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Gramercy Insurance Co. v. Contractor's Bonding, Ltd.

United States District Court, W.D. Texas, Austin Division

January 19, 2018




         BE IT REMEMBERED on this day the Court reviewed the file in the above-styled cause, and specifically Plaintiff Gramercy Insurance Company (Gramercy)'s Motion to Remand [#10], Defendant Contractor's Bonding, Ltd. (CBL)'s Response [#13] in opposition, and Gramercy's Reply [#15] in support, as well as CBL's Motion to Transfer and, in the Alternative, Motion to Compel Arbitration and Stay Proceedings [#6], Gramercy's Response [#12] in opposition, and CBL's Reply [#14] in support. Having reviewed the documents, the relevant law, the arguments of counsel, and the case file as a whole, the Court now enters the following opinion and orders.


          This action arises from a reinsurance agreement dispute between Gramercy and CBL. In July 2007, CBL entered into a reinsurance agreement with Gramercy. Suppl. Mot. Transfer [#8-1] Ex. B at 15 (Reinsurance Agreement). The Reinsurance Agreement contains both arbitration and forum selection clauses. The arbitration clause states "[a]ny and all disputes or differences arising out of the Agreement, including its formation and validity, shall be submitted to binding arbitration." Id. at 10. The forum selection clause states "[u]nless prohibited by law, the Superior Court of the State of Georgia, Gwinnett County, and the applicable United States District Court shall have exclusive jurisdiction over any and all court proceedings to compel, stay or enjoin arbitration." Id. at 11.

         After the parties executed the Reinsurance Agreement, Gramercy began to experience financial difficulties, and in December 2012, Gramercy was placed in receivership in state court. Resp. Mot. Transfer [#12] at 2. The Texas Commissioner of Insurance, in its capacity as receiver, designated Resolution Oversight Corporation (Resolution Oversight) as the special deputy receiver for Gramercy. Id. As special deputy receiver, Resolution Oversight is authorized to stand in the shoes of and exercise the powers of the receiver. Id. [#12-2] Ex. 1 at 1-2 (Stroud Aff).

         Under Texas Insurance Code § 443.201, the receiver (or special deputy receiver) may issue a written demand to any person in possession of property rightfully belonging to the receivership estate. Tex. Ins. Code § 443.201(a). The person in possession of the property must assert any right to retain the property by filing a pleading with the receivership court within twenty days of receipt of the written demand. Id. If the person in possession of the property fails to deliver the property or file the pleading within the twenty-day period, the special deputy receiver may petition the receivership court to issue a summary turnover order directing the immediate delivery of the property to the receiver and finding the person has waived all claims of right to the property. Id. § 443.201(d).

         On May 12, 2017, in its capacity as special deputy receiver, Resolution Oversight emailed a written demand to CBL alleging CBL owed Gramercy upwards of $1 million under the terms of the Reinsurance Agreement. Stroud Aff. at 2; Not. Removal [#1-1] Ex. A at 3 (Original Pet.). CBL did not respond or deliver the requested funds within twenty days of receiving the demand. Stroud Aff. at 2. As a result, on June 22, 2012, Resolution Oversight petitioned the receivership court to issue an order finding CBL had waived its right to the funds and directing CBL to deliver the funds to Resolution Oversight. Id. at 2-3.

         On August 1, 2017, CBL made a special appearance in state court and filed a motion to quash service of process. Mot. Remand [#10] at 3. The next day, CBL removed the action to federal court.[1] Not. Removal [#1]. CBL now moves to transfer this case to the Northern District of Georgia, Atlanta Division or, in the alternative, to compel arbitration. Mot. Transfer [#6] at 3 n.3. In turn, Gramercy moves for remand to state court. Mot. Remand [#10]. Following a hearing before this Court on October 25, 2017, the pending motions are ripe for review.


          I. Motion to Remand

         Gramercy argues the Court should abstain from exercising jurisdiction over this matter under Burford v. Sun Oil Co., 319 U.S. 315 (1943). Mot. Remand [#10] at 5-10. Alternatively, Gramercy argues this Court is required to remand under the doctrine of equitable restraint set forth in Younger v. Harris, 401 U.S. 37 (1971). Id. The Court addresses these arguments in turn.

         A. Burford Abstention

         Burford abstention is appropriate only when the district court has discretion to grant or deny relief. Munich Am. Reinsurance Co. v. Crawford, 141 F.3d 585, 589 (5th Cir. 1998) (citing Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 716-18 (1996)). CBL argues Burford abstention is inappropriate because under the Federal Arbitration Act (FAA) this Court lacks discretion with respect to CBL's pending motion to compel arbitration. Resp. Mot. Remand [#13] at 3; see generally 9 U.S.C. § 4 ("[U]pon being satisfied that the making of the agreement for arbitration ... is not in issue, the court shall make an order directing the parties to proceed to arbitration .. . ." (emphasis added)). Gramercy disagrees and argues (1) the FAA is inapplicable because it is reverse preempted by the McCarron-Ferguson Act; and (2) the FAA is inapplicable because CBL waived its right to arbitration. Mot. Remand [#10] at 9-10.

         1. ...

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