Opinion
Nos. 2014–C–1228 2014–CA–1393.
06-24-2015
STAR TRANSPORT, INC. v. PILOT CORPORATION, et al. Star Transport, Inc. v. Pilot Corporation, et al.
Michael W. Magner, Edward D. Wegmann, Virginia W. Gundlach, Brittany M. Simpson, Jones Walker LLP, New Orleans, LA, for Relators/Pilot Corporation et al. Joseph M. Bruno, Meelissa A. DeBarbieris Bruno & Bruno, LLP, New Orleans, LA, for Respondent/Star Transport, Inc.
Michael W. Magner, Edward D. Wegmann, Virginia W. Gundlach, Brittany M. Simpson, Jones Walker LLP, New Orleans, LA, for Relators/Pilot Corporation et al.
Joseph M. Bruno, Meelissa A. DeBarbieris Bruno & Bruno, LLP, New Orleans, LA, for Respondent/Star Transport, Inc.
(Court composed of Judge TERRI F. LOVE, Judge MAX N. TOBIAS, JR., Judge ROLAND L. BELSOME, Judge MADELEINE M. LANDRIEU, Judge ROSEMARY LEDET ).
Opinion
MADELEINE M. LANDRIEU, Judge.
This matter stems from a lawsuit filed in Civil District Court, Orleans Parish, by a nationwide trucking company, Star Transport, Inc. (“Star”), against Pilot Corporation and Pilot Travel Centers, LLC (collectively, “Pilot”), which owns a network of truck stops and supplies fuel to Star. In its lawsuit, Star alleges Pilot fraudulently breached an oral agreement to sell fuel to Star at certain discounted rates with certain rebates and wrongfully converted funds. In a judgment dated October 7, 2014, the trial court made three rulings pertinent here: (1) it denied Pilot's motion to dismiss for forum non conveniens; (2) it granted Star's motion in limine to exclude evidence of a certain promissory note between the parties; and (3) it denied Pilot's exception of prematurity and motion to stay proceedings pending arbitration.
Pilot timely filed both an appeal and an application for supervisory writs challenging these rulings. On January 20, 2015, a five-judge panel of this court, with two judges dissenting, denied Pilot's writ application with written reasons. Pilot sought review of our decision in the Louisiana Supreme Court. On April 14, 2015, this court issued an order continuing Pilot's appeal indefinitely pending the Louisiana Supreme Court's decision on Pilot's application for review of this court's writ denial. On April 24, 2015, the Supreme Court granted Pilot's writ application and remanded the matter to this court for briefing, oral argument and opinion. Counsel for both parties argued before this court on May 20, 2015. This opinion follows.
Star Transport, Inc. v. Pilot Corporation, et al., 2014–C–1228 (La.App. 4 Cir. 1/20/15), unpub.
Star Transport, Inc. v. Pilot Corporation, et al., 2014–CA–1393 (La.App. 4 Cir. 4/14/15), unpub.
The Court also specifically directed that we discuss upon remand our prior opinion in Saavedra v. Dealmaker Developments, LLC, 2008–1239 (La.App. 4 Cir. 3/18/09), 8 So.3d 758. See Star Transport, Inc. v. Pilot Corp., 2015–0339 (La.4/24/15), 168 So.3d 407.
JURISDICTION
We have determined, and the parties agree, that the issues presented by this writ application are identical to those presented by Pilot's appeal. We therefore consolidate the appeal (No. 2014–CA–1393) with the writ application (No. 2014–CA–1228). We first address whether this court has appellate jurisdiction. The rulings made by the trial court—the denial of an exception of forum non conveniens, the granting of a motion in limine, and the denial of an exception of prematurity and/or motion to stay pending arbitration—are interlocutory rulings. Louisiana Code of Civil procedure article 1841 defines an interlocutory ruling as “[a] judgment that does not determine the merits but only preliminary matters in the course of the action.” Louisiana Code of Civil Procedure article 2083 provides: “An interlocutory judgment is appealable only when expressly provided by law.” The parties do not dispute that the first two rulings cited above are not appealable. Pilot argues, however, that this court has appellate jurisdiction over the trial court's denial of the exception of prematurity and the motion to stay pending arbitration based upon a provision of the Federal Arbitration Act (“FAA”). See 9 U.S.C. § 16(a)(1)(A). We disagree. This court has previously held that it lacked appellate jurisdiction to review the overruling of exceptions of prematurity and lack of subject matter jurisdiction that were based upon an arbitration provision. Saavedra v. Dealmaker Developments, LLC, 2008–1239, pp. 4–5 (La.App. 4 Cir. 3/18/09), 8 So.3d 758, 761–62. In that case, the appellants also argued that the same provision of the FAA, which permits an immediate appeal from an order refusing to stay a matter pending arbitration, preempted Louisiana's procedural law that restricts the parties to seeking review by applying for supervisory review. Despite our concluding in Saavedra that the action was governed by the FAA, we held that Louisiana's procedural rule applied. Accordingly, we dismissed the appeal, converted the action to an application for supervisory writs, and ruled on the merits. Id., p. 5, 8 So.3d at 762.
For the same reasons expressed in Saavedra, we dismiss Pilot's appeal for lack of jurisdiction. There is no need to convert the appeal to a writ application because Pilot simultaneously filed both an appeal and an application for supervisory writs seeking review of the same judgment. In accordance with the Louisiana Supreme Court's directive, we consider Pilot's writ application pursuant to our supervisory jurisdiction.
