Benchmark Insurance Company v. SUNZ Insurance Company

Background

The case began as an interpleader action involving approximately $20.5 million in excess collateral connected to large-deductible workers’ compensation insurance policies. Benchmark Insurance Company deposited the funds with the court. Most insured defendants disclaimed any interest, and SUNZ Insurance Company withdrew the funds that were no longer disputed.

Butler America Holdings Inc., Century Employer Organization, LLC, and Payday, Inc. (the “Crossclaimants”) maintained claims involving the remaining funds and brought claims against Benchmark or SUNZ. Century and Payday asserted breach-of-contract claims against SUNZ Insurance Company. Those claims involved Program Agreements with SUNZ Insurance Solutions, LLC that contained mediation and binding-arbitration provisions.

SUNZ Insurance Company moved to dismiss Century and Payday’s crossclaims for lack of subject-matter jurisdiction or, alternatively, to compel arbitration. On February 23, 2021, Chief District Judge John R. Tunheim denied that motion. SUNZ then appealed that order to the U.S. Court of Appeals for the Eighth Circuit because it denied the request to compel arbitration.

Motion to Stay

SUNZ Insurance Company and SUNZ Insurance Solutions, LLC asked the court to stay the entire case while the appeal was pending. Benchmark did not oppose the motion. The Crossclaimants agreed that most proceedings should be stayed but argued that the parties should still litigate the issue of entitlement to the remaining interpleaded funds.

The court explained that it had discretion to pause proceedings to manage its docket, conserve judicial resources, and promote a just resolution. It considered four factors: the likelihood of success on appeal, possible irreparable harm without a stay, harm to other parties, and the public interest.

The court found that SUNZ had identified a valid basis for prevailing on appeal, but treated that factor as neutral. The possible harm to SUNZ weighed only slightly in favor of a stay because litigating the issue of the interpleaded funds could implicate the same Program Agreement involved in the arbitration appeal. The court found that the Crossclaimants would not suffer substantial harm because they had already agreed to stay nearly all proceedings. Finally, the public-interest factor favored a stay because continuing to litigate the collateral issue could create inconsistent rulings and unnecessary expense while the Eighth Circuit considered the arbitration issue.

Balancing the factors, the court held that a stay of the entire case was warranted pending the outcome of the appeal.

Motions to Amend and Disposition

The Crossclaimants had moved to amend their claims by adding claims against Benchmark, adding claims against SUNZ Insurance Solutions, LLC, amending claims against SUNZ Insurance Company, and adding claims against SUNZ Insurance Company. Because the court granted the stay, it denied Payday, Butler, and Century’s motions to amend without prejudice. The order states that they may renew the motion after the Eighth Circuit resolves the appeal.

Magistrate Judge Tony N. Leung ordered that SUNZ Insurance Company and SUNZ Insurance Solutions, LLC’s Motion to Stay Pending Appeal was GRANTED, and Payday, Inc., Butler America Holdings Inc., and Century Employer Organization, LLC’s Motions to Amend were DENIED WITHOUT PREJUDICE. The order left prior consistent orders in effect.