Opinion
Civil Action No. 3:01-CV-0650-G
January 24, 2002
MEMORANDUM ORDER
Before the court are the following motions: (1) the motion of the plaintiff Dustrol, Inc. ("Dustrol") to certify, for an interlocutory appeal, this court's memorandum order, filed October 16, 2001 ("October 16 Order"), compelling arbitration and staying the judicial proceedings in this case; and (2) Dustrol's motion to amend its pleadings, by filing a second amended complaint, and to obtain injunctive relief pending an appeal. For the reasons discussed below, Dustrol's motion for certification is denied, and its motion to file a second amended complaint is granted. Dustrol's additional request to enjoin the arbitration proceedings pending an appeal of the October 16 Order denied.
The court administratively closed this case on November 1, 2001. Order, filed November 1, 2001. Although Dustrol has not filed a motion to reopen this case, as specifically authorized in the order of November 1, the court will construe these motions as reopening the case and will address the merits of each motion in turn.
I. BACKGROUND
Although the history of this case, factually and procedurally, is set forth in detail in the October 16 Order, the court will again summarize some of the major events in the course of this dispute. On April 28, 1998, the defendant in this action, Champagne-Webber, Inc. ("Champagne-Webber"), entered into a Subcontract with Dustrol relating to milling work Dustrol was to perform for Champage-Webber on a five-mile stretch of Interstate 35W in Tarrant County. Defendant's Proposed Findings of Fact and Conclusions of Law ("Champagne-Webber's Findings") ¶ 3; Plaintiff's Proposed Findings of Fact and Conclusions of Law ("Dustrol's Findings") ¶ 17. The Subcontract contained an arbitration clause, which provided, in part: "At [Champagne-Webber's] sole option any and all claims, disputes and other matters in question arising out of, or relating to, this Subcontract, or the breach thereof, shall be submitted to arbitration in accordance with the Construction Industry Arbitration Rules of American Arbitration Association. . . ." Subcontract, located in Appendix to Defendant's Motion to Compel Arbitration and Motion to Stay Suit ("Champagne-Webber's Appendix") at 2. After the Subcontract was executed, the State of Texas Department of Transportation ("DOT") changed its instructions (in a "Change Order") to Champagne-Webber concerning the milling work Dustrol was to perform on the project. Dustrol's Findings ¶ 19; Champagne-Webber's Findings ¶ 10. According to Champagne-Webber, this Change Order was incorporated into Dustrol's Subcontract with Champagne-Webber. Champagne-Webber's Findings ¶ 14. Dustrol disputed this contention and claimed that it entered into a separate oral agreement with Champagne-Webber to perform this additional milling work. Application for Injunctive Relief ("Dustrol's Application") at 6-7. Dustrol also asserted that this separate oral contract did not contain any arbitration provision. Dustrol's Application at 7.
Tragically, following the completion of Dustrol's milling work on the project, several fatal automobile accidents occurred at the construction site, which resulted in six different wrongful death actions against Champagne-Webber in Tarrant County court. Dustrol's Findings ¶ 30; Champagne-Webber's Findings ¶ 25. ChampagneWebber impleaded Dustrol as a third party defendant in those actions and, ultimately, settled with the wrongful death claimants and non-suited any claims it had against Dustrol. Dustrol's Findings ¶¶ 32, 40. On March 14, 2001, Champagne-Webber filed a "Demand for Arbitration" against Dustrol, pursuant to the arbitration clause in the Subcontract, with the American Arbitration Association ("AAA"), on the basis of Dustrol's alleged breach of the Subcontract. Champagne-Webber's Findings ¶ 30; Dustrol's Findings ¶ 41. In response to Champagne-Webber's arbitration demand, Dustrol filed an application for injunctive relief seeking to enjoin the arbitration proceedings. Dustrol's Application at 1. In its application, Dustrol argued that its dispute with Champagne-Webber was not covered under the parties' Subcontract because the work that allegedly gave rise to the claims was done under a separate oral agreement, which contained no arbitration term. Id. at 12. In addition, Dustrol argued that even if the arbitration clause did apply to the claims in dispute, Champagne-Webber waived any right to invoke the arbitration clause by asserting those same claims against Dustrol in the Tarrant County wrongful death lawsuits. Id. Shortly thereafter, Dustrol filed a motion to compel arbitration. Defendant's Motion to Compel Arbitration and Motion to Stay Suit with Supporting Brief ("Champagne-Webber's Motion Brief") at 1.
