Case: 23-30171 Document: 84-1 Page: 1 Date Filed: 03/04/2024
United States Court of Appeals
for the Fifth Circuit
____________
United States Court of Appeals
Fifth Circuit
No. 23-30171
____________ FILED
March 4, 2024
Bufkin Enterprises, L.L.C., Lyle W. Cayce
Clerk
Plaintiff—Appellee,
versus
Indian Harbor Insurance Company; QBE Specialty
Insurance Company; Steadfast Insurance Company;
General Security Indemnity Company of Arizona;
United Specialty Insurance Company; Lexington
Insurance Company; Safety Specialty Insurance
Company; Old Republic Union Insurance Company,
Defendants—Appellants.
______________________________
Appeal from the United States District Court
for the Western District of Louisiana
USDC No. 2:21-CV-4017
______________________________
Before Willett, Wilson, and Ramirez, Circuit Judges.
Per Curiam: *
In a suit arising from an insurance dispute, the district court abused
its discretion by denying a group of domestic insurance companies’ motion
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*
This opinion is not designated for publication. See 5th Cir. R. 47.5.
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to compel arbitration and stay the ongoing litigation. We therefore reverse
and remand with instructions to grant the motion. We deny as moot the
insured’s motion to certify the question of whether Louisiana Revised
Statutes § 22:868 prohibits enforcement of arbitration clauses in insurance
contracts for surplus lines insurers.
I.
In May 2020, Bufkin Enterprises, L.L.C. purchased surplus lines
insurance coverage issued by ten insurers—eight domestic (U.S.-based) and
two foreign (internationally-based)—to insure Bufkin’s property in
Louisiana. 1 The policy’s declaration page lists individual policy numbers
assigned to each of the ten insurers. The policy’s contract allocation
endorsement also states that “this contract shall be constructed as a separate
contract between [Bufkin] and each of the [insurers].”
Notably, the policy includes an arbitration provision:
All matters in difference between [Bufkin] and the
[insurers] . . . in relation to this insurance, including its
formation and validity, and whether arising during or after the
period of this insurance, shall be referred to an Arbitration
Tribunal[.]
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1
The domestic insurers, appellants here, are Indian Harbor Insurance Company;
QBE Specialty Insurance Company; Steadfast Insurance Company; General Security
Indemnity Company of Arizona; United Specialty Insurance Company; Lexington
Insurance Company; Safety Specialty Insurance Company; and Old Republic Union
Insurance Company. The foreign insurers are Certain Underwriters at Lloyd’s London
and HDI Global Specialty SE. The parties disagree whether the policy amounts to a single,
all-encompassing agreement between the domestic and foreign insurers and Bufkin, or
discrete agreements between each insurer and Bufkin. As detailed herein, we need not
definitively settle this disagreement, but we refer to a singular policy in this opinion to
simplify the discussion. The policy provision at issue, the arbitration clause, is identical
across the agreement(s).
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The provision states that any “[a]rbitration shall be in New York and the
Arbitration Tribunal shall apply the law of New York[.]” It further provides
that the Arbitration Tribunal’s decision “shall be binding” and enforceable
“in a court of competent jurisdiction[.]”
In August 2020, Hurricane Laura hit Calcasieu Parish, damaging an
apartment complex Bufkin owned in Lake Charles, Louisiana. Bufkin
thereafter reported the loss to the insurers collectively. In its proof of loss
correspondence, Bufkin did not differentiate between coverage obligations
owed, or actions undertaken, by the domestic and foreign insurers. Instead,
Bufkin’s proof of loss stated that Bufkin “entered into this contract of
insurance with the reasonable expectation that the [i]nsurers would abide by
the terms of their policy and pay losses without delay.” And further, that
“[t]he [i]nsurers were paid to cover” Bufkin’s properties. Despite the
insurers’ issuing “an advance payment of $100,000.00,” Bufkin’s proof of
loss accused “[t]he [i]nsurers”—as a group—of delay, withholding payment
due under the policy, and causing interruptions to Bufkin’s business.
