3M Company v. Amtex Security, Inc. ( 2008 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 07-3519
___________
*
3M Company, *
*
Plaintiff - Appellee, *
* Appeal from the United States
v. * District Court for the
* District of Minnesota.
Amtex Security, Inc., doing *
business as Amtex Global Services, *
*
Defendant - Appellant. *
*
___________
Submitted: June 11, 2008
Filed: September 16, 2008
___________
Before MURPHY, BYE, and SHEPHERD, Circuit Judges.
___________
MURPHY, Circuit Judge.
3M Company (3M) brought this matter to compel arbitration with Amtex
Securities, Inc. (Amtex) of Amtex's claims in the Southern District of Texas for breach
of contract, tortious interference, fraudulent inducement, unjust enrichment, and
breach of the duties of good faith and fair dealing. The district court1 granted the
motion to compel, and Amtex appeals. We affirm.
I.
In 2005 3M sought proposals from vendors to serve as the integrated service
provider for 3M's production plant in Greenville, South Carolina. The integrated
service provider was to ensure efficient operation of the plant by providing various
administrative, technical, and professional services. Amtex offered a proposal which
3M accepted.
3M and Amtex entered into two agreements on February 13, 2006. The master
agreement covered general terms of the parties' relationship such as confidentiality,
indemnification, and responsibility for paying taxes and obtaining permits. A separate
subagreement detailed the duration, scope of services, and contract price for services
at the Greenberg plant. The subagreement also permitted 3M to contract with Amtex
for services at other facilities without modifying the master agreement. Both
agreements are governed by South Carolina law, and only the subagreement has an
arbitration clause.
The scope of services provision in the subagreement indicated that Amtex's
duties would include records management, pest control, ordering and delivery of items
necessary to operate the plant, repairs and maintenance, general construction
contracting, electrical installations, painting services, and equipment rental. The fixed
contract price in the subagreement for 2006 was $7,128,224, an amount calculated to
include a premium above Amtex's expected costs.
1
The Honorable Paul A. Magnuson, United States District Judge for the District
of Minnesota.
-2-
The subagreement called for quarterly reviews of Amtex's actual costs to
determine if they fell outside upper or lower control limits. If they fell outside of
either, the parties would "jointly investigate and determine the cause of the variation."
A variation within Amtex's control required no action. On the other hand, variations
caused by a change in production output, equipment additions, or changes to
equipment or processes at the plant were to be treated as changes to the original scope
of services. In those circumstances the parties were to issue a "change order
amendment" to the subagreement calling for a one time lump sum payment to Amtex
or credit to 3M to reflect the actual cost increase or decrease of the change.
The subagreement includes an arbitration clause in Article 4D. This clause
requires arbitration in St. Paul, Minnesota if the parties cannot agree on "any of the
following: a) whether a variation has occurred; b) the cause of any variation; or c) the
value of a change order amendment." A "change order amendment" is defined as an
amount which reflects "the actual cost increase or decrease of the Change(s)," and
"Changes" are defined very broadly as "changes within the original scope of
Services." The parties thus agreed to arbitrate any dispute regarding the existence,
cause, or value of any change to the scope of services Amtex was to provide. The
master agreement also includes a disputes provision ("general disputes clause"),
Article 17, which does not require arbitration but instead gives each party the right to
pursue "any legal remedy" for "any claim arising out of or attributable to the
interpretation of the agreement." The parties agreed that whenever the two agreements
conflicted or addressed the same topic, the subagreement would take precedence over
the master agreement.
Almost immediately after entering into the agreements, the parties began to
disagree about the scope of services Amtex was required to provide. During 2006 the
parties mutually agreed to eliminate various items from the scope of Amtex's services,
reducing the contract price to $5,882,838. While 3M paid Amtex $5,350,704 of the
reduced contract price from February through November 2006, Amtex paid its
-3-
vendors only $3,802,599. The difference of $1,548,105 in Amtex's favor meant that
Amtex had received far in excess of a premium over its costs for that period.
