Opinion
Civil Action No. 00-30062-MAP.
January 10, 2001
MEMORANDUM AND ORDER WITH REGARD TO PLAINTIFF'S MOTION FOR AN ORDER REQUIRING SECURITY FOR THE STAY OF THIS ACTION (Docket No. 25)
Christian Mutual Life Insurance Company ("Plaintiff") has moved for the entry of an order against Monarch Life Insurance Company ("Defendant") granting it security, in the form of a bond, for any losses which may be occasioned by District Judge Michael A. Ponsor's September 1 2, 2000 order, which stayed this action pending an arbitration between Plaintiff and Penn Mutual Life Insurance Company ("Penn Mutual"). Defendant opposes the motion. After considering the parties' written and oral arguments, the motion will be denied.
When ordering the stay, Judge Ponsor indicated that the issues presented in both the instant matter and the arbitration "are so close that it makes no sense to go forward with this litigation while the arbitration is going on." (Docket No. 23: H'rg Tr at 36.) In addition, Judge Ponsor stated that he did
not believe there would be any severe prejudice to [Plaintiff] by holding off while that takes place. The court is here if there are any undue delays in the arbitration so that if [Plaintiff] is suffering some substantial prejudice, it should be brought to my attention in the form of a motion to reconsider or something of that nature and I will give it my first attention.
(Id. at 36-37.) In so ruling, Judge Ponsor was exercising the court's inherent discretionary power to control its docket. See McCarthy v. Azure, 22 F.3d 351, 361 n. 15 (1st Cir. 1984).
Relying on Judge Ponsor's statements and as something of an afterthought, Plaintiff now argues that a twenty-one year old decision of the Fourth Circuit Court of Appeals "provides the vehicle" for at least some security against prejudice. In the cited case, American Home Assurance Co. v. Vecco Concete Constr. Co., 629 F.2d 961 (4th Cir. 1980), the Fourth Circuit reversed the trial court's denial of a motion by a third party defendant to either dismiss all proceedings against it or to stay those proceedings pending arbitration. The court concluded that the third party defendant was "clearly entitled to a stay of the third-party action," explaining, in an analysis not dissimilar to Judge Ponsor's ruling here, the following:
[S]ince questions of fact common to all actions pending in the present matter are likely to be settled during the . . . arbitration, we find that all litigation should be stayed pending the arbitration proceedings. While it is true that the arbitrator's findings will not be binding as to those not parties to the arbitration, considerations of judicial economy and avoidance of confusion and possible inconsistent results nonetheless militate in favor of staying the entire action.
Id. Then, in a phrase upon which Plaintiff now bases its argument, the Fourth Circuit stated that
[t]o assure that the stay of all proceedings requested by [the defendant] will not prejudice [the plaintiff] [the defendant] shall be required to give bond in an amount sufficient to save [the plaintiff] harmless pending the stay. Any fears of lengthy delays are allayed since the district court has such control of its docket as to ensure against unwarranted delay due to the arbitration proceedings.
Id.
Although Plaintiff cites no other case or statutory provision which calls for a bond in exchange for a stay of litigation, Plaintiff argues that, as in American Home, Defendant ought to post a bond so that Plaintiff will not be harmed during the pending of the stay. Estimating that the arbitration will be completed approximately one year from the imposition of the stay, Plaintiff seeks a bond of $1.1 million representing, in its view, approximately one year's revenue from the policy administration activities which Defendant will continue to control despite Plaintiff's position that it alone has the right to such administration.
While the court can imagine circumstances in which a bond would be appropriate to save harmless a litigant who has opposed a stay, it does not believe that a bond is appropriate in this case. First, Plaintiff has failed to identify with any particularity how the stay itself is prejudicial, let alone substantially so. Plaintiff simply claims in its motion, as confirmed at oral argument, that the delay in resolving this case could possibly increase its damages because Defendant would continue to administer the Penn Mutual disability business. In the court's estimation, such speculation, standing alone, is insufficient to require a bond. If ultimately successful against Defendant, Plaintiff will be able to seek damages for the entire period of time for which it claims to have been harmed.
Second, Plaintiff acknowledges that the very damages it is seeking against Defendant in this case are the same, if not something less, than the damages it seeks and could be awarded in its arbitration with Penn Mutual. (See Docket No. 26: Pl.'s Mem. at 4 ("Each day that this day remains in effect represents a loss of $3,000.00 in policy administration revenue to [Plaintiff] which can only be recovered through the satisfaction of a money judgment eventually entered by the Court, or through the satisfaction by Penn Mutual of a money judgment entered by the arbitration panel.").) This alternative, if not primary, source of relief makes the necessity for a bond less, rather than more, appropriate here.
Third, the mere fact that Defendant, a Massachusetts insurance company, is in state-supervised receivership does not call for the security which Plaintiff seeks. Granted, Plaintiff expresses some trepidation about Defendant's future ability to pay a judgment. Without more, however, Plaintiff's concerns are simply speculative. Of course, should Plaintiff bring facts to the attention of the court which might reasonably demonstrate that Defendant's receivership was no longer rehabilitative, but liquidative, the hold harmless considerations in American Home might well come to the fore.
Finally, the court believes that Plaintiff's request for a bond must, at least in some way, be related to a likelihood of success on the merits of its claim. For understandable reasons, Plaintiff does little to address that issue. Cf. Tejidos de Coamo, Inc. v. Int'l Ladies Garment Workers' Union, 22 F.3d 8, 14 (1st Cir. 1994) (distinguishing between a stay of labor arbitration, which equates with an injunction appealable under 28 U.S.C. § 1292(1), and a stay of the court's own proceedings, for which no findings of irreparable injury are required). In contrast, Defendant expends considerable energy pointing out the evident weaknesses of Plaintiff's direct claims against it, as distinct from Penn Mutual. (See Docket No. 29: Def.'s Opp'n at 2-5.) Again, it must be remembered that, in granting the stay, Judge Ponsor was convinced by Defendant that the arbitration issues between Plaintiff and Penn Mutual "are virtually identical, if not identical," to the issues presented in this litigation and that the resolution of those issues at arbitration "will have a substantial impact, in fact more than a substantial impact upon this case if not a completely dispositive effect." (H'rg Tr. at 37.) Without a greater showing by Plaintiff that Defendant, as distinct from Penn Mutual, might well be liable should this matter go to trial, the court is further disinclined to order a bond.
Accordingly, Plaintiff's motion is DENIED.
IT IS SO ORDERED.