Unable to secure resolution of its claim, Bufkin filed this lawsuit in
Louisiana state court for declaratory judgment, breach of contract, and
breach of the duty of good faith and fair dealing. Initially, Bufkin sued only
the domestic insurers. However, Bufkin filed an amended petition that
named the foreign insurers as defendants. This amended petition was
expressly filed for the purpose of then dismissing the foreign insurers “with
prejudice[,] foregoing [sic] any rights against them[.]” It alleged that the
foreign insurers were culpable of the very same conduct Bufkin had originally
imputed to the domestic insurers. To illustrate, Bufkin’s original petition
alleged that “[the domestic insurers] breached the terms of the policy . . . by
failing to pay for all benefits due to [Bufkin].” The amended petition added
the foreign insurers as defendants but insisted that “[a]ll other allegations
remain the same,” such that Bufkin alleged that all the insurers engaged in
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the same conduct. Consistent with its amended petition, Bufkin
contemporaneously filed a separate motion for dismissal with prejudice of the
foreign insurers, which the state court granted.
The domestic insurers then removed the case to the Western District
of Louisiana. Once in federal court, the domestic insurers moved to compel
arbitration under the Federal Arbitration Act (FAA) and the Convention on
the Recognition and Enforcement of Arbitral Awards of June 10, 1958 (the
Convention) and moved to stay the court proceedings. The district court
denied the motion, reasoning that the Convention did not apply (1) because
the domestic insurers were not parties to an arbitration agreement with a
foreign-citizen party, given that each domestic insurer “[had] a separate
contract with the insured”; and (2) equitable estoppel could not be a basis to
invoke the Convention because Bufkin’s claims were asserted only against
the domestic insurers after the foreign insurers had been dismissed with
prejudice. Additionally, the district court concluded that the FAA did not
compel arbitration because Louisiana Revised Statutes § 22:868(A)(2) 2
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2
La. Rev. Stat. § 22:868 states, in relevant part:
A. No insurance contract delivered or issued for delivery in this state
and covering subjects located, resident, or to be performed in this
state . . . shall contain any condition, stipulation, or agreement . . .
(2) Depriving the courts of this state of the jurisdiction or venue of
action against the insurer.
....
D. The provisions of Subsection A of this Section shall not prohibit a
forum or venue selection clause in a policy form that is not subject to
approval by the Department of Insurance.
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“reverse-preempted” the FAA under the McCarran-Ferguson Act, 15
U.S.C. § 1012(b). 3 The domestic insurers appealed.
II.
We review de novo the denial of a motion to compel arbitration and
stay proceedings pending arbitration. Noble Cap. Mgmt., L.L.C. v. US Cap.
Glob. Inv. Mgmt., L.L.C., 31 F.4th 333, 336 (5th Cir. 2022) (citation omitted).
“We review for abuse of discretion a district court’s determination of
whether equitable estoppel may be invoked to compel arbitration.” Auto
Parts Mfg. Miss., Inc. v. King Const. of Houston, L.L.C., 782 F.3d 186, 196 (5th
Cir. 2015) (citing Bridas S.A.P.I.C. v. Gov’t of Turkmenistan, 345 F.3d 347,
360 (5th Cir. 2003)). “To constitute an abuse of discretion, the district
court’s decision must be either premised on an application of the law that is
erroneous, or on an assessment of the evidence that is clearly erroneous.”
Grigson v. Creative Artists Agency, L.L.C., 210 F.3d 524, 528 (5th Cir. 2000).
III.
The parties spar over several issues, including: (1) whether the
Convention applies to compel arbitration—and underlying that question,
whether Bufkin had a series of discrete contracts with each insurer, as the
district court concluded, or had one overarching policy agreement to which
all the insurers were parties; (2) whether the district court abused its
discretion by failing to apply equitable estoppel to compel arbitration, even
assuming the insurers’ contracts with Bufkin were separate; and (3) whether
the district court erred in holding that Louisiana Revised Statutes § 22:868
overrode the arbitration agreements in the surplus lines insurance policies at
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3
The McCarran-Ferguson Act provides that federal statutes not specifically
related to “the business of insurance” cannot preempt state statutes enacted “for the
purpose of regulating the business of insurance.”
