The Fifth Circuit Court of Appeals has held that a federal court may enjoin arbitrable state-law claims in an insurance dispute.  In American Family Life Assurance Co. of Columbus v. Biles, No. 12-60235 (5th Cir. April 30, 2013), David Biles completed an application for an accident insurance policy that was underwritten by the American Family Life Assurance Co. of Columbus (“Aflac”) and included a binding arbitration clause.  Less than one year after the policy became effective, Biles passed away.  Aflac then paid the insurance policy benefits to the two named beneficiaries, Biles’s mother, Glenda, and his life partner, Ken Ashley.

Glenda and the deceased man’s siblings later filed a lawsuit in a Mississippi court against Aflac, company sales associate Brendan Hammond, Ashley, and a bar where Biles was drinking prior to his death.  The lawsuit alleged that Ashley “conspired with Hammond to fraudulently obtain the Policy with the intent to end the decedent’s life and collect the Policy’s death benefits,” and “caused or contributed to the death of the decedent.”  Biles’s family (“Appellants”) also alleged that Aflac should have known Ashley was prohibited from collecting death benefits as a result of his alleged role in Biles’s death.  Aflac responded by seeking to compel arbitration pursuant to the Federal Arbitration Act.  Aflac also filed a motion for summary judgment in district court.  The decedent’s family responded by arguing that Biles’s signature on the policy was a forgery and the federal motion to compel arbitration should be dismissed.  Eventually, the district court issued a motion to compel arbitration.  In response, Appellants filed an appeal with the Fifth Circuit.

In their appeal, the Appellants argued that the district court should not have considered Aflac’s federal law claim in deference to the state law claims based on the Supreme Court’s decision in Colorado River Water Conservation District v. United States, 424 U.S. 800 (1976).  According to the Fifth Circuit, “abstention is appropriate only when the federal and state “suits are parallel, having the same parties and the same issues.’”  The court said,

The federal and state lawsuits in this case are far from parallel. The state action undisputedly involves additional defendants and issues not involved in the federal action, which is limited to the narrow issue of whether arbitration applies to the dispute between Appellants and Aflac and its agents. Although we have noted that it might not be necessary that the parties and issues are absolutely identical in every instance for Colorado River abstention to be appropriate, see Brown, 462 F.3d at 395 n.7, this case is not an example of the exception to the general rule.

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Tags: David Biles, Fifth Circuit, Fifth Circuit Court of Appeals