Opinion
Civil Action No. 3:01CV-64-S
June 12, 2001
MEMORANDUM OPINION
This matter is set for consideration of several pending motions made by both the plaintiff, Barge, Waggoner, Sumner Cannon, Inc. ("BWSC"), and the defendant, Tritel Communications, Inc. ("Tritel"). Having been fully briefed, these motions are now ripe for review.
BACKGROUND
This suit arises out of a contract dispute between BWSC and Tritel. The undisputed facts are that:
• on or about February 1, 1999, the parties entered into a contract pursuant to which BWSC was to provide architectural and engineering services in exchange for payment by Tritel;
• the parties' contract provided for the arbitration of disputes arising out of the contract and stated that "[t]he demand for arbitration shall be made within ten (10) days after written notice of the claim, dispute or other matter in question has been given;"
• between February and August 2000, a dispute arose concerning BWSC's performance of its contract obligations;
• on or about August 9, 2000, Tritel, by counsel, sent a letter to BWSC which stated in relevant part that "[i]n the absence of an amicable resolution of this dispute, Tritel shall seek arbitration of its claims as provided in the Contract . . .;"
• between August and October 2000, the parties, through counsel, exchanged letters concerning the dispute;
• on or about January 5, 2001, Tritel filed its demand for arbitration with the American Arbitration Association; and
• on or about January 29, 2001, BWSC filed a complaint and a motion for a preliminary injunction with this court requesting, inter alia, injunctive relief restraining Tritel from proceeding with arbitration.
See generally DNs 1-3.
BWSC contends that Tritel is prohibited from seeking arbitration of the parties' contract dispute because Tritel failed to make its demand for arbitration "within ten days after written notice of the claim, dispute or other matter in question" was given, as required by the contract. See Ver. Compl. (DN 1) at ¶¶ 12-16. Tritel has responded with a motion to dismiss based on BWSC's failure to allege an amount in controversy in excess of $75,000. In the alternative, Tritel requests that we either dismiss or stay these proceedings pending the outcome of the parties' arbitration because an arbitrator, not this court, must determine whether it complied with the contract's notice requirements.
STANDARD OF REVIEW
When considering a motion to dismiss, a court must determine whether a reasonable jury could find for the plaintiff under any set of facts. See Cheatham v. Paisano Publications, Inc., 891 F. Supp. 381, 384 (W.D.Ky. 1995). In making this determination, the court will construe the complaint in the light most favorable to the plaintiff. See Columbia Natural Resources, Inc. v. Tatum, 58 F.3d 1101, 1109 (6th Cir. 1995). Only when it appears beyond doubt that the plaintiff would be unable to recover under any set of facts that could be presented consistent with the allegations of the complaint will such a motion be granted. See Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957).
On a motion to stay proceedings pending arbitration under 9 U.S.C. § 3, the movant must demonstrate that the subject of the parties' dispute is arbitrable. See Nederlandse Erts-Tankersmaatschappij, N.V. v. Isbrandtsen Co., 339 F.2d 440, 442 (2nd Cir. 1964). In determining whether the movant has satisfied this burden, the district court will take as true the movant's version of facts and issues. See Pas-Ebs v. Group Health, Inc., 442 F. Supp. 937, 941 (S.D.N.Y. 1977).
DISCUSSION I. Jurisdictional Amount
"If a claim of the required jurisdictional amount is apparently made in good faith, that claim controls unless it appears `to a legal certainty that the claim is really for less than the jurisdictional amount.'" Jones v. Knox Exploration Corp., 2 F.3d 181, 182 (6th Cir. 1993) (quoting St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283, 289, 58 S.Ct. 586, 82 L.Ed. 845 (1938)). Where, as here, a complaint seeks only injunctive relief, "the amount in controversy is measured by the value of the object of the litigation." Hunt v. Washington State Apple Adver. Comm'n, 432 U.S. 333, 347, 97 S.Ct. 2434, 53 L.Ed.2d 383 (1977).
