Reginald Broome v. American Family Life Assurance ( 2021 )

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________
No. 20-2852
_____________
REGINALD BROOME;
CHRIS SALSMAN,
Appellants
v.
AMERICAN FAMILY LIFE ASSURANCE COMPANY OF COLUMBUS;
CONTINENTAL AMERICAN INSURANCE COMPANY
On Appeal from the United States District Court
for the District of Delaware
(D.C. Civil Action No. 1-19-cv-1967)
District Judge: Honorable Maryellen Noreika
______________
Submitted on July 15, 2021
______________
Before: McKEE, GREENAWAY, JR., and RESTREPO, Circuit Judges.
(Filed: November 17, 2021)
______________
OPINION *
______________
RESTREPO, Circuit Judge
*
This disposition is not an opinion of the full Court and, pursuant to I.O.P. 5.7,
does not constitute binding precedent.
Appellants brought this action against appellees, American Family Life Assurance
Company of Columbus (“Aflac”) and Continental American Insurance Company
(“Continental”), seeking an Order vacating an arbitration award in favor of appellees
(“Award”). On appeal, appellants challenge the District Court’s Order granting
appellees’ motion to dismiss the Complaint. Because we agree with the District Court
that appellants failed to comply with requirements of the Federal Arbitration Act
(“FAA”), 9 U.S.C. § 1, et seq., with respect to service of process on appellees, we affirm.
I.
Appellants, two former independent contractor insurance agents, contracted with
Aflac and Continental to sell insurance products. These contracts (“Associate’s
Agreements” or “Agreements”) required any dispute between the parties to be submitted
for binding arbitration, and that any arbitration proceeding between the parties “be
covered by, and conducted pursuant to, the FAA.” App. 40, 58. Pursuant to the
Agreements, the arbitrators’ award “shall be binding and conclusive upon all parties
hereto subject only to grounds permitted under the FAA for vacating, correcting, or
modifying an award.” App. 41, 58. Thus, the arbitration proceeding between the parties
as well as the right to seek to vacate the arbitrators’ Award are governed by the FAA.
Accordingly, after a dispute arose between the parties, they participated in an
arbitration proceeding. At the commencement of the proceeding, all parties and the
arbitrators executed an Amended Scheduling Order providing, “The parties agree that this
arbitration proceeding shall be conducted in accordance with the [FAA], the Arbitration
Agreement contained in Paragraph Ten of [Appellants’] Associate’s Agreements and this
2
Amended Scheduling Order.” ECF (D. Del.) No. 6, Ex. D ¶ 4. After the arbitration
hearing, the arbitrators issued an Award on June 14, 2019, finding in favor of Aflac and
Continental and dismissing appellants’ claims.
Appellants filed their Complaint in the Delaware Court of Chancery on September
12, 2019 seeking to vacate the Award of the arbitrators. Appellants served the Summons
and Complaint on the Delaware Insurance Commissioner on September 19, 2019. 1 Aflac
and Continental were thereafter served with process through the Delaware Insurance
Commissioner on September 27, 2019, three-and-a-half months after the Award was
issued. 2 Appellees thereafter removed the action to the District Court based on diversity
of citizenship. Aflac and Continental subsequently filed a Motion to Dismiss the
Complaint, which the District Court granted on August 12, 2020.
II. 3
The District Court granted appellees’ motion to dismiss on two independent
grounds: (1) appellants failed to serve process on Aflac and Continental within the 3-
1
As the District Court pointed out, under Delaware law, nonresident insurers operating in
Delaware, such as appellees, are subject to the Delaware Insurance Code, including its
procedures for service of process in a legal proceeding, and “[u]nder Delaware law,
Defendants can only properly be served with legal process via service upon the Delaware
Insurance Commissioner, which will then mail the process to Defendants’ registered
agent in the state.” App. 6 (citing 18 Del. C. §§ 524, 525).
2
Under Delaware law, service upon a nonresident insurer is not complete until three days
after the process is mailed by the department of insurance to the insurer. See 18 Del. C. §
525.
3
The District Court had jurisdiction under 28 U.S.C. § 1332(a), and we have appellate
jurisdiction under 28 U.S.C. § 1291. The parties agree that we review de novo the
District Court’s grant of the motion to dismiss.
