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MidFirst Bank v. Safeguard Properties, LLC

United States District Court, W.D. Oklahoma

May 8, 2017

MIDFIRST BANK, Petitioner,
v.
SAFEGUARD PROPERTIES, LLC, Respondent.

          ORDER

          TIMOTHY D. DeGIUSTI, UNITED STATES DISTRICT JUDGE

         Before the Court is Petitioner MidFirst Bank's (MidFirst) Petition to Compel Arbitration and Designate an Arbitrator [Doc. No. 1]. Defendant Safeguard Properties, LLC (Safeguard)[1] has filed its response in opposition [Doc. No. 13] and MidFirst has replied [Doc. No. 16]. The matter is fully briefed and at issue.

         BACKGROUND

         MidFirst provides retail banking and residential mortgage services. Safeguard is a provider of mortgage field services throughout the United States. It provides a number of services to financial institutions with interests in defaulted, foreclosed, and bank-owned real property. It also contracts with mortgagees and mortgage servicers to conduct property inspections, property preservation, and repair services.

         On December 4, 2007, the parties executed a Master Service Agreement (the Agreement) under which Safeguard was to provide services on properties throughout the United States. In the Agreement, Safeguard represented it would, inter alia, perform the services in accordance with (1) industry standards and all applicable laws and regulations, (2) service standards set forth in the Agreement, and (3) the “Rules, ” which were defined as “all published HUD, VA, Fannie Mae, Freddie Mac, GNMA, private investor and private mortgage insurer regulations, guidelines and requirements and all updates thereto [as well as] all applicable federal, state and local laws, rules, regulations and ordinances, and [MidFirst's] requirements, policies and procedures, and all amendments thereto.”

          MidFirst's right to indemnification from Safeguard was governed by section 11 of the Agreement, which stated:

[Safeguard] shall indemnify and hold [MidFirst], its Affiliates, respective employees, officers, directors, and agents harmless from any and all loss, payments, expenses, claims, injury, liability, damages, penalties, fines, forfeitures, denials of insurance and/or guarantee claims, lost compensation or reimbursement amounts, attorneys fees and costs, of any kind whatsoever, arising from or in any way connected with (a) any violation or failure to comply with the Rules; (b) non-compliance with the terms of this Agreement or any Exhibit, Addendum or Amendment hereto, including but not limited to breach of any warranty or representation or performance standard set forth herein; (c) any claims or actions whatsoever brought by any Subcontractor or on behalf of a Subcontractor hired by or working on behalf of Company; (d) negligent, wrongful acts or misconduct by Company, its employees, officers, directors, agents, contractors or Subcontractors, (e) any claims or actions brought by a third party alleging damage or injury to the property or person arising out of an act or omission of Company, its affiliates, respective employees, officers, directors, contractors, Subcontractors, and agents or (f) any mistakes by Company, its affiliates, respective employees, officers, directors, contractors, Subcontractors, and agents relating to the Contract Services herein.

         The indemnification provision also contained the following arbitration clause:

In the event any disputes arise relating to this Section, then the parties agree to submit the dispute to arbitration, in accordance with the laws of Oklahoma, unless both parties agree in writing not to go to arbitration. Such dispute will be brought in the jurisdiction of Oklahoma with a venue of the Western District of Oklahoma.

         MidFirst alleges that for more than 2, 600 properties, Safeguard failed to perform its services in conformity with HUD rules, which caused HUD to reconvey the properties back to MidFirst and/or refuse payment of insurance benefits. MidFirst contends that as a result, it incurred substantial monetary damages and other losses, including interest curtailments, reconveyance losses, costs assessed by HUD, and other miscellaneous expenses. MidFirst submitted claims to Safeguard for indemnification for the aforementioned losses. However, Safeguard refused to indemnify MidFirst and gave notice it was terminating the Agreement, to be effective February 13, 2017.

         MidFirst alleges Safeguard has breached the Agreement, entitling it to “offset its Damages by an amount equal to Safeguard invoices yet to be paid.” Pet. ¶ 20. Pursuant to the Federal Arbitration Act (FAA), 9 U.S.C. §§ 1 et seq., MidFirst filed the present action, invoking the arbitration clause set forth in § 11. Safeguard objects to arbitration on the grounds that (1) the arbitration clause does not apply to MidFirst's set off claims and the parties did not agree to arbitrate such claims, and (2) the arbitration clause is so vague that it is unconscionable and unenforceable under Oklahoma law.

         STANDARD OF DECISION

         When deciding whether an enforceable agreement to arbitrate exists, the Court views the facts and all reasonable inferences in the light most favorable to the party opposing arbitration. Ragab v. Howard, 841 F.3d 1134, 1139 (10th Cir. 2016). “The FAA provides that arbitration agreements ‘shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.'” In re Cox Enter., Inc. Set-top Cable Television Box Antitrust Litig., 835 F.3d 1195, 1201 (10th Cir. 2016) (quoting 9 U.S.C. § 2)). The FAA is a “congressional declaration of a liberal federal policy favoring arbitration agreements.” Id. at 1201 (quoting Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983)). Its purpose is to place arbitration agreements upon the same footing as other contracts and reverse the judiciary's longstanding refusal to enforce agreements to arbitrate. E.E.O.C. v. Waffle House, Inc., 534 U.S. 279, 289 (2002).

         When a contract contains an arbitration clause, there is a “strong presumption” that the dispute is arbitrable. Cox Enter., 835 F.3d at 1201. Thus, “an order to arbitrate the particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute. Doubts should be resolved in favor of coverage.” Id. (quoting United Steelworkers of Am. v. Warrior & Gulf Nav. Co., 363 U.S. 574, 582-83 (1960)). Although such presumption “disappears” where there is a dispute over whether a valid arbitration agreement exists, Dumais v. American Golf Corp., 299 F.3d 1216, 1219 (10th Cir. 2002), “[i]n the absence of any express provision excluding a particular grievance from arbitration, ... only the most forceful evidence of a ...


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