Acheron Portfolio Trust, et al. v. Barry Mukamal

[DO NOT PUBLISH]
In the
United States Court of Appeals
For the Eleventh Circuit
____________________
No. 21-12111
____________________
ACHERON PORTFOLIO TRUST,
AVERNUS PORTFOLIO TRUST,
LORENZO TONTI 2006 TRUST,
STYX PORTFOLIO TRUST,
ACHERON CAPITAL, LTD.,
Plaintiffs-Appellants,
versus
BARRY MUKAMAL,
as Trustee of the Mutual Benefits Keep Policy Trust,
Defendant-Appellee.
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2 Opinion of the Court 21-12111
____________________
Appeal from the United States District Court
for the Southern District of Florida
D.C. Docket No. 1:20-cv-25025-DPG
____________________
Before WILLIAM PRYOR , Chief Judge, J ILL PRYOR , and G RANT, Cir-
cuit Judges.
PER CURIAM:
Plaintiffs the Acheron Trusts and Acheron Capital (collec-
tively, “Acheron”) appeal the district court’s dismissal of their peti-
tion to compel defendant Barry Mukamal, as Trustee of the Mutual
Benefits Keep Policy Trust, to arbitrate their dispute regarding the
management of the trust. In dismissing the petition, the district
court concluded that (1) it was for the court, not the arbitrator, to
decide the gateway question of arbitrability and (2) the parties’ dis-
pute was not subject to arbitration. After careful review and with
the benefit of oral argument, we affirm.
I. BACKGROUND1
In 2004, the Securities and Exchange Commission brought
an enforcement action against Mutual Benefits Corporation for
1 Because we write for the parties, we assume their familiarity with the facts
and issues and include only what is necessary to explain our decision.
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fraudulently selling fractional investment interests in viaticated life
insurance policies.
See SEC v. Mut. Benefits Corp., 408 F.3d 737,
738 (11th Cir. 2005). As a result of this enforcement action, the vi-
aticated life insurance policies were placed into a receivership. In-
vestors were given the option of retaining or selling their interests
in the policies. The retained policies were ultimately transferred
into the Mutual Benefits Keep Policy Trust for which Mukamal
(the “Trustee”) acts as trustee. Appellants the Acheron Trusts2
own fractional interests in these policies.
When the trust was formed, the Trustee entered into a ser-
vicing agreement (the “Litai Agreement”) with third party Litai As-
sets to service the policies. Under the servicing agreement, Litai
was responsible for performing various tasks related to the policies.
It tracked when premiums were due on the policies, collected the
funds needed to pay the premiums, and paid the premiums as they
came due. It also maintained updated information about the
whereabouts of the insureds under the policies to determine
whether each insured remained alive. When an insured died, Litai
would submit a claim to the relevant insurer to collect the benefits
owed under the insurance policy and distribute the benefits to
those individuals or entities, like the Acheron Trusts, who owned
fractional interests in the policy. Servicing of fractional interests in
2 The Acheron Trusts include the Acheron Portfolio Trust, Avernus Portfolio
Trust, Lorenzo Tonti 2006 Trust, and Styx Portfolio Trust. Appellant Acheron
Capital is the investment manager for each of the Acheron Trusts. Acheron
Capital does not itself own interests in the policies.
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4 Opinion of the Court 21-12111
life insurance policies is complex and not routinely offered by life
insurance servicers. To accomplish its servicing obligations, Litai
relied on specialized software to support its administration of the
policies.3
Aware of the complex nature and demands of servicing frac-
tional interests in life insurance policies, Acheron Capital entered
into an agreement with the Trustee in 2015 (the “2015 Agree-
ment”) to protect its interests going forward. The 2015 Agreement
gave Acheron Capital the right to participate in the negotiation of
any new “servicing agreement” and the power to refuse to approve
any new servicing agreement that was not “commercially reason-
able.” Doc. 1-4 at 2–3.4 The 2015 Agreement provided that if the
Trustee and Acheron Capital were “unable to agree with respect to
the terms of a new servicing agreement or further extension of the
existing Servicing Agreement,” they would mediate their dispute.
