# Warner v. Miller Insurance Services, LLP

> District Court, E.D. Louisiana · January 22, 2025

URL: https://www.frixlaw.com/law-library/cases/10785723

## Case

- **Court:** District Court, E.D. Louisiana
- **Decided:** January 22, 2025
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10785723

## How later opinions describe it (automated extraction)

- holding appraisal provision courts persuasive.”

## Opinion text

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA

MICHAEL D. WARNER, IN HIS CIVIL ACTION
CAPACITY AS CHAPTER 7
TRUSTEE OF COX OPERATING
LLC, MLCJR, LLC, COX OIL
OFFSHORE, L.L.C., ENERGY XXI,
GOM, LLC, ENERGY XXI GULF
COAST, LLC, EPL OIL & GAS, LLC,
AND M21K, LLC

VERSUS NO: 24-2864

MILLER INSURANCE SERVICES,
SECTION: “J”(1)
LLP ET AL.

ORDER AND REASONS

Before the Court are competing motions from opposing parties. First,
Defendant Insurers1 file their Motion to Compel Arbitration and to Stay or,
Alternatively, Dismiss These Proceedings, and, Subject to the Motion to Compel
Arbitration, Motions to Dismiss Pursuant to Rule 12(b) (Rec. Doc. 10); Plaintiff
responds in opposition (Rec. Doc. 21), to which Defendant Insurers reply (Rec. Doc.
26). Second, Plaintiff files his Motion to Remand (Rec. Doc. 14). Defendants respond
in opposition (Rec. Doc. 22), to which Plaintiff replies (Rec. Doc. 25). Having
considered the motion and legal memoranda, the record, and the applicable law, the
Court finds that Plaintiff’s Motion to Remand should be GRANTED, and Defendants’

1 Defendants Certain Underwriters at Lloyd’s of London Subscribing to Policy Number
B0621EMSCO000121; Hudson Insurance Company; AIG US, Inc.; Clearwater Insurance Company;
Starstone Insurance Company; and WR Berkley Corporation join in the filing of the motion. Defendant
Miller Insurance Services, LLP—which has not made an appearance nor apparently received service
and citation in this matter—alone has not joined the motion. The Court will refer to the movants as
“Subscribing Defendants” for ease of reference.
Motion to Compel Arbitration should be DENIED as moot.
FACTS AND PROCEDURAL BACKGROUND
This litigation arises from an insurance dispute over damage by Hurricane Ida

to oil and gas equipment in the Gulf of Mexico. The equipment—which include
pipelines, production rigs, and facilities associated with oil and gas leases—are owned
by Cox Operating, L.L.C. and its affiliate entities and were insured by Subscribing
Defendants.
Nearly two years after the hurricane, Cox Operating, L.L.C. filed for Chapter
11 bankruptcy. At the same time, affiliate entities MLCJR, LLC; Cox Oil Offshore,

L.LC; Energy XXI GOM, LLC; Energy XXI Gulf Coast, LLC; EPL Oil & Gas, LLC;
and M21K, LLC (collectively “Cox Affiliates”) also filed for bankruptcy. The actions
were consolidated and converted to a Chapter 7 case. Named Plaintiff in this action
is Michael D. Warner, the Chapter 7 bankruptcy trustee of Cox Operating and Cox
Affiliates.
Originally filed in the Civil District Court for the Parish of Orleans, this action
was removed by Subscribing Defendants pursuant to federal question jurisdiction of

28 U.S.C. § 1331. As their specific basis, Subscribing Defendants cited the Convention
on the Recognition and Enforcement of Foreign Arbitral Awards (“New York
Convention”), as confirmed by 9 U.S.C. § 203 of the Federal Arbitration Act (“FAA”).
In their Notice of Removal, Subscribing Defendants contend the New York
Convention applies because multiple insurers are foreign entities, the United States
is a signatory to the Convention, the agreement arises from a commercial relationship
between parties, and crucially for this matter, the insurance policy at issue contains
an arbitration clause.
Parties now present dueling motions. Subscribing Defendants request this