On October 16, 2001, the court issued a memorandum order granting Champagne-Webber's motion to compel arbitration and denying, as moot, Dustrol's application for injunctive relief. October 16 Order. Subsequently, on November 1, 2001, the court issued an order administratively closing this case. Order, filed on November 1, 2001. Approximately a month later, Dustrol filed the instant motions to certify the October 16 Order for interlocutory appeal under 28 U.S.C. § 1292(b) and to amend its pleadings under FED.R.Civ.P. 15(a). See Dustrol's Motion for Section 1292(b) Certification and Brief in Support ("Motion for Certification") at 1; Dustrol's Motion to Amend Pleadings and Request for Injunction Pending Appeal, and Brief in Support ("Motion to Amend") at 1. Champagne-Webber filed timely responses opposing both of Dustrol's motions. See Defendant's Response to Motion for Section 1292(b) Certification ("Certification Response") at 1; Defendant's Response to Motion to Amend Pleadings and Request for Injunction Pending Appeal ("Amend Response") at 1. According to a previous submission to the court, the AAA has apparently set this matter for an arbitration hearing on January 28, 2002. Dustrol's Notice of Recent Developments in the Related Arbitration Proceeding at 3 and attached Exhibit "A" (July 27, 2001 AAA letter) at 1-3.
The court engaged in a rather extensive analysis of the parties' arguments and came to the clear conclusion, based on the record before it, that the dispute over the milling work is arbitrable under the Subcontract's broad arbitration provision and that Dustrol did not satisfy its heavy burden of showing that, by substantially invoking the judicial process, Champagne-Webber waived its right to arbitration. See October 16 Order at 7-28.
II. ANALYSIS A. Motion for Certification
In considering whether to certify the October 16 Order, the court must keep in mind the strong federal policy favoring arbitration. See Moses H. Cone Memorial Hospital v. Mercury Construction Corporation, 460 U.S. 1, 24-25 (1983). Consistent with this policy, a direct appeal may not be taken from an interlocutory order compelling arbitration, unless authorized by § 1292(b). See 9 U.S.C. § 16(b)(2). Under § 1292(b), a court may certify for appeal "an order otherwise not appealable" if the district judge is of the opinion that "such order involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation. . . ." 28 U.S.C. § 1292(b).
(b) Except as otherwise provided in section 1292(b) of title 28, an appeal may not be taken from an interlocutory order —
(1) granting a stay of any action under section 3 of this title;
(2) directing arbitration to proceed under section 4 of this title;
(3) compelling arbitration under section 206 of this title; or
(4) refusing to enjoin an arbitration that is subject to this title.9 U.S.C. § 16(b).
In this case, Dustrol seeks certification of the October 16 Order because it believes its application for injunctive relief presented two controlling issues of law as to which there is substantial ground for difference of opinion. Motion for Certification at 1. Specifically, these two issues are "(I) whether the arbitration clause on which Champagne-Webber relies actually covers the controversy giving rise to Champagne-Webber's claims against Dustrol, and (2) whether Champagne-Webber's conduct, particularly its filing of the identical claims against Dustrol in state court without invoking the arbitration clause, constituted a waiver of any right to arbitrate." Id. at 2. The court finds neither of these grounds is substantial enough to warrant certification under § 1292(b), particularly in light of the fact that Dustrol's motion for certification simply repeats arguments that already have been discussed and rejected by the court.
First, Dustrol fails to present any new facts or points of law in support of its renewed claim that the arbitration clause in the Subcontract does not cover the claims in dispute. The court's October 16 Order adequately addressed this issue. As noted in that decision, both the Supreme Court and the Fifth Circuit have characterized arbitration clauses, similar to the one in the Subcontract, as "broad arbitration clauses capable of expansive reach." October 16 Order at 14 (case citations in October 16 Order). After reviewing the record in this case again, the court concludes, under applicable Fifth Circuit precedent, that the arbitration clause in the Subcontract is sufficiently broad to cover the claims in dispute. See Pennzoil Exploration and Production Company v. Ramco Energy Limited, 139 F.3d 1061, 1067 (5th Cir. 1998) (labeling as "broad" a clause requiring arbitration of "[a]ny controversy or claim arising out of or relating to this Agreement"); Nauru Phosphate Royalties, Inc. v. Drago Daic Interests, Inc., 138 F.3d 160, 164-65 (5th Cir.) (holding that when parties agree to an arbitration clause governing "[a]ny dispute . . . arising out of or in connection with or relating to this Agreement," they "intend the clause to reach all aspects of the relationship."), cert. denied, 525 U.S. 876 (1998). Accordingly, Dustrol has failed to demonstrate that, on this first ground, the October 16 Order involves "a controlling question of law as to which there is substantial ground for difference of opinion." 28 U.S.C. § 1292(b).
