Lodgeworks, L.P. v. C.F. Jordan Construction, LLC

FILED
United States Court of Appeals
UNITED STATES COURT OF APPEALS Tenth Circuit
FOR THE TENTH CIRCUIT December 20, 2012
Elisabeth A. Shumaker
Clerk of Court
LODGEWORKS, L.P.,
Plaintiff-Appellee,
v. No. 12-3074
(D.C. No. 6:11-CV-01317-KHV-GLR)
C.F. JORDAN CONSTRUCTION, LLC, (D. Kan.)
Defendant-Appellant.
ORDER AND JUDGMENT*
Before KELLY, O’BRIEN, and MATHESON, Circuit Judges.
C.F. Jordan Construction, LLC (“Jordan”) appeals from the district court’s
grant of a preliminary injunction in favor of LodgeWorks, L.P. (“LodgeWorks”).
The district court enjoined Jordan from arbitrating in a forum other than Wichita,
Kansas and from seeking arbitration in Texas. Because it is predicated on an error of
law, we vacate the order granting a preliminary injunction.1
*
After examining the briefs and appellate record, this panel has determined
unanimously to grant the parties’ request for a decision on the briefs without oral
argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument. This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and collateral
estoppel. It may be cited, however, for its persuasive value consistent with
Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
1
Our jurisdiction derives from 28 U.S.C. § 1292(a)(1).
I. BACKGROUND
The relevant facts are not in dispute. Briefly, LodgeWorks contracted with
Jordan for the design and construction of a hotel in Austin, Texas. About ten months
after it was completed, the hotel had to be closed for five months for water
remediation, cleaning, and rebuilding of affected areas. LodgeWorks alleged the
water infiltration and resulting damages were due to Jordan’s design and construction
defects.
The parties’ contract included the following provisions:
39. Arbitration. All claims, disputes and other matters in question
arising out of, or relating to, this Agreement or the breach thereof, shall
be decided in Wichita, Kansas by arbitration in accordance with the
Construction Industry Arbitration Rules of the American Arbitration
Association then obtaining, unless the parties mutually agree otherwise.
This Agreement to arbitrate shall be specifically enforceable under the
prevailing arbitration law. The award rendered by the arbitrators shall
be final, and judgment may be entered upon it in accordance with
applicable law in any court having jurisdiction thereof.
....
42. Applicable Law. This Agreement shall be governed by and
construed under the laws of the State of Kansas (excluding conflict of
laws principles), unless otherwise required by the laws of the state in
which the Project is located or otherwise agreed in the Project
Addendum for a particular Project.
Aplt. App. at 38 (“Venue Clause” and “Choice-of-law Clause,” respectively).
LodgeWorks filed a demand for arbitration with the American Arbitration
Association (“AAA”) and requested the proceedings be held in Wichita, Kansas.
Jordan objected and filed suit in a Texas court to prevent arbitration in Kansas and
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the application of Kansas law.2 Jordan later dismissed the Texas lawsuit and filed an
arbitration demand with the AAA seeking arbitration in Texas. Jordan then requested
the AAA to consolidate the two arbitrations.
LodgeWorks filed the underlying action seeking a preliminary and permanent
injunction to prevent Jordan from arbitrating in a forum other than Wichita, Kansas
and from arbitrating in Texas under Texas law. Adopting the recommendation of a
magistrate judge, the district court concluded that LodgeWorks had met the requisite
four criteria and granted a preliminary injunction “enjoin[ing] [Jordan] from seeking
to conduct an arbitration hearing in a forum other than Wichita, Kansas or asking the
American Arbitration Association to hold a hearing on this dispute in Texas.”
Aplt. App. at 256. The district court did not, however, rule on the Choice-of-law
Clause, finding LodgeWorks did not attempt to “meet the requirements of a
preliminary injunction on the choice of law question.” Id. at 254 n. 8. On appeal
neither party quarrels about the Choice-of-law Clause, so we do not consider it.
Cf. Gray v. Univ. of Colo. Hosp. Auth., 672 F.3d 909, 915 (10th Cir. 2012) (holding
“[b]ecause plaintiffs have failed to contest in any meaningful way the district court’s
dismissal of their . . . claims, they have voluntarily foregone any right to further
adjudication of those claims”).
2
Jordan invoked a Texas statute it claimed allowed it to void the contract
language requiring arbitration. Jordan has abandoned this argument on appeal.
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II. PRELIMINARY INJUNCTION STANDARDS
The party seeking a preliminary injunction must demonstrate the following
four factors weigh in its favor: “(1) it is substantially likely to succeed on the merits;
(2) it will suffer irreparable injury if the injunction is denied; (3) its threatened injury
outweighs the injury the opposing party will suffer under the injunction; and (4) the
injunction would not be adverse to the public interest.” Beltronics USA, Inc. v.
Midwest Inventory Distribution, LLC, 562 F.3d 1067, 1070 (10th Cir. 2009).
III. DISCUSSION
Whether the contracting parties “are bound by a given arbitration clause raises
a question of arbitrability for a court to decide.” Howsam v. Dean Witter Reynolds,
Inc., 537 U.S. 79, 84 (2002) (internal quotation marks omitted). Here, the parties do
not dispute their disagreement is subject to arbitration under the broad arbitration
clause in their contract. Therefore, the question of arbitrability is not before us.