Amtex stopped paying its vendors because it believed that 3M had forced it to
perform services outside the scope outlined in the subagreement and that it was
entitled to, but had not received, an increase in the contract price. 3M disagreed, and
the parties terminated the master agreement and subagreement effective December 31,
2006. At that time Amtex still held unpaid vendor invoices of approximately $1.2
million.
Amtex sent a letter to 3M on March 2, 2007, demanding $1,650,000 in quantum
meruit or in the alternative $1,102,896 as an "equitable adjustment under Article 4 of
the [subagreement]" for causing a variation in Amtex's costs. 3M responded by
accusing Amtex of misappropriation. Amtex filed a complaint in Texas state court on
March 30, 2007, alleging unjust enrichment, breach of contract, breach of the duties
of good faith and fair dealing, and tortious interference with contract; the complaint
sought only compensatory damages. 3M removed the matter to federal court in the
Southern District of Texas based on diversity jurisdiction.
3M filed a demand for arbitration with the American Arbitration Association
(AAA) in July 2007 and then a motion to compel arbitration in the federal district
court in Minnesota. It requested arbitration in St. Paul under § 4 of the Federal
Arbitration Act, 9 U.S.C. §§ 1-16, seeking $1.2 million from Amtex or an order
requiring it to pay its subcontractors. In its motion papers in the district court, 3M
argued that Amtex's demand for an equitable adjustment of the contract price under
Article 4 of the subagreement relates to a variation and therefore falls within the scope
of that agreement's arbitration clause.
Shortly after 3M demanded arbitration Amtex amended its complaint in the
Southern District of Texas on August 1, 2007, to include claims for fraud, tortious
-4-
interference, and violations of the South Carolina Unfair Trade Practices Act,
requesting consequential and punitive damages and attorney fees in addition to the
compensatory damages sought in its original filing. 3M moved under 9 U.S.C. § 3that the district court in Texas stay proceedings on Amtex's amended complaint until
the district court in Minnesota ruled on its motion to compel arbitration. The district
court in Texas granted the stay.
3M's memorandum of law in support of its motion for arbitration contended that
the new allegations in Amtex's amended complaint "have no basis" and were added
"for the sole purpose of attempting to defeat 3M's motion to compel arbitration." 3M
asserted that despite Amtex's characterization of its claims, underlying all of them was
its desire to recoup $1.2 million in additional compensation because it believed its
costs of operating the plant had been increased due to actions taken by 3M. This type
of dispute falls within the scope of the parties' arbitration clause said 3M. Amtex
responded that the arbitration clause had a narrow scope which did not encompass the
allegations in its amended complaint and that it therefore could pursue "any legal
remedy" for its claims under the general disputes clause in the master agreement. It
also contended that the parties could not be compelled to arbitrate because quarterly
reviews of Amtex's costs were a condition precedent to arbitration and they had not
been conducted.
The district court in Minnesota entered an order in September 2007 granting
3M's motion to compel arbitration. The court referenced the presumption in favor of
arbitration and concluded that "3M has established that disputes between it and Amtex
fall within the parties' arbitration agreement" because "regardless of how the parties
characterize their claims, they are variations or changes to what was spent in
furtherance of the contract." Amtex appeals, arguing that the district court erred by
concluding that an arbitrator would have jurisdiction over its claims because the
arbitration clause has too narrow a scope to cover them. While disagreeing with that
-5-
interpretation of their contract, 3M also argues that the district court order was a
nonfinal interlocutory order over which we have no jurisdiction.
II.
Appellate jurisdiction generally is limited to final decisions, 28 U.S.C. § 1291,
and 9 U.S.C. § 16(a)(3) gives parties the right to appeal "a final decision with respect
to an arbitration," which "ends the litigation on the merits and leaves nothing more for
the court to do but execute the judgment," Green Tree Fin. Corp.–Alabama v.
Randolph, 531 U.S. 79, 86 (2000) (citations omitted).
