Schwartz v. 4 Ever Life International Limited ( 2021 )

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 Todd Schwartz, No. CV-20-02002-PHX-DJH 10 Plaintiff, ORDER 11 v. 12 4 Ever Life International Limited, et al., 13 Defendants. 14 15 Pending before the Court is Defendants 4 Ever Life International Limited, Blue 16 Cross and Blue Shield Association, and Worldwide Insurance Services, LLC’s 17 (collectively “Defendants”) Motion to Compel Arbitration. (Doc. 21). Plaintiff filed a 18 Response (Doc. 24), and Defendants filed a Reply. (Doc. 25). The matter is fully briefed. 19 The Court now issues its ruling. 20 I. Background 21 Plaintiff Todd Schwartz’s claims originate from a travel insurance policy his wife, 22 Yoko Nishiguchi, applied for on June 26, 2018. (Doc. 24 at 2). After purchasing a policy 23 online (the “Policy”), Mr. Schwartz suffered an injury overseas. (Doc. 11 at ¶ 11). He filed 24 a claim and later appealed the denial of his claim. (Docs. 24 at 3; 25 at 3). Ultimately, he 25 was denied coverage. He brings three claims against Defendants for breach of contract, 26 bad faith, and aiding and abetting. (Doc. 11). On December 28, 2020, Defendants 4 Ever 27 Life International Limited (“4 Ever Life”), Blue Cross and Blue Shield Association 28 (“BCBS”), and Worldwide Insurance Services, LLC (“Worldwide”), sought to enforce the 1 arbitration clause in the Policy by filing a Motion to Compel Arbitration. (Doc. 21). The 2 parties now dispute whether the Policy’s arbitration clause is enforceable. (Docs. 21; 24; 3 25). 4 When applying for the Policy online, Mrs. Nishiguchi began by reviewing the 5 benefits and entering the required background and contact information. (Doc. 24 at 2). The 6 website then navigated her to a section titled “Terms of Policy Issuance/Access 7 Agreement.” (Doc. 24-2 at 6). In this section, applicants are required to acknowledge and 8 consent to three agreements: Key Plan Provisions, Access Agreement, and Terms of Policy 9 Issuance. (Id.) The Key Plan Provisions require the applicant to certify that the applicant 10 has primary health insurance. (Id.) The Access Agreement sets out terms for use of the 11 website. (Id. at 8). The Terms of Policy Issuance informs the participant who the policy is 12 issued by and states that the quoted price includes a membership fee. (Id. at 6). The website 13 required Nishiguchi to acknowledge and consent to the three agreements before she could 14 “continue to payment.” (Id. at 7). None of the agreements contained an arbitration clause. 15 (Doc. 24 at 2). Thus, Mrs. Nishiguchi was not required to read, acknowledge, or agree to 16 an arbitration clause before proceeding to payment. (Id.) 17 Elsewhere on the site, however, and accessible to Mr. Schwartz and Mrs. 18 Nishiguchi, was a link: “Plan Description download.pdf.” (Doc. 24-3 at 2). The link leads 19 to an “Individual Certificate of Coverage [that] describes the main features” of the Policy. 20 (Id. at 4). The Policy names 4 Ever Life as the insurer. (Id. at 5). It names Worldwide as 21 the administrator. (Id.) It also states that 4 Ever and Worldwide are independent licensees 22 of BCBS. (Id.) 23 The Policy’s description entails who is eligible for coverage, how the plan works, 24 what the plan pays, and what the plan does not pay for. (Id. at 4). The last section, “General 25 Provisions,” contains instructions on filing claims and appealing coverage decisions. (Id. 26 at 23–24). Under “General Provisions” is a subsection titled “Grievances.” (Id. at 23). 27 Under “Grievances” is a subsection titled “Dispute Resolution.” (Id. at 25). The third 28 paragraph under this subsection has an arbitration clause. (Id.) It reads as follows: 1 All grievances not resolved by the Insurer’s grievance procedures, and all other controversies and claims arising out 2 of or relating to the Policy, or any coverage provided 3 thereunder, shall be determined by final and binding arbitration administered by the American Arbitration Association 4 (“AAA”) under its Commercial Arbitration Rules and 5 Mediation Procedures (“Commercial Rules”) . . . The award rendered by the arbitrator shall be final, non-reviewable and 6 non-appealable and binding on the parties and may be entered 7 and enforced in any court having jurisdiction. There shall be one arbitrator agreed to by the parties within twenty (20) days 8 of receipt by respondent of the request for arbitration or in 9 default thereof appointed by the AAA in accordance with its Commercial Rules. The seat or place of arbitration shall be 10 Philadelphia, Pennsylvania. 