Tempe Hospitality Ventures, LLC v. Highgate Hotels, Lp ( 2023 )

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS DEC 18 2023
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
TEMPE HOSPITALITY VENTURES, LLC, No. 22-16330
an Arizona limited liability company,
D.C. No. 2:22-cv-00647-SPL
Plaintiff-Appellant,
v. MEMORANDUM*
HIGHGATE HOTELS, LP, a Delaware
limited partnership,
Defendant-Appellee.
Appeal from the United States District Court
for the District of Arizona
Steven Paul Logan, District Judge, Presiding
Submitted October 16, 2023**
Submission Vacated October 18, 2023
Resubmitted December 18, 2023
Phoenix, Arizona
Before: IKUTA, BADE, and BRESS, Circuit Judges.
Concurrence by Judge BRESS.
Plaintiff-Appellant Tempe Hospitality Ventures, LLC appeals the district
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
court’s order compelling it to arbitrate its claims against Defendant-Appellee
Highgate Hotels, LP. We issued a limited remand so the district court could
ascertain its jurisdiction, and that court concluded it had jurisdiction under 28
U.S.C. § 1332. We have jurisdiction under 9 U.S.C. § 16(a)(3), and we affirm.
1. The Hotel Management Agreement’s (HMA) adoption of the American
Arbitration Association’s commercial arbitration rules constitutes clear and
unmistakable evidence that the parties intended to delegate threshold questions of
arbitrability to an arbitrator. See Brennan v. Opus Bank, 796 F.3d 1125, 1130 (9th
Cir. 2015). The district court properly concluded that an arbitrator must decide
whether Tempe Hospitality’s claims are within the scope of the HMA’s arbitration
clause. See, e.g., Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S. Ct. 524,
527 (2019) (stating that parties may “agree by contract that an arbitrator, rather
than a court, will resolve threshold arbitrability questions as well as underlying
merits disputes”).
2. The carve-out provision in section 23.3.7 of the HMA does not negate the
parties’ clear and unmistakable delegation of arbitrability questions to an arbitrator.
Whether section 23.3.7 permits Tempe Hospitality to litigate in the district court its
claim seeking declaratory relief is a delegable question of arbitrability because
“when a tribunal decides that a claim falls within the scope of a carve-out
provision, it necessarily decides arbitrability.” Oracle Am., Inc. v. Myriad Grp.
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A.G., 724 F.3d 1069, 1076 (9th Cir. 2013). Because the parties clearly and
unmistakably delegated arbitrability questions, an arbitrator must decide whether
the declaratory relief claim is exempt from arbitration under section 23.3.7. The
district court correctly concluded that the language in section 23.3.7 does not
nullify the delegation of threshold arbitrability questions. Moreover, because the
claim seeking declaratory relief challenges the enforceability of the HMA’s fees
provision rather than the enforceability of the delegation provision, the claim is not
exempt from arbitration. See Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S. 63, 72
(2010) (stating that a court must enforce an arbitration agreement containing a
delegation provision unless a party “challenged the delegation provision
specifically”).
AFFIRMED.
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FILED
DEC 18 2023
Tempe Hospitality v. Highgate Hotels, No. 22-16330
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
BRESS, Circuit Judge, concurring in the judgment:
The parties’ Hotel Management Agreement (HMA) adopted the American
Arbitration Association’s (AAA) commercial arbitration rules. I agree with the
majority that, standing alone, this would constitute “clear and unmistakable
evidence” that the parties intended to delegate threshold questions of arbitrability to
an arbitrator. See Brennan v. Opus Bank, 796 F.3d 1125, 1130 (9th Cir. 2015). If
that were the only question, this would be a very easy case under our precedents.
But the HMA also contains a provision, Section 23.3.7, which states that “the Parties
shall have the right to commence litigation or other legal proceedings with respect
to any Claims solely relating to . . . enforcement of the dispute resolution provisions
of this Agreement.” Tempe Hospitality Ventures argues that this provision allows it
to challenge the enforceability of the arbitration clause in court. In Tempe’s view,
the arbitration clause is unconscionable, and Section 23.3.7 evinces the parties’
intent to allow a court to decide whether the arbitration clause is enforceable.