3M argues that the Minnesota order to compel and the order to stay proceedings
in Amtex's case in the Southern District of Texas must be considered together for
purposes of finality. It points out that litigation of the merits is not ended when a
court orders parties to arbitrate certain matters while others are stayed. See Green
Tree, 531 U.S. at 87 n.2 (order compelling arbitration and dismissing remaining
claims was final appealable order but "[h]ad the district court entered a stay instead
of a dismissal . . . , that order would not be appealable"); Manion v. Nagin, 255 F.3d
535, 540 (8th Cir. 2001) (interlocutory order directing arbitration and staying action
generally not appealable). Amtex responds that the district court's order to compel is
final because when a motion to compel arbitration is the only matter before the court,
an order granting the motion "is deemed to dispose of the entire case, and permit
appellate review under 9 U.S.C. § 16(a)(3)." Prudential Ins. Co. of Am. v. Lai, 42
F.3d 1299, 1302 (9th Cir. 1994).
We agree with the position taken by Amtex and circuit courts which have
concluded that when a motion to compel arbitration and a motion for a stay are
brought separately, they should be treated individually and the resulting order
compelling arbitration is final and appealable. Prudential, 42 F.3d at 1302; S + L +
H S.p.A. v. Miller-St. Nazianz, Inc., 988 F.2d 1518, 1522-23 (7th Cir. 1993) (order
-6-
compelling arbitration held to be final and appealable because it originated in separate
matter from case with motion to stay, even though cases were before same district
court judge who held a joint hearing on the motions and issued one opinion dealing
with both motions); but cf. CitiFinancial Corp. v. Harrison, 453 F.3d 245, 251 (5th
Cir. 2006) (orders to compel arbitration and for stay issued by two judges sitting
within the same federal district were reviewed together by the Fifth Circuit since
"[j]urisdiction is lodged in a court, not in a person").
Here, 3M's motion to compel and Amtex's amended complaint were brought in
two separate actions in different district courts not located within the same circuit.
Neither party tried to join or transfer the cases. See S + L + H, 988 F.2d at 1522-23;
McDermott Int'l, Inc. v. Underwriters at Lloyds, 981 F.2d 744, 747 (5th Cir. 1993)
(cases consolidated under § 42(a) became "single judicial unit," thus order compelling
arbitration and staying other proceedings was not final); Middleby Corp. v. Hussmann
Corp., 962 F.2d 614, 615 (7th Cir. 1992) (district court confirmation of arbitrator's
award without resolving stayed matters was not appealable because judge had
consolidated the two actions for all purposes). No single circuit court would have
appellate jurisdiction over orders issuing from the individual districts in which Amtex
and 3M have filed. See 28 U.S.C. § 1294(1) (appeals must be taken from district
court to the court of appeals for the circuit embracing the district); McGeorge v.
Continental Airlines, Inc., 871 F.2d 952, 954 (10th Cir. 1989) (no jurisdiction over
appeal from decision of district court not within territory of circuit). We conclude that
we do have jurisdiction over the Minnesota district court's order to compel arbitration
since it disposes of the only matter brought before that court.
III.
We review de novo a district court's grant of a motion to compel arbitration
under 9 U.S.C. § 4. See Faber v. Menard, Inc., 367 F.3d 1048, 1051 (8th Cir. 2004).
A court must grant a motion to compel arbitration if a valid arbitration clause exists
-7-
which encompasses the dispute between the parties. 9 U.S.C. § 4; MedCam, Inc. v.
MCNC, 414 F.3d 972, 974 (8th Cir. 2005). The parties do not dispute that Article 4D
of the subagreement is a valid arbitration clause; their disagreement centers on
whether Amtex's claims fall within its scope.
Amtex urges us to conclude that the district court erred in compelling
arbitration because the arbitration clause has a very narrow scope which applies only
to disputes arising from the quarterly review process or from written changes to the
scope of services. Since its claims are all "premised upon breaches of contract" it
says, they are not covered by Article 4D. 3M responds that their arbitration clause is
broad, encompassing "all disputes regarding monies allegedly owed to [Amtex] in
connection with its work at the Greenville Plant" and that all of Amtex's claims come
within the scope of Article 4D.
Unless the parties provide otherwise, the court rather than the arbitrator will
determine whether a particular dispute falls within the scope of the clause.