11 (Id.) 12 II. Legal Standard 13 The Federal Arbitration Act (“FAA”), 9 U.S.C. § 2, states that arbitration 14 agreements “shall be valid, irrevocable, and enforceable, save upon such grounds as exist 15 at law or in equity for the revocation of any contract.” The savings clause of § 2 “permits 16 agreements to arbitrate to be invalidated by generally applicable contract defenses, such as 17 fraud, duress, or unconscionability.” AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 18 339 (2011) (quoting Doctor’s Assocs., Inc. v. Casarotto, 517 U.S. 681, 687 (1996)) 19 (internal quotation marks omitted). 20 The Supreme Court interprets § 2 as a “congressional declaration of a liberal federal 21 policy favoring arbitration agreements, notwithstanding any state substantive or procedural 22 policies to the contrary.” Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 23 1, 24 (1983). The FAA “leaves no place for the exercise of discretion by a district court, 24 but instead mandates that district courts shall direct the parties to proceed to arbitration on 25 issues as to which an arbitration agreement has been signed.” Chiron Corp. v. Ortho 26 Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000) (quoting Dean Witter Reynolds 27 Inc. v. Byrd, 470 U.S. 213, 218 (1985)). “The court’s role under the [FAA] is therefore 28 limited to determining (1) whether a valid agreement to arbitrate exists and, if it does, (2) 1 whether the agreement encompasses the dispute at issue.” Chiron Corp., 207 F.3d at 1130. 2 If both questions yield positive answers, then the FAA “requires the court to enforce the 3 arbitration agreement in accordance with its terms.” Id. Accordingly, the Court will begin 4 by evaluating whether the Policy contained a valid arbitration clause. 5 III. Validity of Arbitration Clause 6 Mr. Schwartz brings three arguments challenging the validity of the arbitration 7 clause. (Doc. 24). First, he argues he did not agree to arbitration. (Doc. 24 at 9). Second, 8 he claims that the arbitration clause is both procedurally and substantively unconscionable. 9 (Doc. 24 at 12). Third, Mr. Schwartz claims the reasonable expectations doctrine voids the 10 Policy’s arbitration clause. (Id.) 11 a. Mutual Assent 12 “Arizona law applies to whether a valid arbitration agreement exists.” Shelby v. 13 Brookdale Senior Living Inc., 2021 WL 718183, at *1 (D. Ariz. Feb. 24, 2021) (citing 14 Shivkov v. Artex Risk Sols., Inc., 974 F.3d 1051, 1058–59 (9th Cir. 2020)). A contract must 15 “manifest mutual assent, i.e., the parties’ intent to be bound.” Valdiviezo v. Phelps Dodge 16 Hidalgo Smelter, Inc., 995 F. Supp. 1060, 1064 (D. Ariz. 1997) (citing Keith Equip. Co. v. 17 Casa Grande Cotton Fin., Co., 928 P.2d 683, 685 (Ariz. Ct. App. 1996)). This analysis 18 focuses on objective evidence, not the parties’ hidden intent. Silva v. Butori Corp., 2020 19 WL 2308528, at *4 (D. Ariz. May 8, 2020). “Objective evidence includes written and 20 spoken words as well as acts.” Johnson v. Earnhardt’s Gilbert Dodge, Inc., 132 P.3d 825, 21 828 (Ariz. 2006) (citing Corbin–Dykes Elec. Co. v. Burr, 500 P.2d 632, 634 (Ariz. Ct. App. 22 1972)) (holding that the manifestation of mutual assent “is determined by the words used 23 and the other manifestations of intent having reference to the contract”); see also 24 Restatement (Second) of Contracts § 19(1) (“The manifestation of assent may be made 25 wholly or partly by written or spoken words or by other acts or by failure to act.”). The 26 requirement of mutual assent applies “with no less vigor to formation of arbitration 27 contracts.” Silva, 2020 WL 2308528, at *4. 