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issue via the McCarran-Ferguson Act. Because it is dispositive, we focus on
the domestic insurers’ argument that the district court abused its discretion
by failing to apply equitable estoppel to compel arbitration under the
Convention. The domestic insurers assure that this is so even if the district
court correctly determined that the insurers’ contracts with Bufkin—
domestic and foreign—are separate contracts. We agree.
The Convention is an international treaty that provides citizens of
signatory countries the right to enforce arbitration agreements. Its purpose
is “to encourage the recognition and enforcement of commercial arbitration
agreements in international contracts and to unify the standards by which
agreements to arbitrate are observed and arbitral awards are enforced in the
signatory countries.” Scherk v. Alberto-Culver Co., 417 U.S. 506, 520 n.15
(1974). The FAA codifies the Convention, providing that it “shall be
enforced in United States courts in accordance with [the FAA’s terms].” 9
U.S.C. § 201.
“In determining whether the Convention requires compelling
arbitration in a given case, courts conduct only a very limited inquiry.”
Freudensprung v. Offshore Tech. Servs., Inc., 379 F.3d 327, 339 (5th Cir. 2004)
(citation omitted). “[A] court should compel arbitration if (1) there is a
written agreement to arbitrate the matter; (2) the agreement provides for
arbitration in a Convention signatory nation; (3) the agreement arises out of
a commercial legal relationship; and (4) a party to the agreement is not an
American citizen.” Id. (citation and internal quotation marks omitted).
Once these factors are met, a district court must order arbitration “unless it
finds that the [arbitration] agreement is null and void, inoperative or
incapable of being performed.” Id. (citation omitted). If we were to conclude
that there was one overarching policy agreement to which all the insurers
were parties, then the above factors would plainly be met. There is a written
arbitration agreement to arbitrate in New York, which is located in a
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Convention signatory nation, the agreement arises out of a commercial legal
relationship, and some of the insurer-parties are not American citizens. Id.
On the other hand, if we were to conclude that there were ten separate
contracts, the contracts between Bufkin and the domestic insurers would not
include a party that is not an American citizen, so those contracts would fail
to meet the fourth factor. Id. In that instance, the only signatories to the
arbitration agreements subject to the Convention would be Bufkin and the
foreign insurers. However, the domestic insurers argue that even if we held
there were ten separate contracts, arbitration must still be compelled under
the doctrine of equitable estoppel.
As a general matter, Louisiana courts have applied equitable estoppel
to enforce arbitration agreements. See, e.g., Pontchartrain Nat. Gas Sys. v.
Tex. Brine Co., 2018-1249 (La. App. 1 Cir. 12/30/20), 317 So. 3d 715, 743–45
(citing and applying Grigson). Numerous federal district courts applying
Louisiana law have likewise held that equitable estoppel is appropriate to
compel arbitration under the Convention. See, e.g., Thumbs Up Race Six,
LLC v. Indep. Specialty Ins. Co., No. 22-2671, 2023 WL 4235565, at *3 (E.D.
La. June 28, 2023) (collecting cases). “The linchpin for equitable estoppel is
equity—fairness.” Grigson, 210 F.3d at 528; Sturdy Built Homes, L.L.C v.
Carl E. Woodward L.L.C., 11-0881 (La. App. 4 Cir. 12/14/11), 82 So. 3d 473,
478 (quoting same). And this court has held that equitable estoppel could, in
either of two scenarios, allow a non-signatory to a contract with an arbitration
clause to compel arbitration with a signatory. Grigson, 210 F.3d at 527–28.
The first scenario is when a signatory to an agreement containing an
arbitration clause must rely on the terms of the written agreement in asserting
its claims against the non-signatory. Id. at 527. The second is when a
signatory to a contract containing an arbitration clause raises allegations of
substantially “interdependent and concerted misconduct by both the non-
signatory and one or more of the signatories to the contract.” Pontchartrain
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Nat. Gas Sys., 317 So. 3d at 743 (citing Grigson, 210 F.3d at 527). If we
presume there are ten separate contracts, the signatories to the arbitration
agreements subject to the Convention are Bufkin and the foreign insurers.
