American Security v. Stewart

F I L E D
                                                         United States Court of Appeals
                                                                  Fifth Circuit
                 IN THE UNITED STATES COURT OF APPEALS          JUL 22 2002
                         FOR THE FIFTH CIRCUIT
                                                             Charles R. Fulbruge
                                                                    Clerk
                             No. 01-60910

                           Summary Calendar

AMERICAN SECURITY INSURANCE COMPANY,

                                            Plaintiff-Appellant,

versus

MONEY STEWART,

                                            Defendant-Appellee.

                       --------------------
          Appeal from the United States District Court
            for the Southern District of Mississippi
                     USDC No. 4:01-CV-153-LN
                       --------------------

Before DeMOSS, PARKER, and DENNIS, Circuit Judges.

PER CURIAM:*

     American Security Insurance Company (American) is appealing

the district court’s order granting the appellee Money Stewart’s

motion to dismiss its complaint and denying American’s request to

compel arbitration of its dispute with Stewart.     American argues

that Stewart is claiming fraudulent inducement with respect to

its overall contract with American and others and not solely with

respect to the arbitration clause and, thus, the matter must be

     *
        Pursuant to 5TH CIR. R. 47.5, the court has determined
that this opinion should not be published and is not precedent
except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
                             No. 01-60910
                                  -2-

referred to arbitration.   Stewart argues that the district court

properly invoked the abstention doctrine because the entire

dispute among all the involved parties can be resolved in the

pending state court proceeding.

     In light of the strong federal policy favoring arbitration,

the district court abused its discretion in declining to exercise

its jurisdiction and in failing to rule on the motion to compel

arbitration.   See Bank One, N.A. v. Boyd,
288 F.3d 181, 184-87
(5th Cir. 2002).

     The matter is REMANDED to the district court for the entry

of factual findings regarding whether Stewart is asserting fraud

in the inducement of the contract generally or if his claim of

fraudulent inducement focuses specifically on the execution of

the arbitration agreement.    See Bhatia v. Johnston,
818 F.2d 418,

421
(5th Cir. 1987); Snap-On Tools Corp. v. Mason,
18 F.3d 1261,

1268
(5th Cir. 1994).   If the district court determines that

Stewart’s allegations of fraudulent inducement are directed to

the contract generally, arbitration should be compelled.    If the

district court determines that the claim of fraud focuses on the

arbitration clause only, it should make a factual determination

whether the arbitration agreement was induced by fraud.    The case

is REMANDED to the district court for further proceedings

consistent with this opinion.

     VACATED AND REMANDED.