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refusing to address whether "Envoy failed to satisfy a condition precedent to arbitration" when the parties "agreed to arbitrate arbitrability"
Summary of this case from Indocarb Corp. v. MadhavanOpinion
Case No. 3:19-cv-00954-AC
11-22-2019
ANDREW VARCAK, Plaintiff, v. ENVOY MORTGAGE LTD., Defendant.
FINDINGS AND RECOMMENDATION :
Introduction
Plaintiff Andrew Varcak ("Varcak") brings this action seeking a declaratory judgment, pursuant to the Declaratory Judgment Act ("DJA"), 28 U.S.C. §§ 2201-2202, that arbitration with Defendant Envoy Mortgage LTD. ("Envoy") must be dismissed, and that Oregon law should govern the employment contract at issue. Envoy moves to dismiss under Federal Rules of Civil Procedure 12(b)(1), 12(b)(3), and 12(b)(6); or in the alternative, to transfer this action to the United States District Court for the Southern District of Texas pursuant to 28 U.S.C. § 1404(a) based on a forum selection clause. Varcak opposes the motion, arguing Envoy failed to comply with a condition precedent to arbitration, and that the forum selection clause is permissive rather than mandatory.
For the reasons stated below, the court recommends it exercise its discretion under the DJA to decline jurisdiction because it would frustrate the purpose of the Federal Arbitration Act ("FAA"), and that Envoy's motion be GRANTED.
Background
Varcak, an Oregon resident, was employed by Envoy, a Texas limited partnership, from June 2015 through March 2019 to perform work in Oregon and Washington. (Compl., ECF No. 1, ¶¶ 2-3, 6.) Varcak signed a Producing Area Manager Employment Agreement ("Employment Agreement") on June 24, 2015. (Compl. ¶ 7.) The Employment Agreement includes the following sections:
9.2 Internal Mediation. The parties agree that in the event of any dispute arising between them that arises out of the employment relationship and/or this Agreement, prior to initiating any charge, lawsuit, proceeding, or complaint with any administrative agency or court, the party intending to initiate such a claim or proceeding, will at least ten (10) days prior to doing so, provide the other party with a specific demand for monetary relief, as well as a calculation explaining the basis for said monetary demand, as well as a short and plain statement of the grounds upon which such demand is sought. Notwithstanding the foregoing, this provision does not prohibit a party from immediately seeking injunctive relief limited to preventing irreparable harm.
9.5 Arbitration. In the event that parties cannot resolve a dispute by the ADR provisions contained herein, any dispute between the parties concerning the wages, hours, working conditions, terms, rights, responsibilities or obligations between them or arising out of their employment relationship shall be resolved through binding arbitration in accordance with the rules of the American Arbitration Association applicable to employment claims. Such arbitration may not include may not be joined or join or include any claim by any persons not party to this
Agreement. Except as otherwise set forth herein, the parties share equally in the cost of such arbitration, and shall be responsible for their own attorneys' fees, provided that if the arbitration is brought pursuant to any statutory claim for which attorney fees were expressly recoverable, provided that if the arbitration is brought pursuant to any statutory claim for which attorney fees were expressly recoverable, the arbitrator shall award such attorneys' fees and costs consistent with the statute at issue. Nothing herein shall preclude a party from seeking temporary injunctive relief in a court of competent jurisdiction to prevent irreparable harm, pending any ruling obtained through arbitration. Further, nothing herein shall preclude or limit Area Manager from filing any complaint or charge with a state, federal, or county agency.(Id. ¶¶ 8-9.)
On March 7, 2019, Varcak resigned from his employment with Envoy. (Def.'s Mot. to Dismiss, ECF No. 9, at 4.) Envoy contends that Varcak breached the Employment Agreement and suffered losses as a result. (Id.) Envoy initiated arbitration with the American Arbitration Association ("AAA") on May 8, 2019. (Id.) Envoy contends it and Varcak participated in a telephone conference pursuant to Rule 7 of the AAA Employment Arbitration Rules and Mediation Procedures ("AAA Rules") on June 13, 2019. (Id. at 5.) Envoy also contends that at some point during the telephone conference, Varcak's attorney disconnected from the call. (Id.) Varcak filed this action on June 18, 2019, seeking a declaration that arbitration must be dismissed because Envoy failed to comply with Section 9.2 of the Employment Agreement, a term Varcak contends is a condition precedent to the arbitration clause contained in Section 9.5; Varcak also contends that Oregon, not Texas, law applies to the Employment Agreement. (Compl. ¶¶ 9, 15-17.)