Forum Non Conveniens
We review the trial court's denial of Pilot's motion to dismiss for forum non conveniens under an abuse of discretion standard. “The abuse of discretion standard of review is appropriate because La. C.C.P. art. 123, which treats forum non conveniens, permits—it does not mandate—that a case be transferred if certain conditions are fulfilled.” Cantuba v. American Bureau of Shipping, 2001–1139, p. 2 (La.App. 4 Cir. 2/13/02), 811 So.2d 50, 52. Significantly, according to the record before us, neither jurisdiction nor venue in Orleans Parish is disputed. On its motion, Pilot argued, and had the burden of proving, that either: (1) there is a more convenient forum in Louisiana to which the case should be transferred, or (2) there exists “a more appropriate forum outside of this state.” La. C.C.P. art. 123. “A plaintiff's choice of forum is entitled to great weight and should not be disturbed absent a showing that the convenience of all parties and the interests of justice require that the litigation should proceed elsewhere. The burden of such a showing is on the mover.”Nat'l Linen Serv. v. City of Monroe, 39,199, p. 5 (La.App. 2 Cir. 12/15/04), 889 So.2d 1186, 1190 (citing Lamb v. Highlines Construction Co., 541 So.2d 269 (La.App. 4th Cir.1989) ). On the record before us, we cannot say the trial court abused its discretion by denying Pilot's motion to dismiss.
Exclusion of Promissory Note
Pilot claims the trial court erred by granting Star's motion in limine to exclude from evidence the April 3, 2012 promissory note between the parties.
Star has been purchasing fuel from Pilot since at least 2005, as evidenced by a written purchase agreement executed in November, 2004. In its lawsuit filed on February 5, 2014, Star alleges that the parties entered into an oral agreement in January, 2009 (evidenced by a letter from Pilot's vice-president) that Pilot would provide fuel using a particular, discounted price structure, which included monthly rebates to Star. The pricing and rebate schedules were reflected in various written documents. By April of 2012, Star had fallen behind on its payments to Pilot for fuel. To compromise this indebtedness, Star agreed to sign a promissory note in favor of Pilot for approximately 14.3 million dollars, which was executed on April 3, 2012. This promissory note contains an extremely broad arbitration provision.
Approximately one year after the execution of the note, the results of an FBI investigation were publically revealed indicating that Pilot had been involved in a scheme to deceptively withhold diesel fuel rebates and discounts from its customers. Pilot admits in its brief that the federal government investigated fraudulent conduct in connection with Pilot's diesel fuel sale discount programs. Pilot further admits that as a result of that investigation, Pilot entered into a criminal enforcement agreement wherein it acknowledged and accepted full responsibility for the misconduct. Within a year of finding out about the FBI investigation, Star filed the present suit alleging that Pilot committed fraud by overcharging for fuel and wrongfully withholding rebates on fuel purchases between 2005 and 2013.
Pilot responded to the suit by asserting that the entire matter belonged in arbitration on account of the arbitration provision contained in the 2012 promissory note. Although Pilot's exception of prematurity and motion to stay were based upon that arbitration provision, Pilot did not at that time assert a reconventional demand based upon the promissory note. Star then filed a motion in limine to exclude the promissory note from evidence, which the trial court granted.
The parties represent that Pilot filed such a reconventional demand after the trial court issued the judgment on review herein.
As mentioned in our previous disposition of the writ, the record does not disclose the precise basis for the trial court's granting of Star's motion. The transcript suggests that the trial court's ruling was based upon either (1) a factual finding by the trial court that the promissory note is unrelated to the fraud claims alleged by Star in the lawsuit, and therefore is not relevant; or (2) the trial court's belief that the promissory note and/or the arbitration clause within it were null and void due to fraudulent procurement. The record further discloses that the trial court did not hold an evidentiary hearing or take evidence on Star's motion.
As stated in our prior disposition of the writ, this court rarely finds it appropriate to intervene in trial court rulings on motions in limine, which by their nature can be revisited at any point during the litigation. Nevertheless, in this case we find that the trial court abused its discretion by granting the motion to exclude the promissory note without at least having an evidentiary hearing on the matter. The arbitration clause contained in the promissory note is the basis for Pilot's exception of prematurity and motion to stay. That alone makes the promissory note relevant. Moreover, to the extent that the trial court's ruling was based upon a finding that Star was fraudulently induced to sign the note containing the arbitration provision, the trial court erred by making such a factual finding without holding an evidentiary hearing on this issue. For these reasons, we conclude that the trial court abused its discretion by granting the motion in limine to exclude the note from evidence, and we reverse that ruling.
Arbitration
The final issue we address is whether the trial court erred by denying Pilot's exception of prematurity and motion to stay pending arbitration.
Pilot argues that the arbitration provision in the 2012 promissory note requires that this entire controversy be submitted to arbitration. The determination of whether to stay proceedings and/or to compel arbitration is a question of law. Saavedra, supra, p. 6, 8 So.3d at 762. Therefore, our standard of review is simply to determine whether the trial court was legally correct or incorrect. Id.
It is undisputed that the arbitration provision in the promissory note is exceptionally broad, providing:
ANY CLAIM OR CONTROVERSY (“CLAIM”) BETWEEN THE PARTIES, WHETHER ARISING IN CONTRACT OR TORT OR BY STATUTE INCLUDING, BUT NOT LIMITED TO, CLAIMS RESULTING FROM OR RELATING TO THIS AGREEMENT SHALL, UPON THE REQUEST OF EITHER PARTY, BE RESOLVED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION ACT.... ANY DISPUTE CONCERNING WHETHER A CLAIM IS ARBITRABLE OR BARRED BY THE STATUTE OF LIMITATIONS SHALL BE DETERMINED BY THE ARBITRATOR.
In Saavedra, supra, this court stated:
It is now well-settled that as a matter of substantive federal law applicable also to the states: (i) an arbitration clause is severable from the remainder of the contract, and (ii) unless the challenge is to the arbitration clause itself, the issue of the contract's validity is decided by the arbitrator. Applying
these principles to the instant case, which is governed by the FAA, we note that Mr. Saavedra's fraud claim is directed to the purchase agreement as a whole; he is not attacking the arbitration provision itself. We thus find that Mr. Saavedra's claims, including the claim of fraud in the inducement, must be arbitrated.
2008–1239, pp. 9–10, 8 So.3d at 764–65.
