United States District Court, D. Colorado
RECOMMENDATION OF UNITED STATES MAGISTRATE
Y. Wang Magistrate Judge
matter is before the court on Defendant Atlantic Building
Systems, LLC's (“Defendant” or
“Armstrong Steel”) Motion to Dismiss or in the
Alternative Motion to Stay (the “Motion to
Dismiss”) [#10, filed September 1, 2016],
which was referred to this Magistrate Judge pursuant to 28
U.S.C. § 636(b)(1), the Order Referring Case dated
August 15, 2016 [#6], and the Memorandum dated October 4,
2016 [#14]. Because Defendant seeks to dismiss the action in
favor of arbitration and only alternatively, seeks to compel
arbitration and stay the matter,  this court treats it as a
dispositive motion. See Vernon v. Qwest Commc'ns
Int'l, Inc., 925 F.Supp.2d 1185, 1189 (D. Colo.
2013) (reviewing a motion to compel as dispositive, despite
the magistrate judge's conclusion otherwise, given the
uncertainty as to whether such motions are dispositive).
But see Adetomiwa v. Coll., No. 15-CV-01413-PAB-NYW,
2015 WL 9500787, at *1 (D. Colo. Dec. 31, 2015) (citing
PowerShare, Inc. v. Syntel, Inc., 597 F.3d 10 (1st
Cir. 2010) (holding that a motion to compel arbitration is
non-dispositive because a district court retains jurisdiction
to review the arbitration award); Virgin Islands Water
& Power Auth. v. Gen. Elec. Int'l Inc., 561 F.
App'x 131, 133 (3d Cir. 2014) (unpublished) (“A
ruling on a motion to compel arbitration does not dispose of
the case, or any claim or defense found therein.”).
the same legal standards apply to this instant Motion to
Dismiss as would apply to a motion to compel arbitration.
Having reviewed the Parties' briefing and the applicable
case law, this court finds that oral argument would not
materially assist in the Recommendation. Accordingly, for the
reasons stated below, this court respectfully RECOMMENDS that
Defendant's Motion to Dismiss be GRANTED.
case arises from an insurance coverage dispute between
Plaintiff James River Insurance Company
(“Plaintiff” or “James River”) and
Armstrong Steel. James River issued professional liability
policies to Defendant beginning September 22, 2011. [#1 at
¶ 8]. James River then issued renewal number 00050092-4,
effective September 22 2015 to May 1, 2016. [#28 at ¶
8]. James River separately issued renewal number 00050092-5,
effective May 1, 2016 to May 1, 2017. [Id.]. In
procuring policy numbers 00050092-4 and 00040092-5, Armstrong
Steel submitted applications for insurance, signed by its CEO
Ethan Chumley, representing that no claims had ever been made
against it and further representing that it was not aware of
any act, error, omission or circumstance which would possibly
result in a claim being made against it. [Id. at
¶¶ 9-10]. James River contends that contrary to
that representation, Armstrong Steel knew of several
lawsuits, but failed to disclose them. [Id.].
Specifically, James River asserts that Defendant was aware
of, and actively participated in, a lawsuit and arbitration
proceeding arising from legal actions taken by Lake Norman
Tennis Center, LLC (“Lake Norman proceedings”).
[Id.]. Armstrong Steel has made a claim for coverage
under the James River policies for the Lake Norman
proceedings. [Id. at ¶ 14].
September 1, 2016, Armstrong Steel moved to dismiss the
action in favor of arbitration. [#10]. Defendant contends
that there are arbitration clauses in the two policies at
issue that require the Parties to submit to arbitration to
resolve this policy coverage dispute. [Id.].
Plaintiff disagrees, arguing that the endorsements to the
policies contemplate litigation in court, not arbitration.
[#13 at 6-7]. James River further contends that even if the
arbitration clause is binding on the Parties, it does not
require arbitration, but rather is permissive. [Id.
at 7]. In Reply, Defendant argues that the arbitration clause
is mandatory and the Service of Suit endorsements apply only
“in the event of the failure of the Company to pay any
amount claimed to be due hereunder.” [#16 at 5-6]. This
court now turns to the interpretation of the relevant policy
Federal Arbitration Act (“FAA”), 9 U.S.C. §
4, does not create an independent basis for federal subject
matter jurisdiction. Moses H. Cone Mem'l Hosp. v.
Mercury Constr. Corp., 460 U.S. 1, 26 n.32 (1983);
P&P Industries, Inc. v. Sutter Corp., 179 F.3d
861, 866 (10th Cir. 1999). Therefore, this court first
preliminarily considers whether there is subject matter
jurisdiction for this action. In the Complaint, Plaintiff
contends that it is an Ohio corporation and has a principal
place of business in Virginia. [#1 at ¶ 1]. It further
contends that Armstrong Steel is a limited liability company
whose members are not citizens or residents of Ohio or
Virginia and has a principal place of business in Colorado.
[Id. at ¶ 2]. In the pending Motion to Dismiss,
Defendant does not dispute the allegations about its
citizenship, nor does it move to dismiss for lack of
diversity jurisdiction. [#10]. This court takes judicial
notice that in other matters before this court, Armstrong
Steel has identified itself as a Delaware corporation with
its principal place of business in Colorado. See
[General Steel Domestic Sales, LLC v. Chumley, No.
14-cv-01932-REB-CBS, ECF No. 1 at ¶ 6, 57 at ¶ 6].
Thus, this court is satisfied of its jurisdiction pursuant to
diversity of citizenship under 28 U.S.C. §
is well established that “arbitration is a matter of
contract and a party cannot be required to submit to
arbitration any dispute which he has not agreed so to
submit.” Howsam v. Dean Witter Reynolds, Inc.,
537 U.S. 79, 84 (2002) (citation omitted). Accordingly, this
court will apply the long-settled two-step inquiry for
whether to enforce an arbitration clause: (1) did the Parties
enter an agreement to arbitrate; and (2) if so, does the
dispute at issue fall within the scope of the arbitration
agreement. See, e.g., National American
Insurance Co. v. SCOR Reinsurance Co., 362 F.3d 1288,
1290 (10th Cir. 2004); Williams v. Imhoff,
203 F.3d 758, 764 (10th Cir. 2000).
the parties clearly and unmistakably provide otherwise, the
question of whether the parties agreed to arbitrate is to be
decided by the court, not the arbitrator.” Riley
Manufactoring Co., Inc. v. Anchor Glass Container Corp.,
157 F.3d 775, 779 (10th Cir. 1998). Where the parties dispute
whether an arbitration agreement exists, the party moving to
compel arbitration bears a burden similar to what a movant
for summary judgment faces. Hancock v. Am. Tel. &
Tel. Co., Inc., 701 F.3d 1248, 1261 (10th Cir.
2012). If the moving party carries this burden, the
burden shifts to the non-moving party to show a genuine issue
of material of fact about the formation of the agreement to
addition, Section 3 of the FAA provides for a stay of this
action pending the ultimate outcome of arbitration:
If any suit or proceeding be brought in any of the courts of
the United States upon any issue referable to arbitration
under an agreement in writing for such arbitration, the court
in which such suit is pending, upon being satisfied that the
issue involved in such suit or proceeding is referable to
arbitration under such an agreement, shall on application of
one of the parties stay the trial of the action until such
arbitration has been had in accordance with the terms of the
agreement, providing the applicant for the stay is not in
default in proceeding with such arbitration.
9 U.S.C. § ...