Opinion ID: 2791911
Heading Depth: 2
Heading Rank: 2

Heading: Parallel Proceedings in Delaware

Text: Shortly after the Ramos arbitration began, OSI and the Captives sued Capstone 8 in the Delaware Court of Chancery, claiming the premiums OSI paid to the Captives were too high and seeking, inter alia, a temporary restraining order on the Ramos arbitration. Capstone removed the case to federal court. Capstone then filed a motion to dismiss on the ground that arbitrability of the disputes should be decided by Ramos. OSI argued that the dispute was not covered by a valid arbitration clause. On February 12, 2014, the Delaware district court ruled on the motions. Reading the language in the Billing Guidelines and the Services Agreement together, the court found that the contract was unambiguous and that all disputes—other than Article V disputes and certain fee disputes 9—are “to be resolved by arbitration for which ‘venue and jurisdiction shall be in Delaware.’” Having found that the agreements required arbitration of the dispute, the district court dismissed for lack of subject matter jurisdiction. OSI then initiated arbitration in Delaware and successfully moved the Delaware district court to compel Capstone to join that arbitration. Capstone appealed the district court’s interpretation of the arbitration agreement and its order compelling arbitration in Delaware; the Third Circuit affirmed. Organizational 8 PoolRe is not a party to the Delaware litigation. 9 The Billing Guidelines require fee disputes over the Firm’s legal work to be submitted to “the Houston Bar Association’s Fee Dispute Committee for binding and nonappealable arbitration.” 5 Case: 14-20433 Document: 00512996557 Page: 6 Date Filed: 04/07/2015 No. 14-20433 Strategies, Inc. v. Feldman Law Firm LLP, No. 14-1704, 2015 WL 1285958, at –3 (3d Cir. Mar. 20, 2015). C. The Second Arbitration Demand and the First Award On June 23, three days before the first merits hearing in the Ramos arbitration, Capstone filed a second arbitration demand alleging OSI breached Article V of the Services Agreement. Ramos deferred consideration of the second demand until after the first hearing. On July 9, Ramos found OSI in material breach of the contracts with Capstone, PoolRe, and the Firm; granted declaratory relief to the Firm that it was not liable for professional negligence or breach of fiduciary duty; found PoolRe was properly joined in the arbitration; and granted to Capstone, the Firm, and PoolRe “attorney’s fees, expenses and costs . . . in the amount of $451,244.44, to be divided among themselves as they see fit.” Ramos denied all of OSI’s counterclaims. PoolRe filed a second amended petition to confirm the award with the Texas district court. 10 In the petition, PoolRe sought to compel OSI to join the second arbitration (“Phase II arbitration”). OSI filed a brief opposing the motion to confirm and seeking a temporary restraining order to stay the second petition. On July 29, the Texas district court issued its first memorandum order and opinion addressing these motions. It stayed PoolRe’s motion to confirm pending the Delaware district court’s decision on the motion to compel because the Delaware action was filed first. Reading the Billing Guidelines arbitration clause together with the Services Agreement integration and venue clauses, the Texas district court concluded that “the parties intended to carve out disputes under Article V from the broad grant of arbitrability in the previous 10PoolRe inexplicably filed a motion to confirm the arbitration award in the district court before the arbitration hearing began. 6 Case: 14-20433 Document: 00512996557 Page: 7 Date Filed: 04/07/2015 No. 14-20433 agreements among the parties.” The court thus denied the Capstone Parties’ motion to compel and stayed the Phase II arbitration. Capstone and the Firm joined the motion to confirm on August 26, 2013. OSI later filed a motion to lift the stay on the confirmation proceedings and a motion to vacate the first award. The Texas district court lifted the stay on the confirmation proceedings and OSI filed its response to the motion to confirm. As noted above, the Delaware district court ruled on February 12, dismissing for lack of subject matter jurisdiction. On March 31, 2014, the Texas district court ruled on the pending motions to confirm and vacate the award and to compel Phase II arbitration. The district court found that Ramos exceeded his authority by exercising jurisdiction over and applying AAA rules to the disputes between PoolRe and the Captives. Because this “tainted the entire process” the court vacated the award and denied the motion to confirm. Lastly, the court denied the motion to compel because the live arbitration demand requested relief on the first, and now vacated, award. Capstone and PoolRe now appeal the court’s vacatur of the award and denial of the motion to compel Phase II arbitration.