Id. at 3. If they did not resolve their dispute in mediation, they
agreed that the dispute would be “submitted to JAMS, or its suc-
cessor, for final and binding arbitration.”
Id. Under the 2015 Agree-
ment, either party could initiate arbitration by “filing a written de-
mand for arbitration at any time following the declaration of an
impasse by the mediator.”
Id. The only other reference in the
agreement to JAMS says that “[a]t no time prior [to the declaration
3 Litai did not develop the software. The receiver originally paid a separate
entity to develop the software, and later sold it to Litai.
4 “Doc.” numbers refer to the district court’s docket entries.
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21-12111 Opinion of the Court 5
of an impasse] shall either side initiate an arbitration or litigation
related to this Agreement except to pursue a provisional remedy
that is authorized by law or by JAMS Rules or by agreement of the
parties.”
Id.
When the Litai Agreement expired, the Trustee selected an-
other entity—Q Capital—to succeed Litai as the servicer of the pol-
icies. In connection with his selection of Q Capital as the new ser-
vicer, the Trustee contracted with Proactive Technologies (“Pro-
Tech”) to provide software that Q Capital would use for servicing
the fractional interests (the “ProTech Agreement”). Unlike the ne-
gotiations for the Q Capital servicing agreement,5 Acheron was not
included in the negotiations for the ProTech Agreement.
Acheron contended that, under the terms of the 2015 Agree-
ment, it should have been included in the Trustee’s negotiations
with ProTech. In the instant dispute, Acheron filed a petition to
compel arbitration of the dispute over the ProTech Agreement.
The Trustee moved to dismiss Acheron’s petition to compel arbi-
tration. The matter was referred to a magistrate judge, who rec-
ommended that the motion be denied after concluding that (1) it
was for the court, not the arbitrator, to decide whether the instant
dispute was arbitrable and (2) the ProTech Agreement was not a
servicing agreement subject to arbitration. The district court
adopted the magistrate judge’s report and recommendation and
5 Acheron refused to approve the Q Capital servicing agreement, triggering a
separate dispute regarding the commercial reasonableness of that agreement.
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dismissed Acheron’s petition to compel arbitration.6 This appeal
followed.
II. STANDARD OF REVIEW
“We review
de novo a district court’s decision on whether a
dispute is covered by an arbitration agreement.”
Int’l Underwriters
AG v. Triple I: Int’l Invs., Inc., 533 F.3d 1342, 1344 (11th Cir. 2008);
see also Kroma Makeup EU, LLC v. Boldface Licensing + Brand-
ing, Inc., 845 F.3d 1351, 1354 (11th Cir. 2017) (“We review
de novo
a district court’s denial of a motion to compel arbitration.”).7
III. DISCUSSION
We first consider whether the court or the arbitrator has the
authority to decide whether a dispute is arbitrable under the 2015
6 The district court also concluded that the Acheron Trusts lacked standing
because only Acheron Capital was a party to the 2015 Agreement containing
the arbitration clause. Because Acheron Capital has standing to enforce the
agreement, we need not and do not decide whether the Acheron Trusts have
standing.
See Greater Birmingham Ministries v. Sec’y of State for Ala., 992 F.3d
1299, 1317 (11th Cir. 2021).
7 Mukamal maintains that Acheron failed to properly object to the magistrate
judge’s report and recommendation and thus is entitled to plain-error review
only.
See 11th Cir. R. 3-1 (“A party failing to object . . . waives the right to
challenge on appeal the district court’s order . . . . In the absence of a proper
objection, however, the court may review on appeal for plain error if neces-
sary in the interests of justice.”). Notably, when the district court reviewed
Acheron’s objections, it applied
de novo review, suggesting it considered Ach-
eron’s objections to be sufficient. In any event, because the result we reach
would be the same under either standard of review, we review
de novo.
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Agreement. Because we conclude that the question of arbitrability
is for the court to decide, we next consider whether the district
court erred in determining that the dispute over the ProTech
Agreement is not subject to arbitration. We agree with the district
court that the 2015 Agreement gives Acheron no right to arbitrate
this dispute and thus affirm the court’s denial of the motion to com-
pel arbitration.
A. Under the 2015 Agreement, the Court, not the Arbitra-
tor, Decides Questions of Arbitrability.