On July 10, 2019, Envoy filed the current motion to dismiss, or in the alternative, motion to transfer this action to the Southern District of Texas. (Def.'s Mot. to Dismiss, ECF No. 9.)
Legal Standards
I. Rule 12(b)
Federal courts are courts of limited jurisdiction, and generally have jurisdiction as authorized by the Constitution or by statute. Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 377 (1994). Courts presume that a case "lies outside this limited jurisdiction, and the burden of establishing the contrary rests upon the party asserting jurisdiction." Id. Federal Civil Procedure Rule 12(b)(1) allows for a defendant to challenge subject-matter jurisdiction. FED. R. CIV. P. 12(b)(1).
A motion to dismiss for lack of subject-matter jurisdiction under Rule 12(b)(1) may be either "facial" or "factual." Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004). In a facial attack on subject-matter jurisdiction, the court resolves the motion as it would a motion to dismiss under Rule 12(b)(6). Leite v. Crane Co., 749 F.3d 1117, 1121 (9th Cir. 2014); Savage v. Glendale Union High Sch., 343 F.3d 1036, 1039 n.1 (9th Cir. 2003). In a facial challenge, the court accepts the factual allegations of the complaint as true and draws all reasonable inferences in the plaintiff's favor, and "the court determines whether the allegations are sufficient as a legal matter to invoke the court's jurisdiction." Leite, 749 F.3d at 1121. "If the court determines at any time that it lacks subject-matter jurisdiction, the court must dismiss the action." FED. R. CIV. P. 12(h)(3).
In a Rule 12(b)(3) motion to dismiss, parties may assert the defense of improper venue by motion prior to filing a responsive pleading. "A defendant over whom personal jurisdiction exists but for whom venue is improper may move for dismissal or transfer under 28 U.S.C. § 1406(a)." Action Embroidery Corp. v. Atl. Embroidery, Inc., 368 F.3d 1175, 1181 (9th Cir.2004).
Venue is proper in "(1) a judicial district in which any defendant resides, . . . (2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, . . . or (3) if there is no district in which an action may otherwise be brought as provided in this section, any judicial district in which any defendant is subject to the court's personal jurisdiction with respect to such action." 28 U.S.C. § 1391(b). "Whether venue is 'wrong' or 'improper' depends exclusively on whether the court in which the case was brought satisfies the requirements of federal venue laws, and those provisions say nothing about a forum-selection clause." Atlantic Marine Const. Co., Inc. v. U.S. Dist. Court for Western Dist. of Texas, 571 U.S. 49, 55 (2013).
Under Rule 12(b)(6), a party may move to dismiss a complaint for "failure to state a claim upon which relief can be granted." FED. R. CIV. P. 12(b)(6). A court may dismiss "'based on the lack of cognizable legal theory or the absence of sufficient facts alleged'" under a cognizable legal theory. UMG Recordings, Inc. v. Shelter Capital Partners LLC, 718 F.3d 1006, 1014 (9th Cir. 2013) (quoting Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990)).
The court must accept as true the allegations in the complaint and construe them in favor of the plaintiff. Teixeira v. Cty. of Alameda, 873 F.3d 670, 678 (9th Cir. 2017); see also Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009); Snyder & Assocs. Acquisitions LLC v. United States, 859 F.3d 1152, 1156-57 (9th Cir. 2017). The pleading standard under Rule 8 "does not require 'detailed factual allegations,' but it demands more than an unadorned, the-defendant-unlawfully-harmed- me accusation." Iqbal, 556 U.S. at 678 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)); see also FED. R. CIV. P. 8(a)(2).