The object of this litigation is BWSC's avoidance of arbitration of its contract dispute with Tritel in Mississippi. We cannot say to a legal certainty that the value to BWSC of avoiding arbitration in Mississippi is less than $75,000. Costs associated with arbitration that could be avoided by litigation in this court include the payment of all costs of arbitration, as well as the payment of Tritel's "attorney's fees, costs, charges and expenses in connection with such proceedings." See GC-23. Based on these potential costs, and the apparent lack of bad faith in which BWSC made its claim of the required jurisdictional amount, we will deny Tritel's motion to dismiss to the extent it is based on BWSC's failure to meet the jurisdictional requirements set forth in 28 U.S.C. § 1332.
II. Procedural Arbitrability
The contract provision relevant to this dispute reads:
GC-23 ARBITRATION
All claims, disputes and matters in question arising out of or relating to this Contract or any claimed breach of this Contract, except for claims which have been waived by the making or acceptance of the final payment, shall be decided by arbitration in accordance with the construction industry arbitration rules of the American Arbitration Association then in effect unless the parties mutually agree otherwise. This agreement to arbitrate shall be specifically enforceable.
Notice of demand for arbitration shall be filed in writing by the other party to this Contract and with the American Arbitration Association. The demand for arbitration shall be made within ten (10) days after written notice of the claim, dispute or other matter in question has been given, and in no event shall it be made after the date of final acceptance of the work by the OWNER or when institution of legal or equitable proceedings based on such claim, dispute or other matter in question would be barred by the applicable statute of limitations, whichever occurs first.
. . . .
Ver. Compl., Ex. 1 at 7 (hereinafter "GC-23").
Whether Tritel's dispute with BWSC is arbitrable depends on at least two interdependent determinations. First, arbitrability of Tritel's claim hinges on if and when Tritel gave "written notice of the claim, dispute or other matter in question. . . ." BWSC contends that such notice was given by letter on August 9, 2000. Tritel disputes this contention, stating that the correspondence between the parties from August to October 2000 merely constituted an ongoing attempt to settle the parties' dispute. If, as Tritel argues, the correspondence did not constitute sufficient written notice, then the date on which such notice was given must be determined in order to ascertain whether Tritel's demand for arbitration was timely.
Even more fundamental than the resolution of when written notice was given by Tritel to BWSC is deciding who makes this determination. Tritel argues that the arbitrator, not this court, must resolve these issues, while BWSC contends that the matter is properly for this court and that arbitration is no longer an option for Tritel.
Relevant case law indicates that whether a demand for arbitration was timely filed is a question best answered by the arbitrator. In the context of collective bargaining agreement disputes, the Supreme Court has determined that:
Doubt whether grievance procedures or some part of them apply to a particular dispute, whether such procedures have been followed or excused, or whether the unexcused failure to follow them avoids the duty to arbitrate cannot ordinarily be answered without consideration of the merits of the dispute which is presented for arbitration.
Once it is determined, as we have, that the parties are obligated to submit the subject matter of a dispute to arbitration, "procedural" questions which grow out of the dispute and bear on its final disposition should be left to the arbitrator.John Wiley Sons, Inc. v. Livingston, 376 U.S. 543, 557, 84 S.Ct. 909, 11 L.Ed.2d 898 (1964).
Sixth Circuit decisions concerning the arbitrability of collective bargaining agreement disputes are consistent with this "Supreme Court doctrine mandating that issues of procedural arbitrability be determined by arbitrators, not judges. . . ." Raceway Park, Inc. v. Local 47, Service Employees Intern. Union, 167 F.3d 953, 954 (6th Cir. 1999). For example, in Local 12934 of Intern. Union, Dist. 50, United Mine Workers of America v. Dow Corning Corp., 459 F.2d 221 (6th Cir. 1972), the court held that an arbitrator, not the district court, must determine whether union grievances were "either untimely filed or that procedural steps prerequisite to arbitration were not followed." Id. at 223-24.
The Sixth Circuit has only found that the district court may determine the timeliness of a demand for arbitration when the disputed arbitration provision contained "an expressed conclusive presumption" that a party's failure to pursue a grievance within a stated amount of time precluded that party from later demanding arbitration of the dispute. See General Drivers, Warehousemen and Helpers, Local Union 89 v. Moog Louisville Warehouse, 852 F.2d 871, 873 (6th Cir. 1988); Raceway Park, supra. In both Moog and Raceway Park, the disputed arbitration provisions contained clauses which explicitly precluded arbitration in the event that written notice was not given by the complaining party within a stated period of time. In those cases, the court reasoned that because of the contracts' express limitations, grievances filed after the expiration of the relevant time period fell outside the scope of the arbitration provision. See Moog, 852 F.2d at 873.
