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FCCI Insurance Co. v. Nicholas County Library

United States District Court, E.D. Kentucky, Central Division, Lexington

March 5, 2019

FCCI INSURANCE COMPANY, Plaintiff,
v.
NICHOLAS COUNTY LIBRARY, Defendant.

          MEMORANDUM OPINION AND ORDER

          Joseph M. Hood Senior U.S. District Judge.

         Plaintiff FCCI Insurance Company has moved for injunctive relief in the form of a temporary restraining order and preliminary injunction to prevent arbitration proceedings in this action until the Court has opportunity to consider the pending motion to dismiss for lack of jurisdiction or, in the alternative, motion to compel arbitration. [DE 20]. Defendant Nicholas County Library opposes the motion for injunctive relief. [DE 25]. An expedited hearing was held on this matter where both parties, through counsel, presented their arguments on the matter. After reviewing the briefing and considering the oral arguments presented by the parties, FCCI's motion for a temporary restraining order and preliminary injunction [DE 20] is DENIED because FCCI has failed to meet its burden demonstrate that injunctive relief is necessary to preserve the status quo until the Court rules on the pending motion to dismiss or to compel arbitration.

         I. Factual and Procedural Background

         The Nicholas County Library entered into a construction contract with Crace & Co., Inc., related to the construction of an addition to the Nicholas County Library. FCCI issued payment and performance bonds for the project, naming Crace as principal and Nicholas County Library as obligee.

         The construction contract between Crace and the Library states:

For any claim subject to, but not resolved by, mediation pursuant to Section 21.3, the method of binding dispute resolution shall be as follows:
[X] Arbitration pursuant to Section 21.4 of this Agreement.

         [DE 11-2 at 6, Pg ID 56]. Additionally, the contract provides that “[i]f the parties have selected arbitration as the method for binding dispute resolution in the Agreement, any claim, subject to, but not resolved by, mediation shall be subject to arbitration.” [Id. at 8, Pg ID 58].

         FCCI was not a party to the construction contract between Crace and the Library. Still, the FCCI performance bond appears to incorporate the construction contract, stating:

The Condition Of This Obligation is such that whereas, the Principal entered into a certain contract with the Owner, dated the 18th day of October, 2016, a copy of which is hereto attached and made part hereof for the construction of: Nicholas Co. Library, New Two Story Addition, Carlisle, KY.

[DE 1-1 at 1, Pg ID 6].

         One of the special conditions in the performance bond was that Crace install rebar to reinforce the walls of the library addition. After investigation, FCCI claims that they determined that this condition was not met. As a result, FCCI terminated Crace under the performance bond. At the same time, Nicholas County Library made a claim on the FCCI performance bond.

         Subsequently, FCCI filed this action seeking a declaratory judgment on the alleged default and overpayment. [DE 1]. The Library moved to dismiss for lack of jurisdiction or, in the alternative, to compel arbitration. [DE 11]. Additionally, if FCCI was not compelled to arbitrate, the Library has asked the Court to stay this case until Crace and the Library can submit their dispute to arbitration. [Id.].

         Before the Court could rule on that motion, the parties agreed to stay the case and mediate the dispute. [DE 13]. Recently, the parties notified the Court that they had failed to resolve the dispute through mediation and asked that the stay be lifted and that a briefing schedule be implemented for the pending motion to dismiss or compel arbitration. [DE 17; DE 18]. FCCI responded to the motion to dismiss or compel on February 20, 2019. [DE 19]. A demand for arbitration from the Library, dated January 25, 2019, is attached to the FCCI's response in opposition to the motion to dismiss. [DE 19-1]. Based on the Court's briefing schedule [DE ...


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