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PoolRe Insurance Corp. v. Organizational Strategies, Inc.

United States Court of Appeals, Fifth Circuit

April 7, 2015


Page 257

Appeal from the United States District Court for the Southern District of Texas.

For Poolre Insurance Corporation, Capstone Associated Services, Limited, Capstone Associated Services (Wyoming), L.P., Capstone Insurance Management, Limited, Plaintiffs - Appellants: Edward John Gorman, Feldman Law Firm, L.L.P., Houston, TX; Luis Andres Paredes, RSL Funding, L.L.C., Houston, TX.

For Feldman Law Firm, L.L.P., Plaintiff - Appellant: Edward John Gorman, John Robert Craddock, Counsel, Feldman Law Firm, L.L.P., Houston, TX.

For Organizational Strategies, Incorporated, Nicolette Hendricks, William Hendricks, Defendants - Appellees: Neil R. Lapinski, Esq., William M. Kelleher, Esq., Gordon, Fournaris & Mammarella, P.A., Wilmington, DE; John F. Unger, Royston, Rayzor, Vickery & Williams, L.L.P., Houston, TX.

Before SMITH, PRADO, and OWEN, Circuit Judges.


Page 258

EDWARD C. PRADO, Circuit Judge:

This arbitration case arises from disputes over Appellee OSI's captive insurance program, created with Appellant Capstone's assistance. Appellant PoolRe, managed by Capstone, provided insurance services to OSI's newly created captive insurance companies. Capstone and OSI entered into contracts requiring AAA arbitration, whereas PoolRe and the captive insurance companies entered into contracts

Page 259

requiring ICC arbitration. Arbitrator Ramos joined all of the parties for arbitration under AAA rules. Because Ramos acted contrary to the express provisions of the PoolRe arbitration agreements, the district court held that Ramos exceeded his authority and, pursuant to 9 U.S.C. § 10, vacated the award. We affirm.


Appellants Capstone Associated Services, Capstone Associated Services (Wyoming) L.P., and Capstone Insurance Management, Limited (collectively " Capstone" ) are related companies that provide turnkey formation and administrative services for captive insurance companies.[1] Appellant PoolRe Insurance Corporation, administered by Capstone,[2] is a third-party insurer that provides insurance-pooling services. The Feldman Law Firm, L.L.P. (" the Firm" )[3] provides legal services related to Capstone's captive insurance support program.

Appellee Organizational Strategies, Incorporated (OSI) is a professional-services firm managed by Appellees Nicolette and William Hendricks. Capstone discussed OSI's captive insurance options with the Hendrickses. After an on-site visit, the Firm sent the Hendrickses an Engagement Letter, attached to which were the Firm's Billing Guidelines. The Billing Guidelines contain an arbitration clause requiring, with the exception of certain disputes,[4] arbitration " pursuant to the Commercial Arbitration Rules of the AAA [American Arbitration Association]." The Billing Guidelines also include a delegation clause: " The parties agree that the issue of arbitrability shall likewise be decided by the arbitrator, and not by any other person."

Also attached to the Engagement Letter was the Services Agreement, which was to be executed after the formation of the captive insurance companies.[5] The Services Agreement contains a venue and jurisdiction clause providing that for most[6] disputes " venue and jurisdiction shall be in Delaware" . Additionally, the Services Agreement contains an integration clause: " To the extent of any conflict between the terms and provisions of this Agreement and the Engagement Letter, this Agreement exclusively shall control." PoolRe is not a party to any of the Capstone/OSI agreements.

Mrs. Hendricks signed the Engagement Letter and a copy was sent to Capstone. This multiyear agreement contemplated the formation of three captive insurance companies (" the Captives" ), which would underwrite alternative-risk programs for OSI. Capstone provided its services under

Page 260

the Engagement Letter from June 2011 to early 2012 without incident.

During this time PoolRe and the Captives issued a series of insurance policies to OSI. PoolRe entered into a separate Reinsurance Agreement with each of the three Captives. The three contracts contain identical arbitration clauses requiring International Chamber of Commerce (ICC) arbitration. The Reinsurance Agreements also state that arbitration " shall take place in the Territory of Anguilla, B.W.I." [7]

Disputes arose between OSI and the Capstone parties and the Firm. After an annual audit, OSI came to believe it was overpaying insurance premiums. As a result, OSI requested that Capstone change certain accounting information, and Capstone refused. The parties failed to resolve their issues, OSI terminated the Engagement Letter, and PoolRe cancelled its agreements with the Captives. A dispute arose over whether PoolRe properly refunded deposits to OSI. The Firm subsequently withdrew from further work with OSI, pending resolution of the dispute.

A. Arbitration Begins

Capstone filed an arbitration demand against OSI in March 2013 for breach-of-contract claims. The demand was forwarded to Dion Ramos of Conflict Resolution Systems, PLLC (CRS) in ...

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