In Moog, the arbitration provision stated in relevant part that "if the Union fails to notify the Company in writing . . . within 15 calendar days . . . then the Union shall be conclusively presumed to have accepted the Company's answer thereto and said grievance shall not thereafter be arbitrable." Moog, 852 F.2d at 872-73. In Raceway Park, the relevant provision stated that "[u]nless the Union serves written notice . . . on the Employer within thirty (30) days . . . of its intent to seek binding arbitration, then . . . all parties shall be barred from ever submitting such grievance, dispute or disagreement to arbitration." Raceway Park, 167 F.3d at 956.
In contrast with Moog and Raceway Park, the arbitration provision to which Tritel and BWSC agreed expresses no such conclusive presumption against arbitration after a stated amount of time. Therefore, not only is it unclear whether Tritel made a timely demand for arbitration, but the effect of an untimely filed demand for arbitration is also unclear. Based on the relevant precedent discussed above, we find that this matter falls within the more general category of cases in which an arbitrator, not the district court, must determine whether a demand for arbitration was timely filed.
While the Sixth Circuit has not yet done so, several circuits have applied the rationale of John Wiley Sons and its progeny in the context of private commercial contract disputes. See, e.g., Glass v. Kidder Peabody Co., Inc., 114 F.3d 446, 455 n. 63 (4th Cir. 1997); Del E. Webb Const. v. Richardson Hosp. Authority, 823 F.2d 145, 149 (5th Cir. 1987); National Iranian Oil Co. v. Mapco Intern., Inc., 983 F.2d 485, 491 (3rd Cir. 1992) ("We hold that . . . the arbitrator determines the timeliness of the demand for arbitration. . . ."); Contracting Northwest, Inc. v. City of Fredericksburg, Iowa, 713 F.2d 382, 385 (8th Cir. 1983) ("The merits of the dispute and whether the failure to meet the procedural prerequisites will bar recovery are for the arbitrator to decide."). This consistent extension of the John Wiley Sons doctrine to disputes arising out of private commercial contracts by our sister circuits, while not binding, is persuasive authority in support of Tritel's position that an arbitrator, not this court, must decide whether Tritel's demand for arbitration was timely filed.
Based on these reasons, we find that an arbitrator must determine whether or not Tritel complied with the procedures set forth in its agreement with BWSC regarding the arbitration of disputes. Because BWSC's Complaint seeks only injunctive relief enjoining Tritel from proceeding with arbitration and is unrelated to the substantive contract dispute between the parties, it will be dismissed with prejudice pursuant to Fed.R.Civ.P. 12(b)(1).
CONCLUSION
For the reasons above stated, we will: (1) deny Tritel's motion to dismiss to the extent it is based on BWSC's failure to make a claim in excess of the jurisdictional amount; (2) grant Tritel's motion to dismiss to the extent it is based on principles of arbitrability; (3)deny Tritel's motion to stay these proceedings pursuant to 9 U.S.C. § 3; (4) deny BWSC's motion for a preliminary junction; and (5) grant BWSC's motion for leave to file a supplemental memorandum. A separate order will be entered this date in accordance with this opinion.
IT IS SO ORDERED.
ORDER
Motions having been made, and for the reasons set forth in the accompanying memorandum opinion, and the court being otherwise sufficiently advised, IT IS HEREBY ORDERED AND ADJUDGED that:
1. The unopposed motion of the plaintiff, Barge, Waggoner, Sumner Cannon, Inc. ("BWSC"), for leave to file a supplemental memorandum, see DN 12, is GRANTED, and the supplemental memorandum filed therewith is hereby deemed filed of record as of the date of entry of this Order;
2. The motion of the defendant, Tritel Communications, Inc. ("Tritel"), for a stay of proceedings pursuant to 9 U.S.C. § 3, see DN 3, is DENIED;
3. Tritel's motion to dismiss BWSC's Complaint pursuant to Fed.R.Civ.P. 12(b)(1), see DN 3, is GRANTED, and BWSC's Complaint is DISMISSED WITH PREJUDICE; and
4. BWSC's motion for a preliminary injunction, see DN 2, is DENIED AS MOOT.
IT IS SO ORDERED.