Phelps Secures Win to Prevent Insurers from Forced Arbitration in Design Row Over New Orleans Airport Terminal

NEW ORLEANS — May 24, 2024 — In a dispute arising from alleged design defects at the new terminal at Louis Armstrong New Orleans International Airport, a team of Phelps lawyers successfully prevented a group of insurers from being forced to participate in an arbitration to which the insurers did not agree.

The federal court’s decision protected the insurers’ rights, enjoined the arbitration against them and emphasized the need of having express consent between parties for arbitration to be compelled.

The City of New Orleans, through the New Orleans Aviation Board (NOAB), was seeking more than $51 million in damages for alleged design issues at the $1.3 billion airport terminal, which opened in 2019.

Phelps’ clients, a consortium of insurers, provided professional liability insurance for the designers of the new terminal. In June 2023, NOAB filed a demand with the American Arbitration Association against the insurers and others. When the insurers demanded to be removed from the arbitration, NOAB refused.

At issue was whether the insurers were required to arbitrate involuntarily – without an agreement to arbitrate – because the insured parties had agreed to arbitrate.

Phelps filed suit in federal court in October 2023 seeking:

• A declaratory judgment that NOAB had no right to demand arbitration from the insurers.
• An injunction preventing NOAB from further pursuing the arbitration against the insurers.

The court agreed with the insurers, finding “that forcing a party that has not agreed to arbitrate a dispute…would ‘undermine the longstanding principle that arbitration is a consent-based process through which parties can decide for themselves where and how to resolve a specific set of potential disputes.’”

The Phelps team was led by New Orleans partner Daniel Lund III, Tampa partner William J. Tinsley, Jr. and Baton Rouge counsel Kevin Welsh.