Opinion
Civil No. 00-1426-HA
December 21, 2000
Steve D. Larson Stoll, Stoll, Berne, Lokting Shlachter, P.C. Portland, Oregon Attorney for Plaintiff.
Michael J. Sandmire Daniel P. Larsen Ater Wynne, LLP Portland, Oregon Attorneys for Defendant.
OPINION AND ORDER
Pending before the court is Defendant Skylark Co., Ltd. ("Skylark's") motion to dismiss Plaintiff Neal Peason's ("Pearson's") complaint or, in the alternative, to strike and make more definite and certain. Skylark is a Japanese corporation with its headquarters and places of business located solely in Japan. Pearson is an individual Oregon resident. For almost twenty years, Pearson, Pearson's father, and Skylark were shareholders of Enway Corporation "(Enway"), incorporated in Oregon. The parties relationship began in 1981 when Skylark purchased forty cases of potato products from Pearson's father. Enway was eventually formed to supply Skylark with potato products and then pasta products for its restaurant chain in Japan. Pearson's father is deceased, and Pearson now owns all his fathers shares of Enway.
In September 1999, Enway ceased doing business, and thereafter, Skylark filed an action in Clackamas County Circuit Court for judicial dissolution of Enway. Pearson then filed a civil complaint in Multnomah County Circuit Court, alleging that Skylark breached its fiduciary duties to him and had engaged in corporate oppression. Skylark removed Pearson's complaint to federal court. The separate judicial-dissolution action is still proceeding in Clackamas County Circuit Court, and a receiver has already been appointed.
In its present motion Skylark seeks dismissal of Pearon's complaint on the grounds that (1) personal jurisdiction over Skylark is lacking; (2) Pearson's claims are subject to binding arbitration; (3) this forum is inconvenient for Skylark; and (4) this court should abstain from exercising jurisdiction under the Colorado River doctrine. In addition, Skylark seeks an order striking certain allegations in Pearson's complaint and an order requiring Pearson to make other allegations more definite and certain. As the court finds the claims in Pearson's complaint are subject to binding arbitration, only Skylark's first two contentions need be addressed.
1. Personal Jurisdiction.
As a threshold issue, this court concludes that it has personal jurisdiction over Skylark. In short, Skylark has had plenary contacts with the forum state of Oregon. First, Skylark itself has filed an action in Oregon state court to dissolve Enway, and Pearson is a necessary party to that action. Second, Skylark negotiated with Pearson's father, an Oregon resident, to form Skylark. Third, Skylark has entered into numerous contracts to buy potato and pasta products from Enway. (Complaint at 3-4.) Fourth, Skylark has even registered to do business in the state of Oregon. Therefore, the court concludes that Skylark has purposefully availed itself of the benefits of the forum state. In addition, this lawsuit is closely related to those contacts, and exercising jurisdiction over Skylark would not be unreasonable. See Decker Coal Company v. Commonwealth Edison Co., 805 F.2d 834, 839 (9th Cir. 1984) (setting out the test for specific personal jurisdiction). As a result, the court has jurisdiction over this dispute.
Skylark cites ATT Co. v. Compagnie Bruxelles Lambert, 94 F.3d 586, 591 (9th Cir. 1996), for the proposition that "[a] parent corporation's relationship with its subsidiary may confer personal jurisdiction over the parent if the subsidiary is acting as the parent company's alter ego so as to justify disregard of the corporate entity." That case, however, involved a wholly unrelated American corporation's attempt to sue a foreign parent corporation for an environmental tort committed by the subsidiary. Thus, in ATT the parent/subsidiary relationship had no relation to the underlying action. In this case, the lawsuit stems directly from the parent/subsidiary relationship. Thus, ATT is inapposite.
2. Arbitration.
The Federal Arbitration Act mandates that upon the application of a party, the court shall stay the proceedings and order the parties to arbitrate in accordance with the terms of their agreement. 9 U.S.C. § 3. Skylark has moved the court stay this case and order the parties to proceed with binding arbitration in accordance with the agreement between Pearson and Skylark governing their ownership of Enway. The agreement provides,
All disputes, controversies or differences which may arise between the parties, out of or in relation to or in connection with this Agreement or for the breach thereof, shall be finally settled by arbitration pursuant to the Japan-American Trade Arbitration Agreement, of September 16, 1952, by which each party shall be bound.