Several years later, in Rain CII Carbon LLC v. ConocoPhillips Co., 2012–0203 (La.App. 4 Cir. 10/24/12), 105 So.3d 757, we considered a case where, as here, there were allegations of fraud in the inducement of both the contract in general and of the arbitration clause itself. In that case, we held that because the allegations of fraud were identical and those allegations were all contingent upon the outcome of the underlying action, they were so intertwined that it would be impossible for the court to try only the issue of whether the arbitration clause was fraudulently induced, without also deciding whether the underlying contract was fraudulently induced. Id., p. 10, 105 So.3d at 763. Under those circumstances, we declined to overrule the trial court's granting of the exception of prematurity sending the entire matter to arbitration. Id., p. 11, 105 So.3d at 763.
Addressing the issue before us, we first note that the case at bar is factually distinguishable from Saavedra and Rain CII Carbon in that the “underlying contract”—that is—the agreement sued upon, does not contain the arbitration clause in question. Instead, the arbitration provision is contained in a promissory note that is completely separate from Pilot's agreement to sell fuel to Star at particular discounted rates. Therefore, even if the trial court or the arbitrator found that Star was fraudulently induced to sign the promissory note, that finding would not necessarily have any bearing upon the claim alleged by Star in this lawsuit, which is that Pilot fraudulently billed Star at higher rates than it had promised and failed to provide the rebates it had promised.
Although the promissory note may be pled by Pilot as an offset against any amount Pilot may ultimately be held to owe Star in damages, the gravamen of this lawsuit at the time the issue joined was not the promissory note. The parties have not cited, nor have we found, a case addressing arbitration with facts similar to the instant case.
In light of this factual distinction, we consider whether the trial court erred by declining to send the matter to arbitration. Star argues here, as it did in the trial court, that its challenge is to the validity of the arbitration clause itself. Star asserts that Pilot knew about the impending criminal investigation of its prior conduct at the time the promissory note was signed. Star further argues that because of Pilot's knowledge, the impetus for presenting the promissory note to Star was not so much to compromise or memorialize Star's indebtedness as it was to obtain the very broad arbitration provision contained in the note, which could then be applied to future claims. Finally, Star contends that Pilot's deliberate concealment of information about its own improper conduct and the FBI investigation into that conduct vitiates Star's consent to the arbitration provision because of fraudulent inducement.
The record reflects that although the judge admitted into evidence the documents that were attached to the parties' memoranda in support of and/or opposition to their exceptions and motions, the hearing before the trial court was otherwise limited to the argument of counsel. In support of his argument attacking the validity of the arbitration clause, Star's counsel recognized that the court could not properly make a determination as to the issue of fraudulent inducement without the introduction of further evidence, suggesting: “I think that the procedural device would be to either have a mini hearing or to refer it to the merits.” Without giving written or oral reasons, the trial court at the conclusion of the hearing overruled the exception of prematurity and denied the motion to stay, declining to compel arbitration. Therefore, the record before us does not disclose the basis for the trial court's rulings.
In Saavedra, we noted that “[the] party pleading the exception of prematurity has the initial burden of showing the existence of a valid contract to arbitrate.” Id., p. 6, 8 So.3d at 762 (emphasis added). We further noted that the question of whether the parties have submitted a particular controversy to arbitration—arbitrability—is generally one for the court to decide. Id., p. 7, 8 So.3d at 763. Finally, we noted that even where the FAA applies, as here, the issue of the validity of the contract containing the arbitration provision is decided by the arbitrator unless the challenge is to the validity of the arbitration clause itself. Id., p. 9, 8 So.3d at 764.
In the case before us, Star raises a challenge as to the validity of the arbitration clause itself, claiming the provision itself was fraudulently procured. Unlike in Rain CII Carbon, we do not find that Star's allegations of fraudulent inducement of the arbitration provision are so factually intertwined with its allegations of fraud in the agreement sued upon that the two issues cannot be decided separately. In fact, the arbitration provision is not even contained in the agreement sued upon, but in a separate promissory note signed years afterward. Nor would the trial court's finding that the arbitration provision was fraudulently procured necessarily mean that the promissory note in which the clause is contained was fraudulently procured as well. That is, even if the court finds that Pilot concealed relevant information from Star in order to induce Star to sign a broad arbitration provision, it would not preclude a subsequent finding that Star actually owed Pilot the amount stated in the note.
Given these circumstances, we conclude that the trial court erred in denying the exception of prematurity without having first held an evidentiary hearing to determine whether there was fraud in the inducement of the arbitration clause. We therefore remand the matter to the trial court for an evidentiary hearing and a decision upon the issue of the validity of the arbitration provision.
DECREE
For the reasons stated, we:
(1) consolidate the appeal with the writ application;
(2) dismiss the appeal;
(3) grant the writ application in part to reverse the trial court's granting of the motion in limine excluding the promissory note from evidence;
(4) deny the writ application insofar as it addresses the trial court's denial of the motion to dismiss for forum non conveniens, the overruling of the exception of prematurity, and the denial of the motion to stay pending arbitration and to compel arbitration; and
(5) remand the matter to the trial court for an evidentiary hearing.LOVE, J., concurs in part and dissents in part.
TOBIAS, J., dissents in part, concurs in part, and assigns reasons.
LOVE, J., concurs in part and dissents in part.
I respectfully concur in part and dissent in part. I agree with the majority in so far as it consolidates the appeal with the writ application and dismisses the appeal. Additionally, I agree with the majority's finding that the trial court did not abuse its discretion in denying Pilot's motion to dismiss for forum non conveniens. I disagree, however, with the majority's denial of Pilot's writ application seeking review of the trial court's denial of its exception of prematurity and its motion to stay pending arbitration. I also disagree with the majority's decision to remand the matter for an evidentiary hearing on Star's motion in limine.
