United States District Court, E.D. Kentucky, Central Division, Lexington
MITSUI SUMITOMO INSURANCE USA, INC. as subrogee of ASAHI BLUEGRASS FORGE CORPORATION, Plaintiff,
DENHAM-BLYTHE COMPANY, INC., et al., Defendants.
MEMORANDUM OPINION AND ORDER
M. Hood Senior U.S. District Judge.
matter is before the Court upon Defendant Denham-Blythe
Company, Inc's (“Denham-Blythe”) Motion to
Alter or Amend [DE 34] the Court's March 21, 2019
Memorandum Opinion and Order [DE 32] arguing that since the
Court dismissed this case based on the applicability of
dispute resolution clauses in the Contract, the Court should
not have ruled on the issue of whether the waiver of
subrogation clause extended to post-construction claims.
Additionally, as opposed to dismissing this case,
Denham-Blythe requests the Court stay further proceedings in
this matter pending arbitration. [DE 34]. For the reasons
stated herein, Denham-Blythe's Motion to Alter or Amend
[DE 34] will be granted in part and denied in part.
AND PROCEDURAL HISTORY
case arises from a January 31, 2011 design-build contract
(“the Contract”) between Asahi Bluegrass Forge
Corporation (“Asahi”) and Denham-Blythe for the
construction of a 68, 000 square foot manufacturing facility
(“the Building”). [DE 20-1, at 2]. “As part
of its obligations as general contractor, Denham-Blythe
contracted with several Contractors to complete the design
and construction process[, ]” including BlueScope,
Varco Pruden Buildings (“Varco”) (a division of
BlueScope), and Arrow Metals and Coatings, Inc.
(“Arrow”). [DE 29, at 2]. On March 2, 2012, the
roof of the Building was damaged by severe winds and was
subsequently repaired by Denham-Blythe. [DE 20-1, at 2].
Again, on March 1, 2017, the roof of the Building sustained
damage from severe winds, and Denham-Blythe completed both
the temporary repair work and permanent repair work.
the roof was damaged on March 1, 2017, Asahi submitted
property damages claims to its insurer, Plaintiff Mitsui
Sumitomo Insurance USA, Inc. (“Mitsui”).
Id. “According to the Complaint, Mitsui
Sumitomo made payments to Asahi in response to the claims in
the amount of $1, 315, 092.00 under policy PKG3126694
(hereinafter referred to as ‘the Policy') with
effective dates of October 1, 2016 through October 1,
2017.” Id. (citing [DE 20-3]). On February 22,
2018, Mitsui, as subrogee of Asahi, filed its Complaint [DE
1] against Denham-Blythe, BlueScope, Varco, and Arrow
asserting subrogation rights against Defendants for the
amounts paid to repair the property damage caused by the 2017
severe winds. [DE 1]. Mitsui's claims against
Denham-Blythe include negligence, breach of contract, breach
of warranty of workmanlike services, and negligent
misrepresentation. Id. Mitsui's allegations
against BlueScope and Varco include negligence, negligent
misrepresentation, breach of warranty of workmanlike service,
and breach of contract and third-party beneficiary.
April 13, 2018, Denham-Blythe filed a Motion to Dismiss [DE
20], and on February 15, 2019, BlueScope filed a Motion for
Judgment on the Pleadings [DE 28] requesting Mitsui's
claims against BlueScope and Varco be dismissed.
BlueScope's Motion for Judgement on the Pleadings [DE 28]
is nearly identical to Denham-Blythe's Motion to Dismiss
[DE 20]. The only substantial difference between the two
Motions [DE 20; DE 28] is that BlueScope's Motion for
Judgment on the Pleadings [DE 28] omitted Denham-Blythe's
argument that the claim is barred by the dispute resolution
clauses in the contract.
March 21, 2019, the Court granted Denham-Blythe's Motion
to Dismiss [DE 20] because pursuant to the dispute resolution
provisions in the Contract, the contracting parties were
required to mediate, and if mediation was unsuccessful, to
proceed to arbitration. [DE 20, at 20-25]. Thus, Mitsui's
claim is barred by the dispute resolution clauses in the
Contract. Since BlueScope's Motion for Judgment on the
Pleadings [DE 28] failed to argue Mitsui's claim is
barred by the dispute resolution provisions in the contract,
the Court denied BlueScope's Motion [DE 28]. However, in
addition to deciding the dispute resolution issue, the Court
also ruled on the issue of whether the waiver of subrogation
clause applied to post-construction claims by finding that it
did not apply. [DE 32, at 9-20]. On April 1, 2019,
Denham-Blythe moved to alter or amend the Court's March
21, 2019 Memorandum Opinion and Order [DE 32] to omit Section
A.2, entitled “WHETHER THE CLAIM IS BARRED BY THE
WAIVER OF SUBROGATION CLAUSE, ” and stay further
proceedings in this matter pending arbitration. [DE 34].