28 Under the doctrine of separability, “an arbitration provision is considered to be an 1 independent and separate agreement between the parties to the underlying contract.” 2 Stevens/Leinweber/Sullens, Inc. v. Holm Dev. & Mgmt., Inc., 795 P.2d 1308, 1312 (Ariz. 3 Ct. App. 1990); see also Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 4 402 (1967) (“[E]xcept where the parties otherwise intend—arbitration clauses as a matter 5 of federal law are ‘separable’ from the contracts in which they are imbedded . . . .”). 6 Therefore, “only when the arbitration provision is enforceable will the court compel 7 arbitration.” Stevens/Leinweber/Sullens, Inc., 795 P.2d at 1313. 8 Mr. Schwartz asserts there was no mutual assent to the arbitration clause because 9 neither he nor his wife were required to review and consent to the terms of the Policy before 10 completing the insurance transaction. (Doc. 24 at 8–9). Mr. Schwartz stresses that he 11 received a mailed copy of the Policy after he was injured and filed his insurance claim. (Id. 12 at 9). He does, however, acknowledge that the Policy was available to him to review on 13 the website by selecting the “Plan Description download.pdf” link. (Id. at 2). Mr. Schwartz 14 also argues that, though the Policy describes the coverage, it has no binding language and 15 no signatures to indicate it is a contract. (Id. at 9). 16 Defendants contend that Mr. Schwartz assented to the Policy’s terms by filing an 17 insurance claim. (Doc. 25 at 3). They also contend that Mr. Schwartz assented to the 18 Policy’s terms by appealing the denial of his claim using the instructions in the Policy. (Id.) 19 Defendants also note that, in a letter sent by Mr. Schwartz’s counsel, he asserted that if the 20 parties could not reach a resolution, “[they] would have no alternative but to pursue 21 arbitration through the AAA.” (Id.) This course of action, they argue, shows Mr. Schwartz 22 had agreed to the Plan’s terms. Defendants also insist they are not required to ensure that 23 the purchaser of a policy on their website has reviewed and acknowledged that policy’s 24 terms. (Id.) 25 The Court finds that there was mutual assent to the arbitration clause. Mr. 26 Schwartz’s actions demonstrate, not only his acknowledgment of both the Policy and 27 arbitration clause, but his intent to be bound. The Policy, which Mr. Schwartz elected to 28 purchase, was available for viewing on the website. (Doc. 24 at 2). Mr. Schwartz filed a 1 claim after his accident, and when he was denied coverage, he appealed. Both insurance 2 claim and appeal procedures are outlined in the Policy, immediately preceding the 3 arbitration clause. Mr. Schwartz provided the Policy to his counsel, who informed 4 Defendants that if the parties could not resolve their dispute, Mr. Schwartz’s counsel would 5 have to implement the arbitration clause by filing an action with AAA. Thus, the objective 6 evidence proves that the parties, through their “acts” and “written and spoken words,” had 7 a mutual understanding of the Policy and the underlying arbitration clause. Johnson, 132 8 P.3d at 828 (citing Corbin–Dykes Elec. Co., 500 P.2d at 634) 9 b. Unconscionability 10 Next, Mr. Schwartz argues the agreement is unenforceable because it is both 11 procedurally and substantively unconscionable. 12 i. Procedural Unconscionability 13 Deciding whether an agreement is procedurally unconscionable requires a case-by- 14 case analysis that focuses on the “fairness of the bargaining process,” including the 15 existence of “unfair surprise, fine print clauses, mistakes, or ignorance of important facts 16 or other things that mean bargaining did not proceed as it should.” Gullett ex rel. Estate of 17 Gullett v. Kindred Nursing Ctrs. W., L.L.C., 390 P.3d 378, 386 (Ariz. Ct. App. 2017) 18 (quoting Dueñas v. Life Care Ctrs. of Am., Inc., 336 P.3d 763, 768 (Ariz. Ct. App. 2014)). 