United States District Court, D. Montana, Billings Division
FINDINGS AND RECOMMENDATION OF U.S. MAGISTRATE JUDGE
CAROLYN S. OSTBY, Magistrate Judge.
This action arises from commercial guaranty agreements. Now pending are:
(1) Plaintiff Western Security Bank's ("WSB") Motion for Summary Judgment ( ECF 12 ) against Defendant Schneider Limited Partnership ("Schneider") as to Count 1 of the Complaint, and
(2) Defendants Jay Winzenried, Stephen Emery, and Big Horn Basin Bone and Joint, LLC's ("Moving Defendants") Motion to Stay Proceedings ( ECF 17 ).
Having reviewed the arguments and the applicable law, the Court recommends as follows.
In December 2011, WSB entered into loan agreements with Meridian Surgical Partners, LLC and affiliates, and Omni Funding Corp., together with defendants Schneider, Andrew Baker, Daniel Mattson, Jay Winzenreid, Stephen Emery, and Big Horn Basin and Joint, LLC. Pursuant to these agreements, WSB loaned more than $2.0 million for construction of an ambulatory surgical center in Billings, Montana. ECF 15 at 2.
Schneider and the Moving Defendants each executed an unconditional Commercial Guaranty Agreement, which guaranteed a certain percent of the debt owed to WSB by Omni. ECF 18-1. Omni defaulted on the loan in September 2013, and WSB now seeks to recover against the defendants for the money owed under the Guaranty Agreements. WSB has previously settled its claims against the Meridian entities, Daniel Mattson, and Andrew Baker. ECF 15 at 3.
Jurisdiction in this action rests on diversity. The case was removed from state court in February 2015. ECF 1. The pending motions were filed in March. The Court will first address the motion to stay proceedings.
II. MOTION TO STAY
A. PARTIES' ARGUMENTS
In February 2014, the Moving Defendants filed a Demand for Arbitration with the American Arbitration Association, naming Meridian Surgical Partners-Montana, LLC and Meridian Surgical Partners, LLC, as respondents. ECF 23-3. The arbitration is currently pending. The Moving Defendants argue that this case should be indefinitely stayed pending resolution of the arbitration between them and Meridian. Defendants argue that the operative facts in the arbitration are based on Meridian's failure to obtain a transfer agreement with a local Billings hospital in order to open the ambulatory surgical center. They argue that Meridian fraudulently induced them to move forward with the financing of the ASC by misrepresenting to them that Meridian had obtained a transfer agreement when in fact it had not. ECF 18 at 24-25. They argue that both this action and the arbitration are about the damages they suffered as a result of reliance on the actions of Meridian, and that determination of liability and assessment of damages, including payment to WSB, will be resolved in the pending arbitration. Id. at 26.
The Moving Defendants further argue that a stay is warranted under either the mandatory grounds of the Federal Arbitration Act ("FAA"), 9 U.S.C § 3, or in the exercise of the Court's discretion. Id. at 24. They argue that a decision made in this proceeding could be used against them in the pending arbitration, there is the potential for contradictory findings, and WSB faces virtually no hardship based on the delay. ECF 18 at 36.
WSB responds that the FAA is inapplicable because compelled arbitration is not sought in this case, nor could it be. ECF 23 at 7. WSB is not contractually bound by ...