3
month limitation period expressly set forth in the FAA, 9 U.S.C. § 12; and (2) appellants
failed to serve Aflac and Continental with process by the Marshal, as also expressly
required by the FAA, id.As to the FAA’s time limitation on service of process, the FAA provides, “Notice
of a motion to vacate, modify, or correct an award must be served upon the adverse party
or his attorney within three months after the award is filed or delivered.” Id. Here, it is
undisputed that appellants did not serve the Summons and Complaint on the Delaware
Insurance Commissioner any earlier than September 19, 2019. 4 Since the Arbitrators
issued an Award on June 14, 2019, even assuming arguendo that service of process was
complete upon serving the Insurance Commissioner under these circumstances, process
was not served within three months after the Award was filed or delivered, and the
District Court properly dismissed the Complaint for failure to comply with the FAA. 5
See Pfannenstiel v. Merrill Lynch, Pierce, Fenner & Smith, 477 F.3d 1155, 1158 (10th
Cir. 2007).
4
Appellants argued in the District Court that “service was properly accomplished . . . on
September 19, 2019.” ECF (D. Del.) No. 10, at 17; App. 6; see Appellant’s Br. 8
(acknowledging that process “for both [Aflac and Continental] was served on the
Delaware Insurance Commissioner on September 19, 2019”).
5
The District Court pointed out that, under Delaware law, “it appears that Defendants
were not deemed served” on September 19, 2019 “as Plaintiffs assert,” since “[t]hat is the
date on which the Complaint was served on the Commissioner,” and under Delaware law,
“service upon a nonresident insurer is not complete until three days after the process is
mailed by the department of insurance to the insurer.” App. 6, 7; see supra note 2.
However, the Court correctly concluded, “in any event, even if the Court were to accept
Plaintiffs’ proffered September 19, 2019 service date, that date is still more than three
months after the June 14, 2019 Award being challenged was issued.” App. 7.
4
In addition to the time limitation of service, the FAA provides that where the
adverse party is a nonresident of the district within which the award was made, then
service “shall” be made “by the marshal of any district within which the adverse party
may be found.” 9 U.S.C. § 12 (emph. added). As the District Court noted, “it is
undisputed that [appellees] are ‘nonresidents’ and that [appellants] did not serve either of
[appellees] via the United States Marshals Service.” App. 5. Thus, the District Court’s
dismissal of the Complaint was proper based on non-compliance with the FAA. 6
Appellants spend a significant portion of their brief justifying why they initiated
this action in the Delaware Court of Chancery, but in this case, Aflac and Continental do
not dispute that the Delaware state courts had jurisdiction. It is clear, in any event, that
the District Court had jurisdiction based on diversity of citizenship, and that appellees
were well within their rights to remove this case to the District Court on that basis. See
28 U.S.C. §§ 1332(a), 1441(a). Further, to the extent appellants argue that they were in
compliance with the Delaware Uniform Arbitration Act (“DUAA”), 10 Del. C. § 5701, as
explained, under the Associate’s Agreements, the arbitration proceeding between the
parties as well as the right to seek to vacate the arbitrators’ Award are governed by the
6
Appellants argue that for them to have had the Marshals serve process, service “might
have had to be accomplished in Nebraska, [Aflac’s] state of incorporation, Georgia, its
principal place of business, and for Continental . . . in South Carolina, where it has its
principal place of business.” Appellant’s Br. 34. Thus, appellants do not argue they were
somehow unable to serve Aflac and Continental by the Marshals in compliance with the
FAA, only apparently that it “might have” been inconvenient.
5
FAA. 7 Because of appellants’ failure to comply with the FAA which governs this action,
dismissal of the case was appropriate.
For the foregoing reasons, we affirm the Order of the District Court.
7
Section 5702(a) of the DUAA provides that the making of an arbitration agreement
“specifically referencing the [DUAA] and the parties’ desire to have it apply to their
agreement confers jurisdiction on the [Chancery] Court . . . to enter judgment on an
award thereunder . . .” 10 Del. C. § 5702(a) (emph. added). Absent such an express
reference, “any application to the Court of Chancery . . . to vacate or enforce an
arbitrator’s award shall be decided by the Court of Chancery in conformity with the
[FAA], and such general principles of law and equity as are not inconsistent with that
Act.” Id. § 5702(c) (emph. added). Here, the Agreements expressly identified the FAA
as governing.
6