19 Courts consider the following factors “helpful” but “not exclusive,” Dueñas, 336 20 P.3d at 768, in determining whether a contract is procedurally unconscionable: “[A]ge, 21 education, intelligence, business acumen and experience, relative bargaining power, who 22 drafted the contract, whether the terms were explained to the weaker party, whether 23 alterations in the printed terms were possible, [and] whether there were alternative sources 24 of supply for the goods in question.” Maxwell v. Fid. Fin. Servs., Inc., 907 P.2d 51, 58 25 (Ariz. 1995). Courts also consider “whether the contract was separate from other 26 paperwork, whether the contract used conspicuous typeface, and whether the contract was 27 signed hurriedly and without explanation in emergency circumstances.” Dueñas, 336 P.3d 28 at 768 (internal citations omitted). 1 Mr. Schwartz alleges the arbitration clause is procedurally unconscionable because 2 it was not provided to him when he applied for insurance and he therefore could not have 3 consented to it. (Doc. 24 at 12). Mr. Schwartz also reiterates that he did not receive a copy 4 of the Policy until after he filed his claim. (Id. at 3, 12). He claims that, even if he had 5 received the Policy sooner, that the arbitration clause is “buried” on the last page of the 6 Policy without a heading and without any indication of the waiver of the right to jury trial. 7 (Id. at 12). Defendants respond by arguing Mr. Schwartz had access to the Policy but failed 8 to read it. (Doc. 25 at 8). They also argue that the arbitration clause was not buried; it was 9 in a section titled “Dispute Resolution.” (Id. at 7). They further claim that Defendants had 10 no duty to call attention to the arbitration provision or to include an obvious waiver of the 11 right to jury trial. (Id.) 12 The Court finds that the arbitration agreement was not procedurally unconscionable. 13 It is undisputed that that Policy was accessible on the website. (Doc. 24 at 2). The Court 14 understands that there may have been confusion during the online application process, 15 since Mrs. Nishiguchi received three separate agreements before completing the 16 transaction, none of which were the Policy itself. However, this does not amount to unfair 17 surprise because the Policy Mr. Schwartz and Mrs. Nishiguchi intended to purchase was 18 available for their review the entire time. The Court further finds that the arbitration clause 19 was not buried because, although it is located on the last page of the Policy, there is a clear 20 way to locate it. It is found under bolded section headings by going to the last section of 21 the Policy, “General Provisions,” then to “Grievances,” and finally, to “Dispute 22 Resolution.” Finally, Mr. Schwartz has made no indication that age, education, 23 intelligence, or the other Maxwell factors apply. Thus, the Court finds that Mr. Schwartz 24 has not sustained his burden of proving the contract was procedurally unconscionable. 25 ii. Substantive Unconscionability 26 “Substantive unconscionability concerns the actual terms of the contract and 27 examines the relative fairness of the obligations assumed.” Maxwell, 907 P.2d at 58 (citing 28 Resource Mgmt. Co. v. Weston Ranch & Livestock Co., 706 P.2d 1028, 1041 (Utah 1985)). 1 Courts consider whether the “contract terms [are] so one-sided as to oppress or unfairly 2 surprise an innocent party,” whether there is “an overall imbalance in the obligations and 3 rights imposed by the bargain,” and whether there is a “significant cost-price disparity.” 4 Id. (citing Resource Mgmt. Co., 706 P.2d at 1041). 5 One way an arbitration agreement may be substantively unconscionable is if the 6 “fees and costs to arbitrate are so excessive as to ‘deny a potential litigant the opportunity 7 to vindicate his or her rights.’” Dueñas, 336 P.3d at 769 (quoting Clark v. Renaissance W., 8 LLC, 307 P.3d 77, 79 (Ariz. Ct. App. 2013)). The party challenging the clause must provide 9 “specific, non-speculative” “evidence regarding the probable costs of arbitration and 10 individualized evidence regarding her inability to pay those costs.” Dueñas, 336 P.3d at 11 769–770 (citing Clark, 307 P.3d at 80). 