I write separately to express my views as it relates to the promissory note (“Note”) and allegations of fraud in light of our holdings in Saavedra v. Dealmaker Developments, LLC, 08–1239 (La.App. 4 Cir. 3/18/09), 8 So.3d 758, and Rain CII Carbon LLC v. ConocoPhilips Co., 12–0203 (La.App. 4 Cir. 10/24/12), 105 So.3d 757.
I begin by addressing the relevant facts in this case, as my review of the record differs from that of the majority. Star's petition states that the parties entered an agreement for the purchase of fuel to begin in 2005. The Direct Bill Agreement executed on November 4, 2004, has at all times reflected the billing and payment arrangements between the parties. Star alleged that throughout their business relationship Pilot agreed to provide fuel at discounted rates. In January 2009, the parties entered into an agreement which set out the pricing structure for fuel purchases, which was memorialized in a letter from Pilot's vice president. The petition further states that the “pricing structure agreement was confirmed ... in statements to Star employees and in writing.” Notably, nowhere in Star's petition does it make the distinction between the oral and written agreements that established the contractual relationship between the parties.
Subsequent to the parties agreeing to a pricing structure, Star fell behind in its payments to Pilot. To account for Star's debt, Star executed the Note which was signed by Star's president and notarized on April 9, 2012. The Note, which Pilot attached as an exhibit to its exception, makes express reference to the Direct Bill Agreement and includes a plainly marked arbitration provision. Pilot argued at the hearing that the Note served as “an amendment or modification” to the Direct Bill Agreement. The executed Note reflected a modification to the existing agreement to account for any future default in payment on the part of Star and served as an “accounting exercise” for the debt Star had already accrued during the course of its contractual relationship and dealings with Pilot. Although the Note is signed and notarized, establishing Star's knowledge of its existence, Star's petition does not reference the Note.
Star alleges in its petition that Pilot committed fraud by overcharging and wrongfully withholding rebates owed for fuel purchases. Star attaches as proof an affidavit filed in support of a search warrant as part of the FBI's investigation of fraudulent conduct relating to Pilot's discounted rates program. In its opposition to Pilot's exception, Star attached as supporting evidence the same affidavit in support of the FBI search warrant, a former Pilot employee's plea agreement, evidence of the class action lawsuit and settlement, and the criminal enforcement agreement. In its separately filed motion in limine, Star attached the criminal enforcement agreement.
At the hearing, the trial court admitted Star's evidence over Pilot's objection on hearsay grounds, finding the evidence was not offered for the truth of the matter asserted but as supporting evidence of Star's allegations of fraud.
This sum represents a portion of over four hundred million dollars ($400,000,000.00) of fuel purchased by Star from Pilot in the relevant period of time as alleged by Star in its petition. Star had fallen behind in the payment for fuel purchased from Pilot and executed the note in payment of its debt. That we are dealing with many millions of dollars clearly indicates that the parties have some business sophistication and acumen.
Motion in Limine
I disagree with the majority's finding that the trial court abused its discretion when it granted Star's motion in limine without an evidentiary hearing or taking evidence on Star's motion. The record indicates that the trial court had before it the exceptions and motions filed by both parties, including their attached exhibits, when it heard arguments from counsel on both sides. Similarly, evidence was presented and accepted at the hearing. Pilot offered in support of its exception of prematurity and motion to stay pending arbitration, Star's petition, the Direct Bill Agreement, and the Note. As outlined above, Star offered documentary evidence in opposition to Pilot's exception of prematurity and in support of its motion in limine, including evidence that Pilot engaged in misconduct adversely affecting its customers. Moreover, neither party has assigned as error the trial court's failure to consider or accept evidence.
The transcript reflects that Pilot's evidence was admitted over Star's objection on authenticity grounds, noting that prior to the hearing the parties filed a joint motion to supplement the record with the exhibits attesting to their authenticity.
It is the nature of businesses that they do not want the public to know about any adverse financial situation: Star would not want their customers and competitors to know that they were behind in the payment for millions of dollars for fuel (for nothing slows down debtor payments to a creditor on accounts receivable like when the debtor knows the creditor is having financial problems) and Pilot would not want the public to know the existence of any untoward trade practices, if any. All parties would have wanted to keep such closed to the public through arbitration. I have little doubt Star would have executed the note with or without the arbitration agreement in it (or another side agreement for arbitration). Another way to look at the very broad arbitration clause is to consider that Pilot saw a “tort” coming and Star considered the “tort” language to be superfluous and not worth challenging.
Further, because the Note represents sums allegedly owed Pilot, any dispute over amounts owed will necessarily take into account the Note. Thus, as a practical matter, whether the issues are before the arbitrator or the trial court, I find the Note relevant. Therefore, I do not find the record supports the majority's view that the trial court failed to accept evidence on the pleadings.
In this case, any consideration of Pilot's exception of prematurity and Star's allegations of fraudulent inducement of the arbitration clause requires consideration of the Note. As my analysis will explain in greater detail, I find merit to Pilot's exception; and consequently, I find the Note relevant and should not be excluded from evidence. Accordingly, I find the trial court abused its discretion by granting Star's motion in limine.
Exception of Prematurity
Whether to stay or compel arbitration is a question of law. Saavedra, 08–1239, p. 6, 8 So.3d 758, 761. Therefore, an appellate court reviews questions of law to determine whether the trial court was legally correct or incorrect. Id. This Court “ ‘should consider de novo issues of law concerning whether the dispute was within the scope of the arbitration agreement, unless the parties also clearly agreed the issue of whether a dispute was arbitrable was subject to arbitration.’ ” Id. (quoting Collins v. Prudential Ins. Co. of Am., 99–1423, p. 7 n. 11 (La.1/19/00), 752 So.2d 825, 830 ); See also Hoffman, Siegel, Seydel, Bienvenu & Centola, APLC v. Lee, 05–1491, p. 4–5 (La.App. 4 Cir. 7/12/06), 936 So.2d 853, 856 (recognizing that “ ‘[i]f the trial court's decision was based on an erroneous interpretation or application of law, rather than a valid exercise of discretion, such [an] incorrect decision is not entitled to deference by the reviewing court’ ”) (quoting Dufrene v. HBOS Mfg., LP, 03–2201, p. 2 (La.App. 4 Cir. 4/7/04), 872 So.2d 1206, 1209 ).
