The opinion of the court was delivered by: Hon. Harry D. Leinenweber
MEMORANDUM OPINION AND ORDER
Defendants have filed two motions: one to dismiss Plaintiff's Complaint under FED. R. CIV. P. Rule 12(b)(1) or stay this case and compel arbitration, and one to file a reply longer than 15 pages. The Court grants Defendants' request to file their brief. However, as explained below, it denies their Motion to Dismiss. The Court also denies their alternate request for a stay and order compelling arbitration, but without prejudice to re-file. Cf. Titus v. Swalls, No. 7 C 0614, 2010 WL 4181138, at *1 (S.D. Ill. Oct. 20, 2010). For reasons that will become clear, counsel are reminded of their duty of candor to the Court.
In 2007, Plaintiff Thomas D. Philipsborn Irrevocable Insurance Trust (the "Trust") and Defendants Avon Capital, LLC ("Avon") and Donald Trudeau ("Trudeau") agreed that the Trust would sell three life insurance policies to Avon. Each policy insured the life of Thomas Philipsborn, and the policies provided for a total payout of approximately $20 million. The policies were issued by three different companies: American General Life Insurance Company ("American General") ($5 million); Transamerica Occidental Life Insurance Company ("Transamerica") ($10 million); and AXA Equitable Life Insurance Company ("Axa") ($5 million). The parties apparently agreed to a total purchase price of $4,550,000. The policies were already collateral for outstanding loans; part of the sale agreement required the buyer to pay off these loans with purchase funds. That is, $3,044,837 of the purchase price would pay off the loans, and the remaining $1,505,163 would go to the Trust.
Plaintiff intimates that the American General and Transamerica sales proceeded successfully, and that it transferred all three policies to Avon. The Trust claims, though, that Defendants shorted it $818,513 on the AXA sale. Plaintiff contends that the sale agreement was not reflected in a single written document, but rather in a series of written and oral promises. None of those promises, they claim, included an arbitration agreement.
Although they are discussed in, neither the Complaint nor the Motion to Dismiss, Defendants evidently submitted three nearly identical Purchase Agreements to Plaintiff during the sale process. The Trust executed two and returned them. The third governed the AXA sale and remains unaccounted for. The two Agreements that the Trust signed permit Avon to accept the contract by countermining or paying the purchase price. Each also includes an arbitration clause.
Defendants attached a copy of the American General Purchase Agreement to their Motion to Dismiss. They implied that that contract governed the AXA sale under dispute.
The Trust initiated arbitration in September 2008. In the arbitration Complaint, the Trust alleged that it executed all three Purchase Agreements. It now claims that the Complaint reflects a misunderstanding, and that no AXA Purchase Agreement exists. (That Complaint also alleged that the Transamerica policy was foreclosed upon because Avon never satisfied the loan that it secured. That claim is not at issue here.) The American Arbitration Association notified the parties in September 2009 that arbitration could not proceed until Avon paid its portion of the arbitration fee. Counsel for both sides conferred, and the resulting discussion is the subject of much contention.
In October 2008, Defendants' counsel wrote:
As for the AAA fees, Avon will agree to pay them on or before October 26, with the understanding that any right arbitration will be waived if the fees are not paid. On that point, however, we ought to retain some flexibility such that if we are making tangible progress toward settlement we can revisit the issue. I know that you have said Mr. Philipsborn will not agree to another continuance of the hearing but, as we discussed, future developments might change his view. We should keep the same flexibility in mind when it comes to these fees. If we agree on that, then I believe we are in a position to confirm this with [AAA].
Judging by the piecemeal e-mail evidence appended to the various filings, settlement talks may have continued through April 2010. Apparently, Avon never paid its arbitration fees.
In May 2011, Plaintiff filed this action. Defendants now move to dismiss, or alternatively to stay this case pending arbitration. Plaintiff opposes, claiming that the parties' contract (as evidenced by their communications) does not provide for arbitration. Plaintiff also claims that Defendants waived their right to arbitrate by refusing to pay their fees in the first arbitration. Defendants continue to argue that the parties agreed in writing to arbitrate, and deny that they waived that right, pointing out that settlement talks continued after Plaintiff "withdrew" their claim in arbitration.
The Federal Arbitration Act was enacted to protect arbitration agreements from disfavor and place them on the same footing as other contracts. E.E.O.C. v. Waffle House, Inc., 534 U.S. 279, 288-89 (2002). The FAA obliges courts to stay proceedings and/or compel arbitration if an issue in litigation is covered by a valid arbitration agreement. Van Tassell v. ...