John Smart v. Sunshine Potato ( 2002 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 01-3132
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John Smart; Sota Foods, Inc., *
d/b/a King of Potatoes; John *
Smart & Associates, Inc., *
*
Plaintiffs - Appellants, * Appeal from the United States
* District Court for the
v. * District of North Dakota.
*
Sunshine Potato Flakes, L.L.C., *
*
Defendant - Appellee. *
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Submitted: June 11, 2002
Filed: October 7, 2002
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Before WOLLMAN, RICHARD S. ARNOLD, and LOKEN, Circuit Judges.
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LOKEN, Circuit Judge.
John Smart and two companies he controls (collectively, “Smart”) filed this
diversity action in the District of North Dakota against Sunshine Potato Flakes,
L.L.C. (“Sunshine”). The district court granted Sunshine’s motion to compel
arbitration and stayed the action. We dismissed Smart’s appeal of this interlocutory
order for lack of jurisdiction, as required by Section 16(b) of the Federal Arbitration
Act, 9 U.S.C. § 16(b). Smart v. Sunshine Potato Flakes, L.L.C., No. 00-2656 (8th
Cir. May 22, 2001). The dispute was then arbitrated in New Mexico, and the
arbitrator awarded Sunshine $688,530. Upon motion by Sunshine, the district court1
lifted its prior stay and confirmed the award. Smart appeals, arguing the court erred
in exercising jurisdiction over Sunshine’s motion to confirm. We affirm.
The district court initially had diversity jurisdiction over this action. After it
entered a stay pending arbitration under 9 U.S.C. § 3, the court had the further power
to confirm any ensuing arbitration award. Cortez Byrd Chips, Inc. v. Bill Harbert
Constr. Co., 529 U.S. 193, 202 (2000). Sunshine timely filed its motion to lift the
stay and confirm the award less than four months after the arbitrator’s decision. See
9 U.S.C. § 9. Smart does not appeal the merits of the arbitration award. Rather, he
raises two issues arising from the unusual procedural path the parties followed after
the arbitrator published his award.
Initially, Smart filed an action in a North Dakota state court to vacate the
arbitration award pursuant to North Dakota’s version of the Uniform Arbitration Act.
See N.D.C.C. § 32-29.2-12. Sunshine improperly removed this action to the United
States District Court for the District of New Mexico and filed a motion to confirm the
arbitration award under the Federal Arbitration Act. The District of New Mexico
rejected Sunshine’s motion to confirm because it failed to allege diversity jurisdiction
and remanded the case back to state court.2 Rebuffed by the federal court in New
Mexico, Sunshine then moved the district court to lift its stay and confirm the
arbitration award. Smart’s response included a motion to vacate the award, but he
1
The HONORABLE RICHARD W. GOLDBERG, Judge of the United States
Court of International Trade, sitting by designation.
2
The Federal Arbitration Act does not provide a basis for federal question
jurisdiction. See Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S.
1, 25 n.32 (1982). Arguably, the New Mexico court only had power to dismiss, not
remand to a North Dakota state court, but that question does not concern us.
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later withdrew this motion and relied exclusively on his procedural objections to the
district court’s jurisdiction.
Smart first argues that the doctrine of election of remedies bars Sunshine from
bringing its motion to confirm in the district court after unsuccessfully attempting to
remove Smart’s state court action to the federal court in New Mexico. Focusing on
the venue issue, Smart argues that Sunshine should not be permitted to “have [its]
cake and eat it too,” quoting a phrase from our opinion in PVI, Inc. v. Ratiopharm
GmbH, 253 F.3d 320, 327 (8th Cir. 2001) (quotation omitted), where we discussed
(but refused to apply) the doctrines of estoppel and election of remedies in an
unrelated context. The election of remedies doctrine bars the pursuit of inconsistent
claims for relief and prevents double recovery for a single injury. See Kansas State
Bank in Holton v. Citizens Bank of Windsor, 737 F.2d 1490, 1498-99 (8th Cir. 1984).
The doctrine “is harsh and not favored by the courts.” Lear v. Equitable Life
Assurance Soc’y of the U.S., 798 F.2d 1128, 1134 (8th Cir. 1986).
In this case, Sunshine had three options for seeking an alternative venue when
Smart moved to vacate the award in state court. Sunshine could have filed a motion
to confirm the award in the District of New Mexico, where the arbitration took place.
It did file such a motion but was rejected by that forum for failing to plead diversity
jurisdiction. Alternatively, Sunshine could have removed Smart’s action to the North
Dakota district court, which it did not do. Third, Sunshine could request that the
North Dakota federal court lift its prior stay in this case and confirm the award.
Smart cites no authority for the proposition that the doctrines of preclusion, estoppel,
or election of remedies bar a party from sequentially pursuing alternative venues that
may be available. We conclude these doctrines do not apply. Rather, the statutory
time limits on filing lawsuits, seeking judicial review of arbitration awards, and
exercising one’s right of removal protect the courts and litigants from an excessively
protracted search for alternative venues.
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Second, Smart argues that the district court should have declined to exercise
its jurisdiction and deferred to the pending state court action “under the so-called
‘first-filed’ rule.” But “first filed” is not a “rule.” It is a factor that typically
determines, “in the absence of compelling circumstances,” which of two concurrent
federal court actions should proceed to judgment. U.S. Fire Ins. Co. v. Goodyear Tire
& Rubber Co., 920 F.2d 487, 488 (8th Cir. 1990) (quotation omitted). The first-filed
factor is often dominant in determining which federal court should proceed when the
parties to an arbitration award have filed cross motions to vacate and confirm the
award in different district courts. See Cortez Byrd Chips, 529 U.S. at 198. However,
when the issue is whether a federal court should defer to a pending suit in state court,
as in this case, the order in which jurisdiction was obtained, while still a relevant
factor in applying the abstention doctrine, is far less apt to be determinative because
of the federal court’s “virtually unflagging obligation” to exercise its jurisdiction.
Colo. River Water Conservation Dist. v. United States, 424 U.S. 800, 817-18 (1976);
see Moses H. Cone, 460 U.S. at 21-23.
In this case, we need not consider how to apply the abstention doctrine when
one party to an arbitration moves to vacate the award in state court, and the other
party then files a motion to confirm the award under the Federal Arbitration Act in
federal court. Here, Smart’s state court action was not the first-filed. This action in
federal court -- initially filed by Smart -- was first-filed, and the district court had
previously exercised its authority under the Federal Arbitration Act to stay the action
and compel arbitration. Moreover, no duplication of judicial effort occurred when the
district court proceeded to exercise its continuing jurisdiction because the North
Dakota state court took no action while the New Mexico and North Dakota federal
courts decided the issues presented to them. See Federated Rural Elec. Ins. Corp. v.
Ark. Elec. Coops., Inc., 48 F.3d 294, 298-99 (8th Cir. 1995). Smart suggests that
Sunshine is attempting an improper “end run” around its failure to remove the state
court action to federal court. But the Supreme Court has rejected the contention “that
the decision of a party to spurn removal and bring a separate suit in federal court
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invariably warrants the stay or dismissal of the suit under the Colorado River
doctrine.” Gulfstream Aerospace Corp. v. Mayacamas Corp., 485 U.S. 271, 290
(1988). In these circumstances, the district court did not abuse its discretion in
exercising its jurisdiction to lift the stay and confirm the award. See U.S. Fire, 920
F.2d at 489 (standard of review).
The judgment of the district court is affirmed.
A true copy.
Attest:
CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.
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