The trial court did not offer a basis for its ruling at the hearing, nor did the trial court offer written reasons. Consequently, this Court need only determine from a review of the record whether the trial court was legally correct or incorrect.
In this case, Pilot filed an exception of prematurity and a motion to stay proceedings pending arbitration. “The party pleading the exception of prematurity has the initial burden of showing the existence of a valid contract to arbitrate.” Saavedra, 08–1239, p. 6, 8 So.3d at 762 (emphasis added). The exceptor must also “prove that the dispute falls within the scope of the arbitration provision.” Rain, 12–0203, p. 8, 105 So.3d at 762. However, the burden of proof does not always remain with the party pleading the exception as the burden shifts to the party opposing the exception “to show its claims [fall] outside the arbitration clause.” Id.
I find this Court's previous holdings in Saavedra and Rain controlling in our review of the trial court's denial of Pilot's exception of prematurity and motion to stay pending arbitration. To support its exception of prematurity and motion to stay, Pilot offered the Direct Bill Agreement, the Note incorporating by specific reference the Direct Bill Agreement, and Star's petition. The majority concludes that the Note is a completely separate agreement from Pilot's agreement to sell fuel to Star because it was executed in a separate document years after the parties began their contractual relationship. I disagree.
We have previously recognized that jurisprudence “allow[s] an arbitration agreement to apply if ‘an arbitration clause is incorporated by reference to another written contract.’ ” Dufrene, 03–2201, p. 5–6, 872 So.2d at 1211 (quoting Woodson Const. Co. v. R.L. Abshire Const. Co., 459 So.2d 566, 569 (La.App. 3rd Cir.1984) ). The Note incorporates by specific reference the Direct Bill Agreement, which memorialized the contractual agreement between the parties for the purchase and sale of fuel through Pilot's discounted rates program. Furthermore, the record shows that Star's president signed and notarized the Note evidencing Star's awareness of its existence and the arbitration provision. Id., 03–2201, p. 8, 872 So.2d at 1213 (recognizing that a “party who signs a written instrument is presumed to know its contents”).
The fact that the Note was signed after the contractual relationship began is of no moment. The parties have shown a pattern of entering oral and written agreements since their contractual relationship began in 2005. Particularly, Star relies on this type of post-original agreement in its petition to support its claim that it entered an agreement with Pilot in January 2009, outlining the discounted pricing structure. However, Star also alleges in its petition that Pilot always agreed to sell fuel to Star at discounted rates. Thus, Star suggests that the 2009 “agreement” modified the parties' contractual relationship established in November 2004 in the Direct Bill Agreement. In the same way that Star relies on the 2009 pricing structure agreement to establish its breach of contract claims, Pilot relies on the Note to establish Star's agreement to arbitration of any claims arising from or relating to their contractual relationship. Consequently, I disagree with the majority's finding that the Note is a completely separate agreement. Thus, as a matter of law, I find a valid arbitration agreement existed between the parties.
The arbitration provision at issue here can only be characterized as broad. The arbitration provision at issue covers “any claim or controversy between the parties, whether arising in contract or tort or by statute, including but not limited to, claims resulting from or relating to this agreement” as well as “any dispute [concerning] whether a claim is arbitrable.” All of Star's allegations fall within the scope of the arbitration provision. In Pennzoil Exploration & Prod. Co. v. Ramco Energy, Ltd., 139 F.3d 1061, 1067 (5th Cir.1998), it was recognized 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.” Id. (quoting Nauru Phosphate Royalties, Inc. v. Drago Daic Interests, Inc., 138 F.3d 160, 164–65 (5th Cir.1998) ). I find the same holds true in this case.
While this Court is not bound by the holdings in federal cases, there is considerable jurisprudence from federal courts interpreting arbitration provisions. Therefore, in this instance I find Pennzoil offers guidance.
Here, because Star has alleged fraud, a federal court under the Federal Arbitration Act (9 U.S.C.A. § 1, et seq. ) would automatically throw out the arbitration clause, begs the question of why Star did not file their suit in United States District Court. Star's argument rings hollow, reinforcing why forum non conveniens should be granted in this case as discussed infra.
Further, it is without question that the parties involved are sophisticated businesses. Therefore, both parties were more than capable of protecting themselves in negotiations that involve a binding arbitration agreement in a multi-million dollar deal. In that the Note is a modification of Pilot and Star's contractual relationship, I find the parties intended the arbitration provision to reach all aspects of the relationship. Thus, Pilot met its initial burden as the party pleading the exception as set forth in Saavedra and Rain.
Consequently, the burden shifts to Star to prove that its claims fall outside the scope of the arbitration provision. First, Star avers that its claims arise out of a separate agreement with no connection to the Note. For the reasons outlined above, I find no merit to this argument.
Second, in its motion in limine, Star claimed that the Note in its entirety was induced by fraud and was void ab initio. However, counsel for Star argued at the hearing that its fraudulent inducement claim and the evidence it offered in support is directed to the arbitration provision itself; and therefore, the making of the agreement to arbitrate may proceed in the trial court. Star's counsel offered into evidence several documents to “show the Court that substantial allegations have been made regarding fraud.” Counsel for Star stated that the evidence was offered to assist the trial court in determining “whether or not [he] made an attack on the arbitration clause.”
This Court has recognized that an arbitration provision is “severable from the remainder of the contract, and ... unless the challenge is to the arbitration clause itself, the issue of the contract's validity is decided by the arbitrator.” Rain, 12–0203, p. 9, 105 So.3d at 763 (quoting Saavedra, 08–1239, p. 9, 8 So.3d at 764 ).
