Court Opinion

ID: 5126710
Source: CourtListenerOpinion
Date Created: 2021-11-17 18:00:31.251234+00
Date Added: 2024-06-11T08:20:55.977493
License: Public Domain

NOT PRECEDENTIAL

                       UNITED STATES COURT OF APPEALS
                            FOR THE THIRD CIRCUIT

                                    _____________

                                     No. 20-2852
                                    _____________

                                REGINALD BROOME;
                                 CHRIS SALSMAN,
                                            Appellants

                                           v.

      AMERICAN FAMILY LIFE ASSURANCE COMPANY OF COLUMBUS;
           CONTINENTAL AMERICAN INSURANCE COMPANY

                    On Appeal from the United States District Court
                               for the District of Delaware
                        (D.C. Civil Action No. 1-19-cv-1967)
                     District Judge: Honorable Maryellen Noreika
                                     ______________

                              Submitted on July 15, 2021
                                  ______________

          Before: McKEE, GREENAWAY, JR., and RESTREPO, Circuit Judges.

                              (Filed: November 17, 2021)

                                   ______________

                                      OPINION *
                                   ______________

RESTREPO, Circuit Judge

      *
        This disposition is not an opinion of the full Court and, pursuant to I.O.P. 5.7,
does not constitute binding precedent.
       Appellants brought this action against appellees, American Family Life Assurance

Company of Columbus (“Aflac”) and Continental American Insurance Company

(“Continental”), seeking an Order vacating an arbitration award in favor of appellees

(“Award”). On appeal, appellants challenge the District Court’s Order granting

appellees’ motion to dismiss the Complaint. Because we agree with the District Court

that appellants failed to comply with requirements of the Federal Arbitration Act

(“FAA”), 9 U.S.C. § 1, et seq., with respect to service of process on appellees, we affirm.

                                             I.

       Appellants, two former independent contractor insurance agents, contracted with

Aflac and Continental to sell insurance products. These contracts (“Associate’s

Agreements” or “Agreements”) required any dispute between the parties to be submitted

for binding arbitration, and that any arbitration proceeding between the parties “be

covered by, and conducted pursuant to, the FAA.” App. 40, 58. Pursuant to the

Agreements, the arbitrators’ award “shall be binding and conclusive upon all parties

hereto subject only to grounds permitted under the FAA for vacating, correcting, or

modifying an award.” App. 41, 58. Thus, the arbitration proceeding between the parties

as well as the right to seek to vacate the arbitrators’ Award are governed by the FAA.

       Accordingly, after a dispute arose between the parties, they participated in an

arbitration proceeding. At the commencement of the proceeding, all parties and the

arbitrators executed an Amended Scheduling Order providing, “The parties agree that this

arbitration proceeding shall be conducted in accordance with the [FAA], the Arbitration

Agreement contained in Paragraph Ten of [Appellants’] Associate’s Agreements and this

                                             2
Amended Scheduling Order.” ECF (D. Del.) No. 6, Ex. D ¶ 4. After the arbitration

hearing, the arbitrators issued an Award on June 14, 2019, finding in favor of Aflac and

Continental and dismissing appellants’ claims.

       Appellants filed their Complaint in the Delaware Court of Chancery on September

12, 2019 seeking to vacate the Award of the arbitrators. Appellants served the Summons

and Complaint on the Delaware Insurance Commissioner on September 19, 2019. 1 Aflac

and Continental were thereafter served with process through the Delaware Insurance

Commissioner on September 27, 2019, three-and-a-half months after the Award was

issued. 2 Appellees thereafter removed the action to the District Court based on diversity

of citizenship. Aflac and Continental subsequently filed a Motion to Dismiss the

Complaint, which the District Court granted on August 12, 2020.

                                           II. 3

       The District Court granted appellees’ motion to dismiss on two independent

grounds: (1) appellants failed to serve process on Aflac and Continental within the 3-

1
 As the District Court pointed out, under Delaware law, nonresident insurers operating in
Delaware, such as appellees, are subject to the Delaware Insurance Code, including its
procedures for service of process in a legal proceeding, and “[u]nder Delaware law,
Defendants can only properly be served with legal process via service upon the Delaware
Insurance Commissioner, which will then mail the process to Defendants’ registered
agent in the state.” App. 6 (citing 18 Del. C. §§ 524, 525).

2
 Under Delaware law, service upon a nonresident insurer is not complete until three days
after the process is mailed by the department of insurance to the insurer. See 18 Del. C. §
525.
3
  The District Court had jurisdiction under 28 U.S.C. § 1332(a), and we have appellate
jurisdiction under 28 U.S.C. § 1291. The parties agree that we review de novo the
District Court’s grant of the motion to dismiss.

