In Crosby, as the Trustee of Aaron Guidry Trust and Trustee of the Lauren Guidry Trust, Guidry and Guidry v. Crosby Enterprises, LLC, Crosby Dredging, LLC, Tala Air Logistics, LLC, Crosby Holding, LLC, Crosby, Trosclair, and Dufrene, 2023-1338 (La. App. 1 Cir. 8/9/24), 2024 WL 3733158, — So.3d —. a five judge panel of the Louisiana First Circuit Court of Appeal recently upheld the trial court’s sustaining of a dilatory exception of prematurity and dismissal of the action, based on the existence of an arbitration agreement between the Parties. The underlying merits of Crosby, 2024 WL 3733158, concern a management dispute over multiple family business entities in the marine transportation industry formed over almost fifty years (the “Crosby Entities”); however, the appellate court’s decision dealt with whether the trial court should have stayed rather than dismissed the case. Suit was filed in January 2023 alleging breach of fiduciary duties, gross mismanagement and wasted corporate assets, improperly used false and unauthorized signatures of plaintiffs on documents submitted to banks to inflate the financial condition of the companies. Id.at *3.
In response to the petition, the defendants pleaded a dilatory exception of prematurity arguing the entire matter was subject to arbitration based upon an arbitration clause found in all of the operating agreements of the various companies, save two, providing:
This Agreement and the relations of the Members with each other and with third persons shall be governed by the laws of the State of Louisiana. Any and all disputes arising from this Agreement shall be submitted to binding arbitration pursuant to the Rules of the American Arbitration Association, and judgment upon the award rendered by the arbitrator(s) may be entered in any court of competent jurisdiction.
Id.(Emphasis added).
Following a hearing in August 2023 when the trial court orally ruled it “would suspend the relevant claims until the proper arbitration proceedings had occurred”, the trial court signed a judgment sustaining the exception of prematurity and dismissing the plaintiffs’ claims as to all of the Crosby Entities except the two companies whose operating agreements did not contain the arbitration provision. Id.at *4. Plaintiffs filed a motion for devolutive appeal of the judgment “challenging the trial court’s ruling insofar as the trial court dismissed the plaintiffs’ claims instead of staying the trial court’s proceedings pursuant to La. R.S. 9:4204.” Id.
Upon lodging of the appeal, the defendants filed a motion to dismiss the appeal for lack of appellate jurisdiction contending the judgment granting the exception of prematurity was interlocutory. Id.at *4. Plaintiffs opposed the motion to dismiss the appeal arguing the judgment was a final, appealable judgment as it completely dismissed their claims against some of the defendant entities. Id.at *4-5. The First Circuit denied the defendants’ motion to dismiss the appeal holding that the judgment was final and appealable under Louisiana Code of Civil Procedure article 1915(A)(1). Id.at *5. While recognizing that a defense of a valid arbitration agreement can be raised by either a dilatory exception of prematurity or a motion to stay the case pending arbitration, the First Circuit upheld the trial court’s judgment sustaining the dilatory exception of prematurity, holding that the plaintiffs’ claims were subject to arbitration and upholding the trial court’s dismissal via the exception for all but two defendants. Id.at *5-6. The Crosby court agreed with the trial court’s reliance on Louisiana Code of Civil Procedure article 933, which provides, “[i]f the dilatory exception of prematurity is sustained, [then] the premature action … shall be dismissed.” Id. at *8. The Crosby court further acknowledged that La. R.S. 9:4202 provides that upon application of a party, the trial court is required to stay the case until the arbitration occurs; however, in this instance, the plaintiffs did not timely file a motion to stay before the judgment on the exception was signed by the trial court. Id.at *7-8. The appellate court simply stated “[o]nly when a stay is asked for does the statute come into play.” Id.at *8.
The court’s decision in Crosby provides a valuable lesson to parties opposing a dilatory exception of prematurity based on an arbitration agreement. The opposing party should always file a motion to stay, allowing the court the option to either stay or dismiss the claim. This protects the party from waving the option to stay the claim and allows them to raise the issue on appeal, if the trial court dismisses the claim.
The Crosby opinion is located at 2023 CA 1338 Decision Appeal.pdf (la-fcca.org).