12 Courts look for several elements. See Clark, 307 P.3d at 80. First, “the party seeking 13 to invalidate the arbitration agreement must present evidence concerning the cost to 14 arbitrate.” Id. (citing Green Tree Fin. Corp.-Alabama v. Randolph, 531 U.S. 79, 91–92 15 (2000)). Second, “a party must make a specific, individualized, showing as to why he or 16 she would be financially unable to bear the costs of arbitration.” Id. (citing Randolph, 531 17 U.S. 79, 91–92 (2000)). Third, “a court must consider whether the arbitration agreement or 18 the applicable arbitration rules referenced in the arbitration agreement permit a party to 19 waive or reduce the costs of arbitration based on financial hardship.” Id. (citing Randolph, 20 531 U.S. 79, 91–92 (2000)). A finding of substantive unconscionability “alone is sufficient 21 to render a contract unconscionable.” Batory v. Sears, Roebuck & Co., 456 F. Supp. 2d 22 1137, 1140 (D. Ariz. 2006) (citing Maxwell, 907 P.2d at 59). 23 Mr. Schwartz asserts the arbitration clause is substantively unconscionable because 24 arbitration must occur in Philadelphia, Pennsylvania. (Doc. 24 at 12). He argues it would 25 be a burden to travel to Pennsylvania because the contract was formed in Arizona, his 26 medical witnesses are in Arizona, and he resides in Florida. (Doc. 24 at 12–13). 27 Additionally, Mr. Schwartz argues, AAA’s Commercial Rules would make arbitration 28 prohibitively expensive, requiring him to pay $14,300 in administrative fees, along with 1 “additional party fees,” “hearing room rental” fees, and “additional services” fees. (Id.) Mr. 2 Schwartz also notes the costs arising from having to travel from Florida to Pennsylvania, 3 from requiring his Arizona physicians to travel to Pennsylvania, and from hiring a 4 Pennsylvania lawyer. (Id.) 5 Defendants challenge Mr. Schwartz’s allegations of undue cost as speculative 6 because Mr. Schwartz does not provide estimates of expected litigation costs. (Doc. 25 at 7 8). They note Mr. Schwartz’s failure to disclose whether he entered into a contingent fee 8 agreement that would require his counsel to advance costs. (Id.) Nonetheless, they allege 9 that Mr. Schwartz’s concerns are assuaged because AAA’s Rules allow for reduction or 10 waiver of administrative fees. (Doc. 25 at 9). Defendants also challenge Mr. Schwartz’s 11 allegations of undue cost connected to hiring Pennsylvania counsel, since Rule 5.5 of the 12 Pennsylvania Rules of Professional Conduct provides that lawyers admitted in other 13 jurisdictions “may provide legal services on a temporary basis” that are “reasonably related 14 to a pending or potential arbitration.” (Id.) Defendants also question why Mr. Schwartz’s 15 physicians would need to travel to Pennsylvania when they could make virtual 16 appearances. (Doc. 25 at 9). 17 Upon reviewing the record, the Court finds that the arbitration agreement is not 18 substantively unconscionable. Mr. Schwartz’s claims of substantive unconscionability 19 largely rest on the prohibitive expense of arbitration. Mr. Schwartz is currently unable to 20 work due to his injuries. He and his wife live on a combined income of $90,000. (Doc. 24- 21 1 at 4). Under the AAA’s administrative fee schedules, Mr. Schwartz is presented with two 22 options to pay administrative fees: standard fee schedule and flexible fee schedule. (Doc. 23 24-5 at 1). The standard option requires two payments totaling $12,335. (Doc. 24-5 at 2). 