We first address whether the court or the arbitrator decides
the arbitrability of the instant dispute. The default rule is that
courts decide questions of arbitrability.
See Howsam v. Dean Wit-
ter Reynolds, Inc., 537 U.S. 79, 84 (2002) (“[A] gateway dispute
about whether the parties are bound by a given arbitration clause
raises a ‘question of arbitrability’ for a court to decide.”). Parties
can contract around this default rule by “clearly and unmistakably”
providing that the arbitrator shall decide questions of arbitrability.
Id. at 83;
see also JPay, Inc. v. Kobel, 904 F.3d 923, 930 (11th Cir.
2018) (“Questions of arbitrability, then, stay with the court unless
there is clear and unmistakable evidence that the parties intended
to submit such questions to an arbitrator.”) (internal quotation
marks and emphasis omitted).
We therefore look to the 2015 Agreement to determine
whether the parties expressed any such “clear and unmistakable”
intent. Acheron argues that the 2015 Agreement’s reference to
JAMS, a mediation and arbitration organization, constitutes “clear
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8 Opinion of the Court 21-12111
and unmistakable” evidence that the question of arbitrability be-
longs to the arbitrator. Unless the parties agree otherwise, JAMS
applies the JAMS Comprehensive Arbitration Rules & Procedures
(“JAMS Rules”) to resolve disputes submitted for binding arbitra-
tion. Under the JAMS Rules, the arbitrator decides the gateway is-
sue of arbitrability. By invoking JAMS and the JAMS Rules in the
2015 Agreement, Acheron argues, the parties clearly delegated the
question of arbitrability to the arbitrator. Acheron acknowledges
that the 2015 Agreement does not expressly incorporate the JAMS
Rules or refer to any particular JAMS rule, but it nonetheless con-
tends that reference to the JAMS Rules in general is sufficient to
reflect the parties’ agreement that the JAMS Rules will govern, in-
cluding on the question of arbitrability. We disagree.
An arbitration agreement’s incorporation of rules that spe-
cifically empower the arbitrator to decide questions of arbitrability
constitutes “clear and unmistakable” evidence that the parties in-
tended to submit such questions to the arbitrator.
See Terminix
Int’l Co. v. Palmer Ranch Ltd. P’ship, 432 F.3d 1327, 1332 (11th Cir.
2005). In
Terminix, the parties expressly agreed that “arbitration
shall be conducted in accordance with the Commercial Arbitration
Rules then in force of the American Arbitration Association.”
Id.
These rules in turn gave the arbitrator “the power to rule on his or
her own jurisdiction, including any objections with respect to the
existence, scope or validity of the arbitration agreement.”
Id. We
held that by agreeing to arbitrate according to these rules, the par-
ties “clearly and unmistakably” agreed to delegate this power to the
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21-12111 Opinion of the Court 9
arbitrator.
Id.;
see also JPay, 904 F.3d at 937 (“[B]y incorporating
AAA rules into an agreement parties clearly and unmistakably
evince an intent to delegate questions of arbitrability.”).
Acheron argues that the same principle applies here. But un-
like the agreement in
Terminix, which explicitly stated that arbitra-
tion would be conducted according to the AAA rules, no similar
language appears in the 2015 Agreement with respect to the JAMS
Rules. The 2015 Agreement provided only that the dispute “shall
be submitted to JAMS” for arbitration and that,
before any arbitra-
tion has begun, the parties may pursue a provisional remedy “au-
thorized by law or by JAMS Rules or by agreement of the parties.”
Doc. 1-4 at 3. Despite calling for the submission of disputes that
could not be settled in mediation to JAMS for arbitration, the 2015
Agreement did not say that the JAMS Rules would govern arbitra-
tion. Instead, it provided that a dispute would be submitted to
JAMS for arbitration “pursuant to the provisions below,” none of
which incorporated the JAMS Rules.
Id. The agreement’s only ref-
erence to the JAMS Rules merely permitted the parties to com-
mence provisional remedies
before arbitration began. That the
agreement invoked the JAMS Rules in this context but did not say
they would govern the arbitration itself is strong evidence that the
parties did not agree to be bound by the JAMS Rules generally.