(Skylark's Memorandum in Support of its Motion, Ex. B.) Pearson's claims are clearly encompassed within the broad language of the arbitration clause specifying that "[a]ll disputes, controversies or differences" arising out of the agreement will be arbitrated. (Id.)
In order to avoid the effect of the arbitration clause, Pearson raises two arguments. First, he argues that when Skylark filed the judicial-dissolution action in state court, grounds existed to terminate the agreement. According to Article 10 of the Agreement,
Either [party] shall have the right to terminate this Agreement forthwith by giving the other party a written notice to the effect thereof upon the occurrence of the following events to the Company:
(a) liquidation, bankruptcy, or insolvency
(b) termination of business by a decision of the board of directors
(Skylark's Memorandum in Support of its Motion, Ex. B.) Pearson has submitted a letter from his counsel to Skylark purporting to terminate the agreement as a result of the judicial-dissolution action. (Pearson's Response, Ex. A.) However, "[u]nder the federal common law of arbitrability, an arbitration provision in a contract is held to survive the termination of that contract unless there is clear evidence that the parties intended to override this presumption." Riley Manuf. Co. v. Anchor Glass Container Corp., 157 F.3d 775, 781 (10th Cir. 1998). Moreover, Pearson's termination letter was sent after Skylark filed this motion. A party may not retroactively terminate an arbitration agreement that the other party has sought to enforce. See, e.g., Textile Workers of America, AFL-CIO, Loc. No. 129 v. Columbia Mills, Inc., 472 F. Supp. 527, 531 (S.D.N.Y. 1978). "If that were the case, any party seeking to avoid arbitration could simply declare an agreement containing an arbitration clause terminated and thereby avoid the parties' prior agreement to arbitrate." World Love Productions, Inc. v. Keepers Industries, Inc., No. 92-Cv-7842, 1993 WL 6591 at *2 (Slip. Op.) (S.D.N.Y. Jan. 5 1993). Thus, Pearson's purported notice of termination of the agreement does not allow him to avoid the agreement's arbitration clause.
Pearson also argues that Skylark waived arbitration by removing his complaint to federal court, citing Cabinetree of Wis. v. Kraftmaid Cabinetry, Inc., 50 F.3d 388 (7th Cir. 1995). In Cabinetree, the plaintiff filed an action in state court, and the defendant removed it to federal court in a timely manner. Discovery proceeded, and almost 2,000 documents were produced. Eight months after removal, the defendant "dropped a bombshell into the proceedings" by demanding that the district court stay the case pending arbitration of the parties' dispute. Id. at 389-91. Not surprisingly, the district court and the Seventh Circuit found the defendant had waived its right to enforce the arbitration clause by first electing to proceed in federal court.
In contrast, in this case plaintiff filed his complaint on approximately September 21, 2000, and Skylark removed it to federal court on October 23, 2000. On October 30, 2000, a mere seven days after removal, Skylark then filed its pending motion to compel arbitration. Thus, the point in the proceedings at which Skylark sought to compel arbitration bears no resemblance to the defendant's belated motion in Cabinetree. The Ninth Circuit has held that "[a] party seeking to prove waiver of a right to arbitrate must demonstrate: (1) knowledge of an existing right to compel arbitration; (2) acts inconsistent with that existing right; and (3) prejudice to the party opposing arbitration resulting from such inconsistent acts." Hoffman Constr. v. Active Erectors Installers, 969 F.2d 796, 798 (9th Cir. 1992). Pearson has failed to demonstrate that Skylark acted inconsistent with its right to arbitrate by removing this case to federal court or that he has been prejudiced as a result. Thus, Pearson's waiver argument fails, and arbitration is appropriate.
THEREFORE, IT IS HEREBY ORDERED that defendant's motion to dismiss or, in the alternative, to strike and make more definite and certain, (doc. 3), is granted in part as follows: The parties shall proceed with arbitration in accordance with the terms of their agreement. This case is stayed pending resolution of those proceedings.