This week, the Fifth Circuit decided Woodmen of the World Life Insurance Society/ Omaha Woodmen Life Insurance Society v. JRY, No. 08-30405 (5th Cir. Mar. 23, 2009). The defendant-appellees (“JRY” and “TSY”) are parents suing on behalf of the Estate of their minor son (“BMY”) and the plaintiff-appellant Woodmen of the World (the “Society”) is a non-profit fraternal society that provides life insurance and other benefits, including access to a Woodmen Youth Camp via a Certificate of Insurance. This certificate incorporates the Woodmen Constitution, which provides that disputes between members and the Society should be resolved by arbitration.
The parents of BMY sued the Society in Louisiana state court claiming that BMY was sexually assaulted by fellow campers while attending the Woodmen camp and alleging that the camp staff were negligent in failing to properly supervise the campers. The Society filed a motion to compel arbitration. The district court held that the dispute fell outside of the arbitration agreement and the Society appealed.
The Fifth Circuit set out a two-step analysis that a court should follow to decide whether to compel arbitrationunder the FAA:
- Whether the parties agreed to arbitrate the dispute in question.
- Whether legal constraints external to the parties’ agreement foreclose the arbitration of those claims by deciding: (a) whether there is a valid agreement to arbitrate between the parties and (b) whether the dispute falls within the scope of the arbitration agreement.
Since the parties did not dispute the validity of the arbitration agreement, the court only considered the issue of whether their tort claims were encompassed by the arbitration agreement. The court cited the federal policy of favoring arbitration and stated that “ambiguities in the language of the agreement should be resolved in favor of arbitration.”
The court concluded that the arbitration clause was “at minimum susceptible of an interpretation that covers the asserted dispute” and remanded with instructions to grant the Society’s motion to compel arbitration.