McLaughlin Gormley King Co. v. Terminix Int’l Co., L.P., 105 F.3d 1192, 1993-94
(8th Cir. 1997). In conducting an inquiry into whether claims come within the
arbitration clause, the district court does not reach the potential merits of any claim
but construes the clause liberally, resolving any doubts in favor of arbitration and
granting the motion "unless it may be said with positive assurance that the arbitration
clause is not susceptible of an interpretation that covers the asserted dispute."
MedCam, 414 F.3d at 974-75.
Article 4D of the subagreement mandates arbitration "[i]n the event [the parties]
cannot agree on any of the following: a) whether a variation has occurred; b) the cause
of any variation; or c) the value of a change order amendment." While the clause is
not as extensive as clauses which require arbitration of "any" or "all" disputes, the
parties' definitions of terms such as "change" and "change order amendment" indicate
that they agreed to arbitrate a very broad range of disputes regarding the existence,
-8-
cause, or value of any change to the scope of services Amtex agreed to provide at the
plant.
Although a party may not be compelled to arbitrate a dispute unless it has
agreed to do so, the "liberal federal policy favoring arbitration agreements," Moses H.
Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983), requires that a
district court send a claim to arbitration when presented with a broad arbitration clause
like the one here as long as the underlying factual allegations simply “touch matters
covered by” the arbitration provision, Mitsubishi Motors Corp. v. Soler Chrysler-
Plymouth, Inc., 473 U.S. 614, 625 n.13 (1985); see also Kiefer Specialty Flooring,
Inc. v. Tarkett, Inc., 174 F.3d 907, 910 (7th Cir. 1999) (claim came within scope of
broad arbitration provision because significant relationship existed between plaintiff's
claim and the arbitration provision).
Every claim in Amtex's original complaint fell squarely within the scope of the
arbitration clause, but Amtex amended its complaint shortly after 3M demanded
arbitration to include claims such as fraudulent inducement and a request for punitive
damages.2 Our task is to look past the labels the parties attach to their claims to the
underlying factual allegations and determine whether they fall within the scope of the
arbitration clause. Each of the nine claims in Amtex's amended complaint includes
factual allegations regarding the scope of services, the costs incurred by Amtex in
providing those services, its right to receive an equitable adjustment for changes to the
scope of services, or 3M's alleged withholding of payments for services. Given the
broad scope of the arbitration clause and our "insist[ence] upon clarity before
concluding that the parties did not want to arbitrate a related matter," First Options
of Chicago, Inc. v. Kaplan, 514 U.S. 938, 945 (1995), we conclude that it cannot be
said with positive assurance that the arbitration clause is not susceptible of an
2
3M argues that Amtex amended its complaint in an attempt to plead its way out
of arbitration, but at this point we will not second guess Amtex's motivation in filing
its amended complaint or touch on the merits of any of its claims.
-9-
interpretation that covers Amtex's claims. The district court therefore did not err by
granting 3M's motion to compel arbitration. When the parties have agreed on an
arbitration clause that appears to cover their dispute, it should be upheld. See Volt
Info. Sciences, Inc. v. Bd. of Trustees of Leland Stanford Junior Univ., 489 U.S. 468,
479 (1989).
Amtex also argues that the district court erred in granting the motion to compel
because the quarterly expense reviews were a condition precedent to arbitration and
were never conducted. That is a matter of procedural arbitrability, however, which
is decided by the arbitrator. See, e.g., Int'l Ass'n of Bridge, Structural, Ornamental &
Reinforcing Ironworkers, Shopman's Local 493, 359 F.3d 954, 956 (8th Cir. 2004).
This argument does not undermine the district court's decision.
If any party should be dissatisfied with the result of an arbitration, the Federal
Arbitration Act itself provides avenues for relief. A disgruntled party may move to
vacate, modify, or correct an arbitration award. 9 U.S.C. § 10 (vacate); 9 U.S.C. § 11(modify or correct). If a party believes that the arbitrator exceeded the powers granted
by the arbitration agreement, it may go back to the district court and request that it
vacate the arbitration award. 9 U.S.C. § 10(a)(4); see Schoch v. InfoUSA, Inc., 341
F.3d 785, 788 (8th Cir. 2003). On the other hand a satisfied party may move to
confirm the award under 9 U.S.C. § 9.
In conclusion we affirm the order of the district court.
______________________________
-10-