24 The flexible option requires three payments totaling $14,300. (Id.) Administrative costs are 25 not inclusive of “additional party fees,” “additional services” fees, or “hearing room rental” 26 fees. (Doc. 24-5 at 4). Importantly, AAA Rule 53 states that “[t]he AAA may, in the event 27 of extreme hardship on the part of any party, defer or reduce the administrative fees.” 28 Additionally, Mr. Schwartz has not provided any facts supporting the possibility of adding 1 new parties. Mr. Schwartz also has not explained which additional services “that go beyond 2 those provided for in the AAA’s rules,” he would require. (Doc. 24-5 at 4). Mr. Schwartz 3 gives no explanation as to why hiring Pennsylvania counsel is necessary given Rule 5.5 of 4 the Pennsylvania Rules of Professional Conduct. Mr. Schwartz’s concerns related to flying 5 his doctors to Pennsylvania are equally unsupported. Thus, the Court finds that Mr. 6 Schwartz has not provided “specific, non-speculative” “evidence regarding the probable 7 costs of arbitration and individualized evidence regarding [his] inability to pay those costs.” 8 Dueñas, 336 P.3d at 769–770 (citing Clark, 307 P.3d at 80). Ultimately, the Court finds 9 the Policy’s arbitration clause is neither procedurally nor substantively unconscionable. 10 c. Reasonable Expectations 11 Finally, Mr. Schwartz argues the reasonable expectations doctrine renders the 12 arbitration agreement unenforceable. Under the reasonable expectations doctrine, terms to 13 an agreement may be struck when a party has “reason to believe” a signing party would 14 not accept the term. Harrington v. Pulte Home Corp., 119 P.3d 1044, 1050 (Ariz. Ct. App. 15 2005). Arizona courts look to seven factors to determine if a party had reason to believe a 16 party would not accept a term. Darner Motor Sales, Inc. v. Universal Underwriters Ins. 17 Co., 682 P.2d 388, 397 (Ariz. 1984). Evidence of reasons to believe can be shown by (1) 18 “prior negotiations,” or (2) it can be “inferred from the circumstances,” (3) or “inferred 19 from the fact that the term is bizarre or oppressive,” or from (4) “the fact that it eviscerates 20 the non-standard terms explicitly agreed to,” (5) or “from the fact that it eliminates the 21 dominant purpose of the transaction.” Id. It is (6) required that provisions are drafted so 22 that they “can be understood if the customer does attempt to check on his rights.” 23 Harrington, 119 P.3d at 1051 (quoting Darner, 682 P.2d at 399). Courts are also required 24 to consider (7) “any other facts relevant to the issue of what [the party seeking to invalidate 25 the agreement] reasonably expected in [the] contract.” Id. (citing Darner, 682 P.2d at 398). 26 Mr. Schwartz acknowledges, and Defendants agree, that factors one (prior 27 negotiations), two (inference from circumstances), and five (eliminates dominant purpose 28 of transaction), do not weigh one way or the other. (Docs. 24 at 13; 25 at 10). 1 The third factor asks whether the term is “bizarre” or “oppressive.” Here, Mr. 2 Schwartz argues that the arbitration clause is bizarre and oppressive because it does not 3 appear to be a contract, and because it requires an expensive arbitration in Pennsylvania. 4 (Doc. 24 at 13). The Court has already found the contract is not unconscionable or 5 oppressive, and Mr. Schwartz does not explain what makes the term bizarre. 6 Factor four addresses whether the arbitration clause “eviscerates the non-standard 7 terms explicitly agreed to.” The Court finds no such effect, and Mr. Schwartz fails to 8 address this factor. 9 Factor six considers whether the provision “can be understood if the customer does 10 attempt to check on his rights.” Mr. Schwartz asserts that “nothing was drafted where 11 customers could have looked, in applying for and in paying for the Policy, regarding 12 arbitration.” (Doc. 24 at 13). This factor considers the terms of the provision. Mr. 13 Schwartz’s allegation that “nothing was drafted where customers could have looked,” 14 misses the mark, and is contradicted by the undisputed fact that the Policy was accessible 15 on the website. The Court finds that if a customer were to “attempt to check on his rights,” 16 that there is nothing in the wording of the arbitration clause rendering it incomprehensible. 17 The seventh factor considers any other relevant facts. Mr. Schwartz argues that 18 “there is no evidence that [he] was ever aware of and even agreed to [the] provision.” (Doc. 19 24 at 13–14). The Court is unpersuaded because Mr. Schwartz used the Policy to file a 20 claim and later appealed the decision denying his claim. (Doc. 25 at 3). Additionally, Mr. 21 Schwartz, through counsel, communicated his intention to invoke the arbitration clause if 22 the parties could not reach a resolution. 