Dustrol's second ground for certification is similarly without merit. Dustrol claims that its waiver argument presents a "novel and close question of law" as to whether Champagne-Webber waived its right to arbitration by asserting claims against Dustrol in the Tarrant County wrongful death actions. Motion for Certification at 4. In support of this argument, Dustrol cites a Seventh Circuit case for the proposition that a party who initiates litigation first and seeks arbitration later presumptively waives its right to arbitration. Id.; see also Dustrol's Reply Brief in Support of Motion for Section 1292(b) Certification ("Dustrol's Certification Reply") at 2. Under applicable Fifth Circuit precedent, however, waiver is found only "when the party seeking arbitration substantially invokes the judicial process to the detriment or prejudice of the other party." Subway Equipment Leasing Corporation v. Forte, 169 F.3d 324, 326 (5th Cir. 1999) (internal citation omitted). Moreover, the party alleging waiver of arbitration carries a heavy burden. Id. (internal citation omitted). The court previously concluded, in a rather detailed discussion, that Dustrol failed to meet its heavy burden of showing waiver under Fifth Circuit law. October 16 Order at 16-27. Specifically the court found that, under the circumstances of the case, Champagne-Webber did not substantially invoke the judicial process before seeking arbitration. Id. at 19-24 (citing numerous Fifth Circuit decisions in support of the finding that the record did not support Dustrol's waiver claim). Thus, Dustrol has again failed to present "a controlling question of law as to which there is substantial ground for difference of opinion." 28 U.S.C. § 1292(b).
The court also disagrees with Dustrol's assertion that there is an absence of Fifth Circuit precedent on the question whether Dustrol bears the burden of proving waiver. Dustrol's Certification Reply at 2. To the contrary, as noted above, the Fifth Circuit has previously held that the burden of proving waiver rests on the party making that assertion. Subway Equipment Leasing Corporation, 169 F.3d at 326.
Accordingly, the court denies Dustrol's motion to certify this matter for appeal under § 1292(b).
B. Motion to Amend Complaint
The appropriate starting point for amendment of a pleading is FED.R.Civ.P. 15(a). Under Rule 15(a), "a party may amend the party's pleading only by leave of court or by written consent of the adverse party; and leave shall be freely given when justice so requires." FED.R.Civ.P. 15(a); see also Foman v. Davis, 371 U.S. 178, 182 (1962) ("[L]eave to amend `shall be freely given when justice so requires.'"). Whether a motion to amend should be granted is within the discretion of the district court. Id. at 182. When exercising its discretion, the court may consider such factors as "undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of the amendment, etc. . . ." Overseas Inns S.A.P.A. v. United States, 911 F.2d 1146, 1150-51 (5th Cir. 1990) (quoting Foman, 371 U.S. at 182). A motion for leave should not be denied "unless there is a substantial reason to do so." Leffall v. Dallas Independent School District, 28 F.3d 521, 524 (5th Cir. 1994).
Dustrol's first amended complaint asserted two claims: a request for an injunction or stay and a request for declaratory relief. First Amended Complaint, filed April 18, 2001. Dustrol's claim for injunctive relief was previously denied by this court as moot. October 16 Order at 27. Dustrol's proposed second amended complaint seeks to drop its remaining claim for declaratory relief. See Second Amended Complaint, attached as an Exhibit to Motion to Amend at 1-5. Dustrol's motion to amend its pleadings also seeks to temporarily enjoin the pending arbitration for the duration of the appeal, so as to prevent the appeal from becoming moot. Motion to Amend at 2 Champagne-Webber opposes Dustrol's motion, maintaining that the amendment of Dustrol's complaint will not convert the October 16 Order into a final decision for appellate purposes. Amend Response at 5. Rather, Champagne-Webber argues that "Dustrol's lawsuit against Champagne-Webber, including its renewed request for injunctive relief, will remain viable, merely stayed." Id.
Dustrol asserts that it will "take an appeal from the Court's Order of October 16, 2001 upon the granting of this [m]otion. . . ." Motion to Amend at 2.
The FAA provides that an interlocutory order compelling arbitration is not immediately appealable. 9 U.S.C. § 16(b). However, an order compelling arbitration is a "final" order and thus immediately appealable where the motion to compel arbitration was the sole issue before the district court. See Green Tree Financial Corporation-Alabama v. Randolph, 531 U.S. 79, 85-86, 89 (2000) (holding that a "`final decision' . . . is a decision that `ends the litigation on the merits and leaves nothing more for the court to do but execute judgment.'"). As noted previously, Dustrol's remaining claim is a request for declaratory judgment. In this instance, the court sees no reason not to grant Dustrol's motion to amend its pleadings by dropping this declaratory relief claim. Leffall, 28 F.3d at 524. Therefore, as a result of this ruling, the court dismisses this case because there are no longer any unadjudicated claims presently before the court. See Alford v. Dean Witter Reynolds, Inc., 975 F.2d 1161, 1164 (5th Cir. 1992) ("The weight of authority clearly supports dismissal of the case when all of the issues raised in the district court must be submitted to arbitration.") (emphasis in original). Dustrol's additional request to temporarily enjoin the arbitration proceedings for the duration of any appeal it may take of this court's October 16 Order, however, is denied for the reasons stated in the October 16 Order and this memorandum order.
III. CONCLUSION
For the reasons discussed above, Dustrol's motion for certification is DENIED. Dustrol's motion to amend its pleadings is GRANTED in part. Dustrol's request to temporarily enjoin arbitration proceedings is DENIED. This case is DISMISSED because there are no remaining claims before the court.
SO ORDERED.
January 24, 2002.