matter be compelled to arbitration, which Plaintiff opposes. Plaintiff requests this
matter be remanded to state court, which Subscribing Defendants oppose.
LEGAL STANDARD
Where parties put forward competing motions, the jurisdictional issue takes
priority. See Int’l Energy Ventures Mgmt., L.L.C. v. United Energy Grp., Ltd., 818
F.3d 193, 209 (5th Cir. 2016). The legal standard tied to Plaintiff’s Motion to Remand,

therefore, takes priority.
A defendant may remove a civil action filed in state court if a federal court
would have had original jurisdiction over the action. See 28 U.S.C. § 1441(a). The
removing party bears the burden of proving by a preponderance of the evidence that
federal jurisdiction exists at the time of removal. De Aguilar v. Boeing Co., 47 F.3d
1404, 1408 (5th Cir. 1995). The jurisdictional facts supporting removal are examined
as of the time of removal. Gebbia v. Wal-Mart Stores, Inc., 233 F.3d 880, 883 (5th Cir.

2000). Ambiguities are construed against removal and in favor of remand, because
removal statutes are to be strictly construed. Manguno v. Prudential Prop. & Cas.
Ins., 276 F.3d 720, 723 (5th Cir. 2002).
Federal courts have original jurisdiction over cases which pose a “federal
question,” by “arising under the Constitution, laws, or treaties of the United States.”
28 U.S.C.A. § 1331 (1980). Courts consider whether a case poses a federal question
pursuant to the “well-pleaded complaint rule, which provides that federal jurisdiction
exists only when a federal question is presented on the face of the plaintiff’s properly
pleaded complaint.” Caterpillar Inc. v. Williams, 482 U.S. 386, 393 (1987) (citing

Gully v. First Nat’l Bank, 299 U.S. 109, 112–13 (1936)).
DISCUSSION
I. Plaintiff’s Motion to Remand
Presenting a jurisdictional question, Plaintiff’s Motion to Remand demands
first treatment. Subscribing Defendants pin federal jurisdiction on the applicability
of the New York Convention. There is no debate on the standard for a matter to fall

under the Convention: “The Convention applies to international arbitration clauses
when (1) there is an agreement in writing to arbitrate the dispute, (2) the agreement
provides for arbitration in the territory of a Convention signatory, (3) the agreement
arises out of a commercial legal relationship, and (4) a party to the agreement is not
an American citizen ” Lim v. Offshore Specialty Fabricators, Inc., 404 F.3d 898, 903
(5th Cir. 2005) (citation and emphasis omitted). Here, parties solely debate whether
the foundational requirement is present: Does the insurance policy contain an

agreement to arbitrate?
The policy’s “General Conditions” Section contains the pertinent paragraph.
Entitled “Arbitration Clause,” the provision reads in whole:
In case the Insured and these Insurers shall fail to agree as to the
amount of loss, damage or expense each shall, if both parties agree,
select a competent and disinterested appraiser. The appraisers together
shall first select a competent and disinterested umpire, and in the event
of the appraisers failing for fifteen (15) days to agree upon such umpire,
then on request of the Insured or these Insurers, such umpire shall be
selected by a judge of a State District court in the jurisdiction where the
loss occurred. The appraisers together shall then appraise the loss,
damage or expense stating separately sound value and loss, damage or
expense in respect of each item; and failing to agree shall submit their
differences only to the umpire. An award in writing, so itemized, of any
two when filed with the Insurers shall determine the amount of sound
value and loss, damage and/or expense, such determination to be
binding on the parties hereto. Each appraiser shall be paid by the party
selecting him and expense of appraisal and the umpire shall be paid by
the parties equally.

(Rec. Doc. 1-2 at 80 ¶ 4). In the same policy section, parties agree to first resolve
damage disputes by means of the “Arbitration Clause”: “Any disputes relating to the
quantum of loss will be dealt with in the first instance in accordance with the
provisions of the Arbitration Clause set out in these General Conditions (Applicable
to All Sections).” Id. at 83 ¶ 12(f).
Despite the two policy references to an “Arbitration Clause,” Plaintiff argues
the substance of the paragraphs—and not their titles—controls. As support, Plaintiff
quotes another generally applicable provision found in the same section of the policy:
TITLES AND PARAGRAPHS
The several titles of the various paragraphs of this Policy (and of
endorsements and supplemental contracts, if any, now or hereafter
attached to this Policy) are inserted solely for convenience of reference
and shall not be deemed in any way to limit or affect the provisions to
which they relate.