Because Star makes allegations of fraudulent inducement of the arbitration clause itself, this Court must first consider the allegations made in Star's petition. In Long v. Jeb Breithaupt Design Build Inc., 44,002, p. 14 (La.App. 2 Cir. 2/25/09), 4 So.3d 930, 939, the court stated that “one of the primary concerns of courts is that a party seeking to avoid arbitration will simply allege fraudulent inducement in order to get the case into the district court. For this reason, allegations of fraud in a petition are closely scrutinized by the court.” Additionally, La. C.C.P. art. 856 requires that “[i]n pleading fraud or mistake, the circumstances constituting fraud or mistake shall be alleged with particularity.”
In French's Welding & Maintenance Serv., L.L.C. v. Harris Builders, L.L.C., et al., 10–0089 (La.App. 4 Cir. 8/11/10), 45 So.3d 1148, plaintiff sought a preliminary injunction prohibiting arbitration of the parties' disputes claiming the arbitration clause was unenforceable because defendant never signed the contract containing the arbitration provision and defendant misrepresented the necessity of the arbitration provision's inclusion. Id., 10–0089, p. 2, 45 So.3d 1148, 1149. During negotiations, plaintiff's attorney advised his client that the arbitration clause should be deleted. Id., 10–0089, p. 1, 45 So.3d 1148, 1149. However, defendant insisted that the arbitration clause was required under state law and could not be deleted. Id. In light of defendant's representation of the law, plaintiff signed the contract. Id. Only in preparation for arbitration, did plaintiff learn that the state removed the arbitration clause from the contract and that defendant had not executed the contract. Id. Based on the evidence presented, this Court affirmed the trial court's finding that plaintiff was misled and coerced into agreeing to arbitration because defendant falsely claimed that arbitration was required under the contract. Id.
I find that in pleading fraud Star alleged with particularity that Pilot engaged in “misconduct” relative to its discounted rates program. Specifically, Star offered sufficient evidence to support its claim that Pilot's misconduct involved overcharging and withholding rebates from its customers. However, these allegations of fraud speak to the “agreement” between Pilot and Star in general. Whether the facts and circumstances alleged and evidence submitted supports the claim of fraudulent inducement of the arbitration provision is an entirely separate inquiry.
Star's petition makes no mention of the Note or the arbitration provision. Nor does the petition make a specific allegation of fraudulent inducement of the arbitration provision itself. The petition states that Pilot “intentionally engaged in fraudulent conduct to artificially inflate the costs basis and conceal the actual value of the rebate due Star with the intentional purpose of breaching Pilot's contract with Star.” Star also directs the court to the attached copy of the affidavit filed in support of the FBI investigation for specific facts regarding Pilot's fraudulent conduct. However, the affidavit makes no mention of Star, the Note, or the arbitration clause.
In contrast to its allegations of fraud of the “agreement,” Star's allegations of fraudulent inducement of the arbitration provision are conclusory allegations. Star alleges that because of Pilot's fraudulent misconduct and a desire to protect itself against future claims, Pilot used Star's indebtedness to coerce Star into agreeing to arbitration. Nevertheless, Star only points to facts and circumstances that Pilot engaged in misconduct relating to the discounted rates program in general.
Additionally, the fact Pilot entered into a criminal enforcement agreement for conduct relating to its rebate program does not by itself support the allegation that Pilot constructed a plan to coerce Star into agreeing to arbitration. Thus, the facts and circumstances presented at the hearing, in the petition, and in the motion in limine do not address Star's claim that it was deceived into agreeing to arbitration. Star merely suggests a hypothetical scenario to suggest possible misconduct relative to the Note. Unlike the plaintiff in French's Welding, Star failed to plead with particularity its allegations of fraud of the arbitration provision as required under La. C.C.P. art. 856.
The majority also finds that the allegations of fraud of the arbitration provision and those of the agreement are not “so factually intertwined,” that the matter must be referred to arbitration. Unlike this Court's comparative analysis in Rain, the majority does not establish how the allegations of fraud are factually distinct. Instead, it considers whether the Note and the “agreement sued upon” are separate distinguishable agreements.
Applying the principles set forth in Saavedra, this Court is called to examine the allegations of fraud of the arbitration provision itself and those of the “agreement sued upon.” A review of the record demonstrates that “the allegations of fraud are substantially identical.” Rain, 12–0203, p. 10, 105 So.3d at 763 (emphasis added). The allegations of fraudulent inducement of the arbitration provision and the allegations of fraud as to the validity of the parties' agreement arise out of the same set of facts and circumstances. Star even used the same evidence in support of its allegations of fraud of the “agreement sued upon” to attack the arbitration provision.
Outside of relying on evidence of Pilot's general misconduct, Star fails to plead independent facts or circumstances specific to Pilot's allegedly coercive actions to procure Star's agreement to arbitration. Consequently, Star's allegations of fraudulent inducement of the arbitration provision are simply conclusory allegations that cannot stand on their own. Therefore, Star's fraud claims do not attack the arbitration provision itself and only challenge the agreement as a whole.
Star's opportunity to present evidence to support its allegations of fraudulent inducement of the arbitration provision was at the hearing on the exception and motion in limine.
Star's claims relate to a diesel fuel sales discount program with Pilot in which Star claims that it did not get the discount for which they bargained.
Finally, jurisprudence is clear that arbitration is favored. Aguillard v. Auction Mgmt. Corp., 04–2804, p. 6–8 (La.6/29/05), 908 So.2d 1, 7–8. Thus, “any doubt concerning the scope of which disputes are arbitrable should be resolved in favor of arbitration.” Saavedra, 08–1239, p. 7, 8 So.3d at 763 (citing Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24–25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983) ). Based on my de novo review, the issue of whether the parties' agreement is invalid because it was induced by fraud must be referred to arbitration. Therefore, I find the trial court erred in denying Pilot's exception of prematurity and motion to stay pending arbitration.