Rather, the question presented is whether venue selection is for the court or the
arbitrator to decide.
Once an arbitration provision has been resolved in favor of arbitration, “the
validity of the remainder of the contract . . . is for the arbitrator to decide.” Nitro-Lift
Techs., L.L.C. v. Howard, 133 S. Ct. 500, 503 (2012) (per curiam) (holding validity
of covenants not to compete was for arbitrator to decide). “Thus procedural
questions which grow out of the dispute and bear on its final disposition are
presumptively not for the judge, but for an arbitrator to decide.” Howsam, 537 U.S.
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at 84 (internal quotation marks omitted). Such procedural questions include
“whether prerequisites such as time limits, notice, laches, estoppel, and other
conditions precedent to an obligation to arbitrate have been met.” Id. (emphasis and
internal quotation marks omitted).
Although this circuit has not addressed whether arbitral venue is an issue for
the court or the arbitrator, other circuits have done so. The Second Circuit recently
held, after determining the dispute was arbitrable, “venue is a procedural issue that
[the] arbitrators should address in the first instance.” UBS Fin. Servs. v. W. Va. Univ.
Hosps., Inc., 660 F.3d 643, 655 (2d Cir. 2011). Similarly, the First Circuit held, “the
dispute between the parties is concededly arbitrable, [therefore] determining the
place of the arbitration is simply a procedural matter and hence for the arbitrator.”
Richard C. Young & Co. v. Leventhal, 389 F.3d 1, 5 (1st Cir. 2004); cf. Cent. W. Va.
Energy, Inc. v. Bayer Cropscience LP, 645 F.3d 267, 274 (4th Cir. 2011) (stating
dispute over which arbitration panel should decide issues was “far more akin to a
venue dispute than a question of arbitrability, and, as such, it [was] appropriate for
arbitral resolution”); Ridge at Red Hawk, L.L.C. v. Schneider, 493 F.3d 1174, 1178
& n.3 (10th Cir. 2007) (stating “the fact that an arbitration was held in an improper
venue does not call into question the merits of the award” and noting “venue is a
matter that goes to process rather than substantive rights—determining which among
various competent tribunals will decide the case” (internal quotation marks and
brackets omitted)).
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“[T]he relevant question here is what kind of arbitration proceeding the parties
agreed to. That question does not concern a state statute or judicial procedures. It
concerns contract interpretation and arbitration procedures. Arbitrators are well
situated to answer that question.” Green Tree Fin. Corp. v. Bazzle, 539 U.S. 452-53,
(2003) (plurality opinion) (citation omitted) (addressing “whether the contracts forbid
class arbitration”). “The arbitrators [will] presumably enforce the venue-selection
clause in precisely the same way that a court would.” McCullagh v. Dean Witter
Reynolds, Inc., 177 F.3d 1307, 1310 (11th Cir. 1999). Moreover, the arbitration
clause contains “sweeping language concerning the scope of the questions committed
to arbitration, [so] this matter of contract interpretation should be for the arbitrator,
not the courts, to decide.” Green Tree, 539 U.S. at 453.
The district court erred in holding LodgeWorks was substantially likely to
succeed on the merits of its claim that a court, not the arbitrators, would decide
venue. Having failed to meet the first criterion of a substantial likelihood of success,
LodgeWorks was not entitled to a preliminary injunction and the district court abused
its discretion in granting the injunction as to venue for arbitration.3
3
LodgeWorks had a heightened burden of showing the traditional four factors weigh
heavily and compellingly in its favor, a showing it did not make.
We review the grant of a preliminary injunction for an abuse of
discretion. A district court abuses its discretion if it commits an error of
law, or is clearly erroneous in its preliminary factual findings. Further,
because a preliminary injunction is an extraordinary remedy, the
movant’s right to relief must be clear and unequivocal. Three types of
preliminary injunctions are specifically disfavored: (1) preliminary
(continued)
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IV. CONCLUSION
Although the injunction, as written, is vacated, we presume neither party will
file additional lawsuits about venue. Claim preclusion “prevents the parties or their
privies from relitigating issues that were or could have been raised in an earlier
action.” Mitchell v. City of Moore, 218 F.3d 1190, 1202 (10th Cir. 2000) (internal
quotation marks omitted). We also presume the parties will be most circumspect in
attempting to foreclose arbitration of the contract provisions regarding choice of law.
The district court’s order granting a preliminary injunction, as written, is
vacated.
Entered for the Court
Terrence L. O’Brien
Circuit Judge
injunctions that alter the status quo; (2) mandatory preliminary
injunctions; and (3) preliminary injunctions that afford the movant all
the relief that it could recover at the conclusion of a full trial on the
merits. For these categories of disfavored preliminary injunctions, the
movant has a heightened burden of showing that the traditional four
factors weigh heavily and compellingly in its favor before obtaining a
preliminary injunction.
Fundamentalist Church of Jesus Christ of Latter-Day Saints v. Horne, 698 F.3d
1295, 1301 (10th Cir. 2012) (citations omitted) (internal quotation marks and
brackets omitted).
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