Rule of Civil Procedure 59(e) permits a party to file a
motion to alter or amend a judgment within 28 days after the
entry thereof. “A court may grant a Rule 59(e) motion
to alter or amend if there is: (1) a clear error of law; (2)
newly discovered evidence; (3) an intervening change in
controlling law; or (4) a need to prevent manifest
injustice.” Intera Corp. v. Henderson, 428
F.3d 605, 620 (6th Cir. 2005). “[A] Rule 59(e) motion
cannot be used to ‘relitigate old matters, or to raise
arguments . . . that could have been raised prior to the
entry of judgment,' or ‘to re-argue a
case.'” J.B.F. through Stivers v. Ky. Dept'
of Educ., 690 Fed.Appx. 906, 906-7 (6th Cir. 2017)
(quoting Exxon Shipping Co. v. Baker, 554
U.S. 471, 485 n. 5 (2008); Sault Ste. Marie Tribe of
Chippewa Indians v. Engler, 146 F.3d 367, 374 (6th Cir.
identifies a clear error of law in the Court's prior
ruling. Specifically, as Denham-Blythe correctly asserts,
“If a court determines that an arbitration agreement is
valid, it cannot also rule on substantive issues meant for
arbitration.” [DE 34, at 2]. When the parties have
agreed to arbitrate, the Court may not consider the merits of
the case. See Smith v. Union Carbide Corp., 350 F.2d
258, 261 (6th Cir. 1965) (quoting United Steelworkers of
America v. American Mfg. Co., 363 U.S. 564, 567 (1960));
Burden v. Check Into Cash of Kentucky, LLC, 267 F.3d
483, 487 (6th Cir. 2001). Here, since the Court found the
dispute resolution clauses in the Contract barred
Mitsui's claim, the Court should not have also decided
whether the waiver of subrogation clause was valid. Doing so
was a clear error of law and requires the Court to amend its
March 21, 2019 Memorandum Opinion and Order [DE 32] to omit
Section A.2, entitled “WHETHER THE CLAIM IS BARRED BY
THE WAIVER OF SUBROGATION CLAUSE, ” and language
related to the Court's decision regarding the validity of
the waiver of subrogation clause.
addition to moving to alter or amend the Court's decision
regarding the waiver of subrogation clause issue,
Denham-Blythe requests the Court stay further proceedings in
this matter pending arbitration. [DE 34]. Instead of staying
further proceedings until the Parties participate in
mediation and, if necessary, arbitration, the Court dismissed
this matter without prejudice.
is a split of authority on whether Section 3 of the Federal
Arbitration Act (“FAA”) mandates a stay of
litigation as opposed to a dismissal in certain situations.
See Johnmohammadi v. Bloomingdale's, Inc., 755
F.3d 1072 (9th Cir. 2014); Green v. SuperShuttle Intern.,
Inc., 653 F.3d 766 (8th Cir. 2011); Choice Hotels
Intern. v. BSR Tropicana Resort, 252 F.3d 707 (4th Cir.
2001); Bercovitch v. Baldwin School, Inc., 133 F.3d
141 (1st Cir. 1998); Alford v. Dean Witter Reynolds,
Inc., 975 F.2d 1161 (5th Cir. 1992). But see, Katz v.
Cellco Partnership, 794 F.3d 341 (2d Cir. 2015);
Halim v. Great Gatsby's Auction Gallery, Inc.,
516 F.3d 557 (7th Cir. 2008); Lloyd v. Hovensa,
LLC., 369 F.3d 263 (3d Cir. 2004); Adair Bus Sales,
Inc. v. Blue Bird Corp., 25 F.3d 953 (10th Cir. 1994).
However, the Sixth Circuit has permitted courts to dismiss
actions where the parties did not explicitly request a stay
of the action. See Hilton v. Midland Funding, LLC,
687 Fed.Appx. 515, 518-19 (6th Cir. 2017) (quoting
9 U.S.C. § 3) (explaining that the FAA requires a court
to stay proceedings pending arbitration only “on
application of one of the parties”)).
neither Denham-Blythe nor Mitsui requested this matter be
stayed pending arbitration. Instead, in Denham-Blythe's
Motion to Dismiss [DE 20], Denham-Blythe requested this
matter be dismissed [DE 20; DE 26], and the Court granted
Denham-Blythe's request [DE 32]. Accordingly,
Denham-Blythe has failed to show there is a clear error of
law, newly discovered evidence, an intervening change in
controlling law, or a need to prevent manifest injustice,
which would require the Court to alter or amend its previous
decision to stay further proceedings in this matter, as
opposed to dismissing this case without prejudice.
Henderson, 428 F.3d at 620. Denham-Blythe request
for the Court to stay further proceedings is an attempt to
raise an argument that could have been raised prior to ...