We conclude that the references to JAMS and JAMS Rules in
the 2015 Agreement did not amount to clear and unmistakable in-
corporation of the JAMS Rules.
See Dist. No. 1., Pac. Coast Dist.,
Marine Eng’rs’ Beneficial Ass’n v. Liberty Mar. Corp., 998 F.3d 449,
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10 Opinion of the Court 21-12111
462 (D.C. Cir. 2021) (“The parties’ mention of the AAA in their
agreement does not embody an incorporation of the AAA rules, let
alone a clear and unmistakable incorporation.”);
see also Terminix,
432 F.3d at 1332 (finding incorporation of AAA rules where a con-
tract explicitly provided that “arbitration shall be conducted in ac-
cordance with the Commercial Arbitration Rules then in force of
the American Arbitration Association”);
U.S. Nutraceuticals, LLC
v. Cyanotech Corp., 769 F.3d 1308, 1309–10 (11th Cir. 2014) (find-
ing incorporation where parties agreed to arbitrate “under the aus-
pices and rules of the American Arbitration Association”);
Spirit
Airlines, Inc. v. Maizes, 899 F.3d 1230, 1235–36 (11th Cir. 2018)
(finding incorporation where parties agreed to resolve disputes “by
submission to arbitration . . . in accordance with the rules of the
American Arbitration Association then in effect”). The cases Ach-
eron cites to support its argument—that the 2015 Agreement’s gen-
eral reference to JAMS or the JAMS Rules suffices to incorporate
the rules—involved express incorporation language akin to the lan-
guage in the cases cited above and thus do not bolster its position.8
8
See Green Tree Servicing, LLC v. House, 890 F.3d 493, 496 (5th Cir. 2018)
(“[A]ny controversy or claim arising out of or relating to this contract . . . shall
be settled by binding arbitration in accordance with the Comprehensive Arbi-
tration Rules and Procedures administered by [JAMS] . . . .”);
Contec Corp. v.
Remote Sol. Co., 398 F.3d 205, 208 (2d Cir. 2005) (“[Any] controversy shall be
determined by arbitration . . . in accordance with the Commercial Arbitration
Rules of the American Arbitration Association . . . .”).
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Acheron also points to the JAMS Rules themselves. The
rules provide that all disputes submitted to JAMS for arbitration
will be governed by JAMS Rules even in the absence of an agree-
ment by the parties to apply those rules.9 If the parties had incor-
porated the JAMS Rules, we would look to the content of those
rules for evidence of the parties’ intent to delegate the issue of ar-
bitrability. But, as discussed above, the 2015 Agreement did not in-
corporate the JAMS Rules or otherwise reflect the parties’ agree-
ment to proceed according to those rules. Moreover, Acheron’s ar-
gument is self-defeating: the JAMS Rule that provides that JAMS
Rules are the default for claims over a monetary threshold10 is
premised on the parties having
not agreed to use any particular
9 JAMS Rules 1(a) and 1(b) provide:
(a) The JAMS Comprehensive Arbitration Rules and Procedures (“Rules”)
govern binding Arbitrations of disputes or claims that are administered
by JAMS and in which the Parties agree to use these Rules or, in the
absence of such agreement, any disputed claim or counterclaim that
exceeds $250,000, not including interest or attorneys’ fees, unless other
Rules are prescribed.
(b) The Parties shall be deemed to have made these Rules a part of their
Arbitration Agreement (“Agreement”) whenever they have provided
for Arbitration by JAMS under its Comprehensive Rules or for Arbi-
tration by JAMS without specifying any particular JAMS Rules and the
disputes or claims meet the criteria of the first paragraph of this Rule.
JAMS Comprehensive Arbitration Rules & Procedures (2021). These provi-
sions have not materially changed during this litigation.
10
See id. at 1(a).
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rules. The absence of an agreement as to what rules to use cannot
be clear evidence of an agreement to use JAMS Rules.
The critical question is whether the parties “clearly and un-
mistakably” agreed to submit the gateway question of arbitrability
to the arbitrator.
