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The McDonnel Group, LLC v. Certain Underwriters At Lloyd's, London

United States District Court, E.D. Louisiana

June 28, 2018


         SECTION I

          ORDER & REASONS


         The McDonnel Group LLC (“McDonnel”) is the general contractor for a development project in New Orleans aimed at converting the Maison Blanche Annex building at 939 Iberville Street into residential apartments. The project is owned by French Quarter Apartments Limited Partnership (“French Quarter”) and was insured for the period of November 30, 2015 to August 30, 2017 under a policy issued by Great Lakes Insurance SE, UK Branch, Lloyd's Syndicates CNP 4444 and 958, and Inter Hannover (collectively, “the Underwriters”).

         Between March 30 and April 1, 2017, water intrusion caused significant damage to the project. McDonnel subsequently submitted a claim for the damage to the Underwriters, and a claims adjustment process ensued, the facts of which are in dispute. On March 15, 2018, McDonnel initiated this lawsuit seeking a declaratory judgment that it is entitled to coverage under the policy issued by the Underwriters. McDonnel also alleges breach of contract and insurer bad faith.

         The Underwriters now move to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(3), arguing that the policy contains a valid arbitration agreement between the parties.[1] For the following reasons, the Underwriters' motion is granted.


         The Fifth Circuit “has not [] definitively decided whether Rule 12(b)(1) or Rule 12(b)(3) is the proper rule for motions to dismiss based on an arbitration or forum-selection clause.” Noble Drilling Servs., Inc. v. Certex USA, Inc., 620 F.3d 469, 472 n.3 (5th Cir. 2010). It has “held that a district court lacks subject matter jurisdiction over a case and should dismiss it pursuant to Federal Rule of Civil Procedure 12(b)(1) when the parties' dispute is subject to binding arbitration.” Gilbert v. Donahoe, 751 F.3d 303, 306 (5th Cir. 2014); see also Omni Pinnacle, LLC v. ECC Operating Servs., Inc., 255 Fed. App'x. 24, 26 (5th Cir. 2007) (affirming district court order dismissing case pursuant to Rule 12(b)(1) based on an agreement between the parties requiring arbitration of dispute). However, it has also “accepted Rule 12(b)(3) as a proper method for dismissal based on an arbitration clause.” Gupta v. Lynch, No. 12-1787, 2013 WL 3187273, at *2 (E.D. La. June 20, 2013) (Milazzo, J.) (citing Lim v. Offshore Specialty Fabricators, Inc., 404 F.3d 898, 902 (5th Cir. 2005) (analyzing motion to dismiss based on an arbitration clause under Rule 12(b)(3) and observing that “other circuits agree that a motion to dismiss based on an arbitration or forum selection clause is proper under Rule 12(b)(3)”)).

         On a Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction, the burden of proof is on the party asserting jurisdiction. Ramming v. United States, 281 F.3d 158, 161 (5th Cir. 2001). “Accordingly, the plaintiff constantly bears the burden of proof that jurisdiction does in fact exist.” Id. “In order to bear that burden, the party must prove by a preponderance of the evidence that the court has jurisdiction based on the complaint and evidence.” Gilbert, 751 F.3d at 307. “However, a motion to dismiss for lack of subject matter jurisdiction should be granted only if it appears certain that the plaintiff cannot prove any set of facts in support of his claim that would entitle plaintiff to relief.” Id.

         Similarly, on a Rule 12(b)(3) motion to dismiss for improper venue, the burden is on the plaintiff to show that venue is proper. Summers v. Kenton, OH Police, No. 11-3162, 2012 WL 1565363, at *4 (E.D. La. May 2, 2012) (Africk, J.). The court may consider, in addition to the complaint and its proper attachments, other evidence in the record. Ambraco, Inc. v. Bossclip B.V., 570 F.3d 233, 238 (5th Cir. 2009) (citations omitted). Further, “the court must accept as true all allegations in the complaint and resolve all conflicts in favor of the plaintiff.” Braspetro Oil Servs. Co. v. Modec (USA), Inc., 240 Fed. App'x. 612, 615 (5th Cir. 2007).

         The Court need not decide here whether Rule 12(b)(1) or 12(b)(3) is the more appropriate vehicle for analyzing the Underwriters' motion to dismiss.[2] As explained herein, McDonnel's claims are properly dismissed in favor of arbitration under either rule. See Murchison Capital Partners, LP v. Nuance Commc'ns, Inc., 625 Fed. App'x 617, 627 (5th Cir. 2015) (affirming dismissal of plaintiff's claim on the ground that the defendant “would have been entitled to prevail on a Rule 12(b)(1) or 12(b)(3) motion to dismiss the case because the dispute is covered by the arbitration clause”).


         The policy at issue provides, in pertinent part:

VII. General Conditions. . .

         2. Arbitration:

Any dispute, controversy or claim arising out of, relating to, or in connection with this Policy, shall be finally settled by arbitration. The arbitration shall be conducted in accordance with the International Arbitration Rules of the American Arbitration Association in effect at the time of the arbitration. The seat of the arbitration shall be New York, New York, in the United States of America.[3]

         . . .

7. Conformity to Statute:

         In the event any terms of this Policy are in conflict with the statutes of the jurisdiction where the Insured Property is located, such terms are amended to conform to such statutes.

         The Underwriters insist that McDonnel's claims must be dismissed in favor of arbitration pursuant to the policy's broad arbitration provision, the Federal Arbitration Act (“FAA”), and the United Nations Convention on the Recognition ...

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