II. The Declaratory Judgment Act
The DJA provides: "In a case of actual controversy within its jurisdiction, . . . any court of the United States . . . may declare the rights and other legal relations of any interested party seeking such declaration." 28 U.S.C. § 2201(a) (2018). The DJA confers on federal courts "unique and substantial discretion in deciding whether to declare the rights of litigants." Wilton v. Seven Falls Co., 515 U.S. 277, 286 (1995); see also R.R. Street & Co. Inc. v. Transport Ins. Co., 656 F.3d 966, 975 (9th Cir. 2011) (same). The Supreme Court has "repeatedly characterized the [DJA] as an enabling Act, which confers a discretion on the courts rather than an absolute right upon the litigant." Wilton, 515 U.S. at 287 (quotation omitted). "When all is said and done, we have concluded, the propriety of declaratory relief in a particular case will depend upon a circumspect sense of its fitness informed by the teachings and experience concerning the functions and extent of federal judicial power." Id. (quotation omitted). Thus, the exercise of jurisdiction under the DJA is at the discretion of the district court. Gov't Emp. Ins. Co. v. Dizol, 133 F.3d 1220, 1223 (9th Cir. 1998); see also Winstead v. State Farm Mut. Automobile Ins. Co., 669 Fed. Appx. 910, 910 (9th Cir. 2016) (same). "Even if the district court has subject matter jurisdiction, it is not required to exercise its authority to hear the case." Huth v. Hartford Ins. Co. of the Midwest, 298 F.3d 800, 802 (9th Cir. 2002). "[A] District Court[, however,] cannot decline to entertain such an action as a matter of whim or personal disinclination." Id. at 803. When determining whether to retain jurisdiction in a properly filed declaratory-judgment action, the court "must make a sufficient record of its reasoning to enable appropriate appellate review." Id.
III. The Federal Arbitration Act
The Federal Arbitration Act ("FAA") applies to all contracts involving interstate commerce and specifies that "written agreements to arbitrate controversies arising out of an existing contract 'shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.'" Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985) (quoting 9 U.S.C. § 2). Section 2 is not limited to commercial contracts but includes employment contracts with a narrow exception for transportation workers. See Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 113-114 (2001). When a contract contains an arbitration clause, a presumption of arbitrability exists. AT&T Techs., Inc. v. Commc'ns Workers of Am., 475 U.S. 643, 650 (1986). Additionally, where "parties concede that they have agreed to arbitrate some matters pursuant to an arbitration clause, the 'law's permissive policies in respect to arbitration' counsel that 'any doubts concerning the scope of arbitral issues should be resolved in favor of arbitration.'" Granite Rock Co. v. Int'l Bhd. of Teamsters, 561 U.S. 287, 298 (2010) (emphasis in original) (quoting First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 945 (1995)).
The text of the FAA "leaves no place for the exercise of discretion by a district court," but instead "mandates that district courts shall direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed." Dean Witter, 470 U.S. at 218 (emphasis in original) (citing 9 U.S.C. §§ 3-4). The court's enforcement role is limited to determining only "questions of arbitrability"—"whether the parties have submitted a particular dispute to arbitration." Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002). Questions of arbitrability include only two gateway issues: (1) the validity of the agreement; and (2) the scope of the agreement—whether the agreement encompasses the dispute at issue. Chiron Corp. v. Ortho Diagnostics Systems, Inc., 207 F.3d 1126, 1130 (9th Cir. 2000) (citations omitted). If, and when, the arbitration agreement is valid and encompasses the dispute at issue, "the [FAA] requires the court to enforce the arbitration agreement in accordance with its terms." Id.
Discussion
I. The Underlying Arbitration
The parties do not dispute that a valid arbitration agreement exists. Varcak also admits that Envoy's underlying claims are arbitrable claims. (Pl.'s Opp'n to Def.'s Mot. to Dismiss ("Pl.'s Opp'n"), ECF No. 13, at 8.) Varcak asserts, however, that because Envoy failed to satisfy requirements in section 9.2 of the Employment Agreement before initiating arbitration, the issue of alleged noncompliance of a condition precedent to arbitration is not within the scope of the arbitration clause. (Id.) Varcak seeks to have the court declare that Envoy failed to comply with the condition precedent and dismiss the underlying arbitration. (Id.) Envoy asserts that the arbitrator should resolve this issue. (Def.'s Mot. to Dismiss at 10.) Thus, the parties, in effect, are asking the court to resolve the question of who can decide the issue of whether section 9.2 is a condition precedent to arbitration. The answer to that question "turns upon what the parties agreed [to] about that matter." First Options, 514 U.S. at 943 (emphasis in original).
Envoy asserts, and Varcak offers no argument to the contrary, the Employment Agreement is governed by the FAA. (Def.'s Mot. to Dismiss at 8.) "For any arbitration agreement within the coverage of the FAA, the court is to make the arbitrability determination by applying the federal substantive law of arbitrability." Brennan v. Opus Bank, 796 F.3d 1125, 1129 (9th Cir. 2015) (quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626 (1985), internal quotations removed). The court notes there is tension with this holding and the First Options holding that courts "should apply ordinary state-law principles that govern the formation of contracts." First Options, 514 U.S. at 944. This could necessarily require the court to answer the choice of law question Varcak seeks, which we need not do for the reasons set out below.