For the foregoing reasons, I agree with the majority's ruling in so far as it consolidates the appeal with the writ application and dismisses the appeal in addition to affirming the trial court's denial of Pilot's motion to dismiss for forum non conveniens. However, I would grant Pilot's writ application reversing: (1) the trial court's denial of the exception of prematurity and motion to stay pending arbitration; and (2) the trial court's granting of Star's motion in limine. Accordingly, I concur in part and dissent in part.
TOBIAS, J., dissents in part, concurs in part, and assigns reasons.
I respectfully dissent in part and concur in part. Like the first time this case came before this court on these same issues where I agreed with Judge Love's partial dissent relating to arbitration and added my further analysis to the mix, I now agree with her well-articulated and well-reasoned dissent on the arbitration issue. I further dissent on the forum non conveniens issue.
I.
I find that the arbitration clause is enforceable regardless of whether Star Transport, Inc. (“Star”) alleges fraud in connection with the promissory note for $14,371,133.49 for fuel (subject to certain minimal credits for payments made by Star since the promissory note's execution).1 The promissory note, which was executed by Star and notarized with a jurat in Illinois, contains the agreement to arbitrate at issue herein. The precise language in the note, set forth in all in capital letters therein, reads:
ANY CLAIM OR CONTROVERSY (“CLAIM”) BETWEEN THE PARTIES, WHETHER ARISING IN CONTRACT OR TORT OR BY STATUTE, INCLUDING BUT NOT LIMITED TO, CLAIMS RESULTING FROM OR RELATING TO THIS AGREEMENT SHALL, UPON THE REQUEST OF EITHER PARTY, BE RESOLVED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION ACT.... ANY DISPUTE CONCERNING WHETHER A CLAIM IS ABITRATABLE [sic] OR BARRED BY THE STATUTE OF LIMITATIONS SHALL BE DETERMINED BY THE ABRITRATOR. [Boldface and underlining added for emphasis.]
As stated by the Louisiana Supreme Court on multiple occasions (and I believe they mean what they say), arbitration is favored in Louisiana. Hodges v. Reasonover, 12–0043, p. 4 (La.7/2/12), 103 So.3d 1069, 1072 ; Morial v. BPI Home Builder, LLC, 12–2195, 12–2238, p. 1 (La.11/2/12), 99 So.3d 1006 ; Aguillard v. Auction Management Corp., 04–2804, p. 7 (La.6/29/05), 908 So.2d 1, 7. As La. R.S. 9:4201 states:
A provision in any written contract to settle by arbitration a controversy thereafter arising out of the contract, or out of the refusal to perform the whole or any part thereof, or an agreement in writing between two or more persons to submit to arbitration any controversy existing between them at the time of the agreement to submit, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.
Under Louisiana law, fraud (La.C.C. art.1953) is a tort with a one-year prescriptive period to which the doctrine of contra non valentem non currit praescriptio may be applicable. State ex rel. Louisiana Dept. of Education–Food Service v. Bright Beginnings Child Care, Inc., 42,146, p. 6 (La.App. 2 Cir. 5/16/07), 957 So.2d 362, 366, citing Bell v. Demax Management Inc., 01–0692 (La.App. 4 Cir. 7/24/02), 824 So.2d 490, Cole v. Celotex Corp., 620 So.2d 1154 (La.1993), and La. C.C. art. 3492 ; Chateau Homes by RJM, Inc. v. Aucoin, 11–1118, 11–1119, p. 13 (La.App. 5 Cir. 5/31/12), 97 So.3d 398, 404.The promissory note (a contract) calls for the payment of a liquidated sum of money, here $14,377,133.49, and for the arbitration of a claim in tort related thereto. Such language stands out like the proverbial “sore thumb.” Certainly, any reasonably sophisticated party, as both Star, on the one hand, and Pilot Corporation and Pilot Travel Centers LLC's (collectively hereafter, “Pilot”), on the other hand, are, would question what type of tort could arise out a promissory note. The only obvious torts I can think of are an allegation of fraud and tortious interference with contract. Here, it is reasonably certain that the parties intended for all claims, regardless of source or nature and related to the promissory note, to be arbitrated in all respects, including whether the claim was subject to arbitration or not. Regardless, whether Star was told by Pilot about the federal investigation questioning their business practices, they knew during negotiations leading up to the execution of the note that they still owed millions of dollars for the purchase of fuel.2 Under any scenario, the parties clearly wanted to arbitrate any disputes.
Further, I find nothing in either Saavedra v. Dealmaker Developments, LLC, 08–1239 (La.App. 4 Cir. 3/18/09), 8 So.3d 758, or Rain CII Carbon LLC v. ConocoPhillips Co., 12–0203 (La.App. 4 Cir. 10/24/12), 105 So.3d 757, that warrants a finding that the present case, including the issue of fraud, should not be arbitrated. Moreover, I read Saavedra as requiring that the fraud issue in this case be arbitrated. That the arbitration agreement at issue in this case was agreed to in the promissory note signed years after the initial agreement for fuel sale/purchases is of no moment. Parties are free to contract as they see fit as long as their contract does not contravene public policy; no acts contravening public policy issue is present in this case. Moreover, the issue of fraud, if any, is so integrally connected to the indebtedness that it would be a waste of energy and resources to separate them. See Rain CII Carbon, supra . That is, the same evidence on fraud will be determinative of the indebtedness of Star to Pilot. Id.
Historically, fraud is a serious allegation; once made, it opens up the party alleging fraud to claims for libel and slander (both torts) if fraud is not ultimately proven. A claim of fraud is frequently resorted to when all other possible theories of why one should prevail on a claim are unknown. In other words, one might make the claim when one has nothing to lose, i.e., is approaching insolvency/ bankruptcy/receivership. It is periodically utilized to delay collection of debts. Although federal jurisprudence recognizes that when one asserts fraud (where arbitration has been agreed to by the parties in interest), such may very well make the case not subject to arbitration; such is not, however, always the case.3 One must view each case on its facts. Here, that Pilot entered into a criminal enforcement agreement with federal authorities does not per se prove fraud; a legitimate business reason may exist for entering into such an agreement, one of which is the cost of litigation and defense of the criminal matter.