Id. at 90 ¶ 41. Reading them together, Plaintiff insists that, no matter the provisions’
mislabeling, parties agreed to (1) an appraisal—and not an arbitration—clause and
(2) a clause that operates permissively and not mandatorily. The success of either
argument, Plaintiff contends, would render the New York Convention inapplicable
and wrest jurisdiction from this Court.
Subscribing Defendants read the provisions differently. Countering Plaintiff’s
argument to overlook word choices in titles, Subscribing Defendants argue that the
word choice to overlook is found in the provision: “Plaintiffs [sic] maintain that

because the arbitration provision at issue includes the word ‘appraiser’ or ‘appraisal’
the entire provision is converted into an appraisal provision, regardless of the
remaining substance of the provision.” (Rec. Doc. 22 at 9). Instead of allowing the
provision’s six uses of a variation of “appraise” (and the absence of any variation of
“arbitrate”) to control, Subscribing Defendants encourage looking at the substance of
the clause. To make their arbitration case, they rely on the reasoning in Martinique

Properties, LLC v. Certain Underwriters at Lloyd’s London from the Nebraska
District Court.
Considering a clause similar to the one at issue here, the Martinique court first
assessed whether the question of a clause constituting arbitration should be analyzed
under state law or federal common law. Deciding federal common law the appropriate
lens, the district court thereby put its reasoning directly at odds with the Fifth
Circuit’s conclusion. Martinique Properties, LLC v. Certain Underwriters at Lloyd’s

London, 567 F. Supp. 3d 1099, 1104 (D. Neb. 2021) (citing as an example of a state-
law circuit Hartford Lloyd’s Ins. Co. v. Teachworth, 898 F.2d 1058, 1061–63 (5th Cir.
1990)). Why this Court should adopt the reasoning of a district court from the Eighth
Circuit and not a holding of the Fifth Circuit is left unexplained.2

2 In Martinique, the Nebraska District Court itself attempted to reason through a circuit split on the
issue, where the Eighth Circuit Court of Appeals had not definitively ruled. In reaching its conclusion,
the district court clearly stated it was resolving the issue without the support of circuit precedent. See
Martinique Properties, 567 F. Supp. 3d at 1105 (“This Court finds the reasoning of the federal-law
Undaunted, Subscribing Defendants find the federal common law reasoning in
Martinique convincing. To the Nebraska District Court, the issue was not word
choices in a policy; instead, “the crux of the question in this case is whether the

appraisal process used by both parties resembles classic arbitration.” Id. at 1106. This
presentation of the issue is expressed similarly in Fifth Circuit caselaw. Although
relying on a Texas state law distinction between appraisal and arbitration to reach
its ultimate conclusion, the Fifth Circuit provided a similar analysis in Teachworth.
Therein, the appellate court noted the contrast in the two terms:
[A]n arbitration agreement may encompass the entire controversy
between parties or it may be tailored to particular legal or factual
disputes. In contrast, an appraisal determines only the amount of loss,
without resolving issues such as whether the insurer is liable under the
policy. Additionally, an arbitration is a quasi-judicial proceeding,
complete with formal hearings, notice to parties, and testimony of
witnesses. Appraisals are informal. Appraisers typically conduct
independent investigations and base their decisions on their own
knowledge, without holding formal hearings.

Teachworth, 898 F.2d 1058, 1061–62. And the Fifth Circuit has confirmed that this
broader context—separate and apart from a reflexive application of state law—
provides grounds for distinguishing appraisals from arbitrations. Dwyer v. Fid. Nat.
Prop. & Cas. Ins. Co., 565 F.3d 284, 286 (5th Cir. 2009) (holding appraisal provision