The majority concludes that the meaning of Section 23.3.7 is a matter for the
arbitrator because “when a tribunal decides that a claim falls within the scope of a
carve-out provision, it necessarily decides arbitrability.” Oracle Am., Inc. v. Myriad
Grp. A.G., 724 F.3d 1069, 1076 (9th Cir. 2013). The appellee here did not invoke
Oracle in this way, and the majority’s reliance on the case is not correct.
1
Oracle involved an arbitration clause that incorporated commercial arbitration
rules, like those of the AAA, which direct that questions of arbitrability are to be
decided by the arbitrator. Id. at 1071, 1073. But the arbitration clause there also
contained a “carve-out” providing that certain types of claims could be brought in
court. Id. at 1071. Oracle argued that the carve-out expressed the parties’ intent that
a court would decide arbitrability. Id. at 1075. We disagreed because “Oracle’s
argument conflates the scope of the arbitration clause, i.e., which claims fall within
the carve-out provision, with the question of who decides arbitrability.” Id. at 1076(emphasis in original).
The majority here appears to conclude that because the HMA has an
arbitration provision that incorporates the AAA rules, the parties have necessarily
evinced a clear and unmistakable intent to delegate questions of arbitrability to the
arbitrator, who can then decide if a carve-out (Section 23.3.7) disallows the
arbitration of Tempe’s unconscionability argument. But a provision that could be
described as “carve-out” does not inescapably go to the scope of the arbitration
clause. We reached that conclusion in Oracle only after interpreting the disputed
carve-out and concluding that it was simply a limit on what claims could be
arbitrated, not a limit on arbitrators deciding arbitrability. See 724 F.3d at 1076.
Here, Tempe effectively argues that the parties incorporated the AAA rules
(and their delegation of arbitrability to the arbitrator) but also adopted a warring
2
provision in Section 23.3.7 that directs courts to decide the enforceability of the
dispute resolution provisions. If that were true, there likely would not be the required
“clear and unmistakable evidence” that the parties intended to delegate questions of
arbitrability to the arbitrator. So to decide whether there is, in fact, clear and
unmistakable evidence of an agreement to arbitrate, we need to interpret Section
23.3.7 ourselves, as the district court below did.
That is what we did in Oracle itself. There, we did not walk away from the
carve-out just because it was a carve-out, but rather explained why the carve-out
was—in that case—merely a limit on the scope of arbitrable claims and not reflective
of any agreement that a court could decide threshold issues of arbitrability. In other
words, it is not enough to describe Section 23.3.7 as a carve-out from the arbitration
clause when Tempe is arguing that this provision specifically directs a court to decide
if the agreement to arbitrate is enforceable. 1
Turning to the meaning of Section 23.3.7, I conclude, like the district court,
that Tempe’s interpretation is incorrect. Section 23.3.7 does not allow courts to
decide the “enforceability” of the HMA’s dispute resolution mechanisms. It instead
1
At one point, the majority states that “[t]he district court correctly concluded
that the language in section 23.3.7 does not nullify the delegation of threshold
arbitrability questions.” But the district court did what I am doing and what the
majority elsewhere indicates should not be done: interpret the meaning of Section
23.3.7. The majority cannot say both that the meaning of Section 23.3.7 is for the
arbitrator and that the district court correctly interpreted it.
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states in relevant part that the parties may litigate in court with respect to
“enforcement of the dispute resolution provisions of this Agreement.” Enforcement
does not mean enforceability. Instead, “enforcement” means “[t]he act or process of
compelling compliance with a[n] . . . agreement.” Enforcement, Black’s Law
Dictionary (11th ed. 2019). Thus, under Section 23.3.7 a party could go to court to
compel arbitration. But that does not mean a court can decide the enforceability of
the arbitration clause itself.
Because Tempe is wrong about the meaning of Section 23.3.7, what we are
left with is the HMA’s adoption of the AAA rules. Under our case law, incorporation
of those rules is clear and unmistakable evidence of an intent to delegate questions
of arbitrability (like Tempe’s unconscionability argument) to the arbitrator. See
Brennan, 796 F.3d at 1130. And Tempe raises no specific unconscionability
argument as to this delegation provision itself. See Rent-A-Center, W., Inc. v.
Jackson, 561 U.S. 63, 71–72 (2010).
For these reasons, the district court properly ordered that the parties’ dispute
proceed in arbitration.
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