Certainly, Pilot has a right to explain its actions, and that can be done fully in arbitration in lieu of in court. See Osborn v. Ergon Marine & Industrial Supply, Inc., 12–0183 (La.4/13/12), 85 So.3d 687.
In any event, in the case at bar, the trial court was manifestly erroneous and abused its discretion in overturning the arbitration agreement, making a factual determination without testimonial evidence save the written pleadings, memoranda of counsel, and attachments thereto; that is, no evidence save attachments to pleadings and memoranda was “heard” by the trial court.
I note the absence of counsel suggesting that a full evidentiary hearing is or was necessary with testimonial evidence. Apparently, both Star and Pilot were satisfied with the record such as it existed in the trial court and no further evidence was warranted. A remand for such a hearing causes needless delay and expense, will result in substantial discovery on what and when Pilot knew or should have known about the federal investigation into their business practices on the date that the promissory note was executed, and whether, in the course of a business relationship between multi-million dollar companies, Pilot had a duty to disclose fully details of any investigation to Star before Star signed the note. That is, if Pilot knew the federal authorities were “poking around,” they had no duty to disclose anything until such time as a reasonable person would or should know that it was more likely than not that they were in trouble and potentially subject to criminal liability and such was relevant to Star's continuing to purchase fuel from Pilot.
II.
Second, unlike my colleagues, I find merit to Pilot's argument that the case should be dismissed for forum non conveniens pursuant to La. C.C.P. art. 123. As the record (specifically, the plaintiff's petition) before us reflects, Star is an Illinois corporation not qualified to do business in Louisiana. Their connection to Louisiana is tenuous at best. That is, from time-to-time their motor vehicles pass through Louisiana, and they may purchase fuel4 in this state while doing so. To me, that does not mean Star has any connection to Louisiana for purposes of a forum in Orleans Parish (where neither of the Pilot entities markets fuel or has an office) for their claims against Pilot any more than one would say that I have a connection to Mississippi because I drive through that state on an infrequent basis going between New Orleans and Mobile, Alabama, and may periodically buy gasoline or a meal in Mississippi while doing so.Additionally, although the Pilot defendants are qualified to do business in Louisiana, neither of them are Louisiana entities (corporation or limited liability company). Pilot Corporation is a Tennessee corporation with its Louisiana registered office now in Baton Rouge. Pilot Travel Centers LLC is a Delaware limited liability company with its principal business office in Knoxville, Tennessee, and its Louisiana registered office now in Baton Rouge. The claim asserted by Star relates to alleged overcharging for fuel by Pilot over several years in multiple jurisdictions.
It is indeed puzzling that Star would not have filed its claim in United States District Court for Illinois, Tennessee, or Delaware. It is readily apparent that had Star filed its suit in a Louisiana federal district court, the Louisiana-based federal court would in an instance transfer the case to another federal court in a more convenient forum such as Illinois or Tennessee.
Star asserts in its brief in opposition to Pilot's writ application that the reasons that they chose New Orleans as the venue for this suit was that (a) they thought it was a “fair and neutral forum;” (b) another victim of the “fraud” who did business in Orleans Parish filed suit in Orleans Parish to which Pilot did not object to the venue, and settled the suit; (c) Pilot did not file suit on the promissory note and did not file a reconventional demand; (d) they could not obtain a fair trial in Tennessee where Pilot is based and is the largest privately held company in that state (and seventh largest privately held corporation in the United States), employing 20,000 Tennessee residents and partially owned by the Tennessee governor; (e) evidence is in electronic form; (f) Star “believes” [but does not know] that evidence is located throughout the United Stated; (g) Star has hired Harold Asher, a forensic CPA based in Orleans Parish, as an expert witness; and (h) two other witnesses are located outside of Tennessee (in Iowa and Texas) who would not be inconvenienced by Louisiana as a forum. (Harold Asher is the only known witnesses in Louisiana; no known evidence is in Louisiana and whatever is here, if any, is minimal at best.) And notwithstanding those assertions in brief, Star's counsel openly admitted in oral argument before us when questioned that he chose Louisiana as the venue because it was convenient to him; he did not allude to any of the reasons asserted in the brief. La. C.C.P. art. 123 A references convenience to parties and witnesses, not the parties' counsel.
If a plaintiff's hiring of an expert witness to help you with its case is a rational reason to create a forum, please save me. That means that anyone could hire an expert in their local venue and bootstrap their way into creating a forum locally. Such sounds improper, even ludicrous.
In sum, to burden Louisiana courts with the dispute between the relators and the respondent smacks of putting an unnecessary burden on the Louisiana judicial system.
I respectfully dissent from the majority decision not to order the trial court to transfer this case to a more appropriate forum.
III.
Finally, I concur in the majority's decision to reverse the trial court's ruling on Star's motion in limine to strike the promissory note from the proceedings and in dismissal of Pilot's appeal.
Excluding the promissory note from evidence was interlocutory and would create unnecessary problems for the parties and their counsel; it would not only increase the cost of the litigation, but also ultimately results in judicial inefficiency. One must remember that only the enforcement of the provisions of the promissory note is at issue.
At oral argument, counsel alluded to the promissory note being attached to a reconventional demand by Pilot filed after the issues before us joined. However, that reconventional demand, if it exists, is not part of the record before us and cannot be considered.
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IV.
Accordingly, I would grant Pilot's motion to dismiss for forum non conveniens and vacate the trial court's ruling on the enforceability of the arbitration clause and striking the promissory note from evidence. If forum non conveniens is not granted, then I would send this matter to arbitration forthwith and grant the stay pending arbitration as requested by Pilot. I find no need for a further evidentiary hearing on any issue.