The domestic insurers are non-signatories. Thus, we focus on the second
scenario. 4
Two cases are especially instructive in determining whether a
signatory has alleged “interdependent and concerted misconduct” under
Grigson. The first is Pontchartrain Natural Gas Systems. There, the state
court, applying Grigson, concluded that “after a thorough review of the
record,” the allegations of tortious conduct alleged against multiple parties—
“although . . . carefully pl[ed]”—were not “wholly separate and apart from
each other.” 317 So. 3d at 744. Indeed, the court noted that it would be
“nearly impossible to differentiate where one entity’s fault would end and
another would begin.” Id. Thus, the state court held “that the allegations of
misconduct . . . [we]re concerted and interdependent” such that all claims
were “subject to consideration by the arbitration panel.” Id.
The second case is Kronlage Family Ltd. P’ship v. Indep. Specialty Ins.
Co., 651 F. Supp. 3d 832, 841–42 (E.D. La. 2023), where the district court
applied equitable estoppel to compel arbitration under the Convention after
the plaintiff failed to differentiate between conduct of foreign and domestic
insurers. Crucial to the Kronlage court’s conclusion was that the petition
“contain[ed] repeated allegations of substantially interdependent conduct”
and also referred to the insurers “collectively and ma[de] allegations against
both[.]” Id. at 842. That court found it compelling that the petition alleged,
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4
While it is true that “equitable estoppel is much more readily applicable when the
case presents both independent bases,” Grigson, 210 F.3d at 527, this court has upheld a
district court’s application of equitable estoppel in the arbitration context under only the
second prong as well. E.g., Brown v. Pac. Life Ins. Co., 462 F.3d 384, 398 (5th Cir. 2006).
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inter alia, that the defendants “collectively insured the policy” and
“received [p]laintiff’s insurance claim.” Id.
Here, the domestic insurers maintain that Bufkin satisfies Grigson,
warranting arbitration under the Convention through equitable estoppel,
because “Bufkin has raise[d] allegations of substantially interdependent and
concerted misconduct by both the [d]omestic [i]nsurers and the [f]oreign
[i]nsurers,” i.e., non-signatories and signatories to the Convention-covered
arbitration clauses. They point to Bufkin’s amended petition, which
expressly alleges that the foreign and domestic insurers collectively engaged
in the exact same conduct. Further, Bufkin submitted its insurance claim to
all the insurers, domestic and foreign alike, and Bufkin’s formal proof of loss
ascribed to the insurers, as a group, a common course of conduct.
Bufkin makes three primary points in response. First, the cases citing
Grigson’s “intertwined” language “turn on a ‘signatory’ to a contract raising
claims of intertwined misconduct, something not present in this case.”
Second, Bufkin contends that its “submission of loss” does not “change[]
the contracts and separate coverage” of the insurers; in any event, Bufkin’s
naming of all the insurers on its submission was simply Bufkin’s attempt to
“follow[] instructions[.]” Finally, Bufkin argues that to allow the domestic
insurers to arbitrate under the Convention is to “circumvent . . . Louisiana
law through equitable estoppel.”
On the record before us, Bufkin has alleged substantially
interdependent and concerted conduct by the domestic and foreign insurers.
Bufkin’s amended petition does not differentiate between conduct of foreign
and domestic insurers. See Kronlage, 651 F. Supp. 3d at 842. Nor does it
allege facts to suggest that the insurers’ conduct was “wholly separate and
apart from each other.” Pontchartrain Nat. Gas Sys., 317 So. 3d at 743.
Indeed, it alleges the opposite: Bufkin added the foreign insurers as
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defendants but made clear that “[a]ll other allegations remain[ed] the same.”
Put differently, Bufkin’s amended petition alleges that the foreign and
domestic insurers collectively engaged in the same culpable conduct.