A. The Arbitrator Should Decide Arbitrability
Varcak brings this action seeking a declaration that the arbitration between him and Envoy should be dismissed because of Envoy's alleged failure to satisfy a condition precedent to initiating arbitration. (Compl. ¶ A.) What is unclear from Varcak's complaint and response to Envoy's motion is if this court should dismiss the arbitration as initiated prematurely because of Envoy's alleged failure to satisfy certain steps required by the Employment Agreement before a party can initiate arbitration, or if Envoy has effectively voided the arbitration clause by the alleged failure to accomplish prerequisites to initiating arbitration. (See id. at 4-5; Pl.'s Opp'n at 8-9.) Based on Varcak's complaint, the threshold question isn't what can be arbitrated, but rather who, court or arbitrator, can decide that question. See Henry Schein, Inc. v. Archer and White Sales, Inc., ___ U.S. ___, 139 S. Ct. 524, 530 (2019) ("Just as a court may not decide a merits question that the parties have delegated to an arbitrator, a court may not decide an arbitrability question that the parties have delegated to an arbitrator.").
Answering the "who decides" question first requires the court to determine if the question of arbitrability at issue is substantive or procedural in nature. The distinction is important because questions of substantive arbitrability are presumably resolved by the court, whereas procedural arbitrability questions are presumably answered by the arbitrator. Howsam, 537 U.S. at 85. "Substantive arbitrability questions require a determination of whether the parties contracted to arbitrate the subject matter of the dispute, while procedural arbitrability questions require a determination of whether the procedure to proceed to arbitration was followed or excused." Cascades Tissue Group—Pennsylvania, Inc. v. United Steel, Paper, and Forestry, Rubber, Mfg., Energy, Allied Indus. and Service Workers Intern. Union, 119 F. Supp. 3d 307, 312 (E.D. Penn. 2015). On the question of substantive arbitrability, "[u]nless the parties clearly and unmistakably provide otherwise, the question of whether the parties agreed to arbitrate is to be decided by the court, not the arbitrator." AT&T Techs., 475 U.S. at 649. However, on the question of procedural arbitrability, "an 'arbitrator shall decide whether a condition precedent to arbitrability has been fulfilled.'" Howsam, 537 U.S. at 85 (quoting the Revised Uniform Arbitration Act § 6(c), and comment 2, 7 U.L.A 12-13 (Supp. 2002)). Thus, determining who decides an arbitrability question may yield two different answers depending on if the issue is substantive or procedural.
In the present case, the line between procedural and substantive arbitrability lacks clarity, but the court need not resolve that question since the answer is the same in either case. Varcak contends that Envoy failed to satisfy a condition precedent to arbitration, specifically that Envoy failed to provide Varcak with certain information at least ten days before filing with the AAA. (Pl.'s Opp'n at 8.) Varcak therefore states the dispute is not yet ripe for arbitration. (Id.) Varcak concedes that Envoy's claims are arbitrable, though he disputes the merit of Envoy's claims. (Id.) One can reasonably infer from these statements that the alleged failure to satisfy a condition precedent to arbitration is wholly procedural in nature. This procedural arbitrability question is not one this court can decide.
Varcak also argues that Envoy should be barred from pursuing arbitration because he was deprived of the right to attempt resolution through some other alternative dispute resolution process. (Id. at 9.) Varcak appears to contend that Envoy no longer has a right to pursue arbitration because of an alleged breach of a condition precedent to initiating arbitration. Construing the issue in this way makes the issue sound more substantive, since whether the parties agreed to arbitrate has been called into doubt. If the issue is substantive, then the court must decide if the parties clearly and unmistakably agreed that the arbitrator should decide arbitrability.
The Ninth Circuit holds "that incorporation of the AAA rules constitutes clear and unmistakable evidence that contracting parties agreed to arbitrate arbitrability." Brennan, 796 F. 3d at 1130. Here, the arbitration clause in the Employment Agreement clearly states in part, "any dispute between the parties concerning the wages, hours, working conditions, terms, rights, responsibilities or obligations between them or arising out of their employment relationship shall be resolved through binding arbitration in accordance with the rules of the American Arbitration Association applicable to employment claims." (Compl. ¶ 9.) The court finds that Varcak and Envoy have agreed to arbitrate arbitrability, and therefore the court cannot answer the question of substantive arbitrability.
Therefore, whether Varcak contends Envoy's alleged failure to comply with a condition precedent to arbitration is procedural or substantive in nature, the parties have agreed that the arbitrator shall determine arbitrability and not this court.