                                             3
month limitation period expressly set forth in the FAA, 9 U.S.C. § 12; and (2) appellants

failed to serve Aflac and Continental with process by the Marshal, as also expressly

required by the FAA, id.

       As to the FAA’s time limitation on service of process, the FAA provides, “Notice

of a motion to vacate, modify, or correct an award must be served upon the adverse party

or his attorney within three months after the award is filed or delivered.” Id. Here, it is

undisputed that appellants did not serve the Summons and Complaint on the Delaware

Insurance Commissioner any earlier than September 19, 2019. 4 Since the Arbitrators

issued an Award on June 14, 2019, even assuming arguendo that service of process was

complete upon serving the Insurance Commissioner under these circumstances, process

was not served within three months after the Award was filed or delivered, and the

District Court properly dismissed the Complaint for failure to comply with the FAA. 5

See Pfannenstiel v. Merrill Lynch, Pierce, Fenner & Smith, 477 F.3d 1155, 1158 (10th

Cir. 2007).

4
  Appellants argued in the District Court that “service was properly accomplished . . . on
September 19, 2019.” ECF (D. Del.) No. 10, at 17; App. 6; see Appellant’s Br. 8
(acknowledging that process “for both [Aflac and Continental] was served on the
Delaware Insurance Commissioner on September 19, 2019”).
5
 The District Court pointed out that, under Delaware law, “it appears that Defendants
were not deemed served” on September 19, 2019 “as Plaintiffs assert,” since “[t]hat is the
date on which the Complaint was served on the Commissioner,” and under Delaware law,
“service upon a nonresident insurer is not complete until three days after the process is
mailed by the department of insurance to the insurer.” App. 6, 7; see supra note 2.
However, the Court correctly concluded, “in any event, even if the Court were to accept
Plaintiffs’ proffered September 19, 2019 service date, that date is still more than three
months after the June 14, 2019 Award being challenged was issued.” App. 7.

                                              4
       In addition to the time limitation of service, the FAA provides that where the

adverse party is a nonresident of the district within which the award was made, then

service “shall” be made “by the marshal of any district within which the adverse party

may be found.” 9 U.S.C. § 12 (emph. added). As the District Court noted, “it is

undisputed that [appellees] are ‘nonresidents’ and that [appellants] did not serve either of

[appellees] via the United States Marshals Service.” App. 5. Thus, the District Court’s

dismissal of the Complaint was proper based on non-compliance with the FAA. 6

       Appellants spend a significant portion of their brief justifying why they initiated

this action in the Delaware Court of Chancery, but in this case, Aflac and Continental do

not dispute that the Delaware state courts had jurisdiction. It is clear, in any event, that

the District Court had jurisdiction based on diversity of citizenship, and that appellees

were well within their rights to remove this case to the District Court on that basis. See

28 U.S.C. §§ 1332(a), 1441(a). Further, to the extent appellants argue that they were in

compliance with the Delaware Uniform Arbitration Act (“DUAA”), 10 Del. C. § 5701, as

explained, under the Associate’s Agreements, the arbitration proceeding between the

parties as well as the right to seek to vacate the arbitrators’ Award are governed by the

6
 Appellants argue that for them to have had the Marshals serve process, service “might
have had to be accomplished in Nebraska, [Aflac’s] state of incorporation, Georgia, its
principal place of business, and for Continental . . . in South Carolina, where it has its
principal place of business.” Appellant’s Br. 34. Thus, appellants do not argue they were
somehow unable to serve Aflac and Continental by the Marshals in compliance with the
FAA, only apparently that it “might have” been inconvenient.

                                              5
FAA. 7 Because of appellants’ failure to comply with the FAA which governs this action,

dismissal of the case was appropriate.

      For the foregoing reasons, we affirm the Order of the District Court.

7
  Section 5702(a) of the DUAA provides that the making of an arbitration agreement
“specifically referencing the [DUAA] and the parties’ desire to have it apply to their
agreement confers jurisdiction on the [Chancery] Court . . . to enter judgment on an
award thereunder . . .” 10 Del. C. § 5702(a) (emph. added). Absent such an express
reference, “any application to the Court of Chancery . . . to vacate or enforce an
arbitrator’s award shall be decided by the Court of Chancery in conformity with the
[FAA], and such general principles of law and equity as are not inconsistent with that
Act.” Id. § 5702(c) (emph. added). Here, the Agreements expressly identified the FAA
as governing.
                                           6