courts persuasive.”). The arbitration issue, moreover, was not presented to the Eighth Circuit on
appeal. See Martinique Properties, LLC v. Certain Underwriters at Lloyd’s of London, Subscribing to
Pol’y No. W1551E160301, 60 F.4th 1206, 1207 n.2 (8th Cir. 2023) (“Underwriters also invoked the
Convention on the Recognition and Enforcement of Foreign Arbitral Awards (Convention) in its motion
to dismiss, but because Martinique Properties does not challenge the district court’s application of the
Convention, we do not address it here. Similarly, neither party contests the district court’s conclusion
that the appraisal process here qualifies as an arbitration for purposes of the FAA.”). Here, Subscribing
Defendants argue, despite Fifth Circuit precedent, this Court should also rely on persuasive reasoning:
“Persuasively, the Court in Martinique Properties, LLC v. Certain Underwriters at Lloyd’s London
Subscribing to Pol’y No. W1551e160301, 567 F. Supp. 3d 1099 (D. Neb. Oct. 15, 2021), addressed the
split in the United States Courts of Appeals.” (Rec. Doc. 22 at 10). This Court declines the invitation.
in the Standard Flood Insurance Policy of the federal National Flood Insurance
Program “is not an arbitration and is not governed by the Federal Arbitration Act
(FAA)”). Here, parties agreed to submit for appraisal a disagreement on the amount

of loss. Thus, the appraisal clause concerned only a portion of the controversy.
Although the clause provided a manner for the selection of appraisers, absent is
mention of evidence submission, witness testimony, or hearing procedures of any
type. Simply, the formalities of arbitration are missing. Simpler still, Fifth Circuit
precedent dictates the provision’s treatment as an appraisal clause. Accordingly, with
no arbitration agreement between parties, the New York Convention does not apply.

Although this conclusion is sufficient for the treatment of the jurisdictional
question, Plaintiff is also correct in the second instance: the permissive nature of the
clause also places the dispute outside the confines of the Convention. Subscribing
Defendants marshal caselaw to show “provisions with the word ‘may’ trigger
mandatory arbitration.” (Rec. Doc. 22 at 13 (first citing Allis–Chalmers Corp. v.
Lueck, 471 U.S. 202, 204 n.1 (1985); then citing Local 771, I.A.T.S.E., AFL–CIO v.
RKO Gen., Inc., 546 F.2d 1107, 1115–16 (2d Cir. 1977)). As a general proposition,

Subscribing Defendants may be correct. But see Retractable Techs. Inc. v. Abbott
Lab’ys Inc., 281 F. App’x 275, 275–76 (5th Cir. 2008) (“By the use of the word ‘may,’
the parties preserved other options to resolve disputes, including litigation.”). The
cases they cite, however, are inapposite to the matter here.
In Subscribing Defendants’ cited cases, “may” is present in an arbitration clause
that a single party can invoke—making the verb’s treatment decisive on the
arbitration issue. See Allis-Chalmers Corp., 471 U.S. at 204 (“If the Committee does
not resolve the matter, the employee may bring it to arbitration in the manner
established under the collective-bargaining agreement.”); Loc. 771, I.A.T.S.E., 546

F.2d at 1115 (“The parties may submit to arbitration in accordance with the rules of
the American Arbitration Association upon written request of either party[.]”). Such
is not the case here. The clause agreed upon is effective only “if both parties agree” to
appraisal. (Rec. Doc. 1-2 at 80 ¶ 4). Thus, the agreement is merely preparatory, as
parties agree that they may later jointly agree to submit a valuation dispute for
appraisal. Permissive clauses do not bind parties to alternate dispute resolution. See

Retractable Techs. Inc., 281 F. App’x at 275–76. On its own, the permissive nature of
the clause in question makes the Convention inapplicable. Again, remand is
demanded.
II. Defendants’ Motion to Compel
As the Court has determined federal jurisdiction lacking, Subscribing
Defendants’ Motion to Compel Arbitration is not properly before it. Any arbitration
or venue-related arguments made therein shall be presented to a court of proper

jurisdiction.
CONCLUSION
Accordingly,
IT IS HEREBY ORDERED that Plaintiffs’ Motion to Remand (Rec. Doc. 14)
is GRANTED. This case is REMANDED to the Civil District Court for the Parish of
Orleans.
IT IS FURTHER ORDERED that Defendants’ Motion to Compel Arbitration
(Rec. Doc. 10) is DENIED as moot.
New Orleans, Louisiana, this 22nd day of January, 2025.

CARL J. BA R
UNITED ST S DISTRICT JUDGE

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10785723. Public record. Not legal advice.