B. The Court Need Not Determine Whether Oregon or Texas Law Applies
Having determined that the arbitrator can determine arbitrability of this case, the court may not determine any substantive issues, including choice of law, relating to the Employment Agreement. See Chiron Corp., 207 F.3d at 1130; see also Crown Equip. Corp. v. Supplies & Servs., No. 98-3435, 1999 WL 266271 at *11-12 (6th Cir. Apr. 20, 1999) (holding the arbitrator decides what substantive law governs the dispute); Medika Int'l, Inc. v. Scanlan Int'l, Inc., 830 F. Supp. 81, 87 (D. P.R. 1993) (same). As the court notes above, tension exists in the law as to whether courts should interpret a contract using state-law principles or federal substantive arbitrability law. See First Options, 514 U.S. at 944; Brennan, 796 F.3d at 1129. Even if the court were to interpret the arbitration clause in the Employment Agreement using Texas or Oregon law, the result would be the same. The Texas Supreme Court has not specifically addressed that incorporating the AAA rules shows unmistakable evidence that parties agreed to arbitrate arbitrability, but the Texas appellate courts have adopted that approach. See Petrofac, Inc. v. DynMcDermott Petroleum Operations Co., 687 F.3d 671, 675 n.2 (5th Cir. 2012). The Oregon courts also have not spoken on the issue of incorporation by reference to the AAA Rules, but the Oregon Supreme Court has held that for contracts covered by the FAA, federal substantive arbitrability law applies. Industra/Matrix Joint Venture v. Pope & Talbot, Inc., 341 Or. 321, 329 (2006). Because the Ninth Circuit holds, using federal substantive arbitrability law, that incorporating the AAA rules shows unmistakable evidence that parties agreed to arbitrate arbitrability, this court infers that using Oregon state law would yield the same result.
Regardless of which law the court applies on the issue of arbitrability, the court comes to the same conclusion. Therefore, the court need not decide the choice of law issue.
II. Discretion Under the Declaratory Judgment Act
This court is presented with a unique procedural posture. Varcak seeks declaratory judgment of questions that the court must defer to the arbitrator in an arbitration proceeding that has already been initiated by Envoy. Conversely, Envoy neither seeks to compel arbitration pursuant to Section 4 of the FAA or stay this action pursuant to Section 3 of the FAA. Both sections use language that assert a party must move the court for the redress of those sections. For example, Section 4 provides that a "party aggrieved . . . may petition" the district court "for an order directing" that arbitration proceed. 9 U.S.C. § 4 (2018). Section 3 provides that if an action is brought in district court, the court "shall on application of one of the parties stay the trial" until arbitration is completed. 9 U.S.C. § 3 (2018). Additionally, since the parties are apparently participating in arbitration, compelling arbitration pursuant to Section 4 would be redundant and serve no purpose. Envoy's 12(b) motions to dismiss are also ill-fitting to the procedural posture of this case for reasons discussed below. The court agrees with Envoy that dismissal should be granted, but the court should dismiss pursuant to the DJA and not Rule 12(b).
9 U.S.C. § 4 states in part:
A party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition any United States district court which, save for such agreement, would have jurisdiction under title 28, in a civil action or in admiralty of the subject matter of a suit arising out of the controversy between the parties, for an order directing that such arbitration proceed in the manner provided for in such agreement.
9 U.S.C. § 3 states:
If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.
"The [DJA] 'gave the federal courts competence to make a declaration of rights; it did not impose a duty to do so.'" Dizol, 133 F. 3d at 1223 (quoting Public Affairs Associates v. Rickover, 369 U.S. 111, 112 (1962)). A court may also raise the issue of whether it should entertain the declaratory-judgment action sua sponte. Id. at 1221. In the Ninth Circuit, the courts, when considering whether to exercise jurisdiction, must evaluate if the action would: "(1) involve the needless determination of state law issues; (2) encourage the filing of declaratory actions as a means of forum shopping; (3) risk duplicative litigation; (4) resolve all aspects of the controversy in a single proceeding; (5) serve a useful purpose in clarifying the legal relations at issue; (6) permit one party to obtain an unjust res judicata advantage; (7) risk entangling federal and state court systems; or (8) jeopardize the convenience of the parties." Allstate Ins. Co. v. Herron, 634 F .3d 1101, 1107 (9th Cir. 2011). The Ninth Circuit's articulation of these so-called "Brillhart factors" does not require a parallel state-court proceeding for a court to decline its exercise of jurisdiction. See Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491 (1942); Dizol, 133 F.3d at 1222.
