In American Family Life Assurance Co. v. Biles, No. 12–60235 (5th Cir. Apr. 30, 2013) (click here for opinion), an individual purchased an accident insurance policy from Aflac, naming his mother and life partner as beneficiaries. After the purchaser died, Aflac paid the benefits to the named beneficiaries. However, the decedent’s siblings and mother sued Aflac in Mississippi state court, alleging that Aflac should not have paid any benefits to the life partner. Aflac asked the state court to enforce the accident policy’s arbitration provision, but the state court found there were issues regarding the validity of the signatures on the agreement. The family members alleged that the decedent’s signature was a forgery. The state court ordered the parties to engage in discovery regarding the validity of the signature, denied Aflac’s motion to compel arbitration without prejudice, and gave permission to re-file the motion to compel arbitration after discovery had taken place. Aflac then filed a stand-alone petition to compel arbitration in federal court pursuant to section 4 of the Federal Arbitration Act, and the federal district court granted Aflac’s motion to compel arbitration and rejected a Colorado River abstention argument. The Fifth Circuit affirmed, with a detailed discussion of why abstention was not appropriate. The family members also argued on appeal that the lower court improperly denied their request for additional discovery regarding the signatures on the agreement, but the Fifth Circuit found no abuse of discretion in denying the request for additional discovery.
The family members also argued on appeal that the motion to compel arbitration should not be granted because there was a genuine dispute regarding a material fact. The mother had submitted an affidavit saying the signature on the agreement was not the signature of the decedent, but the affidavit unfortunately was not part of the record on summary judgment. Instead, the mother submitted the affidavit as part of a motion for reconsideration before the district court. The Fifth Circuit found that because the affidavit was not part of the summary judgment record, there was no genuine dispute regarding a material fact. The Fifth Circuit affirmed the district court’s order compelling arbitration.
This case shows some potential pitfalls when litigating the enforceability of an arbitration agreement. The family members and Aflac submitted competing affidavits from handwriting experts, and after a Daubert hearing, the court granted Aflac’s request to strike the affidavit from the family member’s expert, leaving the family members with no proof of forgery. Also, the mother’s affidavit was not properly submitted into the summary judgment record. Furthermore, Aflac’s strategy carried some risks; another federal court may have abstained under the Colorado River doctrine, which recently occurred in another case I previously discussed.
If all the affidavits were valid and properly submitted, and if the court found a genuine dispute regarding the making of the agreement, the court could have had a jury trial pursuant to section 4 of the FAA regarding the enforceability of the arbitration agreement. I believe such trials are as common as a unicorn. Is anyone aware of jury or bench trials pursuant to section 4 of the FAA? Is anyone aware of other Daubert hearings in connection with the enforceability of an arbitration agreement?