23 Considering these factors, the Court finds the reasonable expectations doctrine does 24 not render the arbitration clause unenforceable. Therefore, having exhausted Mr. 25 Schwartz’s arguments to the contrary, the Court finds the arbitration clause is enforceable. 26 IV. Scope of Arbitration 27 The Court will now determine whether the Policy’s arbitration clause governs the 28 claims at issue. See Chiron Corp., 207 F.3d at 1130. Here, the relevant language in the 1 arbitration clause states that “[a]ll grievances not resolved by the Insurer’s grievance 2 procedures, and all other controversies and claims arising out of or relating to the Policy . 3 . . shall be determined by final and binding arbitration administered by the [AAA].” (Doc. 4 24-3 at 25) (emphasis added). 5 When considering arbitration clauses, federal courts interpret the phrases such as 6 “arising in connection with” very broadly. Simula, Inc. v. Autoliv, Inc., 175 F.3d 716, 721 7 (9th Cir. 1999). Such phrasing “reaches every dispute between the parties having a 8 significant relationship to the contract and all disputes having their origin or genesis in the 9 contract.” Id. When an arbitration clause is thus phrased, a plaintiff’s “factual allegations 10 need only ‘touch matters’ covered by the . . . arbitration clause” to require arbitration, “and 11 all doubts are to be resolved in favor of arbitrability.” Id. 12 Mr. Schwartz concedes that his breach of contract claim against 4 Ever Life falls 13 within the scope of the arbitration clause. However, he argues that his bad faith and aiding 14 and abetting claims do not because they are independent torts and do not arise under the 15 Policy. (Doc. 24 at 10–11). 16 The Court finds that both the bad faith and adding and abetting claims plainly “touch 17 upon” the Policy. See Simula, Inc., 175 F.3d at 721. As alleged in his bad faith claim, “4 18 Ever/BCBS knowingly or recklessly denied Schwartz the coverage he was entitled to under 19 the Policy.” (Doc. 11 at ¶ 53) (emphasis added). As alleged in the aiding and abetting claim, 20 “Worldwide substantially assisted 4 Ever/BCBS in breaching their insurance policy and 21 committing bad faith by falsely claiming to Schwartz that it had an independent qualified 22 physician review his claim . . . .” (Id. at ¶ 62) (emphasis added). Given these allegations 23 and the scope of the arbitration agreement, which the Court must interpret broadly, the 24 Court finds that Mr. Schwartz’s bad faith and aiding and abetting claims have a significant 25 relationship to the contract and that all of Mr. Schwartz’s claims are subject to arbitration. 26 See Simula, Inc., 175 F.3d at 721. 27 V. Stay of Proceedings 28 Defendants request that the Court enter a stay or proceedings. (Doc. 21 at 5). Under 9 U.S.C. § 3, when a court finds that the suit “is referable to arbitration” it shall “stay the trial of the action until such arbitration has been had in accordance with the terms of the 3|| agreement... .” Because the Court has found this matter referable to arbitration, it will 4|| stay all proceedings. 5 Accordingly, 6 IT IS HEREBY ORDERED that Defendants’ Motion to Compel Arbitration (Doc. 7\| 21) 1s granted. The parties shall proceed with arbitration as dictated by the Policy. 8 IT IS FURTHER ORDERED that all proceedings in this matter are hereby stayed. 9 IT IS FINALLY ORDERED that the parties shall provide the Court with a joint 10 || status report within thirty (30) days of this Order, informing the Court of their progress in arbitrating this matter. Thereafter, the parties shall submit a joint status report every four 12 || (4) months to inform the Court of their progress. 13 Dated this 29th day of June, 2021. 14 15 oC. . fe □□ 16 norable’ Diang/4. Hunfetewa 17 United States District Fudge 18 19 20 21 22 23 24 25 26 27 28 -13-