In the present case, nearly every factor weighs against this court exercising its jurisdiction under the DJA. The first factor is not a perfect fit to this case, but the court cannot determine issues that the parties have contracted to have an arbitrator decide. The second factor weighs heavily against the court's exercise of jurisdiction. The parties have clearly contracted to arbitrate their issues, including arbitrability, and by all appearances, Varcak is attempting to have this district retain jurisdiction by forcing Envoy's hand to move for a stay under the FAA. Factors three, four, and five, weigh against the court exercising jurisdiction as well. While duplicative litigation may or may not be the outcome of our exercising jurisdiction, all aspects of the controversy would not be solved here, and deciding the issues presented here would unnecessarily complicate, not clarify, the legal relations at issue. Concerning the sixth factor, Varcak's request for this court to declare that Oregon law applies to the contract, without stating why the choice of law issue even matters, appears to be an attempt to gain unfair res judicata advantage. The seventh factor is not at issue as there is no state court proceeding. Finally, the eighth factor is generally neutral as Envoy appears to find arbitration convenient, having initiated the arbitration proceeding, whereas Varcak appears to find this forum more convenient, having filed this action here.
Taken in context with the purpose of the FAA and finding that the parties agreed to have the arbitrator decide the issues before the court, the court finds it would be an abuse of discretion to exercise jurisdiction under the DJA and dismissal is warranted.
III. Envoy's Motions to Dismiss Under Rule 12(b) are Inappropriate
Envoy has moved to dismiss Varcak's action on three different theories. For the following reasons, the court finds none of the Rule 12(b) motions fit the procedural posture of this case. Additionally, the court need not decide the Section 1404(a) motion as the court recommends dismissing pursuant to its discretion under the DJA.
Rule 12(b)(1) allows a defendant to challenge subject matter jurisdiction. FED. R. CIV. P. 12(b)(1). Envoy cites Geographic Expeditions, Inc. v. Estate of Lhotka, 599 F.3d 1102 (9th Cir. 2010), to contend that dismissal under 12(b)(1) is appropriate on a motion to compel arbitration. First, the court has no motion to compel arbitration before it. Second, Geographic Expeditions held an arbitration agreement's liability cap, which was less than $75,000, did not preclude diversity jurisdiction. Id. at 1107-08. The parties are not disputing that diversity jurisdiction exists in this case, thus, dismissing under Rule 12(b)(1) is inappropriate.
"Rule 12(b)(3) allow[s] dismissal only when venue is 'wrong' or 'improper.'" Atlantic Marine, 571 U.S. at 55. "Whether venue is 'wrong' or 'improper' depends exclusively on whether the court in which the case was brought satisfies the requirements of federal venue laws, and those provisions say nothing about a forum-selection clause." Id. Although Envoy's Rule 12(b)(3) argument is not a model of clarity, it appears to hinge on the presence of a forum selection clause. (See Def.'s Mot. to Dismiss, at 7.) This motion is clearly inappropriate under the Atlantic Marine rule. Atlantic Marine, 571 U.S. at 55 (holding that dismissal under Rule 12(b)(3) because of a forum selection clause is incorrect).
Rule 12(b)(6) allows a court to dismiss a complaint for failure to state a claim upon which relief can be granted. Nowhere in Rule 12(b)(6) does it specify that the particular court where the motion lies must be the particular court that can grant the relief. Varcak asks the court to declare that the arbitration must be dismissed, and Oregon law applies to the Employment Agreement. This case presents an ordinary common-law contract dispute for which relief can be given; the court has simply determined that the arbitrator, not it, must be the one to grant the relief. For that reason, dismissing under 12(b)(6) would be inappropriate.
Conclusion
For the reasons stated above, the court recommends it exercise its discretion under the DJA and decline jurisdiction because it would frustrate the purpose of the FAA. Envoy's motion to dismiss (ECF No. 9) should be GRANTED, but pursuant to the DJA, not Rule 12(b).
Scheduling Order
The Findings and Recommendation will be referred to a district judge for review. Objections, if any, are due within fourteen (14) days. If no objections are filed, then the Findings and Recommendation will go under advisement on that date.
If objections are filed, then a response is due fourteen (14) days after being served with a copy of the objections. When the response is due or filed, whichever date is earlier, the Findings and Recommendation will go under advisement.
DATED this 22nd day of November, 2019.
/s/_________
JOHN V. ACOSTA
United States Magistrate Judge