See JPay, 904 F.3d at 930. When arbitration rules
are expressly incorporated into an agreement, we presume the par-
ties considered the content of those rules and agreed to be bound
by them. Mere mention of an arbitration body, without explicit in-
corporation of that body’s rules, does not give rise to the same pre-
sumption. Here, the parties have not manifested an intent to be
bound by rules outside the four corners of the 2015 Agreement.
Absent such manifestation, we cannot say that the parties “clearly
and unmistakably” agreed that JAMS Rules—including the rule
making JAMS Rules the default where the parties fail to specify the
rules under which the arbitration will be conducted—govern who
will decide questions of arbitrability.
In sum, the 2015 Agreement does not contain the “clear and
unmistakable” evidence necessary to overcome the presumption
that the court, rather than the arbitrator, decides the gateway ques-
tion of arbitrability.
See First Options of Chicago, Inc. v. Kaplan,
514 U.S. 938, 944 (1995) (quotation and brackets omitted).
B. The ProTech Agreement is Not a Servicing Agreement
Subject to Arbitration.
We now address whether the instant dispute is arbitrable.
Because we conclude the ProTech Agreement is not a “servicing
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agreement” within the meaning of the 2015 Agreement, the par-
ties’ dispute over the ProTech Agreement is not subject to arbitra-
tion.
The parties agreed to arbitrate disputes relating to any new
or existing “servicing agreement.” Although the 2015 Agreement
did not define “servicing agreement,” the parties agree that the
Litai Agreement was a servicing agreement. The parties also agree
that we can look to the Litai Agreement to determine the meaning
of “servicing agreement” as used in the 2015 Agreement.
A direct comparison of the obligations and duties set out in
the ProTech and Litai Agreements reveals no overlap between the
two. The Litai Agreement required Litai to provide a range of ser-
vices including premium funds management, policy premium pay-
ment, accounting and reporting, insured tracking, death claim
management, customer service functions, and services related to
policy changes and disposition. Specifically, Litai tracked premium
deadlines and collected funds to pay premiums on time. It also
maintained updated information about each insured. When an in-
sured died, Litai was responsible for submitting a claim to the rele-
vant insurer, collecting benefits on the policy, and distributing
those benefits to the owners of fractional interests in the policy.
The ProTech Agreement, by contrast, requires ProTech to per-
form tasks related exclusively to the design, development, hosting,
and maintenance of software that Q Capital would use to perform
its servicing obligations.
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Acheron argues that we should look instead to the functions
performed by the ProTech software and compare them to the ser-
vices Litai performed. By performing these functions, Acheron
contends, the ProTech software makes it possible for Q Capital to
fulfill its obligations as servicer. According to Acheron, because the
ProTech software is essential for Q Capital to carry out its servicing
obligations, the ProTech Agreement itself is a servicing agreement.
We are not persuaded that the functionality of the ProTech
software transforms the ProTech Agreement into a servicing
agreement. Under the agreement, ProTech is responsible for de-
veloping, hosting, and maintaining a software program. It is not
responsible for managing the portfolio of policies, collecting funds
to service the policies, or any of the numerous associated servicing
tasks laid out in the Litai Agreement.
The fact that the ProTech software may be necessary for Q
Capital to service the policies has no effect on ProTech’s obliga-
tions or on the characterization of the ProTech Agreement. As the
district court explained, Acheron’s argument based on the central-
ity of the software “insufficiently limits the boundaries of what
could be considered” a servicing agreement. Doc. 32 at 19; Doc. 37.
The district court aptly observed that “employment contracts, of-
fice leases, and any number of contracts for services or tangible
goods could be subject to arbitration as ‘servicing agreements’ us-
ing the logic that those contracts provide necessary products or ser-
vices for a primary servicer to carry out its servicing responsibili-
ties.”
Id. Regardless of the tools necessary for Q Capital to carry out
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its servicing obligations, Q Capital—not ProTech—is responsible
for servicing the policies.
Based on the lack of overlap between the obligations in the
ProTech Agreement and the obligations in the Litai Agreement, as
well as the fact that ProTech’s software is merely a tool that a ser-
vicer uses to perform its servicing obligations, we conclude the
ProTech Agreement is not a servicing agreement and thus not sub-
ject to arbitration.
IV. CONCLUSION
For the reasons discussed above, we affirm.
AFFIRMED.
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