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Jpmorgan Chase Bank, N.A v. Republic Mortgage Insurance Company and Republic Mortgage Insurance Company of North Carolina

November 30, 2012


The opinion of the court was delivered by: William J. Martini, U.S.D.J.:


This action comes before the Court on a motion by Defendants Republic Mortgage Insurance Company and Republic Mortgage Insurance Company of North Carolina (collectively, "RMIC") to enjoin or stay Plaintiff JPMorgan Chase Bank, N.A. ("Chase") from proceeding with Case No. 13 195 01260 12 before the American Arbitration Association. The arbitration would focus on a single insurance policy that was, at one time, part of this litigation. The arbitration would not focus on-and this Opinion does not address-policies that were never before this Court. There was no oral argument. Fed. R. Civ. P. 78(b). For the reasons discussed below, RMIC's motion is GRANTED and arbitration is enjoined until further order of this Court.


The Court writes solely for the parties. And given the factual and procedural complexity of this case and the relatively narrow scope of the pending motion to enjoin or stay arbitration, the Court will be brief. Chase is a national banking association that makes mortgage loans. From 2001 to 2005, RMIC insured Chase's mortgage loans. When the financial crisis of 2007 through 2009 hit, defaults on these loans skyrocketed. Chase alleges that RMIC responded in bad- faith, repeatedly rescinding coverage in violation of its contractual duties. In this litigation, Chase seeks damages for the rescission of hundreds of individual policies, as well as a declaration interpreting the master contract that governs those policies. Needless to say, adjudicating hundreds of alleged contract breaches in a single case presents obvious difficulties. These difficulties have been explored with counsel, and they are the subject of a pending motion to dismiss.

Chase filed a first iteration of its Complaint on November 23, 2010. Compl., ECF No. 1. That initial pleading described "RMIC's efforts to avoid its obligations under mortgage insurance policies on which Chase is the named insured, a successor/assignee of the named insured or otherwise entitled to payment.." Id. ¶ 1. The Complaint sought a declaration that RMIC could not rescind policies absent a judicial declaration or arbitral award. Additionally, it sought damages for breach of contract, breach of fiduciary duty and bad faith insurance practices, and detrimental reliance for approximately 2,000 rescissions.

After RMIC moved to dismiss, Chase withdrew its claims for detrimental reliance, filed an Amended Complaint, and brought a cross-motion for summary judgment on its claim for declaratory relief. On May 5, 2011, the Court, per the Honorable Stanley R. Chesler, denied Chase's cross-motion and granted RMIC's motion to dismiss the Complaint. See JPMorgan Chase Bank, N.A. v. Republic Mortg. Ins. Co., No. 10-06141, 2011 WL 1750439 (D.N.J. May 4, 2011). Judge Chesler granted leave to file an amended complaint so that Chase could pursue breach of contract claims based on RMIC's failure to pay on individual contracts. Id. at *5.

On July 19, 2011, Chase filed its Second Amended Complaint (the "SAC"). That pleading asserts claims for, inter alia, breach of contract, bad faith, and breach of fiduciary duty with respect to roughly 375 rescissions. The SAC makes specific allegations about eight rescissions, two of which are no longer at issue in this litigation. See Letter from Robert A. Goodman to the Hon. William J. Martini (Sept. 6, 2012), ECF 70. Additionally, the SAC requests a declaration with respect to RMIC's duties and rights under Sections 2.2, 2.3 and 5.6 of the Master Contract Form MP-1103 ("the Master Contract"), which governs all of the rescinded policies at issue in the litigation.

Two months after Chase filed the SAC, RMIC again moved to dismiss. Shortly thereafter, the case was reassigned to the undersigned. On May 25, 2012, Chase demanded an arbitration with RMIC.*fn1

The proposed arbitration concerns a single policy ("the Bear Policy") originated by Bear Sterns and currently serviced by Chase. Of crucial significance for purposes of the instant motion, the Bear Policy was named in Chase's initial Complaint. Chase's arbitral demand ("the Demand") seeks a declaration that RMIC breached the Master Contract when it rescinded the Bear Policy. It also seeks damages in breach of contract. On June 19, 2012, RMIC filed the pending motion to enjoin or stay the arbitration. While the instant motion was pending, Chase again changed the number of rescissions it wishes to challenge in this litigation. See Revised Exhibit A to the Second Amended Complaint, ECF No. 67-1.


RMIC argues that Chase waived its right to arbitrate the Bear Policy when it brought suit on that same policy in this Court. The Court agrees. As explained below, arbitration would necessarily resolve issues concerning a policy Chase voluntarily included in this litigation. While the specific policy is no longer before this Court, the underlying contract issues remain front and center in this litigation. Allowing the arbitration to proceed would prejudice RMIC. Because Chase waived its arbitration rights, Chase is enjoined from proceeding with the arbitration until further order of the Court.

Participating in litigation can waive rights to arbitration. When waiver occurs, federal district courts have the power to issue an appropriate injunction. See Gray Holdco, Inc. v. Cassady, 654 F.3d 444, 461 (3d Cir. 2011) (affirming district court's order enjoining arbitration). "Consistent with the strong preference for arbitration in federal courts, waiver is not to be lightly inferred, and waiver will normally be found only where the demand for arbitration came long after the suit commenced and when both parties had engaged in extensive discovery." Nino v. Jewelry Exch., Inc., 609 F.3d 191, 208 (3d Cir. 2010) (quoting PaineWebber Inc. v. Faragalli, 61 F.3d 1063, 1068-69 (3d Cir. 1995) (internal quotations and citations omitted)).*fn2 A non-exclusive list of six factors guides the waiver analysis:

(1) timeliness or lack thereof of the motion to arbitrate; (2) extent to which the party seeking arbitration has contested the merits of the opposing party's claims; (3) whether the party seeking arbitration informed its adversary of its intent to pursue arbitration prior to seeking to enjoin the court proceedings; (4) the extent to which a party seeking arbitration engaged in non-merits motion practice; (5) the party's acquiescence to the court's pretrial orders; and (6) the extent to which the parties have engaged in discovery.

Gray Holdco, 654 F.3d at 451 (citing Hoxworth v. Blinder, Robinson & Co., 980 F.2d 912, 926-27 (3d Cir. 1992)). These six factors "generally are indicative of whether a party opposing arbitration would suffer prejudice attributable to the other party's delay in seeking arbitration." Id. The inquiry is "necessarily case specific." Id. "Not ...

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