complaint ¶ 7. Under the Agency Agreement, QBE granted Morga & Medlin authority to act as an agent for QBE to solicit, receive, accept, bind or endorse insurance coverage to the extent authorized by QBE's underwriting guidelines. Complaint ¶ 8. The Agency Agreement provided for Morga & Medlin to be compensated by commissions. Complaint ¶ 9.

The Agency Agreement contained an arbitration provision, which stated in relevant part:

If any dispute or disagreement shall arise in connection with any interpretation of this Agreement, its performance or nonperformance, the parties shall make every effort to meet and settle their dispute in good faith informally. If the parties cannot agree on a written settlement to the dispute within thirty (30) days after it arises, or within a longer period agreed upon by the parties, then the matter in controversy shall be settled by binding arbitration, in accordance with the rules of the American Arbitration Association, and judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction . . . . Exhibit A to Complaint, Article VIII, p. 7. The Agency Agreement also provided that it would "be governed by and construed in accordance with the laws of the State of Wisconsin without giving effect to principle of conflicts of laws." Exhibit A to Complaint, Article XXII, p. 16.

On November 11, 2011, QBE gave Morga & Medlin written notice that the Agency Agreement would be terminated within 120 days, effective March 19, 2012. Complaint ¶¶ 13-14. On November 22, 2011, Morga & Medlin's counsel responded to the notice, arguing that the withdrawal of Morga & Medlin's agency authority during the 120-day notice period effectuated an immediate termination in breach of the Agency Agreement and that Morga & Medlin was entitled to a $150,000 bonus. Declaration of Susan Stephen ("Stephen Dec.") ¶ 3 and Exhibit A. Morga & Medlin's counsel also stated that Morga & Medlin "could immediately file a lawsuit and seek substantial damages," but "hope[d] that the dispute [could] be resolved amicably within the next two weeks." Exhibit A to Stephen Dec.

On December 1, 2011, Susan Stephen, QBE's branch manager for Fresno, replied to the arguments raised in the letter from Morga & Medlin's counsel. Stephen Dec. ¶ 4 and Exhibit B. After receiving this letter, Morga & Medlin's counsel, Michael Renberg, asked to speak with QBE's in-house counsel. Declaration of Michael Renberg ("Renberg Dec.") ¶ 4. QBE complied with the request by having its in-house counsel, Brendan Malley, contact Mr. Renberg. Renberg Dec. ¶ 4. The two men spoke on or about December 12, 2011. Renberg Dec. ¶ 5.

The parties disagree about the substance of the conversation. Mr. Renberg declares:

On or about December 12, 2011, I had a brief telephone conversation with Mr. Malley. I advised Mr. Malley that statements in the notice of termination were in breach of the contract and that my client was entitled to a bonus due in January because the effective date of the termination was not until March 2012. [Mr.] Malley disagreed and simply asked that we send a courtesy copy of the demand for arbitration to his attention. There was no ...


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