Lonstein Law Office, P.C. v. Evanston Insurance Company

Background

Lonstein Law Office, P.C. (LLO), Julie C. Lonstein, and Wayne D. Lonstein sued Evanston Insurance Company, Markel Service Incorporated, and AT&T Services, Inc. The plaintiffs alleged that Evanston and Markel failed to pay defense costs under a professional malpractice insurance policy and that AT&T, as successor to DirecTV, was required to defend and indemnify them for lawsuits arising from their work involving alleged commercial misuse of DirecTV programming.

LLO and DirecTV entered into a 2009 retainer agreement concerning investigation and litigation of claims involving unauthorized exhibition of DirecTV programming. That agreement contained an indemnification provision but no arbitration clause. In 2019, the plaintiffs and AT&T entered into a Wind Down Agreement. The agreement superseded earlier agreements, contained a mutual release with an exception for certain indemnification claims, and required that claims arising out of or relating to the agreement be resolved through individual arbitration administered by the American Arbitration Association.

The operative complaint asserted claims against AT&T concerning indemnification. AT&T moved under the Federal Arbitration Act (FAA), the federal statute governing enforcement of written arbitration agreements, to compel arbitration. The plaintiffs did not dispute that the Wind Down Agreement contained a valid arbitration provision or that Wayne and Julie Lonstein were bound by it. They argued that their indemnification dispute arose from the 2009 retainer agreement, which did not require arbitration, rather than from the Wind Down Agreement.

Court’s Analysis

The court explained that its role on a motion to compel arbitration is limited. The court generally considers whether the parties formed a valid arbitration agreement and whether their dispute falls within its scope. But when the parties clearly agree that arbitrators will decide those questions, the court sends the dispute to arbitration so the arbitrators can decide them.

The court held that the Wind Down Agreement incorporated the American Arbitration Association’s Commercial Arbitration Rules. Those rules authorize an arbitrator to decide the arbitrator’s own jurisdiction, including objections concerning the existence, scope, or validity of the arbitration agreement. The court therefore concluded that the arbitrators—not the court—must initially decide whether the plaintiffs’ dispute falls within the arbitration clause.

The court also stated that the clause was broad because it covered disputes that “arise out of” or “relate to” the Wind Down Agreement. Although the plaintiffs argued that the dispute did not arise from that agreement, the court held that this argument did not answer whether the dispute related to it. The court further noted that joining defendants who were not parties to the arbitration agreement did not allow the plaintiffs to avoid arbitration with AT&T.

Disposition

The court granted AT&T’s motion to compel arbitration. It stayed the case against AT&T until the arbitration is completed. The parties must provide a status report 90 days after the opinion and order and every 90 days afterward. The clerk was directed to close the docket entry for AT&T’s motion.

In a footnote, the court denied AT&T’s request to seal information contained in the opinion to the extent AT&T sought that relief, while taking no position on sealing other information referenced in the sealing motion. The opinion did not decide the separate motion by Evanston and Markel to dismiss.