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Apt. Owner, Represented by Lane Law, Fights Arbitration Of $7M Ida Case At 5th Circuit.

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By Elizabeth Daley

A New Orleans luxury retail and apartment complex urged the Fifth Circuit to deny its foreign and domestic insurers' request to arbitrate a $7 million dispute over Hurricane Ida damage, arguing the insurers incorrectly construed the policies as one to force arbitration under international rules.

In a brief Tuesday, Belmont Commons LLC said its nine domestic and two foreign insurers went "to great lengths" to argue their policies were "actually one 'overarching contract'" to demand arbitration under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

The convention, to which the U.S. acceded in 1970, prescribes arbitration if one party in a dispute between entities of different signatory nations requests it, unless a U.S. court finds otherwise.

Belmont Commons LLC said "there is no doubt" that its separate contracts with its domestic insurance companies "do not fall under the convention." The real estate company said those contracts "do not satisfy the requirement that a party to the agreement is not an American citizen."

Belmont also said that its allegations against its insurers were separate. If the court's ruling depends upon whether Belmont alleges "substantially interdependent and concerted conduct," Belmont asked for the opportunity to at least proceed with discovery.

In seeking to force Belmont to arbitrate, the insurers "ignore or distort unfavorable jurisprudence" and include cases that are irrelevant to the dispute, the company argued.

Belmont again cited the Western District of Louisiana's March decision in Bufkin Enterprises LLC v. Indian Harbor Insurance Co.

In that case, a judge denied arbitration, and property owner Bufkin was allowed in court for claims that its insurance did not provide sufficient coverage for damage from 2020's Hurricane Laura. The insurers claimed they were foreign entities, but the court found them to be American companies and said arbitration was prohibited in insurance policies under Louisiana law.

Despite recent changes in a Louisiana statute limiting actions, jurisdiction and venue, Belmont said a carveout pertaining to forum and venue selection in policies was not meant "to abrogate the anti-arbitration purpose of the statute."

"This was the primary reason the statute was passed in the first place more than 70 years ago," Belmont added.

The insurers had said previously that assertions "that an arbitration provision is not a 'forum or venue selection clause' for purposes of Section 22:868 misunderstand Louisiana law."

Belmont said that even if arbitration could be "considered a 'subset' of forum/venue selection clauses," its insurers "have not addressed the conflict with the equitable estoppel doctrine created by the choice-of-law provision." Belmont said a clause that New York law governs disputes "directly conflicts with La. R.S. Section 22:868(A)(1), and nothing in La. R.S. Section 22:868(D) exempts surplus lines carriers from this provision."

Regardless, the property owner said forcing it to another jurisdiction for arbitration due to a choice-of-law provision "is the antithesis of fairness, particularly when New York law is much more favorable to insurers and when the arbitrators are proscribed from awarding particular types of damages." Belmont said that "Louisiana has some of the strongest bad faith statutes in the country."

These statutes "allow recovery of penalties and other damages that could not be awarded if New York law displaces Louisiana law," Belmont said.

The real estate company said for this reason and others, forcing it into New York would be "inherently unjust." It asked the judge to at least sever the arbitration clause from the choice-of-law provision "and rule that Louisiana law governs any insurance claims arising under the policies."

Belmont owns a property near New Orleans' French Quarter comprising luxury apartments, retail space and parking, according to court filings. It first sued its nine domestic insurers in Louisiana state court in August 2022, saying the insurers refused to cover damage caused by Hurricane Ida, a Category 4 storm that hit Louisiana in August 2021.

The domestic insurers subsequently removed Belmont's suit to Louisiana federal court on Oct. 13, 2022. The same day, the domestic insurers, led by AXA XL unit Indian Harbor Insurance Co., filed their own complaint to compel arbitration, this time including Belmont's two foreign insurers, underwriters at Lloyd's of London and HDI Global Specialty SE.

In January, U.S. Magistrate Judge Michael North granted the insurers' motion to compel arbitration. Belmont filed its opening appellate brief in June.

Representatives of the parties did not immediately respond to requests for comment Thursday.

The insurers are represented by Thomas C. Wright, Eric B. Boettcher, Landon J. Francois and Raffi Melkonian of Wright Close & Barger LLP and by D. Russell Holwadel of Adams Hoefer Holwadel LLC.

Belmont is represented by Michael D. Lane of Lane Law Group LLC.

The case is Indian Harbor Insurance Co. et al. v. Belmont Commons LLC et al., case number 23-30246, in the U.S. Court of Appeals for the Fifth Circuit.

--Editing by Nick Petruncio.


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