Further, Bufkin’s submission of its insurance claim to all the insurers—
pursuant to “instructions” or not—shows that the insurers were collectively
engaging in interdependent conduct in processing Bufkin’s claim.
We also conclude that, as in Thumbs Up Race Six and Kronlage,
equitable estoppel is appropriate to compel arbitration under the Convention.
It is of no moment that Bufkin is no longer pursuing claims against the foreign
insurers; Grigson does not require that. Grigson simply asks whether the
signatory to the arbitration agreement (here, Bufkin) raises allegations of
substantially interdependent and concerted misconduct by both a non-
signatory (the domestic insurers) and one or more signatories to the contract
(the foreign ones). See Pontchartrain Nat. Gas Sys., 317 So. 3d at 743–45
(citing Grigson, 210 F.3d at 527). Bufkin has. As the master of its complaint,
see Cody v. Allstate Fire & Cas. Ins. Co., 19 F.4th 712, 715 (5th Cir. 2021),
Bufkin named the foreign insurers as defendants and accused them of the
same malfeasance as the domestic insurers. This, coupled with Bufkin’s own
conduct in submitting and negotiating its submission of loss, satisfies Grigson.
While Bufkin was certainly free to name and then dismiss the foreign
insurers, the district court was not free to disregard them in considering the
domestic insurers’ motion to compel arbitration. Yet in focusing on Bufkin’s
dismissal of the foreign insurers, the district court neglected to consider the
foreign insurers’ part in the seamless coverage agreement struck by the
parties, and Bufkin’s interactions with the insurers. Honing in, that coverage
arrangement included the arbitration clause that afforded the insurers—
foreign and domestic—“predictability in resolving disputes dealing with the
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substantial risks presented by a surplus lines insurance policy.” 5 The district
court failed to apply Grigson’s “interdependent and concerted misconduct”
test. This was an abuse of discretion. See Grigson, 210 F.3d at 528 (“To
constitute an abuse of discretion, the district court’s decision must be either
premised on an application of the law that is erroneous, or on an assessment
of the evidence that is clearly erroneous.”). The upshot is that indulging
Bufkin’s pleading-and-then-dismissing gamesmanship by denying arbitration
turns on its head the axiom that “[t]he linchpin for equitable estoppel is
equity—fairness.” Id.
Further, and contrary to Bufkin’s contention, this conclusion does not
run “against Louisiana public policy.” The Convention is an exception to
Louisiana’s general bar on policy terms that deprive its state courts of
jurisdiction and venue in actions against insurers. See La. Rev. Stat.
§ 22:868. Indeed, this court has already held that § 22:868 does not reverse
preempt the Convention because the McCarran-Ferguson Act does not apply
to treaties. Safety Nat’l Cas. Corp. v. Certain Underwriters at Lloyd’s London,
587 F.3d 714, 718 (5th Cir. 2009) (en banc). In other words, § 22:868 does
not come into play. Instead, the arbitration agreement between the parties is
subject to the Convention through equitable estoppel. There is no tension
between this position and Louisiana law.
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5
The domestic insurers maintain that surplus lines insurance is “specialized
coverage written by unlicensed, nonadmitted insurance companies to cover specific
extraordinary items and uncommon or high risks that are generally not covered by
traditional insurance companies under standard policies.” In such a high-risk enterprise,
arbitration under the Convention was a material benefit of the insurers’ bargain with
Bufkin.
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IV.
Before concluding, we turn to Bufkin’s motion to certify to the
Louisiana Supreme Court “[w]hether La. R.S. § 22:868 prohibits the
enforcement of arbitration clauses in insurance contracts for surplus lines
insurers.” Having resolved this appeal on Grigson estoppel grounds,
§ 22:868’s impact is not a live issue in this dispute. Thus, Bufkin’s motion
to certify is denied as unnecessary.
V.
For the reasons set forth, we REVERSE the district court’s denial of
the domestic insurers’ motion to compel arbitration and stay this litigation
and REMAND with instructions to grant the motion. We also DENY AS
MOOT Bufkin’s motion to certify.
12